1 OECD’s work on setting FDI standards and definitions By: Ayse Bertrand Investment Division, OECD

2 OECD involvement in FDI statistics Part of the mission of the OECD Investment Committee –Setting international standards and definitions for FDI statistics –FDI data collection and dissemination –Analysis of FDI trends and developments –Assessing regularly compliance of OECD members with international standards [IMF/OECD SIMSDI] –Developing FDI globalisation indicators –Assistance to non-members (as required)

3 OECD Sets international FDI standards and definitions OECD Benchmark Definition of Foreign Direct Investment –Provides clear orientations to countries to develop or to improve their FDI statistical systems –Improves the basis for economic analysis, particularly for international comparison –Offers objective standards for measuring FDI activity

4 OECD Benchmark Definition Prepared under the auspices of the OECD Investment Committee Technical work conducted by the OECD experts of the Workshop of International Investment Statistics – WIIS (of the Investment Committee) BMD first issued in 1983 and revised twice BMD Fourth edition – forthcoming in 2008 (1 st half)

5 Revision of the Benchmark Definition Purpose Recommendations The approach Work method Time table Structure

6 Revision of the Benchmark Definition Purpose: How to better meet user requirements –To review international statistical standards and definition to measure FDI –To bring them into line with the economic and financial developments since the last revision in –Dichotomy of FDI: Part of Balance of Payments statistics/ financial account FDI statistics – independent set of statistics (including globalisation indicators)

7 Revision of the Benchmark Definition Recommendations BOP related –Only a few changes – continuity of historical time series –Useful clarifications of existing concepts and methods New challenges & methodologies [developmental work] –Mergers and Acquisitions (as type of FDI) Defining M&As, Greenfield investment, extension of capital Developing methodology for M&As resulting from exchange of shares –Developing meaningful presentations of FDI excluding transactions through Special Purpose Entities (SPEs) and other capital in transit –Developing methodology to identify ultimate investing/ultimate host country –Developing methodology to identify round-tripping of transactions –Research agenda with other items

8 Revision of the Benchmark Definition The approach – Wide international co-operation IMF/OECD DITEG Timely co-ordination of outcomes, information, etc between IMF BOPCONM and OECD WIIS – Transparency of documents, discussions Issues papers Background documents Outcome papers – Focus on user requirements OECD Investment Committee and its Secretariat UNCTAD and other international and national entities

9 Revision of the Benchmark Definition Working method Under the general supervision of WIIS – OECD Benchmark Advisory Group (BAG) Drafting group of WIIS to assist the Secretariat Held 3 meetings (April and November 2005, April 2006) Expected to hold 2 more meetings (March and October 2007) –Project groups (focus on new recommendations) SPEs Ultimate investing/host economy Mergers and acquisitions Income

10 Revision of the Benchmark Definition Very tight calendar (extended by one year) Basic recommendations: 1 st drafts to be approved by OECD WIIS –end 2006 New recommendations to be developed in –SPEs –UIC/UHC –M&As All texts to be approved (including new recommendations) in Oct 2006 by WIIS Approval by the OECD Investment Committee – End 2007 Approval by the OECD Council – st half 2007 Publication – 1 st half 2008

11 Revision of the Benchmark Definition Contents 1) Introduction 2) Uses of FDI statistics 3) Main concepts and definitions 4) Scope of FDI 5) Measuring FDI 6) Special entities 7) Country attribution and industry classification 8) FDI and Globalisation 9) Annexes 10) Bibliography 11) Glossary 12) Index

12 Revision of the Benchmark Definition Annexes i. List of methodological changes from BMD 3 rd edition ii. Standard presentation of FDI statistics iii. List of borderline cases iv. Framework for direct investment relationship v. Valuation of unlisted equity vi. Reinvested earnings vii. SPEs viii. Collective investment instruments ix. M&As x. Ultimate host/investing country xi. Currency Unions xii. Reporting methods, data confidentiality, data transmission xiii. Research agenda xiv. OECD Council recommendation

13 Thank you. Ayse Bertrand Manager, International Investment Statistics Investment Division Directorate for Financial and Enterprise Affairs Tel: Fax: