Sunday

3rd Jul 2022

Investment in new member states jumps by 70 percent

Foreign investment in Central and Eastern Europe jumped by 70 percent last year, new UN figures have revealed – while sluggish "old" Europe experienced a decrease.

The annual World Investment Report, issued by the UN economic think-tank UNCTAD on Thursday (29 September), shows that foreign direct investment in the EU as a whole dropped by 36 percent to 216 billion dollars.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • Car production in Slovakia - EU membership has boosted investor confidence (Photo: European Commission)

Foreign direct investment (FDI) refers to the inflow of foreign capital into a country.

It can entail, for example, investments through cross-border mergers, but also to so-called "greenfield investments" – such as the setting up of a completely new factory by a foreign company.

The UNCTAD researchers state that there are "large differences" in investment trends between the EU-15 (the "old" member states) and the new member countries that entered the bloc in April 2004.

In the EU-15, FDI in 2004 dropped by 40 percent to 196 billion – the lowest level since 1998 – while foreign investment in the new states jumped by almost 70 percent.

In the old member states, traditionally large FDI recipients Germany, the Netherlands and Luxembourg, accounted for 95 percent of the decline.

UNCTAD stresses that FDI figures are very volatile, and they can easily give a distorted picture by the impact of single transactions or by statistical effects.

Nevertheless, the UN body also highlights that weak German and Dutch economic growth were important factors in the declining figures.

Seen over a medium-term period, UNCTAD notes that the UK and France have in recent years been the largest recipients of FDI, as they performed relatively well in terms of economic growth.

By contrast, sluggish Germany and Italy have seen less FDI in recent years.

The UK experienced an upsurge in FDI in 2004, and became the second largest recipient of FDI worldwide, after the US but before China.

But the 2004 upsurge was primarily due to large one-off international merger deals, UNCTAD notes – such as the take-over by the Spanish bank Santander Central Hispano of Britain’s Abbey National.

Meanwhile, most new EU countries reported marked increases in investment from abroad.

FDI flows to Lithuania quadrupled, while in Latvia they doubled.

As in previous years, however, Poland, the Czech republic and Hungary got most foreign cash pumped into their economies.

Between 1995 and 2004, FDI to the new member states grew five-fold, which is almost twice as fast as world-wide investment growth.

Although only 9.4 percent of FDI in the European Union takes place in the new member states, foreign investment is a relatively important factor in the national income of the new countries.

The region of Central and Eastern Europe is set to remain an attractive location for foreign investment in the near future, UNCTAD adds.

Labour costs in the region are substantially lower than in the EU-15, the workforce is highly skilled, and productivity is improving fast.

Meanwhile, EU membership has boosted confidence of investors in the region.

Germany, The Netherlands, Austria and France are the biggest investors in Central and Eastern Europe.

MEPs boycott awards over controversial sponsorship

Two MEPs have withdrawn their nominations from the MEPs Awards over the Swiss pharmaceutical company Novartis's participation as a sponsor — currently involved in an alleged bribery scandal in Greece.

EU Parliament interpreters stage strike

Interpreters at the European Parliament are fed up with remote interpretation, citing auditory health issues given the poor quality of the online sessions.

EU opens door to Ukraine in 'geopolitical' summit

EU leaders will also discuss eurozone issues with European Central Bank president Christine Lagarde, as more and more leaders are worried about voters' distress at soaring inflation.

Opinion

The euro — who's next?

Bulgaria's target date for joining the eurozone, 1 January 2024, seems elusive. The collapse of Kiril Petkov's government, likely fresh elections, with populists trying to score cheap points against the 'diktat of the eurocrats', might well delay accession.

News in Brief

  1. EU Parliament 'photographs protesting interpreters'
  2. Poland still failing to meet EU judicial criteria
  3. Report: Polish president fishing for UN job
  4. Auditors raise alarm on EU Commission use of consultants
  5. Kaliningrad talks needed with Russia, says Polish PM
  6. Report: EU to curb state-backed foreign takeovers
  7. EU announces trade deal with New Zealand
  8. Russia threatens Norway over goods transit

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  2. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  3. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  4. Council of the EUEU: new rules on corporate sustainability reporting
  5. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  6. Reuters InstituteDigital News Report 2022

Latest News

  1. Nato's Madrid summit — key takeaways
  2. Czech presidency to fortify EU embrace of Ukraine
  3. Covid-profiting super rich should fight hunger, says UN food chief
  4. EU pollution and cancer — it doesn't have to be this way
  5. Israel smeared Palestinian activists, EU admits
  6. MEPs boycott awards over controversial sponsorship
  7. If Russia collapses — which states will break away?
  8. EU Parliament interpreters stage strike

Join EUobserver

Support quality EU news

Join us