Using MNE Foreign Affiliate Data to Estimate Foreign Direct Investment via Ultimate Investing Country: A New Methodology Developed for USAID in Vietnam

45 Pages Posted: 1 Apr 2021 Last revised: 3 Apr 2021

See all articles by Seth Heller

Seth Heller

affiliation not provided to SSRN

Date Written: March 26, 2021

Abstract

Official foreign direct investment (FDI) statistics track FDI via direct investing nation rather than ultimate investing country (UIC). If a FDI project is sourced through an overseas subsidiary, normal FDI metrics will register that investment as being from the third country, not the home country of the multinational. There is a growing awareness that the large amount of FDI channeled through special purpose vehicles and offshore financial centers therefore makes official statistics unreliable: investment from certain nations may be significantly under or over counted. According to official statistics, the United States ranks 11th in terms of total amount of foreign direct investment (FDI) in Vietnam. As Vietnam joins the ranks of lower middle-income countries, and becomes more integrated into global value chains, a more representative methodology for calculating FDI would help Vietnam thoughtfully engage with foreign investors and support Vietnam's development objectives. This report, commissioned by the United States Agency for International Development (USAID) in Hanoi includes: 1) A literature review of FDI databases and FDI tracking methods, 2) a comparative analysis of the existing methods for tracking FDI via UIC, 3) a discussion on the feasibility of implementing those methods for Vietnam, 4) a novel method for estimating Vietnam’s inward FDI via UIC, 6) recommendations to USAID for further research and analysis.

Keywords: ultimate investors, bilateral foreign direct investment (FDI), phantom FDI, multinational enterprises, ultimate investing country (UIC), foreign affiliate statistics, international development, international finance, United States Agency for International Development (USAID), United Nations

Suggested Citation

Heller, Seth, Using MNE Foreign Affiliate Data to Estimate Foreign Direct Investment via Ultimate Investing Country: A New Methodology Developed for USAID in Vietnam (March 26, 2021). Duke Global Working Paper Series No. 37, Available at SSRN: https://ssrn.com/abstract=3813390 or http://dx.doi.org/10.2139/ssrn.3813390

Seth Heller (Contact Author)

affiliation not provided to SSRN

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