Definition: Reverse investment

Category: Foreign direct investment

Occurs when a direct investment enterprise acquires a financial claim on its direct investor(s). Because direct investment is recorded on a directional basis, capital invested by the direct investment enterprise in its direct investor (reverse investment) is regarded as an offset to capital invested in the direct investment enterprises by a direct investor and its related enterprises, except in instances when the equity participations are at least 10% in both directions.

Such reverse investment transactions are recorded based on the direction of the direct investment relationship:

1) When the claims are not sufficient to establish a second, separate direct investment relationship, the reverse investment transactions should be recorded according to the directional principle of the direct investment relationship as follows:

- As direct investment in the reporting economy, claims on direct investors in the data for the economy in which the direct investment enterprise is resident.
- As direct investment abroad, liabilities to affiliated enterprises in the data for the economy in which the direct investor is resident.

2) When the equity participations are at least 10% in both directions, two direct investment relationships are established. In these circumstances, equity and other capital transactions between enterprises are recorded as direct investment claims and liabilities in both directions, as follows:

- As direct investment abroad for transactions on assets.
- As direct investment in the reporting economy for transactions on liabilities. http://ec.europa.eu/eurostat/ramon/statmanuals/files/OECD_Handbook on_Eco_Glob_Indicators.pdf