EARTHTRENDS DATA TABLES For more information, please consult http://earthtrends.wri.org TECHNICAL NOTES: FINANCIAL FLOWS DEFINITIONS AND METHODOLOGY Foreign Direct Investment (FDI) is private investment in a foreign economy to obtain a lasting management interest (10 percent or more of voting stock) in an enterprise. The IMF defines FDI in its Balance of Payments manual as the sum of equity investment, reinvestment of earnings, and inter-company loans between parent corporations and foreign affiliates. It became the dominant means for funds transfer from rich to poor countries after the liberalization of global financial markets in the 1970s and accounts for more than one-half of financial flows to developing countries. Data are based on balance of payments information reported by the International Monetary Fund (IMF), supplemented by data from the OECD and official national sources. Data are expressed in net inflows (inflows minus outflows) and are in million current U.S. dollars. Exports of Goods and Services represents the value of all goods and other market services provided to the rest of the world. Exports include the value of merchandise, freight, insurance, transport, travel, royalties, license fees, and other services, such as communication, construction, financial, information, business, personal, and government services. They exclude labor and property income (formerly called factor services) as well as transfer payments. Data is presented in millions of current $US dollars. WRI calculates Exports of Goods and Services as a percent of Gross Domestic Product (GDP) by dividing total exports by GDP figures provided by the World Bank. External Debt Service as a Percent of Exports is the sum of principal repayments and interest actually paid in foreign currency, goods, or services on long-term debt, interest paid on short-term debt, and repayments (repurchases and charges) to the IMF, shown as a percent of total exports of goods and services. Both long-term public and private debt are included. Private debt is an external obligation of a private debtor that is not guaranteed by a public entity. Exports of goods and services include income and workers' remittances. These data show, among other things, the burden of external debt payments in relationship to the country’s ability to obtain foreign currency. The main sources of external debt information are reports to the World Bank through its Debtor Reporting System (DRS) from member countries that have received International Bank for Reconstruction and Development (IBRD) loans or International Development Association (IDA) credits. These data are supplemented by information on loans and credits from the Organization for Economic Cooperation and Development (OECD), major multilateral banks, loan statements from official lending agencies in major creditor countries, and estimates by World Bank and International Monetary Fund (IMF) staff. Debt data are reported to the World Bank in the units of currency in which they are payable, and if necessary are converted to U.S. dollars at the average exchange rate for the given year. Official Development Assistance (ODA) and Aid include concessions by governments and international institutions to developing countries to promote economic development and welfare. The data shown here record the actual receipts of financial resources or of goods or services valued at the cost to the donor, less any repayments of loan principal during the same period. Values are reported in million current US dollars. Grants by official agencies of the members of the Development Assistance Committee (DAC) are included, as are loans with a grant element of at least 25 percent, and technical cooperation and assistance. The data on development assistance are compiled by the DAC and published in its annual statistical report, Geographical Distribution of Financial Flows to Aid Recipients, and the DAC annual Development Co-operation Report. Official Development Assistance Per Capita is total ODA divided by the mid-year population. ODA per capita values are obtained directly from the World Bank. Official Development Assistance as a Percent of GNI is calculated as a proportion of gross national income (GNI, formerly GNP), and can be used to measure the level of importance of foreign aid to a country's economy. GNI is the sum of value added by all resident producers, plus any product taxes not included in the valuation of output, plus net receipts of primary income from abroad. Values are obtained directly from the World Bank. Balance of Trade is the net exports (exports minus imports) in million current U.S. dollars of goods and services for a particular country. It includes all transactions between residents of a country and the rest of the world involving a change in ownership of general merchandise, goods sent for processing and repairs, nonmonetary gold, and services. If a country’s exports exceed its imports, it has a trade surplus and the trade balance is said to be positive. If imports exceed exports, the country has a trade deficit and its trade balance is said to be negative. A change in the trade balance may indicate change in a country's economic health or in the relative cost of domestic products when compared with international prices. Data are based on the International Monetary Fund (IMF) Balance of Payment and International Financial Statistics databases, supplemented with estimates by World Bank staff. More information can be found in the fifth edition of the IMF’s Balance of Payments Manual 1993 (available online at http://www.imf.org/external/np/sta/bop/BOPman.pdf). Sources include customs data, monetary accounts of the banking system, external debt records, information provided by enterprises, surveys to estimate services transactions, and foreign exchange records. Net National Savings is equal to gross national savings (gross domestic product minus final consumption, plus net income and net current transfers from abroad) minus the value of consumption of fixed capital (the replacement value of capital used up in the process of production). The United Nations system of national accounts defines gross national income as "the aggregate value of the balances of gross primary incomes for all sectors; (gross national income is identical to gross national product (GNP) as hitherto understood in national accounts generally.)" Data are shown as a percent of GNI. Adjusted Net Savings(previously “genuine savings”) is equal to net national savings plus education expenditure, minus energy depletion, mineral depletion, net forest depletion, and carbon dioxide damage. Adjusted Net Saving is an indicator of sustainability. Persistently negative rates of savings must lead, eventually, to declining well-being. It measures the true rate of savings in an economy after taking into account investments in human capital, depletion of natural resources and damage caused by pollution. Data are shown as a percent of GNI. For a more complete description of the methodology used by the World Bank, please visit: http://lnweb18.worldbank.org/ESSD/essdext.nsf/44ByDocName/GreenAccountingAdjustedNetSavings. FREQUENCY OF UPDATE BY DATA PROVIDERS The World Bank publishes the World Development Indicators each year in April. Data for this table were taken from the 2004 on-line edition, which typically include values through 2002 or 2003. Savings rates are updated irregularly, and, as of February 2005, were available through 2001. DATA RELIABILITY AND CAUTIONARY NOTES Foreign Direct Investment: Because of the multiplicity of sources, definitions, and reporting methods, data may not be comparable across countries. Data do not include capital raised locally, which has become an important source of financing in some developing countries. In addition, data only capture cross-border investment flows when equity participation is involved and thus omit nonequity cross-border transactions. For a more detailed discussion, please refer to the World Bank’s World Debt Tables 1993-1994 (volume 1, chapter 3). Exports of Goods and Services: Data on exports are compiled from customs reports and balance of payments data. Although the data on exports and imports from the payments side provide reasonably reliable records of cross-border transactions, they may not adhere strictly to appropriate definitions of valuation and timing, or correspond with the change-of-ownership criterion. Neither customs nor balance of payments data usually capture the illegal transactions that occur in many countries. Goods carried by travelers across borders in legal but unreported shuttle trade may further distort trade statistics. External Debt as a percent of Total Exports: Variations in reporting rescheduled debt affect cross-country comparability. Other areas of inconsistency include country treatment of arrears and of nonresident national deposits denominated in foreign currency. With the widening spectrum of debt instruments and investors and the expansion of private non-guaranteed borrowing, data are increasingly difficult to measure. Official Development Assistance: Data are not directly comparable, since the ODA figures do not distinguish among different types of aid, which can affect individual economies in different ways. Because data are based on donor country reports, they may not match aid receipts recorded developing and transition economies. According to the World Bank, "the nominal values used here may overstate the real value of aid to the recipient." The purchasing power of foreign aid can decrease when price and exchange rates fluctuate, grants are tied to specific policy restrictions, or technical assistance pays for the work of firms in other countries. Balance of Trade: Because of the variety of sources, data may be inconsistent. Differences in collection methods—such as timing, definitions of residences and ownership, and exchange rate valuations—contribute to net errors and omissions. In addition, smuggling and other illegal or quasi-legal transactions may be unrecorded or misreported. Net National Savings and Adjusted Net Savings (ANS): The data which were used to calculate savings rates are mostly from official sources and are generally considered to be reliable. Due to methodological or data limitations, the calculation omits several important resources including soils, fish, water resources, water and air pollutants. The calculation is at best an approximation and should not be used as a stand-alone measure of the savings rate of a particular country. These data are useful as a comparison measure and to demonstrate trends over time. SOURCES FDI, Trade Data, Debt Service, and Development Assistance: Development Data Group, World Bank. 2004. World Development Indicators 2004 online. Washington, D.C.: The World Bank. Available online at http://www.worldbank.org/data/onlinedbs/onlinedbases.htm. Net National Savings and Adjusted Net Savings (ANS): Development Data Group, World Bank. 2003. Available online at: http://lnweb18.worldbank.org/ESSD/envext.nsf/44ByDocName/GreenAccountingAdjustedNetSavings Washington, D.C.: The World Bank.