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

2. Part III. Sector Accounts
Contents
Rest of the world in ESA
Geographical breakdown
Concept of residency (exercise)
Important transactions (exercise)
Special purpose entities
Data sources
Challenges regarding ROW

3. 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.1A
S.13
S.12B
S.1
S.12A
S.11

4. Geographical breakdown

5. Concept of residency

6. 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 )

7. 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

8. 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)

9. Concept of residency
Economic territory

10. 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

11. EXERCISE

12. Exercise Dutch citizen or not? The Dutch ambassador in Latvia Resident
His Latvian secretary
Non-resident
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)

13. 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)

14. Financial assets and liabilities

15. 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

16. Property income flows
Income (interest, dividend, reinvested earnings) as a result of:
Portfolio investment income:
S.125: Insurance corporations and pension funds have large technical reserves
S.123: Mutual funds
Direct investment income:
S.11: Non-financial corporations
Other investment income:
S.122: Interbanking positions

17. Foreign direct investment

18. 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)

19. Foreign direct investment

20. 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

21. Foreign direct investment

22. Foreign direct investment

23. EXERCISE

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

25. Exercise FDI Solution 1

26. Exercise FDI Solution 2

27. Exercise FDI Current acc. A Current acc. B Financial acc. A
AF.5 75 AF A L
Financial acc. B AF
AF.5 100 A L

28. Special Purpose Entities
Entities that mainly aim at performing sub-holding activities and raising funds to finance global group operations.
Domiciled in The Netherlands because of favourable legal and fiscal regime.

29. Special Purpose Entities
Charasteristics:
Parent company is by definition based in ROW
Enormous financial flows and positions and large property income flows
Mainly little effect on macroeconomic aggregates
Almost no direct relation with the Dutch economy
For the purpose of analysing the Dutch RoW account, data are presented excluding transactions of SPEs.

30. Data sources Main source: Other sources:
Balance of payments (transactions and stocks)
Other sources:
Supervision financial corporations (S12)
Government statistics (S13)
International trade statistics (goods and services)
Statistic Financials of corporations (S11)
International Investment Position

31. Source: balance of payments
Processed by the Dutch Central Bank
Direct reporting
± main reporters on a monthly basis
Population benchmark on a yearly basis
Transactions in securities via depot statistics
Trade in goods/services by Statistics Netherlands

32. Differences BOP and ROW
Differences in presentation
Conceptual or interpretation differences
Actual basis vs continuous basis
Classification differences
Differences due to other sources
Integration differences
Data vintages

33. Co-operation with Dutch Central Bank (DNB)
Goal of achieving consistency between BOP and ROW:
2006 covenant: compilation of sector accounts by Stat. Neth.
Yearly: detailed agreement
Twice a year: joined meeting of management
Quarterly meetings on fine-tuning of the data:
Fine-tuning of processes
Explanation of data adjustments
Regular meetings on conceptual issues:
Blank spots
Registration of insurance and pension transactions
SPEs
Treatment of FISIM in BOP
Possible causes of statistical discrepancies

34. Challenges regarding ROW
Blank spots (f.i. foreign assets of individuals)
Differences between ROW and BOP
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

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