What to Do When Foreign Direct Investment Is Not Direct or Foreign : FDI Round Tripping

Aykut, Dilek ; Sanghi, Apurva ; Kosmidou, Gina

World Bank, Washington, DC

关键词: FDI;    DFI;    INVESTMENT;    FOREIGN DIRECT INVESTMENT;    BILATERAL INVESTMENT TREATY;   

DOI  :  10.1596/1813-9450-8046
RP-ID  :  WPS8046

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

As globalization has intensified,multinational enterprises' investments have become asophisticated set of financial transactions that aredifficult to monitor and classify by the home and hostcountries. In some cases, what is classified as foreigndirect investment is rather "indirect foreign directinvestment," channeled through a third country.Indirect flows have increased significantly in recent years,now accounting for almost 30 percent of global foreigndirect investment flows. Indirect foreign direct investmentflows also capture the flow of domestic funds channeledthrough offshore centers back to the local economy in theform of direct investment, also known as "foreigndirect investment round tripping." These investments donot offer the benefits of typical foreign direct investment,and may lead to tax revenue and welfare losses. Roundtripping is mostly channeled through offshore financial ortransshipping centers. In most cases, domestic companiesround trip their investments to benefit from preferentialtreatments reserved for certain countries and their firms.The most important policy measure to reduce round trippingactivity and mitigate its impact is to improve the businessenvironment for all firms; this can foster domestic andforeign investment, and may, to some extent, also curbforeign direct investment round tripping. Nevertheless,countries also need to adapt to the new playing field forforeign direct investment, and recognize the trade-offs oftheir national policies on capital flows. National policymeasures must be complemented by international actions. Atthe same time, all indirect foreign direct investment flowsshould be closely monitored, something that is bestconducted in coordination with international partners.