Tracking FDI

Multinational Enterprises seeking to understand how globalization affects their business need foreign direct investment, (FDI), information in order to gauge an economy’s suitability for expansion of their own enterprises, to find out how and where their competitors are investing in foreign markets, and to monitor how globalization may be affecting their clients.

According to UNCTAD, the United Nations Conference on Trade and Development, the most important feature of FDI is to gain equity ownership in order to influence the management of a foreign enterprise, (although countries vary, usually 10% is considered an effective voice), and this feature distinguishes an FDI investment from simple foreign portfolio investment, (FDI Statistics, n.d.). Since gaining a lasting interest in a foreign economy is the ultimate goal, only investments by direct investor related enterprises that gain equity ownership are classified as FDI and are tracked.

Capital generated in industrialized countries and redistributed through FDI to less developed and emerging markets is tracked by a variety of different organizations in addition to UNCTAD; other notable agencies include the World Bank and the Organization for Economic Cooperation and Development, (OECD). Additionally, it is important for individual government agencies like the U.S. Department of Commerce to track this information to ensure that their incentives for attracting FDI are successful.

UNCTAD tracks transnational corporate investment statistics of inward flows of stocks and capital as well as outward FDI flows, or disinvestments, through the International Transactions Reporting System, ITRS, and supplements the data through annual country surveys, (Methods of Data Collection, n.d.). UNCTAD reports on these statistics in the World Investment Report, the World Investment Prospects Survey, the Manual on FDI Statistics, and Balance of Payments Statistics Reports, and a variety of other statistical reports and databases. The recently released World Investment Report reported that FDI inflows increased globally to $1.2 trillion in the first half of 2010, after a 16% decline in 2008 and a 37% decrease in 2009, where it bottomed out at $1,114 billion, (Zahn, 2010).

At the World Bank Group and their member organizations, the Development Data Group collects FDI statistics from the statistical systems of member countries and publishes the data in a variety of electronic and print resources, most notably the publications World Development Indicators, the World Development Report, the World Bank Annual Report, Global Development Finance, and Global Economic Prospects. The World Bank reports in Global Economic Prospects that FDI capital inflow to developing countries have increased in 2010 to $589.5 billion from a low in 2009 of $454 billion, (International Bank for Reconstruction and Development, 2010).

Like the World Bank the OECD collects FDI data from member organizations and publishers the statistics in an online database and through a series of publications including the OECD Factbook, the OECD Economic Outlook, OECD Economic Surveys, and other publications. The OECD also recently reported that 2010 FDI year-to-date data from its 22 participating countries indicates that inflows have more than doubled from the same time period in 2009, outflows have increased by 40%, and that M&A investment is expected to increase by 20% this year, (Gestrin, 2010).

Agencies such as the UN, the World Bank and the OECD determine the development status of a country generally through measurement and comparison of economic indicators such as GDP or GNI. These agencies track and report on FDI inflows and outflows annually and more frequently, and indicate that capital generated in developed nations is reinvested and also disinvested in developing nations, primarily through mergers and acquisitions, but also by becoming shareholders or stakeholders. Additionally, to promote the usefulness of the data the collected these and additional agencies present their statistics in freely accessible online databases.



References:

FDI Statistics Definitions and Sources. (n.d.). Retrieved from http://www.unctad.org/Templates/Page.asp?intItemID=3144&lang=1



Gestrin, M. (2010, June). International investment freefall comes to an end. OECD Investment News, 13, 1-3. Retrieved from http://www.oecd.org/dataoecd/32/37/45562632.pdf



International Bank for Reconstruction and Development. (2010, Summer). Global Economic Prospects: Fiscal Headwinds and Recovery: Main Analysis. Washington, DC: The World Bank. Retrieved from http://siteresources.worldbank.org/INTGEP2010/Resources/GEPSummer2010MainReport.pdf



Methods of Data Collection and National Policies on Treatment of FDI Information. (n.d.). Retrieved from http://www.unctad.org/Templates/Page.asp?intItemID=3157&lang=1



Zahn, J. (2010, July 22). World Investment Report 2010: investing in a low carbon economy. (20th ed.). New York: United Nations Conference on Trade and Development. Retrieved from http://www.unctad.org/en/docs/wir2010_en.pdf