Term paper 3

Trade and investment

Valuation

M are valued usually at CIF (Cost Insurance Freight)

X are recorded FOB (Free on Board)

=> M value higher than X value by the value of freight and insurance.

Trade classifications

SITC = Standard International Trade Classification

HS = Harmonized System

FDI definitions

• IMF BoP Manual (5th ed 1993) and OECD Benchmark Definition of FDI (3rd ed) 1996:

“the category of international investment that reflects the objective of obtaining a lasting interest by a resident entity in one economy in an enterprise resident in another economy...”

Components of FDI Flows and Stocks

* Equity capital

* Reinvested earnings: in addition to equity capital

* Intercompany loans: loans extended by the paternal company to the affiliate

Measurement

Approval vs. disbursements data – two sides of the FDI coin

Gross and net measures

Directional principle

Assignment 27 September 2010: Trade and investment

Provide an overview and brief analysis of developments in

international trade and investment flows over the last decade in

[country: XXX

Trade:

Limitation: Merchandise trade (excluding trade in services)

Main indicators:

* Total XM values (trade balance)* Composition of trade

* Major regional groups/countries: source (M)/destination (X)

FDI:

Limitation: Inward foreign direct investment (FDI) excluding outward FDI

and foreign portfolio investments (FPI)/foreign indirect investment

(FII). Main indicators:Total size (approved/disbursed/BoP-concept)Sectors (broad sectors, ISIC)Source countriesSectors/source countries