Download The Need for High Quality Data on Direct Investment in

Agenda item 9
Issue paper 8
The Need for High Quality
Data on FDI in the
International and National
Economic Accounts
Meeting of Group of Experts on the
Impact of Globalization on National
Accounts
May 11-13, 2009, Geneva, Switzerland
What is Direct Investment?


Investment in which investor in one
economy obtains interest in
enterprise in another economy so as
to confer significant degree of
influence (often control)
Operational definition: direct investor
holds/acquires at least 10 percent of
voting power in direct investment
enterprise
Economic role of direct investment

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Generally perceived to be more stable
than other types of cross-border
investment
In addition to finance, direct investment
brings additional dimensions
• such as technology transfer
• managerial know-how
• access to markets

May prompt concern about investment in
“strategic industries”
Direct investment is one of five
functional categories in
international accounts framework

Functional categories show economic role
of investment (assets and liabilities)
•
•
•
•
•

Direct investment
Portfolio investment
Financial derivatives
Other investment
Reserve Assets
Unlike SNA, functional categories primary
classification, before instrument
classification
Direct investment in National
Accounts Framework

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Reinvested earnings of direct investment
enterprises (credit and debits) part of the
Entrepreneurial Income and Allocation of
Other Primary Income Account
Reinvestment of income included in
financial account
Direct investment transactions recorded
separately as memorandum items in
financial account
One of elements differentiating between
Gross Domestic Product and Gross
National Income
Top 10 inward direct investment countries 1997 and 2007
(billions of US dollars)
Economy
Value of
inward DI in
1997
Economy
Value of
inward DI in
2007
United States
824
United States
2,423
France
400
France
1,617
United Kingdom
287
Luxembourg
1,482
China: Hong Kong
249
United Kingdom
1,348
Germany
191
China: Hong Kong
1,185
Canada
136
Germany
857
Belgium
129
Belgium
747
Netherlands
122
China, PR, Mainland
742
Australia
101
Netherlands
705
Spain
100
Spain
571
Total top ten
2,539
Total top ten
11,677
Top 10 outward direct investment countries 1997 and 2007
(billions of US dollars)
Economy
United States
Value of
outward DI
in 1997
1,068
Economy
Value of
outward DI in
2007
United States
3,333
France
599
France
2,449
United Kingdom
384
United Kingdom
1,705
Germany
296
Luxembourg
1,460
Japan
272
Germany
1,218
China, Hong Kong
236
China, Hong Kong
1,027
Netherlands
199
Netherlands
846
Switzerland
165
Spain
687
Canada
153
Switzerland
595
Italy
131
Belgium
593
Total of top ten
3,502
Total of top ten
13,913
Need for better quality data on
direct investment

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As can be seen, value of DI
transactions grown substantially
Discrepancies between inward and
outward financial transactions and
between income credits and debits
also grown sharply
In addition, many countries do not
produce positions data
New Statistical Standards on Direct
Investment

Standards set in:
• Balance of Payments and International
Investment Position Manual, sixth
edition (BPM6)
• OECD Benchmark Definition of Foreign
Direct Investment, fourth edition (BD4)
• 2008 SNA follows these standards
Coordinated Direct Investment
Survey (CDIS)

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CDIS designed to improve quality of
statistics on direct investment positions,
for both inward and outward
Data for end 2009
To be broken down by:
• Equity and debt
• Counterpart country

Improved data expected to lead to better
quality data on transactions and income
Coordinated Direct Investment
Survey (CDIS) (continued)

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130 jurisdictions indicated a willingness to
participate (though actual participation may be
lower)
Preliminary data to be reported to IMF by end
September 2010
• In some cases, only regional totals may be available
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Expected initial release end-2010/early 2011
Revised data to be reported to IMF end-March
2011
Expected release mid-2011
Decision to conduct on annual basis yet to be
taken
Coordinated Direct Investment
Survey (CDIS) (continued)
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IMF formed Task Force on CDIS, with
other I/Os and 10 jurisdictions
Task Force provided advice to IMF in
preparation of CDIS Guide
Guide placed on IMF website at:
http://www.imf.org/external/np/sta/cdis/i
ndex.htm
Available in Arabic, Chinese, French,
Russian, and Spanish, as well as English
Coordinated Direct Investment
Survey (CDIS) (continued)

Guide sets out:
• conceptual bases of direct investment
• valuation principles to be used

For equity:
• market value for listed enterprises
• own funds at book value for unlisted enterprises
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For debt securities: market price
For all other debt: nominal value
• provides model survey forms and other
practical suggestions for countries new to
conducting surveys
Coordinated Direct Investment
Survey (CDIS) (continued)

Problems in undertaking CDIS include:
• Development of business register

BRs used in most business surveys may not be
appropriate for direct investment as they do not
collect data to determine whether entity is in direct
investment relationship
• Business records may not be maintained on
basis to readily extract data required
• Many countries rely on banking transactions
data to develop statistics on direct investment
so are unaccustomed to conducting surveys
and do not have BRs
Coordinated Direct Investment
Survey (CDIS) (continued)

CDIS should provide better data on
“fellow” enterprises, that is, those
without a 10 percent equity
investment in each other but which
are in a direct investment
relationship because they have a
common investor
Coordinated Direct Investment
Survey (CDIS) (continued)
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Use of different concept of units may pose
statistical comparability problems
Enterprise or Local enterprise group
• For fellows, where ultimate controlling parent
is nonresident, direct investment considered to
be inward, even if negative
• Where ultimate controlling parent is resident,
direct investment considered to be outward,
even if negative

Depending on which unit used, direct
investment may be reported as either
inward or outward