The concepts described on these pages are words and expressions used in statistics with a specific, limited meaning. In everyday speech the word may have a different meaning. In connection with each definition you can find information about which sets of statistics use the concept.

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Foreign direct investment

A direct investment relationship exists between a resident enterprise in one economy (direct investor) and an enterprise (direct investment enterprise) that is resident in an economy other than that of the direct investor, when the direct investor has control (over 50% of the voting power) or influence (from 10% to 50%) over the direct investment enterprise. In other words, direct investment reflects the objective of establishing a lasting interest between the direct investor and the direct investment enterprise. The direction of the investment (either inward or outward) is determined in the statistics based on the direction of the control/influence between parties. Furthermore, foreign direct investments refer to financial transactions between parties in a direct investment relationship.

The capital of direct investments is divided into equity and debt-based items. The counter item of reinvested earnings presented in the current account is recorded in equity. Equity includes transactions with shares in corporations, share subscriptions in rights issues and other equity transactions. For listed companies, the value of equity is recognised at market value and for other enterprises at own funds at book value. The debt capital of direct investments includes individual loans, leasing credits, deposits in consolidated accounts, subordinate loans comparable to equity, trade credits, accrued charges/credits and deferred charges/credits, bonds, and money market instruments. If both the creditor and debtor practise other financial intermediation than insurance, only so-called perpetuals are classified as debt capital of direct investments.

The statistics on foreign direct investments are published according to the so-called extended directional principle. The new statistical standards (BPM6/BD4) recommend that the asset/liability principle is applied to direct investments in the statistics on balance of payments and international investment position. Similarly, the extended directional principle is recommended to be applied in connection with examinations of direct investments by country or sector. Due to divergent ways of presentation, the figures for direct investments given in the statistics differ from one another.

Statistics using the definition

Validity of the definition

  • Valid until (31 December 2078)

Source organisation

  • IMF