national bank of belgium draft oecd benchmark definition of fdi, 4th edition main concepts and...

© 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

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