1. Part III. Sector Accounts Arij in ‘t Veld
REST OF THE WORLD
Arij in ‘t Veld

2. Part III. Sector Accounts
Introduction
S.11 Non-financial corporations
S.12 Financial corporations
S.13 Government
S.14 Households
S.15 Non-profit institutions serving households
S. 2 Rest of the world

3. Part III. Sector Accounts
Contents
Rest of the world in ESA
Geographical breakdown
Concept of residency
Important transactions
From GDP to GNI
Data sources
Challenges regarding ROW

4. ROW in ESA
No real sector; non-resident units that have economic relationships with resident units
Rest of the World accounts: overall view of the economic relationships between the national economy and the rest of the world
From point of view of the rest of the world! (ESA )
S.2
S.15
S.14
S.13
S.1
S.12
S.11

5. Geographical breakdown

6. Concept of residency

7. Concept of residency What is a resident unit?
Resident units are those units which have a centre of economic interest on the economic territory of that country (ESA )

8. Concept of residency Centre of economic interest
A location (e.g. land or building) within the economic territory
from which economic activities are engaged
producing, financing, insuring, redistributing
consuming
owning land or buildings
over a period of at least one year

9. Concept of residency Economic territory
Geographic territory, administered by a government, within which persons, goods, services and capital can move freely
Also included are for example:
national air-space
territorial enclaves (e.g. embassies, military bases, etc.)
territorial waters
part of the continental shelf (North Sea)

10. Concept of residency

11. Concept of residency
So, a resident unit is a unit that has a centre of economic interest on the economic territory of that country
Exceptions:
Units primarily engaged in consumption (households) that go abroad for short periods (less than a year). They include:
- border workers
- seasonal workers
- tourists, patients, students
- staff of international organisations that have headquarters in extra-territorial enclaves
- representatives of the government (including their households) established in territorial enclaves

12. EXERCISE

13. Exercise Dutch citizen or not? The Dutch ambassador in Latvia
Resident / Non-resident
His Latvian secretary
A Dutch married couple that spends the summer months in Latvia
A Dutchman who works at Statistics Netherlands but lives in Germany
A subsidiary of a large Dutch multinational in Latvia
A Japanese company (without legal status) on one of the Dutch isles
A Dutch student who works in the summer months on a farm in France
A Dutch student who studies (and lives) a couple of years abroad
A very small country office of a Dutch aid organisation in Ethiopia
Philips, the Dutch multinational, located in the Netherlands which equity capital is in foreign hands (more than 50 percent)

14. Important transactions
Part III. Sector Accounts
Important transactions
Financial assets and liabilities
Imports and exports of goods and services
Property income flows
Foreign direct investment (FDI)

15. Financial assets and liabilities

16. Imports and exports Trade in goods and services:
Change of ownership of goods between residents and non-residents
All services rendered by residents to non-residents and vice versa
Problems:
Transit trade (Rotterdam)
Internal transfer pricing (within multinationals)
Asymmetries between countries

17. Property income flows
Income (interest, dividend, reinvested earnings) as a result of:
Portfolio investment income:
S.128 / S.129: Insurance corporations and Pensionfunds have large technical reserves
S.124: Mutual funds
Direct investment income:
S.11: Non-financial corporations
Other investment income:
S.122: Interbanking positions

18. Foreign direct investment

19. Foreign direct investment
An enterprise in which a non-resident investor owns 10% or more of the voting power or vice versa.
Main transactions related to FDI:
Financial accounts:
AF.41 (Short term loans)
AF.42 (Long term loans)
AF.5 (Shares and other equity (real estate))
Non-financial accounts:
D.41 (Interest)
D.42 (Distributed income of corporations (= dividend))
D.43 (Reinvested earnings on FDI)

20. Foreign direct investment

21. Foreign direct investment
The amount of profit that is distributed and the amount that is reinvested is a decision of the direct investor: therefore, all profit (D.42 and D.43) is attributed to the parent company
When not 100% of the shares is owned by one company, then the dividend payments and RIE are divided proportionally among the shareholders
D.43 has direct relationship with AF.5: RIE is actually an increase of the FDI

22. Foreign direct investment

23. Foreign direct investment

24. EXERCISE

25. Exercise FDI
D.41 – interest
D.42 – dividend
D.43 – reinvested earnings
AF.42 – long term loans
AF.5 – shares

26. Exercise FDI Current acc. A Current acc. B Financial acc. A
AF.5
AF.42 A L
Financial acc. B
AF.42
AF.5 A L

27. From GDP to GNI (1) From GDP to GNI 2013*
Output (basic prices)
Intermediate consumption (excl. Deductible VAT) (-)
Value added (gross, basic prices)
Taxes on products
Subsidies on products (-)
Difference imputed and paid VAT
Domestic product (gross, basic prices)
Net current transfers from the rest of the world  1
National income (gross, basic prices)

28. From GDP to GNI (2) Net Current transfers 2013* Resources Uses
Compensation of employees
Taxes on product and imports
Subsidies RoW (-)
Property income RoW  2
Total Current transfers
Net current transfers from the rest of the world : ( = minus )  1

29. From GDP to GNI (3) Property income 2013* Resources Uses
Interest
Dividends
Withdrawals from income of quasi-corporations
Reinvested earnings on direct foreign investments
Other investment income
Total Property income  2

30. Data sources Main source: Other sources:
Balance of payments (transactions)
Internatioal Invenstment Position (stocks)
Other sources:
Financial corporations (S12)
Government statistics (S13)
International trade statistics (goods and services)
Finance of non-financial corporations (S11)

31. Challenges regarding ROW
Blank spots (f.i. foreign assets of individuals)
Asymmetries between countries
Different counterpart sector information
Continuous basis vs. actual basis
Globalisation:
What is a resident entity and what is not?
Accounting by multinationals (transfer pricing, intercompany services)
SPEs

32. Part III. Sector Accounts Thanks for your attention
REST OF THE WORLD
Thanks for your attention