GGNA 11.-13.5.2009 IMPACT OF GLOBALISATION ON NATIONAL ACCOUNTS

1. Agenda item 9 Foreign Direct InvestmentsComments by Eeva Hamunen, Statistics Finland on the IMF paperTHE NEED FOR HIGH QUALITY DATA ON FDI IN THE INTERNATIONAL AND NATIONAL ECONOMIC ACCOUNTS GGNA 11.-13.5.2009 IMPACT OF GLOBALISATION ON NATIONAL ACCOUNTS

2. FDI from the perspective of National Accounts Important SNA transactions are produced in FDI statistics, though FDI and BOP use functional categories and different terminology In financial accounts of SNA foreign direct investments are included under different instruments debt securities, loans, equity, trade credits and other instruments In non-financial accounts of SNA terminology and classification of property income differ from BOP Eeva Hamunen

3. SNA 2008 SNA 2008 recommends FDI to be shown as memorandum items in financial accounts and balance sheets Table 26.6. In SNA 2008 Chapter 26 shows the links between financial assets and BOP functional categories Eeva Hamunen

4. About practice For national accountants FDI statistics may not be very familiar, particularly if balance of payments and FDI are not compiled by the same institution The new SNA improves the situation This requires more co-operation between compilers of FDI, NA and FA Eeva Hamunen

5. In Finland Bank of Finland is responsible for FDI statistics Statistics Finland is in charge of national and financial accounts Business register maintained by Statistics Finland is used both for FDI and source statistics of NA: Frames of the FDI surveys are mainly based on the information on foreign ownership of resident enterprises in the business register as well as on the register of consolidated enterprises maintained by Statistics Finland Eeva Hamunen

6. Data sources in Finland For FDI statistics: a cut-off type annual survey with estimation procedure for the tail based on financial statements major enterprises supply monthly BoP/FDI data excl. reinvested earnings and equity stock For non-financial and financial accounts the main source is Structural Business Statistics Foreign-owned enterprises in Finlandare not treated separately for NA and FA purposes Eeva Hamunen

7. About data compilation in Finland Operating surplus data of NA is a residual item after some modifications made in the basic data However, reinvested earnings for NA are taken from BOP (FDI) as such Eeva Hamunen

8. Some general problems in compilation of FDI statistics Reinvested earnings and profits difficult to estimate before survey data available: risk of marked revisions COP-concept applied but difficult in practice: how to identify holding gains and losses – no support from IFRS Reinvested earnings and dividends have mirror image in COP One problem for NA is that treatment of re-invested earnings on FDI introduces asymmetry to sector accounts - which however are very important for SNA statistics Eeva Hamunen

9. More problems in practice Foreign unincorporated branches included in inward FDI only if separate accounts available but for the most part are included in NA Who is the ultimate controlling parent (UCP) Accounting practices vary between countries Global financial centres are a problem Unlisted shares, untraded equity - difficult to estimate and value A special problem: construction projects abroad Eeva Hamunen

10. What is important A common business register with one single identification number is first step to coherence - the BR should be used for all macro economic statistics Enterprise group register helps very much FDI data collection In Europe EuroGroups Register is under development for the major European groups Eeva Hamunen

11. We welcome In EU the FDI network is under development The new Regulation on European Statistics: exchange of confidential data is allowed The new co-ordinated CDIS-survey Memorandum items for FA and balance sheets in SNA 2008 Eeva Hamunen