## BPM6 Update — Direct Investment Task Team (DITT) Third Meeting (March 30, 2021)—Summary of Discussions

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### Introduction
- The DITT third meeting was held on March 30, 2021, via WebEx and was co-chaired by Ms. Maria Borga, Deputy Chief, Balance of Payments Division, IMF Statistics Department, and Mr. Krzysztof Makowski, chair of the OECD Working Group on Investment Statistics (WGIIS).
- Objectives of the meeting: share outcomes of the Committee on Balance of Payments Statistics meeting, discuss forthcoming testing and stock-taking exercises, and agree DITT follow-up work until the June 2021 Committee meeting.
- Secretariat change announced by the IMF: Ms. Rita Mesias will replace Ms. Padma Hurree-Gobin as DITT co-secretariat; Ms. Hurree-Gobin will become Committee co-secretariat.

### Outcomes of Guidance Notes Presented at the Committee Meeting (February 22–25, 2021)
- Chairs and secretariat presented: (i) Summary of Discussions of the Committee meeting (February 22–25, 2021); (ii) testing and stock-taking exercises; and (iii) way forward.
- The Committee indicated that some Guidance Notes (GNs) with strong consensus may be approved through written procedure.

#### Greenfield Investment and Extension of Capital (D.1)
- GN presents two approaches for measuring greenfield investment (GI) and extension of capacity (EC): the transaction approach and the capital approach.
- Recommendation: include collection of supplementary data on GI using the transaction approach under DI in BPM7 (provided clear definitions of GI and EC can be developed).
- Public consultation: strongly supported inclusion of guidance on definition and collection of GI and EC in BPM7 through the transaction approach.
- Committee views:
  - Majority supported the transaction approach; recognition that the capital approach (addressable by FATS) may be closer to user needs and more analytically useful.
  - Requested clear definition of GI and EC, clarification of coverage scope (equity, debt, and/or reinvested earnings), and recording basis (gross or net).
  - Agreed to include practical guidance in the BPM7 Compilation Guide (BPM7 CG) and to undertake testing.
- Next steps (DITT/IMF/WGIIS):
  - Seek volunteers to undertake testing on analytical usefulness of the transaction approach for GI measurement.
  - Revise GN to incorporate: (i) results of the testing; (ii) a proposed definition of GI and EC; and (iii) a clearer scope of coverage and recording.
  - Consider revised GN by the Committee through written procedure.

#### Treatment of Collective Investment Institutions (D.3)
- Current treatment: investment in and by collective investment institutions (CIIs) that meet the operational definition of DI are included in DI.
- GN proposed modifying operational definition to exclude certain investment in or by CIIs. DITT split between alternatives:
  - A3.2: treat all investment (even over 10 percent) in CIIs as portfolio investment, but keep investment by CIIs over 10 percent in DI.
  - A3.3: exclude all investment in or by CIIs from DI except private equity and real estate investment funds.
- Public consultation and Committee: split between A3.2 and A3.3; slight preference for A3.2 as more practical.
- Next steps:
  - Revise GN in light of discussions and Committee’s slight preference for A3.2.
  - State agreed proposals to go into BPM7 and circulate for final approval via written procedure.

#### Corporate Inversions (D.4)
- GN discusses conceptual/practical issues posed by corporate inversions (CIs), their distortion of DI statistics, and recommends strengthened guidance on publishing supplemental details and defining CIs.
- Public consultation: supported voluntary supplemental presentation of CIs and inclusion of an official statistical definition starting from the current BPM6, paragraph 8.19 definition.
- Committee requested inclusion of a typology of corporate actions to clarify borderline between CIs and other restructuring, indicating whether actions are transactions or Other Changes in Volume (OCV).
- Next steps:
  - Revise GN to address comments and state proposals for BPM7, including CI definition and typology of corporate actions.
  - Consult the Globalisation Task Team (GZTT) and finalize GN.
  - Circulate again for final approval via written procedure.

#### Including Intra-Concern Financial Derivatives in Direct Investment (D.12)
- GN assumption: financial derivatives between affiliates behave atypically; current classification places all financial derivatives (except those associated with official reserves) in the functional category “financial derivatives”.
- Recommendation: maintain current classification and add a voluntary supplementary item “of which between affiliates”.
- Public consultation: unanimous support for recommendation and for detailed elaboration of data sources in BPM7 CG.
- Committee: strong support and agreement to add requested information in BPM7 CG.
- Next steps:
  - Revise GN stating final recommendation and circulate for Committee approval through written procedure.

#### Identifying Superdividends and Borderline Between Dividends and Withdrawal of Equity (D.17)
- GN recommends abandoning the concept of superdividends for distributions from accumulated reserves of operating earnings of DIEs, given practical and conceptual drawbacks.
- Public consultation: generally in favor of abandoning superdividends; opposed to including an “of which” position for withdrawal of equity due to confidentiality constraints.
- Committee: mostly supported abandonment; some members raised concerns about inconsistency between DI dividends and other dividends in macroeconomic accounts.
- Next steps:
  - Revise GN reflecting discussions and preferred recommendation.
  - Consult the Advisory Expert Group (AEG) to ensure consistency with National Accounts.
  - Final decision will consider outcomes from AEG discussions on F.2 “Asymmetric Treatment of Retained Earnings Between Direct and Portfolio Investment and Potential Extension to Domestic Relationships” and D.16 “Treatment of Retained Earnings”.

### Forthcoming Testing and Stock‑Taking Exercises
- Committee requested testing for GN D.1 by June 2021.
- Proposed short‑timeframe testing approach:
  - Gather views on need for GI/EC data and how the transaction approach meets those needs.
  - Target a selected number of countries for survey, including Eurostat pilot participants; include non‑EU countries (with UNCTAD assistance) to ensure geographical representation and different statistical capacities.
  - Build on Eurostat questionnaire for GI data collection.
- Contributions announced:
  - Statistics Canada plans to release GI data to supplement cross‑border M&A by end‑May and will share consultation results and user feedback.
  - Emphasis on relying on Eurostat questionnaires for cross‑country comparability.
- Stock‑taking for GN D.9 (reconciling FDI and FATS/AMNE):
  - Need to coordinate fully and align with GZTT work on MNEs.
  - Proposed focused approach by drafting team of D.9 supported by OECD, WGIIS, and GZTT to reach out to compilers of balance of payments, national accounts, and business statistics.
  - Two‑stage survey approach suggested: broad questions on definitions/concepts/data availability for many countries, and in‑depth testing for a smaller sample.
- Corporate inversions (CIs) workplan:
  - Committee requested typology of CIs, a CI definition, and guidance on whether CIs are OCV or transactions.
  - Suggested pragmatic drafting: add examples of CIs (e.g., from countries where phenomenon is relevant) rather than exhaustive typology.
  - Offer from USA representative to test hypotheses using U.S. data; offers to share experiences from National Bank of Poland and other countries noted.

### Way Forward and Coordination
- Timeline for GN preparation and review determined by Committee meetings on June 21–24 and October 26–28, 2021.
  - Current plans: five GNs prepared for June 2021 meeting (including D.14 re‑scheduled and potentially cleared via written procedure); four GNs scheduled for October 2021 meeting.
- WGIIS activities:
  - Forthcoming WGIIS webinar (towards the end of May) to assist public consultation of current GNs.
  - WGIIS secretariat to support drafting teams of GNs D.1 and D.9 in testing and stock‑taking exercises.
  - Creation of Benchmark definition Technical Expert Group (BTEG) to help WGIIS secretariat revise Benchmark Definition of FDI, fourth edition (BD4); Terms of Reference (ToR) and call for participants to be circulated within DITT.
  - DITT member participation in BTEG encouraged.
- DITT chairs/secretariat emphasized streamlining proposed supplemental presentations to limit number of DI breakdowns requested of compilers in new manuals.

### Concluding Remarks
- Co‑chairs and co‑secretariat expressed appreciation for cooperation and work of DITT members.
- Emphasis on pragmatic, coordinated testing and consultation to inform BPM7 and BPM7 Compilation Guide.

### Actions Agreed (DITT Secretariat)
- Circulate comments received from DITT on the current set of GNs to the BPTT and WGIIS, then launch public consultations in early May.
- Share ToR and call for participation for the WGIIS BTEG (open until cob Friday, April 9).
- Prepare and circulate the summary of discussion of the meeting before posting those and the presentation on the DITT website.

### Attendees
- IMF: Maria Borga (co‑chair), Padma Hurree‑Gobin (co‑secretariat), Rita Mesias, Thomas Elkjaer
- OECD: Krzysztof Makowski WGIIS chair (co‑chair), Francesca Spinelli (co‑secretariat), Emilie Kothe
- Country Representatives: Michael Abbondante (Australia), Fernando Lemos (Brazil), Eric Simard (Canada), Mirco Lattwein (Germany), Mei Ling Tjung (Indonesia), Stefano Federico (Italy), Sakiko Ootsuka (Japan), Paul Feuvrier (Luxembourg), Fedor Kharlashin (Russia), Piet Swart (South Africa), Fernando Nieto (Spain), Lee Mallet (United Kingdom), Raymond Mataloni (USA), Wilson Phiri (Zambia)
- Other International Organizations: Carmen Picón Aguilar (ECB), Astrit Sulstarova (UNCTAD), Irene Madsen and Philippe de Rougemont (Eurostat)

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_Source: https://www.imf.org/-/media/files/data/statistics/bpm6/ditt/ditt-third-meeting-minutes-march-30-2021.pdf_