Glossary of Terms
FOREIGN DIRECT INVESTMENTS
Resident of an economy - an entity that has a center
of economic interest in the economic territory of a country usually indicated
by a one-year stay in that economy. The one-year period is suggested
only as a guideline and not as an inflexible rule.
References: 5th edition of Balance of Payment Manual (BPM5) (International Monetary Fund); Detailed Benchmark Definition of the Foreign Direct Investment (Organization for Economic Cooperation and Development); and Glossary of Foreign Direct Investment Terms (Survey of Implementation of Methodological Standards for Direct Investment (SIMSDI) 1993 System of National Accounts
Foreign Direct Investment – the category of
international investment made by a resident entity in one economy (direct
investor) with the objective of establishing/obtaining a lasting interest
in an enterprise resident in an economy other than that of the investor
(direct investment enterprise). ”Lasting interest” implies
the existence of a long-term relationship between the direct investor
and the enterprise and a significant degree of influence by the direct
investor on the management of the direct investment enterprise. Direct
investment involves both the initial transaction between the two entities
and all subsequent transactions between them and among affiliated enterprises,
both incorporated and unincorporated.
Reference: 5th edition of Balance of Payment Manual (BPM5) (International Monetary Fund); Detailed Benchmark Definition of the Foreign Direct Investment (Organization for Economic Cooperation and Development); and Glossary of Foreign Direct Investment Terms (Survey of Implementation of Methodological Standards for Direct Investment (SIMSDI)
Registered foreign direct investments - refer to
original/initial and additional paid-up capital investments and contributions
by non-residents as single proprietors as approved by the Department
of Trade and Industry, or as incorporators and/or stockholders in newly-registered
and existing domestic stock corporations and domestic partnerships as
approved by the Securities and Exchange Commission. These include acquisition
of shares in other SEC-registered companies by newly-registered and/or
existing domestic stock corporations and domestic partnerships and exclude
inter-company loans and statutory inward remittances and security deposits
required from foreign corporations or multinational firms that have been
licensed to operate in the Philippines.
Reference: Securities and Exchange Commission RA 7042 or the Foreign Investment Act with its IRR as amended by RA 8179
Approved foreign direct investment -
represent the amount of contribution or share of nonresidents in investment projects
within the Philippine economic territory as approved by investment promotion
agencies such as the Board of Investments, Philippine Economic Zone Authority,
Subic Bay Metropolitan Authority and the Clark Development Corporation,
and other government entities as may be created for the same purpose.
Approved foreign direct investments do not represent actual investments
generated but rather investment commitments, which may or may not be
realized immediately or in the future. These consist of equity, loans
and reinvested earnings.
Reference: Consolidated FDI Quarterly Reports (NSCB and Inter-Agency Committee on Foreign Direct Investment Statistics)
Foreign Direct Investment in the Philippines Balance of Payments - all equity investments by nonresidents in the Philippines, except equity securities transacted through the stock exchange that do not exceed 10 percent of the total shares of the resident enterprise. It is assumed that a nonresident investor has a significant influence in management and expresses lasting interest in or relationship with the resident enterprise in which they invest. These include the following major investment:
Foreign Equity Capital – comprises: (i) equity in branches; (ii) all shares in subsidiaries and associates (except nonparticipating, preferred shares that are treated as debt securities and included under direct investment, other capital); and (iii) other capital contributions of foreign investors in a direct investment enterprise.
Reinvested earnings and undistributed branch profits of foreign direct investment enterprises - comprised of foreign direct investors’ shares in proportion to equity held, of earnings that foreign subsidiaries and associated enterprises do not distribute as dividends (reinvested earnings), and earnings that branches and other unincorporated enterprises do not remit to foreign direct investors (undistributed branch profits).
Other foreign direct investment capital - covers the borrowing or lending of funds between foreign direct investors and subsidiaries, branches, and associates - including debt securities, suppliers’ credit, and nonparticipating, preferred shares (which are treated as debt securities).
Reference: 5th edition of Balance of Payment Manual (BPM5), International Monetary Fund; 1993 System of National Accounts Detailed Benchmark Definition of the Foreign Direct Investment, Organization for Economic Cooperation and Development); and Glossary of Foreign Direct Investment Terms, Survey of Implementation of Methodological Standards for Direct Investment (SIMSDI) 1993 System of National Accounts
Direct investment enterprise in the Philippines Balance of
Payments - 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.
Reference: 5th edition of Balance of Payment Manual (BPM5), International Monetary Fund 1993 System of National Accounts
are per NSCB Resolution No. 12, Series