Measuring inward and outward foreign direct investment FDI for policy making

1. Measuring inward and outward foreign direct investment (FDI) for policy making Ken Davies China and India Investment Co-operation Lead Manager OECD China-OECD Dialogue on FDI Statistics 9 September 2007, Xiamen

2. What is in this presentation OECD Member countries� FDI data Original uses Evolving requirements Inadequacies China�s FDI data 2003 and 2006 Investment Policy Reviews Forthcoming study of outward FDI

3. Uses of FDI data FDI statistics used with other capital account data: To assess how countries financed their current account deficits or how they reinvested their surpluses. As an element in the analysis of OECD countries� international liberalisation commitments.

4. Uses of FDI data FDI statistics continue to be used to assess the openness of countries that apply for accession to the OECD. The OECD�s Investment Committee disposes of two investment instruments: The Code of Liberalisation of Capital Movements related to restrictions that affect capital and financial accounts The Declaration on International Investment and Multinational Enterprises which prescribes on �national treatment� for foreign companies

5. Uses of FDI data FDI data are also used to assess the openness of non-member countries and territories applying to sign the Declaration on International Investment and Multinational Enterprises. On 11 July 2007, Egypt became the first Arab and first African country to sign the OECD Declaration on International Investment and Multinational Enterprises. This marks a new stage in Egypt's drive to attract more foreign direct investment (FDI). A series of policy reforms have helped to underpin a fifteen-fold increase in Egypt�s FDI between 2001 and 2006. FDI reached a record USD 9 billion in the first three quarters of its 2007 fiscal year. This compares with USD 6.1 billion for the whole of 2006. Source: OECD web site, www.oecd.org

6. Investment Policy Review of Egypt, September 2007 CONTENTS Preface 7 Executive Summary and Recommendations 9 Chapter 1. Egypt's Evolving Position in the Global Economy 13 1.1 Trends in investment patterns 13 1.2 Egypt�s international investment-related commitments 16 Chapter 2. Egypt�s Policy Framework for Investment 23 2.1. Investment policy 24 2.2. Investment promotion and facilitation 35 2.3. Trade policy 41 2.4. Competition policy 44 2.5. Other policy issues covered in the PFI 45 � Source: OECD Investment Policy Review of Egypt, 2007.

7. Evolving requirements for FDI statistics Current priority areas, as indicated by the interests of the Investment Committee: Attractiveness of domestic economy as an investment location inward investment statistics needed Opportunities and challenges when domestic enterprises move off-shore for outsourcing outward investment statistics needed New issues such as unwelcome mergers and acquisitions (M&As), strategic sectors, national champions, economic patriotism sectoral inward and outward investment, especially cross-border M&As, needed Investment for development which was identified by the Monterrey Consensus as the main source of economic development Statistics on OECD investment to less developed countries and South/South investments needed

8. Current FDI data inadequacies More detailed breakdowns are needed than are currently available: In-depth information on partner countries, including smaller economies. There is great interest in investments to and from developing economies (e.g. in Asia, Middle East) which users cannot analyse without such data. Equity investment data capable of being broken down by type of investment (M&As, greenfield investments). Real investments as opposed to paper transactions, real source and destination of investments.

9. 2003 and 2006 Investment Policy Reviews of China The 2003 Investment Policy Review of China confirmed that China has experienced large FDI inflows. However, investment measured per head remained modest when compared to other countries. The Review recommended policy options to attract more and better FDI and to attract FDI to the regions where the Government is promoting economic development, such as central and west China. The 2006 Investment Policy Review of China examined China�s policies towards cross-border M&As.

10. Challenges in the 2003 and 2006 IPRs of China:Large unidirectional divergences with counter-party data

11. Challenges in the 2003 and 2006 IPRs of China:original FDI sources unclear

12. China is not unusual:the example of the Russian Federation

13. Challenges in the 2003 and 2006 IPRs of China:lack of statistics on cross-border M&As This challenge is not limited to China. While some private sources attempt to collect data on cross-border M&As worldwide, there is no international official source for these figures. Statistics on cross-border M&As are a vital element in the debate on the costs and benefits of globalisation, for example in the continuing series of Roundtables on Freedom of Investment, National Security and �Strategic� Industries held at the OECD in Paris.

14. Current work on China�s outward FDI The next Investment Policy Review of China will focus on Chinese and OECD Government Approaches to Encouraging Responsible Business Conduct in the light of rapidly increasing outflows of direct investment from China. This will include a separate study of the magnitude, composition and direction of these flows.