New method for calculating foreign direct investment permits company group analysis
The detailed results of the foreign direct investment stock statistics for 2010 to 2013 are now available for the first time based on the new calculation method, which was implemented as part of the harmonisation measures in accordance with the new OECD Benchmark Definition of Foreign Direct Investment (FDI). This has resulted in a significant reduction in FDI stocks.
The underlying components of the OECD definition correspond to those of the definition in the current IMF Balance of Payments Manual, which is used for the international investment position (IIP). However, while gross figures are recorded for FDI stocks in the IIP, capital links within multinational groups are netted in these FDI stock statistics. This means, for example, that the forwarding of FDI via special purpose entities and the use of tax and economic incentives for foreign investment by domestic investors are no longer included in the calculation.
Compared with the previous calculation, loans to the investors are now deducted and cross-border affiliated loans are allocated according to the domicile of the group's headquarters. If the group's headquarters are domiciled in Germany, the affiliated loans of the enterprises in Germany are counted as positive (lending) or negative (borrowing) German direct investment abroad. The latter is also referred to as outward FDI. If the group's headquarters are domiciled abroad, the cross-border affiliated loans of the enterprises in Germany are recorded as positive (borrowing) or negative (lending) FDI in Germany, which is also called inward FDI.
The inclusion of cross-border, intra-group claims of investment enterprises – comprising loans to their shareholders and to affiliated enterprises – results in a significant reduction in FDI stocks compared with the previous calculation.
German corporate assets abroad (outward FDI)
At the end of 2013, German corporate assets abroad came to €908 billion on balance and thus rose only marginally on the year by €7 billion. This increase was dampened by exchange rate effects, as the euro appreciated in 2013, particularly against the US dollar, and therefore the conversion of direct investment assets in foreign currency into euro produced lower figures. The new calculation method results in claims from outward FDI amounting to €1.2 trillion at the end of 2013, while liabilities totalled €300 billion. These liabilities comprised loans of foreign investment enterprises to their German investors (€200 billion) and affiliated loans from foreign enterprises whose group headquarters are domiciled in Germany to enterprises in Germany (€100 billion).
Two-thirds of primary outward FDI was attributable to European countries at the end of 2013. These countries accounted for almost all liabilities arising from outward FDI. The Netherlands had the largest share, with claims arising from outward FDI relationships amounting to €231 billion and liabilities totalling €148 billion. An analysis of German FDI in individual countries shows that, based on the new calculation method, German corporate assets in the United States made up the largest share (€152 billion). Outward FDI in China is growing in importance. At the end of 2013, it came to €47 billion and thus ranked second among non-EU countries.
Foreign corporate assets in Germany (inward FDI)
Inward FDI came to €658 billion at the end of 2013 and was thus only €6 billion higher than at the end of 2012. It comprised, on the one hand, liabilities totalling €827 billion. More than half of these were attributable to investment capital (€448 billion) of foreign investors, the remaining part was attributable to investor loans (€118 billion) and affiliated loans from enterprises abroad to enterprises in Germany whose group headquarters are domiciled abroad (€261 billion). On the other hand, there were claims of enterprises in Germany arising from loans to foreign investors (€35 billion) and to affiliated companies abroad (€135 billion).
Inward FDI at the end of 2013 was primarily attributable to investors from European countries. Investors from the Netherlands (€154 billion) and Luxembourg (€116 billion) should be mentioned in particular. As these countries are well-known holding locations, in future inward FDI is to be allocated not only to primary investor countries but also to the country of domicile of the group's headquarters.
Detailed results broken down by country and economic sector as well as the new methodological notes on "Foreign direct investment stock statistics" can be found in Special Statistical Publication 10 on the Bundesbank's website.