© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition Main concepts and definitions Roger De Boeck Balance of payments Istanbul,

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© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition Main concepts and definitions Roger De Boeck Balance of payments Istanbul, 9 November 2006

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition 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

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition 2. Main purposes Reliable and detailed statistics InterpretabilityPracticability QualityDetailCosts Confidentiality

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition Clarification of the definitions/concepts User friendly Accessibility Comprehensiveness Utility Illustration ExamplesPractices

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition Balance of payments Manual - IMF System of National accounts - UN Consistensy with other International aggregates

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition 3. Basic concepts and definitions BMD 3Draft BMD 4 InfluenceInfluence lasting interest lasting interest What is a foreign direct investment? direct investor direct investment enterprise > 10 % voting rights ordinary shares + identified deviations voting power + strict application

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition + 1st level 2nd level 3d level N level What is the operational framework of FDI statistics? Direct linksIndirect links AA BCNBCN FEDX GY

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition What is the operational framework of FDI statistics? Indirect links Vertical chains Horizontal chains A B C A BC

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition BMD 3draft BMD 4 x > 50% 10% 50% 10% 50% Ordinary shares / Voting rights Voting power Voting power Voting power + What is the operational framework of FDI statistics? Full consolidated system FCS Framework of direct investment relationships FDIR ControlInfluenceControlInfluence Joined Control Subsidiaries Branches Associate companies Subsidiaries Branches Associate companies Subsidiaries

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition 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?

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition {} excluded What is the frame of FDI statistics?

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition Multiplication of subsequent % 1st level > 10% of voting power of voting power other levels : > 50% of voting power What is the frame of FDI statistics? 2 accepted proxy's the equity multiplication method t he influence/control method

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition What is the frame of FDI statistics? A Multiplication of subsequent % 1st level > 10% of voting power of 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 BC D E F G B C D E

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition 4. Measurement of FDI OutwardInward Vertical 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 reporting economy

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition Includes What does FDI statistics contains? Initial equity transaction / position All subsequent transactions / positions

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition Equity capital Loans/deposits Long term Short term Debt instruments Other assets/liabilities Reinvested earningsRetained earnings Reserves Dividends Interests What does FDI statistics contains? Main components Flows Positions

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition = Profit of year t - dividends paid in year t positive or ! negative ! = Retained profits + reserves in the long run What does FDI statistics contains? Reinvested earnings

© National Bank of Belgium Draft OECD Benchmark Definition of FDI, 4th edition What does FDI statistics contains? Country breakdown Activity breakdown ResidentNon resident