by ayse bertrand manager, international investment statistic investment division,
DESCRIPTION
Benchmark Definition of FDI, 4 edition (BMD4) OECD revises international standards for FDI statistics. by Ayse Bertrand Manager, International Investment Statistic Investment Division, Directorate for Financial and Enterprise Affairs, OECD [email protected]. - PowerPoint PPT PresentationTRANSCRIPT
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Benchmark Definition of FDI, 4 edition (BMD4)
OECD revises international standards
for FDI statistics
by Ayse BertrandManager, International Investment Statistic
Investment Division, Directorate for Financial and Enterprise Affairs, OECD
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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 (of the Investment Committee)
First issued in 1983 and revised twice Fourth edition – forthcoming in 2008
Prepared in close co-operation with OECD Member countries, IMF, and other international institutions
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Objectives of Benchmark Definition
To provide– a single point of reference for FDI statistics;– clear guidance for individual countries – international standards considering the effects of
globalisation;– the basis for a comparable international economic analysis – an objective basis to identify methodological differences
across countries– practical guidance to users of FDI statistics– FDI as measures of globalisation
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BMD4
Guiding principles for the revision
1. Need to consider evolving user requirements
2. Need for clarity
3. Need for continued international co-ordination to achieve harmonised standards (BPM, SNA, HEGI, MSTS, etc)
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What do we want to measure?
Traditional FDI series - do they meet user needs?
New challenges developing meaningful presentations of FDI 1) Are we treating pass-through funds and capital in transit
properly2) How can we obtain FDI by type
• (M&As, greenfields, extension of capital, financial restructuring)
3) FDI according to ultimate investing/ultimate host country4) Research agenda
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Challenges for BMD4
BOPFinancial Acc.
FDI (aggr)
IIPFDI (aggr)
BMD4FDI statistics
HEGIAMNE’s
BOPCurrent Acc.
Invest. Income Development
of new
Methodologies
USERS’ PRIORITY
- Pass through investment-M&As
- UIC/IHC
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BMD4
Results of the revision1. Existing recommendations remain unchanged and/or are
reinforced, improved, clarified
2. Existing recommendations are modified
3. Replacement/removal of existing recommendations.
4. Introduction of new recommendations.
5. Research agenda
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BMD4
Selected topics
1. FDIR
2. Valuation
3. Scope of FDI statistics1. Standard features
Asset/liability principle
Directional principle and excluding SPEs
2 Supplemental featuresM&As
UIC/UHC
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FDIR
FDIR (successor of FCS) - method to identify and to determine the extent and type of DI relationships.
FDIR is based on equity investment only.
FDIR - to determine the population of direct investors and direct investment enterprises
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FDIR
Foreign direct investment reflects the objective of establishing a lasting interest by a resident enterprise in one economy (direct investor) in an enterprise resident in an economy other than that of the investor (direct investment enterprise).
The ownership of 10 % or more of the voting power of a resident enterprise by a non-resident investor in a resident enterprise is the evidence of such a relationship.
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FDIR
A foreign direct investor is an entity (an institutional unit) that has acquired at least 10% of the voting power of a corporation, or equivalent for an unincorporated enterprise, resident in an economy other than its own. A direct investor could be from any sector of the economy and could be any of the following:i. an individual;ii. a group of related individuals;iii. an incorporated or unincorporated enterprise;iv. a public or private enterprise;v. a group of related enterprises;vi. a government; vii. an estate, trust or other societal organisation; orviii. any combination thereof.ix. In the case where two enterprises each own 10% or more of each
other’s voting power, each is a direct investor in the other.
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FDIR
New entities included in FDIR if they meet 10% criteria.
Treatment of Collective Investment Institutions in FDI (CII)
Treatment of Non-Profit Institutions Serving Households (NPISH).
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FDIR
Basic types of affiliates:– A controlled affiliate is an enterprise in which the
investor has control of more than 50% of the voting power. (subsidiary)
– A non-controlled affiliate is an enterprise of which the investor owns of at least 10% of the voting power and no more than 50%.(associate)
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FDIR: Principles for extending the relationship through indirect
ownership A series of
controlled affiliates can continue as long as control exists at each stage in the ownership chain
A
B
C
8 0 %
8 0 %
E c o n o m y 1
E c o n o m y 2
E c o n o m y 3
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FDIR: Principles for extending the relationship through indirect
ownership:
Any controlled affiliate can extend the relationship to a non-controlled affiliate by owning from 10% to 50% of the voting power of that enterprise
A
B
CEc o n o m y 3
6 0 %
3 0 %
Ec o n o m y 1
Ec o n o m y 2
3 0 %
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FDIR: Basis for extending the relationship through joint ownership
investor and its controlled affiliates combined own +50% of the voting power of an enterprise, the owned enterprise is a controlled affiliate of the investor.
A
B
C F
E
E c o n o m y 1
E c o n o m y 2
E c o n o m y 3
3 0 %8 0 %
3 0 %
8 0 %
8 %
8 %
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Valuation of equity
Market value = basic principle Listed equity: Listing in an organised market provides a good
basis for valuing listed equity Unlisted equity (6 methods to estimate market value)
i. Recent transaction price
ii. Market capitalisation method
iii. Net asset value (NAV)
iv. Present value
v. Own funds at book value (OFBV)
vi. Apportioning global value
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Scope of FDI Statistics
1) Two sets of data:
a) Aggregate FDI statistics [BPM Fin. account & OECD BMD]
b) Detailed FDI statistics = OECD BMD By partner country By industry
2) Standard features
i. Asset/liability principle (Aggregate FDI)
ii. Directional prin. & excluding funds passing through SPEs
(FDI by partner and by industry )
3) Supplemental features
i. M&As
ii. UIC/UHC
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Genuine FDI
FDI according to immediate counterpartyProblems:
- Overstatement (Inflation) of FDI- Analytical interpretation of
origin/destination countryorigin/destination industryorigin/destination of country/industry
FDI excluding funds passing through– SPEs – according to national definition and as a part of DP
– (a typology of SPEs : under development in co-ordination with SNA
– Operating affiliates [Research agenda]
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Supplemental series
FDI by type1. M&As
• Non-resident purchase /sale of existing equity (10% to 100% of the voting power)– Sub-category (above 50% of the voting power)
2. Other types of FDI – Research agenda
i. Issuance of new equity– Greenfield investment– Extension of capital
ii. Financial Restructuring
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Ultimate investing/host country
Example of IIC and UCIC
100%
100%
100%
Country C1Enterprise E1
Country C2Enterprise E2
Country C3Enterprise H1
Country C4Enterprise E3
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THANK YOU