Netherlands leads the field in direct investment
The Netherlandsranks first in the world as regards the level of inward and outward foreign investment. This top ranking is flattered by the favourable tax treatment of these investments in theNetherlands. But even after adjusting for this effect, the Netherlands is a large investor, numbering among the global top ten.
In view of the strongly increased interest in direct investment the IMF has begun collecting worldwide data on direct investment. The results of this Coordinated Direct Investment Survey (CDIS) have recently been published on the IMF website. At end-2009, the Netherlands accounted for USD 3,700 billion in foreign direct investment. In other words, Dutch enterprises invested a total of this amount in associated foreign enterprises. This represents around 18 per cent of total outward investment as reported by the participating countries to the IMF. Conversely, the Netherlands welcomed an inflow of USD 3,000 billion in inward foreign direct investment. The United States followed at some distance with outward direct investment of USD 3,500 billion and inward of USD 2,300.Luxembourgranked third with USD 1,750 and 1,800 billion respectively.
The two tables below present the top ten of countries in terms of inward and outward direct investment as at end-2009.
The Netherlands' top ranking requires some qualification and explanation. Only part of the total amount reflects foreign direct investment that affects the Dutch real economy. A significant reason for the Netherlands' top position is the relatively large size of its Special Financial Institutions (SFIs) sector. SFIs are institutions that were established in the Netherlandson account of its favourable economic and fiscal climate to act as a financial turntable for entities with a foreign parent company. SFIs account for around 75% of the total of Dutch direct investment.
It is worth noting that, to a greater or lesser extent, the direct investment data for many other countries on the list are influenced by investment in and by SFIs. Indeed in other countries too, such as Luxembourg and Switzerland, institutions comparable to SFIs play a major role. Even if SFIs’ positions are left out of the Dutch data, the Netherlands still features prominently in the field of direct investment. Excluding SFIs, the Netherlands’ outward direct investment (at end-2009) amounted to USD 950 billion and inward direct investment USD 650 billion. As only a small number of countries adjust their direct investment data for the influence of SFIs, it is not possible to draw up precise rankings without investment in and by SFIs. Nonetheless, the above data allow the conclusion that the Netherlandswould in that case still rank among the top ten. One explanation for the significant position of the Netherlands, even excluding SFIs, is that many headquarters of large multinationals are established in this country, such as Shell, Unilever, Philips and Ahold.
Direct investment is often seen as a stable source of funding and forms an important element in international economic integration, also in economically turbulent times.Direct investment in a country can advance competitiveness and could potentially help to boost productivity and employment. The IMF and the OECD use the term direct investment if the objective of an investment is to obtain a lasting interest in an enterprise in another country. The lasting interest implies the existence of a long-term relationship with a view to exercising influence on the management of the enterprise. An interest of 10% or more is generally regarded as a direct investment. Besides direct interests in the share capital, intra-group claims and/or liabilities, such as a loan issued by a Dutch enterprise to a foreign group company, are also counted as direct investment.
