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Foreign direct investment (FDI)statistics

Unit G4 International transactions

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Summary of the presentation

What is foreign direct investment?

Methodological framework

Implementation at national level

Basic data request breakdown

Stocks versus flows

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What is foreign direct investment?

Foreign direct investment (FDI) is a category of cross-

border investment associated with a resident in oneeconomy (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 thedirect investor owns 10% or more of the voting power in

the direct investment enterprise.

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Methodological framework Existing methodology based on the OECD Benchmark

Definition of FDI, 3rd edition (BD3).

Detailed instructions on the data requests outlined in theEurostat Balance of Payments Vademecum (last versionupdated in November 2010).

Framework Regulation for data transmission: 184/2005 onCommunity statistics concerning balance of payments,international trade in services and foreign direct investment.

Next methodological framework: OECD Benchmark Definitionof FDI, 4th edition (BD4). To be implemented as from 2014(reference year 2013).

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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.

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Basic data request breakdown 1/2

Two types of FDI (according to direction):

Inward: positions/flows of partner countries to the reportingcountry

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)

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Basic data request breakdown 2/2

Geographical breakdown:

By partner country: more details requested for main partnercountries.

By economic zones (OECD, NAFTA, ASEAN, OPEC, etc) .

By economic activity:

Based on the NACE classification (equivalent to ISIC).

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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 changesresulting from holding gains or losses.

Allow measuring long-standing economic links betweencountries.

Detailed breakdowns by industry sector and partnercountry are more easily available because they are lesslikely to be susceptible to statistical confidentialityconstraints.

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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 whengoing into details by industry sector and partner country.

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Data example: Stocks

EU-27 FDI Stocks (partner Extra-EU-27, million EUR)

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

2004 2005 2006 2007 2008

EU-27 FDI Outward Stocks EU-27 FDI Inward Stocks

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Data example: Flows

EU-27 FDI Flows (partner Extra-EU-27, million EUR)

0

100000

200000

300000

400000

500000

600000

2004 2005 2006 2007 2008

EU-27 FDI Outward Flows EU-27 FDI Inward Flows

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Thank you for your attention