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BOPCOM-06/38NineteenthMeetingoftheIMFCommitteeonBalanceofPaymentsStatisticsEuropeanCentralBank,Frankfurt,Germany,October23–26,2006SummaryofDiscussionsPreparedbytheStatisticsDepartmentInternationalMonetaryFund2ContentsPageI.
Introduction.
3II.
MondayOctober,23,2006.
31.
Remittances.
32.
InternationalInvestmentPositionandExternalDebt33.
DirectInvestment.
44.
Securitiesdatabases.
6III.
Tuesday,October24,200665.
UpdateofInternationalStandards.
66.
IssuesonupdateofBPM5.
77.
OverviewoftheBPM5update.
12IV.
Wednesday,October25,2006.
138.
Financialinstrumentsandinstitutionalsectorclassification.
139.
Measuringdirectinvestmentequity:Canada'sexperience.
1310.
UserneedsforFDIdataandupdateonprogressofBD41311.
Frameworkofdirectinvestmentrelationships.
1412.
ScopeoftheexceptionfromFDIoftransactionsbetweenfinancialentities1413.
Variousissuesforresolutionondirectinvestment1514.
FDIStatistics—Treatmentofinter-companytransactionsoffinancial.
17intermediarieswithnonfinancialentities17V.
ThursdayOctober26,2006.
1715.
Treatmentofpass-throughfundsandcapitalintransitinFDIstatistics1716.
Reserverelatedliabilities.
1817.
ReserveAssetTechnicalExpertGroup(RESTEG)Summarypaper.
.
.
.
1818.
InternationalConferenceontheCPIS1919.
Treatmentofhybridinstruments.
1920.
Nextmeeting.
2021.
Workprogram.
2022.
VoteofappreciationtoECB.
20AppendicesI.
DirectInvestmentRelationships:SomeExamples.
213NineteenthMeetingoftheIMFCommitteeonBalanceofPaymentsStatistics:SummaryofDiscussionsI.
INTRODUCTIONTheNineteenthMeetingoftheIMFCommitteeonBalanceofPaymentsStatisticstookplaceattheEuropeanCentralBankatFrankfurtamMain,October23-26,2006.
Theoutcomesofthediscussionsaresummarizedbelow.
II.
MONDAYOCTOBER,23,20061.
Remittances(a)LuxemburgGroup:ProgressreportbyIMF—BOPCOM/06-03TheIMFpresentedthereport.
TheCommitteenotedthesignificantprogressmadesincethepreviousCommitteemeetinginJune2005.
Lookingahead,theintentionistoproduceanannotateddraftoutlineoftheCompilationGuidebythenextmeetingoftheLuxemburgGroupinDecember2006,andadraftGuidesometimein2007.
(b)Definitionofremittances:paperbyUnitedNations—BOPCOM/06-04TheCommitteediscussedandendorsedtheproposalsintheUnitedNationspaperonthedefinitionsofthevarioustypesofremittancessubjecttothefollowingminorclarifications,additions,andamendments:(i)byconventionpersonaltransfersaretoincludegamblingandlotteriestransactions;(ii)theterm"remittancesofresidentemployees"tobereplacedwith"workersremittances";(iii)theterm"netcompensationofemployees"tobereplacedwiththeterm"compensationofemployeeslesstaxes,travelexpenses,etc";(iv)whileinconcept"totalremittances"includesnon-lifeinsurancetransactions,thesetransactionsareexcludedonpracticalgrounds;and(v)thesupplementarytablepresentedinthepapershouldincludetotalsforthevarioustypesofremittancesdescribed.
2.
InternationalInvestmentPositionandExternalDebt(a)ExpandingtheformatoftheIIP—BOPCOM/06-06TheCommitteediscussedtheIMFproposaltointroduceacurrencyandremainingmaturitybreakdownintotheIIP.
TheIMFparticipantfromthePDRDepartmentemphasizedtherelevanceofbothdatasets,butparticularlycurrencycomposition,fortheFundandmembercountrypolicywork,includingArticleIVconsultations.
4Allmemberssawthepolicyneed/usefulnessofthedataoncurrencycompositionandnotedthatthereconciliationofIIPwiththeotherflowsrequiredinformationonthecurrencycomposition.
Therewasbroad,butnotunanimous,supportforremainingmaturitydata.
Theneedsforinformationoncurrencyhedgingandforabreakdownbymajorcurrencywereraised.
Somemembersobservedthattheinclusionofdataoncurrencycompositionanddebtonremainingmaturityinthestandardcomponentsrequiressignificantchangesindatacollectionsystems,whileothersobservedthatsomedataalreadyexisted,e.
g.
,forthebankingsystem.
Otherswereconcernedoverthedetailproposedandconsideredthattimeisrequiredbeforesuchcanbeincludedinthestandardcomponents.
Inthissituation,itwasconsideredprematuretoincludecurrencycompositionanddataonremainingmaturityinthestandardcomponentsbuttheyshouldbeencouragedsupplementaryitems.
Countriesshouldalsobeencouragedtoperiodicallycompileinformationontheextentofcurrencyhedging.
TheIMF'srepresentativesnotedthatgiventheimportanceofcurrencycompositionfortheFund'spolicywork,theyintendtoworkwiththeCommitteetoincorporatesuchinformationintoIMFreportingformsfortheIIPfortheBalanceofPaymentsStatisticsYearbook.
(b)ProgressontheworkoftheTaskForceonFinanceStatistics(TFFS),includingJointExternalDebtHub—BOPCOM/06-07TheCommitteesupportedtheworkoftheTFFSinimprovingdataavailabilityandquality.
MembersrequestedadvancenoticeofthefutureIMFIIP/externaldebtcomparisons.
Moregenerally,theIMFwasencouragedtocontinuetoworkwithitsinternationalpartnerstoachievegreatercoordinationindatacollectionworkfromcountries.
(c)InternationalBankingStatistics:ReportbytheBIS—BOPCOM/06-08TheCommitteenotedprogressmadebytheBIStoincreasethenumberofcountriesreportingbankingdata.
TheyalsonotedtheBISefforttoimprovedataqualityandcoverage,andinparticulartheongoingworktoimprovedataonexportcreditsfortheJointExternalDebtHub.
Thediscussiononthisitemwidenedtocovertheprovisionofdatatointernationalagenciesmoregenerally.
Whileacceptingthatinternationalagencieshavetheirownpriorities,itwasagreedtoincludethistopicontheagendaofnextyear'sCommitteemeeting.
3.
DirectInvestment(a)UNCTADpresentationoncapacitybuildingfordirectinvestment—BOPCOM/06-095TheCommitteewelcomedUNCTAD'sinitiativesaimedatstrengtheningthecapacityofdevelopingcountriestocompiledirectinvestmentstatistics.
ItwasagreedthatthesupplyofFDIdatatointernationalagenciesbeincludedinthetopicondataprovisionreferredtounderthepreviousagendaitem.
However,OECD(InvestmentDivision)expressedconcernsonthefeasibilityofsuchacoordinationforFDIstatistics.
(b)Worldinvestmentreport2006:ReportbyUNCTAD—BOPCOM/06-09ATheCommitteewelcomedtheUNCTADreport.
However,itwasnotedthatinmakinginternationalcomparisonsitisimperativetoensureequalstatisticaltreatmentofallcountries.
Inparticular,inthecaseofHongKongSAR,itwasnotedthattheinclusionofcapitalintransitmaydistortthestatisticsbeingpresented.
(c)UpdateonCoordinatedDirectInvestmentSurvey(CDIS)—BOPCOM/06-10TheIMFpresenteditsproposalforconductingaCDIS.
InanenvironmentofsignificantdecliningstaffresourcesintheIMF'sStatisticsDepartment,theIMFconsideredthatforthesurveytogoaheadstrongsupportofmajordirectinvestingcountries(mostofwhichareCommitteemembers)andinternationalorganizationsisrequired.
Bothcountriesandinternationalorganizationsgaveoverwhelming,in-principle,supportoftheIMF'sproposal.
Mostcountriesexpressedawillingnesstoparticipateinthesurvey.
ThesurveyshouldbesupportiveoftheimplementationoftherelevantaspectsoftheupdateofBPM5.
Therewassomediscussionabouttheappropriatevaluationbasistobeadopted;itwasgenerallyagreedthat,whilenotsteppingbackfromthegeneralprincipleofmarketvalue,onpracticalgrounds,itwouldbenecessarytooptforownfundsatbookvalueforbilateraldata,atleastinthefirstCDIS,inordertoobtainasmuchcomparabilityinthedataaspossible.
Itwasagreedthatthenextstepswouldbeto:ofinalizethereportofthe"TaskForceontheFeasibilityofConductingaCoordinatedDirectInvestmentSurvey"assoonaspossible,takingintoaccountthediscussionsattheCommitteemeeting;otransmitthefinalizedreporttotheCommittee;osendthereporttoIMFmanagementwiththerecommendationthattheCDISproceed(agreementfromFundmanagementisexpected,giventhatthecostswouldbecoveredbytheStatisticsDepartment'sbudget);osendthefinalizedreporttotheIMF'sExecutiveBoard,forinformation;6osetupataskforcetoprepareaCompilationGuide,withthetermsofreferenceforthesurveyassetoutintheIMFpaperBOPCOM/06-10.
ItwasnotedthatthedispatchofformallettersofinvitationtoparticipateintheCDISshouldbeundertakenasearlyaspossiblein2007,soCommitteememberscanmobilizeresourceswithintheiragenciesingoodtime.
Committeememberswereaskedtocommentontheappropriatelevelforthelettertobesentto,andtoprovidetheIMFwithfeedback.
4.
Securitiesdatabases—BOPCOM/06-25TheCommitteewasimpressedbytheECB'spresentationanddemonstrationofitsCentralizedSecuritiesDatabase.
TheBISreportedonitsinitiativetoshare,harmonize,andrationalizesecuritiesdatabases.
III.
TUESDAY,OCTOBER24,20065.
UpdateofInternationalStandards(a)Updateofthe1993SNA:ProgressReport:reportbyISWNA—BOPCOM/06-18TheCommitteewelcomedtheprogressbeingmadeinupdatingtheSNA.
(b)SummaryoftheOutcomeofAEG'sdiscussions—BOPCOM/06-19andBOPCOM/06-31TheCommitteereceivedforinformationtheoutcomeofAEGissuesrelevanttotheworkofupdatingBPM5includingtheworkongoodsforprocessing,merchanting,impactofnon-performingloansonFISIM,retainedearningsofmutualfunds,insurancecorporationsandpensionsfunds,financialinstruments,andgrantingofguarantees.
TheCommitteereceivedforinformationthepresentationbytheSNAeditorontheoutcomeofAEG'sdiscussiononleasesandlicenses.
(c)UpdatingInternationalstatisticalstandardsinservices:reportbyOECD—BOPCOM/06-20TheCommitteewelcomedtheprogressbeingmadeonstatisticalstandardsinservices.
ItwasnotedthattherewerenomajorchangesplannedinthestructureanddetailsofthestandardsexceptthoseemergingfromtheworkofupdatingBPM5,SNA,andotherstatisticalframeworks.
76.
IssuesonupdateofBPM5—BOPCOM/06-37Chapter3:AccountingPrinciples(a)Applicationofmarketvalue—issueraisedbyChileTheCommitteeconsideredtheissueraisedbyChileonhowtoapplymarketvaluationinthecaseoftransactionsingoodsinwhichthecontractsestablishquotationperiodsoftenmonthsafterthegoodshavechangedhands.
Itwasagreedthatmarketvalueatthetimeofchangeofownershipshouldbeestimated,withthegoodsdatarevisedwiththeactualmarketvalue,whenknown.
TheCommitteeconsideredthatthemarketvalueisthecontractprice,regardlessofwhetheritisunknownatthetimeofchangeofownership.
ItwasagreedthatthenewManualandCompilationGuidewouldneedtoelaborateonthisissue.
(b)Timing:Progressivechangeofownership—issueraisedbyAustraliaTheCommitteenotedthattheSNArecognizesprogressivechangeofownershiponworkinprogressincasesofbuildingsunderconstructionwherethereisapriorcontractofsale,butnotonplantandmachinery.
Forthelatteritwasnotedthatadvancepaymentsmadetotheproducerofcapitalgoodsareshownastradecreditfromthebuyer.
TheCommitteeagreedwiththeIMFproposalthatprogressivechangeofownershipbedescribedconsistentwiththeSNAguidelines(see1993SNAparagraph10.
74).
Chapter4:EconomicTerritory,Units,InstitutionalSectors,andResidence(c)Definitionofenterprisegroup—issueraisedbyCanadaNotingthattheSNAdoesnotdefinetheterm"enterprisegroup",theCommitteeagreedtoavoidtheuseoftheterm"enterprisegroup"inthenewManual.
Ifareferenceisneededtoagroupofrelatedenterprises,itisrecommendedtousetheapproachintheFrameworkforDirectInvestmentRelationshipsoftheOECDBenchmarkDefinitionofForeignDirectInvestment,4thedition(BD4).
(d)Terminologyforsectors—issueraisedindiscussionwithUNSDandcommentedonbyHongKongandCanadaTheCommitteewelcomesshortbutprecisedescriptorswhereverpossible.
8Chapter5:FinancialInstrumentsandFunctionalCategories(e)Unallocatedaccountsotherthangold—issueraisedbyHongKongandCanadaUnallocatedgoldandothermetalaccountsareclassifiedasdeposits.
TheCommitteeagreedwiththeAEGintakingnodecisiononunallocatedaccountsincommodities,suchasoil,untilsuchacaseisidentified.
ItwasnotedthatshouldtheissueariseafterthedraftManualisfinalized,therearemechanismstoagreeandpromulgatechanges.
TheCommitteeagreedthat,inprinciple,thetreatmentofunallocatedgoldasadepositshouldbeappliedtootherpreciousmetals.
(f)Unallocatedaccountsandcurrencyofdenomination—issueraisedbyCanadaTheCommitteenotedthattheAEG'soutcomeistoclassifythesefinancialassets/liabilitiesasforeigncurrencydepositswithoutaneedforanyspecificdepositclasstobespecified.
TheCommitteeagreedthatall"preciousmetals"accountsshouldbeclassifiedasforeigncurrencydepositsbutconsideredthatthereisnopresumptionthatthesametreatmentwillbeappliedtootherunallocatedcommodityaccountsifsuchcasesarises.
(g)Ownershipoflandandtimeshareswhereequityshareislessthan10percent—issuesraisedbyAustraliaandHongKongAustraliasuggestedthattherebeanotionalresidentunitforeachnonresidentequitypositionratherthanoneunitperparcelofland,andsothe10percentdefinitionwouldbemetineachinstance,bydefinition.
TheCommitteenotedthatthisapproachwouldbecomplicatedincaseswherethelandwaslessdivisible,asinthecaseofjointownership.
TheCommitteeagreedthattreatmentofownershipoflandwasstraightforwardwherethelandisfullyownedbyresidentsornonresidentsinonesinglecountry.
WhereitisjointlyownedbyaresidentandanonresidenttheCommitteefeltthatthelandcouldbesplitintoseparateparcelsasproposedbyAustralia.
However,theCommitteewasinformedthattheAEGdoesnotlikeassetstobesplit.
ClarificationonthispointfromtheAEGwillbesought.
ItwasagreedthatCommitteememberswouldsendanycommentsontheBOPCOM/06-33ontimesharestothedraftManualeditorsinthecomingweeks.
9(h)Paymentsassociatedwithderivatives—issueraisedinthedraftmanualandcommentedonbyAustraliaTheCommitteenotedthatunderaswaparrangement,theobligationsofeachpartymayariseatdifferenttimes,forexample,aninterestrateswapwhereonepaymentisquarterlyandtheotherisannual.
Whilethequarterlypaymentcouldbeseenashavingtheattributesofaloan,theCommitteeagreedwiththeFundproposalthat,onpracticalgrounds,thetransactionsbeclassifiedasfinancialderivativetransactions.
(i)Otherequityinthefunctionalclassification—issueraisedbyAustraliaandChileTheCommitteenotedthattheclassificationof"otherequity"(i.
e.
,equitynotintheformofsecurities),suchasinpartnershipsornotionalunitsthatwerenotdirectinvestmententerprises,wasnotdealtwithinBPM5.
Itwasagreedthat"otherequity"(asopposedto"equitysecurities")thatdoesnotqualifytobeincludedin"directinvestment"beincludedunder"otherinvestment.
"Itwasagreedlaterinthemeetingthattheclassificationofcross-borderinvestmentinholidayhomesasdirectinvestment,asopposedtootherinvestment,bereviewed.
Chapter8:OtherChangesinFinancialAssetsandLiabilities(j)Write-offandwrite-downs—issueraisedbyAustraliaTheCommitteeagreedtotreatwrite-offsandwrite–downsas"otherchangesinvolume"andonlyusetheterm"write-offs.
"SomeissueswereraisedovertherelationshipbetweenNPL'sandwrite-offs.
ItwasagreedtoreviewthewordinginthedraftManualandmakeclearthatwrite-offsrelatetothedisappearanceofaninstitutionalunit.
A"decision-treechart"tohelpcompilersindecidingbetweenNPLsandwrite-offsshouldappearintheCompilationGuide.
Chapter9:GoodsandServices(k)Merchanting/nonmonetarygold—issueraisedbyCanadaandinthegeneralsenseofusingFOB,byAustraliaTheCommitteeagreedthatgoodsundermerchantingandnonmonetarygoldbevaluedattransactionprices,ratherthanFOBprices.
(l)Educationandhealth—issueraisedbyChina,UK,OECD,Eurostat,UNSDandWTO10TheCommitteemembersagreedbyconsensustostaywiththestatusquoduetotheusefulnessoftimeseriesdataandforpracticalityreasons.
Thus(i)educationfeespayablebyforeignstudentsineducationservices,and(ii)healthcostsincurredbypatientsinhealthservicesshouldcontinuetobein,andnotsplitfrom,"travel".
However,itwaspointedoutthatforcertaineconomiessuchexpenditurescouldbeshownassupplementaryitems.
(m)Additionaldetailforotherbusinessservices—issueraisedbyOECD,EurostatandUNSDTheCommitteeconsideredtheproposaltoreplace"otherbusinessservices"withthreecategories:"researchanddevelopmentservices";"professionalandmanagementconsultingservices";and"technical,traderelatedandotherbusinessservices".
TherewasstrongsupportamongCommitteemembersforthisproposal.
TheChairindicatedthattheIMFwouldreflectfurtherontheissuegiventheconcernofoverloadingtheBOPstatementwithserviceitemsandthepossiblestatisticalprioritiesitimpliesfordevelopingcountries.
(n)Durablegoodsintravelorgoods—issueraisedbyEurostatandUNSDTheCommitteeagreedthatconceptuallydurablegoodsarisingfromtravelshouldbein"goods".
TheCommitteealsonotedthatinpracticesuchgoodswouldbeincludedin'travel"inanumberofcountriesduetoalackofdetailedsourceinformation.
(o)Non-customizedsoftwaredeliveredelectronically—issueraisedbyUK,OECDandUNSDCurrentlythemeasurementofnon-customizedsoftwaredeliveredelectronicallyacrossborderischallenging.
Therewasgeneralconsensustoincludenon-customizedsoftwaredeliveredelectronicallyundertradeinservices.
(p)Re-imports—issueraisedbyUNSDTheCommitteeagreedthatonpracticalgroundstherewasnotmuchsupporttoshowRe-importsinTable9.
1("OverviewofGoodsandServicesAccount")ofthedraftManual.
NonethelesstheCommitteeagreedthatincaseswheresuchtransactionsareimportantcountriesshouldbeencouragedtoprovidethesedataassupplementaryinformation.
(q)Table9.
2—issueraisedbytheUNSDandWTOGoodstatisticalpracticeisthatcompilersprovideareconciliationbetweenmerchandisetradeandbalanceofpaymentsdataforgoods.
Suchareconciliationincludescoverage,valuation,andtimingadjustments,etc.
Thisistobeextendedtoshowthereconciliation11fortransactionssuchasgoodsforprocessingandmerchanting.
TheCommitteeagreedthatUNSDwillprovideinputinrecastingTable9.
2.
Chapter10:PrimaryDistributionofIncomeAccount(r)Exceptionalpaymentsbypubliccorporationstogovernment—commentsbyCanada.
Itwasagreedthatexceptionalpaymentsbypubliccorporationstogovernmentsfundedfromaccumulatedreservesorsalesofassetsbetreatedasawithdrawalofequityincasesofcross-bordertransactions.
TherecommendationtoAEGistotreattheprivatesectorinthesameway.
TheSNAeditorwillinformBOPCOMontheresponsefromAEG.
TheCommitteenotedthatfordirectinvestment,exceptionalpaymentsarealreadytreatedasawithdrawalofequity,butthatthisissuecouldpotentiallyalsoimpactportfolioinvestment.
(s)PresentationofTable10.
2—issueraisedbyCanadaandindirectlybyAustraliaThereasoningbehindtheseparatepresentationofdirectinvestmentincomeforequityandinvestmentfundsharesinTable10.
2ofthedraftManualwasclarified.
Other(t)Neterrorsandomissions—whatshouldbesaid—issueraisedbyHongKongandBIS,commentedonbytheU.
K.
TheCommitteenotedthatneterrorsandomissionsshouldnotbepartofthestandardcomponentsbutrecognizedthatthisitemprovidesusefulinformation.
Itwasagreedasfollows:TherevisedManualshouldprovideafewparagraphselaboratingonerrorsandomissionsandinparticular,emphasizingthatalthoughtheydonotexistinconcept,inpracticetheywill.
Countrieswillbeencouragedtoidentifytheseerrorsintheirstatisticalstatements.
TherevisedManualwillnotprovideguidanceonwheretoshowerrorsandomissionsbuttheIMFwillinitsreportingrequirements.
Formoreinformation,UNSDreferredCommitteememberstothe"SystemApproachtoNationalAccounting,HandbookonNationalAccounting.
"Itwasproposedtoconsiderrevisingtheterm"errorsandomissions"tosomethinglike"errorsandotherstatisticaldiscrepancies.
"12Thepossibility,ofidentifyingerrorsandomissionsinotheraccountse.
g.
,IIPshouldbeconsidered,althoughthismaynotbefullyresolvedintimefortherevisedManual.
General(u)DetailedrelationshipwithIASandSNA—issuesraisedbyChinaandHongKong,respectivelyTheIMFagreedtoupdatetheTableinAppendix1oftheBPM5thatprovidesadetailedreconciliationbetweenSNAandBPM5.
ItwasagreedthatthelinkswithIAScouldbeaddressedintheCompilationGuide.
Suchappendiceswereobviouscandidatesforelectronicpublication.
OtherissuesIssuesraisedbyJapanunderreinvestedearningsandFISIMMr.
NobumoriraisedconcernoverthetreatmentofFISIMintheSNAandtherevisedManual.
TheSNAeditorandMr.
HavingaagreedtodiscusstheissuesbilaterallywithMr.
Nobumori.
TheCommitteesawaneedtoincludesomedescriptionofreinvestedearningsintheCompilationGuide.
7.
OverviewoftheBPM5updateTheCommitteewasupdatedonthetimetableforrevisingBPM5.
Itwasnotedthattheworkispresentlyonschedule.
Mrs.
BertrandalertedtheCommitteeofthepostponementoftheapprovaldateoftheBD4toend-2007toaccommodatedevelopmentalworkonadditionaldatapresentationsforFDIstatistics.
TheChairinformedtheCommitteethatanymajorchangesarisingfromthisdelaymightnotbeabletobetakenupintherevisedManual.
TheChairinformedtheCommitteethatthetitleoftherevisedManualissomethingtowhichtheIMFwouldliketogivesomecarefulthought,butintendedtomaintainthebalanceofpayments"brand"name.
TheCommitteewasinformedthatitwillbeprovidedwiththedraftstandardcomponentsforcommentsbeforetheyarepostedonthewebsiteaspartofthedraftManualforworld-wideconsultation.
Committeememberswereinvitedtoprovidecommentsontheotherquestionsraisedinthepaper,particularlyrelatingtotheappendices,inthecomingweeks.
13IV.
WEDNESDAY,OCTOBER25,2006UpdateofBPM5Continued8.
Financialinstrumentsandinstitutionalsectorclassification—BOPCOM/06-22BRegardingtheclassificationoffinancialassetsandliabilitiesfortheSNA,concernswereraisedbytheCommitteeoverwhetherinthepresentationinTable1ofthepaperalltheinstrumentsproposedbytheISWGNAweremutuallyexclusive.
TheSNAeditoristoinvestigate.
OnthestandardcomponentsfortherevisedManual,therewassupportforthecategoriesdescribedinBOPCOM/06-22B:centralbank,otherdeposit-takingcorporations,GeneralGovernment,andothersectorssplitintotwo:"otherfinancialcorporations"and"nonfinancialcorporations,householdandNPISH(other)".
Thecategorydescriptorsneedtobeuserfriendlywhenusedinfreestandingtext.
Thechangeto"centralbank"from"monetaryauthorities"couldleadtobreaksinseriesforthecentralbankandgeneralgovernmentsectors.
Subsequentlyitwasagreedthatontheissuesofwhethermoneymarketmutualfundsshouldbeincludedwiththeotherdeposit-takinginstitutionssectorornot,andforthesplitofthe"other"sectorinto"otherfinancial"and"other,"questionsforreviewerswouldbeincludedinthedraftManualpostedontheweb.
TheCommitteeexpressedpreferenceforsimpleterminologywherefeasible.
9.
Measuringdirectinvestmentequity:Canada'sexperience—BOPCOM/06-12TheCommitteeappreciatedthepresentationofCanada'sexperienceinmeasuringthemarketvalueofCanada'sFDIequitypositiondata.
TheCommitteewelcomedmoreworkonmethodsforcalculatingmarketvaluesfrombookvaluedata.
TheCommitteenotedthattheworkonCDISwillgiveimpetusonimprovingbookvaluedata.
TheCommitteeconsideredthatthereisneedtocapitalizeontheknowledgeavailableamongCommitteemembersincompilationguidessuchastheCDISSurveyGuide.
10.
UserneedsforFDIdataandupdateonprogressofBD4—BOPCOM/06-13,BOPCOM/06-21,and06-21AMrs.
BertrandsetouttheuserrequirementsofpolicymakersforFDIasdefinedbytheOECD'sInvestmentCommittee:(i)attractivenessofthedomesticeconomyasaninvestmentlocation;(ii)14theopportunitiesandchallengeswhendomesticenterprisesmoveoffshore;(iii)"unwelcome"mergersandacquisitions,strategicsectorsandnationalchampions;(iv)investmentfordevelopment:FDIfromtheOECDareatopoorercountries.
AdequateFDIstatisticscouldsupportthesepriorityareas.
ShealsomentionedthataggregateFDIdataalonearenotsufficienttoanswerallthequestionsraisedinpolicyareasandmoreanalyticalbreakdownswouldbeveryuseful,suchas:(i)in-depthinformationaboutpartnercountries;(ii)detailedequityinvestmentdata;(iii)"real"investmentasopposedto"papertransactions";(iv)transactions/positionsofspecialpurposeentities.
Finallyshenotedthatadditionaldatasetsonnewformsofcorporatelinkupssuchasstrategicalliances,transferofknow-how,jointventures,etc.
,areimportantelementsforpolicyanalysisbut,couldonlybeconsideredinthefutureresearchagenda.
GoodprogressisbeingmadeonupdatingtheBD4withtheWIISmeetingtakingdecisions,inApril2006andOctober2006.
DeliberationsofWIISarereferencedbelowunder13,asappropriate.
Moreover,inOctober2006,WIISconsideredthreedevelopmentalpaperspreparedbyprojectgroupsonadditionalbreakdownsofFDIstatistics(detailedstatisticspresentedbypartnercountryandbyindustryclassification).
Theyare:(i)Treatmentofpass-throughfundsandcapitalintransitinFDIStatistics(ii)Identifyingultimateinvesting/hostcountryinFDIStatistics(iii)SegregatingmergersandacquisitionsasabreakdownofFDIStatistics11.
Frameworkofdirectinvestmentrelationships—BOPCOM/06-23TheCommitteewelcomedandagreedwithMr.
Ridgeway'sproposalssetoutinthepaperfordefiningthescopeforFDIrelationshipsbasedonequitypositions;onterminologythatfocusesoncontrol;andforthedescriptionofFDIrelationshipstobeclear.
TheCommitteeagreedtoleavetotheWIIStheissueofclarifyingthetreatmentofsituationswhereenterprisesalreadyidentifiedasmembersofaFDIrelationshiphavejointownershipofanotherenterprise.
12.
ScopeoftheexceptionfromFDIoftransactionsbetweenfinancialentities—BOPCOM/06-26TheCommitteedecidedtolimitthescopeoftheexceptionofdebttransactionsbetweenrelatedfinancialentitiestothefivesub-categoriesinTable2ofthepaperBOPCOM/06-26(centralbank,otherdeposit-takingcorporations,moneymarketfunds(MMF),investmentfundsotherthanMMFs,andotherfinancialintermediariesexceptinsurancecorporationsandpensionfunds(ICPF).
)TheCommitteedecidednottoextendthescopeoftheexceptiontotransactionsbetweennonfinancialenterprisesandrelatedfinancialentities.
Seealsoitem14below.
15TheCommitteeagreedthatthecoverageofsub-categories6(financialauxiliaries)and7(otherfinancialinstitutionsexceptICPF)neededtobereviewed.
Thismayaffectothersub-categories.
TheCommitteewouldbeconsultedonthedescriptionsonofthesesub-categoriesaspartoftheSNAprocess.
TheCommitteewouldacceptwhatwasagreedforSNA.
13.
Variousissuesforresolutionondirectinvestment—BOPCOM/06-27Thefirsttwoissues–10percentofvotingpower,andlastinginfluence–werenotdiscussedasitwasagreedthattheseweretobesubsumedwithintheearlierdiscussionontheFrameworkforDirectInvestmentRelationships.
(a)ReverseinvestmentTheCommitteeconsideredwhetherreverseinvestmentshouldapplyonlytotransactionsandpositionsbetweenthedirectinvestmententerpriseanditsimmediatedirectinvestor,orwhetheritshouldbeextendedtoanytransactionsandpositionsbetweenadirectinvestmententerpriseandany/allindirectdirectinvestorsaswell.
TheCommitteeoverwhelminglyagreed:thattheprincipleofreverseinvestmentshouldapplytoclaimsbyadirectinvestmententerpriseonindirect,aswellasimmediate,directinvestors,butrecognizedthattheremaybeconcernsofpracticalityinsomecountries.
TheCommitteewasinformedthatthisdecisionconvergedwithWIISdeliberations.
(b)Exclusionofretailmutualfundsandmaster/feederfundsfromdirectinvestmentTheCommitteereconsideredthequestionsastowhetherinvestmentsbyretailmutualfundsandmaster/feederfundsshouldbeexcludedfromdirectinvestment,havingbeenunabletoreachaconclusiononthisissueatitsmeetingin2005.
InadditiontothediscussionincludedinBOPCOM-06/27,theCommitteealsodiscussedtheannextoapaperfromtheBankofJapanandtheECB.
ByconsensustheCommitteeagreedthatthestandardruleforestablishingadirectinvestmentrelationshipshouldapply:werearetailmutualfundtohold10percent(ormore)ofthevotingpowerinaninstitutionalunitresidentinanothereconomy;andwereafeederfundtohold10percentormoreofthevotingpowerinitsnonresidentmasterfund.
16TheCommitteewasinformedthatWIISdeliberationsdidnotresolvetheissueofexclusionofretailmutualfundsandmasterfeederfundsfromdirectinvestment.
WIISwillbeconsultedbyitsSecretariatontheCommitteeoutcome.
(c)TechnicalreservesofcaptivenonlifeinsurancecompaniesTheCommitteeconsideredwhetherthetechnicalreservesofacaptivenon-lifeinsurancecompanyshouldbeincludedindirectinvestment.
TheCommitteedecidedthat,giventhatacaptivenon-lifeinsurancecompanyisadirectinvestmententerprise,theclaimoftheinsuredwasalsothatofadirectinvestorandsoshouldbeincludedindirectinvestment:debt.
TheCommitteewasinformedthatthisdecisionconvergedwithWIISdeliberations.
(d)NonprofitinstitutionsservinghouseholdsTheCommitteeconsideredwhetheranonprofitinstitutionservinghouseholds(NPISH)couldhaveadirectinvestmentrelationshipwitharelatedactivityabroad.
TheCommitteedecidedthat:ANPISHcouldbeadirectinvestorbutnotadirectinvestmententerprise.
Therefore,whereanNPISHestablishedanonresidententerprisewithamarketorientation,itwouldbeadirectinvestorinthatenterprise,ifthedirectinvestmentcriteriaapplied.
WhereanNPISHhasafinancialclaimonarelatednonresidentNPISH,thereshouldbenodirectinvestmentclaim.
Rathersuchaclaimshouldbetreatedeitherasportfolioinvestmentorotherinvestment.
Theprincipleshouldapplytoallnonprofitinstitutions,notjustNPISHs.
TheCommitteewasinformedthatWIISdeliberationsdidnotresolvetheissueofNPISHs.
WIISwillbeconsultedbyitsSecretariatontheCommitteeoutcome.
(e)Goodsandservicesprovidedin-kindTheCommitteeconsideredhowtotreatthecounterpartfinancialtransactiontotheprovisionofgoodsandservicesprovidedin-kind,intheabsenceofanyindicationofwhatthecounterpartentryshouldbe.
TheCommitteenotedthesimilaritytotransferpricing,notingthatsuchsituationsareextremecasesoftransferpricingwithzeroprices.
17TheCommitteedecidedthat:thetreatmentfortheprovisionofgoodsandservicesprovidedin-kindshouldbetreatedinthesamemannerasfortransferpricingbetweenadirectinvestoranditsdirectinvestmententerprise,assetoutinparagraph10.
90ofthedraftManual;wheresuchtransactionsoccurbetweenotheraffiliatedenterprisesthatdonothaveanequityrelationship,thetransactionshouldberegardedasaninjectionofequityintotheaffiliatereceivingthegoodorservicein-kindbytheaffiliateprovidingthegoodorservice;butsuchcasesarelikelytoberare.
TheCommitteenotedthatWIISdeliberationsdidnotresolvetheissueofgoodsandservicesprovidedin-kind.
WIISwillbeconsultedbyitsSecretariatontheCommitteeoutcome.
14.
FDIStatistics—Treatmentofinter-companytransactionsoffinancialintermediarieswithnonfinancialentities—BOPCOM/06-24TheCommitteewelcomedtheECBpaperBOPCOM/06-24thatsetoutfourexamplesregardingthetreatmentoffinancialintermediaries.
TheCommitteeagreedtoapplytheconceptualprinciplepreviouslyestablishedinthediscussionunderBOPCOM/06-26(seeitem12above).
ExamplesillustratingtheimplicationsoftheCommittee'sdecisionsareattached(AppendixI).
V.
THURSDAYOCTOBER26,200615.
Treatmentofpass-throughfundsandcapitalintransitinFDIstatisticsBOPCOM/06-21BMrs.
BertrandinformedtheCommitteethattheissuesinthepaper,developedbyaprojectgroupofWIIS,generatedconsiderableinterestanddebateintherecentmeetingsofWIISandoftheBenchmarkAdvisoryGroup.
ArevisedversionwillbesubmittedtoWIISinMarch2007foritsinclusionintheBenchmarkDefinition,4thedition.
However,thereisnointentiontoalterthebasicconceptsanddefinitionsofFDIagreedtodate.
TheCommitteewaskeenthattheybekeptinformedofdevelopmentswiththisworkandthatmemberscouldexpressviewsthroughelectronicdiscussion.
TheCommitteenotedtheneedtofosteraclearcommunicationtousersontheexactcontentandinterpretationofFDIstatistics.
TheIMFagreedtokeepCommitteemembersinformed.
Itwasagreedthatthistopicbeplacedontheagendafornextyear'smeeting,butisunlikelytoberesolvedintimeforthenewManual.
1816.
Reserverelatedliabilities—BOPCOM/06-29TheCommitteediscussedtheIMFpaperonthepossibleinclusionofreserve-relatedliabilitiesintothebalanceofpaymentsandIIPframework.
Followingextensivediscussions,theChairconcludedthatasmallmajorityfavoredthememorandumitemapproachratherthanincludingreserve-relatedliabilitiesasastandardcomponent.
NonethelessIMFstaffshouldreviewthediscussion,andtrytodrawoutasmuchcommongroundaspossible,andmakeaformalproposaltoCommitteemembers.
CommitteemembersnotedthesensitivityofthisissueandconsideredthatwiderdiscussionwithinthenationalauthoritieswillbeneededoncetheIMFproposalisreceived.
17.
ReserveAssetTechnicalExpertGroup(RESTEG)Summarypaper—BOPCOM/06-28TheCommitteereviewedtheoutcomeoftheRESTEGdiscussionsandconsideredthefollowingfiveissues:(a)ResidentbankdepositsOnthetreatmentofdepositsofthemonetaryauthoritiesindomesticbanks,arangeofviewswereexpressedbothforandagainsttheexclusionofsuchassetsfromreserves.
TheChairconcludedthattherewasoverwhelmingsupportamongCommitteememberstoexcluderesidentbankdepositsfromreserves.
Alsotherewasagreement,butnotunanimous,totightentheconditionsfortheinclusionofforeigncurrencyexternalassetsofnon-monetaryauthoritysectorsinreserveassets,assetoutinparagraph35ofthepaper.
Giventheconcernsofsomecountriesattheseoutcomes,theChairalsoacknowledgedtheneedforfurtherconsultationwithcountries.
(b)ReversetransactionsRegardingwhethertoleavesecurities(orgold)underrepowithinreservesandrecordtherepo-loanunderreserve-relatedliabilities,orreclassifythemasportfolioinvestment(demonetarizethegold),themajorityfavoredtheformeroption.
TheChairnotedtheconcernoverprovidingmisleadingdata(doublecountinginthecasewheretherepo-loanwouldbefromaresident)ifthefirstoptionisfollowed,andthattheIMFfavoredthesecondoption.
Ifthefirstoptionisfollowed,clearinformationonthe19associatedborrowingisrequired.
AgaintheChairalsoacknowledgedtheneedforfurtherconsultationwithcountries.
TheissuewillbeboughtbacktoCommitteemembers.
(c)SDRsTheCommitteeacceptedtheproposalthatacountry'sSDRallocationbeclassifiedasdebt.
(d)MonetarygoldTherewasaclearmajorityinfavorofmaintainingthecurrenttreatmentofmonetarygold.
FurtherconsultationwithCommitteemembersisneededonunallocatedgoldaccountsheldbymonetaryauthorities(paragraph27ofthepaper).
ThisissuewillinvolvefurtherconsultationwithCommitteemembers.
(e)Memorandum/supplementaryitemsThemajorityofCommitteemembersfavoredincludingthecurrencycompositionofreservessplitbetweenSDRbasketcurrenciesandothercurrencies,onlyasamemorandumitemtotheIIP.
Fortheotheritemsinthepaper,supplementarywasagreed.
TheChairconsideredthatincludingthecurrencycompositionasamemorandumitemwouldrequirehighlevelclearanceintheIMF,andthatasupplementaryitemwasmorelikelytobeaccepted.
TheCommitteeagreedthatRESTEGwouldcontinuetoworkonreservesand,iffeasiblegivenresourceconstraints,startworkonotherreservetemplateissues.
RESTEGistoreportbacktonextyear'sCommitteemeeting18.
InternationalConferenceontheCPIS—BOPCOM/06-14TheCommitteeappreciatedMr.
Tenes'spresentationontheCPISseminarheldattheBankofSpaininMarch2006.
TheIMFagreedtotakeforwardtheissuesidentifiedinthereport,subjecttoresourceconstraints.
TheneedtocoordinatetheCDISandCPISsurveyswasnoted,giventherelationshipbetweendirectandportfolioinvestment.
19.
TreatmentofhybridinstrumentsTheCommitteeagreedthatcommentsonthisitembeprovidedtotheIMFinthecomingweeks1.
1MessrsBrownandKozlowplantocirculateanoteabouttheUSA/UKinvestigationonbilateralservicestoCommitteemembersearlynextyear.
2020.
NextmeetingThenextmeetingistobeheldinWashingtonstartingMondayOctober29,2007.
21.
WorkprogramAdraftworkprogramwillbecirculatedtoCommitteemembersfollowingthemeeting.
TheupdateofBPM5andtheCDIS(ifitproceeds)willremainastoppriorities.
TheothertopicsandtheirprioritieswillbereviewedbutamongthenewtopicstobeaddedaretheimplementationofthenewManual,thesupplyofbalanceofpaymentsandotherexternaldatatointernationalagencies,andtheFDIissuerelatingtopass-throughfundsandcapitalintransit.
Itwasalsosuggestedthattheuseofbalanceofpaymentsdatashouldbeonthelong-termworkprogram,perhapswithafocusonspecificaspectsoftheexternalaccountsinturn.
22.
VoteofappreciationtoECBTheCommitteeexpresseditsappreciationtotheECBforitshospitalityinhostingtheCommittee'smeeting.
21AppendixI.
DirectInvestmentRelationships:SomeExamples21.
IfAisafinancialentityinanyofthefollowingfinancialsub-categoriescentralbank,otherdeposit-takingcorporations,moneymarketfunds(MMF),investmentfundsotherthanMMFs,andotherfinancialintermediariesexceptinsurancecorporationsandpensionfunds(ICPF),(so-calledfinancialsubcategories1to5)anditsdirectinvestmententerprisesBandCarenotthen:AlldebttransactionsbetweenAandB,andbetweenBandC,areincludedunderdirectinvestment.
2.
IfAandYarefinancialentitiesinfinancialsubcategories1to5,butBandCarenot,then:DebttransactionsbetweenAandB,andBandCareallincludedindirectinvestment.
2TheillustrativediagramsinAppendixIareobtainedfromBOPCOM/06-24.
223.
IfAandDarefinancialentitiesinfinancialsubcategories1to5,butBandCarenot,then:DebttransactionsbetweenDandAarenotincludedwithindirectinvestmentbutalldebttransactionsbetweenDandB,andDandCareincludedindirectinvestment.
4.
IfAandDarefinancialentitiesinfinancialsubcategories1to5,butBandCarenot,then:DebttransactionsbetweenDandBareincludedindirectinvestment.
23