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FDI COMPILATION GUIDE
1
STATISTICAL OFFICE May 2005
OF THE EUROPEAN COMMUNITIES
Directorate C: Economic and monetary statistics
Unit C4: Balance of Payments
2005 Edition
UK Data Archive Study Number 6664 - Annual Inquiry into Foreign Direct Investment: Secure Access
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This document has been created by the BOP Foreign Direct Investment team, under the guidance and supervision of Mr. Passerini Paolo, head of FDI and FATS projects of the Unit C4 ([email protected]). The Members of the BOP FDI Team are: Mr. De Grisantis Vitantonio Mrs. Margherita Antonia Mrs. Petridou Konstantia Mr. Yattien-Amiguet Jean-François
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Table of Contents
Chapter I. Methodological background........................................................................ 4
I–1 Definition of direct investment and statistical units involved in it .......................5
a) Definition of direct investment...................................................................................... 5
b) Definition of a foreign direct investor .......................................................................... 6
c) Definition of a direct investment enterprise................................................................. 6 Subsidiaries, Associates and Branches ..................................................................................6 → Subsidiary (ownership > 50%) .........................................................................................6 → Associate (ownership between 10% and 50%) .................................................................6 → Branch (wholly or jointly owned).....................................................................................6
d) Definition of the so-called Special Purpose Entities (SPEs) ....................................... 7
e) Definition of indirect participation in direct i nvestment enterprises ........................ 7
I-2 Definition of FDI income .......................................................................................7 →Dividends (including distributed branch profits) ...............................................................8 →Reinvested earnings (RIE) .................................................................................................8 →Interest on inter-company debt ..........................................................................................8
I-3 Definition of the FDI flows components of the financial account part................9
a) Direct Investment Flows ................................................................................................ 9 →Equity capital.....................................................................................................................9 →Reinvested earnings (RIE) .................................................................................................9 →Other direct investment capital (or inter-company debt transactions) ...............................9 I. For subsidiary and associate companies.......................................................................9 II. For branches.................................................................................................................9
b) Definition of Assets/liabilities and directional principle for FDI flows .................. 10
c) Definition of the geographical and sectoral allocation of FDI flows........................ 10
I-4 Definition of the FDI positions ............................................................................10
I-5 The basic method for calculating FDI positions .................................................11
Chapter II. Overview of the compilation process for FDI EU statistics............... 13
II.1 Global description ................................................................................................13
Chapter III. Treatment of confidential/non-publishable data ............................... 17
III.1 Brief description of the security aspects during the Gesmes transmission......17
III.2 The current treatment of disclosive information ..............................................19
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Chapter I. Methodological background
Foreign Direct Investment (FDI) statistical series are compiled by ESTAT BOP Unit C4, under the theoretical framework of the IMF Balance of Payments Manual, Fifth Edition, and the OECD Benchmark definition of Foreign Direct Investment, Third Edition-Paris 1996. In the IMF 5th Manual, the chapters dealing directly with FDI issues are:
• Chapter XIV page 70, for direct investment income.
• Chapter XVIII page 86, for direct investment transactions, Capital and Financial Account part.
• Chapter XXIII, page 104, for direct investment positions.
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Table 1.1 Direct investment components within the framework of the IMF 5th Manual
Current account Goods Services Income Direct investment income
Income on equity
Dividends & distributed branch profits
Reinvested earnings & undistributed Branch profits
Income on debt
Current transfers Cap. and Fin. Account Capital account Financial account Direct investment Direct investment abroad
Equity capital
Claims on affiliated enterprises
Liabilities to affiliated enterprises
Other capital
Claims on affiliated enterprises
Liabilities to affiliated enterprises
Reinvested earnings & undistributed branch profits
Direct in the reporting economy
Equity capital
Claims on direct investors
Liabilities to direct investors
Other capital
Claims on direct investors
Liabilities to direct investors
Reinvested earnings & undistributed branch profits
Portfolio investment Other Investment Reserve assets Errors and omissions
I–1 Definition of direct investment and statistical units involved in it a) Definition of direct investment The direct investment concept refers to the category of international investment made by a resident entity (direct investor) to acquire a lasting interest in an entity operating in an economy other than that of the investor (direct investment enterprise). The direct investment involves both the initial transactions between the two entities and all subsequent capital transactions between them and among affiliated enterprises, both incorporated and unincorporated.
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b) Definition of a foreign direct investor A direct investor is an individual, an incorporated or unincorporated public or private enterprise, a government, a group of related individuals, or a group of related incorporated and/or unincorporated enterprises which have a direct investment enterprise that is, a subsidiary, associate or branch - operating in a country other than the country/ countries of residence of the direct investor/ investors.
c) Definition of a direct investment enterprise A direct investment enterprise is an incorporated or unincorporated enterprise in which a foreign investor owns 10% or more of the ordinary shares or voting power of an incorporated enterprise, or the equivalent of an unincorporated enterprise, or has an effective voice in the management of the enterprise. Some countries may feel it necessary to treat the 10% limit with flexibility to fit circumstances.
Subsidiaries, Associates and Branches
A direct investment enterprise may be an incorporated enterprise - a subsidiary or associate company - or an unincorporated enterprise (branch):
→ Subsidiary (ownership > 50%)
A subsidiary is an incorporated enterprise in which
i) The foreign investor controls directly or indirectly (through another subsidiary) more than 50% of the shareholders' voting power, or
ii) The foreign investor has the right to appoint or remove a majority of the members of this enterprise's administrative, management or supervisory body.
→ Associate (ownership between 10% and 50%)
An associate is an enterprise where the direct investor and its subsidiaries own 10% (or more) of the voting shares, or where the concerned enterprise is an associate of any other enterprise that is a subsidiary of the direct investor.
→ Branch (wholly or jointly owned)
A branch is an unincorporated enterprise that is
i) A permanent establishment or office of a foreign direct investor; or
ii) An unincorporated partnership or joint venture between a foreign direct investor and third parties or
iii) Land, structures and immovable equipment and objects directly owned by a foreign resident (e.g. holiday and second homes) or
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iv) Mobile equipment operating within an economy for at least one year if accounted for separately by the operator (e.g. ships, aircraft, gas and oil drilling rigs).
d) Definition of the so-called Special Purpose Entities (SPEs) The IMF 5th Manual (§365) recommends to consider SPEs as direct investment enterprises if they meet the criteria stated above. SPEs of multinational enterprises are units established in economies other than those in which the parent companies are resident and engaged primarily in international transactions but in few or no local operations. The SPE is a generic label applicable to such organisational structures which are also variously referred to as financing subsidiaries, conduits, holding companies, base companies and regional headquarters.
e) Definition of indirect participation in direct investment enterprises Statistics based on these definitions should cover all enterprises in which the direct investor has directly or indirectly a direct investment interest (Fully Consolidated System). In particular, this means that:
a) Reinvested earnings of indirectly participated enterprises should be included in the statistics
b) Direct investment flows within a group of related enterprises should be included in the statistics without consideration of the percentage of equity held by these enterprises in each other.
I-2 Definition of FDI income
The direct investment income consists of income on FDI equity and on inter-company debt (interest). The direct investment income components are recorded in the current account part, both on the credit and debit side. Income on equity covers two sub-components, namely “dividends and distributed branch profits” and “reinvested earnings and undistributed branch profits” for incorporated enterprises. The OECD recommends calculating the FDI income on the basis of the current operating performance concept. Thus, unlike for the all-inclusive concept, capital gains and losses, and other valuation changes are excluded.
The credit side of the balance records FDI income receivable by the resident direct investors as the result of the activity of their non-resident direct investment enterprises. The FDI income receivable (credit side) is equal to the direct investors’ income received from their direct investment enterprises less FDI income paid (by the direct investors) to their foreign affiliates, resulting either from loans previously granted by the concerned affiliate to its parent company (reverse loans) or from cross participation (below 10%). As a result, negative figures might be observed on the credit side of the Member States’ national data.
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Respectively, income of inward FDI comprises income flowing from the direct investment enterprise to the direct investor less income and vice versa.
→Dividends (including distributed branch profits)
Dividends that are due for payment in the recording period and branch profits remitted to the direct investor, gross of any withholding taxes. Dividends cover payments due on common and preferred shares.
→Reinvested earnings (RIE)
Consist of the direct investor's share (in proportion to direct equity participation) of earnings not distributed as dividends by subsidiaries or associates and earnings of branches not remitted to the direct investor. For a given year n, the RIE are obtained by subtracting from the total profits made in year n (calculated on the basis of the current operating performance concept) all the dividends due for payments in the same year. With regards to RIE, the following points should be emphasized:
• The RIE are allocated to the period when they have been generated.
• Unlike other BOP components, the RIE are not “real transactions” as no-cross-border payments are associated with them. The BOP framework records in fact two “fictive transactions”, assuming that, once the dividends distribution is decided (by the direct investor management) the non-distributed profits are firstly received by the direct investor (a fictive income transaction) and immediately re-routed to the concerned affiliate (a fictive direct investment transactions).
• RIE can be either positive or negative. Negative RIE mean either that the activity of the concerned affiliate has generated net losses (for the given year) and/or amounts to be paid in the form of dividends are higher than the total earnings of the period (the dividends distribution rely also on previous years results of the affiliate).
• An affiliate having a cross participation (less than 10%) can benefit from the profits made by the parent company, but only in the form of dividends. The decision to reinvest part of the profit made by the parent company depends only to the majority shareholders of the parent company.
→Interest on inter-company debt
Interest accrued in the recording period, gross of any withholding tax. Dividends due for payment on no participating preference shares are recorded under interest.
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I-3 Definition of the FDI flows components of the financial account part a) Direct Investment Flows →Equity capital
Equity capital comprises equity in branches, all shares in subsidiaries and associates (except non-participating, preferred shares that are treated as debt securities and are included under other direct investment capital) and other capital contributions (e.g. provision of machinery).
→Reinvested earnings (RIE)
RIE consist of the direct investor's share (in proportion to direct equity participation) of earnings not distributed as dividends by subsidiaries or associates and earnings of branches not remitted to the direct investor. To be consistent with the direct investment income part, these earnings are added to the direct investment equity capital part in amount equal to (and with opposite sign) the corresponding entry recorded under direct investment income.
→Other direct investment capital (or inter-company debt transactions)
Covers the borrowing and lending of funds, including debt securities and trade credits between direct investors and direct investment enterprises. Intercompany debt transactions between affiliated financial intermediaries recorded under direct investment capital flows are limited to permanent debt.
Consequently, total direct investment flow is calculated as follows:
I. For subsidiary and associate companies
i) The direct investor's share of the company's reinvested earnings
ii) Plus the direct investor's net purchases of the company's shares, debt securities (bonds, notes, money market and financial derivative instruments) and loans (including non-cash acquisitions made against equipment, manufacturing rights, etc.)
iii) Less the company's net purchases of the direct investors' shares, debt securities and loans
iv) Plus the net increase in trade and other short-term credits given by the direct investor to the company.
II. For branches
i) The increase in reinvested profits plus the net increase in funds received from the direct investor.
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b) Definition of Assets/liabilities and directional principle for FDI flows Under the assets/liabilities principle, all assets’ transactions are recorded under "direct investment abroad" and all liabilities’ transactions under "direct investment in the reporting economy", regardless of the status of the enterprise (direct investor, direct investment enterprise).
Under the directional principle (recommended by the IMF 5th Manual, §330) the enterprise’s status is taken into account. The direct investor's country records all the capital transactions with foreign direct investment enterprises (including reverse loans and cross participation below the 10% threshold) under the "direct investment abroad", whereas the direct investment enterprise’s country records all the capital transactions with foreign direct investors under the "direct investment in the reporting economy".
For cross-participation above the 10% on each side two separate direct investment relationships are established. The enterprises are simultaneously direct investors and direct investment enterprises. Thus, all capital flows are covered. The flows for which the directional principle gives different results to the assets/liabilities principle are cross-participation below the 10% threshold and reverse loans carried out in this constellation. Only if the status of the direct investment enterprise is known can these reverse flows be recorded in line with the directional principle.
c) Definition of the geographical and sectoral allocation of FDI flows In the geographical allocation, there are two principles that may be applied: the 'debtor/creditor principle' (which is recommended) and the 'transactor principle' . Under the debtor/creditor principle, investment flows are allocated to the country of residence of the non-resident debtor or creditor. Under the transactor principle, flows are allocated to the country of residence of the non-resident party to the transaction.
When the debtor/creditor principle applies, the country of residence of the debtor/creditor to which the transaction is allocated can be the immediate host (or investing) country or the ultimate host (or investing) country down the ownership chain. The IMF and the OECD recommend to record FDI flows by using the immediate host/investing country criterion.
With respect to the allocation of FDI flows by sector, the Eurostat/OECD questionnaire requires a breakdown into 11 major branches and further activity desegregation for manufacturing and services. The classification used is consistent with NACE Rev.1 and ISIC Rev.3 (please refer to the correspondence table in annex). Both outward and inward flows are classified according to the activity of the resident statistical unit.
I-4 Definition of the FDI positions
The direct investment position makes part of a country's overall international investment position (IIP). The net position of FDI assets and liabilities determines the IIP together with the corresponding net positions in portfolio and other investment and reserve assets. FDI positions are conceptually fully consistent with flows and comprise of stocks of equity capital (including reinvested earnings) and other capital (including inter-company debt) at the end of the reference year.
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The IMF (BPM5, §467) recommends that positions should be calculated at market prices of the period under consideration. Positions derived from the balance sheets of direct investors and direct investment enterprises (book values) come close to market values only under certain circumstances. Thus, in most cases two sets of stocks data (book value and market value) might be appropriate. The accounting principles described above for flows are equally applicable to stocks. In contrast with what has been seen for flows though, a geographical allocation according to the ultimate beneficial owner (UBO) concept is recommended for stocks. Moreover, the sectoral breakdown of positions abroad considers the non-resident economic activity.
I-5 The basic method for calculating FDI positions
Within the BOP IIP framework, the FDI position at end of year n is obtained by adding to the FDI positions at end of year (n-1) all the changes that occurred in year n due to FDI flows, price changes, exchange rate changes an other adjustments. Table 1.2 summarises the general presentation of the IIP table, which is an extract from the IMF 5th Manual (page 110).
All the net components can also be negative. In the FDI flows disinvestments may occur. Hence, also for positions, negative assets and liabilities can appear. This is, for example, the case if accumulated uncovered losses exceed equity and other capital. The item 'other adjustment' comprises of changes in the volume of assets/liabilities that usually may derive from:
-debt/equity swaps,
-capital transfers (loan forgiveness)
-unilateral cancellation of liabilities
-rescheduling of loans and
-crossing the threshold from portfolio to direct investment.
The case of crossing to direct investment might need some illustration: If an investor's initial participation was for example 5% of the equity of an enterprise in an earlier period and another participation of 5% is acquired in the period under consideration, then the investor becomes a direct investor and the enterprise becomes a direct investment enterprise. Only the second participation has to be recorded as direct investment flow of the current period. The first transaction was recorded as portfolio investment in the earlier period. Thus, it is included in the current period's portfolio investment position. As the entire 10% stake is now direct investment, the earlier period's 5% stake has to be deducted from the portfolio investment position and to be included in the direct investment position. This is done by corresponding entries under the ‘other adjustment’ item.
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Table 1.2 FDI positions within the framework of the IMF 5th M anual
Position at
beginning of
the year
Flows Price changes Exchange rate
changes
Other
adjustments
Position at
the end of
year
A. ASSETSs
Direct Investment abroad
Equity capital and RIE
Claims on affiliated enterprises
Liabilities to affiliated enterprises
Other capital
Portfolio investment
Other investment
Reserve Assets
B. LIABILITIES
Direct investment in the reporting economy
Equity capital and RIE
Claims on direct investors
Liabilities to direct investors
Other capital
Portfolio investment
Other investment
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Chapter II. Overview of the compilation process for FDI EU statistics
II.1 Global description
This chapter deals with the data processing starting from data reception from Member States until the final output, which in this case is the dissemination of FDI data on Eurostat website of Member States data and EU aggregates.
The Flowchart 2.1 presents all the tasks that need to be executed during the FDI production process in a chronological order.
These tasks can be grouped as follows:
1. Reception and storage of MSs’ data 2. Harmonisation of tasks to make the data comparable and commensurable between
MSs 3. Estimation of missing values to compile the EU/EMU aggregates 4. Final checks on the EU and MSs’ tables before making them available to public
users
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Flowchart 2.1 Steps in the FDI production process
Oracle is the working environment for the production and the storage of ESTAT Bop statistical series. The MDT interface (1) has been developed to facilitate the management of the BOP database and to make the production more user-friendly. Therefore, all FDI statistical tables are stored in the Oracle environment and all the tasks to be realised during the FDI process are made under Oracle using the MDT interface.
1 MDT has been developed internally by Mr. Capaccioli, official of ESTAT.
Final checking
Estimation of the missing
values
Harmonisation of the data
Data reception and storage in
MDT
FDI Production
Process
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Table 2.1 Main steps of the FDI compilation process
1 Collect data
6 Analyse the integrity rules output by country, correct data
2 Receive data via Stadium
3 Make available GESMES data on the working database (MDT)
5 Control the input table and load into the expert source table
- Vademecum - Calendar
8 Compile harmonisation letter by country
7 Apply confidentiality rules
9 Reply to harmonisation letter
10 Correct data
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11 Define the European aggregates to publish and their level of detail
14 Compile fdi_pub_harm and the REF table
- Data ready for paper publication
- Data available on New Cronos
12 Estimate missing data necessary to calculate EU aggregates
13 Calculate and control EU aggregates
15 Validate the REF table (cross checks)
16 Disseminate data via New Cronos
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Chapter III. Treatment of confidential/non-publishable data
This part will go into great depth regarding the description of the FDI compilation process, highlighting the main differences between the current treatment of the so-called “non publishable” data, and the “real” confidential ones. The description will focus both on the security aspects of the current transmission and the statistical treatment to hide secondary confidentiality data.
III.1 Brief description of the security aspects during the Gesmes transmission The starting point is the FDI data(including confidential data) transmitted by National Institutes via the GESMES/CB format which are going directly to the Eurostat Server called Stadium. This Eurostat server receives any data (i.e. not only BOP data) coming from outside and distributes them to the relevant Eurostat Units. Therefore, the data entry within the Commission is directly Eurostat, and not any other Directorate General.
Flowchart 3.1 Circulation of FDI information transmitted by the MSs to Eurostat.
Issues of confidentiality
Acknowledge Letter
Modification
Conf Data Stadium
UNIT C4 IT Stadium
MS Eurostat
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The current Eurostat/Bop data flows defined in the Gesmes/CB format are as follows:
Data flow = name of data collection.
Type of data Data flow
Euro-indicators BOP_EUR
Euro-sics BOP_SICS
Key items BOP_KEY
Quarterly data BOP_Q
International Trade in Services BOP_ITS
Foreign Direct Investments (flows income)
BOP_FDI
Foreign Direct Investments (positions) BOP_POS
Foreign Affiliate Trade Statistics BOP_FATS
In the field of the FDI statistics, the MSs’ data transmission is identified either with the DSI: BOP_FDI (for FDI flows/income) or with the DSI: FDI_POS (for the positions).
A MS can ask Eurostat to protect the FDI information sent via Gesmes. Such a request needs to be done in a written form (a letter or a mail addressed to the Eurostat BOP Unit), in which the concerned MS has to specify (for the stadium server) which types of data flows need to be considered as officially confidential. If, for example, BOP_FDI is declared as being a confidential transmission, then all the files arriving at Eurostat, via the Stadium server and under the label “Data flow=BOP_FDI” will be automatically routed to a machine located in the Secure Eurostat Area. After the successful transfer, the transmission is deleted from any intermediate machine, including the Stadium server.
In most cases, the transmissions of BOP_FDI and BOP_POS do not have a confidential status, which means that a copy of the transmission stays in the Stadium server. Even if not declared as confidential, the transmission might contain values (or empty cells) flagged either with a “C” (for a confidential cell) or a “N” (for a non-publishable one). The corresponding input/source/harm/estim tables are stored in the production database and treated according to the normal procedure. These data can be browsed and copied by Eurostat C4, unless the access is granted to the BOP FDI team only. Nevertheless, once the harmonisation tasks are achieved, the concerned table (fdi_harm_xx) needs to be corrected by hiding additional values to avoid any possible (direct or indirect) recalculations. The statistical treatment of the so-called secondary confidentiality is identical whatever the transmission has been declared as (entirely) confidential or not.
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III.2 The current treatment of disclosive information The automatic procedure currently used to hide additional cells relies on automatic crosschecks throughout the partner, post, activity and flow dimensions. The equations used are those available in the BOP vademecum. Whenever a “C” flag is encountered, the procedure has to indicate the supplementary cells to be hidden. For each dimension, a first choice is given to hide another cell. If the first choice corresponds to the initial value flagged with “C”, then the procedure will hide the value of the component corresponding to the second choice. Therefore, the initial confidential data are being preserved in the Oracle environment, and strengthened by the calculation of secondary confidential cells (“S” flags added by Eurostat C-4 internal program). The first and second choice should be defined with the perspective to minimise the number of additional hidden cells. These criteria need to be adapted for each country, taking into account which components of the concerned dimension are most sensitive for the concerned MSs in their FDI transmission to Eurostat. Below are some examples based on the flow and post dimensions:
Example 1: The flow dimension has only three components. For a given (partner, period, post and activity) cell, a confidential value is detected on the net component (dim_flow=4). Then the value shown on the credit side will be also hidden, as it corresponds to the first choice. But if the confidential value was located in the credit side then the procedure would have hidden the second choice, which is the debit side.
Dimension Components Equation(s) First choice Second choice
Flow Credit (2), Debit (3), net flows (4) 4= 2-3 =2 (credit) =3 (debit)
Therefore, to run the procedure, you need to indicate, for each dimension, the target, the “first” choice, the "second” choice, and the Equation components. For the flow dimension, the function name in bopfdi is set_conf_flow_main, and the command is:
bopfdi.set_conf_flow ( target_table, "2", "3", ("2","3","4") ) ;
It might be the case that the number of additional cells hidden could be reduced by switching credit and debit side in the first choice.
In MDT, the command “Query-> function count-> where confidentiality=R” gives the number of additional hidden cells.
Example 2: The second example concerns the post dimension and six equations, several of which are being interconnected. In Eq1 and Eq3, priority has been given to hide either the “other capital” or the “equity capital” component, whenever a confidential value appears in this equation. It means that we want to favour the sum “equity+other capital” in our system, given that this component is also used for the sectoral breakdown estimates. In Eq2 and Eq4, an option have been taken to hide first the ‘total capital flow’, for the same reason as expressed before, but also because the RIE components are also used in other equations. In Eq5 and Eq6, the same first choice has been defined (331) to restrict the number of additional hidden cells to the necessary ones: If the post 332 is confidential in Eq5, then post 331 will be hidden, and it will not be necessary to hide either post 330 or post 334 in Eq6.
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Dimension Components Equation(s) First choice Second choice
Post 510,530, 541, 525, 505, 560, 580, 591, 575, 555, 330, 331, 332, 333, 334
Eq1: 541=510+530
Eq2: 505=525+541
Eq3: 591=560+580
Eq4: 555=575+591
Eq5: 331=332+333
Eq6: 330=331+334
Eq7: 330=335+333
Eq8 (net flows):
333+525+575=0
=530
=505
=580
=555
=331
=331
=335
=525
=510
=525
=560
=575
=332
=334
=333
=575
For the post dimension, the function name in bopfdi is set_conf_post_main. If complete information has been transmitted by the MS, you have to execute the following sequences:
1- bopfdi.set_conf_post ( target_table, "331", "332", ("331","332","333") ) ;
2- bopfdi.set_conf_post ( target_table, "331", "334", ("331","334","330") ) ;
3- bopfdi.set_conf_post ( target_table, "334", "332", ("335","332","334") ) ;
4- bopfdi.set_conf_post ( target_table, "525", "575", ("525","575","333") ) ;
5- bopfdi.set_conf_post ( target_table, "530", "510", ("530","510","541") ) ;
6- bopfdi.set_conf_post ( target_table, "580", "560", ("580","560","591") ) ;
7- bopfdi.set_conf_post ( target_table, "505", "525", ("505","525","541") ) ;
8- bopfdi.set_conf_post ( target_table, "555", "575", ("555","575","591") ) ;
Table 3.1 presents the list of equations that could be used to hide additional cells on the partner dimension. This list is an adaptation of the equations shown in the BOP vademecum, with a slight divergence for a few of them. For example, North America (E8) normally includes the USA, Canada and Greenland. But MSs’ data frequently present North America as being only the sum of USA and Canada. Therefore we need to implement “E8=USA+CA” in our list, that is the “real” relation used by the MS.
In the case of the partner dimension, the application of a unique set of relations is less easy to adopt, and the presentation below does not reflect the exact treatment in use for each reporting country. The first choice can be influenced by the availability (or not) of some information in the MSs’ Website: For example, most MSs do not publish, at their national level, FDI information with the total EFTA, Near&Middle East countries, total NAFTA, total NICs1, total NICs2 (Asia, Latin America) and the
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total Baltic countries. In this case, it seems more appropriate to use the above-mentioned zones as a first choice.
Furthermore, the second choice does not need to be different from the first one, especially if we (voluntarily) want to reduce the amount of additional hidden cells. Below is an example where the first choice is equal to the second choice, in equation 1 (=Z6). In the case of equation 1 below, our judgement is to consider that it is not necessary to hide any information vis-à-vis a given MS partner, even if a confidentiality cell is detected: Within the EU reporting entities, the tendency is to publish all FDI transactions with individual EU partners.
An example of an equations list for the dimension partner :
Table 3.1 Equations employed to hide additional values
1. bopfdi.set_conf_partner(target_table,"Z6","Z6", ("D2","A3","GR","DE","ES","FR","IE","IT","NL","AT", "PT","FI","SE","GB") ) ;
2. bopfdi.set_conf_partner(target_table,"U2","U2",("U2","A3","DE","ES","FR", "IE","IT","NL","AT","PT","FI") ) ;
3. bopfdi.set_conf_partner ( target_table, "IS", "LI", ("A5","NO","CH","IS", "LI") ) ;
4. bopfdi.set_conf_partner ( target_table, "IS", "LI", ("A6","NO","D2","IS", "LI") ) ;
5. bopfdi.set_conf_partner ( target_table, "E2", "A5", ("E1","A5","D2", "E2") ) ;
6. bopfdi.set_conf_partner ( target_table, "E5", "E6", ("E4","E5","E6") ) ;
7. bopfdi.set_conf_partner ( target_table, "E8", "CA", ("E8","US", "CA" ) ) ;
8. bopfdi.set_conf_partner ( target_table, "E9", "F1", ("E7","E8", "E9","F1" ) ) ;
9. bopfdi.set_conf_partner ( target_table, "IL", "IR", ("F3","IL","F4","F5", "IR") ) ;
10. bopfdi.set_conf_partner ( target_table, "F3", "F6", ("F2","F3", "F6") ) ;
11. bopfdi.set_conf_partner ( target_table, "B1", "MX", ("US","B1","CA", "MX") ) ;
12. bopfdi.set_conf_partner ( target_table, "B9", "SG", ("B9","SG","HK","KR", "TW") ) ;
13. bopfdi.set_conf_partner ( target_table, "C1", "PH", ("MY","PH","C1", "TH") ) ;
14. bopfdi.set_conf_partner ( target_table, "C2", "MX", ("C2","AR","BR","MX", "CL") ) ;
15. bopfdi.set_conf_partner ( target_table, "B7", "B8", ("B5","B6","B7", "B8") ) ;
16. bopfdi.set_conf_partner ( target_table, "U3", "U3", ("U3","SE","GB", "GR") ) ;
17. bopfdi.set_conf_partner ( target_table, "U2", "U2", ("D2","U2","U3") ) ;
18. bopfdi.set_conf_partner ( target_table, "U2", "U4", ("U2", "U4","A1") ) ;
19. bopfdi.set_conf_partner(target_table,"IS","B1",("A8","D2","CH","NO","B1","JP","AU","NZ","CZ","TR","HU","PL","KR", "IS") ) ;
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20. bopfdi.set_conf_partner ( target_table, "LV", "LT", ("EE","LT","LV", "E3") ) ;
21. bopfdi.set_conf_partner ( target_table, "Z5", "Z5", ("A1","E4","E7","F2","F7","E1", "Z5") ) ;
22. bopfdi.set_conf_partner ( target_table, "D4", "D2", ("A1","D2","D4" ) ) ;
23. bopfdi.set_conf_partner(target_table,"Z8","F7", ("D4","A5","E2","E5","E6","E8","E9","F1","F3","F6","F7", "Z8") ) ;
The following equations are used for the confidentiality treatment along the activity sector dimension (extract from set_conf_activity, in bopfdi domain):
bopfdi.set_conf_activity ( target_table , "1490" , "1100" , ( "1495" , "1100" , "1490" ) ) ;
bopfdi.set_conf_activity ( target_table , "2205" , "1805" , ( "2295" , "1805" , "2205" ) ) ;
bopfdi.set_conf_activity ( target_table , "2500" , "2400" , ( "2595" , "2300" , "2400" , "2500" ) ) ;
bopfdi.set_conf_activity ( target_table , "2900" , "2805" , ( "2995" , "2805" , "2900" ) ) ;
bopfdi.set_conf_activity ( target_table , "3200" , "3000" , ( "3295" , "3000" , "3200" ) ) ;
bopfdi.set_conf_activity ( target_table , "3500" , "3400" , ( "3595" , "3400" , "3500" ) ) ;
bopfdi.set_conf_activity ( target_table , "3990" , "1605" , ( "3995" , "1605" , "2295" , "2595" , "2995" , "3295" , "3595" , "3990" ) ) ;
bopfdi.set_conf_activity ( target_table , "6200" , "6110" , ( "6295" , "6000" , "6110" , "6200" ) ) ;
bopfdi.set_conf_activity ( target_table , "6490" , "6295" , ( "6495" , "6295" , "6420" , "6490" ) ) ;
bopfdi.set_conf_activity ( target_table , "6730" , "6520" , ( "6795" , "6520" , "6730" ) ) ;
bopfdi.set_conf_activity ( target_table , "6890" , "6795" , ( "6895" , "6510" , "6795" , "6890" ) ) ;
bopfdi.set_conf_activity ( target_table , "7200" , "7300" , ( "7495" , "7200" , "7300" , "7400" ) ) ;
bopfdi.set_conf_activity ( target_table , "7390" , "7000" , ( "7395" , "7000" , "7495" , "7390" ) ) ;
bopfdi.set_conf_activity ( target_table , "9996" , "9995" , ( "9999" , "9998", "0595" , "1495" , "3995" , "4195" , "4500" , "5295" , "5500" , "6495" , "6895" , "7395" , "9995" , "9996" ) ) ;
bopfdi.set_conf_activity ( target_table , "9998" , "9997" , ( "9999" , "9997" , "9998" ) ) ;
Once all the equations have been defined and adapted to the concerned country, the confidentiality procedure is an iterative one. Below is a model applied to the treatment of 2003A FDI flows, reported by Member State XX. Once the data are harmonised, the first step is to ensure the transfer of confidential flags “C” from the source table to the harmonised one. Then the confidentiality procedure is applied on the harmonised table, in the form of several iterations. In this example, it is assumed that three rounds (please refer to the model presented below) were necessary to make sure that the number of secondary confidential cells was enough.
1. After the first round, we count the number of secondary hidden cells (N1). If N1=0 we stop the procedure, otherwise we continue with a second round
2. After the second round, we count the number of secondary hidden cells (N2). If N2=N1 we stop the procedure (no additional hidden cells between the first and the second round), otherwise we continue with a third round etc…
Procedure (set_conf_flow: a model)
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// CONFIDENTIALITY
filter period (2003A) ;
bopfdi . conf_copy_from_source ( fdi_source_xx , fdi_harm_xx );
// 1st round
set_conf_flow_main ( fdi_harm_xx ) ;
set_conf_post_main_xx ( fdi_harm_xx ) ; // adapted for country xx
set_conf_partner_main_pos_xx ( fdi_harm_xx ) ; // adapted for country xx
set_conf_activity ( fdi_harm_xx ) ;
// 2nd round
set_conf_flow_main ( fdi_harm_xx ) ;
set_conf_post_main_xx ( fdi_harm_xx ) ; // adapted for country xx
set_conf_partner_main_pos_xx ( fdi_harm_xx ) ; // adapted for country xx
set_conf_activity ( fdi_harm_xx ) ;
// 3nd round
set_conf_partner_main_pos_xx ( fdi_harm_xx ) ; // adapted for country xx
set_conf_flow_main ( fdi_harm_xx ) ;
set_conf_post_main_xx ( fdi_harm_xx ) ; // adapted for country xx
etc.