enriching fdi presentation and analysis · enriching fdi presentation and analysis polish...

Krzysztof Makowski / Department of Statistics

Zurich / 16th Annual NBP-SNB Joint Seminar / December 18, 2019

Enriching FDI presentation and analysis

■ Ultimate investing country

■ Ultimate host country

■ Network and micro analysis of FDI entities

Enriching FDI presentation and analysis 2

What is currently in our focus?

Ultimate investing country


■ Countries hosting SPEs among

largest investors

■ The same situation in almost every

country

■ Who is behind the investment

from Netherlands, Luxembourg or

Cyprus?

■ Some investors are missing

■ Where are USA?


Traditional view of inward FDI

4

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

200 000

PLN

Mio

.

■ Who controls the resident company ( )?

■ Single controlling entity

■ Whole value of resident entity allocated to UCP

■ Who controls the foreign investor ( )?

■ Allows to allocate minority ownership to foreign control

■ Value of resident entity allocated proportionally

■ Two approaches in statistics FATS (UCP) / FDI (UBO)

■ Different user needs


Ultimate Beneficial Owner and Ultimate Controlling Parent – theory

5

US

NL

GB

LU

PL

100%

60%

100%

40%

Cases for UCP

•Comparison of the resident owned companies, (ultimately) foreign controlled companies and resident MNE

•Global Value Chains compilation – allocation of income?

Cases for UBO

•Monitoring of minority investment in different economic activities

•Control with minority stake in dispersed ownership setting

•Blocking minority / Access to information

•Legal limits on ownership above 50% from abroad

•Round-tripping


UBO and UCP – which one to use?


Comparison of UBO, UCP and immediate counterpart presentation

0

50 000

100 000

150 000

200 000

250 000

Germany UnitedStates

France Netherlands UnitedKingdom

Poland Spain Austria Switzerland Luxembourg Othercountries

andunallocated

PLN

Mio

.

UBO UCP Immediate


Concentration of foreign investors in different economic activitiesU

ltim

ate

Investing C

ountr

y

Econom

ic A

ctivity o

f re

sid

ent

com

panie

s

■ Majority of the investment is 100% owned by non-residents

■ Minority investments present in important activities


Shareholding percentage – where are the differences?

9

0%

10%

20%

30%

40%

50%

0

50 000

100 000

150 000

200 000

250 000

C K G L M J F D H

PLN

Mio

.

Control Minority % of minority

■ Immediate counterpart in globalised world

■ Relatively easy to measure

■ Not so good proxy for true investors

■ Policy and analytical needs

■ FDI promotion

■ FDI screening

■ Tax evasion

■ Local impact of FDI

■ Cross-border linkages

■ …

■ Ultimate beneficial owner (UBO) or ultimate controlling parent (UCP)

■ Which one to choose?


Ultimate investing country – few things to take away

Ultimate host country


-30 000

-20 000

-10 000

0

10 000

20 000

30 000

40 000

PLN

Mio

.

Equity Debt Total

■ Countries with SPEs …

■ … true investment destinations …

■ … and Sweden


Traditional view of Polish investment abroad

12

■ It might be easier to name country of ultimate investment (business

decision)

■ … rather than name all the countries investment is passing through (legal and tax

considerations)

■ … hence it is harder to obtain this information from data reporter which is not a

decision maker

Ultimate host country an exercise in looking through SPEs


Global

Group

Head

Our

reporting

agent

Group

financial

centre

indirectly

owned by

our

reporting

agent


Ultimate host country for resident controlled investmentIm

me

dia

te c

ounte

rpart

countr

y

Ultim

ate

host

countr

y

■ Value of round-tripping depends

on the direction from which we

are measuring it

■ UCP overstates due to allocation of

minority foreign ownership to

reporting country

■ Different valuation due to special

purpose entities used in

investment chains and accounting

standards


Polish investment in Poland according to UBO, UCP and UHC

15

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

UHC UBO UCP

PLN

Mio

.


Why there is a difference in value of round-tripping?

Assets at

book

value(current

valuation)

Own

funds at

book

value(reflecting

current

valuation)

Assets at

book

value (historical

cost)

Own

funds at

book

value (reflecting

historical

cost)

Assets at

book

value

Own

funds at

book

value

PL SPE country PL

Round-tripping

in Inward FDI

Round-tripping

in Outward FDI

V

alu

e →

■ Where are residents investing? What countries direct investors are

exposed at?

■ Are outward investments really outward?

■ Where investors need help in expanding abroad?


Ultimate host country – some questions we may be able to answer

Network and micro analysis of FDI entities


■ Countries are internally diverse – investment decisions are not made at the country level but on specific locations

■ if we want to analyse what determines investment, local factors also need to be considered

■ Work in progress

■ Extending database on individual FDI investment – extracting data from old systems

■ Effective parsing of geospatial data objects (e.g. transport and energy infrastructure)

■ Two areas

■ Infrastructure determinants of the localization of investment

■ Network effects – neighbour effect on investment (e.g. bringing along suppliers and competitors)


Network and micro analysis of FDI entities


Where are investors from different countries investing


New investment – new locations?


New investment – reinvested earnings?

Supermarket chain owned by foreign direct investor:

- Location of DIE

- Location of Head office

- Location of shops


Location of direct investment entity (DIE)

vs location of their activities

Source: Biqdata.pl

Location

of DIE

Head

office

■ Develop new methods for analysing FDI data

■ Network analysis

■ Spatial econometrics

■ …

■ Acquire new data sources for measuring the impact of FDI

■ Official statistics on micro level

■ Open data

■ …

■ New presentations and old problem of confidentiality


Further work

www.nbp.pl

enriching fdi presentation and analysis · enriching fdi presentation and analysis polish...

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