1. © 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

2. © 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

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

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

5. © 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

6. © 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

7. © 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

8. © 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

9. © 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

10. © 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?

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

12. © 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

13. © 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

14. © 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

15. © 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

16. © 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

17. © 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

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