Major Changes to the
Treatment of Services in BOP Statistics
Workshop on the Sixth Edition of the Balance of Payments and
International Investment Position Statistics Manual – BPM6
Beirut
March 24-26, 2015
Outline
• Services—Standard components
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Manufacturing services on physical inputs owned by others
Maintenance and repair services, n.i.e.
Transport
Travel
Construction
Insurance and pension services
Financial services
Charges for the use of intellectual property n.i.e.
Telecommunications, computer, and information services
Other business services
Personal, cultural, and recreational services
Government goods and services n.i.e.
• This lecture will focus on the major changes in the services
account from BPM5 to BPM6
2
Manufacturing services on physical inputs
owned by others
• Major change from BPM5 (goods for processing)
• A motivation for shifting the classification in BPM6 is to
comprehensively apply the “change of ownership principle”
• A change of ownership to the processor is not imputed, thus the
BPM5 exception is eliminated (BPM6 10.62-10.71).
• In some countries, the value of gross flows of goods are likely to
be significantly reduced, while the importance of services is
increased with BPM6 . This may have a significant effects on the
meaning of components for some countries.
3
Manufacturing services on physical inputs
owned by others
• Undertaken by enterprises that do not own the
goods concerned and that are paid a fee by the
owner.
• Since the ownership of the goods does not
change, no general merchandise transaction is
recorded between the processor and the
owner.
– Examples: Oil refining, liquefaction of natural gas,
assembly of clothing and electronics, other
assembly, labeling, packing.
• Issues:
– Difference in recording of International merchandise trade
statistics.
4
Manufacturing services on physical inputs
owned by others
• Manufacturing service represents the value of the contract
between the owner of the goods and the manufacturer.
• The difference between the goods’ value before/after
processing may differ from the value of the manufacturing
services, due to:
– cross-period movements
– holding gains and losses
– inclusion of overheads (financing, marketing, know-how)
– materials sourced by the owner from economy of
processor/third country
– problems in assessing values of goods sent and returned
(since there is no sale)
• In BPM6: Imputed financial account entries for trade credits
are no longer needed.
5
Recording of related purchases and
sales of goods
The processor:
• The fee charged may cover the costs of materials purchased from residents
– of the same country of the owner
– the same economy as the processor
– or a third economy
• and refers to all work done on goods by the processor for the owner of the
goods
The owner:
Purchases of materials (goods to be processed) may be obtained from:
• Residents > no international transactions
• Country of processor/ third countries > imports of general merchandise (or
merchanting)
Sales of finished goods (after being processed)
• To residents > no international transaction
• To country of processor/ third economy > exports of general merchandise (or
merchanting)
6
BPM6 Box 10.1 - Example 2
Manufacturing services that change the condition of the goods.
A resident of A acquires oil from country B for 10.
The oil is sent to country C (without passing through A) for refining for 15.
The oil continues to be owned by A.
The oil is then sold to country D for 30.
Goods and services entries for country A:
General merchandise import (with country B):
10 DR
Manufacturing services on physical inputs owned by others (with country C):15 DR
General merchandise export (with country D):
30 CR
In both examples, Country C may wish to consider providing supplementary items on
goods received for processing and goods sent after processing
7
Manufacturing Services on Physical Inputs
Owned by Others: Data collection
– Enterprise surveys
• Most efficient method
• Allows collection of fees as well as values of goods sent and received
• Useful to adjust the goods account to measure merchandise trade on a
change of ownership basis
– IMTS
• Depend on the design of Customs declaration forms
– ITRS
• may provide some information on the value of the manufacturing
services;
• care not to include payments for other goods and services
– Administrative sources: tax data for export processing zones/free
zones with preferential tax rates
8
Transport
• Major changes:
– maintenance is included in Maintenance and repair services, and not
in transport
– Postal and courier services is included in transport, and not in
communication
Services (BMP6)
Transport
Sea Transport
Air Transport
Other modes of transport
Postal and courier services
9
Maintenance and repair services, n.i.e.
• BPM6 - Now included under services rather than
goods.
• Cover maintenance and repair work undertaken
by residents on goods owned by nonresidents.
• Include value of repair work (including parts and
materials supplied by repairer).
• Does not include the value of goods for repair.
• Excludes:
– Construction repair and maintenance.
– Maintenance and repair of computers.
10
Construction
Delineation between Services and FDI
• Determine the residency of the enterprise engaged in the construction
project:
• If external operations of a construction enterprise are substantial
enough that they are managed through a site office, a branch (FDI) may
be identified as an institutional unit in the host economy:
– separate set of accounts (incl. a balance sheet)
– production of significant scale managed through a local site office
other than the head office “for one year or more”
– purchasing/renting business premises, recruiting local staff,
operating a bank account
– subject to income taxes (even if exempted), and other legal
requirements
– criteria of “intention” is also relevant, when a project is ex ante
planned which implies criteria of the branch will be met
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Services Account - Construction
• Comprises work performed on construction projects by an
enterprise or site office that is nonresident in the host
country
• Generally the work is of a short-term nature (note the oneyear guideline for residence). No special treatment is adopted
for the residence of short-term workers
• The value of the construction service should equal the full
value of the construction project
12
Construction: Recording of related goods
and services
Recording of related goods and services pertaining to
construction (viewpoint: construction abroad):
• Acquisitions of goods and services (example: equipment rental) by the
enterprises undertaking the construction work from the economy of
location (“host country”) = construction debits
• Goods and services brought from the home economy for use in the
construction project (included in overall input, construction credits);
excluded from general merchandise
• Goods and services acquired from third countries for the project are
included in general merchandise/relevant service item, (and as overall
input in construction credits)
13
Construction: Example 1
Example of the measurement of construction:
Enterprise A, resident of A, provides construction services in B, with a total
(gross) value of $10,000, which consists of:
Goods and services, and labor purchased in A (home country):
Goods
Services
Labor
$645
$120
$435
Goods and services, and labor purchased in B (host country):
Imported from A*
Imported from C*
Sourced in B *
Labor
$525
$1,750
$2,290
$2,110
Goods imported from C
$500
Total cost of purchased inputs
$8,375
Gross operating surplus accruing to A $1,625
Gross value of construction services $10,000
*Subtotal $4,565
14
Construction: Example 1
Recording in BOP
Example of the measurement of construction: Entries in A’s BOP statement:
Credit
Current Account
Goods
Services
$500 (import from C)
$10,000
Primary Income
(Compensation of employees)
$4,565
$2,110
Net acquisition of assets
Financial account
currency and deposits
Debit
Net incurrence of liabilities
+$10,000 - ($500+$2,110+$4,565)=
$2,825
15
Construction: Example 2
16
Construction: Example II
Recording in BOP
17
Insurance services
• The estimate of insurance claims used to derive the
value of insurance services is changed to adjust for
claim volatility.
• Premium supplements are taken into account in
deriving insurance services.
• Reinsurance and direct insurance are treated
consistently (BPM6 paragraph 10.111; BPM5 paragraph
257).
18
For nonlife insurance
Derived items for the BOP (viewpoint: resident insurer)
•
•
•
•
•
Services account:
– insurance services= gross premiums receivable + premium supplements expected claims (actual claims payable plus adjustment for volatility)
Primary income account:
– investment income attributable to nonresident policyholder (premium
supplements)
Secondary income account:
– net premiums receivable = gross premiums receivable + premium
supplements – insurance services
– claims payable
Financial account:
– insurance reserves, (increase in liability to policyholders)
– currency and deposits (i.e. premiums received; claims paid)
IIP:
– insurance reserves
– currency and deposits
19
Numerical Example of Calculations for
Nonlife Insurance
• Box A6c (Appendix 6c of BPM6) distributed
and discussed.
20
Financial Services
• Included are services provided by financial intermediaries
and auxiliaries (except those of insurance and pension funds)
• usually provided by banks and other financial corporations
• these services may be charged for by:
–
–
–
–
explicit charges
margins on buying/selling transactions
deductibles from property income for asset-management costs
margins between interest payable and the reference rate on loans
and deposits, (called financial intermediation services indirectly
measured - FISIM)
21
Financial Intermediation Services Indirectly
Measured (FISM)
 Actual interest includes element of income as well as charge for
service
 by convention, only arises from loans and deposits
 FISIM is calculated:
 for loans from financial corporations – difference between interest actually
payable and the amount payable if reference rate were used
 for deposits – difference between the interest that would be earned if
reference rate were used and interest actually earned
 “reference rate” represents pure cost of borrowing funds
• e.g. rate prevailing for interbank lending and borrowing
• should include no service component!
• should reflect risk and maturity structure of deposits and loans
• single rate for local currency transactions
• different rates for other currencies
22
Numerical Example of Calculation of FISIM
• BPM6 Box 10.5 distributed and discussed
Services BPM6
Financial services
Explicitly charged…..
FISIM
23
Charges for Use of Intellectual Property
• Covers transactions included under “royalties and license
fees” in BPM5
–
Includes:
•
•
Charges for the use of proprietary rights such as patents,
trademarks, copyrights, franchises and outcomes of R&D
Charges for licenses to reproduce and/or distribute intellectual
property embodied in produced originals, prototypes, such as
copyrights on books, computer software, cinematographic works
and related rights (such as for live performances and television,
cable, or satellite broadcast)
24
Research and Development Services
– Includes: Outright purchases/sales of results of R&D (in BPM5 considered
nonproduced and thus included in capital account) such as patents,
copyrights, and sale of information about industrial processes
– Excludes: Charges for the use of the outcomes of R&D
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Treatment of Intellectual Property
BPM6 – Table 10.4
Use of intellectual property
Franchises and trademarks
charges for the use of
intellectual property n.i.e.
Outcomes of research
and development
charges for the use of
intellectual propertyn.i.e
Computer services; audiovisual and
related services:
License to use
excluding
reproduction and
distribution*1
(a) Customized all types
relevant service
item*4
(b) Non-customized—downloaded
or otherwise electronically
delivered
relevant service
item*4
(c) Non-customized—provided on
physical media with periodic
license fee
relevant service
item*4
(d) Non-customized —provided on
physical media with right to
perpetual use
Goods
Sale/purchase of
ownership
rights*3
Capital
account
Research and
development
services
License to
reproduce and/or
distribute
charges for the use
of intellectual
property n.i.e.
relevant service
item*4
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