Debriefing and Summary EU Twinning Project Support to the Israeli Central Bureau of Statistics Activity A.6, Jerusalem, 8-11 July, 2013

Findings (1) Decision (cf. the Twinning contract): Only planning for development of FDI statistics and investment income from FDI Overall findings the Israeli BoP system is in rather good shape, and the work is well distributed and managed by CBS and BoI the methodologies (IMF/OECD) are well understood, and only in rather few cases Israel is not in compliance with the manuals the data collection to a large extent meets the data requirements from the manuals in particular, the FDI questionnaires are consistent, but the different forms constitute a complex system

Findings (2) ITRS is a cornerstone in Israel’s BoP system, and in some ways ITRS causes problems: ITRS data supplements the directly reported FDI data Elimination of directly reported FDI from ITRS is not easy, implying a risk for double-counting/under-counting (?) ITRS generally provides only limited information – difficulties in meeting OECD and IMF requirements For 15% (outward) and 37% (inward) only aggregated data – ITRS code and currency The ITRS codes are often used incorrectly by the banks, implying time consuming data quality work internally in BoI The ITRS codes generally are not detailed enough (1985 system)

Findings (3) ITRS serves (other) purposes: Maintainance of populations and samples Data on a daily basis from the banks provide important analytical information for the surveillance of the foreign reserve / the money market / the monetary policy distinguishment between the ITRS and the FX systems – possibly the monetary policy needs can be served by the FX system

Findings (4) Real estate in the BoP and IIP Real estate definition: i.e. private/non-commercial purposes Currently, Israel is not reporting stock data (IIP) regarding real estate, but only transactions, based on the ITRS Accumulated flows as basis for estimation is not an attractive solution Non-residents, with Israeli real estate, becoming residents What year to start? ITRS problems - precision, coverage Other possible data sources that could be investigated Data on transactions from tax authorities Information from other bodies, e.g. central registrations on land and buildings

Conclusions and recommmendations Joint Working Group (WG): Bank of Israel and CBS – monthly meetings Time plan toward final plan 1 August 2014 The WG controls and details time plan First deadline 15 October 2013: outlining of topics to be dealt with in an overall plan and report – e.g. Future coverage of FDI Co-ordination of BoI survey on FDI and possible, supplementary CBS survey Design of new questionnaires based on a number of existing forms plus (new) manual requirements Integrated reporting: Opening stock + transactions + revaluations = Closing stock How to use the ITRS for statistical purposes in the future Identification of problem areas: Ultimate Investing Country, Ultimate Control Owner, reverse investments, real estate => and how to solve these Additional Israeli requirements? Budgeting at the level of sub-items (separate parts of the project)

BoP/financial account: Assessment (5) The FDI database (CBS): In theory, the FDI database is a possible gold-mine of information A clear strategy of its maintenance is needed Exactly, what data should be in the data base? … and what data sources should be fed into the database? … at what intervals? … and so on! What IT solution would be adequate? How many resources should be be devoted to the maintenance? The statistics ordinance currently does not allow for the business register to be utilized optimally

BoP/financial account: Assessment (6) What are the Twinning project’s actual possibilities? What kind of plan, i.e. how extensive (and expensive!) a plan can we work toward? Basically, two possible paths: Improvement of the ITRS based system – i.e. a relatively limited plan A total, or almost total (cf. the monetary policy needs) replacement of ITRS with a full direct reporting system In principle, a decision on this would be good to have soon. This is probably not realistic. Instead – the Twinning might focus on locating ”the low-hanging fruits”, i.e. the most easily attainable improvements within the current system And – at the same time - the Twinning project might produce a general report for the managements of CBS and BoI as part of the end-product of the component work. This document would describe the pros and cons of the alternative solutions and their statistical and financial consequences.