SUNBIZ

Our International Investment Position And What It Means

International Investment Position (IIP) refers to the value of overseas assets owned by the residents and also the value of domestic assets owned by non-residents that is outstanding at the
15 Nov 2014 00:00
Our International Investment Position And What It Means
The Pearl Resort & Spa, an example of Foreign Direct Investment.

International Investment Position (IIP) refers to the value of overseas assets owned by the residents and also the value of domestic assets owned by non-residents that is outstanding at the end of each reporting period.

The Net International Investment Position (NIIP) which is the key component of the national balance sheet is the difference between an economy’s stock of foreign assets and its foreign liabilities and this may be positive or negative.

The components of Net International Investment Position are Foreign direct investment (FDI), portfolio investment, other investment and reserve assets (which include foreign currencies, gold and special drawing rights).

Liabilities are reported with the same classification, except for “reserve assets,” which have no equivalent on the liabilities side.

The International Investment Position data is also used to measure the rates of return, analysing economic structure, and studying the relationship to domestic sources of financing.

The higher the Net International Investment Position does not necessary mean that a country owes the rest of the world a large amount of money or it’s a bad thing.

It could be driven by FDI which is a good thing. In addition, it is important to clarify that Net International Investment Position is not the same as external debt by Government.

In this regard, it must be pointed out that Net International Investment Position is much larger than Fiji Government foreign debt.

What the statistics say

Interim data shows that Fiji’s Net International Investment Position as at June quarter of 2014 stood at -$6,526.1 million.

This indicates that the value of Fiji’s liabilities exceeded the value of its assets or that the value of overseas Fiji investments was well below the value of foreign investments in Fiji.

In March quarter of 2014, the figure stood at -$6,292.8 million, a further decrease by $233.3 million.

Foreign Debt is the total amount of debt that a country owes to other countries and the Net Foreign Debt is the total value of foreign assets less foreign liabilities.

The breakdown of debt for the June quarter of 2014.

In this period the net foreign debt was $143.1 million dollars, an increase by $41.1 million when compared against the March of quarter 2014 due to the increase in Liability of Loans.

Net Foreign Equity reflects the total value of Fijian assets in foreign ownership less the total value of overseas assets owned by Fijians.

In June quarter of 2014, the net foreign equity for Fiji was -$6,671.1 million as shown in Table 2.

Comparing against the previous quarter, the net foreign equity increased by $274.3 million and this is due to the increase in Liability of Equity.

Conclusively the balance sheet depicts a typical developing nations balance sheet.

Which is not a bad thing, but we all know borrowing for revenue generating asset is key.

From a Fiji perspective, the increasing foreign direct investments remain strong or headed in the right direct.

Tax revenue is the major source of income for all governments. Notable is that some taxes for vehicles are 300 per cent in other more developed countries.

– This is an informative publication, sponsored by The Fiji Sun, Fiji Bureau of Statistics and HFC Bank. All views expressed or implied are purely of the Treasurer at HFC Bank, Peter Fuata.

 




Fiji Sun Instagram
Fiji Plus
Subscribe-to-Newspaper