Transcript ENG - unece

Impact of the BPM6 on the
EU 28 balance of payments and
international investment position
Dr. Matthias Ludwig
European Commission
Eurostat Unit C2 National and regional accounts production. Balance of Payments
Joseph BECH Building E2/810
5, Rue Alphonse Weicker
L-2721 Luxembourg
Session 2 of the Workshop on the implementation of the 2008 SNA in EECCA countries
and linkages with BPM6 and GFSM 2014, Istanbul (Turkey), 6 - 8 May 2015
Outline
B.o.p. and i.i.p. statistics compiled by Eurostat and
their importance in EU policy making
• Most relevant changes introduced by the BPM6 from
the Eurostat perspective
– Methodological changes;
– New treatment of transactions and positions.
• Commission Regulation (EU) No 555/2012 of 22 June
2012 and ECB Guideline 23/2011 of 9 December 2011.
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EU policy making
National b.o.p. and i.i.p. are – among others - used to:
• monitor the divergence in competitiveness (ECB and
European Commission);
• detect macroeconomic imbalances (European
Commission): Current account balance, net i.i.p.,
%-change of export market shares are 3 out of the
11 headline indicators of the MIP Scoreboard.
• Other relevant indicators are: current and capital
• account balance, net interest payments and net
• external debt.
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Eurostat
5
Eurostat
Eurostat indicators:
Importance of goods and services in current account
Eurostat
Balance of Payments and International
Investment Position Manual
Framework for statistics on transactions and
positions between an economy and the rest
of the world.
Reasons for a new Manual:
• Globalization and financial innovation;
• Increase the emphasis on IIP;
• Harmonisation with other macroeconomic
statistics.
The BPM6 provides more explanations and
definitions of topics.
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Major changes in terminology
BPM6
BPM5
Headings ‘net acquisition of financial
assets’ and ‘net incurrence of liabilities’
….instead of 'debits' and ‘credits’
Trade credit and advances
Trade credits
SNA 2008 institutional sector and financial assets/liabilities classifications and
nomenclatures are broadly adopted
Long-term and short-term debt
securities…
... replaced ‘bonds and notes’ and ‘money
market instruments’.
Charges for the use of intellectual
property not included elsewhere
… replaces the term ‘royalties and licence
fees’.
The term ‘personal transfers’ is introduced
...which is broader than the former
‘workers’ remittances’.
To increase the consistency vis-à-vis
national accounting, several nomenclature
changes were introduced: In the BPM6,
the terms ‘primary income’ and
… replace ‘income’ and ‘current transfers’.
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Goods: General merchandise
BPM6 Chapter 10
Main component of b.o.p. goods:
By definition: includes any goods where there is change of
ownership between residents and non-residents, with strict
application of the change of ownership principle in the BPM6
(processing and repairs are moved to services, while merchanting
is added to goods)
Source in almost all EU28 Member States (but Greece):
International merchandise trade statistics (IMTS).
Collected in the Member States of the EU according to Intrastat
and Extrastat Regulations. IMTS are based on different concepts
than BOP, so adjustments have to be made.
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EU Customs union: implications for ITGS
Intrastat:
Coverage: trade between EU Member States in Community goods;
Dispatches (exports) – Arrivals (imports):
Data source:
- Close link with VAT-system;
- direct collection of data from trade operators;
- Supplemental Declaration;
- National reporting thresholds for operators;
- Compiled monthly and transmitted to Eurostat within 40 days;
- detailed in terms of goods traded (Combined nomenclature CN8:
0902 20 00 Green tea in immediate packings of > 3 kg).
Systems to collect ITGS
• Extrastat
• Coverage:
- Statistics on trade with non-EU countries;
- Exports and Imports.
Data source:
- based on customs declarations;
- customs procedures;
- Copy of Single Administrative Document (SAD);
- Compiled monthly and transmitted to Eurostat within 40
days;
- detailed in terms of goods traded (CN8).
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12
Methodological differences between International
Trade in Goods Statistics (ITGS) and BOP
International Trade in Goods Statistics
Coverage & time: when borders are crossed;
Valuation: IMTS use FOB-type valuation as the statistical
value of exports and CIF-type for imports.
Balance of Payments
Coverage & time: change of ownership;
Valuation: FOB/FOB (BPM6 § 10.30).
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• ITGS registers both the value of imports and exports at the
national border: imports are valued at the border of the
importing country (CIF value) and exports at the border of
the exporting country (FOB value).
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Methodological differences between International
Trade in Goods Statistics (ITGS) and BOP
Main adjustments needed when using ITGS in BOP:
• Goods that change ownership without crossing borders, or
goods that cross borders, but do not change ownership.
• In the national accounts and b.o.p., both imports and exports
are valued on a FOB basis (i.e. at the border of the exporting
country). This means that the ITG value of imports needs to
be adjusted from CIF to FOB value.
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Adjusting Intastat and Extrastat data
Exports/Credits and Imports/Debits
Examples of items to be removed:
• Goods sent abroad for processing or returned after processing;
• Only for imports: the value of the CIF/FOB adjustment.
Examples of items to be added:
• Goods in customs warehouses;
• Goods imported/exported illegally.
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The EU reconciliation tables, regularly
compiled as Annex of the BOP Quality
Report
• Example: Luxembourg BOP Quality Report, publicly available in
the internet, download under:
• http://www.statistiques.public.lu/en/methodology/methodes/ec
onomy-finances/bop/bop/index.html
• http://www.statistiques.public.lu/fr/methodologie/methodes/ec
onomie-finances/Bop/bop/qualite2011.pdf
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1. “Goods”
as published by Eurostat FTS in
The EU reconciliation
tables,
million Euro
regularly compiled 2.as
part of BoP
ITGS figure used by BOP compilers in
million Euro *
Quality Report
of which (=including):
(1)
2.1 Repairs of goods (gross value)
2.2 Goods for processing (gross value)
D0 - Differences between 1. and 2.
D1 - Differences between point 1. and
point 2. explained by: (NB: it should be
D0=D1)
2.1.1 Use of settlements information
2.1.2 Revision vintages
2.1.3 Others (please specify)
….
….
3. Adjustments made to ITGS data for BOP
purposes in million Euro
http://www.statistiques.public.lu/fr/methodologie/metho
des/economie-finances/Bop/bop/qualite2011.pdf
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Current account (BPM5)
Current account (BPM6)
Goods and services
Goods and services
Trade balance ( Goods)
Goods
General merchandise
General merchandise on a BOP basis
Net exports of goods under merchanting
(credit)
Goods for processing
Repairs on goods
Services
Services
Other services
Net exports of goods under
merchanting
Other services
Manufactoring services on physical inputs
FISIM
Income
Compensation of employees
Investment income
FISIM
Current transfers
Workers' remittances
Capital and financial account
Maintenance and repair services n.i.e.
Primary income
compensation of employees
Investment income
Other primary income
Secondary income
Personal transfers
Financial account
Capital account1
Capital account1
Financial account
Change in reserve assets
Reserve assets
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Changes in the current accounts
Current account:
Goods, services, primary income (new – income on reserve
assets), secondary income (new – additional breakdown) (BPM5:
goods, services, income, current transfers).
Goods:
Manufacturing service on physical goods owned by others:
Processing is defined as manufacturing services on goods that do
not belong to the manufacturer.
Imputation of change of ownership for goods undergoing
processing in BPM5;
In BPM6, Goods for processing and Repairs on goods are
recorded under Services.
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Changes in the current account
Manufacturing services on physical inputs owned by
others: (cont.)
The change in the methodology for ‘goods for processing’ may
have a significant impact on estimates of goods and services
trade for a number of economies.
The treatment in BPM6, increase exports or imports of
services, and will reduce gross exports and imports of goods.
The fee received for the processing services rendered is
included in ‘manufacturing services on physical inputs owned
by others’.
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Changes in the current account
Net export of goods under merchanting:
In BPM5, merchanting was included in ‚merchanting and other
trade-related services‘.
In BPM6, merchanting of goods is reclassified from services to
goods. The purchase of goods is classified as a negative export of
goods of the economy of the merchant, and the sale is classified
as a positive export of goods, with the difference between sales
and purchases recorded in goods exports as ‚net exports of goods
under merchanting‘.
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Manuals for ITGS: from BPM5 and
MSITS(2003) to BPM6 and MSITS (2010)
BPM and MSITS have common conceptual framework: Manual on
Statistics of International Trade in Services (MSITS):
• Expands the detail for services introducing the extended
• classification: EBOPS (Extended BOP Services
• Classification);
• Covers also definitions and methodology related to FATS
• (Foreign Affiliates Statistics);
• Covers also definitions and methodology related to trade
• in services by mode of supply, as required by GATS/WTO (crossborder supply, consumption abroad, commercial presence,
presence of natural person).
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Importance of services
billion EUR, extra- EU 28
Current account
Credit Debit
2011
Balance Credit
2011
2011
Debit
2012
Balance Credit
2012
2012
Debit
2013
2013
2,807
2,848
-41
3,067
2,971
96
612
495
117
677
533
144
694
14
7
7
16
9
7
6
3
3
7
2
133
116
17
142
Services: Travel
86
88
-1
Services: Construction
10
5
Services: Insurance and pension services
29
Services: Financial services
62
Services
Services: Manufacturing services on
physical inputs owned by others
Services: Maintenance and repair services
n.i.e.
Services: Transport
Balance Credit
2014
Balance
2014
2014
155
3,073
2,947
127
543
151
735
583
151
16
8
8
19
7
12
4
9
7
1
10
7
3
122
20
140
125
15
136
123
13
97
91
6
103
90
14
107
96
12
6
11
5
6
14
5
9
14
5
9
12
17
31
12
20
30
11
18
33
14
19
26
36
70
29
41
75
31
44
75
34
42
0
59
27
33
60
29
30
0
16
4
12
16
4
11
Services: Financial services explicitly
charged and other financial services
3,051 2,896
2013
Debit
Services: FISIM
Services: Charges for the use of intellectual
property n.i.e.
38
55
-16
40
59
-19
41
60
-18
48
80
-32
Services: Telecommunications, computer,
and information services
58
29
29
65
32
34
70
35
35
77
36
41
145
130
15
165
148
17
177
155
22
200
166
34
21
19
1
24
22
2
27
26
1
29
29
0
Services: Other business services
Services: R & D services
Transport
Classification by mode of transport: sea, air, other
• Other: rail, road, internal waterway, pipeline, space,
electricity transmission;
• Who/what is carried: passengers, freight, other;
• Postal and courier services included as separate item of
Transport (BPM5: communication services).
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Travel
Travel covers assortment of goods and services:
• for own use or to give away;
• acquired from an economy by nonresidents;
• during visits to that economy (demand moves);
• covers stays of any length provided no change of
• residency (students, patients).
BPM6: durable goods (e.g. cars) and valuables (art, jewelry)
that are included in customs data are not included in Travel
but in Goods.
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Construction
Creation, renovation, repair, or extension of fixed assets:
• building, roads, bridges, dams;
• related installation and assembly work;
• site preparation and general construction as well a
specialized services; management of construction projects.
Substantial projects (1 year or more) may constitute a branch
resident in the economy of operations: foreign direct
investment between parent and branch.
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Construction
Construction abroad; construction in the reporting economy
Recorded on gross basis: all costs of construction work, inputs
(if acquired by the construction company), and profit (surplus)
Example construction abroad:
• Credit: value of the construction project abroad: 100
• Debit: costs of goods purchased from the economy of
construction work: 75
• Net export construction services (abroad): 25
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Insurance services
Insurance services include:
• life insurance and annuities;
• non-life insurance (e.g. accident and health, fire and other
• property damage, general liability);
• reinsurance (both parties to the policy are providers of
• insurance services);
• freight insurance (rerouting due to FOB valuation);
• pension funds (i.e. not social security);
• standardized guarantees (e.g. export credit and student
• loan guarantees);
• auxiliary services.
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Financial Services
FISIM Financial Intermediation Services Indirectly Measured
• Financial intermediaries offer rates of interest to their
depositors that are lower than the rates that they charge to
their borrowers.
• The resulting interest margin is used to cover expenses and
to provide an operating surplus.
• Interest margins are an alternative to explicit service fee.
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Financial Services
Financial Intermediation Services Indirectly Measured (FISIM)
Actual interest includes element of income as well as charge for
service;
By convention, only arises from loans and deposits where both
parties are financial corporations;
Loans from financial corporations - difference between interest
actually payable and the amount payable if reference rate were
used;
Deposits – difference between the interest that would be earned if
reference rate were used and interest actually earned;
Included in services (not income).
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Other Business Services
Research and development services
• Basic/applied research; experimental development;
commercial research;
• Sale of results from R&D (patents, copyrights) (BPM5:
capital account);
• Excluded: fees for use of R&D results (Charges for the use
of intellectual property).
Professional and management consulting services
• Legal, accounting, PR, consulting service;
• Advertising, market research, call centres;
• Fees for general management of subsidiaries.
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Other Business Services
Technical, trade-related, and other business services
• Architectural, engineering; mining and waste treatment;
operating leasing (excl: transport equipment with crew);
commissions on goods/services transactions payable to
merchants; placement of personnel, security & cleaning,
translation, real estate services.
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Primary income
Income associated with production:
• Compensation of employees;
• Taxes and subsidies on products and production.
Property income
• Investment income = financial assets;
• Rent = land, natural resources.
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Compensation of employees
Requires an employer-employee relationship between a resident
and a non-resident and includes:
• wages and salaries in cash;
• wages and salaries in kind (meals, transport, holidays/sport
facilities, loans at reduced interest, etc.);
• employers’ social contributions.
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Compensation of employees
Examples:
- cross border workers
- seasonal/short term workers
- Nonresident domestic helpers (<1 year)
- local staff in embassies/military bases
- staff of international organisations
Remark: Compensation of employees ≠ workers’ remittances
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Secondary income account
Resembles BPM5 current transfers items.
Each transaction is either exchange or transfer
Exchange: the provision of economic value against receiving
economic value. When economic value (say goods) is provided
without anything in return, the counterpart entry is a transfer.
A transfer is an entry that offsets the provision of an
economic value (good, service, financial asset, or other
nonproduced asset) without a counterpart return of an item
of economic value.
A transfer can be current or capital.
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Current vs capital transfers
Current transfers consist of all transfers that are not capital
transfers
Capital transfers are transfers in which:
- the ownership of an asset (other than cash or inventories,
i.e. fixed assets, valuables, or nonproduced assets) is
transferred; or which
- obliges one or both parties to acquire or dispose of an asset
(other than cash or inventories, i.e. investment grant); or
where
- a liability is forgiven by the creditor.
A capital transfer results in a commensurate change in the
stocks of assets of one or both parties to the transaction
without affecting the saving of either party.
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Capital account
Acquisition of non-produced, non-financial assets
- Natural resources;
- Contracts, leases and licenses;
- Marketing assets and goodwill.
Capital transfers
- Debt forgiveness;
- Nonlife insurance claims;
- Investment grants;
- BPM6 Excludes migrant effects (other changes in
• volume), sale of patents (R&D service).
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Non-produced assets: Natural resources
Included are:
- land if not included in FDI (enclaves for embassies and
international organisations);
- mineral rights;
- forestry rights;
- water;
- fishing rights;
- air space;
- electromagnetic spectrum.
40
Non-produced assets: Contracts, leases
and licenses
Includes contracts/leases/licenses recognized as economic
(intangible) assets (e.g. transfer fees for a football player,
entitlements to purchase goods on exclusive basis, emission
permits that are tradable etc.)
Intangible assets are not created in a production process;
excluded are for instance:
Transfer of ownership or use of intellectual products (software
rights, copyrights, patents) if outright sale recorded in R&D
services, if temporary use Service Charges for use of intellectual
property
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Non-produced assets: Marketing
assets
- Acquisitions/sales of brand names, mastheads, trademarks,
logos, domain names;
- Only when sold separately from the entity that owns them;
- Fee for domain registration, logo design is service;
- Goodwill in BOP is not traded separately from ownership of
an enterprise.
42
Capital transfers
- Debt forgiveness is the voluntary cancellation of all or part
of a debt within a contractual agreement between a creditor
and a debtor (write-off recorded as other flow).
- Exceptional non-life insurance claims related to major
catastrophes may be recorded as capital transfers;
- Investment grants;
- Activation of one-off guarantees and other debt
assumption;
- Taxes levied at irregular intervals, like capital levies and
inheritance taxes;
- Other capital transfers (major compensation payments not
covered by insurance).
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Thank you for
your kind attention
[email protected]