12
Services
Introduction
12.1 Rapid technological advances in the past few
decades in transport, telecommunication, computer,
and information services, including the develop-
ment of the Internet and electronic commerce, and
innovations in creation and packaging of nancial
instruments, combined with an increased trend to-
wards globalization, have resulted in signi cant cross
border exchanges at more distant locations and ac-
cess of business companies to wider markets. Better
communication and transport have also facilitated
the movement of people for the purposes of tourism,
migration, employment, and trade. ese phenomena
have resulted in an explosive development of service
industries and an unprecedented growth in the vol-
ume of international trade in services, including in
the context of international investment. Currently,
services constitute about one- h of worldwide trade
in balance of payments terms.
12.2 e chapter covers general aspects of data
collection and compilation for all services categories,
including separate discussions on services with more
complex transactions and multiple data sources that
require a speci c treatment. It also captures the emer-
gence of new data sources (e.g., electronic commerce)
and adaptations in the application of statistical meth-
odologies to changing circumstances.
12.3 e structure of the chapter follows the order
of the main standard services components but takes
into consideration the relative importance of various
services in the international trade. e next three sec-
tions cover manufacturing services on physical inputs
owned by others, transport, and travel, respectively;
all other types of services are grouped under other
services and are described in “Other Services.” e
last section is dedicated to e-commerce.
12.4 “Other Services” presents (1) a general de-
scription of data sources and methods that could be
used to compile the items included in this category and
(2) separate descriptions on some of the more com-
plex transactions recorded in these items—namely,
construction, treatment of intellectual property, for-
eign exchange services (part of nancial services),
operating leasing (part of other business services),
and government goods and services n.i.e. Detailed
descriptions of compilation of cross border insurance
and pension services and nancial intermediation ser-
vices indirectly measured (FISIM) are provided in the
separate, dedicated Appendices 2 and 3, respectively.
Manufacturing Services on Physical
Inputs Owned by Others
12.5 e BPM6 stipulates that the manufactur-
ing fee received by companies for the manufacturing
activity undertaken on goods owned by other com-
panies be classi ed as a service. e manufacturing
services represent the value of the contract between
the owner of the goods and the manufacturer. How-
ever, gross values of goods associated with manufac-
turing services should be identi ed as supplementary
items in economies where they are signi cant. Re-
cording of gross values of such goods is described in
Chapter 10 of the BPM6 .
12.6 e services provided by the manufacturer
may also be referred to as contract manufacturing,
toll manufacturing, or toll services. ese terms re-
ect an arrangement where some of the manufactur-
ing activity is undertaken by one company on behalf
of another. us, the goods being manufactured are
not owned by the manufacturing company; rather, the
manufacturing company is engaged in the provision
of a service for a manufacturing (contract) fee.
12.7 In contrast, the International Merchandise Trade
Statistics: Concepts and De nitions 2010 (IMTS 2010 )
recommends as follows:
... that in all cases goods for processing, as well as
goods resulting from the processing (compensat-
ing products in customs terminology) are to be
Balance of Payments and International Investment Position Compilation Guide188
included in the merchandise exports and imports
of the countries at their full (gross) value.
1
12.8 Recognizing the needs of balance of payments
statistics, where manufacturing services on physi-
cal inputs owned by others should be recorded, the
IMTS 2010 encourages economies to undertake the
following:
... explicitly identify (preferably by special cod-
ing) in their trade statistics goods for processing
as well as goods resulting from such processing
where no change of ownership takes place. How-
ever, it is recognized that such identi cation may
not be all-inclusive and the obtained information
may not be internationally comparable as (a) mer-
chandise trade statistics compilers may not have
adequate sources of data (especially in cases when
the appropriate customs procedures are not used)
and (b) national de nitions of such procedures
may di er signi cantly.
12.9 However, customs declarations currently used
by most economies do not facilitate the recording of the
manufacturing services, and there may be di erences
between the actual value of manufacturing services and
value obtained from customs declarations as di erence
between the value of the goods before processing and
the value of the goods a er processing. erefore, even
if economies were to follow the encouraged guidelines
of international merchandise trade statistics (IMTS) on
recording goods for processing, the resulting data may
not be adequate for estimating manufacturing services.
It should be noted that manufacturing services on
physical inputs owned by others records only the man-
ufacturing services and not the di erence in the value
of the goods before and a er processing. In this regard,
using data from IMTS may not be a viable option.
12.10 Based on these recommendations, it would
be very di cult to estimate the manufacturing ser-
vices using only customs-based merchandise trade
statistics. e information provided by customs dec-
larations could be, nevertheless, useful in combina-
tion with other methods, or alternatively as input in a
data model (by major type of manufacturing) used in
combination with regular benchmark surveys to vali-
date the model outcomes.
12.11 e BPM6 recommends that the movement
of goods under the processing arrangements to be
identi ed as supplementary items for both the owner
and the provider of manufacturing services—that is,
they should be recorded as follows:
Goods for processing in the reporting economy
Goods returned (CR), Goods received (DR)
Goods for processing abroad
Goods sent (CR), Goods returned (DR)
12.12 In this manner, they can be compared with
the results of the enterprise survey and maintain a
link with the IMTS data. In addition, continuing to
record these data in the IMTS is necessary so that they
can be excluded from the total of transaction in goods
to exclude double counting.
12.13 It is possible that some goods will be man-
ufactured in one economy, then be sent to another
economy for further manufacturing, and then either
be returned to the owning economy, returned to the
economy where the initial manufacturing was under-
taken (either for further manufacturing or for nal
sale), or sent to a third economy (for further manu-
facturing or for nal sale). Indeed, it is possible that
the goods never enter the economy of the residence
of the owner as all the manufacturing is entirely done
abroad. Until nal sale, the goods should be recorded
as being owned by the original party throughout and
the various fees recorded under manufacturing ser-
vices on physical inputs owned by others between the
manufacturing economy and the economy where the
owner is resident.
12.14 e di erence between the value of the
goods before processing and the value of the goods
a er processing may di er from the value of manu-
facturing services for various reasons, including the
following:
• Sale of goods a er processing in the economy
of the manufacturer or to a third economy; in
such cases, the value of the processed goods that
are returned to the owner is diminished by the
value of goods sold to the economy of the manu-
facturer or to a third economy, the latter being
separately recorded as exports by the owner of
the goods
• Incorrect assessment of the values of goods sent
and returned; since there is no sale or purchase of
1
IMTS 2010 , paragraph 1.20.
Services 189
the goods, the values recorded by customs at the
time of import and reexport are notional values,
whose balance probably does not di er by the
amount of the processing fee received (resulting
in balance of payments errors and omissions).
Also, these values may be assessed di erently by
the customs authorities of the economy of the
sender and the customs of the economy of the
receiver
• Recording of the goods before and a er process-
ing across di erent periods
• Inclusion of holding gains or losses; holding
gains or losses accrue to the owner of the goods.
However, it is likely that the changes in the value
of the goods while in the possession of the man-
ufacturing company could be included in the
value of the goods and hence be mistaken for
part of the manufacturing services. For example,
if the price of oil changes substantially a er the
manufacturer takes possession of the consign-
ment, then the value of oil a er manufacturing
would include the price increase, the manufac-
turing services, and the value of other inputs
• Scrapping of the goods while in the possession of
the manufacturer; these goods may be included
in the value of goods sent but excluded in the
value of goods returned
• Inclusion of manufacturer’s overheads in the
value of the goods a er processing;
2
the manu-
facturing services should include overhead costs
only to the extent they relate to the processing of
the goods
• Value of brand names in goods a er processing;
for example, a shoe manufacturer’s logo adds
value to the goods a er processing. However, this
value should not be included in the manufactur-
ing services
• Inclusion of the value of materials sourced from
the economy of the manufacturer; materials pro-
cured by the processor as inputs in the produc-
tion process and that may be sourced from the
economy of the manufacturer (or sourced from
third economies and then transported directly to
the economy of the manufacturer) are included
in the overall cost of production. It may be that
only a portion of their value is re ected in the
manufacturing services, the rest being inputs in
other processing activities including on its own.
12.15 In collecting data on manufacturing services,
the compiler also needs to be careful to di erenti-
ate manufacturing undertaken on own account from
manufacturing undertaken on goods owned by oth-
ers. In the former case, the processor may purchase
supplies of goods and raw materials from one or more
foreign suppliers (recorded in general merchandise)
and undertake assembly and processing of the goods,
and the nal product is sold on the account of the
manufacturer. In this case, the manufacturer would
have taken ownership of the goods and therefore is
not engaged in contractual work.
12.16 In many cases, the companies engaging in
manufacturing services may be identi able by the
special taxation arrangements that may be in place
for their bene ts. ese arrangements normally entail
the provision of special tax and duty concessions on
their production and purchases, or outright duty ex-
emptions. us, raw materials and other inputs may
be imported duty-free and the company may oper-
ate under a lower corporate tax structure than other
similar companies in the economy. Because of the
preferential tax rates o ered to these companies, the
importation and production process may be closely
monitored by the customs and tax authorities so that
they cannot freely engage in commerce (by selling
some of their inputs or outputs) with other companies
that do not qualify for concessions. us, these com-
panies may operate only in special locations that may
be referred as export processing zones or free zones.
e factory undertaking the manufacturing may
sometimes be referred to as a bonded factory, imply-
ing that the goods are held in bond by the customs au-
thorities. For example, in Mexico, these factories are
referred to as maquiladora, named a er the system
under which these companies were established in the
1960s. However, the compiler should note that many
companies may be engaged in manufacturing services
without necessarily being in such special locations.
12.17 e compiler should note that there may be
cases where the companies operating in special loca-
tions and receiving such concessions may actually
2
Overhead costs include expenses related to the operation of a
business. Most commonly, overhead costs include accounting
fees, advertising, depreciation, insurance, interest, legal fees, rent,
repairs, supplies, taxes, telephone bills, travel, and utilities costs.
Balance of Payments and International Investment Position Compilation Guide190
own the goods being manufactured. ey may pur-
chase inputs domestically and from the rest of the
world, manufacture goods, and sell these manufac-
tures to one client overseas. is output would not
qualify as manufacturing services.
12.18 ere may be cases of technology transfer
3
between a direct investor in economy Aand an af-
liate in economy B without which the a liate would
not be able to undertake production. e production
process may involve the use of raw materials and other
inputs obtained from the direct investor or from other
sources acquired by the a liate. e direct investor
may then be responsible for marketing the goods a er
production. e mere existence of a direct investment
relationship and the a liate’s reliance on the technol-
ogy of the direct investor do not imply the provision
of manufacturing services. e a liate may be able to
acquire goods on own account and may be contracted
to sell/transfer the nal output only to the direct in-
vestor. In that case, the manufacturing activity would
be recorded on the books of the a liate as manufac-
turing on own account.
12.19 e compiler should also make the distinc-
tion between the goods associated with manufac-
turing activities and those under merchanting. For
merchanting, the gross values of the goods acquired
and sold are included in goods (as negative and posi-
tive exports, respectively). In the case of goods associ-
ated with manufacturing services, there is no change
of ownership, unless the parties later agree otherwise,
in which case the sales of the nished products would
be recorded under general merchandise (the manu-
facturing fee would be paid as agreed in the initial
contract). Furthermore, there may be cases where
the goods under a merchant’s ownership may be sub-
jected to certain manufacturing services that changed
the condition of these goods, in which case the pur-
chases and sales should be recorded under general
merchandise instead of merchanting.
Collecting Data on Manufacturing Services
12.20 Data on manufacturing services on physical
inputs owned by others can be collected through an
enterprise survey, IMTS, and an international transac-
tions reporting system (ITRS). Administrative sources
also can provide useful information (see model form 7).
12.21 Enterprise surveys generally represent the
most e cient method to collect information on man-
ufacturing services. e compiling agency may con-
duct dedicated surveys to collect data on the value
of the manufacturing services as well as the value of
the goods sent and received for processing. e lat-
ter would be useful to adjust the goods account to
measure merchandise trade on a change of owner-
ship basis. As noted previously, companies engaged
in manufacturing services may operate under special
customs and tax regulations; therefore, when collect-
ing the information, the compiler should exert care to
identify the concessions given to companies operat-
ing in special locations and properly record external
transactions.
12.22 Customs declarations currently used by
most economies for IMTS do not facilitate the record-
ing of the manufacturing services. Apossible solution
is for economies to amend their customs declaration
forms to require that traders report the value of the
manufacturing services on the goods being traded.
However, this is a possible long-term solution as there
are various factors that will have to be considered
before this option is pursued. Customs declaration
forms may be designed according to legal speci ca-
tions that underpin trading arrangements, and it may
be di cult to adjust these forms solely for statistical
purposes.
12.23 An ITRS may provide some information on
the value of the manufacturing services. However, the
compiler should ensure that this amount does not in-
clude payments for other goods and services. us,
the ITRS may need to be adjusted to collect speci c
information on the manufacturing services and to
exclude all other transactions payments between the
manufacturing company and the company owning
the goods.
12.24 e manufacturer may be required to pro-
vide statements to the tax authorities on its income
and expenses as part of the close monitoring that
may be in place due to its receipt of tax concessions.
Such statements may be available from the customs
authorities or the tax authorities. ese agencies may
also be able to identify the value of the manufacturing
3
Technology transfer includes patenting, licenses, know-how,
technical assistance and the provision of research and develop-
ment services. See OECD, Measuring Globalization: OECD Hand-
book on Economic Globalization Indicators, 2005.
Services 191
services from the relevant tax on provision of such
services.
12.25 e gross value of goods for processing, both
of the goods sent for processing (raw materials) and
goods returned to the economy of origin a er the
completion of processing ( nished products), should
be identi ed as supplementary items in economies
where they are signi cant. ese values could be iden-
ti ed in IMTS, in enterprise surveys, or in a supple-
mentary inquiry in an ITRS.
Transport
12.26 Transport includes passenger, freight, and
other transport services provided by residents of one
economy to residents of another economy. e BPM6
recommends that transport be classi ed by mode of
transport (namely, sea, air, and other, which includes
rail, road, inland waterway, pipeline, space transport,
and electricity transmission). It also recommends
that these categories be classi ed further by what is
carried (namely, passenger or freight), and by other
auxiliary services related to the transportation of the
mentioned categories. Transport also includes postal
and courier services.
Ownership and Operation
of Transport Equipment
12.27 To properly record transport services in the
balance of payments, it is necessary to distinguish be-
tween the owner of mobile equipment
4
and the op-
erator of the equipment. e owner is generally the
company that has legal title to the equipment. e
company that controls the operation and movement
of the equipment is regarded as the operator. e
operator is usually responsible for supplying a crew,
maintaining equipment in proper working order, and
deciding when, and to which location, the equipment
will be moved.
12.28 e owner and the operator may be the same
or di erent companies. As separate companies, they
may be residents of di erent economies. In some
cases, a chain of leasing arrangements may separate
the owner from the operator of the equipment. As in a
nancial lease, the lessee of mobile equipment is con-
sidered the economic owner for balance of payments
purposes, because a change of ownership is presumed.
If a parent company transfers mobile equipment to
a branch located abroad, the branch is—for balance
of payments purposes—considered the owner if the
equipment is recorded in the books of the branch.
Ships registered under ags of convenience should
be attributed to the legal owners; however, the ags
of convenience used by companies do not determine
the residence of the owner or operator. e residence
of the company that operates the ships is determined
according to general criteria as de ned in the BPM6 ,
paragraphs 4.131–4.135, and it may not necessarily be
the same as the company that owns the ships, such as
where the ship operator has an operating lease from
the ship owner, who is resident in another economy.
5
Transport Arrangements
12.29 Owners and operators may enter into a
number of leasing or chartering arrangements. Vari-
ous terms are used to describe these arrangements,
but a broad description should su ce for purposes
of the Guide . For balance of payments purposes, only
leases with crew are included under transport; opera-
tional leases (without crew) and nancial leases are
classi ed elsewhere (see also section ahead on operat-
ing leasing).
12.30 ere are bare boat or bare bottom charter
arrangements whereby an owner leases a vessel to an
operator, who is responsible for equipping the vessel
and supplying the crew.
12.31 ese leases usually cover long periods but
may also cover short periods. For all lease types, the
compiler should make sure the leases are leases with
crew and not operating (without crew) or nancial
leases, before including them under transport. If, for
example, a vessel is legally owned by a bank or other
type of nancial institution, the compiler should, for
balance of payments purposes, usually regard the ves-
sel as being economically owned by the lessee ( nan-
cial lease).
12.32 ere are time charter arrangements whereby
a vessel is leased to an operator who provides a crew.
4
In this case, and provided the equipment is rented without the
crew, the compiler should record operating lease payments, which
are made by the operator to the owner, under other business
services—operating leasing services.
5
Most commonly encountered are ships, aircra , drilling plat-
forms, and railway rolling stock.
Balance of Payments and International Investment Position Compilation Guide192
e bare boat or bare bottom charter is a form of time
charter. Atime charterer may also lease a vessel from
a bare boat charterer. For balance of payments pur-
poses, the time charterer should be regarded as the
operator, although if there are several time charters
involved, the charterer supplying a crew is regarded
as the operator.
12.33 In addition, there are voyage charters . For
example, an exporter or an importer may hire, for a
single voyage, a vessel to ship a bulk commodity such
as wheat or minerals. e voyage charterer has no
responsibility for operation of the vessel and is not,
therefore, considered the operator. Avariation of voy-
age charter, space charter, or slot charter consists of
an arrangement in which space on the vessel, rather
than the whole vessel, is hired. Payments for voyage,
space, and slot charters should be recorded as freight
under transport.
12.34 In the case of the aircra industry, there are
two main leasing types:
• Wet leasing (covers provision of an aircra , com-
plete crew, maintenance, and insurance for which
payment is by hours operated), which is nor-
mally used for short-term leasing (for balance of
payments purposes recorded under transport)
• Dry leasing (covers provision of an aircra with-
out insurance, crew, ground sta , supporting
equipment, maintenance, etc.), which is more
usual for the longer-term leases and is recorded,
for balance of payments purposes, under oper-
ating leasing services—other business services.
e aircra industry also uses combinations of
wet and dry when, for example, the aircra is
wet-leased to establish new services and then, as
the airlines ight or cabin crews become trained,
they are switched to a dry lease.
Freight Services
12.35 Freight relates to the movement of goods,
and the compiler should distinguish among freight on
imports, freight on exports, and other freight. Other
freight relates to the carriage of goods where there is
no change of ownership. e freight costs incurred by
the exporter and importer are de ned in the BPM6 ,
paragraph 10.78. To meet the BPM6 speci cations
and conventions, the compiler needs to make the fol-
lowing estimates:
• For credits—(1) total earnings on exports by res-
ident carriers for transportation of goods outside
the economy border and (2) total earnings on
imports by resident carriers for transportation of
goods within the exporting economy border
• For debits—(1) total earnings on exports by
nonresident carriers for transportation of goods
within the economy border and (2) total earnings
on imports by nonresident carriers for transpor-
tation of goods outside the exporting economy
border
12.36 e de nitions of these estimates are the re-
sult of the valuation of imports and exports at f.o.b.
e delivery terms of the contract between the ex-
porter and the importer may not be on the f.o.b. basis,
but ultimately the importer pays for the goods and
all transportation (and insurance) costs whatever the
delivery terms, either directly to a resident or nonresi-
dent carrier or to the exporter, who then makes the
arrangements (again either with a resident or nonresi-
dent carrier). Some imputations are implied—for ex-
ample, if an exporter arranges for a nonresident carrier
to transport imported goods to the nal destination in
the compiling economy, a transportation debit is im-
puted. Examples of the treatment of freight services
are presented in Box 10.3 of the BPM6 . e Guide pro-
vides guidance on the estimation of freight services for
exports and imports in Tables 12.1 and 12.2 in terms
of resident carriers earnings on exports (credits) and
nonresident carriers earnings on imports (debits).
Broad adjustments to the estimates to take account
of transportation costs within the exporting economy
border can be made by consultations with a small
number of large resident freight carriers. Conceptually,
a corresponding counterpart adjustment to currency
and deposits should be made in the nancial account.
12.37 e service charge for freight may be re-
corded separately or included in the c.i.f. value of
goods, depending on the delivery terms speci ed in
the contract. If recorded separately, this represents
the actual market transaction, and it is very useful for
users and analysts when comparing against the freight
data derived from the c.i.f. to f.o.b. adjustment (for
more details on the valuation of freight transport ser-
vices on a transactional basis, see Manual on Statistics
of International Trade in Services 2010 (MSITS 2010) ,
paragraphs 3.107–3.110).
Services 193
Passenger Transport Services
12.38 With regard to transport of persons, the com-
piler must distinguish between international services
(included in passenger services) and domestic ser-
vices (included in travel).
6
e service is deemed to be
provided by the company that is actually running the
ight or the boat ride (the operating carrier) and not
by the company that initially sells the ticket and cashes
the income (the plating carrier in interlining
7
) or those
that sell the ticket (the marketing carriers in the case
of code sharing agreements
8
). Nevertheless, the in-
come generated for the marketing carriers as well as
the corresponding expenses for the operating carrier
or the plating carrier may also be balance of payments
transactions (included in transport services—other; in
Extended Balance of Payments Services (EBOPS) clas-
si cation they are classi ed under other supporting
and auxiliary transport services).
Pipeline, Electricity, and Space Transport
12.39 Pipeline transport and electricity cables
have many features in common. Fixed infrastructure
is used for providing transport services rather than
mobile equipment. e cables and pipeline may run
through international waters as well as within econo-
mies. e usual criteria are applied to identifying the
residence of the service provider where cables and
pipeline run within an economy. e operator may
have no physical presence in the host economy, creat-
ing di culties in using a survey to collect data on the
activity, in which case revenue authorities may be able
to provide data on the value of the services provided.
12.40 Space transport is essentially concerned with
delivery of satellites into orbit. Change of ownership
of a satellite can be regarded as having taken place
when it is delivered to the buyer. e f.o.b. value of
the satellite is its value at the border of the export-
ing economy. If the satellite is launched from the
economy of manufacture, the cost of transporting the
satellite to the launching site should be included in
the f.o.b. valuation. e cost of launching the rocket
should be treated as freight services. If the satellite
is launched in a third economy, the freight charges
would include costs (including the cost of the launch
rocket) incurred between the f.o.b. valuation and
the satellite reaching orbit in space. If the satellite is
launched from the owner’s economy, there would be
no international freight component for delivering the
satellite into orbit because the service provided would
be a resident-to-resident transaction. If the rocket is
sold to the resident by a nonresident, the cost of the
rocket should be shown as an import of goods. Details
of costs involved should be readily available from the
principals, who should be easy to identify.
Other Transport Services
12.41 Other transport services include support-
ing and auxiliary transport services that are not di-
rectly provided for the movement of goods or people,
some of which are also provided by transport opera-
tors (see also MSITS 2010 , paragraphs 3.104–3.105).
e operators of mobile equipment visiting ports will,
for example, incur various port charges and acquire
goods and services, such as fuel (bunkers), provisions
and catering services (all included in goods), and
loading and unloading services
9
(included in trans-
port services—other). In addition, if an agent looks
a er an operator’ a airs while the vessel is in port,
the operator will be charged for the agent’s services
(included in transport services—other). Other port
expenses may also be incurred by operators and by
owners; these should be identi ed and recorded in the
balance of payments as appropriate. While in port, the
crew may purchase goods and services for their own
use; these expenditures should be identi ed and in-
cluded in travel under business travel.
6
Passenger services provided within an economy are treated as
travel services when provided by operators who are residents of
that economy for nonresidents and as passenger services (part of
transport services) when provided by nonresident operators for
residents.
7
Interlining (also known as “interline ticketing”) is a voluntary
commercial agreement between individual airlines to handle pas-
sengers traveling on itineraries that require multiple airlines. Carri-
ers that participate in airline alliances almost always have interline
agreements with each other. However, direct competitors can also
bene t from interline agreements. When a ticket is issued for an
interline itinerary, one of the carriers marketing ights in that itin-
erary will be selected by the ticketing agent as the “plating carrier.”
8
Code sharing agreements usually refer to numbering a ight
with the airline’s code even though the ight is operated by
another airline. ey must have interline agreements with all
other carriers in the itinerary to allow a single ticket to be issued.
Contrary to interlining, the code share relationships can a ect
whether an interline ticket (or e-ticket) can be issued.
9
Loading and unloading expenses should include any demurrage
expenses.
Balance of Payments and International Investment Position Compilation Guide194
12.42 In addition to expenses incurred in port,
other expenses, such as commissions paid to selling
agents for sales of passenger fares and freight services
(other transport), may be incurred by nonresident
operators.
12.43
Table
12.1 sets out items in transport services
and outlines data sources and methods that could be
used to compile them. Data on mode of transport
should be readily attainable from any of the sources.
e sources and methods summarized in the table are
subsequently explained in more detail.
Freight and Insurance on Imports
12.44 e balance of payments compiler should
measure international freight services provided by
nonresident transport operators on imports of the
compiling economy as these services are part of
freight debit items. However, when it is not possible
to measure these services directly, the compiler may
measure total international freight on imports and
deduct those services (if any) provided by resident
transport operators. It may also be necessary to
measure total international freight in order to adjust
imports of goods that have been measured on a c.i.f.
basis to the preferred f.o.b. basis.
12.45 While insurance premiums
10
on interna-
tional freight are not part of transport, there is a close
relationship between these premiums and the freight
services themselves. Because of this relationship, it is
o en convenient to estimate these two items at the
same time.
12.46 e compiler may use several methods to
estimate freight and insurance premiums on imports,
and these are set out in Table 12.2 . Many of these
methods require detailed collection and/or assembly
10
e compiler should make sure that the insurance premiums
are broken down into service charge (insurance services) and
net premiums (secondary income), as explained in Appendix 2,
“Insurance Transactions and Positions.”
Table 12.1 Methods for Estimating Transport (concluded)
1
Description Source and method of compilation
Sea, air, and other transport
Passenger
Services Provided by Resident Transport Operators (credit)
Data could be collected—through an enterprise survey or an ITRS—from
resident operators. Fares earned from nonresident passengers on domestic
transport should be excluded and included in travel. Alternatively, a data
model based upon the number of nonresident passengers carried by resident
operators, passengers economies of origin and destination, and average fare
rates could be used.
Services Provided by Nonresident Transport Operators (debit)
Data could be collected—through an enterprise survey or an ITRS—from
branches of nonresident operators or ticket selling agents. Ideally, data should
be collected on earnings, rather than a ticket sales basis. Gross data should be
recorded—that is, before the deduction of commissions. Alternatively, a data
model on numbers of resident passengers carried by nonresident operators and
classifi ed by destination and data on average fares could be used.
Freight
Freight on exports and imports of
the compiling economy
Export Freight Services Provided by Residents (credit)
Data could be collected, through an enterprise survey or an ITRS, from resident
operators. If an ITRS is used, freight paid on exports by exporters to resident
operators should be measured and added to freight on exports. Alternatively, a
data model could be used.
Import Freight Services Provided by Nonresidents (debit)
This item could be collected through an ITRS if it provides a breakdown of
import costs and if the amounts paid to resident operators by nonresident
exporters are deducted. Alternatively, freight on imports could be measured by
approaching, via an enterprise survey, branch offi ces and agents for nonresident
operators. Another way to derive this item is to estimate total freight on
imports (see Table 12.2 for various methods) and to deduct from this estimate
the income earned by resident transport operators from freight on imports. The
latter item could be collected through an enterprise survey.
1
Services 195
Table 12.1 Methods for Estimating Transport (concluded)
1
Description Source and method of compilation
Other
Other earnings by transport
operators—for example, salvage
Services Provided by Resident Transport Operators (credit)
Data could be collected—through an enterprise survey or an ITRS—from
resident operators.
Services Provided by Nonresident Transport Operators (debit)
Data could be collected through an enterprise survey or an ITRS, either by
approaching branch offi ces and agents for nonresident operators or by
approaching resident users of the services.
Services provided to transport
operators—for example, agent
fees and commissions; loading,
unloading, and demurrage charges;
and port charges
Services Provided to Resident Transport Operators (debit)
Data could be collected from the operators through an enterprise survey or
through an ITRS. Alternatively, a data model could be used.
Services Provided to Nonresident Transport Operators (credit)
Data could be collected from the branch offi ces or agents of the nonresident
transport operators, from the resident companies providing the services, or
from offi cial sources (such as port authorities). Rules should be clearly defi ned
so that there is no omission or duplication in reporting. Alternatively, a data
model
2
based on related information could be used. Even if the owner is
not the operator (the unit determining the residency in the case of services
delivered from a base), in a port of call, the owner may have expenditures that
should be included in this item.
Postal and courier services Data could be collected from the companies that provide postal and courier
services through an enterprise survey or an ITRS. Recording of these services on
imports and exports of merchandise follows the same principles as for other
freight services (gross basis, f.o.b. valuation).
Source: IMF staff.
1
The table provides the general description of sources and methods. The applicability depends on the economy’s circumstances.
2
Adata model may not be suitable in the case of code sharing, where each bilateral contract is unique and refers to a specifi c segment and
where the international market of passenger air transport is changing rapidly.
of data, and it may not be possible to undertake the
work required on a regular or timely basis. erefore,
until data become available, the compiler may have to
estimate freight and insurance premiums on imports
by: (1) calculating ratios of freight and insurance pre-
miums to total imports (or to groups of commodities
imported) from a detailed analysis and (2) extrapo-
lating ratios for more recent periods. Factors such as
changes in freight and insurance rates, capacity, type
of transport, and the commodity composition of im-
ports should be taken into account.
Alternative bases for collecting
passenger fares
12.47 To measure passenger fares, which will
typically be the largest component of passenger ser-
vices, the compiler has two broad options: to collect
information on the basis of overall travel revenue
value or to collect information on the basis of ticket
sales. Regardless of the basis used, the data provider
should report revenue or sales before the deduction
of commissions.
12.48 It is common for an airline ticket sold by one
airline (the validating or plating carrier
11
) to be used
by a passenger on a number of airlines when segments
of the journey are traveled on airlines other than the
airline issuing the ticket. is practice is called inter-
lining. If there is no interlining between the companies
involved, then separate tickets have to be issued. It is
also common for airlines to operate certain segments
under a code share agreement. Acode share ight is a
commercial ight that is operated by one airline (the
operating carrier), but marketed by others (the market-
ing carriers). erefore, for balance of payments pur-
poses, the compiler should—when possible—obtain
data on revenue earned by an airline from residents of
other economies rather than data on sales by an airline
to residents of other economies and clarify payments
11
e plating carrier collects the entire fare from the customer
and is responsible for distributing the proceeds to other carriers
in that itinerary only as those carriers carry the passenger. Only
the plating carrier is responsible for paying commission to the
issuing agency, and only based on the fare associated with the
portion of the itinerary own by the plating carrier.
1
Balance of Payments and International Investment Position Compilation Guide196
Table 12.2 Methods for Estimating Freight and Insurance on Imports
Option 1. Extract data from IMTS
Some IMTS record both the f.o.b. and c.i.f. values of imports (see model form 3.2); therefore, the values of freight costs
and insurance premiums can be directly taken from IMTS. (However, some method is needed to identify freight costs
and insurance premiums separately.) When both valuations are not reported as a matter of course, it may be possible to
analyze the supporting import documentation supplied to customs to obtain freight costs and insurance premiums. Such
analysis could be achieved by means of a properly designed sample survey of the customs records. In some economies,
import documentation may also provide the name or registration of the vessel carrying the imported goods. The
compiler could match this information against lists of vessels operated by residents; if no match is found, it could be
assumed that the freight service was provided by a nonresident operator.
Option 2. Collect, from importers, data on freight and insurance premiums paid on imports
Data could be collected from importers through enterprise surveys or an ITRS. In an ITRS, the basic breakdown of freight
and insurance costs could be collected on a supplementary basis, or the ITRS could be used as a basis for identifying
certain importers that could be approached on a sample or selective basis. Alternatively, enterprise surveys could be used
to obtain across-the-board measures or selective data on commodities, modes of transport, and/or operators.
Option 3. Collect freight data from branch offi ces or agents of nonresident operators
Through enterprise surveys, data could be collected from branch offi ces or agents of foreign transport operators on the
value of freight and the value and volume of imports. These data could be categorized by type of cargo (containerized,
bulk, etc.) or commodity carrier, the economy from which the goods were consigned, and the mode of transport.
Unfortunately, agents for nonresident operators may not always have these data in respect of their principals. Therefore,
although enterprise surveys represent a partial approach in some cases, they could be useful to identify freight for
selected commodities and/or modes of transport.
Option 4. Analyze trade fl ows, freight, and insurance rates
Tables on the value (c.i.f. or f.o.b.) and volume of imports broken down by commodity, mode of transport, and economy
from which the goods were consigned could be derived from IMTS. Freight and insurance premium rates could then be
applied to these to derive freight costs and insurance premiums. Freight and insurance premium rates could come from
several sources, including trade journals, any of the sources described elsewhere in this table, partner economy data
for the major commodities imported, as available, or surveys of industry prices. (These surveys could range from highly
sophisticated surveys to small selective surveys, including periodic surveys of major players.) In this option, some cells of
data may be very accurate, but other cells may be less accurate. This is a good example of a data model approach.
Option 5. Use an arbitrary ratio approach
Some compilers may consider it unnecessary to measure freight and insurance accurately and may therefore apply
somewhat arbitrary ratios to determine the value of freight and insurance on imports. For example, they may assume
that freight is x percent of the value of imports and insurance premiums are y percent. To the extent that these ratios
are inaccurate, there will be a misclassifi cation of current account debits between imports and freight and insurance.
This method of ratio estimation should be avoided. Most analysts would fi nd accurate data on transport costs to be an
advantage. By undertaking even a small survey of selected importers, more reliable estimates could be generated.
Option 6. Extrapolate from residents’ experiences
Data on freight and insurance premium rates could be collected, through enterprise surveys or an ITRS, from resident
transport operators and insurance companies. These data could be broken down by commodity, mode of transport,
economy of origin, and so forth and used in conjunction with option 4, for example, to derive the amounts earned by
nonresidents.
Source: IMF staff.
among airlines caused by interlining and code sharing.
It may be possible to collect such data as airlines keep
records on revenue generated by economy of sale.
12.49 e compiler must make a simple, but not
altogether unreasonable, assumption that tickets sold
in a particular economy are sold to residents of that
economy and adjustments made to estimates as nec-
essary, by using surveys of travelers. In the case of
interlining and code sharing agreements, the com-
piler should consider adjusting the data based on the
distribution of proceeds among the airlines under
Services 197
such agreements. However, as not all airlines earning
revenue from residents of a particular economy will
have o ces in that economy, it may be di cult for the
compiler to obtain complete coverage of passenger
fare revenue earned by nonresident operators from
residents of the home economy. In such situations, the
compiler should seek alternative sources to comple-
ment the information.
12.50 An alternative means of measuring passenger
fare revenue earned by nonresident operators is to col-
lect information on the total value of tickets sold in the
compiling economy and deduct from this total value the
earnings of resident carriers. An estimate of ticket sales
may also be derived from a household budget survey or
other surveys of individuals. It may be possible to ap-
proach airlines with o ces in the compiling economy
and travel agents who place business directly abroad
with nonresident carriers to obtain data on total ticket
sales—but this measure should be used with caution.
Many tickets are purchased and not used; therefore, al-
lowance should be made for refunds as well as for the
time lag between ticket purchase and its use. Addition-
ally, the compiler must be aware that in most economies,
rapid changes are underway, including the increasing
use of Internet (e-commerce) to purchase tickets (see
“Other Services”). In some cases, passenger fares may
be a component of package tour payments, and the
compiler may, in consultation with travel industry rep-
resentatives, have to separate passenger transport (to be
included under transport) from other components of
the value of the package (to be included in travel).
Transport activities of resident transport
operators (exports)
12.51 Proper measurement of these transactions
typically requires a direct approach to operators.
Such an approach would be similar to the approach
that is outlined in Chapter 2 on enterprise surveys.
Information on balance of payments transactions
of resident transport operators will o en be avail-
able, through enterprise surveys or an ITRS, from
the operators themselves. An ITRS would measure
transactions made by these companies through the
banking system. In addition, these companies are
likely to have numerous balance of payments trans-
actions that bypass an ITRS or are recorded on a net
basis. Also, payments by nonresidents to resident
operators for transport of the compiling economy’s
imports are not to be included in balance of pay-
ments because freight of transported goods outside
the exporting economy border is deemed to be paid
by the importing economy. erefore, a correction
should be made to ITRS data so that freight credits
are not recorded. As mentioned in paragraph 12.36,
a corresponding counterentry should be registered
conceptually under currency and deposits in the -
nancial account.
12.52 It may also be necessary to approach resident
transport operators for information on transactions
that go beyond the scope of balance of payments.
For example, freight undertaken by residents on im-
ports could be deducted from total freight on imports
to estimate the services provided by nonresidents
(freight imports) (see also MSITS 2010 , paragraphs
3.107–3.110).
12.53 When actual data on balance of payments
transactions are unavailable, data models utilizing re-
lated information could be established. For example,
data on passenger fare earnings of resident operators
could be estimated by multiplying appropriate fares
by numbers of nonresident passengers carried by
resident carriers and classi ed by economy of origin/
destination combinations. A er a total earnings gure
is determined, balance of payments expenses, such as
commissions on ticket sales and port charges associ-
ated with these earnings, could then be determined by
applying ratios of expenses to earnings or values per
number of operations (e.g., takeo s equal to number
of ights). Such ratios could be determined in consul-
tation with industry representatives or by an analysis
of historical data.
12.54 Until data from operators or data models be-
come available, it may be necessary for the compiler
to extrapolate the relevant transport series. e ex-
trapolation could be accomplished by establishing the
historical relationship between transport series and
other aggregates (e.g., passenger fares to nonresident
arrivals or freight services to imports). Similar meth-
ods could be used to project the transport services. For
best results, volumes and prices should be projected
separately. Extrapolations and projections should take
into account factors a ecting the demand for services,
known as changes in capacity and changes in prices.
is might be particularly relevant for quarterly esti-
mates or anticipated estimations.
Balance of Payments and International Investment Position Compilation Guide198
Transport services associated with nonresident
operators (imports)
12.55 Balance of payments transactions of nonresi-
dent transport operators with the compiling economy
are typically more di cult to measure than those of res-
ident operators. Nevertheless, by using a well-designed
ITRS, an enterprise survey of agents and branches of
nonresident operators, certain o cial sources, data
models, or a combination of these sources, it should
be possible to compile reliable estimates for relevant
components in the balance of payments.
12.56 Data on freight services on imports that are
provided by nonresident transport operators could
be obtained from agents and branches of nonresident
operators or from importers themselves. Enterprise
surveys or an ITRS could be used for either approach.
However, if an ITRS is used, it would be necessary to
estimate the value of international freight services in-
cluded in amounts paid by importers to nonresident
exporters. Such amounts, which may be available
from importers, should be added to freight debits ac-
tually measured in an ITRS.
12
Data on payments made
by nonresidents to resident operators for transport of
imports should be deducted from freight on imports
rather than recorded as freight credits. Also, it would
be important to identify in the ITRS, or through a sup-
plement to the ITRS, any payments made in domes-
tic currency by importers to nonresident transport
operators.
13
If, on the other hand, enterprise surveys
of agents and branches of nonresident operators are
used, the compiler should be satis ed that coverage is
adequate and that branches and agents are fully aware
of relevant balance of payments transactions of com-
panies for which they act. If this is not the case, alter-
native strategies should be investigated.
12.57 An alternative method for estimating im-
port freight services provided by nonresidents is to
estimate total freight on imports (as previously de-
scribed) and to deduct from the estimate freight ser-
vices provided by resident transport operators. e
latter could be collected through a supplement to an
ITRS or through enterprise surveys. is may be the
most e ective way to measure freight on imports.
12.58 In some economies, customs records pro-
vide information, such as name and Lloyd’s number,
on vessels carrying the economy’s imports. From this
information, it should be possible to identify vessels
operated by nonresidents.
14
If customs data can also
be used to measure freight on imports—for example,
by taking the di erence between imports c.i.f. and im-
ports f.o.b. and deducting an estimate for insurance
premiums—these data could be matched with infor-
mation on the vessel to determine freight services
provided by vessels operated by nonresidents.
12.59 Data on passenger fares could be collected
by approaching branch o ces and ticket selling
agents of nonresident operators. Alternatively, total
ticket revenue earned from the transport of resi-
dents by nonresident operators could be estimated
by: (1) multiplying, by average fares, the number
of resident passengers (classi ed by destination of
travel and mode of transport) who are leaving and
entering the compiling economy, and (2) deducting
earnings by resident operators. Data on the number
of passengers may come from migration statistics
or from other statistics, such as reports by airports
or airline operators, on arrivals and departures.
15
Data on average fares could, with allowances made
for di erent fare structures, be obtained from travel
agents or airline companies.
12.60 Other earnings for services provided by
nonresident operators could be measured by using an
ITRS, an enterprise survey of resident users of these
12
Alternatively, these amounts could be calculated by estimating
total freight on imports (see Table 12.2) from which one deducts
import freight fees earned by residents (an item that could be
derived from enterprise surveys) and importer payments to
nonresident transport operators (an item that could be obtained
from an ITRS).
13
Nonresident transport operators o en maintain domestic cur-
rency accounts with resident banks. Payments for services pro-
vided to residents may be paid into these accounts, and payments
for services acquired from residents may be made from these
accounts. Any withdrawals from these accounts by nonresident
operators therefore re ect net, not gross, balance of payments
transactions. Consequently, it is necessary to measure the ows
through these accounts in order to derive correct balance of pay-
ments entries.
14
Vessels operated by residents could be identi ed from informa-
tion provided by resident operators; all other vessels could be
assumed to be operated by nonresidents.
15
When migration statistics are used, allowance should be made
for the possibility of a more complete accounting for arrivals than
for departures.
Services 199
services, or an enterprise survey of local agents of
nonresident transport operators.
12.61 Data on services provided to nonresident
transport operators could be collected through an ITRS,
through a survey of resident providers of these services
or of local agents of nonresident transport operators, or
through o cial sources (such as port records).
12.62 Alternatively, for some or all of the services,
a data model could be developed. e compiler could
establish a set of cost ratios, such as of agent fees,
loading and unloading services, or various taxes and
charges to freight on imports and/or exports. Such
analyses should be performed on the basis of com-
modity and mode of transport. Historical data could
be used to establish ratios, or local agents and branch
o ces of nonresident transport operators could be
approached on a selective basis. Next, shares of freight
on imports and exports carried by nonresident opera-
tors should be established. Information for imports
should be available from the relevant balance of pay-
ments item. For exports, information may be available
from IMTS, or an estimate could be made on the basis
of discussions with, or a collection from, a representa-
tive group of importers and exporters.
12.63 A er nonresident shares of freight on exports
and imports are established, relevant ratios would be
applied to these shares for the purpose of estimating
values of services provided to nonresident operators.
12.64 Alternatively, for some services (such as port
charges) provided to nonresidents, the value could be
obtained by: (1) estimating the value of total services
provided to all operators and (2) deducting from this
estimate the value of services provided to resident
operators (data on the latter could be collected from
resident operators).
12.65 Some of the methods previously outlined
will require collection and/or assembly of detailed
data, and it may not be possible to undertake the work
required on a frequent or timely basis. erefore, until
data become available, the compiler may have to ex-
trapolate certain transport services.
12.66 Passenger fares and related statistical data
series could be extrapolated by using ratios that re ect
the historical relationship between passenger fares (in
constant prices) and arrivals and departures. Results
should be in ated by using a price index for passenger
fares. Other transport services could be extrapolated
by using ratios of services to various volume aggre-
gates (such as import and/or export volumes) and ad-
justing for price changes.
Travel
Description and Classifi cation
12.67 Travel covers expenditure by residents of one
economy that are traveling in another.
16
ese expen-
ditures should be classi ed as business and personal
travel because, in the national accounts, frequently
(but not always) the former represents an intermedi-
ate expenditure of business and the latter represents
nal consumption expenditure of households.
17
In ad-
dition, an alternative breakdown of travel by product
group (goods, local transport services, accommoda-
tion services, food-serving services, other) may be
identi ed by the compiler. is breakdown allows for
closer links with other macroeconomic statistics, in
particular the supply and use tables in the national ac-
counts (see BPM6 , paragraph 10.95).
Data Sources and Methods
12.68 Four broad approaches could be used to
measure travel expenditure, and these are summa-
rized in Table 12.3 . ese approaches could be used
individually or combined. e rst approach is based
on the instruments used to pay for travel, and the
most common instruments considered are credit
and debit cards. Another approach measures the
total value of the expenditure including the types of
goods and services acquired by residents traveling to
economies other than their own, as well as ows of
traveling residents as recorded at the borders. Athird
approach uses partner economy data, and the fourth
approach uses a data model, which may combine all
the aforementioned.
12.69 Some economies use an ITRS as the main
data source to measure travel. However, in some econ-
omies, the individual transaction threshold set for an
16
For a complete description of balance of payments travel items,
see Chapter 10 of the BPM6 .
17
More strictly, in the case of business travel, the related goods
and services are considered to be consumed for the bene t of the
employer of the traveler rather than that of the traveler.
Balance of Payments and International Investment Position Compilation Guide200
Table 12.3 Estimating the Travel Component
Type of approach Credit Debit
Instruments
used to measure
expenditures
by individuals
traveling outside
their economy of
residence
Enterprise surveys or an ITRS could be used to
measure expenditures of nonresidents traveling
in the compiling economy and using principally
credit and debit cards, although travelers
checks, foreign currency notes and coins, and
bank accounts held with domestic banks could
also be used if relevant.
An ITRS could be used to measure
expenditures of residents traveling abroad and
using principally credit and debit cards, and
information on prepaid tours and packages,
although travelers checks, foreign currency
notes and coins, and bank accounts held with
domestic banks could also be used if relevant.
Estimates may be required for travel fi nanced
by domestic currency acquired abroad by
nonresidents traveling in the compiling
economy or from income earned by
nonresidents in the host economy. (Information
could possibly be obtained from surveys of
travelers.) Supplementary estimates may also be
required for travel goods and services provided
to specifi c categories, such as students and
medical patients that would cover education-
and health-related expenditures, including
goods and services in kind, such as scholarships
and other aid provided to nonresident students.
(Information could possibly be obtained from
surveys of students or educational institutions or
from offi cial records.)
Estimates may be required for travel fi nanced
from accounts held abroad or earnings acquired
abroad by residents and travel services provided
to specifi c categories, such as students and
medical patients that would cover education-
and health-related expenditures, including
goods and services in kind, such as scholarships
and other aid provided to students. Such
estimates could be obtained from surveys of
travelers. Alternatively, in surveys of returned
residents, the recourse to the instruments used
for expenditure might be useful to minimize
memory recall effects. Partner economy data
may also be used, in particular, for economies
specialized in certain types of services, such
as health- or education-related services.
(Information could possibly be obtained
through representative offi ces, consulates, etc.)
Expenditure by
types of goods
and services
acquired by
residents
traveling abroad
This approach is typically used in surveys of
nonresidents traveling in reporting economy.
These are mostly applied at the border, but
might also be used at collective accommodation
or tourism attractions.
Alternatively, surveys of tourism companies
such as hotels, domestic airlines, restaurants,
etc. could be used if these companies can
identify nonresident expenditure. Those could
be reconciled with surveys of travelers using a
similar type of approach for reconciling sources,
as that used in the Tourism Satellite Account.
This approach would typically be restricted
to surveys of returned residents, either at the
border as they return, or within a household
survey.
Partner economy
data
A partner economys travel debits in respect
of the compiling economy could be used to
contrast and check the compiling economys
travel credits visàvis the partner economy.
A partner economys travel credits in respect
of the compiling economy could be used to
contrast and check the compiling economys
travel debits visàvis the partner economy. This
is in particular useful in the case of students
or medical patients traveling to partner
economies that are specialized in certain
types of services, such as health- or education-
related services. (Information could possibly
be obtained through representative offi ces,
consulates, etc.)
Data model Most data models involve assigning a per capita
estimate of expenditures to estimates of the
number of nonresident short-term traveling
individualstypically obtained from migration
statistics.
Most data models involve assigning a per
capita estimate of expenditures to estimates
of the numbers of residents traveling
abroadtypically obtained from migration
statistics.
Source: IMF staff.
Services 201
ITRS may be too high to properly cover travel-related
expenses.
18
Moreover, some travel components such
as personal expenses of short-term workers abroad
are not captured by an ITRS. Persons traveling abroad
now rely less on resident banks for services transac-
tions such as the purchase of traveler’s checks or for-
eign currency notes. Instead there is an increasing
use of credit and debit cards. In addition, there is an
increasing use of prepaid package tours
19
that are paid
for in the economy of the traveler using domestic cur-
rency. Generally, these modalities of payment can be
easily captured through the ITRS; however, comple-
mentary information (e.g., surveys covering travel
agents) may be needed to properly identify and al-
locate the amounts by service type. On the contrary,
payment in cash (domestic or foreign currency) car-
ried by travelers is more di cult to capture. Given
the insu ciencies already noted, economies using
the ITRS should ensure supplementary data sources
or models are employed to measure the travel item.
12.70 Another problem with the reliance on a strict
ITRS is that it is di cult to determine the breakdown
between business and personal travel. Additionally, an
ITRS needs to be supplemented by other sources to
obtain such data as expenditure nanced from income
earned in the host economy, expenditure by others on
behalf of the individual traveling abroad, and travel
goods and services provided in kind or on own account.
12.71 In respect of traveler’s checks and credit and
debit cards, the compiler should ensure that data are
reported on a gross basis—that is, before the deduc-
tion of commissions on traveler’s check sales or com-
mission on transactions. Collection rules should be
designed to ensure that there is no overlap or dupli-
cation of the information captured. When compiling
data on the export of travel services, data on settle-
ments of transactions by nonresidents using traveler’s
checks and credit and debit cards could be easily de-
rived from an ITRS. A short investigation could be
previously undertaken to determine the pattern in
using these modalities of settlement by nonresidents
visiting the compiling economy. Very o en, nonresi-
dents use credit cards for major transactions, such as
hotel or acquisition of expensive gi s, while cash is
withdrawn from an automatic teller machine for
settlement of smaller expenses. Also, nationals living
abroad may return more or less regularly for vaca-
tion or around certain holidays. During their stays,
they may use preponderantly debit cards to withdraw
cash for their current expenses and also for gi s to
relatives (personal transfers). If a pattern of spending
and visiting peaks during the year is identi ed among
the population of visiting nationals, reliable estimates
may be produced for the travel component related to
debit/credit card settlements a er the part related to
personal transfers has been removed.
12.72 Surveys may be used to collect information
from tourism businesses that provide services to non-
resident individuals. ese surveys may have to be
supplemented by other sources to obtain such data as
expenditure by short-term nonresident workers, visi-
tors and other short-term individuals traveling abroad
to relatives and friends that do not use services of or-
ganized tourism businesses, students, and medical pa-
tients as they might behave more as residents in terms
of their expenditure patterns. Furthermore, in some
economies, certain groups of individuals abroad (such
as students and medical patients) may be signi cant.
As the expenditure of these individuals may be sub-
stantially di erent from the expenditure of others, it
may be necessary to conduct separate surveys targeting
these special categories. As an alternative to surveying
tourism businesses, the compiler may use household
surveys to measure the expenditures of travelers.
12.73 An expansion of tourism statistics to include
other short-term individuals traveling abroad that are
not visitors
20
is discussed in Chapter 3 . When surveys
18
For example, in the case of EU27, in 2011, frontier surveys
and credit card data are the main sources for compiling the
travel item. Settlement data also play an important role in a few
European Union (EU) member states (in particular, these data are
important in eastern and central European member states, and in
hybrid data collection systems). However, a survey undertaken in
March–April 2011 of EU member state balance of payments com-
pilers indicated that settlements data are being replaced by direct
reporting systems due to increases in the reporting threshold
pertaining to settlements data.
19
Passenger fares (transport services) may be a component of
package tour payments, in which case the compiler will have to
nd a way to properly distribute them between the two service
components.
20
Tourism Satellite Account: Recommended Methodological Frame-
work 2008 de nes the “visitor” as “a traveler taking a trip to a
main destination outside his/her usual environment for less than
a year and for any main purpose (business, leisure or other per-
sonal purpose) other than to be employed by a resident company
in the country or place visited.” e “visitor” category covers both
overnight visitors (tourists) and same-day visitors (excursionists).
Balance of Payments and International Investment Position Compilation Guide202
of travelers are used as primary sources of informa-
tion, information could be collected directly on actual
goods and services acquired by individuals abroad. In-
directly, the information on travel-related expenses in-
curred by individuals abroad may be obtained through
the instruments used for payment. e former ap-
proach is recommended when travel debits are mea-
sured by surveying residents upon their return from
travel abroad, or when travel credits are measured by
surveying nonresidents as they depart from the com-
piling economy. Surveys of returning residents are
preferred as they are likely to retain appropriate nan-
cial records of their trips or are able to provide reason-
able estimates. Border surveys are increasingly used
in many economies, in particular where tourism is an
important activity. e range of data collected by such
surveys varies according to the design and frequency.
Generally, such surveys collect information structured
according to the primary purpose of travel (business,
health care, education, leisure, other) and categories
of expenses. More details could be added for tourism
purposes—that is, to de ne the structure of individu-
als traveling abroad by categories (overnight visitor or
same-day visitor) and their respective expenses.
12.74 Partner economy data (mirror statistics)
could serve as a supplementary source data when
compiling an economy’s travel credits or debits. It is
assumed that at least one of the two partner economies
actually collects “primary” travel data. Very o en, sta-
tistics on visitor and other short-term individuals trav-
eling abroad numbers by economy of origin and their
average expenses compiled by neighboring economies
or economies of frequent destination could be taken
into account. However, the methods of compiling
these statistics may vary from economy to economy
and could range from border surveys to household
surveys. Asymmetries in partner economy data may
occur not only because of di erent methodology but
also because of other factors such as the sample size
of surveys, recording intervals, or estimations mod-
els. Given these considerations, the mirror statistics
should preferably be used as a supplementary source.
12.75 A data model to measure travel could be
constructed using various data, primarily the number
of visitor and other short-term individuals traveling
abroad and estimates of per capita expenditure. Data
on number of visitors and other short-term individuals
traveling abroad are typically available from tourism
statistics. Alternatively, various transport operators,
such as airline and bus companies, may be able to pro-
vide partial information on the number of persons
carried inbound and outbound, and from these data
estimates could be derived on the number of nonresi-
dents (visitors and other short-term individuals travel-
ing abroad, to estimate travel credits) and the number
of residents. However, it should be noted that these
data are not always accurate as the transport operator
may not always collect information on the residence of
the customer. Furthermore, when collected, the infor-
mation may relate to the nationality of the customer
and not the residence. Estimates of per capita expen-
diture could be obtained from occasional surveys of
persons who travel. If necessary, separate data models
may be designed to measure education and/or medical
services based on information from relevant institu-
tions or special surveys (e.g., survey of students).
12.76 Tourism statistics provide a potential alterna-
tive data source, which might be used to partly estimate
travel, in particular some of its components. Moreover,
data sources used for compiling the tourism satellite
account ( 2008 SNA ), for example, are also likely to be
relevant for balance of payments statistics. However,
in order to enable the use of tourism statistics, the dif-
ferences in terms of the coverage between balance of
payments de nitions, on the one hand, and tourism sta-
tistics as used in the International Recommendations for
Tourism Statistics 2008 (IRTS 2008) (as well as in Tour-
ism Satellite Account: Recommended Methodological
Framework 2008 ), on the other, need to be understood.
12.77 IRTS 2008 uses the concept of “usual envi-
ronment” as an additional criterion to residence. e
concept is designed to exclude from tourism statistics
persons who travel regularly between their place of
residence and place of work (e.g., border or seasonal
workers), who study (individuals studying abroad for
more than one year), or who visit other places as part
of their regular life routine, although these places may
be in di erent economic territories.
12.78 ere are also some additional di erences in
terms of the coverage of expenditure between travel
( BPM6 ) and tourism ( IRTS 2008 ) expenditure. Some
of the main di erences in the BPM6 are as follows:
Services 203
• Travel includes imputed values of products (such
as accommodation
21
) that may be provided free of
charge. It includes the acquisitions of goods and
services by border, seasonal, and other short-term
workers (i.e., persons in an employer-employee
relationship
22
with a unit resident in the visited
economy). It also includes acquisitions by students
and medical patients (as well as their accompany-
ing dependents) away from their economy of resi-
dence for a period of one year or more. Tourism
expenditure, as de ned, excludes these items.
23
• Travel excludes purchases of valuables and con-
sumer durables above a customs threshold by
residents traveling abroad (see also Chapter 5
on IMTS). Tourism expenditure, as de ned,
includes all such purchases irrespective of the
threshold. Travel also excludes expenditure on
international passenger transport (included
under passenger transport ); tourism expenditure
includes such expenses in the case of visitor and
other short-term individuals traveling abroad.
12.79 e BPM6 , as does the Manual on Statistics
of International Trade in Services 2010 (MSITS 2010) ,
excludes migrants from its de nition of individu-
als traveling abroad, and tourism statistics similarly
exclude migrants from its de nition of visitors. Re-
garding refugees, following an identi ed intention to
stay in their place of refuge for one year or more, they
are identi ed as migrants in the BPM6 (paragraph
4.128) and in the MSITS 2010 (Annex V, paragraph
16), whereas tourism statistics exclude refugees in all
cases, as they are considered to be within their usual
environment.
12.80 To highlight the link between balance of
payments and tourism statistics, the BPM6 and
MSITS 2010 include a supplementary item, tourism-
related services in travel and passenger transport.
is supplementary item includes travel expenditures
and international transport of visitors—both over-
night visitors (tourists) and same-day visitors (ex-
cursionists). It consequently excludes acquisition of
goods and services by the following business-travel
categories: border, seasonal, and other short-term
workers (including crews of ships, aircra s, oil rigs,
etc. stopping o or laying over)—that is, those in an
employer-employee relationship with a unit resident
in the economy visited, as well as passenger transport
payable by border, seasonal, and other short-term
workers.
24
12.81 If statistics compiled on services are to be
used for compiling the tourism satellite account, or
vice versa, adjustments will be needed for these dif-
ferences in coverage. However, it is important to note
that the data sources used for compiling the tourism
satellite account are also likely to be relevant for bal-
ance of payments statistics.
12.82 When data from these sources are not avail-
able in time to compile series of travel data for the
most recent periods, extrapolation methods may be
used. Data models of the type described previously
are o en used in extrapolations (and interpolations).
e extrapolations are derived by adjusting the base
period estimates for price changes and exchange rate
changes. However, these extrapolations do not take
account of changes in expenditure patterns over time
or changes in the market composition of visitors and
other short-term individuals traveling abroad—that
is, their economy of origin. e expenditure patterns
of visitors and other short-term individuals traveling
abroad in any given period would vary substantially
based on their economy of origin.
Other Services
12.83 Other services include construction; insur-
ance; nancial services; charges for the use of intel-
lectual property n.i.e.; telecommunication, computer
and information services; other business services; per-
sonal, cultural, and recreational services; and govern-
ment goods and services n.i.e. provided by residents
of one economy to residents of another economy. e
21
For example, the imputation for time-sharing arrangements (see
BPM6 , paragraph 10.100).
22
e employer-employee relationship is discussed in more details
in Chapter 13.
23
Although the imputed values are excluded from the concept of
tourism expenditure, they are included in the tourism consump-
tion concept.
24
e BPM6 and MSITS 2010 also recommend an alternative
presentation of travel , by product, according to the following
categories: goods ; local transport services ; accommodation services ;
food-serving services ; and other services . Afurther breakdown of
“ travel, other services ” into health services and education services is
also suggested.
Balance of Payments and International Investment Position Compilation Guide204
complete list recommended by the BPM6 is set out in
Table 12.4 of this chapter.
25
12.84 Data sources and methods that could be
used to compile items in other services are described
ahead. In addition, a discussion follows on some of
the more complex transactions recorded in these
items—namely, construction, treatment of intellectual
property, foreign exchange services (part of nancial
services), operating leasing (part of other business
services), and government goods and services n.i.e.
Detailed descriptions of compilation of FISIM and
insurance and pension services are provided in Ap-
pendices 2 and 3, respectively.
Data Sources and Methods
12.85 Table 12.4 summarizes data sources and
methods that could be used to compile items in other
services. Depending on the system design, an ITRS
can provide a comprehensive source of many balance
of payments transactions in services and is used in
some economies as the main data source. However,
in some cases, the individual transaction thresh-
old set for an ITRS may be too high to adequately
cover expenses related to many services. Moreover,
the ITRS may have di culties in ensuring a proper
coverage or classi cation by service type at the level
of detail required. If an ITRS is used, supplementary
information may o en be needed, such as enterprise
surveys and other (o cial) sources. Whatever ap-
proach is adopted, collections should be designed in
accordance with identi ed information needs.
12.86 In an ITRS, some inherent problems require
attention if the compiler is to measure transactions in
other services accurately. Many international transac-
tions in services do not necessarily involve cash pay-
ments and merely give rise to entries in intercompany
accounts. Such situations may occur, for example,
when transactions in other services take place be-
tween companies in a direct investment relationship.
e compiler should ensure that transactions settled
through these accounts are reported in the system and
that the gross entries giving rise to these transactions
are recorded. Reporters may record certain transac-
tions on a net basis—that is, a er certain costs, such
as nance charges and commissions, have been de-
ducted. On other occasions, data may be commingled.
For example, data from an ITRS may commingle the
amount paid for a security and nancial service. Clear
rules are required to ensure that reporters supply data
according to balance of payments requirements—that
is, services (and other transactions) need to be sepa-
rately identi ed, and provided on a gross basis. Clas-
si cation of transactions may be a problem as persons
completing an ITRS form may be overburdened
by the level of detail requested in the form. Awell-
designed ITRS should address these issues.
12.87 A specialized type of ITRS relevant to mea-
suring expenditures of nonresident government en-
tities and international institutions located in the
compiling economy (government goods and services
n.i.e.) is a survey of banks to report on the value of
transactions passing through accounts of foreign gov-
ernments and international institutions.
12.88 An enterprise survey can be selective (e.g.,
concentrating on important players or a sample of
a particular industry, such as insurance) or broadly
based (e.g., covering all companies that may provide
or use international services). Also, it is important to
note that a large share of companies engaged in in-
ternational trade in services can be found among
companies undertaking other international business
activities. Chapter 3 discusses the enterprise survey
covering transactions in other services. To overcome
problems inherent in the enterprise survey, the com-
piler should set an objective of obtaining complete
coverage of the di erent types of services, and de-
velop a clear set of reporting rules to avoid omission
or duplication of data. Good survey design, which is
discussed in Chapter 2 , is thus essential.
12.89 O cial sector data (essentially government
accounting records) could be used to measure ex-
penses of diplomats and other representatives abroad,
defense expenditures abroad, and expenditures for
other services abroad.
12.90 For measuring the expenditures of non-
resident government entities and international insti-
tutions located in the compiling economy, partner
economy data obtained from balance of payments
compilers in partner economies or surveys of foreign
embassies and international institutions could be
25
A full description of each of these items is provided in Chap-
ter10 of the BPM6 , and a more detailed description is provided
in the MSITS 2010. e latter may prove useful for compilers
willing to compile more detailed services statistics.
Services 205
Table 12.4 Compilation of Items in Other Services (concluded )
Description Source and method of compilation
Maintenance and repair
services n.i.e.
An enterprise survey or an ITRS could be used to compile this item. Special attention
should be made to distinguish these services from the repair and maintenance
recorded under the construction activity or those related to computers included
under computer services. See relevant survey model forms in Appendix 8.
Construction An ITRS or enterprise survey could be used to compile this item. If an ITRS is used,
particular care should be taken to measure transactions involving bank accounts
of construction companies in the host economy, because some of these companies
may meet the criteria for treatment as residents. More generally, a survey collecting
data on construction could jointly collect information on foreign direct investment
and other nonresident-resident transactions. Special note should be taken of the
treatment of construction activity, which is discussed in paragraphs 8.61–8.63 of
Chapter 8 and further in this chapter
Insurance services An enterprise survey or an ITRS could be used to obtain the underlying premiums
and claims data necessary to compile this item. The most comprehensive data
could be obtained from surveying resident insurance companies, in particular for
estimating the exports of insurance services and for estimating reinsurance imports
and exports. Such surveys would collect data on the nonresident policyholders
share in premiums, claims, and reserves. However, the same information will not be
possible for the import of insurance services where the providers of the insurance
services are nonresident to the compilers economy. Thus estimates have to be based
on ratios available from the domestic insurance sector, information derived from
ITRS, or partner economy data, as possible. Data from an ITRS will capture premiums
paid and claims received on a cash basis. See Appendix 2, Insurance Transactions and
Positions, for a discussion of how relevant source data are manipulated in order to
derive estimates of insurance services.
Financial services
Explicitly charged and other
fi nancial services, except FISIM
Financial intermediation services
indirectly measured (FISIM)
An ITRS or an enterprise survey could be used as a primary source to compile the
fi rst item. Care should be taken to ensure that fi nancial service fees are reported
separately from underlying fi nancial transactions, particularly if an ITRS is used.
If primary source data are unavailable, this item could be estimated by applying
appropriate ratios to various measures of fi nancial activity involving nonresidents. If
signifi cant, the collection of supplementary information will probably be necessary
to derive estimates of foreign exchange services when the service element is implicit
in transactions rates. The treatment of these services is described further in this
chapter. Compilation of the FISIM estimate requires detailed information on position
data on loans and deposits, by maturity structure and currency, as well as the
identifi cation of relevant interest rates used by fi nancial corporations. Adescription
of the compilation of FISIM is presented in Appendix 3.
Charges for the use of
intellectual property n.i.e.
An enterprise survey or an ITRS could be used to compile this item. The breakdown of
these services and their treatment is described further in this chapter.
Telecommunication, computer,
and information services
An enterprise survey or an ITRS could be used to compile this item. Care should be
taken to ensure the gross reporting of transactions.
Other business services:
Research and development
Professional and management
consulting services
Technical, trade-related, and
other business services
Operating leasing
An ITRS or an enterprise survey could be used to compile these items. For the
compilation of research and development services, the discussion in Research and
Development in this chapter is relevant. For leasing, it is important to note the
different treatments of fi nancial and operating leasing.
(The treatment of financial leasing is discussed in Chapter 10.)
Personal, cultural, and recreational
services; audiovisual and related
services; other personal, cultural,
and recreational services
An ITRS or an enterprise survey could be used to compile these items.
Balance of Payments and International Investment Position Compilation Guide206
used. Alternatively, some form of estimation based on
a data model may be used.
Construction
12.91 Construction should be recorded in the bal-
ance of payments when a company undertakes con-
struction activity in an economy other than the one
in which it is resident, and in which the activity car-
ried out is not substantial enough to recognize it as a
separate institutional unit (see also Chapter 8 ). Estab-
lishing the residency of the construction companies
(or its related company) is thus the rst step in deter-
mining the proper treatment of transactions typical
of a company engaged in construction activity in an
economy other than the one where its headquarters
is located.
12.92 A construction company established in
one economy may undertake the construction of
large-scale projects (e.g., plant, buildings, bridges)
in another economy either through a direct invest-
ment relationship (creating a foreign branch in that
economy or through subsidiary or associate com-
panies in that economy), or by directly undertak-
ing the work itself. If the construction company
undertakes the work itself (via an unincorporated
site o ce, for example), its activities may be re-
garded either as a direct investment activity or as an
export of services by that company, depending on
circumstances.
12.93 If certain criteria are met the work under-
taken is to be treated as having involved the creation
of a separate institutional unit—a branch—resident in
the economy where the activity is being carried out,
which is a direct investment enterprise (DIENT). Such
criteria (as recommended in the BPM6 ) could be as
follows:
(1) e project extends over a period of at least
one year.
(2) e maintenance of a complete and separate
set of accounts for the activity (i.e., income
statement, balance sheet, transactions with the
parent company, etc.)
(3) e activity being subject to tax in the host
economy
(4) e existence of a substantial physical presence
(5) e receipt of funds for its work for its own ac-
count, and so forth.
12.94 If some of the aforementioned criteria are
not met, the activity is to be treated as an export by
the construction company. e decision is based on
the weight of the evidence for a set of criteria and not
on any single criterion; for example, it would be very
di cult to identify a branch if for the construction ac-
tivity a separate set of accounts cannot be prepared or
maintained. Construction activities involving major
projects (bridges, dams, power stations, etc.) that are
carried out through unincorporated site o ces, in
many cases, meet the criteria of a DIENT and thus are
treated as part of the production of the host economy,
not as an export of services to that economy. Chapter 8
discusses the residency aspects together with a com-
parative treatment of the most common transactions
speci c to the construction activity in both cases,
rst, where the company conducting the construc-
tion project is a resident of the host economy (direct
investment relationship), and second, where the con-
struction activity is conducted by a nonresident com-
pany in the compiling economy.
12.95 e value of construction recorded in the bal-
ance of payments should equal the gross value of output
by the producing company. It should include the value
Table 12.4 Compilation of Items in Other Services (concluded )
Description Source and method of compilation
Government goods and
services n.i.e.
For debits, most information could be obtained from an ITRS or from offi cial sources
(as discussed in paragraphs 6.12–6.14 of Chapter 6). For credits, information could
be obtained from balance of payments compilers in partner economies, surveys of
embassies (see Collections on Goods and Services Statistics in Chapter 3), an ITRS,
or a data model. Further in this chapter is presented additional information on the
compilation of this item.
Source: IMF staff.
Services 207
of all goods and services used as inputs to the work,
other costs of production, and the operating surplus
that accrues to the owners of the construction company.
12.96 As discussed in Chapter 10 of the BPM6 , it
is recommended that construction be disaggregated
into construction abroad and construction in the
compiling economy. Construction abroad includes the
gross value of the construction work for nonresidents
by companies resident in the compiling economy (ex-
port of construction, credits). e goods and services
acquired from residents of the host economy by those
companies are recorded in the balance of payments of
economy of residence of construction company under
construction abroad debits (i.e., construction-related
expenditure in the host economy by the company
conducting the project
26
).
12.97 Construction in the reporting economy in-
cludes construction work for residents of the compil-
ing economy by nonresident construction companies
(import of construction, debits). e goods and ser-
vices acquired by the nonresident construction com-
pany from residents of the compiling economy for
projects in the reporting economy should be recorded
as construction in the reporting economy credits
(whether these goods and services were previously
acquired by the residents from within or outside the
compiling economy). As part of the inputs into the
construction work, the construction company may
choose to purchase some of the goods and services in
its home economy, in which case these still constitute
part of the value of construction. However, because
they have not been purchased from residents of the
host economy, they are excluded from goods and ser-
vices purchased in the host economy and, equally im-
portant, will not be recorded as debit transactions
27
by
the host economy.
12.98 Depending on the method of data collection
used, it may not be possible to identify separately the
goods purchased from residents of the home economy
and from those of the host economy. For practical
reasons, the compiler may need to estimate a break-
down, or otherwise attribute all goods purchased
to either the host or the home economy of the con-
struction company. Also, it may not always be pos-
sible to identify the purchase of goods and services
separately from labor costs (which should in principle
be recorded under primary income if an employer-
employee relationship is established—see Chapter
13). In this case, the compiler will need to estimate
a breakdown or, alternatively, allocate all costs either
as goods and services or as compensation of employ-
ees (for employees that are residents in the host econ-
omy). Where a nonresident construction company
employs workers from third economies for projects in
the host economy, their salaries will not be recorded
as compensation of employees by the host economy
since it is intended that they be employed for the du-
ration of the construction project, which by de nition
should be less than one year. Both subcomponents of
construction cover the work performed on construc-
tion projects and installations by a company in loca-
tions outside the economic territory of the company.
12.99 Finally, it is important that the compiler
ensures that the gross ows giving rise to the credit
and debit aggregates for the construction services
are recorded. In other words, the construction cred-
its would result from summing up the credit ows
from construction abroad and from construction in
the compiling economy. Similarly, the construction
debits would consist of debit entries from construc-
tion abroad and from construction in the compiling
economy.
12.100 Example 12.1 presents the recording of
construction. Table 8.7 of Chapter 8 , which shows
the range of balance of payments entries that should
be recorded for construction activity, should be con-
sulted for additional details.
12.101 As discussed in paragraphs 10.103 of the
BPM6 , if the external operations of a construction
company are substantial enough, a separate branch,
resident in the host economy, will be constituted.
is will usually give rise to a direct investment re-
lationship between the parent and the branch. e
26
Includes expenditures on goods and services that were procured
from the host economy where the construction activity is taking
place. Imported goods and services from a third economy are
recorded as imports. Goods and services brought directly into the
host economy by the construction company are not balance of
payments transactions.
27
It should be noted that the merchandise trade statistics will gen-
erally include the value of goods imported into the host economy
for use on the construction site as imports under the general
and special trade systems. In the case of goods purchased by the
construction company in its home economy and shipped to the
construction site, an adjustment must be made to the merchan-
dise trade statistics so as to exclude the value of any such goods
from the balance of payments—goods component.
Balance of Payments and International Investment Position Compilation Guide208
Example 12.1 Recording of Construction Activity in Balance of Payments
is example assumes information is available to distinguish all cost-related components and attribute the
balance of payments transactions as appropriate. Acompany from economy
Aundertakes a construction
project in economy B for a period of six months
1
. e total value of the project is 34,500 units of domestic
currency, and the following costs are incurred by the construction company:
Materials purchased from residents of economy A 18,000
Materials purchased from residents of economy B
2
1,000
Acquisition of materials from residents of economy C
3
2,000
Services procured in economy B (including equipment rental)
2
3,000
Wages and salaries paid to residents of economy A
4
4,500
Wages and salaries paid to residents of economy B 1,000
Total cost of inputs 29,500
Gross operating surplus accruing (profi t) 5,000
Total gross value of construction work 34,500
e gross value of construction work is calculated as the sum of the inputs into the production process
(goods and services consumed as inputs, and labor) and the gross operating surplus accruing to the produc-
ing company. us, the value of construction is 34,500 units. e following transactions should be recorded
in the balance of payments of economies Aand B:
Economy A
(construction abroad)
Economy B
(construction in host economy)
Current account Credit Debit Credit Debit
Goods 2,000
5
Services
Construction services 34,500 4,000
6
4,000
6
34,500
Primary income
Compensation of
employees
1,000 1,000
Financial account
Net acquisition of
fi nancial assets
Net incurrence of
liabilities
Net acquisition of
fi nancial assets
Net incurrence of
liabilities
Other investment
Currency and deposits 27,500 5,000
Reserve assets
7
Currency and deposits 34,500
1
is example also covers the case of construction work (excluding repairs to existing premises) for an embassy undertaken by a
resident unit of the economy where the foreign embassy is located (see BPM6 , paragraph 10.177).
2
is is a transaction between a resident and a nonresident, as the company from economy Ais not resident in economy B.
3
ese imports are not to be recorded in the merchandise trade of the economy B, as they are imported by a nonresident unit. ey
are, however, recorded as imports by the economy A.
4
Wages and salaries are paid directly in their accounts in economy A.
5
Covers acquisition of goods from economy C.
6
Includes materials purchased in economy B (1,000) and services procured in economy B (3,000).
7
It is assumed that the work is undertaken for the government of economy B and paid out of reserve assets.
Services 209
treatment and measurement of construction activity
in the balance of payments in respect of direct invest-
ment relationship is discussed further in Chapter 8.
Financial Services
12.102 As stated in Chapter 10 of the BPM6 , -
nancial services covered under this heading refer to
nancial intermediation, auxiliary services, and other
nancial services, other than those associated with in-
surance and pension funds. ese services are almost
exclusively provided by banks and other nancial cor-
porations, because of the usually stringent supervision
associated with their provision. Conversely, nancial
institutions rarely produce other services, a fact that is
important in data collection.
12.103 Financial services may be charged for ex-
plicitly or implicitly, and some transactions in -
nancial assets may involve both explicit and implicit
charges (for more details, see BPM6 , Chapter 10). In
the case of nancial intermediaries, the funds neces-
sary to engage in such activities are obtained not only
by taking deposits but also by issuing bills, bonds, or
other securities. ese funds, as well as own funds,
are used to acquire mainly nancial assets not only by
making advances or loans to others but also by pur-
chasing bills, bonds, or other securities. As mentioned
in Table 12.4, care should be taken to ensure that
charges for nancial service are reported separately
from underlying nancial transactions, particularly if
an ITRS is used.
12.104 For many nancial services, explicit fees
are charged, and thus estimation does not require any
special calculation. ey may be derived either from
an ITRS or from bank statements. Surveys on nan-
cial claims on and liabilities to nonresidents may also
collect the explicit fees charged on nancial transac-
tions in these instruments (see Appendix 8, model
form 14).
12.105 Implicit charges for nancial services
have to be measured indirectly. Ignoring the implicit
charges for nancial services may lead to understat-
ing the value of such services and also distorting
related nancial ows (investment income or nan-
cial account recordings). e most common implicit
charges result from (1) estimation of margins on buy-
ing and selling transactions; (2) expenses related to
asset management that are deducted from property
income receivable, in the case of asset-holding com-
panies; or (3) margins between the interest rate and
the reference rate on loans and deposits (FISIM).
Adescription of these services is provided in the rel-
evant section of Chapter 10 in the BPM6 . e sub-
header ahead describes the treatment of nancial
services associated with transactions in nancial in-
struments having a spread between their buying and
selling prices. e treatment of FISIM is described in
Appendix 3.
Margins on Buying and Selling
Transactions—Foreign Exchange Services
12.106 is type of service is o en related to the
activities of dealers in nancial instruments such as
foreign exchange, shares, bonds, nancial deriva-
tives, and other nancial instruments. e dealers’
charges o en are included indistinguishably in the -
nancial transactions to which they relate—that is, the
amounts actually paid or received. e service charge
that is to be separated from the actual amount paid
for the nancial transactions is calculated as the dif-
ference (margin) between the reference price and the
dealer’s buying price at the time of purchase, and the
di erence between the reference price and the dealer’s
selling price at the time of sale. e reference price is
usually a mid-price (i.e., an average—see ahead) be-
tween the buying and selling prices.
12.107 Debt securities such as bills and bonds are
o en traded on organized markets (see Chapter 10).
Aservice charge is levied when securities are acquired
and sold by brokers/ nancial institutions. e service
charge represents in each case the margin added to
the estimated market value of the security that makes
up the purchase price (or ask price) or the price of-
fered to the seller (the bid price). Prices of securities
may change rapidly, and to avoid including holding
gains and losses in the estimation of the service mar-
gins, it is important to calculate the margins on sales
and purchases in terms of mid-prices. e mid-price
of a security is the average at a given point in time
between the bid and ask price. us the margin on
the purchase of a security is one half of the di erence
between the bid and ask prices of the security at the
time of the purchase, and the margin on the sale is the
other half of the di erence between the bid and ask
prices of the security.
12.108 As stated in Chapter 3 of the BPM6 , trans-
actions denominated in foreign currencies should be
converted at midpoint rates applicable at the times of
Balance of Payments and International Investment Position Compilation Guide210
Credit Debit
Goods 99 101
Net errors and omissions 2
12.113 Dealers may also earn pro ts because they
take speculative positions. For example, they may buy
and hold currencies because they expect the value to
rise. However, this speculative pro t is capital in na-
ture and should not be recorded as income.
12.114 e direct collection of information on bal-
ance of payments transactions attributable to foreign
exchange trading may be di cult. Resident consum-
ers of the services are unlikely to know the values of
those services implicitly purchased from nonresident
dealers, and, in many cases, resident dealers will be
unable to supply information on services provided to
nonresidents. Adata model, which would enable the
compiler to calculate estimates of foreign exchange
services by multiplying the average spread between
midpoint and buy/sell rates by the volume of foreign
exchange transactions with nonresidents, may have
to be used. Information on spreads could come from
discussions with dealers. Information on volumes of
foreign exchange transactions could be obtained ei-
ther from the institution responsible for supervising
and regulating the foreign exchange market or from
market participants. e compiler may also consider
consulting the statistics collected by the BIS from
central banks on the triennial global survey on for-
eign exchange and derivative market activity.
28
e
Credit Debit
Goods 100 100
Net errors and omissions
Credit Debit
Financial services
Provided to economy B 2
Provided to economy C 3
Net acquisition
of fi nancial
assets
Net
incurrence of
liabilities
Financial account
Other investment
Currency and deposits
Of economy B*
102
Of economy C** 97
*It is assumed that economy B purchases the foreign
exchange with domestic currency that is held in accounts
with banks in economy A.
** It is assumed that economy C deposits the domestic
currency received into accounts with banks in economy A.
the transactions. When a transactor sells or buys for-
eign currency to or from a foreign exchange dealer (or
bank), the dealer will buy at the buy rate and sell at the
sell rate. Dealers derive income from the di erence
(or spread) between buy and sell rates. e BPM6 rec-
ommends use of the midpoint rate because the spread
re ects the provision of services. If actual buy and sell
rates were used to measure transactions, a distortion
could be recorded in balance of payments numbers.
12.109 For example, a dealer sells 100 units of for-
eign currency to importers (to pay for imports) for
101 units of domestic currency, buys 100 units of for-
eign currency from exporters for 99 units of domestic
currency, and thereby makes a pro t of 2 units of do-
mestic currency. If importers and exporters converted
their international trade transactions by using the
relevant sell and buy rates, the following transactions
would be recorded in the balance of payments:
12.110 In the foregoing example, it is assumed that
the dealer converted transactions at the midpoint rate;
if the dealer also used the buy and sell rate, the o set-
ting item would be recorded as a transaction in exter-
nal nancial assets. Nevertheless, an apparent de cit
in goods would be recorded in spite of the fact that the
economy paid, in foreign currency terms, exactly the
same amounts for both imports and exports.
12.111 e problem is avoided if both the exporter
and importer convert transactions by using the mid-
point rate.
12.112 If foreign exchange dealers and their coun-
terparts are residents of di erent economies, service
transactions equal to di erences between actual buy
or sell rates and the midpoint rate should be recorded
in the balance of payments of transactor economies.
For example, if a foreign exchange dealer in economy
Asells 100 units of foreign currency to a resident of
economy B for 102 units of domestic currency ( nan-
cial services exports of 2 units to B), and a dealer in
economy Abuys 100 units of foreign currency from
residents of economy C for 97 units of domestic cur-
rency ( nancial services exports of 3 units to C), the
following transactions should be recorded in the bal-
ance of payments of economy A:
28
e objective of this survey is to obtain information on the size
and structure of the foreign exchange and derivative markets. e
most recent survey was carried out in 2010, and the BIS has an-
nounced its intention of coordinating the ninth survey in 2013.
Services 211
frequency of the BIS survey is relatively low; however, it
could provide useful information as a reference point.
12.115 When a resident dealer transacts with a non-
resident other than a dealer, a nancial service credit
entry should be recorded. When a nonresident dealer
transacts with a resident other than a dealer, a nancial
service debit entry should be recorded. When a foreign
exchange transaction occurs between a resident dealer
and a nonresident dealer, transactions may occur at
the midpoint between buy and sell prices, with neither
dealer selling services to the other. At other times, one
dealer will act as the price-maker (producer) and the
other will be a price-taker (consumer). In economies
where such transactions are signi cant, the compiler
should endeavor to identify separately those transac-
tions in which the resident dealer is the price-maker
(service credits are recorded) from those in which the
dealer is the price-taker (service debits are recorded).
12.116 In practice, many transactions in balance of
payments recordings may be reported at buy and sell
rates; thus, errors are introduced into the accounts.
Such errors may not have a signi cant impact in the
current account unless the economy is a major pro-
vider of foreign exchange services to nonresidents.
However, in the nancial account, such errors could
have a signi cant impact in economies where the
turnover of transactions is high. erefore, the com-
piler should examine reporting practices and make
adjustments to the accounts (or publish ndings)
when serious misreporting occurs.
Charges for the Use
of Intellectual Property
12.117 Intellectual property products are largely
the results of research and development, computer
so ware and databases, and entertainment, literary,
or artistic originals.
29
Intellectual property products
o en are subject to substantial international trade.
Commonly the international ows relate to copies
of intellectual property products, such as packaged
so ware, and musical and lm recordings (including
products provided over the Internet; see e-commerce
under the “Travel” section of this chapter) or the ser-
vices provided by them, but trade in originals,
30
such
as research and development, can be important. Given
their growing importance, ensuring the accurate mea-
surement of exports and imports of intellectual prop-
erty products is essential.
12.118 e BPM6 records transactions in origi-
nals and copies of intellectual property products and
related services in the goods and services account.
Chapter 10 of the BPM6 describes the categories in
which they are recorded, and Table 10.4 of the BPM6
lists the intellectual property products by major cat-
egories and indicates their treatment according to the
licensing type and/or whether the ownership rights
are transferred. is breakdown indicates whether the
payments/revenues related to the intellectual products
are treated either as charges for the use of intellectual
property services, other relevant services (e.g., com-
puter or audiovisual services), capital account trans-
actions, or transactions in goods (e.g., noncustomized
so ware products provided on physical media).
12.119 One of the most important sources for esti-
mating payments and other related charges for the use
of intellectual property products is business surveys
(collected as license fees, royalties, and other fees under
various licensing agreements). If relevant, the survey
may be designed to collect data separately on various
types of licensing agreements, such as unilateral licens-
ing, cross licensing,
31
or patent pools.
32
All types involve
an agreement by the owner of a patent (licensor) to
allow another party (licensee) to use, or reproduce and
sell a patented invention without transferring the own-
ership. In the context of economies’ experience with
data collection in the framework of global production,
the globalization survey for multinational companies
29
As indicated in the 2008 SNA , paragraph 10.98, they may also
result from mineral exploration and evaluation, but in the vast
majority of cases such products are not subject to international
transactions. Such exploration transactions are o en by nature
resident-resident (i.e., a notional direct investment enterprise es-
tablished in the host economy acquiring from a resident of the host
economy the rights to use the results of mineral exploration and
evaluation). In some cases, yet, the residential status of the mineral
exploration service provider may not be known (e.g., geologists
tend to travel around the world for relatively short periods of time).
In general, services incidental to mineral prospecting and explora-
tions can give rise to international transactions; these are usually
recorded under Technical, trade-related, and other business services
(see BPM6 , paragraph 10.152, or MSITS 2010 , paragraph 3.245).
30
Originals and copies of intellectual property products are intro-
duced as distinct products.
31
Cross licensing agreements involve an exchange of two or more
patent portfolios and are typically used to allow the mutual use
of patents by multiple patent holders in order to secure freedom
of operation. Neither party pays monetary royalties to the other
party, the aim being to create a barrier to entry for new entrants.
32
Patent pools typically consist of the collection of patents re-
quired to o er a product or service.
Balance of Payments and International Investment Position Compilation Guide212
conducted by Organisation for Economic Co-operation
and Development (OECD) economies is considered a
suitable source for international transactions to be re-
ported under charges for the use of intellectual prop-
erty, if it provides separate data on international ows
of intellectual property products.
12.120 Payments for the acquisition of intellec-
tual property products under a license to use or to
reproduce and/or distribute may be made in one
single (large) payment, in several installments over
the period of contract, or in a large initial payment
followed by a series of small payments in succeed-
ing years. e recording of payments should follow
the substance of the license agreement in terms of
time for recording (see BPM6 , paragraph 10.139).
In practice, it may be feasible to record the pay-
ments only when they are made. e recording of
such payments in balance of payments would be as
charges for the use of intellectual property, except
for computer, audiovisual, or other similar intellec-
tual property when the license to use is included in
the product sold (i.e., sold to consumers with no re-
production/distribution license attached to it). e
latter are recorded under the relevant goods or ser-
vices items (e.g., mass produced computer so ware
with right to perpetual use should be included under
goods; downloaded or online use of computer so -
ware should be included under services (see BPM6 ,
Table 10.4, for more details).
12.121 When the indications are that the owner-
ship rights are transferred as well, the recording of
transactions is di erent (see ahead). e recording
is further complicated by the fact that some of the
intellectual property products, such as so ware, can
be recorded either as goods or services. Also, capital
account transactions involving the acquisition and
disposal of marketing assets,
33
for instance, can be dif-
cult to separate from services transactions recording
charges for the use of intellectual property. It is thus
recommended that business surveys on services cover
all ows related to transactions in these products in a
comprehensive manner. Depending on its relevance
for the economy, separate surveys by type of intel-
lectual property products may be undertaken (i.e.,
separate surveys for computer, research and develop-
ment, or audiovisual, as such industries have a com-
pletely di erent functioning).
12.122 e information required for the compila-
tion of related ows can also come from other sources,
including customs statistics or the ITRS (depending
on its design). e compiler should be mindful of the
coverage of each source and avoid double counting
where sources overlap.
12.123 e breakdown of the main types of intel-
lectual property products internationally traded fol-
lows the EBOPS classi cation described in the MSITS
2010 . e treatment of each of the subcomponents is
as follows.
12.124 Franchise and trademark licensing fees
generally cover all payments and charges for the use of
marketing assets,
34
most notably trademarks and fran-
chises. e charges related to trademarks cover both
the initial fee and annual fees for the domain name
registration for the Internet, as applicable. ey also
include fees for sponsorship of related events if the fee
is for the right to use the logo or trademark. For exam-
ple, a sponsor of the Olympics would include the pay-
ments of sponsorship fees if this conveys the right to
use the Olympic logo, in advertising, or to place such
a trademark on its products. Generally, payments for
franchise and trademark licensing include an aspect
of property income (e.g., putting a non nancial, non-
produced asset at the disposal of another party) be-
sides the service itself. In practice, the entire payment
would be treated as a charge for the use of intellectual
property unless additional information is available to
allow the breakdown.
12.125 If the ownership rights are transferred (i.e.,
for existing logos, domain names, or trademarks), the
balance of payments records the transactions as ac-
quisition/disposals of nonproduced, non nancial as-
sets in the capital account.
12.126 Licenses for the use of outcomes of research
and development cover fees and charges for the use
of proprietary rights arising from research and de-
velopment. In the BPM6 , research and development
33
Marketing assets include brand names, mastheads, trademarks,
logos, and domain names.
34
With reference to the rights to sell products under a particular
trademark, brand name, or signature.
Services 213
transactions are recorded either as charges for the use
of intellectual property or research and development
services. e research and development component
that is part of the former relates to licenses to repro-
duce and licenses to use outcomes of research and
development. In practice, it may be di cult to di er-
entiate all payments for licenses to reproduce from the
sale of proprietary rights (research and development
services), as in some cases the former will represent
sales of proprietary rights.
12.127 Licenses to reproduce and/or distribute
computer so ware cover the charges for the autho-
rized reproduction and/or distribution (through li-
censing agreements) of produced so ware originals.
For example, a manufacturer pays for the right to in-
clude the so ware on the computers that it produces,
in which case the payment would be a license to re-
produce and/or distribute provided by the owner of
the original so ware and recorded in balance of pay-
ments as charges for the use of intellectual property.
But a license to distribute does not cover the sale of
a copy of a computer so ware package that is pur-
chased by an individual or company for individual
use. e sale of the so ware (customized) for indi-
vidual or personal use is recorded in computer ser-
vices. Mass-produced, noncustomized so ware sold
on physical media with the right to perpetual use is
included under goods.
12.128 Licenses to reproduce and/or distribute
audiovisual and related products , which cover two
product categories: (1) audiovisual and related ser-
vices and (2) other related products, such as original
works of authors (e.g., translation rights), painters,
sculptors, and so forth, other than those relating to
products of an audiovisual nature. e rst category
of products covers fees and charges for the authorized
reproduction and/or distribution, through licens-
ing agreements, of produced audiovisual originals or
prototypes (e.g., cinematographic works and sound
recordings, including drama performances, musical
performances, sporting events, etc.). Also included
are rights relating to the reproduction and/or distri-
bution of recordings of live performances on radio,
television, cable, and satellite broadcast.
12.129 In the case of major events, such as the
Olympics, the payments for the rights to broadcast it
live o en extend over several years prior to the event.
However, the cumulative amount of the prepayments
made with the institution responsible for the organi-
zation of the event will be recorded under the charges
for the use of intellectual property during the period
in which the event is actually taking place, the indi-
vidual payments made over the prior-to-event years
being recorded under trade credit and advances.
12.130 Retransmission rights for sport events are
also covered under this heading. However, licenses
to use audiovisual products that cover, for example,
transactions in audiovisual products provided on
physical media (CDs, DVDs, etc.) and other audiovi-
sual services will be separately recorded as transactions
in goods (CDs, DVDs carrying the right to perpetual
use) or audiovisual and related services, recording
transactions such as fees to actors (unless employees
of the company making the payments), payments to
encrypted television channels, and so forth.
12.131 Statistics on international transactions re-
lated to intellectual property services are di cult to
separate from other related activities. In particular, the
arrangements for intragroup services may sometimes
entail transferring goods or intangible property. In
some cases, such as know-how contracts containing a
service element, it may be very di cult to determine
where the exact border lies between the ownership
transfer and licensing of intellectual property.
12.132 Exploiting patents or other intellectual
property products via licensing generates important
cross border transactions between various institu-
tional units, much of these ows re ecting transac-
tions among a liated companies located in di erent
economies. is is one of the areas posing consider-
able statistical challenges because the monetary trans-
actions in the intellectual property products are rarely
recorded by either party, either implicitly or other-
wise. It should also be noted that in the presence of
cross licensing agreements, only net gures can be
derived (o en zero). Where the phenomenon is sig-
ni cant, the compiler should attempt, as possible, to
input values for the gross ows using available data on
fees charged to third parties.
12.133 Depending on the modality of conveying
the rights from one party to another, either entirely
or via a license to use or reproduce, a number of
Balance of Payments and International Investment Position Compilation Guide214
possibilities for recording the transaction arise. Most
o en, the following cases
35
are encountered:
• Provision of access to the intellectual property
products through a license agreement between
the provider and the recipient in exchange for a
fee that is observable in monetary terms; these
ows should be recorded in the balance of pay-
ments under the charges for the use of intel-
lectual property products with a counterentry
under nancial account.
• Provision of license to reproduce without a vis-
ible fee, either by (1) the parent to a foreign sub-
sidiary with the expectation of receiving property
income in the future or (2) the foreign subsidiary
to the parent in return to previous foreign direct
investment; in both cases, the estimated value of
expected fees should be recorded under charges
for the use of intellectual property and the coun-
terpart transaction under the direct investment
equity capital.
12.134 Accounting for international ows re-
lated to intellectual property products poses many
challenges, including di culties in determining the
economic ownership of intangible products. Apar-
ticular case could be, in the context of multinational
companies, diverting the production and manage-
ment of licensing of such products to subsidiaries
located in other economies to maximize their rev-
enues. Moreover, the ows between a liated com-
panies may be partially or entirely missing from
nancial reports, and the values of such records may
not necessarily re ect the market value of the com-
panies involved in the ows, leading thus to under-
estimated values.
12.135 In the case of ows between una liated
companies, records may exist in cases of sales or leas-
ing, but due to their intangible nature, these products
are not always tracked and registered in customs,
banking, and similar administrative data, and may
also not be evaluated at market prices. e OECD’s
publication Handbook on Deriving Capital Measures
of Intellectual Property Products treats in more detail
statistical challenges related to movements of intellec-
tual property products between a liated companies
in di erent economies. However, further research at
the international level to clarify the existing standards
is needed, and the Task Force on Global Production
is currently working on developing some guidance in
the eld.
Research and Development
12.136 e internationally recognized standards
for the collection and use of research and develop-
ment statistics are set by the Frascati Manual: Pro-
posed Standard Practice for Surveys on Research and
Experimental Development (Paris: OECD, 2002).
ese standards are further developed in the OECD’s
publication Handbook on Deriving Capital Measures of
Intellectual Property Products , which follows the 2008
SNA line, introducing for the rst time the expendi-
tures on research and experimental development as
capital formation. e balance of payments adopted a
broader notion of research and development services
that encompasses the Frascati Manual ’s research and
development (the outputs of research and develop-
ment as treated by 2008 SNA ) and technical services
that may also give rise to patents (e.g., other testing
and product development activities that may give
rise to patents). Further details on the breakdown
of this product category are provided in the MSITS
2010 (paragraphs 3.237–3.239) following the EBOPS
classi cation.
12.137 Valuation of research and development
should take into account all expenditure undertaken
in the process of production. Since much of the re-
search and development is carried on own account,
by convention, the best measure for its valuation is at
cost, unless the market value is observed.
12.138 Surveys speci cally designed to capture re-
search and development activities that may be under-
taken by both market and nonmarket performers are
one of the most important data sources for estimat-
ing international trade in these services. e surveys
identify the transfers of funds to/from abroad related
to the performance of research and development and
could in principle identify the economic nature of
these transfers. Other source data could be industry-
speci c surveys targeting data from specialized busi-
ness companies on their revenues from exports, for
instance. Companies whose main activity is di erent
from research and development can be surveyed sep-
arately using questionnaires that would cover, among
35
More details are covered in the OECD’s publication Handbook
on Deriving Capital Measures of Intellectual Property Products .
Services 215
other information on their research and develop-
ment, exports and imports. However, research and
development surveys may fail to capture companies
that import research and development services but do
not carry out research and development themselves,
and companies that own (and potentially export and
import) economic rights to outputs of research and
development they did not develop themselves (e.g.,
patent trolls).
12.139 General trade surveys covering all services
would, however, capture these activities, provided the
survey clearly identi es the activities and related ex-
ternal ows at the desired level of detail.
12.140 In many economies, an important segment
of research and development is covered by public re-
search organizations, including universities, which
may be classi ed in the government or nonpro t sec-
tors. Speci c surveys could be designed to collect data
on international trade in research and development.
At present, most research and development surveys
do not include questions on payments (domestic or
international) for the transfer of economic ownership
of research and development outputs carried out in
the past.
12.141 Depending on its design, the ITRS would
also capture research- and development-related
ows. In this context, it is important to distinguish
the payments for a transfer of economic ownership
of research and development outputs (research and
development services), and charges for the use of
research and development outputs (classi ed under
charges for the use of intellectual services).
12.142 Given existing shortcomings in the cur-
rently available data sources for international trade
in research and development services, the compiler
may undertake supplementary studies or cross source
comparisons to improve the estimates.
Other Business Services: Operating Leasing
12.143 Paragraphs 10.153–10.157 in Chapter 10 of
the BPM6 describe the distinctive features of operat-
ing leasing. Leasing is an important source of nance
for many businesses. Distinguishing operating leasing
from nancial leasing is important because the for-
mer relates to payments for services whereas the lat-
ter is a purely nancial transaction. It is important to
consider the terms and conditions of operating leases,
as in some cases they may closely resemble a nancial
lease (leases that last for all or most period of the ex-
pected service life of the underlying asset, and where
the lessee assumes the risks and rewards of ownership,
such as maintenance costs). In these cases the transac-
tions should re ect the economic, rather than legal,
reality. Although similar, a nancial lease is seen as the
sale of a product for a loan, and therefore the transac-
tions concerned are excluded from services. e treat-
ment of nancial leasing is discussed in Chapter 10.
12.144 Using the ITRS as source data may not be
su cient to distinguish the operating leases from -
nancial leasing in estimating the cash ows related to
leases. In the case of operating leasing, the lessee does
not acquire the economic ownership of the underly-
ing assets. Consequently, the lessee’s balance sheet
does not show any assets or liabilities in respect to the
lease contracts; the lessee simply acquires the right to
use the underlying assets, re ected by lease payments
(operating lease service).
12.145 Further distinctions from operating leasing
should be made in the following cases:
• Rental of buildings by international organiza-
tions, embassies, and so forth (included in gov-
ernment goods and services n.i.e.)
• e leasing of telecommunications lines or ca-
pacity (included in telecommunications services)
• e rental of mobile equipment (ships, aircra s,
etc.) with crew (included in transport)
• Rental of dwellings for accommodation and ve-
hicles to nonresidents during their stays in econ-
omies other than their economies of residence
(included in travel)
• License payments for the right to use intangible
assets, such as so ware and intellectual property,
are included under speci c headings (included in
computer services, charges for the use of intel-
lectual property n.i.e., etc.)
• Rent of land and other natural resource lease
(included in other primary income); the allo-
cation of the payment for the leasing of dwell-
ings with land, when there is no objective basis
for splitting it between rent on land (primary
income) and rental on the dwellings (operating
lease or government goods and services n.i.e. if
leased by international organizations, embassies,
Balance of Payments and International Investment Position Compilation Guide216
and so forth), is done in the favor of the com-
ponent with the highest value. More elaboration
on rent can be found in Chapter 13, paragraphs
13.98–13.104
• Marketable operating leases may create new con-
tracts (assets) when the right can be transferred
or subleased; in such cases, the lessee sells the
right and thus realizes the price di erence (in-
cluded in capital account—contracts, leases, and
licenses).
12.146 e correct identi cation of the type of
lease covered by the terms of contracts of business
companies is essential. If an enterprise survey is used,
care should be taken not to overlap with the informa-
tion already captured through ITRS.
Mobile oil rigs and fl oating production,
storage, and off-load vessels (FPSO)
12.147 e hiring of (o shore) mobile oil drilling
rigs and oating production, storage, and o -load
(FPSO) vessels is likely to be on a long-term basis,
thereby implying a nancial lease arrangement that
involves an imputed change of ownership (with the
result that the rig or FPSO should be recorded as an
import/export of a good). In fact, FPSOs are o en
re tted to the speci cations of individual elds. In
other instances, more o en for onshore work, rigs
are hired for relatively short periods and without
crews.
12.148 e mobile drilling rigs and FPSOs should
be treated the same as shipping vessels or aircra leased,
without crews, from their principals. In practice, the
onshore rigs can be readily identi ed from records of
port authorities, and relevant data should be available
from operators or lessees. O shore rigs and FPSOs
may not be captured by the port authorities as they may
never enter harbor. However, as they are usually hired
by only a few exploration companies, they can usually
be identi ed through other sources of information. e
services provided by mobile oil drillings rigs hired with
crews should be classi ed as other business services.
Government Goods and Services Not
Included Elsewhere
12.149 e balance of payments treatment and
sources for information on the three main types
of transactions recorded in this item are described
subsequently. Due to practical di culties in distin-
guishing some of the government-function-related
services that are supplied by and to government units,
by convention they are classi ed under this heading.
Where possible, such services should be classi ed to
relevant services (see BPM6 , paragraph 10.179).
Government Expenditure Abroad (Debits)
12.150 Data on government expenditure abroad
should be available from an ITRS or from o cial sources
(see Chapter 6).
36
Should the data not be timely, it may
be necessary to extrapolate certain series—in which case
government expenditure policies, budget decisions, and
trends in historical data should be considered.
12.151 Local expenditures of diplomats and other
government personnel posted abroad should also be
recorded as debits for government goods and services
n.i.e. Estimates of these expenditures could be based
on the wages and so forth—details of which should
be available from government records—paid to these
persons and an assumption about the percentage of
wages spent on such expenditures.
Expenditure by Foreign Governments and
International Institutions Located in the
Compiling Economy (Credits)
12.152 is expenditure could be measured by
using an ITRS or by using a survey of foreign embas-
sies and international institutions. (See paragraphs
3.94–3.97 of Chapter 3 for details on surveys of for-
eign embassies and international institutions.) In each
case, source data may provide only broad aggregates
or partial data. erefore, the compiler may have to
establish a data model that uses data from these and
other sources.
12.153 For example, from analyzing historical data,
the compiler may observe a relationship between the
numbers of foreign embassy sta and expenditures
by foreign governments. Timely information on sta
numbers, which may be available from an economy’s
Ministry of Foreign A airs, could be used to derive
current estimates of expenditure by multiplying the
sta number by the historical data ratio. Allowances
36
Wages and salaries paid by embassies and so forth to local
sta —that is, residents of the host economy—should be recorded
as compensation of employees in the balance of payments.
Services 217
should be made for such factors as in ation. Alterna-
tively, a sample survey of cooperative embassies may
provide information on the relationship between sta
numbers and expenditures, and that ratio could be
multiplied by total sta numbers to derive an overall
estimate.
12.154 As with the compiling economy’s govern-
ment expenditure abroad, wages and salaries paid by
foreign governments and international institutions to
local sta and to long-term international sta should
be classi ed as compensation of employees. In cer-
tain sources, such as an ITRS, it may be di cult to
separate these wages and salaries from related expen-
ditures. However, it may be possible to determine, ei-
ther from an occasional analysis of data from other
sources or from discussions with certain embassies,
a ratio for dividing total expenditure into appropriate
components.
12.155 Local expenditure of diplomatic and simi-
lar personnel stationed in the compiling economy
should also be recorded in government goods and
services n.i.e.
37
Previous observations about measur-
ing the expenditure of compiling economy o cials
stationed abroad are also pertinent here.
Services Associated with the Provision
of Technical Assistance and Aid
12.156 As noted in paragraphs 10.179 and Box 10.6
of the BPM6 , the value of goods and services, includ-
ing the administrative costs incurred in the donor
economy as a result of providing technical assistance
and aid, should be included under speci c services
provided (e.g., computer services within the telecom-
munication, computer, and information services or
under professional and management consulting ser-
vices within other business services). Technical as-
sistance provided by government or an international
organization is classi ed under government goods
and services only when not speci ed to a speci c
service and if the technical assistance personnel are
employed by the donor government or an international
organization. Chapter 14 presents some examples of
recording technical assistance in balance of payments.
12.157 e balance of payments compiler of the
donor economy could obtain information on the costs
and type of provided services from o cial sources, such
as records of the aid agency. In the recipient economy,
the balance of payments compiler could obtain infor-
mation from the embassy of the donor economy or
the relevant domestic ministry or agency. Information
on several related transactions could also be obtained
from an ITRS (e.g., current transfers to government
received through the banking system) or from cus-
toms (data on imports of materials and equipment).
An alternative source would be to use OECD’s O -
cial Development Assistance (ODA) records,
38
which
show these costs unclassi ed by recipient economy.
Aparticular recipient economy’s share of the domes-
tic administrative costs of a particular donor economy
could be calculated by applying to total administrative
costs the ratio of the recipient economy’s grants to total
grants provided by the donor economy. Care should
be exercised by the compiler to avoid duplication of
amounts when using more than one source.
E-commerce
12.158 An increased use of credit and debit cards and
other similar payment means in settling transactions via
the Internet or other computer-mediated networks, more
widely known as electronic commerce (e-commerce),
has been noted recently in many economies. is pay-
ment method is used by both business companies and
households/individuals, and the products purchased
through e-commerce may include a wide range of goods
and services (e.g., travel arrangements, e-books, online
games, online insurance, etc.). In principle, charges for
electronically delivered products are included in ser-
vices, while goods ordered by electronic means and sup-
plied across the border are generally classi ed as goods
(except for some products, such as so ware products,
obtained with a nonperpetual license to use).
12.159 ere are a number of practical challenges
in measuring international e-commerce transactions,
in particular those undertaken by the households:
(1)these are usually small-scale transactions that may
37
Persons working in international institutions cannot be resi-
dents of these institutions. All sta of international institutions
staying in the host economies for 12 months or more should be
regarded as residents of those host economies. Persons staying
in host economies for less than 12 months should be regarded as
residents of the economies in which they maintain permanent
households—typically their economies of origin.
38
More details on ODA are provided in Chapter 7.
Balance of Payments and International Investment Position Compilation Guide218
not be captured via ITRS; (2) settlement payments
may be on a net basis (possibly via a clearing house)
or nontraditional payment systems—payment card
network—may be used; (3) households surveys may
not properly capture these transactions or data may
be collected indistinguishably for domestic and inter-
national transactions made via the Internet; (4)ship-
ment of goods may be made via postal and courier
services; and (5) it is di cult to estimate the fees as-
sociated with transactions intermediated by trade
e-platforms, such as eBay or Amazon.
12.160 e compiler should make e orts to identify
these transactions within the available source data and
allocate the amounts to the relevant goods or services
entries. As possible, shipping charges associated with
e-commerce should be allocated to relevant transport
services, and nancial services associated with e-com-
merce should be included in nancial services.
12.161 Some economies have established special
surveys collecting data separately from business com-
panies on the use of electronic forms of payments for
their sales and purchases. To the extent such surveys
distinguish the international transactions from the
domestic ones, they may be a good source for the bal-
ance of payments. Where the phenomenon is widely
spread, special surveys may be designed to capture
the main agents facilitating these transactions cover-
ing both traditional circuits and the nontraditional
payment systems. Household surveys may also be a
source of information for e-commerce. e compiler
should be mindful of the coverage of each source and
avoid double counting where sources overlap.
