Paper short abstract:

This paper presents findings for developing and transition economies from the "Atlas of Offshore FDI," which systematically quantifies and maps the structure of global offshore shell company investment. Offshore "round-trip" FDI is shown to result in particularly large distortions in official data.

Paper long abstract:

In recent years, there has been greatly increased academic and public interest in the use and abuse of offshore shell companies, which have been linked to a range of issues from corporate tax avoidance to illicit financial flows. The scale of shell company use is enormous; far from a peripheral distortion of the map of global foreign direct investment (FDI), these networks of "paper" entities in many respects are the map of FDI, accounting for as much as half of the world's entire FDI stock, and well over half of the FDI of many developing and transition economies. The scale of this issue not only poses problems in relation to issues directly associated with offshore / tax haven use, but also, even more fundamentally, prevents us from seeing the true shape of the global economy, above all in the global south. This paper presents key findings for major developing and transition economies from the "Atlas of Offshore FDI" project, which employs a novel micro-macro data triangulation methodology to systematically map and quantify the true beneficial owning nationality of FDI stocks in countries held via offshore holding structures, which have been hitherto classified on only a proximate origin basis in official data. Significant findings include the most systematic estimation to date of offshore "round-trip" FDI in the BRIC economies, which is shown to result in a substantial exaggeration of the value of truly "foreign" investment in these countries in existing official statistics.