Canada's International Investment Position (IIP)

Canada's International Investment Position (IIP)
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Detailed information for fourth quarter 2006

Status:

Active

Frequency:

Quarterly

Record number:

1537

This statistical program measures Canada's asset and liability position with non-residents.

Data release - March 15, 2007

Description

Canada's international investment position is the statistical statement that presents the value and composition of the stock of Canadian financial claims on non-residents and Canadian financial liabilities to non-residents.

Canadian international financial assets are owned by Canadian residents and embody future economic benefits from non-residents. Canadian international financial liabilities are owned by non-residents and embody future economic benefits from Canadian residents. Financial assets store a value, but unlike most non-financial assets, they are not directly employed in productive activity. Instead, they are convertible into cash or other financial instruments.

The difference between total financial assets and total financial liabilities is referred to as the net international investment position. Put another way, Canada's net investment position is the difference between what Canada owns (its external assets) and what Canada owes (its external liabilities) to non-residents.

There are three classes of financial assets and financial liabilities in the international investment position: direct investment, portfolio investment and other investment. These three classes largely reflect the nature of the investment in another country.

In direct investment, the investor residing in one country has a significant influence on the management of an enterprise residing in another country; this means the direct investment also encompasses investment where there is a substantial influence to the point of having a controlling interest.

In portfolio investment, the investor in financial instruments does not have a significant influence on the non-resident issuer of the instruments. In other investment, there is also no influence from the investor's viewpoint, but unlike portfolio investment, there is generally no market to trade the instruments used to carry out the investment.

Government relies on these statistics to help assess Canada's financial condition, and to help assess economic integration between Canada and other nations. Other users of these statistics include the academic community, credit rating agencies, and supranational organizations, such as the International Monetary Fund (IMF) and the Organization for Economic Co-operation and Development (OECD).

Statistical activity

The Canadian System of National Accounts (CSNA) provides a conceptually integrated statistical framework for studying the state and behavior of the Canadian economy. The accounts are centered on the measurement of activities associated with the production of goods and services, the sales of goods and services in final markets, the supporting financial transactions, and the resulting wealth positions.

To produce financial statistics, the CSNA measures the economic dimensions of the public sector of Canada, including the financial inter-relationships among the thousands of entities that make up the three levels of government in Canada (federal, provincial and territorial, and local). In order to carry out this program, the CSNA maintains a universe of all public sector entities including their complex inter-relationships.

The Non-resident Sector Program is a component of the Canadian System of National Accounts (CSNA). The linkage is possible because the standards and conventions used to establish the Canadian residency of the transactors and to compile the transactions of Canadian residents with non-residents are identical to those used in the CSNA.

Reference period: Calendar year

Subjects

  • Balance of international payments
  • Economic accounts
  • Government financial statistics

Data sources and methodology

Target population

The universe for the international investment position includes all transactors that reside in Canada and hold assets with non-residents, as well as all transactors that reside in Canada and have liabilities to non-residents. The transactors can be businesses, governments, non-profit institutions, or households.

Most of the data used to derive the international direct investment position originate from surveys of Canadian companies that are asked to consolidate all of their Canadian operations and accordingly are referred to as Canadian enterprises. The survey frame is believed to contain up-to-date coverage of all Canadian enterprises having a significant amount of international assets or liabilities. This frame is constantly updated through a number of sources.

For the international portfolio investment position, assets data are collected from institutional investors.

For the international other investment position the data are gathered mostly from Canadian banks.

Instrument design

There are several questionnaires that collect data that are used directly for compiling Canada's international investment position. These are:

BP52 - Geographical distribution of capital (annual)
BP53 - Structure of Canadian companies in the reporting enterprise (annual)
BP54 -- Canadian portfolio investment (annual)
BP55 - Particulars of issues of funded debt and foreign bank borrowings (annual)
BP56 - Geographic distribution of selected long-term debt booked in Canada at Canadian banks and consolidated Canadian subsidiaries (annual)
BP59 -- Capital invested abroad by Canadian enterprises (annual)
BP59S -- Capital invested in secondary foreign companies by Canadian enterprises (annual)
BP60 - Canadian investment in non-Canadian corporations (annual)
BP61- Investment in Canada of non-Canadian Partnerships (annual)

The questionnaires used for the International Investment Position were designed at various times from the 1950's to the 1990's.

Sampling

Questionnaires dealing with direct investment or other investment are sent to Canadian enterprises known to have or believed to have significant international assets or liabilities, whereas the questionnaire dealing with portfolio investment is sent to institutional investors.

There are roughly 3200 firms that meet the sampling criteria for questionnaires dealing with direct investment or other investment, while there are approximately 600 firms that receive the portfolio investment questionnaire. These surveys are believed to cover close to 100% of the target population.

Data sources

Responding to this survey is mandatory.

Data are collected directly from survey respondents, extracted from administrative files and derived from other Statistics Canada surveys and/or other sources.

Questionnaires - Data are collected, in part, via annual questionnaires; response is mandatory for the surveyed entities. Respondents are instructed to send their completed questionnaires to the Balance of Payments Division within four weeks of receiving the questionnaire. A follow-up is done after an additional two weeks if no response is received.

Administrative data sources --
- Industry Canada (monthly list of Canadian companies with non-resident investments)
- Bank of Canada and the Office of the Superintendent of Financial Institutions (supplementary administrative sources provided by financial institutions)
- Finance Canada (data regarding monetary authorities)
- Citizenship and Immigration Canada (number of landed immigrants)
- Treasury Board (allowances)

Other Statistics Canada surveys --
- Canada's Balance of International Payments Quarterly Data (record no. 1534) provides data regarding recent direct investment and other investment transactions affecting both the asset and liability side of the international investment position.
- Canada's International Transactions in Securities Monthly Survey (record no. 1535) provides data regarding recent portfolio investment transactions affecting both the asset and liability side of the international investment position.

Other sources - A variety of other sources are used such as financial press, business publications, company reports, etc.

View the Questionnaire(s) and reporting guide(s).

Error detection

The raw data received from questionnaire respondents are submitted to edits to ensure consistency and coherence. Historical edits compare data from the latest period to data from earlier reference periods. When necessary, there is follow up with the respondent to verify or correct the data.

There is a manual comparison at an aggregate level with values from previous periods. When necessary, the manual comparison is made at a micro level.

The data received are also verified against publicly available sources such as securities filings and the financial press.

Imputation

Historical imputation is used for non-response. Results for the most recent reference period available are used. Data from companies' annual reports are sometimes used to help impute for non-response.

Estimation

Benchmark data on international investment positions are mostly collected on an annual basis. To estimate quarterly changes in the international investment positions that have occurred subsequent to the most recent annual data collection, quarterly data about transactions are taken from Canada's Balance of International Payments Quarterly Data (record no. 1534). Adjustments are then made to account for currency exchange rate fluctuations and other valuation changes.

Quality evaluation

Before the international investment position data are published, several steps are taken to ensure the quality of the estimates.

The change in position from the previous period is compared to the data on investment transactions during the period as shown in Canada's Balance of International Payments Quarterly Data (record no. 1534).

The evolution of the net international investment position (assets less liabilities) is compared with the current account surplus or deficit as shown in Canada's Balance of International Payments Quarterly Data (record no. 1534).

The asset and liability data from the National Balance Sheet Accounts (record no. 1806) are also reviewed as a cross check for the international investment position data.

Disclosure control

Statistics Canada is prohibited by law from releasing any information it collects that could identify any person, business, or organization, unless consent has been given by the respondent or as permitted by the Statistics Act. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.

In order to prevent any data disclosure, confidentiality analysis is done using the Statistics Canada Generalized Disclosure Control System (G-Confid). G-Confid is used for primary suppression (direct disclosure) as well as for secondary suppression (residual disclosure). Direct disclosure occurs when the value in a tabulation cell is composed of or dominated by few enterprises while residual disclosure occurs when confidential information can be derived indirectly by piecing together information from different sources or data series.

Revisions and seasonal adjustment

Previous quarters of the current year are revised at the time the latest quarter is published. Each year, with the publication of the first quarter's data, revisions are made extending back 4 years.

This is in line with the revision policy of the Canadian Systems of National Accounts (CSNA). Each year, only the most current four years of CSNA data are subject to revision. Revision of data five or more years ago does not occur until the next historical revision as dictated by the CSNA. As a result, breaks in series are sometimes inevitable and footnotes are provided to warn the data user of any problems.

There is no seasonal adjustment of the international investment position.

Data accuracy

Non-sampling errors - While considerable effort is made to ensure high standards throughout all stages of collection and processing, the resulting estimates are inevitably subject to a certain degree of non-sampling error. Examples of non-sampling error are coverage error, data response error, non-response error and processing error.

Coverage error can result from incomplete listing and inadequate coverage of the population of Canadian transactors that engage in international investment.

Data response error may be due to questionnaire design, the characteristics of a question, inability or unwillingness of the respondent to provide correct information, misinterpretation of the questions or definitional problems.

Non-response error is related to respondents that may refuse to answer, are unable to respond or are too late in reporting. In these cases, data are imputed. The extent of any imputation error decreases with increases in the response rate and attempts are therefore made to obtain as high a response rate as possible. Final response rates vary considerably between the various questionnaire types. The response rate for most of the international investment position questionnaires is slightly above 50%, except for the portfolio investment questionnaire, where the response rate is approximately 75%. Analysts keep in contact with the respondents to try to maximize the response rate. Slow reporting is often an issue.

Processing error may occur at various stages of processing such as data entry, editing and tabulation. Measures have been taken to minimize these errors. Data entry and edit are performed simultaneously due to the spreadsheet design which allows errors to be quickly seen. Historical ratios also aid in eliminating outliers created by data entry. Tabulation is automated to eliminate human error.

Documentation

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