Provisional data for the first nine months of 2006, show that the foreign direct investment flows in Malta amounted to Lm487.7 million while direct investment abroad was Lm2.1 million, the National Statistics Office reported yesterday.

As from 2004, for Balance of Payments purposes, data started to be collected on a country and economic activity breakdown basis. For the first time, this release presents a set of tables introducing Direct Investment broken down by a number of countries, regional aggregates and economic activity aggregates.

The fifth edition of the IMF Balance of Payments manual defines Direct Investment as “the category of international investment that reflects the objective of a resident entity in one economy (i.e. direct investor) obtaining a lasting interest in an enterprise resident in another economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise, and significant degree of influence by the investor on the management of the enterprise. Direct investment comprises not only the initial transaction establishing the relationship between the investor and the enterprise but also all subsequent transactions between them and among affiliated enterprises, both incorporated and unincorporated.”

Direct Investment is sub-divided into two categories:

Foreign Direct Investment (FDI) in Malta – where a foreign investor owns 10 per cent or more of the ordinary shares (or voting power) of an enterprise in Malta, and Direct Investment Abroad – where a Maltese resident entity (or an individual, government or association) owns 10 per cent or more of the ordinary shares of an enterprise in another economy. These companies can be subsidiaries, affiliates or branches.

Direct Investment is made up of three basic components:

• Equity Capital – comprising equity investment in subsidiaries, associates and branches. Capital contributions (e.g. provisions of machinery) and purchase of immovable property are also classified under equity capital.

• Reinvested Earnings – consisting of the direct investor’s share (i.e. attributed to the shareholding of the company) of earnings not distributed as dividends by subsidiaries, associates and branches not remitted to the direct investor. Losses are regarded as negative re-invested earnings.

• Other Capital – including inter-company transactions such as borrowing and lending of funds, and trade debits and credits between direct investors and direct investment enterprises. Transactions between enterprises in different economies that share the same direct investor are also considered as direct investment and included under other capital. Direct Investment flows include transactions occurring during a particular period. Besides accumulated flows, Direct Investment Stock Position takes into account any market value revaluations, re-classifications, and exchange rate changes prevailing at the end of the reporting period.