Foreign direct investment needs screening to protect national security and public order in EU

Foreign Direct Investment

Foreign direct investment is a major source of growth, jobs and innovation and has always been a key factor in supporting economic and social development in the EU. However, it also poses possible risks for national security, and a proper framework for the screening of such investments is needed.

"Foreign investment in key technologies and in sensitive infrastructure such as energy and water supply and financial services must be controlled," said Christian Bäumler, rapporteur for the EESC's opinion on foreign direct investment screening, adopted by the EESC during its plenary session on 19 April.  The screening of investments in businesses that are of strategic importance for national security and public order in the EU is patchy and uncoordinated. Not all Member States have screening procedures in place - in countries without such mechanisms, investments go unscreened. The EESC emphasised that a system at EU level must deal with the differences between Member States, while safeguarding national and European interests.

Over the last 10 years there has been an increase in investment from third countries in the EU, with most of it coming from the USA, Canada and Switzerland, followed by Brazil, China and Russia. There have been concerns that some foreign investors, notably state-owned investors, were interested in acquiring European businesses that possessed key technologies, and in investing in strategic industrial sectors, infrastructure and other assets that are important for the security of the Member States and the EU as a whole.

The EESC welcomed the Commission's proposal for a Regulation establishing a framework for screening of foreign direct investments in the EU, but noted that the extent of the problem is not yet fully known, as the Commission did not carry out an exhaustive impact assessment of investment flows..

"The proposed EU screening mechanism is a step forward, but it cannot yet fully safeguard EU and Member States' interests. In such a case, at this stage, the system must not become burdensome, time-consuming and costly," said the EESC co-rapporteur, Gintaras Morkis. (sg)