Covid-19: Europe warns on FDI, capital movement risks

The EU has warned member states to remain vigilant on foreign direct investment (FDI) and the movement of capital from third countries during the current coronavirus (Covid-19) crisis in an effort to protect strategic industries.

“The Covid-19 related emergency is having pervasive effects on the economy of the E U. As part of the overall response, the European Commission also singled out the issue of foreign direct investment screening. Among the possible consequences of the current economic shock is an increased potential risk to strategic industries, in particular but by no means limited to healthcare-related industries,” the Commission said in a communication on 25 March.

As a result, member states have been asked to make full use of FDI screening mechanisms to protect the healthcare sector, the supply of critical inputs, as well as other sectors involved in supporting efforts to fight the Covid-19 pandemic.

The EU is warning member states to be cautious of FDI during the current Covid-19 crisis. (Getty Images/Yozayo)

Noting that national screening mechanisms are in place for 14 of the 27 member states, the Commission called on governments lacking such regulations to create “a full-fledged screening mechanism, and in the meantime to use all other available options to address cases where the acquisition or control of a particular business, infrastructure or technology would create a risk to security or public order in the EU, including a risk to critical health infrastructures and supply of critical inputs.”

Of key concern to the Commission in the latest update has been the risk of the acquisition of companies involved in the manufacture of healthcare products or related industries such as research establishments.