Country Practices in the Implementation of International Recommendations for FDI Statistics

Pages:27-32
SUMMARY

Selected Recording Issues Direct investment threshold Measurement of earnings Indirectly owned direct investment enterprises Reverse investment Special purpose entities Financial intermediation Valuation of FDI stocks

 
INDEX
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Page 27

Key Findings of the 2001 SIMSDI Update

6.1 This chapter summarizes the findings from the 2001 update of the Survey of Implementation of Methodological Standards for Direct Investment (SIMSDI). 1 Highlights of the results are provided in Box 6.1.

6.2 The results showed that there have been marked improvements in the availability of FDI statistics in the four years between the 1997 SIMSDI survey and the 2001 update-in particular, for inward and outward position data (an additional 13 and 14 countries, respectively) and for inward and outward FDI financial flows (an additional 9 and 10 countries, respectively). In addition, there have been improvements in the reporting of data on FDI income, with an additional 10 countries reporting data on inward FDI income on equity, an additional 11 reporting data on inward reinvested earnings, and an additional 10 reporting data on inward FDI income on debt.

6.3 During the same period, there was also a significant increase in the compilation of data showing geographic breakdowns, particularly for the inward and outward FDI financial flows data (an additional 11 and 13 countries, respectively) and for the position data (an additional 11 and 12 countries, respectively). Similar increases were seen in the number of countries compiling data showing breakdowns by industrial sectors.

6.4 The four years between the 1997 SIMSDI survey and the 2001 update also saw significant improvements in the items covered by the FDI statistics, with a marked increase in the number of countries now following the international recommendations in a number of areas. For the data on equity capital, increases were seen in the number of countries that include noncash acquisitions of equity (such as through the provision of capital equipment) and real estate owned by nonresidents; for the data on other capital, significantly more countries now include intercompany loans, both short-term and long-term, and financial leases. Other areas where the coverage of the data improved markedly were the inclusion of activities of SPEs in both the inward and outward FDI transactions data, the inclusion of relevant activities of offshore enterprises in the outward FDI transactions data, and the inclusion of expenditure on natural resources exploration in both the inward and outward FDI transactions data.

6.5 The results of the 2001 SIMSDI update also showed that there are now a number of areas where more than three-fourths of the 61 countries that participated follow the international recommendations applicable for their circumstances-namely, the use of the 10 percent ownership rule as the basic criterion for defining direct investment enterprises and direct investors, the inclusion of equity capital between affiliated banks and between affiliated financial intermediaries, the correct recording of reverse investment equity transactions when two FDI relationships have been established, the inclusion of purchases and sales of real estate by nonresidents, and the inclusion of data on activities of SPEs and offshore enterprises.

6.6 However, despite these improvements in the implementation of the international recommendations since the 1997 SIMSDI survey, the 2001 update indicated that there are still a number of aspects of these recommendations that are not yet followed by the majority of the 61 countries that participated in the update: - Only 11 countries fully apply the recommendations regarding the inclusion of indirectly owned direct investment enterprises for their inward FDI transactions data-the same number as in 1997.

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Box 6.1. Highlights of the 2001 SIMSDI Results

Areas where there have been marked improvements since 1997

- Availability of FDI statistics, particularly:

-Position data

-Income data (including reinvested earnings)

-Geographic and industrial sector breakdowns

- Coverage of FDI statistics, particularly the inclusion of:

-Noncash acquisitions of equity

-Intercompany loans and financial leases

-Real estate owned by nonresidents

-Activities of special purpose entities (SPEs)

-Activities of offshore enterprises in the outward FDI statistics

-Expenditure on natural resource exploration

Areas where more than 75 percent of countries surveyed follow the international recommendations applicable to their economy

- Use of the 10 percent ownership rule as the basic criterion for defining FDI relationships

- Equity capital transactions between affiliated banks and between affiliated financial intermediaries

- Recording of reverse investment equity transactions when two FDI relationships have been established

- Inclusion of data on real estate owned by nonresidents

- Inclusion of data on activities of SPEs

- Inclusion of data on activities of offshore enterprises

Areas where, despite improvements, the majority of countries do not yet follow the international recommendations

- Inclusion of activities of indirectly owned direct investment enterprises

- Use of the Current Operating Performance Concept to measure direct investment earnings

- Time of recording FDI income on equity (when payable or declared payable) and income on debt (when accrued)

- Recording of reverse investment transactions when the FDI relationship is in one direction only

- Inclusion of activities involving construction enterprises and mobile equipment

- Valuation of FDI positions (assets and liabilities)

- Only 19 countries fully apply the recommended Current Operating Performance Concept for measuring their direct investment earnings in their inward FDI statistics.

- Only 22 countries record income on equity (dividends and distributed branch profits) in their inward and outward FDI transactions data at the time they are payable, as recommended; only 25 record income on debt (interest) as it is accruing for their inward data, and...

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