## 2. Inward and Outward DI Derived from CDIS Mirror Data Position

## Source details

**Canonical URL:** [2. Inward and Outward DI Derived from CDIS Mirror Data Position](https://www.imf.org/-/media/files/publications/cr/2022/english/1brnea2022001.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2022/english/1brnea2022001.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2022/english/1brnea2022001.pdf.json)

---

### Mission overview and objectives
- Remote External Sector Statistics (ESS) TA mission to Brunei Darussalam conducted during July 26–29, 2020.
- Objectives:
  - Conduct the first overall assessment of the balance of payments since the country produced 2010-Q1 data under BPM6.
  - Make recommendations to lower balance of payments’ high-level errors and omissions.
  - Prepare JPES staff to disseminate the International Investment Position (IIP) statistics.

### Main findings on compilation capacity and data gaps
- Main challenge: implementation of a holistic approach to collect data from different sources, including conducting own surveys and questionnaires, revamping compilation methods, and centralizing ESS methodology within JPES staff.
- Reported balance of payments data lacks the granularity recommended by best practices, hindering basic cross-checks to improve validations.
- Several standard presentation items contain embedded transactions, making compilation prone to imprecision.
- Combination of different compilation methods has functioned well recently, but transparency and granularity need improvement while preserving confidentiality.
- JPES staff are aware of vulnerabilities such as inability to cross-check basic data (e.g., ratio of income to positions data) and errors from concealing multiple transactions in single items.

### Priority outcomes and recommended near-term work program
- Short-term focuses:
  - Conduct further analysis of areas that could contribute to errors and omissions.
  - Dissect data and provide further breakdowns to improve classification within main balance of payments accounts and items.
  - Add a section to collect outward direct investment data to the current business survey.
  - Share detailed cross-border transactions related to oil trade among related enterprises, construction, and travel items with the mission to clarify and improve compilation methods.
- Compilers should plan to disseminate the IIP and garner higher-authority support to prepare and disseminate a comprehensive IIP consistent with transactions, positions, and the income account of the balance of payments.

### Priority recommendations (one-year action plan highlights)
- December 2021 — Dissect the data and provide further breakdowns and improved classifications within major accounts.
- December 2021 — Add the section to collect outward direct investment data to the current business survey.
- Continuous Effort — Continue with the current work aiming at disseminating IIP data.
- Continuous Effort — Exploring and strengthening inter-agency collaboration.

### Action plan milestones and targets
- Achieve 12 detailed SITS breakdown — August 2021
- Explore compilation of financial derivatives — December 2021
- Explore mechanism to collect data on direct investment abroad — June 2022

### Balance of payments (BOP) dissemination and current status
- Brunei Darussalam is a participant of the Enhanced General Data Dissemination System (e-GDDS).
- On August 26, 2019, Brunei Darussalam uploaded annual series of balance of payments statistics on its National Summary Data Page (NSDP).
- The standard BOP presentation sent to the IMF’s Statistics Department provides slightly more breakdowns than the analytic presentation in national publications.
- Detailed breakdowns still needed:
  - Current account: transport and travel data could provide additional details likely available to compilers but not currently used.
  - Primary and secondary income accounts: reduced to credits and debits, precluding income by instrument, economic sector, other categories of cross-border investment, and transfers.
  - Financial account: DI data for incoming DI are separately identified by equity and debt instruments (only on the net incurrence of liabilities item); portfolio investment includes both equity and investment fund shares and debt instruments but is not subclassified by economic sector; other investment provides adequate breakdown.

### Goods account specifics and oil trade treatment
- Goods data provided monthly by Royal Customs and Excise Department (RCED) electronically; processed into IMTS and annual BOP. Imports valued c.i.f., exports f.o.b.
- Challenges collecting trade-in-goods data from some government agencies and large enterprises; detailed data needed to record freight and insurance in services item.
- Case: new oil refinery and sister company in Singapore:
  - Initial delivery from resident oil company to sister company in Singapore should be considered an oil export from Brunei Darussalam to Singapore.
  - The “re-export” from Singapore to the Brunei refinery could be:
    - an actual import in Brunei Darussalam (if ownership changed), or
    - the provision of manufacturing services abroad (credits) if ownership did not change and physical transformation was performed for a nonresident owner.
  - JPES must inquire with the new oil refinery whether the oil received was an actual change of ownership or a manufacturing service.
- Goods account methodological adjustments include:
  - Collection of purchases of bunkers abroad from BLNG;
  - Purchases of aviation fuel abroad (reported by RBA);
  - Military goods transactions (reported by MinDef);
  - Adjustments to oil exports to comply with f.o.b. valuation criteria;
  - Recording of imports of high-value capital goods, such as commercial jets.
- Recommendation: JPES should collect information on trade in goods and services directly from the new refinery to avoid under- or over-recording; explore merchanting as a BPM6 item.

### Services account and digital trade considerations
- Previous TA on services: April 2019 by ASEAN.
- Services are recorded for almost every item except manufacturing services on physical inputs owned by others; data sourced from quarterly and annual surveys and administrative data.
- Economic Census indicates around 10,000 companies in Brunei Darussalam.
- JPES sends questionnaires quarterly to 100 largest companies and to 200 for the annual survey.
- Mission recommends an exploratory survey of at least 500 companies that conduct cross-border transactions to improve coverage and cross-check goods transactions.
- Major components collected: transport, travel, and government services; intention to start compiling trade in services-debits-by households, mostly digital services.
- Recommendations:
  - Separate collection of insurance and financial services.
  - Update travel credits and debits estimates based on more recent observations.
  - Update insurance and freight goods trade ratios used in services account (currently based on 2010 economic census).
  - For digital trade imports by households, evaluate implementing Version 1 of the Handbook on Measuring Digital Trade and review INDEC working paper methodology for estimating household imports of digital services.

### Institutional and procedural recommendations
- JPES should become the sole keeper of ESS methodology in Brunei Darussalam and strengthen inter-agency collaboration.
- JPES should prepare to disseminate IIP data within the next 18 months and request a follow-up TA mission during the second semester of 2021, contingent on containment of the worldwide health emergency.

### Primary income — current compilation and sources
- Data on the e-GDDS website includes consolidated credits and debits only; separate identification of remuneration of employees, and income on direct, portfolio, and other investment as well as reserves’ income is not shown.
- Key sources: income from the Brunei Investment Agency (BIA), official reserves of the Autoriti Monetari Brunei Darussalam (AMBD), and income from the Sustainability Fund, banks, and nonfinancial corporations; possibly including households.
- Data gaps and practices:
  - No information on income debits for local issuance of portfolio instruments and no data for loans from abroad.
  - Data supplemented with an annual survey and a small estimate for smaller enterprises based on the Economic Census.
  - No income data collected on loans from foreign direct investors or from other foreign related companies.
  - JPES staff may be assuming loans and other advances related to FDI participation are interest free, which may not hold for borrowing from/lending to unrelated entities.
- Recommendation: Break down the primary income account by sector and by functional category; compare mirror position data and income debits; analyze mirror data from CDIS, CPIS, and BIS; prioritize collection of banks’ data with support from the banking regulatory agency.

### Secondary income — coverage and personal transfers
- Secondary Income account does not show breakdown between current transfers and personal transfers.
- Current transfers (excluding personal transfers) should be collected from administrative sources; JPES should engage main governmental agencies to gather government’s own-account grants and scholarship grants.
- Personal transfers: very recently sourced from AMBD, which administers a monthly survey of remittances companies reporting remittances data.

### Direct investment — data sources, coverage, and mirror data comparisons
- BEDB provides a quarterly list of direct investors used to survey companies for transaction data.
- JPES staff stated there are roughly 300 with FDI in Brunei Darussalam; the largest 100 companies contribute to the 90 percent of the total.
- The annual survey covers 250 companies; the quarterly survey covers around 100 largest. Position data are collected.
- No information recorded in the balance of payments for investment by Brunei Darussalam residents abroad.
- Mirror data comparison (CDIS) — inward positions (Mirror CDIS Data) and transactions (Balance of Payments / National Publications) — (Millions of US Dollar):
  - 2012: Inward Positions: Mirror CDIS Data 20
  - 2013: Inward Positions: Mirror CDIS Data 48; Transactions/Balance of Payments/National Publications 777.6
  - 2014: Inward Positions: Mirror CDIS Data 36; Transactions/Balance of Payments/National Publications 568.2
  - 2015: Inward Positions: Mirror CDIS Data 2,335; Transactions/Balance of Payments/National Publications 173.2
  - 2016: Inward Positions: Mirror CDIS Data 2,395; Transactions/Balance of Payments/National Publications -149.7
  - 2017: Inward Positions: Mirror CDIS Data 1; Transactions/Balance of Payments/National Publications 460.1
  - 2018: Inward Positions: Mirror CDIS Data 169; Transactions/Balance of Payments/National Publications 515.3
  - 2019: Inward Positions: Mirror CDIS Data 352; Transactions/Balance of Payments/National Publications 374.6
- Mission inference: JPES-collected data are the best indicator of FDI into Brunei Darussalam because CDIS positions series are erratic and smaller in value for deriving a broad indication of transactions.
- Using CDIS mirror data to estimate DI from Brunei Darussalam to the rest of the world: the average of annual positions for 2010–2019 is US$4.3 billion, while the standard deviation is around US$600 million.
- Likely missing transactions of investment abroad in the hundreds of US dollars each year, with implications for errors and omissions and for populating income account items.
- Recommendations:
  - Use data collected from BEDB to compile DI for BOP and the IIP.
  - Collect DI abroad data from government entities, banks, and the nonfinancial private sector.
  - Evaluate possibility of participating in the CDIS to access mirror data for validation.
  - Improve and expand classification of FDI by types of economic activities.

### Portfolio investment — gaps and mirror data
- National publications and data sent to STA record net acquisition of financial assets subclassified in securities and debt instruments; there is no recording of net incurrence of liabilities (debt).
- Data on portfolio holdings abroad come from banks and insurance companies; transactions derived from changes in stocks and thus include valuation changes.
- BIA does not provide information on portfolio holdings abroad.
- CPIS mirror data on portfolio liabilities: average during 2010–2019 is US$38 million and a standard deviation of US$24 million.
- Recommendation: Improve coverage of the Portfolio Investment account; avoid deriving transactions from simple differences in positions and corroborate coverage.

### Financial derivatives
- JPES had not previously recorded financial derivatives in the balance of payments.
- Mission prepared a collection form for banks (Appendix IV) with instructions to collect data and produce statistics.
- Recommendation: Consider recording financial derivatives in the balance of payments at marked-to-market value.

### Other investment
- Other investment appears well compiled with reasonable scope and detail, although missing government assets and liabilities transactions.
- Main sources: administrative data from AMBD, banks’ balance sheets, some government agencies, and enterprises’ reports.
- Financial transactions are derived from changes in positions, mistakenly including valuation changes in the balance of payments.
- Recommendation: Greater cooperation with AMBD to improve data collection on the other investment account and across the financial account to reduce errors and omissions.

### Reserve assets
- Discussed compilation methods of international reserves with JPES staff.
- Invitation extended to initiate on a voluntary basis the compilation of the Reserves Data Template; mission staff could provide remote assistance.
- The Reserves Data Template helps corroborate compilation of reserves transactions and positions in line with BPM6 and consistency checks with monetary accounts; it allows authorities to gauge adequate level of reserves and monitor risk and vulnerabilities based on predetermined net drains on reserves.

### High-Value Capital Goods (Appendix I) — recording and accounting examples
- High-value capital goods requiring recurrent pre-payments should be recorded at the time economic ownership is conveyed from seller to buyer; ownership timing may be progressive (stage payments) or at full delivery.
- Trade credit and advances arise when payment is not made at same time as change in ownership.
- Accounting examples (selected entries):
  - Example 1. Change of ownership with corresponding payment:
    - Imports 50
    - Other Investment — Currency and Deposits 50 (Net acquisition of financial assets (-))
  - Example 2. No change of ownership but prepayments:
    - Imports No recording (Nil)
    - Other Investment 50 (Net acquisition of financial assets (-))
    - Advances (Trade Credit) 50 (Net incurrence of liabilities (creation of accounts receivable) (-))
    - At delivery: Imports 50; Advances / Trade Credits 50 (Net acquisition of financial assets (cancelation of accounts receivable) (-))
  - Example 3. Loan from a third party. Change of ownership, prepayments:
    - Imports 50
    - Other Investment 0 ((Cash from loan- payment) (+50-50)) — Currency and Deposits
    - Loan 50 (Net incurrence of liabilities)

### Collection of Personal Transfers (Appendix II) — findings
- BPM6 concept of personal transfers replaced “workers remittances”.
- Personal transfers transactions in Brunei Darussalam are relevant.
- During 2015–2018, credits have averaged US$XX million per year, while debits in the same period have recorded an average of US$XX million per year.
- The credits represent in average of the last X years around XX percent of GDP.
- Personal transfers amounted to around xx percent of goods exports (or imports) in 2019.
- Mission view: although AMBD compiles personal transfers, sharing potential improvements to templates with banks and Money Transfer Operators (MTOs) may be useful.
- Example collection templates include thresholds (1-500 BND; 501-1600 BND; 1601-2500 BND; Above 2500 BND) and country-of-origin reporting formats.

### 3. Recommendations on compiling personal transfers (banks and MTOs)
- Initial scope: compile personal transfers based on transfers sent through banks and MTOs only; after progress, include pocket remittances.
- Resident definition: "Resident for more than one year in Brunei Darussalam regardless their nationality should be considered residents."
- Rationale:
  - Rely primarily on MTOs since banks may not undertake large transactions on personal transfers that could be misclassified.
  - Banks should (a) complement with own data and (b) avoid double counting of MTOs settlement accounts in banks.
- Collection format and structure (Appendix II Box 1):
  - Excel files with three tabs for inward and outward transfers; variables: (i) thresholds, (ii) number of transfers per threshold, (iii) country of origin and destination, (iv) total amount.
  - Objective: collect all data that go through each MTO and identify portion to classify as personal transfers using thresholds.
- Treatment of non-remittance amounts:
  - Amounts not classified as remittances should be analyzed before allocating to the balance of payments to avoid premature misclassification.
- Thresholds and timing:
  - Initially recommended cutoff: data below 1,600 Brunei Dollar (BND) should be considered personal transfer.
  - Decision should be based on analysis of at least six months of data after start receiving information, or earlier if MTOs provide monthly historic series.
- Coordination to avoid double counting:
  - JPES should meet with banks to ensure accounts with MTOs are excluded from banks’ personal transfer reporting to AMBD.
- Country-of-origin reporting:
  - MTOs should identify the country of origin of the transfer, not the location of the correspondent bank.
- Implementation horizon:
  - The endeavor will take time; build a solid foundation before making major classification changes.

### Merchanting and re-exports (Appendix III — definitions and recording guidance)
- Merchanting: purchase of goods by a resident from a nonresident and resale to another nonresident without the goods being present in the compiling country; acquisition shown as negative export; sale shown as merchanting export; net exports under merchanting can be negative; entries valued at transaction prices, not FOB.
- Re-exports: exports of goods produced in other economies exported with no substantial transformation; price may differ from original import price.
- Re-imports: domestic goods imported in the same state as previously exported without substantial transformation.
- Where significant, re-exports and re-imports may be shown as a supplementary item.

### Financial derivatives — illustrative compilation example (Appendix IV and V)
- Example parameters:
  - Contract to buy US$1,000 in quarter t = 2 for BND 1,200 (exchange rate BND 1.2 = US$1).
  - Exchange rates observed: quarter t = 1: BND 1.3 = US$1.0; quarter t = 2: BND 1.4 = US$1.0.
  - Interest rate: 6 percent for both currencies.
- Valuation in quarter t = 1:
  - Unrealized gain BND 100; discounted at 6 percent gives 100/1.06 = BND 94.3.
  - Recording: no BOP transactions in t = 1; BND 94.3 recorded in the IIP as increase in assets under financial derivatives due to valuation changes.
- Settlement in quarter t = 2:
  - Import payment at current exchange rate equals BND 1,400 for US$1,000; under contract BND 1,200 is paid and US$1,000 received (equivalent to BND 1,400), producing net value BND 200.
  - Recording at settlement (t = 2):
    - BOP: settlement recorded as net negative accumulation of financial assets in financial derivatives for (BND 200). Counterparts: goods (imports) and other investment (cash payment).
    - IIP: opening position BND 94.3 and transaction BND 200 are offset by valuation adjustment of BND 105.7 so closing position at t = 2 is zero.
- Selected numeric entries in example:
  - BND 94.3
  - BND 100
  - 6 percent
  - Exchange rates: BND 1.2 = US$1; BND 1.3 = US$1.0; BND 1.4 = US$1.0
  - BND 200
  - Accounting entries show Goods import BND 1,400; Financial Derivatives -200; Currency and Deposits -1,200

### Importance and use of IIP statistics (Appendix VI)
- Uses of IIP:
  - Assessment of economic relations with the rest of the world and ability to attract FDI.
  - Measure of financial openness, gross assets and liabilities vis-à-vis GDP.
  - Indication of future interest and dividend flows.
- Exposures and vulnerabilities examinable:
  - External debt to GDP, short-term debt to reserves.
  - Exposure to valuation changes by instrument type.
  - Capital structure: reliance on debt or equity.
  - External debt sustainability indicators.
- Balance Sheet Approach (BSA): focus on stock variables, maturity, currency, and instrument attribution; recognizes vulnerabilities from currency and maturity mismatches.
- Partner-country data: interest in IIP by partner economy and coordinated datasets (CPIS, CDIS) and BIS’ International Banking Statistics (IBS).

*Source: 2. Inward and Outward DI Derived from CDIS Mirror Data Position; 26. The balance of payments’ primary income account reported to STA and the one; 3. The mission recommends the compilation of personal transfers based on transfers that are sent through banks and MTOs, 1brnea2022001 (IMF mission report excerpts).*

### 2.   Inward and Outward DI Derived from CDIS Mirror Data Position _________________________________  14

### 2.   Inward and Outward DI Derived from CDIS Mirror Data Position

### Mission overview and objectives
- A remote External Sector Statistics (ESS) technical assistance (TA) mission to Brunei Darussalam was conducted during July 26–29, 2020.
- Objectives:
  - Conduct the first overall assessment of the balance of payments since the country produced 2010-Q1 data under BPM6.
  - Make recommendations to lower balance of payments’ high-level errors and omissions.
  - Prepare JPES staff to disseminate the International Investment Position (IIP) statistics.

### Main findings on compilation capacity and data gaps
- The main challenge: implementation of a holistic approach to collect data from different sources, including conducting own surveys and questionnaires, revamping compilation methods, and centralizing ESS methodology within JPES staff.
- Reported balance of payments data lacks the granularity recommended by best practices, hindering basic cross-checks to improve validations.
- Several standard presentation items contain embedded transactions, making compilation prone to imprecision.
- Combination of different compilation methods has functioned well recently, but transparency and granularity need improvement while preserving confidentiality.
- JPES staff are aware of vulnerabilities such as inability to cross-check basic data (e.g., ratio of income to positions data) and errors from concealing multiple transactions in single items.

### Priority outcomes and recommended near-term work program
- Mission formulated an immediate and medium-term work program in consultation with JPES staff.
- Key short-term focuses:
  - Conduct further analysis of areas that could contribute to errors and omissions.
  - Dissect data and provide further breakdowns to improve classification within main balance of payments accounts and items.
  - Add a section to collect outward direct investment data to the current business survey.
  - Share detailed cross-border transactions related to oil trade among related enterprises, construction, and travel items with the mission to clarify and improve compilation methods.
- Compilers should plan to disseminate the IIP and garner higher-authority support to prepare and disseminate a comprehensive IIP consistent with transactions, positions, and the income account of the balance of payments.

### Priority recommendations (one-year action plan highlights)
- Table of priority recommendations (target dates and responsible institution JPES):
  - December 2021 — Dissect the data and provide further breakdowns and improved classifications within major accounts.
  - December 2021 — Add the section to collect outward direct investment data to the current business survey.
  - Continuous Effort — Continue with the current work aiming at disseminating IIP data.
  - Continuous Effort — Exploring and strengthening inter-agency collaboration.

### Action plan milestones and targets
- Priority Action/Milestone — Target Completion Date:
  - Achieve 12 detailed SITS breakdown — August 2021
  - Explore compilation of financial derivatives — December 2021
  - Explore mechanism to collect data on direct investment abroad — June 2022

### Balance of payments (BOP) dissemination and current status
- Brunei Darussalam is a participant of the Enhanced General Data Dissemination System (e-GDDS).
- On August 26, 2019, Brunei Darussalam uploaded annual series of balance of payments statistics on its National Summary Data Page (NSDP).
- The standard BOP presentation sent to the IMF’s Statistics Department provides slightly more breakdowns than the analytic presentation in national publications.
- Despite improvements, more detailed breakdowns are needed for greater transparency:
  - Current account: transport and travel data could provide additional details likely available to compilers but not currently used.
  - Primary and secondary income accounts: reduced to credits and debits, precluding income by instrument, economic sector, other categories of cross-border investment, and transfers.
  - Financial account: DI data for incoming DI are separately identified by equity and debt instruments (only on the net incurrence of liabilities item); portfolio investment includes both equity and investment fund shares and debt instruments but is not subclassified by economic sector; other investment provides adequate breakdown.

### Goods account specifics and oil trade treatment
- Goods data provided monthly by Royal Customs and Excise Department (RCED) electronically; processed into IMTS and annual BOP. Imports valued c.i.f., exports f.o.b.
- Challenges remain collecting trade in goods data undertaken by some government agencies and large enterprises; detailed data needed to record freight and insurance in services item.
- Case: transactions involving new oil refinery and sister company in Singapore:
  - The initial delivery from resident oil company to sister company in Singapore should be considered an oil export from Brunei Darussalam to Singapore.
  - The “re-export” from Singapore to the Brunei refinery could be:
    - an actual import in Brunei Darussalam (if ownership changed), or
    - the provision of manufacturing services abroad (credits) if ownership did not change and physical transformation was performed for a nonresident owner.
  - JPES must inquire with the new oil refinery whether the oil received was an actual change of ownership or a manufacturing service.
- Goods account methodological adjustments include:
  - Collection of purchases of bunkers abroad from BLNG;
  - Purchases of aviation fuel abroad (reported by RBA);
  - Military goods transactions (reported by MinDef);
  - Adjustments to oil exports to comply with f.o.b. valuation criteria;
  - Recording of imports of high-value capital goods, such as commercial jets.

Recommendation:
- With the new refinery operations starting in Brunei Darussalam, JPES should collect information on trade in goods and services directly from this enterprise to avoid under- or over-recording in the goods account.
- Merchanting, a new BPM6 item under goods, should be explored as an activity undertaken by residents of Brunei Darussalam.
- Appendix II presents an accounting example for revising historic series for high-value capital goods; Appendix III includes material to craft questions for quarterly and annual surveys to services businesses.

### Services account and digital trade considerations
- Previous TA on services: April 2019 by ASEAN.
- Services are recorded for almost every item (both credits and debits) except manufacturing services on physical inputs owned by others; data sourced from quarterly and annual surveys and administrative data.
- Economic Census indicates around 10,000 companies in Brunei Darussalam.
- JPES sends questionnaires on a quarterly basis to 100 largest companies and to 200 for the annual survey.
  - The mission recommends an exploratory survey of at least 500 companies that conduct cross-border transactions to improve coverage and cross-check goods transactions.
- Major components collected: transport, travel, and government services; intention to start compiling trade in services-debits-by households, mostly digital services.
- Recommendation:
  - Endorse ASEAN TA recommendations on services:
    - separate collection of insurance and financial services;
    - update travel credits and debits estimates based on more recent observations;
    - update insurance and freight goods trade ratios used in services account (currently based on 2010 economic census).
  - For digital trade imports by households, JPES should evaluate implementing Version 1 of the Handbook on Measuring Digital Trade (co-authored by OECD, WTO, IMF) and review INDEC (Argentina) working paper methodology for estimating household imports of digital services.

### Institutional and procedural recommendations
- JPES should become the sole keepers of ESS methodology in Brunei Darussalam and strengthen inter-agency collaboration.
- JPES should prepare to disseminate IIP data within the next 18 months and request a follow-up TA mission during the second semester of 2021, contingent on containment of the worldwide health emergency.

*Source: 2. Inward and Outward DI Derived from CDIS Mirror Data Position, 1brnea2022001 (IMF mission report excerpts).*

### 26. The balance of payments’ primary income account reported to STA and the one

### 26. The balance of payments’ primary income account reported to STA and the one

### Primary income — current compilation and sources
- Data disseminated on Brunei Darussalam’s new e-GDDS website includes consolidated credits and debits only; separate identification of remuneration of employees, and income on direct, portfolio, and other investment as well as reserves’ income is not shown.
- Key sources mentioned in the Sources and Methods document: income from the Brunei Investment Agency (BIA), official reserves of the Autoriti Monetari Brunei Darussalam (AMBD), and income from the Sustainability Fund, banks, and nonfinancial corporations; possibly including households.
- For debits, mainly FDI dividends are captured through the Quarterly Survey of International Investment and International Services.
- Data gaps and practices:
  - No information on income debits for local issuance of portfolio instruments and no data for loans from abroad.
  - Data supplemented with an annual survey and a small estimate for smaller enterprises based on the Economic Census.
  - No income data collected on loans from foreign direct investors or from other foreign related companies.
  - JPES staff may be assuming loans and other advances related to FDI participation are interest free, which may not hold for borrowing from/lending to unrelated entities.

Recommendations
- Proceed with the breakdown of the primary income account by sector and by functional category with current data not yet disseminated.
- Make comparison between mirror position data and income debits in the balance of payments; if necessary, revamp questionnaires to collect observed data to improve coverage and avoid potential errors and omissions.
- As a starting point, analyze mirror data from the Coordinated Direct Investment Survey (CDIS), the CPIS, and from the BIS.
- Collect observed data where possible, using additional surveys if needed; prioritize collection of banks’ data with support from the banking regulatory agency in Brunei Darussalam.

### Secondary income — coverage and personal transfers
- The Secondary Income account does not show the breakdown between its two major components: current transfers and personal transfers.
- Lack of breakdown precludes recognition of areas with poor coverage or potential misreporting.
- Current transfers (excluding personal transfers) should be collected from administrative sources; JPES should engage main governmental agencies to gather government’s own-account grants to international organizations and scholarship grants.
- Personal transfers (previously “workers remittances”) are important for the balance of payments. The Sources and Methods document mentions that very recently personal transfers are sourced from the AMBD, which administers a monthly survey of remittances companies reporting remittances data.

### Direct investment — data sources, coverage, and mirror data comparisons
Findings
- Brunei Economic Development Board (BEDB) facilitates FDI and provides a quarterly list of direct investors used to survey companies for transaction data.
- JPES staff stated there are roughly 300 with FDI in Brunei Darussalam, out of which the largest 100 companies contribute to the 90 percent of the total.
- The annual survey covers 250 companies, while the quarterly survey covers around 100 largest. Position data are collected.
- No information recorded in the balance of payments for investment by Brunei Darussalam residents abroad.

Mirror data comparison (CDIS)
- When comparing FDI into Brunei Darussalam, annual transactions in the balance of payments reported by JPES are considerably higher than positions reported by CDIS participants.
- Table of inward positions (mirror CDIS data) and transactions (balance of payments / national publications) — (Millions of US Dollar):
  - 2012: Inward Positions: Mirror CDIS Data 20
  - 2013: Inward Positions: Mirror CDIS Data 48; Transactions/Balance of Payments/National Publications 777.6
  - 2014: Inward Positions: Mirror CDIS Data 36; Transactions/Balance of Payments/National Publications 568.2
  - 2015: Inward Positions: Mirror CDIS Data 2,335; Transactions/Balance of Payments/National Publications 173.2
  - 2016: Inward Positions: Mirror CDIS Data 2,395; Transactions/Balance of Payments/National Publications -149.7
  - 2017: Inward Positions: Mirror CDIS Data 1; Transactions/Balance of Payments/National Publications 460.1
  - 2018: Inward Positions: Mirror CDIS Data 169; Transactions/Balance of Payments/National Publications 515.3
  - 2019: Inward Positions: Mirror CDIS Data 352; Transactions/Balance of Payments/National Publications 374.6

- The mission infers that JPES-collected data are the best indicator of FDI into Brunei Darussalam because CDIS positions series are erratic and smaller in value for deriving a broad indication of transactions.
- Using CDIS mirror data to estimate DI from Brunei Darussalam to the rest of the world: the average of annual positions for 2010–2019 is US$4.3 billion, while the standard deviation is around US$600 million.
- Likely missing transactions of investment abroad in the hundreds of US dollars each year, with implications for the level of errors and omissions; useful also for populating income account items.

Recommendations
- Use data collected from BEDB to compile DI in Brunei Darussalam for balance of payments purposes and the IIP.
- For DI abroad by residents of Brunei Darussalam, collect data from government entities that may be investing abroad; emphasize data collection from banks and the nonfinancial private sector.
- Evaluate the possibility of participating in the CDIS to facilitate access to mirror data for validation with national sources.
- Improve and expand current classification of FDI by types of economic activities (for users’ benefit), even if not part of standard BPM6 presentation.

### Portfolio investment — gaps and mirror data
Findings
- National publications and data sent to STA record net acquisition of financial assets subclassified in securities and debt instruments; there is no recording of net incurrence of liabilities (debt).
- Data on portfolio holdings abroad come from banks and insurance companies; for these groups, transactions are derived from changes in stocks and thus include valuation changes.
- BIA does not provide information on portfolio holdings abroad.
- The mission did not have access to position data of portfolio holdings abroad; likely that most information come from banks with a large gap in other relevant sectors.
- Mirror data (CPIS) on portfolio liabilities: average during 2010–2019 is US$38 million and a standard deviation of US$24 million.

Recommendation
- Coverage of the Portfolio Investment account could be improved; avoid deriving transactions from simple differences in positions and corroborate coverage.

### Financial derivatives
Findings
- JPES had not previously recorded financial derivatives in the balance of payments.
- The mission prepared a collection form for banks, including instructions to collect data and produce statistics (Appendix IV).

Recommendation
- Consider recording financial derivatives in the balance of payments at marked-to-market value.

### Other investment
Findings
- Other investment appears well compiled with reasonable scope and detail, although missing government assets and liabilities transactions.
- Main sources: administrative data from AMBD, banks’ balance sheets, some government agencies, and enterprises’ reports.
- Financial transactions are derived from changes in positions, mistakenly including valuation changes in the balance of payments.
- Inclusion of transactions and positions from government agencies is relevant to avoid gaps contributing to errors and omissions.

Recommendation
- Greater cooperation with AMBD to improve data collection on the other investment account and to improve data collection across the financial account to reduce errors and omissions.

### Reserve assets
Findings and actions
- Discussed compilation methods of international reserves with JPES staff.
- Invitation extended to initiate on a voluntary basis the compilation of the Reserves Data Template; mission staff could provide remote assistance.
- The Reserves Data Template helps corroborate compilation of reserves transactions and positions in line with BPM6 and consistency checks with monetary accounts; it allows authorities to gauge adequate level of reserves and monitor risk and vulnerabilities based on predetermined net drains on reserves.

### High-Value Capital Goods (Appendix I) — recording and accounting examples
Findings
- High-value capital goods requiring recurrent pre-payments should be recorded at the time economic ownership is conveyed from seller to buyer; ownership timing may be progressive (stage payments) or at full delivery.
- Timing of ownership change may not coincide with payments; accounts receivable/payable (trade credit and advances) can arise if timing differs.
- Trade credit and advances arise when payment is not made at same time as change in ownership; advances include down payments or holding deposits where ownership of funds changes hands.

Accounting examples (entries indicate recording in the balance of payments of the purchasing economy)
- Transactions to be recorded at the time economic ownership is conveyed:
  - Progressive change in ownership
  - At full delivery
- Example 1. Change of ownership with corresponding payment (e.g., quarterly):
  - Imports 50
  - Other Investment — Currency and Deposits 50 (Net acquisition of financial assets (-))
- Example 2. No change of ownership but prepayments (e.g., quarterly):
  - Imports No recording (Nil)
  - Other Investment 50 (Net acquisition of financial assets (-))
  - Advances (Trade Credit) 50 (Net incurrence of liabilities (creation of accounts receivable) (-))
  - At delivery:
    - Imports 50
    - Advances / Trade Credits 50 (Net acquisition of financial assets (cancelation of accounts receivable) (-))
- Example 3. Loan from a third party. Change of ownership, prepayments (e.g., quarterly):
  - Imports 50
  - Other Investment 0 ((Cash from loan- payment) (+50-50)) — Currency and Deposits
  - Loan 50 (Net incurrence of liabilities)

### Collection of Personal Transfers (Appendix II)
Findings
- BPM6 concept of personal transfers replaced “workers remittances”.
- Personal transfers transactions in Brunei Darussalam are relevant.
- During 2015–2018, credits have averaged US$XX million per year, while debits in the same period have recorded an average of US$XX million per year.
- The credits represent in average of the last X years around XX percent of GDP.
- Personal transfers amounted to around xx percent of goods exports (or imports) in 2019.
- The mission views that although AMBD compiles personal transfers, sharing potential improvements to templates with banks and Money Transfer Operators (MTOs) may be useful.

Example collection templates (illustrative)
- Appendix II Table 1: Transfers into Brunei Darussalam by transfer value thresholds (First Threshold: Transfer Value Between 1-500 BND; Second Threshold: Transfer Value Between 501-1600 BND; Third Threshold: Transfer Value Between 1601-2500 BND; Fourth Threshold: Transfer Value Above 2500 BND) with totals and number of transfers, currency denomination, country of origin.
- Appendix II Table 2: Alternative form reporting by country of origin (example for Malaysia, Ringgit), with transfer value bands and number of transfers, totals.

*International Monetary Fund staff report excerpt.*

### 3. The mission recommends the compilation of personal transfers based on transfers

### 3. The mission recommends the compilation of personal transfers based on transfers that are sent through banks and MTOs.

### Recommendations on data sources and scope
- Data on personal transfers should be recorded with observed values mainly produced by banks and MTOs, which is fundamental to implementing the data collection plan discussed ahead.
- In the first stage, the compilation of personal transfers should be based on transfers that are sent through banks and MTOs only.
- After the work is well advanced, estimates should include pocket remittances.
- Current donations should be compiled only from banks’ reporting.
- Resident definition to apply: "Resident for more than one year in Brunei Darussalam regardless their nationality should be considered residents."

### Rationale and staff responsibilities
- The JPES staff should include, eventually, an estimate of pocket remittances. This amount of pocket remittances should be identified in conjunction with other governmental agencies in Brunei Darussalam that could survey border posts.
- The approach recommended relies primarily on data from MTOs since banks may not undertake large transactions on personal transfers that could be misclassified with other items in the balance of payments.
- Banks should be part of the compilation process with twofold objectives:
  - (a) complement with own data transfers undertaken through the banking system, and
  - (b) avoid double counting of MTOs settlement accounts in banks.

### Plan to collect personal transfers (Appendix II Box 1 — implementation elements)
- Collection format and structure:
  - The files in Excel include three tabs with collection tables for inward and outward transfers (origin and destination of transfers to facilitate the understanding of reporters (MTOs)). The “origin” section includes two tabs, thus, the staff of the JPES could choose the best arrangement by cells to get the data.
  - The files also present two options to capture inward and outward data. The variables are (i) thresholds, (ii) number of transfers per threshold, (iii) country of origin and destination, and (iv) the total amount of transfers.
- Objectives of the tables:
  - Collect data for all transfers that go through each MTO, allowing the JPES to identify, according to the information collected, which portion of the total transfers is actually classified as personal transfer considering assumptions mentioned above, and which other transfers do not pertain to remittances.
  - The objective is to collect all data that go through MTOs first. This explains why the use of thresholds is critical to define which portion of the total transfers by agent is to be classified as personal transfer.
- Treatment of non-remittance amounts:
  - The rest of the amounts transferred that do not fall into the remittance criteria should be analyzed so it can be decided if the difference is to be classified in the balance of payments since this information may not be captured by other data source; contributing to the lowering errors and omissions.
  - The above amount not concluded to be part of a remittance (that is, the difference between personal transfers according to thresholds and the total remitted) is a by-product of this collection method. The JPES should not be rushed at the beginning of the exercise to try to allocate this portion of the balance of payments until a proper analysis of the data is made.
- Thresholds and timing:
  - After a series of iterations with MTOs it should be decided which thresholds suit best JPES needs. Initially it is recommended that the collection form should have four thresholds.
  - Initially recommended cutoff: data below 1,600 Brunei Dollar (BND) should be considered personal transfer.
  - This decision should not be taken until JPES analyzes the data of at least six months after start receiving the information, or earlier if MTOs are able to provide monthly historic series.
- Coordination to avoid double counting:
  - Before compiling a sensible mass of information from MTOs, staff of the JPES should meet with banks to guide them that any account with MTOs should be excluded from the information on personal transfers that banks provide to the AMBD. Many MTOs have accounts with resident banks that are used for settlements; the JPES should avoid potential double counting in the financial accounts within Brunei Darussalam’s balance of payments.
- Country-of-origin reporting:
  - During meetings with MTOs, convey the rule that MTOs should identify the country of origin and not the country where the correspondent bank is located. MTOs in Brunei Darussalam should clearly identify the code of the country from which the transfer is originated.
- Implementation horizon:
  - The mission notes that this endeavor will take some time to bear results, requiring a solid foundation, aiming at collecting high quality data. After the exercise is on track, the JPES will need to evaluate the results and move forward with changes if needed.

### Merchanting and re-exports (Appendix III — definitions and recording guidance)
- Merchanting:
  - Merchanting is defined as the purchase of goods by a resident from a nonresident combined with the subsequent resale of the goods to another nonresident without the goods being present in the compiling country.
  - The acquisition of goods by merchants is shown under goods as a negative export of the economy of the merchant.
  - The sale of the good is shown under merchanting as a positive export of the economy of the merchant.
  - The difference between sales over purchases of goods for merchanting is shown as the item “net exports” of goods under merchanting. This item includes merchants’ margins, holding gains/losses, and changes in inventories of goods under merchanting.
  - Net exports of goods under merchanting may be negative in some cases.
  - Merchanting entries are valued at transaction prices, not FOB.
- Re-exports and re-imports:
  - Re-exports are a subset of exports in which goods produced in other economies are exported with no substantial transformation from the state in which they were previously imported.
  - The price of re-exported goods may differ from its price at the time it was originally imported due to such factors as transport costs, dealer’s margins, and holding gain/losses.
  - Re-imports are domestic goods imported in the same state as previously exported, without any substantial transformation occurring to the goods while they were outside the territory.
  - Where significant, re-exports and re-imports may be shown as a supplementary item.

### Financial derivatives — illustrative compilation example (Appendix IV and V — selected figures and recording logic)
- Example parameters and assumptions:
  - In quarter t = 0, company A in Brunei Darussalam signs a contract to import goods for US$1,000 during quarter t = 2. It enters a forward contract to buy US$1,000 in quarter t = 2 for BND 1,200; that is, at an exchange rate of BND 1.2 = US$1.
  - Exchange rates observed: quarter t = 1: BND 1.3 = US$1.0; quarter t = 2: BND 1.4 = US$1.0.
  - Relevant interest rate: 6 percent for both currencies in each period.
- Valuation in quarter t = 1:
  - Contract has a positive unrealized value of BND 100 (change from BND 1,200 to BND 1,300), and discounted at 6 percent gives 100/1.06 = BND 94.3.
  - Recording: no transactions in the balance of payments in quarter t = 1; BND 94.3 is recorded in the IIP as an increase in assets under financial derivatives due to valuation changes.
- Settlement in quarter t = 2:
  - At t = 2, import payment at current exchange rate equals BND 1,400 for US$1,000. Under contract, BND 1,200 is paid and $1,000 received (equivalent to BND 1,400), producing a net value of the financial derivative of BND 200.
  - Recording at settlement (t = 2):
    - Balance of payments: settlement recorded as net negative accumulation of financial assets in the financial derivatives account for an amount of (BND 200). The counterpart entries are in the goods account (imports) and other investment (cash payment).
    - IIP: opening position BND 94.3 and transaction (settlement) BND 200 are offset by a valuation adjustment of BND 105.7 so that the closing position at t = 2 is zero.
- Selected numeric entries emphasized in the example:
  - BND 94.3 (present value of unrealized gain recorded in IIP in quarter t = 1).
  - BND 100 (unrealized gain before discounting at t = 1).
  - 6 percent (interest rate applied to discount valuation).
  - Exchange rates: BND 1.2 = US$1; BND 1.3 = US$1.0; BND 1.4 = US$1.0.
  - BND 200 (net value of the derivative at settlement).
  - Accounting entries show Goods import BND 1,400 and corresponding Financial Derivatives -200 and Currency and Deposits -1,200 in the illustrative accounting.

### Importance and use of IIP statistics (Appendix VI — analytical uses)
- Information on financial structure from IIP data includes:
  - Assessment of economic relations with the rest of the world, such as ability to attract foreign direct investment.
  - Measure of the degree of financial openness, such as the gross assets and liabilities vis-à-vis GDP.
  - Indication of financial structure and its changes over time, such as the size of foreign loans and deposits of the banking sector.
  - Indicator of future interest and dividend flows.
- Exposures and vulnerabilities examinable using IIP data include:
  - Indicator of financial stability: ratios such as external debt to GDP, and short-term debt to reserves.
  - Exposure to valuation changes in assets through the type of instrument owned.
  - Capital structure: reliance on debt or equity financing.
  - Indicator of external debt sustainability.
- Balance Sheet Approach (BSA):
  - Focus on stock variables in sectoral balance sheets, maturity, currency, and instrument attribution of assets and liabilities.
  - BSA recognizes vulnerabilities from currency and maturity mismatches and can study transmission of shocks across countries.
- Partner country data:
  - Growing interest in IIP by partner economy (to whom-from-whom approach).
  - The IMF has been developing and promoting these datasets through coordinated exercises (CPIS, CDIS) and with BIS’ International Banking Statistics (IBS).

*Source: 1brnea2022001 - 3. The mission recommends the compilation of personal transfers based on transfers (IMF PDF content).*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1brnea2022001.pdf_