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Ultimate sources and destinations of New Zealand's direct investment

Author

Matthew Haigh

Abstract

Statistics New Zealand publishes annual information on levels of direct investment broken down by country, both for foreign investment in New Zealand and New Zealand investment overseas, as part of its Balance of Payments (BoP) and International Investment Position (IIP) statistics. A direct investment relationship is classified as being 10 percent or more of the ordinary shares or voting power of an enterprise, and it could be in the form of equity capital, or in other capital such as loans or bonds.

This paper investigates what New Zealand's stock of direct investment by country would look like if it was compiled on an ultimate source or destination basis. In the published BoP and IIP statistics, the country allocation represents the country in which the immediate non-resident counter-party is resident, as recommended by the International Monetary Fund's latest Balance of Payments Manual. Ultimate direct investment statistics would more accurately show where funds are actually coming from and going to.

Investors frequently use entities located in offshore centres to channel direct investment funds, often for tax purposes. Ultimate direct investment statistics would reduce the impact of special purpose entities/holding companies on country breakdowns, potentially increasing investment with the United States, Asia, and Europe. It may also reduce the amount of investment into New Zealand from around the Pacific, given that New Zealand enterprises are often immediately controlled by the Asia/Pacific regional head office of a larger company based elsewhere.

pdf icon. Ultimate sources and destinations of New Zealand's direct investment (PDF, 227KB)

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