The European Commission has issued a recommendation urging its 27 member states to conduct a comprehensive review of outbound investments in critical technology sectors, specifically semiconductors, artificial intelligence (AI), and quantum technologies. This initiative aims to assess and mitigate potential risks to the European Union’s economic security, particularly concerning the transfer of sensitive technologies to non-EU countries.

The Commission’s recommendation builds upon the European Economic Security Strategy introduced in June 2023 and a subsequent White Paper on outbound investments published in January 2024. It reflects growing concerns that certain foreign direct investments may lead to the transfer of EU-origin technologies and know-how to entities outside the Union, potentially undermining international peace and security. The focus is on technologies that could enhance military and intelligence capabilities in ways that may not align with EU interests.

While there are existing rules to screen inbound foreign direct investment into the EU, this would be the first time that outbound foreign direct investments are being targeted. 

Member states are encouraged to initiate a 15-month risk assessment period, during which they will evaluate outbound investments in the specified technology areas. Progress reports are expected by July 2025, with final assessments due in June 2026. The findings from these reviews will inform potential policy measures at both national and EU levels to address identified risks.

This recommendation has significant implications for EU-based companies with substantial investments in ASEAN, which has seen an increasing flow of EU’s investments in a variety of sectors including semiconductors and AI. The EU member states’ investments in these sectors could thus come under scrutiny in such a review. ASEAN countries such as Malaysia, Vietnam, and Singapore and their firms involved in joint ventures or technology transfers in countries may need to work together with EU Member States to assess risk of technology leakage and any potential fallout associated with the EU’s investments as a result of the review. 

The Commission’s proactive stance reflects a broader strategy for the EU’s concern in safeguarding its technological assets in the guise of economic security. By targeting outbound investments, the EU aims to prevent scenarios where critical technologies could be used in ways that conflict with its strategic interests. This move also highlights the delicate balance between fostering global trade and ensuring that such engagements do not compromise the EU’s economic security objectives.