Foreign direct investment (FDI) statistics in the European Union

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1 Foreign direct investment (FDI) statistics in the European Union 1

2 Summary of the presentation Overview of EU FDI statistics - methodology and practice Implementation of the revised international manuals BPM6 and BD4 Recent FDI initiatives Task Force FDI requirements on the EGR FDI statistics presentation 2

3 What is foreign direct investment? Foreign direct investment (FDI) is a category of crossborder 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 classified as FDI when the direct investor owns 10% or more of the voting power in the direct investment enterprise. FDI statistics presentation 3

4 Methodological framework Methodology based on the OECD Benchmark Definition of FDI, 3 rd edition (BD3). Detailed instructions on the data requests outlined in the Eurostat Balance of Payments Vademecum (last version updated in November 2010). 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 2008 to be implemented in the EU as from 2013 reference year. FDI statistics presentation 4

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 5

6 Basic data request breakdown 1/2 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: 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 6

7 Basic data request breakdown 2/2 Geographical breakdown national data - around 250 partners (both individual countries and economic/geographical zones). EU aggregates partners, of which 40 Extra-EU individual countries Economic activity breakdown: around 70 activities based on NACE Rev.1.1 from 2011 annual data transmission cycle, NACE Rev.2 dual reporting for 2008 and 2009 reference years FDI statistics presentation 7

8 Data dissemination Reference database FDI statistics presentation 8

9 Data dissemination Predefined tables FDI statistics presentation 9

10 EU-27 FDI Stocks (partner Extra-EU-27, billion EUR) EU-27 FDI Outward Stocks EU-27 FDI Inward Stocks FDI statistics presentation 10

11 EU-27 FDI Flows (partner Extra-EU-27, billion EUR) EU-27 FDI Outward Flows EU-27 FDI Inward Flows FDI statistics presentation 11

12 Mirror aspects of FDI Asymmetries 1/4 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 12

13 Mirror aspects of FDI Asymmetries 2/4 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, FDI statistics presentation 13

14 Mirror aspects of FDI Asymmetries 3/4 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 14

15 Mirror aspects of FDI Asymmetries 4/4 FDI Network: some results as of March 2011 More than 200 transactions have been initiated for a total value of about EUR 750 billion. All EU Member States participate. About 56% of all transactions have been reconciled for an amount of more than EUR 410 billion. Differences are mainly due to mistakes of reporting companies because of: non-reported transactions delays in reporting wrong period reported In some cases, differences were due to different booking methods in the concerned countries. FDI statistics presentation 15

16 Implementation of BPM6 and BD4 Annual FDI data request 16

17 Background The FDI annual future data requirements discussed along 2010: several proposals were tabled and consulted. An overall agreement on the content was reached in the BoP Working Group. The agreed FDI data request has an adequate level of simplification while providing a reasonable level of information to monitor the relevance and evolution of FDI according to the new international standards. The BoP Regulation provides the possibility of delivering best estimates when accurate data are not available at a reasonable cost. FDI statistics presentation 17

18 Main features of the new EU FDI data Two presentations of FDI statistics: assets/liabilities and directional principle. Separate reporting on FDI by resident Special Purpose Entities (SPEs) and FDI between fellow enterprises. The need to calculate FDI aggregates for the EU (Euro area and total EU) introduces the Community concept in the definition of resident SPEs and the Ultimate Controlling Parent (UCP) Geographical breakdown: the 3 existing levels of aggregation Activity breakdown: NACE Rev.2 (two levels) - already applied as from 2011 data transmission cycle. Codification of components (posts), geographical and activity breakdown co-ordinated with other international organisations. FDI statistics presentation 18

19 Implementation schedule First year of implementation of the new data requirements: 2014 for the data of reference year Two timeliness for the data provision: T+9 months: FDI by geographical breakdown only. T+21 months: FDI by geographical and activity breakdown. No back casted data required. Revisions according to new methodology: loaded in the national tables but not used to calculate EU aggregates. FDI statistics presentation 19

20 Timeliness of the data provision Reference period of the data Old Regulation New Regulation September 2014 December 2012 December 2013 December 2014 December 2015 FDI data at T+21 months (cross-tabulation geo and activity breakdown): - Flows/Income over Stocks at end-2012 FDI data at T+9 months (only geographical breakdown): - Flows/Income over Stocks at end-2013 FDI statistics presentation 20

21 EuroGroups Register Register of multinational corporations active in the EU Ongoing project, currently 5000 biggest groups Corporate structures, ID numbers, key characteristics (where available), UCI, SPE Source: commercial databases (Bureau van Dijk, Dun&Bradstreet), combined by Eurostat, verified and completed by national business registers statisticians Access restricted to EU NSIs and (soon) NCBs Main users: FATS and FDI statisticians FDI statistics presentation 21

22 Task Force on FDI requirements on the EGR Joint initiative of Units G1 and G4 of Eurostat Business Statistics Directorate, in co-operation with the ECB. The Workshop of the ESSnet EGR held in Rome in April 2010 concluded about the need to set up a Task Force to define the different potential features of the EGR that would serve in the compilation of FDI statistics. The results would be taken into account in the second version of the EGR application planned for implementation in FDI statistics presentation 22

23 Issues covered in the Task Force Identification of the units and their ownership relationships according to the FDIR in BD4. Timing and reference period of the EGR population. Definition of the data supply chain, i.e. the data flows between the EGR and the FDI production cycle. Definition of FDI requirements related to remote access to EGR data. Identification of the Ultimate Investing Country and the UCP including its links with the definition of UCI. Identification of the SPEs (National and European concepts). Additional financial information: own funds at book value, market valuation, profits, reinvested earnings, etc. Final report of the TF expected in June 2011 FDI statistics presentation 23