View this email in your browser

哥伦比亚大学国际直接投资展望中文版都可以在我们的网站查看:http://ccsi.columbia.edu/publications/columbia-fdi-perspectives.

Columbia FDI Perspectives

Perspectives on topical foreign direct investment issues
No. 165  January 18, 2015

Editor-in-Chief: Karl P. Sauvant (Karl.Sauvant@law.columbia.edu)
Managing Editor: Maree Newson (mareenewson@gmail.com)
 
Governments and international organizations use the International Monetary Fund (IMF) and Organisation for Economic Co-operation and Development (OECD) accounting method to measure and report on foreign direct investment (FDI) flows and stocks. The IMF/OECD method recommends defining FDI as 10% or more foreign equity in a local entity. The United Nations Conference on Trade and Development measures FDI performance as a country’s share of global FDI relative to its share of gross domestic product.
 
There are approximately 10,000 economic development organizations (EDOs), including investment promotion agencies, in the world with a remit for investment promotion.[1] Government expenditures worldwide for attracting FDI are an estimated US$50 billion a year.[2]
 
Because FDI is critical for economic development and a significant amount of taxpayers’ money is being spent on attracting FDI, this raises a key question: how are EDOs accounting for FDI?
 
The author consulted with national and subnational EDOs in developed and developing countries and with international organizations involved in FDI. Ten common elements in EDO accounting methods were identified:
 
  1. Mandate to promote greenfield FDI only.
  2. Announced FDI is recorded, not only realized investment.
  3. Focus on FDI projects, jobs and capital investment not FDI flows.
  4. Capital investment defined as the total amount the company is investing, even if the capital is raised locally.
  5. FDI defined as more than 50% foreign equity.
  6. The location of the ultimate parent firm’s headquarters is recorded as the source country.
  7. Qualification that announced investments will take place through evidence that the company will make the investment and has started the investment process.
  8. Validation over time that announced investments have been realized.
  9. Recording the role of the EDO in securing the project.
  10. Assessing the quality of investment attracted, typically based on size of projects, average salaries and research and development and headquarters operations.
 
While there is homogeneity in the common elements in FDI accounting, every EDO does it differently. Most EDOs have developed accounting methods ad-hoc or not at all.
 
As the official IMF/OECD accounting method is not designed for investment promotion, there is a clear need for an internationally accepted FDI accounting method for EDOs. As one EDO from a developing country put it: “Most EDOs do not know the criteria that should be used for the qualification of FDI successes or for evaluating their role in the success.” Another EDO from a developed country stated that: “If the government is going to give you $10 million you need to show the return on investment.”
 
I propose therefore a standardized accounting method for EDOs to attract greenfield FDI based around eight key areas:
 
  1. Company information: Company name; type (public/private); percentage foreign equity; origin country of the ultimate parent.
  2. Project details and status: Project type (new/expansion/merger and acquisition/joint venture); project status (announced/opened); description of the project.
  3. Location and sector information: Location of the investment down to site address; the International Standard Industrial Classification sector code or similar for each project, together with the business function.
  4. Investment and employment: Total capital investment and jobs to be created within three years; validation of investment and jobs over time.
  5. Qualification that announced investments will happen: Evidence from investors that their projects will happen (project information; business plan; an official press release or written declaration) and/or that the investment process has started (company registration; proof of a real estate transaction and recruitment). 
  6. Evidence of EDO involvement in securing the investment: Inbound enquiry from EDO marketing activities; meeting the companies and providing business case information or an incentives package before companies announced their investments; organizing site visits for companies; providing services to help facilitate their investment.
  7. Quality of investment: The technology level of each project using international definitions; average salary levels; identifying strategic projects that are high tech and have high levels of investment and job creation.
  8. Return on investment: Key metrics are cost per project, cost per job and the investment multiplier relative to EDO budgets. Return on investment of incentives should also be calculated.
 
By adopting a uniform accounting methodology for greenfield FDI, EDOs would have a framework for how to record and measure such FDI, organizational performance and return on investment. If EDOs publish their FDI results, FDI trends and EDO performance could be compared consistently across and within countries.
 
The accounting method can be further developed for EDOs that have a mandate to promote other types of FDI (e.g., by measuring safeguarded jobs in the case of acquisitions) and to encompass a wider evaluation of the direct and indirect impact of FDI.
 

* Henry Loewendahl (henry.loewendahl@wavteq.com) is CEO of WAVTEQ Limited. The author is grateful to Maria Borga, Magnus Runnbeck and Mira Wilkins for their helpful peer reviews. The views expressed by the author of this Perspective do not necessarily reflect the opinions of Columbia University or its partners and supporters. Columbia FDI Perspectives (ISSN 2158-3579) is a peer-reviewed series.
[1] Author’s estimate.
[2] Including investment promotion budgets, incentives awarded to foreign investors and investor development (training, skills, R&D, infrastructure, utilities, supplier development). See www.incentivesmonitor.com for volume of incentives.
The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Henry Loewendahl, ‘A new foreign direct investment accounting methodology for economic development organizations,’ Columbia FDI Perspectives, No. 165, January 18, 2016. Reprinted with permission from the Columbia Center on Sustainable Investment (www.ccsi.columbia.edu).” A copy should kindly be sent to the Columbia Center on Sustainable Investment at ccsi@law.columbia.edu. 
For further information, including information regarding submission to the Perspectives, please contact: Columbia Center on Sustainable Investment, Maree Newson, mareenewson@gmail.com.
 
Most recent Columbia FDI Perspectives 
  • No. 164, Anne van Aaken, "International investment law and decentralized targeted sanctions: an uneasy relationship,” January 4, 2016.
  • No. 163, Moataz Hussein, “Toward balanced Arab regional investment regulations,” December 21, 2016.
  • No. 162, Robert Basedow, “Preferential investment liberalization under bilateral investment treaties: How to ensure compliance with WTO law?” December 7, 2015. 
All previous FDI Perspectives are available at http://ccsi.columbia.edu/publications/columbia-fdi-perspectives/

Other relevant CCSI news and announcements
  • On January 21, 2016 from 4-6 pm, CCSI and the Center on Global Legal Transformation will co-host a joint event at Columbia Law School that combines a book launch of Governing Access to Essential Resources, edited by Katharina Pistor and Olivier De Schutter, and a preview of CCSI’s forthcoming report, Land Deal Dilemmas: Grievances, human rights, and investor protection. This event draws on the research contained in the book and report to consider how we govern “essential” resources – those necessary for the survival of human beings – and whether existing property rights regimes are adequate for the task, particularly in the context of land-based concessions awarded by host governments to foreign investors. Speakers include Nikhil AnandRichard Brooks, Kaitlin Cordes, Lise Johnson, Susan Karamanian, Katharina Pistor, and Peter Rosenblum. To register, and for more information, please visit our website.
  • On January 29, 2016, the CCSI/Global Economic Governance Programme at Oxford University online forum on New Thinking on Investment Treaties continues with a talk by Lauge Poulsen on “The Politics of Investment Treaties in Developing Countries.” For more information and for the schedule of speakers, please visit our website hereAll presentations will be posted here. Please subscribe to the channel and visit our website for updates.
  • On February 4, 2016, CCSI's Fall 2015 International Investment Law and Policy Speaker Series, co-sponsored by Crowell & Moring LLP and Baker & McKenzie LLP, concludes with a talk by Robert Howse, Lloyd C. Nelson Professor of International Law, New York University School of Law, on “Courting the Critics of Investor-State Dispute Settlement: The EU Proposal for a Judicial System for Investment Disputes.” The talk will take place at Columbia Law School, Jerome Greene Hall, Room 546 (435 W 116th Street, between Amsterdam and Morningside Avenues) from 12:10pm-1:00pm. Past speakers and select videos are available on our website.
Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
Ph: 
(212) 854-0689
Fax: (212) 854-7946
Copyright © 2016 Columbia Center on Sustainable Investment (CCSI), All rights reserved.


unsubscribe from this list    update subscription preferences 

Email Marketing Powered by Mailchimp