Direct investments

Definition

Foreign direct investment (FDI) is defined as cross-border investment in enterprises with the objective of establishing a lasting and significant influence over business activities. Where investors hold 10% or more of the shares or voting rights, they are considered to have a significant degree of influence. A strategic long-term relationship is what differentiates FDI from portfolio investment.

The German FDI statistics observe the concepts and requirements set out in the sixth edition of the IMF’s Balance of Payments and International Investment Position Manual, 2009 (BPM6) and the OECD’s Benchmark Definition of Foreign Direct Investment, Fourth Edition, 2008. For the EU Member States and euro area countries, the resulting statistical data submission requirements are laid down in a European Commission Regulation. Moreover, a European Central Bank (ECB) guideline specifies the reporting commitments of the national central banks of the Eurosystem (Commission Regulation (EU) No 555/2012 of 22 June 2012 and Guideline (ECB) No 23/2011 of 9 December 2011).

Transactions and stocks

The data on FDI are incorporated into three sets of statistics: The financial account – as a sub-account of the balance of payments – contains, on a monthly basis, the reported transactions at market value. The international investment position (i.i.p.) shows stocks at the end of each quarter. The FDI stock statistics report shows stocks at book value at the end of the year, based on corporate financial statements.

More information can be found in the document methodological notes on direct investments.

Foreign affilates statistics (FATS)

Pursuant to the FATS Regulation, outward FATS comprise three characteristics on foreign affiliates.

• Number of affiliates abroad that are ultimately controlled by German investors
• Number of employees of these foreign affiliates (measured in full-time equivalents)
• Annual turnover (annual production value at banks) of these foreign affiliates

All direct or indirect majority stakes in enterprises abroad (including branches and permanent establishments) are included in the calculation of outward FATS variables, provided they are ultimately controlled by German investors. Control is the ability to determine the business policy of a dependent enterprise. In practice, an investor is deemed to have control if they hold (directly and/or indirectly) more than 50% of the shares or voting rights. Owing to the reporting threshold that applies to the foreign direct investment stock statistics, outward FATS likewise only contain characteristics on cross-border controlled enterprises whose total assets exceed €3 million or the equivalent thereof.

Economic activities are classified in line with the internationally harmonised classification of economic activities, NACE Rev 2, according to the main focus of the foreign affiliates’ activities. FATS do not include Section A: Agriculture, forestry and fishing, and Section O: Public administration and defence; compulsory social security.

For insurance companies and banks, a different definition of annual turnover applies.

• For insurance companies, instead of annual turnover, gross premiums written and assumed under insurance contracts are recorded.
• For banks, instead of annual turnover, annual production value is recorded. This comprises net interest received, current income from shares and other variable-rate securities, commissions received, net profit or loss on financial operations and other net operating income.