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Foreign Direct Investors’ Outlays to Acquire or Establish
U.S. Businesses Changed Little in 2005

In 2005, outlays by foreign direct investors to acquire or establish U.S. businesses were $86.8 billion, little changed from the $86.2 billion in outlays in 2004. Outlays remained considerably below those in 1998-2001, when new investment outlays were historically high, ranging from $147.1 billion to $335.6 billion.

Outlays for New Investment in the United States
by Foreign Direct Investors, 1980-2005

Billions of Dollars

p — Preliminary r — Revised Source: U.S. Bureau of Economic Analysis

Outlays increased substantially in manufacturing, information, and depository institutions. Together, these three sectors accounted for 58 percent of total outlays. The increase in information was the first increase since 1999. Outlays in finance (except depository institutions) and insurance declined sharply, by $20.0 billion, or 76 percent.

Outlays from Europe increased substantially, particularly those by investors in the United Kingdom, Germany, and the Netherlands. Outlays from the Asia and Pacific and Middle East regions also increased substantially. For the Asia and Pacific region, the increase was largely accounted for by Japanese and Australian investments. These increases were partly offset by a decline in investment outlays from Canada, where outlays had risen sharply in 2004.

Outlays in 2005

In 2005, as in previous years, outlays by foreign direct investors to acquire existing U.S. businesses (at $79.2 billion) were significantly larger than outlays to establish new U.S. businesses (at $7.6 billion).

By industry, outlays in manufacturing increased to $31.3 billion from $18.3 billion in 2004. Transportation equipment, primary metals, and chemicals had the largest increases within manufacturing. Investment growth in industries other than motor vehicles accounted for most of the increase in transportation equipment. Outlays in information increased for the first time since 1999, to $9.6 billion from $4.3 billion in 2004. The telecommunications and publishing sub-sectors had the largest increases within information. The major sector posting the largest decrease in outlays was finance (except depository institutions) and insurance.

By country of ultimate beneficial owner, outlays by European investors increased to $57.2 billion from $43.8 billion in 2004. British investment accounted for over half of European outlays. Investment from the Netherlands increased substantially to $3.1 billion. Asia and Pacific region outlays also rose in 2005, increasing to $10.7 billion from $6.0 billion in 2004. This increase reflected larger outlays from Australia as well as the first increase in outlays from Japan since 2000. Canadian outlays declined 58 percent to $13.3 billion from $31.5 billion in 2005.

The ultimate beneficial owner is the investor, proceeding up a U.S. affiliate’s ownership chain, beginning with the foreign parent, that is not owned more than 50 percent by another investor. The data on new investment outlays are classified by country based on the location of the UBO; thus, they are shown against the country of the investor that ultimately owns or controls the affiliate, even though the investor may have channeled the funds for the investment though another country, such as a financial center.

The estimates of outlays for 2005 are preliminary. The estimate of outlays for 2004 has been revised up 8 percent from the preliminary estimate published last year.

Employment and assets of newly acquired or established businesses

Newly acquired or established businesses employed 223,800 people in 2005, up 6 percent from 211,600 in 2004. Manufacturing accounted for the largest share of employment, with 92,200 employees. The total assets of newly acquired or established businesses were $170.5 billion, down from $308.6 billion in 2004.

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Estimates in this report are based upon a Bureau of Economic Analysis survey that covers (1) existing U.S. business enterprises in which foreign investors acquired, either directly or through their U.S. affiliates, at least a 10 percent ownership interest and (2) new U.S. business enterprises established by foreign investors or their U.S. affiliates, also using the 10 percent ownership interest threshold.

Additional details on the new investments by foreign investors in 2005 will appear in the June issue of the Survey of Current Business, the monthly journal of the Bureau of Economic Analysis.

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BEA’s national, international, regional, and industry estimates; the Survey of Current Business; and BEA news releases are available without charge on BEA’s website at www.bea.gov. By visiting the site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements.

Summary BEA estimates are available on recorded messages at the time of public release at the following telephone numbers.

(202) 606-5306 Gross domestic product
(202) 606-5303 Personal income and outlays