BOP/IIP and FDI by Jens Hald former head of BoP/IIP in Danmarks Nationalbank EU Twinning Project Support to the Israeli Central Bureau of Statistics Activity A.6, Jerusalem, 8-11 July, 2013

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Who are the users?

      International statistical bodies IMF OECD EUROSTAT ECB etc.

    Israeli bodies BoI CBS MoF MoD etc.

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What are the users’ needs?

  International statistical bodies: To ”police” countries to fullfil the requirements in the BoP manuals Israeli bodies: To increase long term structural economic growth, improve the defence situation of Israel (?) … 3

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FINANCIAL ACCOUNT

 Why is it so difficult to produce accurate statistics in this area?  Why are ”Errors and omissions” so big?

 How accurate ought the statistics in this area to be? 4

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COLLECTION SYSTEM

Which data collection system is best? Pro et con:     Surveys ITRS (information on payments through banks) Administrative sources Combination of systems 5

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COMPILATION SYSTEM

Which compilation system is best?

Pro et con:   One system vs. combination of systems Total coverage vs. sampling 6

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Foreign direct investment (FDI)

• Why is FDI statistics neccessary or important? • Which parts of the FDI statistics are considered to be essential, important or nice to have?

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FDI– manuals and data reporting requirements

     Distribution by countries and by economic industries UCO (Ultimate Control Owner) Cross investments SPE-Special Purpose Entities Real estate investments 8

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FDI - distribution by countries

Requirements, see ch.7 in BD4 • • Full breakdown by country and territory, i.e. more than 300 countries and territories!

• • • Details and problems Directional vs. Asset/Liability principle Supplementary requirements: Look through SPEs For inward FDI, BD4 “strongly encourages” the use of UIC (ultimate investing country) 9

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FDI - full breakdown by industry (ISIC)

      In their reporting to OECD, many countries are using Eurostats Vademecum , i.e. appr. 70 industries In Denmark, we are able to break down into more than 500 industries.

Details and problems Mandatory: Breakdown according to the activity of the direct investment enterprise Supplementary: Breakdown according to the activity of the investor Mergers & Acquisitions 10

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FDI, continued

    Institutional sector (p. 48, BD4) ?

Cross-classification by country and industry, cf. Vademecum Confidentiality UCO (Ultimate Control Owner) – Chapter 3&7 and Annex 10 11

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FDI, cross investments

Cross investments - Ch. 3 (pp. 49-58)  Cross investments is another word for reverse investment   A complex concept Presentations of FDI: IMF, ECB, OECD (Annex 2, BD4) 12

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SPE - Special Purpose Entities

SPE-Special Purpose Entities – Ch. 6 and Annex 7 (BD4)  No internationally accepted definition - Inward: relatively easy; used in Denmark - Outward: relatively difficult; not used in Denmark  ”BD4 recommends to differentiate between non-resident SPEs and non-resident non-SPEs …as a supplementary breakdown” (§319) 13

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FDI - real estate investments

Real estate investments pp.103-05 in BD4 and pp. 55-56 in BPM6 Real estate investments are difficult to measure In Denmark:  non-residents’ purchases of ”real estate for non-commercial purposes” in Denmark is covered by data from Tax Authorities   residents’ purchases of ”real estate for non-commercial purposes” abroad is also covered by data from Tax Authorities the data on inward investments are of higher quality than the data on outward investments – in both cases the data are used for Danmarks Nationalbanks estimations  getting the necessary data from the Tax Authorities took long and hard negotiations 14