Foreign direct investment

A foreign direct investment is an investment across country borders where the investor plans to establish a long-term economic connection and exercise effective influence on the operation in an investment object. This definition is in line with international guidelines in this area. Since the data collection is based on accounts information, 20 per cent ownership is applied as the limit for distinguishing between direct investments and portfolio investments. (International statistics recommendations give a 10 per cent limit.) Directly invested capital covers investors' share of contributions and acquired equity in the investment object as well as investors' assets and liabilities from and to the investment object. Other asset and liability relations between companies in the same group are also included in directly invested capital, e.g. loans between Norwegian and foreign fellow enterprises. The foreign direct investment statistic is calculated according to the directional principle and the revised directional principle.

Fellow enterprises: fellow enterprises are enterprises that are directly or indirectly controlled or influenced by the same enterprise in the ownership hierarchy, but neither fellow enterprise controls or influences the other.

The directional principle: the directional principle is a presentation of direct investment data organized according to the direction of the direct investment relationship, i.e. financial assets and liabilities between the direct investor and the direct investment enterprise are netted.

The revised directional principle: The revised directional principle relates to the treatment of investments between fellow enterprises. The principle is only partly applied in the foreign direct investment statistic as we only cover debt instruments between fellow enterprises.

Income: Income on direct investments consists of distributed earnings, reinvested earnings and income on debt. 

Net income on debt: Income on debt minus interest expense.

Reinvested earnings: Reinvested earnings comprise of the share of earnings that is not paid out to investors as dividend. It is instead withheld in the direct investment enterprise. This represents an income in the balance of payments and retained earnings in the financial account. 

Other changes: Other changes consist of exchange rate revaluations and other market and price related revaluations. The exchange rate revaluations are calculated, while other types of revaluations are taken from the data collection.

Ultimate investor country: The ultimate investor country is defined as the country where the economic agent that controls the largest direct investor in a Norwegian enterprise is registered.

Asset/liability principle: The asset/liability principle records all foreign direct investment claims on and obligations to non-residents using the normal balance sheet, and the stocks and income are presented as gross assets and liabilities. I.e. the direction of the investment does not affect whether it is recorded as assets or liabilities.

The industry classification is from the reference year 2010 in line with the revised Norwegian Standard industrial classification (SN07), which is based on the EU’s industry standard NACE Rev. 2 and the UN’s industry standard ISIC Rev. 4. Limited companies with operations in several industries are, in principle, classified according to the operation that makes the largest contribution to the company’s total value added. Further details of SN07 are given in the publication NOS Standard industrial classification (C 182) and on Statistics Norway’s website at Standard Industrial Classification

Prior to the reference year 2010, the industry classification was based on NACE Rev 1 and ISIC Rev. 3.

Name: Foreign direct investment
Topic: External economy

Division for Financial Accounts

National level.

Annual statistics on stocks and Income.

Reports to Eurostat, the Organization for Economic Co-operation and Development (OECD), the International Monetary Fund (IMF) and United Nations conference on trade and Development (UNCTAD).

Raw data and revised microdata are filed in accordance with Statistics Norway’s standard for filing instructions (DataDok).

The purpose is to provide an overview of Norwegian direct investments abroad and foreign direct investments in Norway, in the form of stocks, income and transactions, both for national and international users and to report to international organizations like Eurostat, IMF and OECD. The international organisations use the data for political and analytical purposes.

Statics on foreign direct investment has been compiled by Statistics Norway since 2006. Norges Bank compiled the data before 2006, based on data from the Norwegian Tax Administration.

In the Statbank you will find:

- Stocks back to 1998

- Income back to 2004

- Transactions from 1993 to 2010 and from 2019

The main users are the Statistical Office of the European Communities (Eurostat), the Organization for Economic Co-operation and Development (OECD), the International Monetary Fund (IMF) and United Nations Conference on Trade and Development (UNCTAD). The statistics is also used by the Norwegian authorities, embassies, educational establishments and research institutions.

No external users have access to the statistics and analyses before they are published and accessible simultaneously for all users on ssb.no at 8 am. Prior to this, a minimum of three months' advance notice is given in the Statistics Release Calendar.

Previously, the foreign direct investment statistical series has been in coherence with the Foreign Direct Investments under the Balance of Payments in the sense that the Directional Principle has been the basis for the compilation of all foreign direct investment figures. The statistic has additionally further specifications of direct investments, broken down by shares and other equity, debt instruments, distributed earnings, reinvested earnings and income on debt, and by country (ultimate investor country and immediate counterpart country) and industry.

After the implementation of the revised international manuals; BPM6/BMD4, the foreign direct investment figures in the different statistics go separate ways, i.e. foreign direct investment in the Balance of Payments is now compiled according to the Asset/Liability Principle and foreign direct investment published here is compiled according to the directional principle. In addition, there are several revisions of the directional principle available from year 2013, of which one is related to the treatment of investments between fellow enterprises.      

Statistics Norway’s data collection from the reporters is based on the Statistics Act § 10

Regulation (EC) No. 184/2005 of the European Parliament and of the Council of 12 January 2005 on Community statistics concerning balance of payments, international trade in services and foreign direct investment, which entered into force on 11 June 2005. This regulation is replaced by no. 555/2012, which was entered into force in January 2015.

The statistics are compiled in line with recommendations by the International Monetary Fund (IMF), as stipulated in The Balance of Payments Manual, 5th edition from 1993 (BPM5) and from 2015 the 6^th edition (BPM6). Definitions and principles in this manual are in accordance with corresponding rules for the specification of the national accounts, as provided in the manual of System of National Accounts (SNA2008) and EU’s version (ESA2010), which covers special conditions in the EU-member countries. Norway has an obligation to adhere to this manual in line with the EEA agreement. The OECD has more detailed recommendations on principles and definitions in the statistics on direct investments. These are given in the manual OECD Benchmark Definition of Foreign Direct Investment 4^th edition (BMD4).

The statistic on foreign direct investments abroad cover, in principle, all Norwegian institutional sectors, but non-financial enterprises in this context is the most important sector by a wide margin, with a sample size of over 3000 enterprises from the two sample-surveys combined. For licenced financial enterprises we have total coverage. Data from the general government sector and for second homes are gathered from administrative sources.

The foreign direct investment statistics are presented as follows:

- Stocks, income and transactions.

- Stocks and income are broken down by shares and other equity, debt instruments, distributed earnings, reinvested earnings and income on debt. The data are also broken down by country and industry.

- Transactions are broken down by shares and other equity, debt instruments and reinvested earnings. The data are also broken down by country and industry.

- Investments between fellow enterprises are calculated according to the revised directional principle from 2013.

- Inwards foreign direct investments in Norway are also broken down by ultimate investor country from 2018, and the data is presented in a supplementary table.

- Transactions data from 1993 to 2010 broken down by country and industry are found in closed time series in the Statbank, as well as transactions data broken down by country and industry from 2019.

Data sources:
The foreign direct investment statistics has two main data sources:

- The sample survey “Information on investments abroad” provides information on the foreign enterprises that the Norwegian enterprise owns, or it associated with, including accounting information on annual financial dividend and equity.

- The sample survey “Balance of payments data reporting” provides information on shares and other equity, internal debt instruments in the enterprise groups and other financial balance sheet and result data like interests and dividend.

Figures for Norwegian households' investments in second homes abroad and figures for foreign investments in second homes in Norway are calculated from several administrative sources.

Population:

Information from annual reports, administrative registers, internet and media are used to map the population of enterprises with assets of liabilities abroad. The total population is unknown.

Sample:

The sample survey “Information on investments abroad” is sent to a sample containing the largest and most important enterprises with foreign direct investments in addition to a sample of small and medium sized enterprises. I.e. Norwegian enterprises with ownership from 20 per cent in an enterprise abroad.
https://www.ssb.no/en/innrapportering/naeringsliv/di

The sample survey “Balance of payments data reporting” covers all big and medium sized enterprises with inwards or outwards direct investments.
https://www.ssb.no/en/innrapportering/naeringsliv/utund-aar

Estimates on investments in second homes are made based on currency, tax and price information. 

The foreign direct investments statistics are based on the following data sources:

- The two most important surveys are the collection of non-financial enterprises “Balance of payments data reporting” and “information on investments abroad”.

- Data from licenced financial enterprises, i.e. banks, financial service enterprises, insurance enterprises and pension funds, are collected from the ORBOF, FORT and PORT reports.

-  Data on results after taxes are collected from the survey “Information on investments abroad” and the Income statements from the Norwegian Tax Administration.

- Data from the general government sector and for second homes are gathered from administrative sources.

Editing:

Collected data is controlled and edited at enterprise level, at different aggregate levels and with help from time series analyses, based on information from annual reports and income statements. For normal publications, the last two years get edited.

Calculations:

- We calculate total equity for foreign controlled enterprises in Norway based on data from the “Balance of payments data reporting” survey and for foreign enterprises owned from Norway based on data from the “Information on enterprises abroad” survey. If the investor, both outwards or inwards, only owns a part of the share capital we make a percentage calculation, and if the investor owns 100 per cent the total equity is just the sum of all the relevant equity items.

- Reinvested earnings are calculated based on results after taxes that are collected from the “information on investments abroad” survey and income statements from the Norwegian Tax Administration. We then deduct dividends that are collected from the two surveys.  

- Transactions are calculated as a change in stocks from one year to the next minus calculated and reported revaluations. Both sample surveys contain currency information that makes it possible to calculate exchange rate revaluations. Other types of revaluations are collected in the survey «Balance of payments data reporting».

Not relevant

Figures are not published if less than three enterprises form a cell in the table, since this would lead to the risk of identification, i.e. the figures could be traced back to the respondent. This also applies when there are more than three units, if one of the respondents is so big that it can be identified.

In the latest international guidelines for the compilation of foreign direct investments (BMD4 and BPM6) there are some new extensions to the directional principle, one is regarding the treatment of investments between fellows. The BMD4 says:

The direction of direct investment between fellow enterprises is determined according to the residency of the ultimate controlling parent of the fellow enterprises involved in the specific transaction/position. It the ultimate controlling parent is a non-resident in either of the economies of the fellow enterprises, all transactions and positions between these fellow enterprises are classified as inward FDI in both countries. If the ultimate controlling parent is resident in the economy of one of the fellow enterprises, all transactions and positions between that fellow enterprise and non-resident fellow enterprise are classified as outward FDI for the economy of the resident enterprise and as inward for the economy of the non-resident fellow enterprise.  

Debt instruments between fellows are from the reference year 2013 recorded according to this new directional treatment, without recalculation of previous year’s data.  

Stocks and income
The stocks and income for outgoing direct investments has followed the same principles from 1998, except for the treatment of investments between fellows from the reference year 2013, as mentioned above.

Until 2003, the stocks and income for inward direct investments were based on surveys conducted by Norges Bank and the Norwegian Tax administration. Since 2005, the stocks and income have been based on our two sample-based surveys.

Transactions
Until 2004, transaction figures for direct investments were based on surveys to Norges Bank and the Norwegian Tax administration. The data basis was the banks’ reporting of international transactions for customers (the Bravo reporting) and direct reports from the enterprises in the form of account relations with non-residents. From 2005 the data used in calculating the transactions are gathered from our two sample surveys. The transactions are calculated as changes in the stocks corrected for currency and other revaluations.

Break in time series
The change from NACE Rev 1. to NACE Rev 2. from reference year 2007 is of little importance to the direct investment statistics, due to the aggregated level of classification and only a few enterprises got reclassified.

Investments between fellow enterprises are from the reference year 2013 classified as inwards or outwards based on the residency of the ultimate investor (ultimate investor country). There has been no recalculation of the previous year’s data, and the change in methodology has made a significant impact on the debt instruments for both inwards and outwards direct investments.

The quality of the statistic is affected by the quality of the population register that is the basis for the data collection, as well as the quality of the data that is reported. Respondents can sometimes make errors when completing forms, and Statistics Norway's processing of the data during registration can lead to errors. Errors may include erroneous scales, e.g. kroner instead of thousand kroner, and wrong assessments by the respondents.

The statistic on foreign direct investments are based on Statistics Norway’s own sample-based surveys. Non-respondents in the balance of payments report are copied from last years report, if the enterprise reported the year before. In the “Information on investments abroad” survey, data from non-respondents are collected from the enterprise’s annual report or from the balance of payments report. Both surveys have a compulsory fine in the event of a reporting obligation not being met.

The total population of enterprises with assets or liabilities abroad is unknown but we are sure that the most important enterprises are covered by the surveys. Structural changes like mergers, acquisitions and demergers are challenging to keep track on and may cause sample errors.

Not relevant