EUROPEAN COMMISSION EUROSTAT Directorate G: Global Business Statistics Unit G2: Structural business statistics and global value chains FDI/2015/05 MEETING OF THE WORKING GROUP ON FOREIGN DIRECT INVESTMENT STATISTICS 17 June 2015 NOVOTEL Luxembourg Kirchberg conference room Ermesinde&Amélie 6, rue du Fort Niedergrünewald, L-2226 Luxembourg Starting: 10.00h Ending: 17.00h FDI/2015/05 Meeting minutes Document is available in CIRCABC Website: https://circabc.europa.eu/w/browse/a3f3bdef-562b-418c-8381-ebb3145c316a Path: CircaBC/ESTAT/FDI/Library/2015.06.17 - FDI Working Group
Item 1: Introductory statement and adoption of the agenda The Chair welcomed the participants and reminded of some meeting administrative issues. The Chair provided also background information of the meeting, including the decision of the BSDG in 2013 to set up a Working Group on FDI statistics. From the meeting documents and presentations only the agenda and the minutes will be made public. The agenda was adopted without comments. Item 2: Approval of the minutes of the previous meeting held on 18 June 2014 The minutes of the previous meeting of 18 June 2014 were approved without comments by the delegates. Item 3: Annual FDI data production cycle past and coming issues Eurostat presented the results from the first EU FDI data reporting, cycle 2014, according the new international standards - Balance of Payments Manual, 6 th edition (BPM6) and Benchmark Definition of FDI, 4 th edition (BD4). The information on the data transmission was complemented by the latest Balance of Payments quality reporting round which addressed the following assessment criteria: relevance, punctuality and coherence. In addition, the main technical challenges related to transmission were highlighted. Eurostat presented briefly how the results have been disseminated on the Eurostat website. Finally, a reminder on the transmission requirements for the next, 2015 data reporting cycle was given in detail with reference to the latest BoP Vademecum and the validation tool developed in Eurostat (EDIT) for checking the internal consistency of the FDI data at national level. Statistics Finland presented the implementation of the new, BPM6/BD4 based FDI data collection in their national practice. A new annual survey was introduced in 2013 merging three previously used questionnaires (Outward / inward investments, Foreign assets and liabilities) into a single reporting. This, together with pre-filling of the questionnaires, substantially reduced the response burden on the statistical units. Despite the challenges related to the new IT system, the newly produced FDI statistics are very much welcomed by domestic users and successfully serve the international organisations needs. 2
Bank Centrale du Luxembourg (BCL) presented their FDI survey on resident special purpose entities (SPEs). These units have a dominant share in the cross-border capital operations of the country, therefore the national authorities have put efforts towards further improving the micro data identification, collection, (re-)classification and validation. The new design of the survey has so far been implemented in two steps: Layout 0 (2012-2014) and Layout 1 (from 2015), gradually enhancing the coverage of the reporting units and the range of their crossborder financial operations. FDI data for SPEs are collected on an infra annual basis: monthly balance sheets are derived from quarterly ones, and then monthly transactions derived from previously (derived) monthly balance sheets. Discussion Eurostat reminded that data on separate FDI flows and income of resident SPEs become mandatory within the regular EU reporting as from reference year 2015. For FDI positions this has been mandatory since 2014 (reference year 2013). Finland clarified that local enterprise groups (LEG) are also included in the national survey but the data are reported at individual enterprise level, even at the legal unit level. BCL furthermore replied to a question on the challenges identifying resident SPEs given their vast numbers (it is observed alone in France that 50% of FDI takes place through new Luxembourg based SPEs created only for one transaction) by listing the sources: enterprises own initiatives or on their behalf their financial service providers, FDI network and STATEC central balance sheet register. Conclusions The FDI WG took note of the different aspects presented in relation to the 2014 production cycle. National compilers took note of the requests within the next, 2015 FDI data reporting cycle. Amongst other validation checks Member States were encouraged to check the international consistency of their datasets before transmission to Eurostat. The FDI WG welcomed the national experience shared by Finland and Luxembourg. 3
The Chair furthermore called for an analysis on the exhaustiveness of the FDI data where the national methodology may set unnecessary coverage constrains (coverage and reporting on SPEs, survey thresholds). Item 4: FDI Network Eurostat presented the 2014 FDI Network activity report together with the evolution of intra- EU asymmetries since 2006 and reminded the participants that the window period to exchange bilateral FDI positions data through the network will be valid until 28 th July 2015. Eurostat furthermore reminded on the mandate of the CMFB "Task Force on asymmetries in FDI and the FDI Network". The task force has met twice in spring 2015 in order to look through the reasons which are limiting the use of the network and propose an action plan to improve its functioning and, ultimately, potential for diminishing the asymmetries. Progress report has been drafted for the CMFB plenary session early July 2015. Potential actions will start to be taken soon after. Discussion There were no comments on the presented issues. Conclusions The FDI WG took note of the reporting by Eurostat. Item 5: FRIBS and the related FDI package Eurostat presented the FDI part of the global FRIBS project, and confirmed its pillar based on the virtually unchanged annual data requirements for FDI statistics (from the EP/Council Regulation N 184/2005). The novelties for the FDI statistics are the inclusion of the preliminary annual data at T+4M according to the directional principle with very limited data content and breakdowns (i.e. relatively easily to derive from QBoP), and an explicit definition of the statistical unit and the measurement unit in the FRIBS basic act. Quarterly FDI/BoP requirements will stay in Regulation N 184/2005. 4
The full FRIBS package should go through final Eurostat consultations in 2016 and be approved by the Commission in December 2016 before going to legislators reading and further adoption, the Council and the European Parliament, 2017-2018. Discussion France expressed concerns on future FDI data transmission to Eurostat, due to the fact that the statistical unit is the legal entity, as well as regarding the request for FDI preliminary annual data (T+4 months), which appears a new issue in FRIBS and not directly transposed from the BoP Regulation. In reply, Eurostat reminded that the proposed statistical unit will be the institutional unit as defined in current international guidelines (IMF, OECD manuals) and, therefore, this novelty should not impact on the future FDI annual datasets deliveries provided that in the current FDI methodology the international recommendations are respected. Eurostat also recalled that, contrary to previous years, the new BPM6 quarterly FDI data requirements prevent from any estimates of EU outward and inward FDI annual transactions based on the sum of quarters. As the new quarterly framework do not foresee the recording of reverse assets/liabilities vis-à-vis each partner listed in the Geo4 level, it is not possible to build a "bridge" between the quarterly assets/liabilities presentation and the annual directional one. Therefore and as the written consultation did not show that the voluntary data provision (T+4M) would secure the early data availability the proposal on preliminary annual data has been made. Luxembourg stated the necessity to discuss FRIBS FDI in the European Statistical Forum and the CMFB as the FDI data production involves not only the NSIs but also NCBs. Conclusions The FDI WG took note of the progress achieved in global FRIBS project and in particular of the proposed annual FDI requirements. Apart from the inclusion of the requirement on preliminary annual data at T+4M and specifically writing down in the Regulation text the 5
definitions for the statistical and measurement units FRIBS will not modify current annual requirements for the FDI statistics. Item 6: Reporting from other organisations Statistics Finland presented experiences in compiling inward FDI statistics by ultimate investing country (UIC). Such data are important for economic analyses, in particular considering the current significant presence of capital round-tripping in the global economy. Finland identifies the UIC as the country of residence of the ultimate controlling parent, which is reported by the statistical respondents. Despite some deviations from the international recommendations (BD4), the survey produces very useful and interesting results. The geographical structure of the Finnish inward FDI positions changes considering the UIC vs immediate counterpart. Finally, some specific cases in the Finnish data compilation were explained: a person or a household cannot be considered as an investor while collective investment funds can only be direct investors but not direct investment enterprises. The OECD shared experience with the first collection of set of countries' national inward FDI stocks data by UIC. These are reported on voluntary basis and so far only six member countries provided such figures. The results for some of these countries were presented in comparison with the regularly reported data according to the immediate counterpart basis. In most cases, the resident economy appears even in top ten UIC for inward FDI positions in that country. It is expected that five more countries will report this breakdown in the near future, and some ten more in the longer run. Finally, the OECD presented some practical issues and specific cases consider during the panel discussion on FDI by UIC in the WGIIS meeting held in March 2015. UNCTAD presented activities in the field of FDI statistics. The UNCTAD databases on FDI and transnational corporations (TNC) activities are one of the largest in the world combining data for more than 200 economies. One of the main UNCTAD publications with FDI statistics is the annual World Investment Report. The organisation also produces other regular papers such as Global Investment Trend Monitor, annual Bilateral FDI Statistics, FDI reports 6
at regional and national level, etc. Similarly with preliminary annual data request proposed for FRIBS by Eurostat, UNCTAD made a plea for early FDI data provision according to the directional principle. Discussion Eurostat invited the three countries (Estonia, France and Finland) that were present in the meeting and had reported FDI data by UIC to the OECD to share their plans for future transmissions of these data. All three national compilers confirmed that they would continue producing this breakdown and even plan further improvement, e.g. France intends to include also income by UIC in 2015, while Finland anticipates involving new potential data sources such as the EuroGroup Register (EGR), etc. The ECB explained their approach of treating holdings of investment funds' shares (with the investment fund as a direct investment enterprise) always as portfolio investment, which is a deviation from BPM6/BD4 recommendations (accepted for practical reasons and to avoid bilateral asymmetries) on the treatment of the so-called "Collective Investment Funds". The ECB also reminded of the importance for the FDI figures by UIC to be clearly communicated to users and with proper metadata to avoid any confusion if circulating two datasets of similar nature. France reminded of the risk of confusing investment funds and private equity funds. Eurostat stated that if they both are considered (in practice) as "Collective Investment Funds", they should be subject to a similar treatment in line with international recommendations. Eurostat is potentially looking towards creating a Task Force on FDI by UIC in 2016 as further harmonised attempt to collect such data. In reply to a question by Eurostat, UNCTAD explained the data source for their Greenfield FDI statistics information from financial markets, which is however used with caution. 7
Conclusions The delegates welcomed the presentations under this item and took note of the practical issues and specificities related to the compilation of FDI data by UIC. Eurostat will investigate the possibility to launch a Task Force in 2016 on this particular topic. Item 7: Any other business The Chair informed that the 2016 meeting of FDI WG would be foreseen for approximately the same time of the year. 8