Activities of multinational enterprises –Eurostat’s approach

Szymon Bielecki

European Commission

Eurostat, Unit G2 Structural Business Statistics

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Outline

AMNE and FATS – general concepts

FATS compilation and dissemination in the European Union

Broader context of EU-FATS

AMNE and FATS – general concepts

What are FATS and AMNE?

FATS: In the past: Foreign Affiliates’ Trade in Services Now: Foreign AffiliaTes Statistics

statistics describing the overall operations of foreign-controlled affiliates (direct investment enterprises)

a ‘bridge’ between business statistics and FDI/BoP part of AMNE statistics (Activities of MultiNational Enterprises) traditional focus on services, now also manufacturing included mode 3 of international supply of services chapter IV of MSITS 2010, consistent with international

standards (BPM6, BD4, SNA2008)

Inward vs. Outward FATS

Resident enterprise

Inward FDI >50%

Non-Resident enterprise

Non-Resident enterprise

Outward FDI >50%

Resident enterprise

TurnoverEmployment

Number of enterprises

TurnoverEmploymentValue added

Number of enterprises etc.

Compiling economy

Inward FATS

Outward FATS

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Statistical unit vs. reporting unit

Inward FATS: …we ask a resident enterprise being an affiliate of a foreign

enterprise group about its own characteristics

THUS: statistical unit = reporting unit

Outward FATS:…we ask a resident enterprise being head of an enterprise

group about characteristics of other enterprises (its foreign affiliates)

THUS: statistical unit ≠ reporting unit

FATS vs. AMNE

Resident enterprise

(controlled)

Non-Resident enterprise

Inward FDI

Non-Resident enterprise

Resident enterprise

(controlling)

Outward FDIOutward

FATS

Resident enterprises(no links)

X

Inward FATS

Compiling economyAMNE

Rationale for compiling FATS

extend the information provided by international trade statistics, FDI statistics and business statistics

describe international commercial presence of enterprises

measure the real economic impact of direct investment flows

complement the information on economic links between countries

very relevant for research on economic globalisation – both in terms of reasons and effects/impacts

policy relevant – GATS, taxation, movement of capital

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Dimensions of FATS

1. Economic activity of the foreign affiliate MSITS: ISIC (ICFA groupings, focus on services) EU: NACE (EU implementation of ISIC, goods and services)

2. Partner country Inward FATS: country of the (ultimate) controlling investor Outward FATS: country of residency of the foreign affiliate

3. Characteristics (variables)

4. Compiling country

FATS variables (MSITS, SNA)

Basic measures:– sales (turnover) and/or output– employment– value added– exports and imports of goods and services– number of enterprises (affiliates)

Additional measures: assets, compensation of employees, net worth, net operating surplus, gross fixed capital formation, taxes on income, research and development expenditures, purchases of goods and services (intermediate consumption)

FATS compilation and disseminationin the European Union

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Common legal framework of FATS in the EU

Regulation (EC) No 716/2007 of the European Parliament and of the Council of 20 June 2007 on Community statistics on the structure and activity of foreign affiliates

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2007:171:0017:0031:EN:PDF

Implementing regulations of the European Commission on derogations, definitions, classifications, quality reporting

FATS Recommendations Manual 2009 editionhttp://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-AR-09-014/EN/KS-AR-09-014-EN.PDF

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Obligatory FATS characteristics (variables)

Number of enterprises Turnover Number of persons employed

Value added at factor cost Gross investment in tangible goods Personnel costs Production value Total purchases of goods and services Purchases of goods and services for resale Total intra-mural R&D expenditure Total number of R&D personnel

Inward & Outward FATS

Inward FATS

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Data requirements

Periodicity: annual (first compulsory reference period 2007)

Timeliness: t+20 months

Classification: NACE (Rev. 2 in the course of implementation)

Dimensions:

– Inward FATS: 1) 26+14 main partners x detailed activities

2) all partners x total economy (sections B-N excl. K)

– Outward FATS: 1) 9 main partners x detailed activities

2) 24 other partners x 17 main activities

3) all partners x total economy (sec. B-S excl. O)

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Limitations and challenges

complexity, intransparency and dynamics of large multinationial corporations’ structures

data completeness – population frame, sampling, size thresholds, response rate, estimations and imputation

consolidated reporting (turnover, trade variables)

confidentiality – level of detail for economic activity, links to other statistical domains (SBS), size of the economy

asymmetries Inward vs. Outward FATS – international cooperation very useful

lack of data cross-checking possibilities

Outward FATS data – some figures…

country variable

No. of enterprises (x1.000)

Turnover (bn €)

Employment (x1.000)

Germany 11.3 682 2309

France (2007) 10.3 443 1785

Italy 7.8 142 739

Netherlands 6.1 295 666

Sweden 4.2 88 568

Denmark 2.9 n.a. 250

Finland 1.5 67 214

Slovenia 1.5 3 47

Belgium 1.2 19 110

Austria 1.0 35 153

(Note: UK and Spain not available)

2008 data, total of non-EU affiliates, total economic activity

…and interesting facts

Germany is the biggest contributor in all 3 variables and almost all destinations

the highest employment per affiliate: Cyprus (510) 41% of ‘German’ turnover recorded by US affiliates US affiliates very important also for the Netherlands, Italy,

Sweden, Finland and Belgium Italy particularly present in Africa, Netherlands in S-E Asia 21% of turnover for the Netherlands recorded by affiliates

resident in offshore financial centres other specific strong links: NL→CH, SE→NO, AT→HR,

NL→RU, FI→RU, SE→UA, IT→KZ, FI→CN, IT→IL, NL→AE, IT→SA, NL→CA, NL→AR, IT→BR, IT→VE, PT→KY, PT→AO

Inward FATS data overview

variable country

No. of enterprises (x1.000)

Turnover (bn €)

Employment (x1.000)

UK 11.2 775 1824

Germany 10.3 577 1429

Italy 5.3 189 473

Hungary 4.7 44 180

Bulgaria 3.8 8 63

Sweden 3.8 84 244

Austria 2.4 60 116

Netherlands 2.1 189 274

Portugal 1.7 15 64

Spain 1.6 98 295

2007 data, total of affiliates controlled from outside the EU, total econ. activity

(Note: France not available)

Some IFATS related facts and interpretations

for most of the EU countries the US parent companies play the most important role (in Cyprus 70%, in the Netherlands 67% of total turnover in non-EU controlled enterprises)

Germany, Hungary and the UK attractive for companies from S-E Asia; Bulgaria for Russia, Ukraine and countries of Central Asia and Middle East

large turnover of Swiss-controlled affiliates in Romania and Slovenia Portugal with 17.5% of affiliates controlled from offshore financial centres 32% of Slovak employment in foreign controlled companies, 50% of Slovak

and Hungarian turnover affiliates controlled from another EU member more numerous than those

controlled by non-EU countries (except for UK) the most important destinations inside the EU: Germany, Hungary, UK,

Italy and Bulgaria; importance of neighbours’ links some other interesting links: UA→HU, IL→HU, SC→HU, AU/NZ→UK,

CA→UK, ZA→UK,

Broader context of EU-FATS

Links of FATS with other statistical domains

FATS extend the information provided by international trade in goods and services statistics (transactions), FDI statistics (flows, stocks, income) and business statistics (characteristics of resident enterprises)

data can and should be analysed in the context of the other statistical domains

the same classification used for FATS, FDI and SBS (economic activity), but different for international trade

trade variables (intra-firm, goods/services) would be very interesting but seem unfeasible in FATS

Relation between FDI statistics and FATS

FDI – cross-border capital links between enterprises FATS – real economic activity of the capital located abroad

(extension of the information provided by FDI)

FDI – 10% or more of voting power in the FDI enterprise (ownership)

FATS – concept of control over the affiliate (e.g. ‘power to name the majority of its directors or otherwise to legally direct its actions’ (MSITS); in practice 50%+ voting power)

FDI – statistics according to individual country shares FATS – affiliate’s characteristics attributed as a total

FATS vs. other statistics

Resident enterprise

(controlled)

Non-Resident enterprise

Inward FDI

Resident enterprise

(controlling)

Outward FDIOutward

FATS

Resident enterprise(no links)

X

Inward FATS

StructuralBusinessStatistics

Non-Resident enterprise

ITG

All non-residententerprises

(and consumers)

ITS

Data collection links to FDI and SBS

FATS variables defined like in the SBS framework Commonly used synergies in data collection:

– Inward FATS: business registers, business statistics surveys

– Outward FATS: FDI registers, FDI surveys (as an annex) Two basic approaches to developing FATS:

1. directly request information from enterprises via surveys (Inward FATS – affiliates, Outward FATS – parents)

2. (Inward FATS only) identify the foreign-controlled subset of the existing data on resident enterprises (SBS)

Advantages of separate FATS surveys (approach 1): – possibility of tailoring the requested data (variables,

classifications) and survey periodicity to data compiler’s needs and data reporters’ capacities

– no automatic use of SBS/FDI size thresholds

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EuroGroups Register Register of multinational corporations active in the EU

Ongoing project, 5000 biggest groups, soon 10000

Corporate structures, ID numbers, key characteristics (where available), UCI, SPE…

integration and cooperation between business statistics and investment statistics

Source: commercial databases (Bureau van Dijk, Dun&Bradstreet), combined by Eurostat, verified and completed by national statistical data compilers

Access restricted to EU NSIs and (soon) NCBs

Main users: FATS and FDI statisticians

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Thank you very much

for your attention!

Contact:

szymon.bielecki@ec.europa.eu