Manual on Statistics of International Trade in Services

1. 
Statistics on trade in services, labour and 
investment from BPM5 
2.51.  Balance of payments statements summarize the 
economic transactions of an economy with the rest of 
the world for a specific period. Two key concepts are 
involved: transaction and residence.  A transaction is 
an economic flow that reflects the creation, 
transformation, exchange, transfer or extinction of 
economic value, and involves change of ownership of 
goods and/or financial assets, the provision of 
services, or the provision of labour or capital. 
Residence is central because the identification of 
transactions between residents and non-residents 
underpins the BPM5 system.  The definition of 
residence that is used in BPM5 is identical to that in 
the 1993 SNA, and is based on a transactor’s centre of 
economic interest.  Since political boundaries may not 
always coincide with those appropriate for economic 
purposes, the economic territory
33
 of a country is used 
as the relevant geographical area for the characteristic 
of residence.  An institutional unit is a resident unit 
when it has a centre of economic interest in the 
economic territory of a country. 
                                                 
33 
For a definition of economic territory, see para. 3.4 below. 

---

 
17 
(a)  Main BPM5 standard services components 
2.52.  BPM5 statistics are arranged within a coherent 
structure to facilitate their use and adaptation for many 
purposes, including policy formulation, analytical 
studies, projections, bilateral comparisons of particular 
components or total transactions, and regional and 
global aggregations. The 11 main BPM5 standard 
services components are: 
1. Transportation. 
2. Travel. 
3. Communications 
services. 
4. Construction 
services. 
5. Insurance 
services. 
6. Financial 
services. 
7.  Computer and information services. 
8.  Royalties and license fees. 
9.  Other business services. 
10.  Personal, cultural, and recreational services. 
11.  Government services, not included elsewhere 
(n.i.e.). 
 
2.53.  These 11 services components together match the 
GATS product coverage relatively well, with several 
exceptions. First, for the most part, the component 
government services, not included elsewhere (n.i.e.) is 
excluded from GATS.
34
  Second, some transactions 
considered as services under  GATS are recorded under 
goods in BPM5; this concerns the value of repairs of 
most goods that are sent abroad for repair, as well as 
most processing services. Third, some BPM5 
components, especially travel, include transactions in 
goods. Fourth, BPM5 includes payments for royalties 
and license fees. Except for franchise payments, this 
component is excluded from GATS coverage. 
(b)  Labour-related flows of funds 
2.54. The relevance of information on short-term 
employment of foreign staff in service industries was 
indicated above (see paras. 2.20 and 2.21). BPM5 
labour-related flows in the current account provide such 
information, although the income to be recorded in the 
balance of payments covers the compensation of persons 
working not only in service-producing activities but also 
in goods-producing industries. 
                                                 
34
  Article 1 of GATS, describing the scope of the agreement, 
excludes services supplied in the exercise of governmental 
authority, meaning any service that is supplied neither on a 
commercial basis nor in competition with one or more service 
suppliers (see annex V). 
2.55.  When individuals work for less than one year in 
an economy where they are not resident, BPM5 records 
their earnings as compensation of employees, within the 
income component, while their expenditure in the host 
economy is placed in the travel component. 
Compensation of employees comprises wages, salaries 
and other compensation received by individuals for work 
performed for residents (natural or juridical persons) of 
economies where they are not resident.  
2.56.  In addition to staff working abroad for less than 
one year, compensation of employees covers potentially 
longer-term employees, such as border workers and 
local (host country) employees of embassies, consulates 
and international organizations. 
2.57.  Individuals who stay abroad for one year or 
more, or who intend to do so, are regarded in BPM5 as 
residents of the foreign economy, and so their earnings 
and expenditures are not recorded in the balance of 
payments because the flows are domestic transactions 
within that foreign economy.
35
 Such individuals are 
called  migrants in BPM5. Workers’ remittances are 
current transfers by migrant workers who are employed 
in a foreign economy and considered to be residents 
there. These remittances are classified as current 
transfers in BPM5. 
2.58.  The relevance of information about workers’ 
remittances is related to the facts that GATS does not 
provide precise guidelines for the definition of 
temporary presence and that most countries’ 
commitments refer to two to five years of stay. Thus, 
workers’ remittances are a useful complement to the 
information provided by compensation of employees. 
(c)  Foreign direct investment 
2.59. Foreign direct investment is usually a 
precondition for the establishment of a commercial 
presence.  FDI statistics are thus a relevant complement 
to FATS statistics as information on the commercial 
presence  mode of supply.  Where countries do not 
compile FATS statistics, FDI statistics may be the only 
available quantitative information on this mode of 
supply. 
                                                 
35
  The one-year rule does not apply to students, medical patients 
and employees working in government enclaves, such as 
embassies and military bases, who remain residents of their 
economies of origin even if the length of stay in another 
economy is one year or more. 

---

 
18 
2.60.  FDI reflects the objective of obtaining a lasting 
interest by a resident entity in one economy (a direct 
investor) in a business in another economy (a direct 
investment enterprise).  The lasting interest implies the 
existence of a long-term relationship between the direct 
investor and the direct investment enterprise, as well as a 
significant degree of influence on the management of the 
enterprise.  Direct investment includes the initial 
transaction between the two entities and all subsequent 
financial transactions between them and among 
affiliated enterprises, both incorporated and 
unincorporated.  In inward and outward direct 
investment statistics, where feasible, the direct 
investment enterprise should be classified by its 
industrial activity in the host country and by the 
industrial activity of its direct investor. 
2.61.  A foreign direct investor is an individual, an 
incorporated or unincorporated public or private 
enterprise, a government, a group of related individuals 
or a group of related incorporated and/or unincorporated 
enterprises that has invested in a direct investment 
enterprise. A direct investment enterprise is a subsidiary, 
associate or branch operating in a country other than the 
direct investor’s country of residence.  The conceptual 
basis for compiling foreign direct investment statistics 
has been defined in BPM5 and in the OECD Benchmark 
Definition, involving such concepts as direct investor, 
lasting interest, significant influence on management and 
at least 10 per cent equity interest or equivalent voting 
power.
36