What are investment hubs
It is estimated by the United Nations Conference on Trade and Development (UNCTAD) that around 30 % of all international corporate investments have been routed through hubs before reaching the destination country. The total annual value of these investments is estimated at 5.45 trillion EUR. Conduit jurisdictions that attract an above-average share of global investments are referred to as ‘investment hubs’.
In order to make cross-border investments happen, investment structures are sometimes set up in in jurisdictions that benefit from a stable legal and political environment, a sound financial infrastructure and a highly professional ecosystem.
This is particularly useful when the investments are to be made in countries where an adequate investment facilitation infrastructure is missing, like in developing countries. In other cases, a neutral jurisdiction is required by the investors. When engaging in, for example, a merger or acquisition, investors often prefer to set-up an investment vehicle in a neutral third country to avoid the other party having a competitive advantage due to a better knowledge of local rules and regulations.
Jurisdictions that attract an above-average share of global investments are referred to as ‘investment hubs’. Examples of investment hubs include Mauritius and Singapore, which are widely considered as a gateway for international investments in Africa and South-East Asia, respectively. European countries such as Ireland, the Netherlands & Luxembourg play a similar role in facilitating international transactions for other regions of the world.