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Krzysztof Makowski / Department of Statistics
Zurich / 16th Annual NBP-SNB Joint Seminar / December 18, 2019
Enriching FDI presentation and analysis
■ Ultimate investing country
■ Ultimate host country
■ Network and micro analysis of FDI entities
Enriching FDI presentation and analysis 2
What is currently in our focus?
Ultimate investing country
Enriching FDI presentation and analysis 3
■ Countries hosting SPEs among
largest investors
■ The same situation in almost every
country
■ Who is behind the investment
from Netherlands, Luxembourg or
Cyprus?
■ Some investors are missing
■ Where are USA?
Enriching FDI presentation and analysis
Traditional view of inward FDI
4
0
20 000
40 000
60 000
80 000
100 000
120 000
140 000
160 000
180 000
200 000
PLN
Mio
.
■ Who controls the resident company ( )?
■ Single controlling entity
■ Whole value of resident entity allocated to UCP
■ Who controls the foreign investor ( )?
■ Allows to allocate minority ownership to foreign control
■ Value of resident entity allocated proportionally
■ Two approaches in statistics FATS (UCP) / FDI (UBO)
■ Different user needs
Enriching FDI presentation and analysis
Ultimate Beneficial Owner and Ultimate Controlling Parent – theory
5
US
NL
GB
LU
PL
100%
60%
100%
40%
Cases for UCP
•Comparison of the resident owned companies, (ultimately) foreign controlled companies and resident MNE
•Global Value Chains compilation – allocation of income?
Cases for UBO
•Monitoring of minority investment in different economic activities
•Control with minority stake in dispersed ownership setting
•Blocking minority / Access to information
•Legal limits on ownership above 50% from abroad
•Round-tripping
Enriching FDI presentation and analysis 6
UBO and UCP – which one to use?
Enriching FDI presentation and analysis 7
Comparison of UBO, UCP and immediate counterpart presentation
0
50 000
100 000
150 000
200 000
250 000
Germany UnitedStates
France Netherlands UnitedKingdom
Poland Spain Austria Switzerland Luxembourg Othercountries
andunallocated
PLN
Mio
.
UBO UCP Immediate
Enriching FDI presentation and analysis 8
Concentration of foreign investors in different economic activitiesU
ltim
ate
Investing C
ountr
y
Econom
ic A
ctivity o
f re
sid
ent
com
panie
s
■ Majority of the investment is 100% owned by non-residents
■ Minority investments present in important activities
Enriching FDI presentation and analysis
Shareholding percentage – where are the differences?
9
0%
10%
20%
30%
40%
50%
0
50 000
100 000
150 000
200 000
250 000
C K G L M J F D H
PLN
Mio
.
Control Minority % of minority
■ Immediate counterpart in globalised world
■ Relatively easy to measure
■ Not so good proxy for true investors
■ Policy and analytical needs
■ FDI promotion
■ FDI screening
■ Tax evasion
■ Local impact of FDI
■ Cross-border linkages
■ …
■ Ultimate beneficial owner (UBO) or ultimate controlling parent (UCP)
■ Which one to choose?
Enriching FDI presentation and analysis 10
Ultimate investing country – few things to take away
Ultimate host country
Enriching FDI presentation and analysis 11
-30 000
-20 000
-10 000
0
10 000
20 000
30 000
40 000
PLN
Mio
.
Equity Debt Total
■ Countries with SPEs …
■ … true investment destinations …
■ … and Sweden
Enriching FDI presentation and analysis
Traditional view of Polish investment abroad
12
■ It might be easier to name country of ultimate investment (business
decision)
■ … rather than name all the countries investment is passing through (legal and tax
considerations)
■ … hence it is harder to obtain this information from data reporter which is not a
decision maker
Ultimate host country an exercise in looking through SPEs
Enriching FDI presentation and analysis 13
Global
Group
Head
Our
reporting
agent
Group
financial
centre
indirectly
owned by
our
reporting
agent
Enriching FDI presentation and analysis 14
Ultimate host country for resident controlled investmentIm
me
dia
te c
ounte
rpart
countr
y
Ultim
ate
host
countr
y
■ Value of round-tripping depends
on the direction from which we
are measuring it
■ UCP overstates due to allocation of
minority foreign ownership to
reporting country
■ Different valuation due to special
purpose entities used in
investment chains and accounting
standards
Enriching FDI presentation and analysis
Polish investment in Poland according to UBO, UCP and UHC
15
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
UHC UBO UCP
PLN
Mio
.
Enriching FDI presentation and analysis 16
Why there is a difference in value of round-tripping?
Assets at
book
value(current
valuation)
Own
funds at
book
value(reflecting
current
valuation)
Assets at
book
value (historical
cost)
Own
funds at
book
value (reflecting
historical
cost)
Assets at
book
value
Own
funds at
book
value
PL SPE country PL
Round-tripping
in Inward FDI
Round-tripping
in Outward FDI
V
alu
e →
■ Where are residents investing? What countries direct investors are
exposed at?
■ Are outward investments really outward?
■ Where investors need help in expanding abroad?
Enriching FDI presentation and analysis 17
Ultimate host country – some questions we may be able to answer
Network and micro analysis of FDI entities
Enriching FDI presentation and analysis 18
■ Countries are internally diverse – investment decisions are not made at the country level but on specific locations
■ if we want to analyse what determines investment, local factors also need to be considered
■ Work in progress
■ Extending database on individual FDI investment – extracting data from old systems
■ Effective parsing of geospatial data objects (e.g. transport and energy infrastructure)
■ Two areas
■ Infrastructure determinants of the localization of investment
■ Network effects – neighbour effect on investment (e.g. bringing along suppliers and competitors)
Enriching FDI presentation and analysis 19
Network and micro analysis of FDI entities
Enriching FDI presentation and analysis 20
Where are investors from different countries investing
Enriching FDI presentation and analysis 21
New investment – new locations?
Enriching FDI presentation and analysis 22
New investment – reinvested earnings?
Supermarket chain owned by foreign direct investor:
- Location of DIE
- Location of Head office
- Location of shops
Enriching FDI presentation and analysis 23
Location of direct investment entity (DIE)
vs location of their activities
Source: Biqdata.pl
Location
of DIE
Head
office
■ Develop new methods for analysing FDI data
■ Network analysis
■ Spatial econometrics
■ …
■ Acquire new data sources for measuring the impact of FDI
■ Official statistics on micro level
■ Open data
■ …
■ New presentations and old problem of confidentiality
Enriching FDI presentation and analysis 24
Further work
www.nbp.pl