Transcript direct investment enterprise

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]
1
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
2
Objectives of Benchmark Definition

To provide
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–
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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
3
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)
4
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
properly
2) How can we obtain FDI by type
• (M&As, greenfields, extension of capital,
financial restructuring)
3) FDI according to ultimate investing/ultimate host country
4) Research agenda
5
Challenges for BMD4
BOP
Current Acc.
Invest. Income
BOP
Financial Acc.
FDI (aggr)
IIP
FDI (aggr)
BMD4
FDI statistics
Development
of new
Methodologies
HEGI
AMNE’s
USERS’ PRIORITY
- Pass
through investment
-M&As
- UIC/IHC
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BMD4

Results of the revision
1. 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
7
BMD4
Selected topics
1. FDIR
2. Valuation
3. Scope of FDI statistics
1. Standard features
Asset/liability principle
Directional principle and excluding SPEs
2 Supplemental features
M&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 nonresident 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.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
an individual;
a group of related individuals;
an incorporated or unincorporated enterprise;
a public or private enterprise;
a group of related enterprises;
a government;
an estate, trust or other societal organisation; or
any combination thereof.
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
Economy 1
A
80%
Economy 2
B
80%
Economy 3
C
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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
Economy 1
A
60%
Economy 2
B
30%
30%
Economy 3
C
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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
Economy 1
30%
80%
Economy 2
30%
E
B
8%
80%
8%
Economy 3
C
F
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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.
ii.
iii.
iv.
v.
vi.
Recent transaction price
Market capitalisation method
Net asset value (NAV)
Present value
Own funds at book value (OFBV)
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 counterparty
Problems:
- Overstatement (Inflation) of FDI
- Analytical interpretation of
origin/destination country
origin/destination industry
origin/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 coordination with SNA
– Operating affiliates [Research agenda]
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Supplemental series

FDI by type
1. 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
Country C1
Enterprise E1
100%
Country C2
Enterprise E2
100%
Country C3
Enterprise H1
100%
Country C4
Enterprise E3
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THANK YOU
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