## Direct Investment Task Team (DITT) — MARCH 30, 2021

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### Overview of DITT work program and meeting agenda
- DITT presented a Work Plan showing 17 Guidance Notes (GNs) in total; 8 completed/in progress and 17 total noted in the graphic.
- Agenda items included:
  - Welcoming Remarks
  - Outcome of February 2021 BOPCOM Meeting
  - Forthcoming Testing and Stock Taking Exercises
  - Way Forward
  - Concluding Remarks

### Outcome of February 2021 Committee Meeting (BOPCOM): GNs presented
- The Committee will meet three times in 2021 due to the number of GNs to be discussed.
- Five GNs were presented at the February 2021 Committee Meeting:
  - D.1: Greenfield and Extensions of Capital — UNCTAD (co-lead), Eurostat (co-lead), Japan, UK, and Zambia
  - D.3: Treatment of Collective Investment Institutions — US (lead), Brazil, Luxembourg, South Africa, and ECB
  - D.4: Corporate Inversions — US (lead), Italy, and UK
  - D.12: Including Intra-concern Derivatives in DI — Poland (lead), Italy
  - D.17: Identifying Super Dividends and the Borderline Between Dividends and Withdrawals of Equity — Germany (lead), Australia, Spain, US, and IMFBP

### D.1 Greenfield Investment (GI): recommendations, consultation outcome, committee actions
- Recommendation:
  - Develop a transactions approach to measuring FDI flows for GI and extensions of capacity
  - Supplemental reporting
  - Requires definition of GI and extensions of capacity
- Outcome of Public Consultation:
  - Strong support for including guidance on the definition and collection of data on GI and extension of capacity in the BPM7
  - Explore the capital approach through the work on MNEs being carried out with the Globalization Task Team (GZTT)
  - Recommended testing before developing detailed guidance on the transactions approach
- Committee Discussion:
  - Almost all Committee members agreed GI data are highly relevant.
  - Majority supported using the transactions approach (more consistent with the overall BoP framework).
  - A few members supported the capital approach as closer to user needs and analytically more useful.
  - Committee members urged to include:
    - Prepare a clear definition of GI and extension of capacity
    - Clarify the scope of its coverage (i.e., equity/debt or both, reinvested earnings?)
    - Clarify the recording (gross or net basis) to ensure comparability across countries
    - Provide practical guidance on its data collection and compilation in the updated Compilation Guide
  - Committee largely favored the need for testing the proposed approaches before including it in the BPM7
- Actions:
  - Elaborate a GI definition and a plan for the testing exercise (June 2021)
  - Undertake the testing in collaboration with the WGIIS; seek volunteers
  - Present testing results, including analytical usefulness of the transaction approach (date to be defined – dtbd)
  - Prepare an updated version of D.1 (dtbd) incorporating testing results and revising the GN to include:
    - (a) a proposed definition of GI and extension of capacity
    - (b) clarifying the scope of their coverage
    - (c) clarifying the recording
  - Updated D.1 will be circulated to the Committee for final approval via written procedure

### D.3 Treatment of Collective Investment Institutions (CIIs)
- Recommendation:
  - Change the current treatment—CIIs are included in DI if they meet the operational definition—due to both conceptual and practical issues.
  - Modify the operational definition of DI to exclude certain investments in or by CIIs; two alternative options considered:
    - (A3.2) treat all investments (even over 10 percent) in CIIs as portfolio investment, while keeping investments by CIIs of over 10 percent in DI in accordance with BPM6 standards; or
    - (A3.3) exclude all investments in or by CIIs from DI except for private equity and real estate investment funds
- Outcome of Public Consultation:
  - Major support for changing the standards, but views were equally split between alternatives A3.2 and A3.3
- Summary of Discussion:
  - Unanimous support to modify the current standards
  - Views split between A3.2 and A3.3 with a slight majority supporting A3.2
  - Recognized practical challenges in either alternative; A3.2 considered easier on practical grounds and slightly preferred
  - Additional clarification could be included in BPM7CG on practical implementation, types of funds, and institutional sector classification
- Actions:
  - DITT to revise the GN, including the slight preference for A3.2
  - Updated D.3 (stating agreed proposals for BPM7) to be recirculated to the Committee for final approval via written procedure

### D.4 Corporate Inversions (CIs)
- Recommendation:
  - Strengthen current guidance on publishing supplementary detail on CIs and define CIs for economies where they are important
- Outcome of Public Consultation:
  - Some support that CIs have distorted the analytical value of DI statistics if not separately identified
  - Support for supplemental statistics on a voluntary basis
  - Official definition of CIs for statistical purposes is needed
- Summary of Discussion:
  - CIs distort analytical usefulness of DI data where important
  - Need for an official definition of CIs for statistical purposes
  - Support for voluntary supplemental data collection for affected countries
  - Some suggested clarifying borderline between CIs and other corporate restructuring (e.g., changes in registered offices)
  - A typology of corporate actions indicating whether treated as transactions or Other Changes in Volume (OCV) would be helpful
  - Committee agreed to consult GZTT in finalizing the GN
- Actions:
  - Update D.4 by addressing comments and stating proposals for BPM7, including the definition of CIs and typology of corporate actions
  - Consult with GZTT before sending D.4 back to the Committee
  - Updated D.4 to be circulated to the Committee (via written procedure) for final approval

### D.12 Including Intra-concern Financial Derivatives in DI
- Recommendation:
  - Maintain the current classification but add a supplementary item, on a voluntary basis, “of which between affiliates”
- Outcome of Public Consultation:
  - Unanimous support for the recommendation
  - Significant support to include detailed elaboration of data sources to identify those statistics in the revised BPM7 CG
- Summary of Discussion:
  - Strong support for the recommendation and inclusion of information in BPM7CG
  - Support for research into financial derivatives within company groups due to potentially different behavior and purposes (e.g., shifting income) compared with derivatives between unaffiliated parties
- Actions:
  - DITT to prepare a final version of D.12 stating the final recommendation

### D.17 Superdividends
- Recommendation:
  - Discard the concept of superdividends for accumulated reserves from ordinary earnings for DIEs
- Outcome of Public Consultation:
  - Generally agreed with the recommendation
- Summary of Discussion:
  - Most members supported the recommendation
  - A few members supported ESA 2010 approach and stressed potential inconsistency of dividends in DI with other dividends in macroeconomic accounts
  - Others noted DI income is measured uniquely due to recording of reinvested earnings and considered inconsistency does not exist
  - Agreed to consult the AEG and consider outcomes from discussions on F.2 and D.16
- Actions:
  - DITT to revise the GN in light of discussions and consult with AEG to ensure consistency with national accounts
  - Final decision will consider the outcome of the AEG consultation and discussions on F.2 and D.16

### Testing exercises and stocktaking
- D.1 Testing Exercise:
  - Purpose: gather practical guidance on collection and compilation using a targeted approach to selected countries rather than a general survey
  - Issues under consideration: which countries, geographical representation, collaboration from IOs and regional organizations, questionnaire design (re-adapt Eurostat questionnaire?), testing strategy
  - Timeline note: testing exercise plan targeted for June 2021
- Stocktaking Survey on MNEs (D.9: Reconciling DI with AMNE Statistics):
  - Recall from October 2020 BOPCOM discussion:
    - Launch a survey to gather feedback from compilers on framework
    - Include a definition of MNE [GZTT GN Treatment of MNEs circulated within DITT]
    - Framework should reconcile DI with AMNE statistics and be coordinated/aligned with GZTT work on MNEs
    - Introduce additional breakdowns of DI statistics to better align with concept of MNEs used in AMNE
  - Proposal:
    - Joint exercise with the OECD-WGIIS and GZTT
    - Focused approach to avoid fragmented discussion
  - Design considerations: audience, timeline

### D.4 typology and other methodological work
- D.4 Typology of Corporate Inversions:
  - Aim to develop a full typology (most usual cases)
  - Indicate whether each case should be treated as transactions or as Other Changes in Volume (OCV)

### Forthcoming GNs and priorities (Committee meetings scheduled)
- Committee meeting June 2021 — Issues and teams:
  - High Priority:
    - D.5 Eliminating Imputations for Entities Owned or Controlled by General Government for Fiscal Purposes — IMFBP (lead) and Eurostat
  - Medium Priority:
    - D.8 Public Private Partnerships — Zambia (lead), IMF, and South Africa
    - D.11 Removing Debt Between Affiliated Insurance Corporations and Pension Funds — France (lead), Canada, and Luxembourg
    - D.14 Financial Conduits — Luxembourg (lead), Germany, IMFBP, Russia, and OECD [may go via written procedure]
    - D.18 Cash Pooling in Direct Investment — ECB (lead), and IMFBP
- Committee meeting October 2021 — Issues and teams:
  - High Priority:
    - D.2 Valuation of Unlisted Equity — Spain (lead), Canada, China, Russia, ECB, and IMFBP
  - Medium Priority:
    - D.10 Can DI be Achieved Other than by Ownership of Equity? — Japan (lead), and Australia
    - D.15 Treatment of Payments Made by Non-resident Affiliates on Behalf of DI Enterprises — Brazil (lead), Australia, and China
    - D.16 Treatment of Retained Earnings — ECB (lead), Brazil, Eurostat, and IMFBP

### WGIIS activities and coordination
- Planned activities:
  - WGIIS webinar to support the public consultation of the next round of GNs — end-May (one or two days event)
  - WGIIS will support the Research & Testing phase foreseen for D.1 and D.9
  - BD4 Update — creating an Expert Group to support the WGIIS Secretariat in the update of the Benchmark Definition of FDI, 4th Edition manual
  - Terms of Reference for the Benchmark definition Technical Expert Group (BTEG)
- Participation notes:
  - Some WGIIS participants expressed interest in joining the BTEG
  - Desire for balanced geographical coverage — missing representatives from North America and Asia
  - Call for participants to be issued soon; contacts encouraged to reach WGIIS Secretariat

### Thematic grouping of GNs and incorporation in BPM7 update
- GNs by theme (examples from DITT list):
  - Boundaries of DI: D.3, D.10, D.11, D.12
  - Clarifications: D.8, D.15, D.18
  - MNEs and SPEs: D.5, D.6, D.9, D.14
  - FDI by type: D.1, D.4
  - DI income: D.16, D.17
  - Measurement and Classification: D.2, D.7
- Incorporation considerations:
  - Concern about many proposed changes (supplemental presentations, more granular detail)
  - No change is an acceptable outcome for some GNs (e.g., D.11, D.12, D.14)
  - Some changes may be grouped:
    - MNEs and UIE/UHE closely related
    - FDI by type: combine greenfield and extensions of capacity with existing guidance on M&A; break out corporate inversions in the residual category
    - Focus on compilation guidance rather than changes to the standards (e.g., D.18)

### Participants and Secretariat
- DITT Chairs:
  - Ms. Maria Borga (IMF, STA)
  - Mr. Krzysztof Makowski (OECD WGIIS Chair, National Bank of Poland)
- Secretariat:
  - Ms. Padma Sandhya Hurree Gobin (IMF)
  - Ms. Francesca Spinelli (OECD)
- International Organizations represented included ECB, Eurostat, OECD, UNCTAD, and IMF staff listed by name
- Country representatives listed from Australia, Brazil, Canada, China, France, Germany, Indonesia, Italy, Japan, Luxembourg, Russia, Spain, United Kingdom, United States, South Africa, and Zambia

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