Draft OECD Benchmark Definition
of FDI, 4th edition
Main concepts and definitions
Roger De Boeck
Balance of payments
© National Bank of Belgium
Istanbul, 9 November 2006
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
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
2. Main purposes
Reliable and detailed statistics
Interpretability
Quality
Detail
Practicability
Costs
Confidentiality
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
Clarification of the definitions/concepts
User friendly
Accessibility
Comprehensiveness
Utility
Illustration
Examples
Practices
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
Consistensy with other International aggregates
Balance of payments Manual - IMF
System of National accounts - UN
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
3. Basic concepts and definitions
What is a foreign direct investment?
BMD 3
Influence
lasting interest
> 10 %
voting rights
direct investor
direct investment
enterprise
ordinary shares
+
identified deviations
Draft BMD 4
Influence
lasting interest
> 10 %
voting power
+ strict
application
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
What is the operational framework of FDI statistics?
Direct links
+
Indirect links
A
B
C
A
N
1st level
B
2nd level
D
3d level
C
E
G
N
F
X
Y
N level
© 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
A
B
B
C
C
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
What is the operational framework of FDI statistics?
BMD 3
draft BMD 4
Full consolidated system
FCS
Control
x > 50%
Influence
10% < x < 50%
Ordinary shares / Voting rights
Subsidiaries
+
Branches
Associate
companies
Framework of direct investment
relationships
FDIR
Control
Influence
Joined
Control
x > 50%
Voting power
10% < x < 50%
Voting power
x > 50%
Voting power
Subsidiaries
+
Branches
Subsidiaries
Associate
companies
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
What is the frame of FDI statistics?
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
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
What is the frame of FDI statistics?
A
60 %
C
60 %
C
70 %
C
40 %
60 %
30 %
I+I
C
=C
60 %
C
20 %
I
20%
{I}
70 %
{} excluded
C
80 %
C
25 %
I
30 %
I
40 %
I
70 %
C
70 %
C
20 %
I
15 %
{I}
40 %
{I}
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
What is the frame of FDI statistics?
2 accepted proxy's
the equity multiplication
method
Multiplication of subsequent %
of voting power
the influence/control
method
1st level > 10% of voting power
other levels : > 50% of voting power
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
What is the frame of FDI statistics?
Multiplication of subsequent %
of voting power
1st level > 10% of voting power
other levels : > 50% of voting power
A
90 %
A
60 %
B
15 %
90 %
60 %
B
C
54 %
D
21,6 %
E
4,32 %
80 %
C
20 %
80 %
40 %
F
G
40 %
D
E
20 %
Excluded
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
4. Measurement of FDI
What does FDI statistics contains?
FDI abroad
Outward
FDI in the reporting
economy
Inward
Vertical chain
- Direct investor to direct investment enterprise = Assets
- Direct investment enterprise to direct investor = Liabilities
Horizontal
chain
- Direct investment enterprise to direct
investment enterprise = Assets/Liabilities
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
What does FDI statistics contains?
Includes
Initial equity transaction / position
All subsequent transactions / positions
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
What does FDI statistics contains?
Main components
Flows
Reinvested earnings
Dividends
Interests
Equity capital
Loans/deposits
Long term
Short term
Debt instruments
Other assets/liabilities
Positions
Retained earnings
Reserves
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
What does FDI statistics contains?
Reinvested earnings
=
Profit of year t - dividends paid in year t
positive
or
! negative !
=
Retained profits + reserves in the long run
© National Bank of Belgium
Draft OECD Benchmark Definition
of FDI, 4th edition
What does FDI statistics contains?
Country breakdown
Activity breakdown
Resident
Non resident
© National Bank of Belgium