ABSTRACT
Direct investment abroad (referred to below as DIA) is obviously a complex phenomenon because of the dual aspect of investment in both capital assets and financial assets. The DIA recorded in the balance of payments is by definition part of the liabilities of the subsidiaries controlled by the source country of the investment flow. The balances of payments record the following transactions as DIA in the strictest meaning of the term: setting up fully owned subsidiaries, acquiring controlling shares in foreign companies (otherwise the acquisitions are portfolio investments), increasing the capital of such companies and purchasing premises. In France, the defin is extended to include medium-to long-term lending to these companies, which is considered to be a capital contribution to subsidiaries. Broader definitions of direct investment include all assets controlled in other countries. This means that, in addition to the assets already mentioned, reinvested earnings and long-term outside financing are included in proportion to the percentage of the capital held. Some institutes also publish statistics on capital assets controlled abroad (reports on ‘MOFAS’ in the United States or the SESSI surveys in France). Even though the reinvested earnings are not recorded
directly in the French balance of payments, their contribution to the balance can still be established through the surveys of outstanding French assets abroad conducted by the Banque de France since 1989. There is also a counterpart to DIA in the assets of establishments abroad, thus providing control of capital assets.
