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A direct investment enterprise is an incorporated enterprise in which a foreign investor owns 10 percent or more of the ordinary shares or voting power for an incorporated enterprise or an unincorporated enterprise in which a foreign investor has equivalent ownership.

Ownership of 10 percent of the ordinary shares or voting stock is the guideline for determining the existence of a direct investment relationship. An “effective voice in the management”, as evidenced by an ownership of at least 10 percent, implies that the direct investor is able to influence, or participate in, the management of an enterprise; absolute control by the foreign investor is not required.

Direct investment enterprises are defined as those entities that are either directly or indirectly owned by the direct investor and comprise:

- subsidiaries (an enterprise in which a non-resident investor owns more than 50 percent);

- associates (an enterprise in which a non-resident investor owns between 10 and 50 percent) and;

- branches (unincorporated enterprises wholly or jointly owned by a non-resident investor).

When the 10 percent ownership requirement for establishing a direct investment link with an enterprise is met, certain other enterprises that are related to the first enterprise are also regarded as direct investment enterprises. Hence the definition of direct investment enterprise extends to the branches and subsidiaries of subsidiaries of the direct investor (so-called “indirectly owned direct investment enterprises”).

The OECD Benchmark Definition of Foreign Investment and the IMF Balance of Payments Compilation Guide describe the scope of enterprises, both directly and indirectly owned, that should be included in the definition. The OECD’s specification of this group of enterprises is referred to as the “Fully Consolidated System"

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.


Statistical Theme: Financial statistics - Foreign direct investment

Created on Tuesday, September 25, 2001

Last updated on Monday, March 3, 2003