EU FDI flows into Cyprus at EUR 2.55 bln

…as EU-15 FDI in the new Member States continues to increase

 

Cyprus attracted EUR 2.55 bln in Foreign Direct Investment (FDI) from the EU-15 during 2005, up sharply compared to EUR 694 mln in 2004 and a negative flow of EUR 469 mln in 2003 according to official EU data.

The upward trend in EU-15 investment flows to the new Member States was maintained in 2005. After falling to EUR 5.1 bn in 2003, investment flows increased from EUR 18.3 bn in 2004 to a record level of EUR 32.4 bn in 2005. In fact, in the last two years, the EU-15 FDI outflows directed to the new Member States grew more rapidly than the total extra-EU-15 outflows, increasing by 256% and 77% in 2004 and 2005 respectively, while the growth rates of total EU FDI flows abroad for the same years were 9% and 30%.

The share of the 12 new Member States in the EU-15 outward FDI flows has been increasing significantly after falling to its lowest level in 2003. In 2005, 17% of all extra EU-15 investment flows were directed towards the new Member States. The growth of EU-15 flows was mainly due to recovery of investments in the Czech Republic and steady growth in investments in the other new Member States.

EU-15 outward FDI stocks held in the 12 new Member States also increased, reaching EUR 175.4 bn at the end of 2004. This represented 8% of all extra- EU-15 stocks. The trend is expected to continue, with end-2005 stocks estimated at EUR 207.8 bn.

 

Spain and Germany largest

In 2005, Spain was the largest investor in the new Member States, accounting for 20% of the total EU-15 investment flows in these countries. The Czech Republic and Hungary attracted the bulk of Spain‘s investments in the new Member States.

Germany (15%) was the second largest investor, with flows directed mainly towards Hungary, Romania and Malta. The main destination of FDI flows from Belgium

was Hungary.

Luxembourg‘s relatively large share (12%) is largely due to the importance of its special purpose entities (mainly financial holding companies); its main investment destinations were Cyprus and Malta.

At the end of 2004, EU-15 stocks held in the new Member States were 26% higher than for 2003, reaching EUR 175.4 bn.

Poland, Hungary and the Czech Republic were the three economies that attracted three quarters of the foreign direct investment from EU-15. The value of FDI stocks held in Poland was EUR 57.5 bn, in Hungary EUR 40.7 bn and in the Czech Republic EUR 34.5 bn.

At the end of 2004, Germany was the main holder of FDI stocks in the new Member States (with 21% of the EU-15 total, followed by France (14%) and Austria (10%).

 

New states invest in area

The investment flows from the 12 new Member States are still very low compared to those of EU-15, representing only 1% of the total outward FDI for EU- 272. The new Member States invested mainly in neighbouring countries.

One third of investment flows from the new Member States in 2005 were directed towards EU-15, with the Netherlands being the main partner, while 14% was

invested within the 12 countries themselves.

For investments outside the EU, the main destination for the new Member States’ FDI was Switzerland (20% of total FDI flows at EUR 1.3 bn). Other European (non-

EU, non-EFTA) countries came next, namely Croatia (7%) and Serbia and Montenegro (6%). Finally, investments by the new Member States in the USA and

in Asia were 1% and 3% respectively. In 2004, there was a marked shift in the distribution of EU-15 FDI stocks among the main economic activities in the 10 new Member States towards services (as yet, no detailed breakdown of activities is available for Bulgaria and Romania).

Service activities increased their share from 50% in 2003 to 69% at the end of 2004.

In absolute terms the growth was even more significant, from EUR 64.2 bn (end-2003) to EUR 112.0 bn (end-2004). The share of manufacturing fell slightly from 26% to 23%, while in absolute terms the value of stocks increased from EUR 33.1 bn to EUR 37.8 bn. The growing importance of the services sector was mainly due to growth in the value of stocks in financial intermediation, which increased from EUR 21.7 bn at the end of 2003 to EUR 61.0 bn at the end of 2004. FDI stocks in business services rose from EUR 18.0 bn to EUR 25.5 bn.