workshop on trade in services, FDI and FATS rOMA 7-8 JUNE 2011 MEDSTAT III Euro-Mediterranean Statistical Cooperation SYNTHESIS OF QUESTIONNAIRES ON THE BALANCE OF PAYMENTS workshop on trade in services, FDI and FATS rOMA 7-8 JUNE 2011

Content International trade in services Foreign direct investment

International Trade in Services

From BPM5 to BPM6 Implement the BPM6 recommendations, including the definition, valuation, classification and recording of services transactions between residents and non-residents. Do you provide the 11 BPM5 standard components for trade in services? The 11 BPM5 standard components for trade in services are provided by all countries but one who will directly implement the BPM6 classification. Israel provides a complete annual breakdown according to EBOPS and by partner countries. When do you intend to provide the 12 BPM6 components for trade in services? The provision of the 12 BPM6 components will be done between 2012 and 2015. The process will need a change in the codification, the implementation of targeted surveys and a better coordination between the different agencies. Do you provide a breakdown by partner countries of these components (high priority Even if data by partner countries are available from the banks ITRS, countries using ITRS generally do not publish these data for quality reasons (except Algeria): Tunisia provides information on transport, travel, government services with a geographical breakdown. Morocco provides information on travel but will introduce the geographical breakdown in surveys questionnaires.

Compilation methods Please provide information on the way you compile (or you intend to compile) each of the BPM6 component For most of MPCs, the ITS data collection is based mainly on banks ITRS. Some items may be provided by direct reporting from a limited number of companies (transportation, construction, insurance, ITC) or targeted surveys. All the countries use existing administrative data as far as possible. Israel compiles ITS data using a survey. Morocco will implement an ITS survey.

EBOPS Compile BOP data according to EBOPS, focusing on those of major economic importance to the economy   Do you already compile some EBOPS components? (please enumerate) EBOPS components are not provided by MS (except Israel). The main reasons are the use of a banks ITRS collection system and the lack of information allowing the provision of detailed services. What are those items of major economic importance you would like to develop? Transport, travel, ITC, other business services (including offshoring) are items of major economic importance for most of the MS. Do you intend to compile ITS using the whole EBOPS classification? The implementation of the EBOPS classification is not considered as a first priority at the moment. A pre-condition would be the introduction of surveys in order to improve the quality and the detail of services statistics. Will you provide some of your data using the supplementary groupings and memorandum items? Possibly: call centers, ITC services….

FATS variables Compile FATS basic variables such as sales (turnover) and/or output, employment, value added, exports and imports of goods and services, and number of enterprises. These variables have to be classified by economic activity (priority to be given to inward FATS) Do you collect inward and/or outward FATS statistics? All MPCs find interest in collecting FATS statistics, but only Israel is currently producing some inward and outward FATS data. The other MPCs have plans to measure FATS statistics in the medium term (Algeria, Morocco, Palestine, Tunisia). Some countries are facing problems when trying to reconcile FDI databases and business surveys in order to compile FATS variables. Which of these variables do you presently collect? Israel (output, employment, value added, exports and imports of goods and services). What sources and methods do you use (or intend to use) to collect FATS statistics? FDI and business surveys

FDI as a proxy for FATS For those countries that must delay the implementation of Foreign Affiliates Statistics, FDI can provide an alternative interim indicator of commercial presence   Do you collect complete statistics on FDI (flows, income, and period-end positions) classified by ISIC Rev 4 activities? FDI classified by ISIC can be used as a proxy for FATS by all MPCs except for Lebanon (the FDI survey covers only banking, financial and insurance sectors).

Trade between related parties Within the statistics on trade in services between residents and non-residents, separately identify the trade with related parties from that of unrelated parties Do you find any interest for this separate identification? Yes, the identification of trade between related parties would be useful to analyze the role played by MNEs for trade in services. What data collection method do you intend to use? MPCs have no plan. They consider that banks ITRS may not be the appropriate solution and that it would be better to use surveys.

GATS modes of supply Allocate the transactions between residents and non-residents over the GATS modes of supply (cross border, consumption abroad, commercial presence, presence of natural persons)   Are you able to classify each of the main components, at least to its dominant mode? MPCs are not able to use the GATS modes of supply and consider it is not a first priority. However some of them will try to do a rough estimate.

Foreign Direct Investments

The 10% threshold Direct investment is considered evident when the direct investor owns directly or indirectly at least 10% of the voting power of the direct investment enterprise. The 10% threshold is reassessed as the unique criterion to determine a FDI relationship Do you use this unique criterion, as recommended in international guidelines? In principle, this criterion is applied, but the verification is difficult due to the limited information in bank reports. In case your answer is no, what are the other criterion?

The FDIR Multi National Enterprises (MNEs) have often complex group structures including several FDI relationships. The Framework for Direct Investment Relationships (FDIR) for identifying the population of enterprises to be included in FDI statistics  Do you have the means to use the FDIR to assess the extent of a FDI relationship? MPCs do not use the FDIR to define the extent of a FDI relationship, as the data collection relies on banks ITRS and banks have no information about the ownership chain. Do you use another methodology? Do you limit the relationship to the first level of influence or control? Only direct relationship is followed, due to the use of ITRS. Are you able using your present collection system to tackle fellow enterprises and to record their transactions? These transactions may be recorded through the banks reporting system but there is no reason to consider that they are presently recorded as FDI.

FDI components It is recommended to provide FDI flows, FDI stocks and FDI income with their components (equity assets and liabilities, reinvested earnings, loans, deposits…) Are you able to provide all the components? MPCSs are able to provide the three main components (equity, reinvested earnings, other capital) with some reservation on reinvested earnings. When available, FDI stocks are estimated on the basis of cumulative flows, combined (in Israel and Morocco) with direct reporting. The FDI Coordinated Survey will help to compile FDI stocks data. Please, provide a short indication on the way you estimate reinvested earnings Reinvested earnings may be difficult to estimate for those countries still using banks ITRS. MPCs do not provide indication on the way reinvested earnings are estimated. Morocco derives reinvested earnings from the results of the FDI Coordinated Survey relating to the profit of invested companies and from the dividends paid.

Geographical allocation International guidelines make a clear recommendation that FDI transactions and positions be compiled by immediate partner country using the debtor/creditor principle for allocation (and not the transactor principle) Which of the two principles do you apply presently? According to the debtor/creditor principle, geographic allocation is made according to the economy of residence of the direct investment enterprise or direct investor, even if the funds are paid to or received from another economy. The majority of MPCs use the transactor principle. To what condition the implementation of the debtor/creditor principle would be feasible? It is considered that the use of a survey collection system would facilitate the implementation of the debtor/creditor principle.

SPEs Ideally the geographical allocation should exclude resident Special Purpose Entities (SPEs) and “look through” non-resident SPEs involved in investment chains and reflect the first non-SPE host or investing country. This supplemental geographical allocation aims at giving a more appropriate economic approach of FDI Are you able to tackle SPEs within your FDI statistics and to do this reallocation? As the geographical allocation is done considering the first counterpart, it is difficult presently to look through the SPEs and reallocate to the first non-SPE host or investing country. However there is a plan for those countries using a survey data collection system to include questions relating to the reallocation of outward FDI through SPEs.

UIC In addition it is strongly recommended that supplemental inward FDI position statistics be compiled on an ultimate investing country (UCI) basis. The compilation on an UCI basis makes a link with FATS and MNEs statistics. Are you able, using the chain of ownership of MNEs or other means, to determine the UCI? The ultimate investing country is a geographical allocation determining the location of the ultimate source of control of the stocks of inward FDI for a reporting economy. The answer is generally no. Some countries will use the Coordinated FDI Survey to ask for the country of the ultimate controlling unit.

Directional principle FDI transactions and positions by partner and by industry should be recorded on a directional basis Is it the case in your country? FDI transactions and positions are reported by partner and by industry mainly applying the asset/ liability principle. However some MPCs try to apply the directional principle when using surveys What are the impediments? The main impediment is the use of a banks ITRS collection system What are your plans? The implementation of the BPM6 and the BD4 will be an opportunity to apply the directional principle.

Asset/liability principle Standard FDI statistics (aggregates) should be recorded based on the asset / liability principle It is the case for all MPCs

Mergers and acquisitions The analysis of FDI by type (greenfield investments, mergers and acquisition, extension of an existing investment) is considered necessary to measure the economic impact on economies Can you provide a breakdown of FDI by type? The banks ITRS does not allow such a breakdown If it is not the case would you consider feasible to collect such information as an extension of regular data collection processes? The collection of such information is considered as useful and feasible through an FDI survey

Conclusions There is a common willingness to fill-in the gaps in data collection (mainly details on trade in services, EBOPS classification, FDI stocks, FATS statistics) The change of collection systems towards direct reporting/surveys is considered as a mean to improve the quality of BOP data But changes towards direct reporting/surveys systems is considered as a costly exercise which will take time and need additional resources.

Thank you for your attention