Foreign direct investment (FDI) statistics

1. Foreign direct investment (FDI) statistics Unit C4 – Balance of payments Luis de la Fuente Layos

2. Summary of the presentation • What is foreign direct investment? • Methodological framework • Implementation at national level • Basic data request breakdown • Data dissemination • Stocks versus flows • Mirror aspects of FDI - Asymmetries FDI statistics presentation

3. What is foreign direct investment? • Foreign direct investment (FDI) is a category of cross-border investment associated with a resident in one economy (direct investor) having control or a significant degree of influence on the management of an enterprise that is resident in another economy (direct investment enterprise). • The direct investor has the intention to obtain a lasting interest in the direct investment enterprise. • International investment is classed as FDI when the direct investor owns 10% or more of the voting power in the direct investment enterprise. FDI statistics presentation

4. Methodological framework • Methodology based on the OECD Benchmark Definition of FDI, 3rd edition (BD3). • Detailed instructions on the data requests outlined in the Eurostat Balance of Payments Vademecum (last version updated in November 2009). • Framework Regulation for data transmission: 184/2005 on Community statistics concerning balance of payments, international trade in services and foreign direct investment. • OECD Benchmark Definition of FDI, 4th edition (BD4) approved in March 2004. Time schedule for data request to be decided. FDI statistics presentation

5. Implementation at national level • Data sources: • Surveys are the main source. • Mixed systems, using direct reporting/surveys and settlement systems are used by a minority of countries. • Data compilers: • National central banks. • National statistical institutes. FDI statistics presentation

6. Basic data request breakdown Two types of FDI (according to direction): • Inward: positions/flows of partner countries to the reporting country • Outward: positions/flows of the reporting country to partner countries Three types of data: • Capital flows (equity, other capital , reinvested earnings) • Stocks at the end of the year (equity and reinvested earnings, other capital) • Income flows (dividends, reinvested earnings, interest) FDI statistics presentation

7. Data dissemination – Reference database FDI statistics presentation

8. Data dissemination – Predefined tables FDI statistics presentation

9. Data dissemination - Stocks EU-27 FDI Stocks (partner Extra-EU-27, million EUR) FDI statistics presentation

10. Data dissemination - Flows EU-27 FDI Flows (partner Extra-EU-27, million EUR) FDI statistics presentation

11. Stocks versus flows 1/2 • Stocks (or positions) allow a structural analysis of foreign investments in the host economy and investment of the home economy in foreign countries. • Show the positions at a certain point in time (end of year or quarter) • Include the accumulation of investments over time but also exchange rates movements and other price changes resulting from holding gains or losses. • Allow measuring long-standing economic links between countries. • Detailed breakdowns by industry sector and partner country are more easily available because they are less likely to be susceptible to statistical confidentiality constraints. FDI statistics presentation

12. Stocks versus flows 2/2 • Flows (or transactions) provide an indicator about the attractiveness of the economies. • Show the net inward and outward investments with assets and liabilities in a given reference period (year, quarter). • Provide information to monitor recent economic developments. • Are subject to more volatility and requires additional information to be properly interpreted. • Confidentiality problems may appear, particularly when going into details by industry sector and partner country. FDI statistics presentation

13. Mirror aspects of FDI – Asymmetries 1/3 • In an ideal world, the FDI inward and outward stocks/flows reported by one country to and from another partner country should match with the outward and inward stocks/flows of that counterpart country. • Asymmetries occur when one country’s data do not correspond to the data for the same transaction reported by its partner countries. • Asymmetries are a main concern for Eurostat as they affect the quality and credibility of the FDI statistics. FDI statistics presentation

14. Mirror aspects of FDI – Asymmetries 2/3 • Asymmetries are caused by different factors: - different methodologies used for data compilation - differences in the classification of items within the accounts - discrepancies in the time of recording transactions - incorrect geographical identification of the counterpart - different treatment of complex transactions, … • It cannot be stated when to look at inward flows/stocks of a certain reporting country and when to look at outwards flows/stocks of their reporting partners. FDI statistics presentation

15. Mirror aspects of FDI – Asymmetries 3/3 • Implementation of FDI Network: - A joint ECB/Eurostat initiative, which has been developed in close cooperation with FDI compilers from all Member States. - Its main goal is to facilitate a secure exchange of information about large FDI transactions between EU compilers with the ultimate aim being the reduction of the intra-EU asymmetries. FDI statistics presentation

16. Thank you for your attention FDI statistics presentation