Foreign direct investments: documentation of statistics

Data description (SIMS 3.1)

Direct investments to Finland describe the capital that a foreign investor has invested directly in a unit located in Finland under the investors' control or influence. Direct investments abroad describe the capital that a Finnish investor has invested directly in a unit located abroad under the investors' control or influence. The statistics compilation is based on Regulation (EC) No 184/2005 of the European Parliament and of the Council on Community statistics concerning balance of payments, international trade in services and foreign direct investment. The statistical data can be used to assess the degree of globalisation in the economy.

Concepts and definitions (SIMS 3.4)

Asset/liability principle

According to the asset/liability principle, financial transactions included in direct investments are presented according to the data given in the balance sheet of the reporting entities either as assets from abroad or as liabilities to abroad. The asset/liability principle does not take into consideration reverse investments, which are included in direct investment according to the directional principle. Direct investments are recorded in the balance of payments according and international investment position to the asset/liability principle.

Capital inflow/outflow

In inward foreign direct investments, the capital invested on net by a foreign direct investor in Finnish direct investment enterprises in a given period. Correspondingly, in outward investments, the capital invested on net by a Finnish direct investor in foreign direct investment enterprises in a given period.

Directional principle

Financial assets and liabilities are netted in direct investments data according to the directional principle by the direction of the control//influence between the direct investor and direct investment enterprise. Direct investments to Finland describe the capital that a foreign investor has invested directly in an enterprise located in Finland under the investors' control or influence. Direct investments abroad describe the capital that a Finnish investor has invested directly in an enterprise located abroad under the investors' control or influence. Reverse investments, or financial assets of the direct investment enterprise from direct investors, and investments between affiliates are taken into account in the data according to the directional principle. The financial assets and liabilities of affiliates whose ultimate control is located in Finland are netted and recorded as outward direct investments. Correspondingly, the financial assets and liabilities of affiliates whose ultimate control is located abroad are netted and recorded as inward direct investments. Data on direct investments according to the directional principle are published in the statistics on Foreign direct investments. Extended directional principle refers to the directional principle applied under the new statistical standards (BPM6/BD4).

Fellow enterprise

Fellow enterprises are connected to one another through a shared parent company. Fellow enterprises cannot have a direct investment relationship with each other.

Foreign direct investment

A direct investment relationship exists between a resident enterprise in one economy (direct investor) and an enterprise (direct investment enterprise) that is resident in an economy other than that of the direct investor, when the direct investor has control (over 50% of the voting power) or influence (from 10% to 50%) over the direct investment enterprise. In other words, direct investment reflects the objective of establishing a lasting interest between the direct investor and the direct investment enterprise. The direction of the investment (either inward or outward) is determined in the statistics based on the direction of the control/influence between parties. Furthermore, foreign direct investments refer to financial transactions between parties in a direct investment relationship. The capital of direct investments is divided into equity and debt-based items. The counter item of reinvested earnings presented in the current account is recorded in equity. Equity includes transactions with shares in corporations, share subscriptions in rights issues and other equity transactions. For listed companies, the value of equity is recognised at market value and for other enterprises at own funds at book value. The debt capital of direct investments includes individual loans, leasing credits, deposits in consolidated accounts, subordinate loans comparable to equity, trade credits, accrued charges/credits and deferred charges/credits, bonds, and money market instruments. If both the creditor and debtor practise other financial intermediation than insurance, only so-called perpetuals are classified as debt capital of direct investments. The statistics on foreign direct investments are published according to the so-called extended directional principle. The new statistical standards (BPM6/BD4) recommend that the asset/liability principle is applied to direct investments in the statistics on balance of payments and international investment position. Similarly, the extended directional principle is recommended to be applied in connection with examinations of direct investments by country or sector. Due to divergent ways of presentation, the figures for direct investments given in the statistics differ from one another.

Immediate direct investor

The institutional unit located abroad that is first in the enterprise's control and influence chain.

Local enterprise group

Enterprises in the same country owned by the same controlling enterprise belong to a local enterprise group. Foreign affiliates and those domestic affiliates where the ownership chain goes through foreign countries are not included in the local enterprise group in question.

Pass-through investment

Investments where a domestic investment enterprise receives capital from a foreign direct investor and then reinvests it in its own direct investment enterprises abroad. The same pass-through investment item increases both inward and outward foreign direct investments. When pass-through investments are negative, foreign investors have unwound their foreign investments channelled through Finland, which decreases both Finland's inward and outward direct investments.

Reinvested earnings

Reinvested earnings are calculated as the difference between the earnings on equity accruing to direct investors and distributed earnings. The counter item of reinvested earnings presented in the current account is recorded in equity.

Reverse investment

Reverse investment refers to the acquisition by a direct investment enterprise of a financial claim on its direct investor

Stock, position

The value of the capital invested by a foreign direct investor in Finnish direct investment enterprises at a given moment (inward direct investments). Correspondingly, the value of the capital invested by a Finnish direct investor in foreign direct investment enterprises at a given moment (outward direct investments).

Ultimate direct investor

An institutional unit using control in a foreign associated company or affiliate located abroad or in the home country that is topmost in the ownership chain of the direct investment enterprise. The ultimate direct investor is not controlled by any other institutional unit. The ultimate direct investor can also be a private person permanently living abroad or in the home country.

Institutional mandate (SIMS 6)

Quality assurance (SIMS 11.1)

Release calendar (SIMS 8.1)

User access (SIMS 8.3)

Confidentiality - policy (SIMS 7.1)