National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition Main concepts and definitions Roger De Boeck Balance of payments Istanbul,

© National Bank of Belgium

Draft OECD Benchmark Definition of FDI, 4th edition

Main concepts and definitions

Roger De BoeckBalance of payments

Istanbul, 9 November 2006



1. Why a revision?

- better reflection of the economy

- better definition of FDI as an element of macro economic statistics

- illustration of the impact of FDI on the economy



2. Main purposes

Reliable and detailed statistics

Interpretability Practicability

Quality Detail Costs Confidentiality



Clarification of the definitions/concepts

User friendly

Accessibility Comprehensiveness

Utility

Illustration

Examples Practices



Balance of payments Manual - IMF

System of National accounts - UN

Consistensy with other International aggregates



3. Basic concepts and definitions

BMD 3 Draft BMD 4 Influence Influence lasting interest lasting interest

What is a foreign direct investment?

direct investor

direct investmententerprise

> 10 % > 10 %

voting rights ordinary shares

+identified deviations

voting power

+ strict application



+

1st level

2nd level

3d level

N level

What is the operational framework of FDI statistics?

Direct links Indirect links

A A

B C N B C N

FED X

G Y




Indirect links

Vertical chains Horizontal chains

A

B

C

A

B C



BMD 3 draft BMD 4

x > 50% 10% < x < 50% x > 50% 10% < x < 50% x > 50% Ordinary shares / Voting rights Voting power Voting power Voting power

+ +


Full consolidated system FCS

Framework of direct investmentrelationships

FDIR

Control Influence Control Influence JoinedControl

Subsidiaries

Branches

Associatecompanies

Subsidiaries

BranchesAssociatecompanies

Subsidiaries



Principles :

• control on control = control C on C = C

• influence on control = influence I on C = I

• control on influence = influence C on I = I

• influence on influence = EXCLUDED I on I = nihil

What is the frame of FDI statistics?



{} excluded


A 60 %

60 %

70 %

80 %

25 %

30 %

40 %

C C C C I I I 40 %

30 % 60 % 70 % 70 % 40 %

I + I C C C {I} = C 60 % 70 %

C C 20 % 20 %

I I 20% 15 %

{I} {I}



Multiplication of subsequent % 1st level > 10% of voting powerof voting power other levels : > 50% of voting

power


2 accepted proxy's

the equity multiplicationmethod

the influence/controlmethod




A

Multiplication of subsequent % 1st level > 10% of voting powerof voting power other levels : > 50% of voting power

90 % 60 % 15 % 90 %60 % 54 % 80 % 20 % 80 % 40 %40 % 21,6 %20 % 4,32 % Excluded

A

B C

D E F G

B

C

D

E



4. Measurement of FDI

Outward InwardVertical chain - Direct investor to direct investment enterprise = Assets

- Direct investment enterprise to direct investor = Liabilities

Horizontal - Direct investment enterprise to direct chain investment enterprise = Assets/Liabilities

What does FDI statistics contains?

FDI abroad FDI in the reportingeconomy



Includes


Initial equity transaction / position

All subsequent transactions / positions



Equity capitalLoans/depositsLong termShort termDebt instrumentsOther assets/liabilitiesReinvested earnings Retained earnings ReservesDividendsInterests


Main components

Flows Positions



=Profit of year t - dividends paid in year t

positiveor

! negative !

= Retained profits + reserves in the long run


Reinvested earnings




Country breakdown

Activity breakdown

Resident Non resident

National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition Main concepts and definitions Roger De Boeck Balance of payments Istanbul,

Documents