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Draft OECD Benchmark Definition of FDI, 4th edition Main concepts and definitions Roger De Boeck

Draft OECD Benchmark Definition of FDI, 4th edition Main concepts and definitions Roger De Boeck Balance of payments Istanbul, 9 November 2006. Draft OECD Benchmark Definition of FDI, 4th edition. 1. Why a revision? - better reflection of the economy

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Draft OECD Benchmark Definition of FDI, 4th edition Main concepts and definitions Roger De Boeck

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  1. Draft OECD Benchmark Definition of FDI, 4th edition Main concepts and definitions Roger De Boeck Balance of payments Istanbul, 9 November 2006

  2. Draft OECD Benchmark Definition of FDI, 4th edition • 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

  3. Draft OECD Benchmark Definition of FDI, 4th edition • 2. Main purposes Reliable and detailed statistics Interpretability Practicability Quality Detail Costs Confidentiality

  4. Draft OECD Benchmark Definition of FDI, 4th edition Clarification of the definitions/concepts User friendly Accessibility Comprehensiveness Utility Illustration Examples Practices

  5. Draft OECD Benchmark Definition of FDI, 4th edition Consistensy with other International aggregates • Balance of payments Manual - IMF • System of National accounts - UN

  6. Draft OECD Benchmark Definition of FDI, 4th edition What is a foreign direct investment? direct investor > 10 % > 10 % direct investment enterprise • 3. Basic concepts and definitions • BMD 3Draft BMD 4 • Influence Influence • lasting interestlasting interest voting power ordinary shares voting rights + strict application + identified deviations

  7. Draft OECD Benchmark Definition of FDI, 4th edition What is the operational framework of FDI statistics? Direct links Indirect links A A • + • 1st level • 2nd level • 3d level • N level B C N B C N D E F X G Y

  8. Draft OECD Benchmark Definition of FDI, 4th edition What is the operational framework of FDI statistics? Indirect links Vertical chains Horizontal chains A A B B C C

  9. Draft OECD Benchmark Definition of FDI, 4th edition What is the operational framework of FDI statistics? Full consolidated system FCS Framework of direct investment relationships FDIR Control Influence Control Influence Joined Control • BMD 3draft BMD 4 • x> 50% 10% < x < 50% x > 50% 10% < x < 50% x > 50% • Ordinary shares / Voting rights Voting power Voting power Voting power • + + Subsidiaries Subsidiaries Associate companies Subsidiaries Associate companies Branches Branches

  10. Draft OECD Benchmark Definition of FDI, 4th edition What is the frame of FDI statistics? • 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

  11. Draft OECD Benchmark Definition of FDI, 4th edition What is the frame of FDI statistics? • {} excluded

  12. Draft OECD Benchmark Definition of FDI, 4th edition What is the frame of FDI statistics? 2 accepted proxy's the influence/control method the equity multiplication method • Multiplication of subsequent % 1st level > 10% of voting power • of voting power other levels : > 50% of voting power

  13. Multiplication of subsequent % 1st level > 10% of voting power of 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 B C C D F D E G E Draft OECD Benchmark Definition of FDI, 4th edition What is the frame of FDI statistics? A

  14. Draft OECD Benchmark Definition of FDI, 4th edition What does FDI statistics contains? FDI abroad FDI in the reporting economy • 4. Measurement of FDI • Outward Inward • Vertical 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

  15. Draft OECD Benchmark Definition of FDI, 4th edition What does FDI statistics contains? Initial equity transaction / position • Includes All subsequent transactions / positions

  16. Draft OECD Benchmark Definition of FDI, 4th edition What does FDI statistics contains? Main components Flows Positions • Equity capital • Loans/deposits • Long term • Short term • Debt instruments • Other assets/liabilities • Reinvested earnings Retained earnings • Reserves • Dividends • Interests

  17. Draft OECD Benchmark Definition of FDI, 4th edition What does FDI statistics contains? Reinvested earnings • = • Profit of year t - dividends paid in year t • positive • or • ! negative ! • = Retained profits + reserves in the long run

  18. Draft OECD Benchmark Definition of FDI, 4th edition What does FDI statistics contains? Country breakdown Activity breakdown Resident Non resident

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