CARICOM TRADE IN SERVICES STATISTICS (CTIS)PROJECT June-December 2016 Regional Training Workshop November 21 to 25, 2016 by Lucilla Lewis, Lead Consultant

BPM6 BOP Accounts CREDIT DEBIT BALANCE Current Account 100,000,000 150,000,000 (50,000,000) Goods Services Primary Income Secondary Income Capital Account 500,000 +500,000 Gross acquisition/disposal of non-produced nonfinancial assets Capital transfers Financial Account 200,000,000 +100,000,000 Overall balance 300,500,000 250,000,000 +50,500,000 Changes in Reserves -50,500,000

BPM6 The Formula: Current account + income account + transfers + capital account + financial account = change in reserves Any difference is entered as errors and omissions Basic accounting principle: To every credit is a debit; so the BOP must balance.

BOP CONCEPTUAL FRAMEWORK Transaction- exchanges or transfers Valuation Classification Resident/nonresident

BOP CONCEPTUAL FRAMEWORK MSITS is based on BPM 6 and is consistent with SNA 2008 BBM6 Concepts and Definitions Resident Nonresident One year cut off Valuation of transactions Market price Gross basis

BOP CONCEPTUAL FRAMEWORK Exchange rate at time of recording Time of recording Accrual basis Difference between provision of services and provision of labour

BOP CONCEPTUAL FRAMEWORK Services between related parties- necessary to give full picture of the extent to which gobalisation of services supply is taking place (provides data for compiling statistics on movement of natural persons

BOP CONCEPTUAL FRAMEWORK Statistics by trading partners- to inform bilateral and multilateral trade in services negotiations; mirror statistics and quality checks Outsourcing- contracting another specialist company to provide services that were previously provided internally. Eg.??

BOP CONCEPTUAL FRAMEWORK Balance of payments trade in goods and services vs. International Merchandise trade statistics – adjustment necessary for compiling FATS variable adjustment to convert imports to FOP already reflected in the BOP, through service entries against sea transportation and freight insurance

BOP CONCEPTUAL FRAMEWORK BOP Travel vs. IRTS 2008 and TSA RMF 2008 Significantly the breakdown by tourism characteristic products is now required in the BOP Main differences continue to include: Medical tourism Education tourism Seasonal and border workers

BPM6:IIP The IIP is a statistical statement that shows at a point in time the value and composition of financial assets of residents of an economy that are claims on nonresidents, and gold bouillon held as reserve assets; and liabilities of residents of an economy The net IIP can be positive or negative

BPM6:IIP by Functional Category IIP Beginning of Period Financial account transactions Other changes in volumes Exchange rate changes Other price changes End of Period IIP Assets Direct Investment Portfolio investment Financial derivatives Other investments Reserve assets Liabilities

Definition of FDI According to BPM6: A direct investor is an entity or group of related entities that is able to exercise influence over another entity that is resident of a different economy. FDI reflects the objective of gaining control or a significant degree of influence by an entity in one economy over the management of an enterprise resident in another economy FDI is usually a precondition for establishment of commercial presence

How are control and significant degree of influence determined When the direct investor owns equity that entitles it to 10% or more of the voting power in the direct investment enterprise

Owns >10% shares, voting power or the equivalent The FDI Universe FDI: the direct investor makes an international investment to obtain control and a lasting interest in an enterprise abroad Country A Country B Direct investor Direct investment enterprise Owns >10% shares, voting power or the equivalent between 10 and 50% Associate Subsidiary Branch more than 50% FATS wholly or jointly unincorporated enterprise individuals enterprises associated groups of individuals/enterprises governments... www.bea.gov

Classification of direct investment enterprises For both inward and outward FDI the enterprise should be classified by its industrial activity in the host country and by the industrial activity of its direct investor where possible. (Outward FDI flows may be of more interest to some member states than to others) For both inward and outward FDI compilation by country of origin for the former and country of destination for the latter is extremely critical for especially for assessing movements of capital intra common market members e.g. within CSME, from other trading blocs e.g. EU CARIFORUM members, CARIBCAN, CBI and with other countries

TYPES OF DATA REQUIRED FOR FDI STOCKS AND FLOWS include Direct Investment Income Interest Dividends/distributed profits Direct Investment Transactions (capital flows) Equity (flows) Reinvestment of earnings (which is ultimately included in the capital stock) Direct investment Position (capital stock) Equity Reinvested earnings debt

END OF SECTION