From left: Ralph Kozlow, Division Chief and Emmanuel Kumah, Deputy Division Chief in the IMF's Statistics Department. (Photo: IMF)
International Investment Positions
However, the quality and availability of direct investment data at the individual country and global levels can be improved. Ralph Kozlow, Division Chief and Emmanuel Kumah, Deputy Division Chief in the IMF's Statistics Department, talk about a new IMF initiative—the Coordinated Direct Investment Survey (CDIS)—to improve the coverage and comparability of foreign direct investment data.
IMF Survey online: What are you hoping to accomplish with the CDIS initiative? Have economies been receptive?
Kozlow: The CDIS is an IMF initiative to provide data on countries' direct investment positions by individual counterpart country—that is, it will show the source and destination of investment by individual country. All participating countries will collect and report data to the IMF on the geographical distribution of the stock of foreign direct investment in their economies, or "inward" direct investment—separately for equity and debt investment, by partner country—for December 31, 2009. Investing economies who can provide the data will also collect and report information on the stock of "outward" direct investment, separately for equity and debt investment, by partner country.
Our plans are to release initial results from the CDIS in late 2010 or early 2011, and comprehensive data should become available later in 2011. With this partner country dimension—the from-whom-to-whom dimension—countries will have access to data provided by their partner direct investment countries. The database that the IMF will release will enable countries to identify differences between their own direct investment data and the data compiled by partner countries, thereby highlighting areas where follow-up could lead to significant data improvements.
The CDIS initiative has been very strongly supported. To date, over 130 countries have responded positively to the invitation by the IMF's Managing Director to participate. This initiative builds on the success of the IMF-sponsored Coordinated Portfolio Investment Survey (CPIS), which is now conducted annually with more than 70 countries participating. I should also note that the IMF's interagency partners—including the Organization for Economic Cooperation and Development, the United Nations Conference on Trade and Development, the Statistical Office of the European Communities, and the European Central Bank, have strongly supported this initiative.
IMF Survey online: Why are data on direct investment so difficult to compile? Or is it that countries don't want to share this type of information?
What is foreign direct investment (FDI)?
FDI is a category of international investment in which an investor in one country, generally an enterprise, acquires an ownership interest that confers influence over the management of an enterprise in another country (defined as holding 10 percent or more of voting power). Direct investment positions include both the equity and debt positions between enterprises that are in a direct investment relationship.
FDI constitutes a major component of the international investment position (IIP) and balance of payments. Other components of cross-border capital recorded in the IIP and balance of payments include portfolio investment, reserve assets, financial derivatives, and other investment.
FDI is generally more stable than other forms of cross-border investment, such as portfolio investment. It may also bring to the recipient economy benefits such as technology transfer and management expertise. At the same time, large foreign investments in strategic sectors sometimes give rise to national concerns.
Kozlow: The main difficulty with compiling high quality direct investment data is that it requires that countries' national agencies undertake enterprise surveys, and this, in turn, often poses several challenges. For instance, national statistical compilers need a good legal basis to conduct enterprise surveys if they are to achieve high response rates. Also, adequate resources for data collection, data editing, compilation, and dissemination are required. Good quality data also rest on compilers having a good understanding of direct investment concepts and definitions.
Countries that currently compile data on direct investment positions report these data to the IMF on a global basis, as needed in the context of producing international investment position statistics. Under the new initiative, they will provide geographical detail. However, data for certain individual partner countries may have to be suppressed to avoid revealing confidential data pertaining to one or a small number of reporting enterprises.
IMF Survey online: Who are the main users of direct investment data?
Kumah: The main users of direct investment data are policymakers in government (principally in ministries of finance and industry, and central banks), international organizations, research organizations, and academic institutions. Clearly, with the increasing interest in globalization and, in particular, in learning more about the benefits as well as risks of cross-border investment, the number of users is growing.
IMF Survey online: You just returned from a CDIS seminar in Muscat, Oman and there are plans for more seminars. What is the purpose of these seminars? What feedback on the CDIS are you receiving from participants?
Kumah: The purpose of the CDIS seminar in Muscat was to explain the CDIS Guide and offer practical advice on how countries in the Middle East could take concrete steps to conduct enterprise surveys to gather data on direct investment positions and other related information. In countries that already conduct these surveys, the intention is to improve them. Similar CDIS seminars have been conducted in Europe, Latin America, Asia, and Africa, and more will be conducted in 2009.
The IMF conducted a regional workshop in Muscat, Oman in May 2008. (Photo: IMF)
Participants in the seminars were very enthusiastic about the opportunity to discuss their draft survey forms and to share their experiences. While many felt that it could be challenging to meet the new standards outlined in the CDIS Guide, they were prepared nonetheless to confront this challenge in view of the opportunity for them to be part of this global initiative to improve the quality of direct investment data. They also appreciated the opportunity that they will have to obtain data on direct investment involving their own countries from partner countries.
IMF Survey online: Is this survey a one-off exercise or are there plans to conduct such surveys on a more regular basis?
Kozlow: At this point, this is a one-off exercise, but prospects are good that it will become an annual exercise. A decision will be taken in the next one to two years on whether to conduct it on a regular basis, as is the case for the CPIS. The Fund's interagency partners, participating countries, and the IMF Committee on Balance of Payments Statistics will be consulted on this question.
Comments on this article should be sent to imfsurvey@imf.org
