OECD’s work on setting FDI standards and definitions

By: Ayse Bertrand Investment Division, OECD [email protected]

1

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) 2

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 3

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) 4

Revision of the Benchmark Definition

 Purpose  Recommendations  The approach  Work method  Time table  Structure 5

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 1995.

–

Dichotomy of FDI:

• Part of Balance of Payments statistics/ financial account • FDI statistics – independent set of statistics (including globalisation indicators) 6

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 7

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 8

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 3 more meetings (October 2006, March and October 2007) – 􀂾

Project groups (focus on new recommendations)

• SPEs • Ultimate investing/host economy • Mergers and acquisitions • Income 9

Revision of the Benchmark Definition

 􀂾

Very tight calendar (extended by one year)

• Basic recommendations: 1 st WIIS –end 2006 drafts to be approved by OECD • New recommendations to be developed in 2006-2007 – 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 – 2008 -1 st half 2007 • Publication – 1 st half 2008 10

Revision of the Benchmark Definition

Contents

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

Revision of the Benchmark Definition

i.

Annexes

List of methodological changes from BMD 3 rd edition ii.

iii.

iv.

v.

Standard presentation of FDI statistics List of borderline cases Framework for direct investment relationship Valuation of unlisted equity vi.

vii.

viii.

ix.

x.

xi.

xii.

xiii.

xiv.

Reinvested earnings SPEs Collective investment instruments M&As Ultimate host/investing country Currency Unions Reporting methods, data confidentiality, data transmission Research agenda OECD Council recommendation 12

Thank you.

Ayse Bertrand Manager, International Investment Statistics Investment Division Directorate for Financial and Enterprise Affairs Tel: 33 1 45 24 91 24 Fax: 33 1 45 24 13 34 E-mail: [email protected]

13