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DIRECTIONAL PRINCIPLE

Statistics Directorate    
Definition:
Unlike other financial investments, direct investment is not recorded in the balance of payments on a strict asset/liability basis. Direct investments are recorded on a directional basis (that is, as resident direct investment abroad, or non-resident direct investment in the reporting economy).

Capital invested by the direct investment enterprise in its direct investor (reverse investment) is regarded as an offset to capital invested in the direct investment enterprise by a direct investor and its related enterprises. That is, such capital is regarded as disinvestment by the direct investor rather than as an asset of the direct investment enterprise, except when the equity participation’s are at least 10 percent in both directions and two direct investment relationships are therefore established.

Source Publication:
Report on the Survey of Implementation of Implementation of Methodological Standards for Direct Investment – IMF, OECD, March 2000 – Appendix II: Glossary of Foreign Direct Investment Terms.

Hyperlink:
http://www.imf.org/external/bopage/pdf/mar2000.pdf

Statistical Theme: Financial statistics - Foreign direct investment

Created on Tuesday, September 25, 2001

Last updated on Tuesday, March 04, 2003