Foreign Direct Investment (FDI) Methodology and Practice in Georgia

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Brief Methodology and Practice of Calculating FDI in Georgia

Definition, international standards and regulatory framework

Foreign investments are classified into three functional categories: Foreign Direct Investment (FDI), Portfolio Investment and Other Investment.

FDI is an important component of Georgia's Balance of Payments — the country's primary financial instrument for recording international transactions. FDI statistics have been compiled in Georgia since 1997, in accordance with:

Since 1997 — Balance of Payments Manual, Fifth Edition (IMF, Washington D.C., 1993)
Since 2009 — Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6) (IMF, Washington D.C., 2008)

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In addition to BPM6, the OECD Benchmark Definition of Foreign Direct Investment, Fourth Edition (OECD BD4) (OECD, Paris, 2008) and the IMF Coordinated Direct Investment Survey (CDIS) Guide (December 2008) are applied to ensure accurate definition, correct identification of direct investment relationships, and consistent compilation.

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FDI is a category of cross-border investment in which a resident of one economy holds a lasting interest in, and a significant degree of influence over, an enterprise resident in another economy. Direct investment encompasses not only the initial capital transaction but all subsequent financial transactions between the direct investor and the direct investment enterprise.

An investor is classified as a direct investor when they own at least 10 percent of the voting shares of an enterprise, or an equivalent degree of influence. Direct investors may be individuals, or incorporated and unincorporated private or state-owned entities.

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Data Sources

Primary sources used in FDI compilation

The primary sources of FDI data are Geostat's quarterly and annual statistical surveys on external economic activities of enterprises. Additional data are obtained from the following institutions:

Ministry of Economy and Sustainable Development of Georgia — on assets privatised by non-resident entities
Ministry of Finance and Economy of the Ajara Autonomous Republic — on assets privatised by non-resident entities
National Bank of Georgia — collects, processes and submits to Geostat on a quarterly basis data on FDI flows in Georgia's financial sector — specifically in commercial banks, insurance companies and microfinance organisations

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Survey Coverage and Selection Criteria

Criteria for including enterprises in the survey

The statistical survey on external economic activities covers enterprises from all regions of Georgia (controlled territories). Enterprises are selected for inclusion based on the following criteria:

The enterprise has a non-resident founder or owner
It carries out export or import transactions
It has received a loan from, or extended a loan to, non-residents
It holds deposits at non-resident banks
It owns 10% or more of the equity or share capital of a non-resident enterprise
It provides services to, or receives services from, non-residents

The list of surveyed enterprises is updated quarterly on the basis of activity type and classification of founders.

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FDI Components

Three main sub-categories

FDI is broken down into three main components: equity capital, reinvested earnings and debt instruments.

Equity Capital

E

Capital invested by the direct investor in the direct investment enterprise, including shares and equity participation.

Reinvested Earnings

R

The direct investor's share of earnings not distributed as dividends, retained and reinvested in the enterprise.

Debt Instruments

D

Inter-company debt transactions and other obligations between the direct investor and the direct investment enterprise.

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Historical Milestones and Data Availability

Development of methodology and dissemination over time

1997FDI data processing begins, broken down by investor country

2007Survey instruments revised to enable compilation of FDI data by sector of the economy, based on the principal activity of enterprises. Breakdown by type of information source also becomes possible.

2009FDI data become available by geographical region of Georgia

2016Data published with a breakdown by three main FDI components — equity capital, reinvested earnings and debt instruments. Time series for these components available from 2013.

2018Geostat begins publishing FDI data in an integrated format, covering both transactions and positions (stocks). Time series available from 2016.

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Publication Schedule

Preliminary and revised data release calendar

Release Calendar

Day 70 Preliminary quarterly data published on the 70th calendar day following the end of the reference period; summing four quarters yields preliminary annual data

15 August Revised annual data — published on 15 August of the following year, based on annual survey results

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Revised data invariably differ from the preliminary estimates. The principal reason is that enterprises submit their audited profit-and-loss statements only once a year.

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Positive and Negative FDI Values

Factors determining the sign of FDI indicators

The value of an FDI indicator can be either positive or negative. The principal factors that may cause a negative value include:

An increase or reduction in equity or share capital
A profit or loss recorded by the enterprise
A loan received from, or repaid to, a non-resident direct investor
Acquisition of an ownership stake in a resident enterprise by a non-resident, or conversely, redemption of a stake by a resident from a non-resident
Distribution of dividends

Since FDI is a financial category and is not confined to investment in fixed assets, both positive and negative values fall within internationally accepted methodological frameworks and standards.

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Notice: Detailed methodology is available at: More →