Carlos Varela's presentation at the FDI Statistics Workshop (20 March 2014) during the session on whether or not FDI statisics are still a useful metric when measuring investment globalisation. Find out more at http://www.oecd.org/daf/inv/measuring-globalisation-fdi-statistics-workshop-2014.htm

1. Measuring investment globalisation:
Are FDI statistics still a useful metric?
Comments
Carlos Varela, Central Bank of Colombia

2. 1. FDI and new productive capacity
2. FDI companies and their linkages with national
economy
3. FDI and financing of the current account

3. 1. FDI and new productive capacity.
Nowadays information regarding how companies are using the
resources of FDI is not provided by FDI statistics. Therefore, it prevents
us from identifying if FDI flows are use to finance current expenditure,
investment (gross capital formation) or another purpose.
In that sense, it would be desirable to identify the FDI that goes into
investment (definition of national accounts).

4. 2. FDI companies and their linkages
with national economy
International literature has found evidence not only about FDI
spillovers (transfers of technology and knowledge to national
companies) but also backward linkages produced by FDI companies.
Currently FDI statistics do not afford us the possibility of
identifying this kind of effects. Therefore, some additional indicators
could be included in FDI statistics surveys.

5. 3. FDI and financing of the current account
FDI has been recognized as an important and more stable
source of financing current account deficits in emerging
markets. However, it could be difficult to identify which parts
of FDI have been used this way.
For example, in Colombia in recent years several
transactions of the FDI have been identified as Round
Tripping.

6. 1.) Transactions between non-residents, which use a resident as
an intermediary End result: Change of ownership between non-
residents who increase liabilities and assets by FDI.
2.) Transactions between residents, which use a non-residents
as an intermediary End result: Change of ownership between
residents who increase liabilities and assets by FDI.
This FDI does not remain in the country that intermediate, so
it does not create productive capacity.
3. FDI and financing of the current account

7. According to international standards, this should be recorded both
as an inflow in FDI and an outflow in direct investment abroad.
In Colombia the following is done:
Detailed analysis the transactions to verify that they correspond to
round tripping, using the following sources:
3. FDI and financing of the current account

8. Round tripping: Sources of information
Administrative records for statistical use: This register reports by
transaction the date, company name, amount, country, economic sector,
among others.
This is complemented with specialized sources such as financial statements of
companies, business and management reports, and contacts with companies.
We identify these transactions separately in internal reports to contribute to
the economic policy decisions of the central bank.
All of these sources allow us to recreate the financial structure of the
transaction.