Chapter

1. Introduction

Author(s):
Rita Mesias
Published Date:
October 2015
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The Guide has been prepared to assist economies that participate or are considering participating in the Coordinated Direct Investment Survey (CDIS). The Guide is also intended to assist economies already participating in the CDIS by providing statistical guidelines that compilers may find useful for improving the quality of their direct investment data. It updates the CDIS Guide that was released in 2010 to incorporate clarifications based on the International Monetary Fund’s (IMF’s) experience in conducting the CDIS and in preparing the Balance of Payments and International Investment Position Compilation Guide (BPM6 CG). This chapter covers the purpose, background, and strategy adopted for the implementation of the CDIS, and an overview on how the Guide is organized.

Purpose of the Coordinated Direct Investment Survey

1.1 The CDIS is a worldwide statistical data collection effort led by the IMF. The purpose of the CDIS is to improve the quality of direct investment position statistics in the international investment position (IIP) and the availability of these statistics by immediate counterpart economies.1 Therefore, the CDIS supports the objective of developing from-whom-to-whom crossborder data, complementing the Coordinated Portfolio Investment Survey (CPIS), and contributes to a better understanding of financial interconnectedness.

1.2 Specifically, the objectives of the CDIS are to collect, compile, and disseminate the following data items:

  • Comprehensive and harmonized data on direct investment positions, broken down between equity and debt instruments, and for debt instruments further broken down between assets and liabilities, by economy of direct investor (DI, for inward direct investment), or of direct investment enterprise (DIENT, for outward direct investment).2
  • Data for both inward and outward direct investment positions are sought; nonetheless, for economies where outward direct investment is not material, data on inward direct investment positions are sufficient for participation in the CDIS.
  • Additionally, the CDIS collects, on an encouraged basis, data on positions between fellow enterprises, and on net positions of resident financial intermediaries.

1.3 Participation in the CDIS represents a firm commitment to improve data on direct investment positions and to undertake a comprehensive survey or a census, by both those economies that currently produce such estimates as well as by economies that have yet to do so. The results of the CDIS (data and metadata)3 are to be reported to the IMF, which publishes nonconfidential information on its website (see http://data.imf.org/CDIS).4

Background

1.4 From its early beginnings, the IMF has used aggregate balance of payments data in its surveillance work and economic analyses. In the past decade, the IMF has been increasingly focusing on position data5 and data by individual counterpart economy. For example, the CPIS was launched in 1997 under the auspices of the IMF for economies to collect bilateral data on holdings of external portfolio investment positions in a coordinated manner, and it became an annual exercise starting with data for 2001. The IMF’s 2007 Surveillance Decision further reinforced the need for counterpart economy data. As well, the Bank for International Settlements (BIS) has been collecting bilateral banking data for many years,6 and the United Nations Conference on Trade and Development (UNCTAD) has been collecting bilateral foreign direct investment inflows and stocks (positions) data7 as have the Organisation for Economic Cooperation and Development (OECD) and Statistical Office of the European Union (Eurostat) in jointly collecting bilateral direct investment data from their member countries.

1.5 Building on the success of these initiatives, the IMF’s Statistics Department (STA) has identified direct investment as an area of large and growing importance, as well as where data can and should be improved. Direct investment brings to the recipient economy not only additional financial resources but also other benefits, such as technology transfer and management expertise, that other forms of crossborder finance lack. Direct investment is, therefore, seen to add to economies’ potential for growth in output, value added, and employment while, at the same time, studies indicate that direct investment is a less volatile source of external finance than portfolio or other investments.

1.6 In 2005, the IMF’s Executive Board recognized the need for improved direct investment statistics and endorsed the proposal by STA to study the feasibility8 of conducting a CDIS that would provide direct investment data by counterpart economy. As part of the feasibility study, approximately 80 economies were contacted about their interest in participating in a CDIS for both inward and outward direct investment. There was overwhelming support for a CDIS for inward direct investment and very strong support for conducting a CDIS for outward direct investment.9 As well, the IMF’s Committee on Balance of Payments Statistics (BOPCOM) at its meeting in October 2006 gave approval for the CDIS to proceed. The IMF decided to proceed in March 2007.

1.7 The CDIS was initially undertaken for the reference date of end-December 2009. At its meeting in Shanghai, China in November 2009, the BOPCOM endorsed the IMF proposal to conduct the CDIS on an annual basis. In December 2010, the IMF released the results of the 2009 CDIS. Seventy-two economies participated expanding to about 100 economies at the time of preparing this update.

Strategy to Implement the CDIS

1.8 To implement the CDIS, a practical strategy was adopted by the IMF, made up of four main pillars. The first pillar was the production of the CDIS Guide finalized in 2010 (and now updated by this Guide).10 The second pillar was the extension of invitations to participate in the CDIS to all members of the IMF and some nonmembers (this step was undertaken in 2007). The third pillar involved training and workshops on a broad regional basis over the period 2008–2012, with the goal of facilitating participation in the CDIS of a large number of developed, developing, and emerging market economies around the world. The fourth pillar was the involvement of international and regional organizations in actively promoting the CDIS with their member states.

1.9 The CDIS is carried out annually and the IMF is making continuous efforts to broaden participation and improve the quality of reported data. As part of these efforts, STA contacted selected CDIS participants in 2013–2014 to bring to their attention large bilateral asymmetries between CDIS data reported by them and data reported by their main counterpart economies (see more about this initiative in Chapter 6). For the dissemination of CDIS data and metadata, STA released in December 2014 an updated CDIS website (http://data.imf.org/CDIS) featuring maps, tables, and relevant documents as well as new web tools that allow users to customize data downloads. Additionally, the IMF continuously provides advice and training on direct investment through the IMF headquarters and regional courses and workshops, and technical assistance, as part of STA’s capacity building work program.

1.10 The Special Data Dissemination Standard (SDDS) Plus11 was established in 2012. The SDDS Plus includes nine additional data categories that an adhering economy commits to fully observe by the end of 2019. These data categories include, among others, participation in CDIS.12

1.11 Currently, participation by economies in the CDIS involves a commitment to submit results of the core data to the IMF within nine months after the end of the reference year; results are to be released by the IMF within 12 months after the end of the reference year. Revised or more detailed core data for the previous years should be provided to the IMF at this time as well (see paragraph 4.25). CDIS metadata are also to be provided and updated to reflect the most recent CDIS data submission.

Data to Be Compiled for the CDIS

Core Data

1.12 Economies participating in the CDIS have agreed to compile:

  • For inward direct investment: The value of outstanding positions by immediate (first) direct investor, by counterpart economy, for both net equity and net debt instruments (the corresponding debt instrument assets and liabilities reported separately), as of the reference date (end-December).

1.13 In addition, economies are asked to provide the following information on outward direct investment, where significant:

  • For outward direct investment: The value of outstanding positions by immediate (first) counterpart economy, for both net equity and net debt instruments (the corresponding assets and liabilities reported separately), as of the reference date (end-December).

1.14 The values on the books of the DIENT should be used for both inward and outward direct investment. To the maximum extent possible, the concepts and principles in the sixth edition of the IMF’s Balance of Payments and International Investment Position Manual (BPM6) and the fourth edition of the OECD Benchmark Definition of Foreign Direct Investment (BD4) are used as the basis for compiling data reported in the CDIS.

1.15 The CDIS seeks to obtain direct investment data by immediate counterpart economy as part of the core datasets. Where bilateral information may be confidential, compilers are asked to report regional breakdowns that would overcome the confidentiality concerns. While such regional data would be of less analytical value than economy detail, they would, nonetheless, be of greater value than including such data in an “all other” category, that is, combining all confidential and unallocated data13 into a single figure without regional allocation.

Additional Items

1.16 Economies may wish to collect the additional items for their own use; however, these data are not requested to be submitted to the IMF. Of particular value are:

  • Industry (in addition to the breakout of data for resident enterprises that are financial intermediaries sought on the IMF CDIS Data Reporting Templates)
  • Round tripping
  • Income
  • Financial transactions
  • Market values on additional bases (unlisted equity is to be reported on the CDIS using one specific proxy for market value, i.e., “Own Funds at Book Value”–see paragraph 3.12)
  • Ultimate investing economy (UIE).14

1.17 Further discussion on industry classification, direct investment income and financial transactions, market valuation of equity, UIE, pass-through funds, and round tripping is presented in Appendix III.

Organization of the CDIS Guide

1.18 The Guide is organized as follows:

  • Chapter 1: Introduction. This chapter provides general information.
  • Chapter 2: Units to Be Surveyed. This chapter helps to establish the survey frame of statistical units involved in direct investment (i.e., DIENTs and DIs).
  • Chapter 3: Information to Be Collected in the Survey. This chapter identifies information that is to be collected and relevant accounting principles such as valuation.
  • Chapter 4: Compilation and Reporting of Direct Investment Statistics. This chapter provides detailed guidance on CDIS compilation using assets/liabilities and directional principle presentational bases. This chapter also presents some predefined presentational tables for the dissemination of CDIS results on the IMF website.
  • Chapter 5: Undertaking a Direct Investment Survey. This chapter explores some of the practical issues involved in conducting the survey by identifying the main tasks and suggesting a timeframe.
  • Chapter 6: Consistency and Validation of CDIS Data. The purpose of this chapter is to assist compilers in improving the quality of direct investment data by using some recommended self-assessment tools and by assessing consistency with IIP and CDIS data reported by counterpart economies (new chapter).

1.19 There are five appendices:

  • Appendix I includes the detailed CDIS data reporting templates and metadata questionnaire.
  • Appendix II discusses residence and institutional units in more detail than in Chapter 2.
  • Appendix III describes industry classification and round tripping in more detail.
  • Appendix IV provides model survey forms for inward and outward direct investment. These model survey forms are updated and are fully aligned with international statistical guidelines.15
  • Appendix V presents the regional grouping as of the time of writing this Guide.
1Data on both the Asset/Liability basis and the Directional Principle basis are useful for analysis. For example, data on the Asset/ Liability basis are consistent with monetary, financial, and other balance sheet data, and thus facilitate comparisons between these data sets. Data on the Directional Principle basis assist in understanding the motivation for direct investment and take account of control and influence; in the directional presentation, reverse investment can be seen as equivalent to the withdrawal of investment; see paragraph 6.44 in the sixth edition of the Balance of Payments Manual and International Investment Position Manual (BPM6). Data on direct investment are needed on an immediate counterparty basis to adequately monitor flows and stocks. See more about Asset/Liability and Directional Principle bases in Chapter 4.
2Economies are encouraged to provide data separately on debt instrument assets and liabilities. However, it is recognized that, due to the need to preserve the confidentiality of data, in some cases, economies may need to provide data by counterpart economy only on total debt instrument positions (netting assets and liabilities), or perhaps even less detail. For additional information about confidentiality considerations see Chapter 5.
3The CDIS data reporting template and metadata questionnaire are briefly presented in Chapter 4.
4Detailed inward and outward data reporting templates and metadata questionnaires used at the moment of writing this update are included in Appendix I. The IMF CDIS website (documents section) will include the most up-to-date templates and questionnaires.
5The balance sheet approach (BSA) focuses on the examination of “position data” (i.e., assets and liabilities) in an economy. The emerging market crisis in the 1990s and early 2000s highlighted the need for closer attention to vulnerabilities through development of sectoral balance sheets. By carefully examining positions in assets and liabilities (including bilateral positions, which can trigger large adjustments in capital flows), the BSA can be a useful complement to the traditional flow analysis.
6The BIS compiles and publishes statistics on international debt securities. Its data collections were revised in 2012 to more closely align them with the recommendations in the Handbook on Securities Statistics, which sets out an internationally agreed-upon framework for classifying securities. For an explanation of the revisions to the BIS debt securities statistics, see Enhancements to the BIS Debt Securities Statistics, Gruić and Wooldridge (2012). The BIS debt securities statistics are available at www.bis.org/statistics/secstats.htm. The Handbook on Securities Statistics is available at www.imf.org/external/np/sta/wgsd/hbook.htm.
8A task force was established to examine the feasibility of conducting a CDIS. The members of the task force were the European Central Bank (ECB), the Eurostat, the OECD, UNCTAD, the World Bank, and the IMF. In addition, representatives from six economies assisted the task force in its work. These economies were Australia, Belgium, Hong Kong SAR, South Africa, the United Kingdom, and the United States.
9A reason for the stronger support for undertaking a CDIS for inward direct investment than for outward is that, for several of the economies surveyed, outward direct investment was not significant and/or more difficult to cover.
10The 2010 Guide was developed under the guidance and with the input of a task force of selected IMF members and international agencies. The members of the task force were Brazil, the People’s Republic of China, Hong Kong SAR, France, Japan, Mexico, the Netherlands, Oman, South Africa, the United Kingdom, and the United States, ECB, Eurostat, OECD, UNCTAD, the World Bank, and the IMF.
11The SDDS Plus is open to all SDDS subscribers but is aimed at economies with systemically important financial sectors. The focus on stronger data dissemination by a narrower range of economies is designed to improve data transparency and help strengthen the international financial system. Adhering to the SDDS Plus is voluntary, but once a country adheres, it undertakes to meet the most rigorous data dissemination and data quality standards within the Fund’s Data Standards Initiatives.
12The SDDS Plus Guide for Adherents and Users elaborates on SDDS Plus requirements (for additional information on SDDS Plus see www.imf.org/external/np/exr/facts/data.htm).
13See paragraph 4.21 for the definition of confidential and unallocated data.
14See additional information about UIE in Annex 10 in BD4, Annex III, and in paragraphs 4.156 and 4.157 in BPM6.
15In the CDIS Guide released in 2010, the model survey forms were included in Chapter 3.

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