Helsinki Q-20101 The impact of globalisation on the EU-system of statistical units ESSnet on...
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Helsinki Q-2010 1
The impact of globalisation on the EU-system of statistical units
ESSnet on profiling MNEs
Helsinki, 5 May 2010
Jean Ritzen
Statistics Netherlands
Helsinki Q-2010 2
Outline
Introduction
The problem
Purposes of the SU study
GBR as starting point
Direction of solution
Some conclusions
Helsinki Q-2010 3
Preambulary principle
Preambulary principle questions on what do we want to measure regarding MNEs:
- Data on real economic processes of the groups?
- Data on the national administrative organisations of the groups?
(Which taxes in what stage: taxes are component of profit/loss allocation variable)
Helsinki Q-2010 4
The problem
The sum of the parts of a MNE differs from the total
Reasons:
- Each statistical agency collects information using own method, even if the used methods theoretically are harmonised.
- Bottom up approaches do not lead to right totals
- Inconsistencies in data collection and/or data processing
- Insufficient recognition of the real context
ESSnet on profiling large and complex MNEs
Helsinki Q-2010 5
ESSnet on profiling MNEs
Work packages:
A. Feasibility study
B. Methodological issues (e.g. statistical units)
C. Examples and testing
D. Communication and dissemination
E Implementation
Helsinki Q-2010 6
Purposes of SU-study (WP-B)
Purposes of the methodological study on statistical units
- to provide the feasibility study with the methodological underpinning of the statistical units structure of enterprise groups to be used in business statistics and as object of 'profiling'.
- to provide input for the development of the data model and the development of algorithms for delineation of statistical units within enterprise groups in the EGR and national statistical registers. .
- to provide input for the process of adapting Council Regulation (EEC) No 696/93 of 15 March 1993 on the statistical units for the observation and analysis of the production system in the Community
These purposes lead to the provision of an actualised system of well defined statistical units that meets and reflects the needs for adequate profiling of large and complex Multinational Enterprise Groups and thus meet the objectives of the ESSnet.
Helsinki Q-2010 7
Goal: Seeing the whole elephant
Globalisation is an irreversible reality.
Parts of the “elephant” must fit in the whole picture
How to break down the puzzle and built up it again?
Richard Barnabé, 2001; Roundtable
MNE-project report to UN-ECE
Helsinki Q-2010 8
Statistical units
Statistical units are the units to which the statistical figures relate.
Coherent system of statistical units developed, national and international (UN-ISIC, EU-SU-regulation 1993)
EU-statistical units are defined in the Statistical units regulation (early nineties). Introduction of the aspect of autonomy for actors in the economy as the leading criterion (above homogeneity)
Autonomy as criterion is important because of the need of availability of meaningfull relevant real economic information in bookkeeping or reports of units.
Helsinki Q-2010 9
EU-statistical units (1993 regulation)
The main present statistical units are:– The Enterprise Group (EG)– The Enterprise (ENT)– The local unit (LU)
Related to these units, other statistical units are defined, but these are more to be used for analytical purposes and are less appropriate for observation or publication purposes. These units are:
– The Kind of Activity Unit (KAU), as a part of an enterprise– The Local Kind of Activity Unit (LKAU), as a part of a local unit;– The Unit of Homogeneous Production (as a part of an Enterprise or
of a KAU);– The Local Unit of Homogeneous Production (as a part of a local unit
or of a LKAU).– The Institutional unit (IU)
Helsinki Q-2010 10
EU Statistical units: relationships
EG
UHP
IU
Enterprise Legal Unit
KAU
Local KAU Local UHP
Local Unit
Statistical World Administrative World
Source: Peter Struijs
Helsinki Q-2010 11
Statistical units in the BR
In the BR actors in the real economic world must be registered, according EU-BR-regulation. These are:
1. Enterprise group: unit contolling financing processes (Institutional sector code)
2. Enterprise: unit controlling the production processes (SIC-code)
3. Local unit (regional aspects of production processes, SIC-code)
Operationalisation: translation of administrative or organisational units into statistical units, e.g. by profiling (national approach)
Helsinki Q-2010 12
(Domestic) Legal Entity (LeU) (Legal or natural person)
Economic/statistical worldLegal/administrative world
(Domestic)Enterprise group
Local (legal) entity
Enterprise
Local unit
The relationships EG, ENT and LU, 1993
Helsinki Q-2010 13
(Domestic) Legal Entity (LeU) (Legal or natural person)
Economic/statistical worldLegal/administrative world
(Domestic)Enterprise group
Local (legal) person
Enterprise
Local unit
The SBR model (national)
Helsinki Q-2010 14
Fundamental changes in interpretations of unit definitions
- Definition or interpretation of the EG:
Not longer combination of enterprises, but combinationof legal entities which are under common control
- Definition or interpretation of enterprise:
Enterprise is result of top down analysis of EG.
Enterprise as smallest combination of legal units can lead to problems, e.g. with ancillary activities
Issue: Identification of the enterprise unit
Helsinki Q-2010 15
Introduction of the profiling method for large units
Definition of profiling:
Profiling is a method to analyse the legal, operational and accounting structure of an enterprise group at national and world level, in order to establish the statistical units within that group, their links, and the most efficient structures for the collection of statistical data.
Helsinki Q-2010 16
Reasons for international incomparabilities
- the data collection method, including sampling (primary data collection/use of data in administrative registrations)
- the nationally applied definitions of variables
- differences of classification or in the use of classifications
- errors in reporting data
- use of different types of units (e.g. enterprise or local KAU)
- deviating (definitions of) statistical units (e.g. different criteria like that of autonomy)
- deviating methods used in the consolidation of data
- decentralised (national) data compilation at MNEs
Helsinki Q-2010 17
An improved model (global EG --> truncated EG)
Economic/statistical World (global)
Global Enterprise group
Legal entity
Legal/administrative World (global)
Local (legal) entity
Economic/statistical World (sub-global)
National part of Enterprise group(“truncated EG”)
National enterprise
Local unit
Legal/administrative World (sub-global)
Legal or operational unit (sub global)
Local unitlegal or operational
Helsinki Q-2010 18
An improved model (global EG --> truncated EG)
Economic/statistical World (global)
Global Enterprise group
Legal entity
Legal/administrative World (global)
Local (legal) entity
EGR
Economic/statistical World (sub-global)
National part of Enterprise group(“truncated EG”)
National enterprise
Local unit
Legal/administrative World (sub-global)
Legal or operational unit (sub global)
Local unitlegal or operational
Helsinki Q-2010 19
An improved model (global EG --> truncated EG), cont
Advantage:
- Co-ordination at EG-level: international tuning
- Full coverage of MNE
- National responsibilities remain
Disadvantage:
- Does not solve consistency problem
Consequence: introduction additional unit, “truncated EG”
Helsinki Q-2010 20
A generalised SBR model (global)
Legal Entity (LeU)
(Legal or natural person)
Economic/statistical worldLegal/administrative world
Global Enterprise group
Local (legal) entity
Global Enterprise
Local unit
EGR
Helsinki Q-2010 21
A generalised SBR (EGR) model (global --> truncated)
Economic/statistical World (global)
Global Enterprise group
Legal entity
Legal/administrative World (global)
Local (legal) entity
Global Enterprise
Local unit
EGR
Economic/statistical World (sub-global)
Truncated Enterprise group
Truncated Enterprise
Local unit
Legal/administrative World (sub-global)
Legal or operational entity (sub global)
Local unitlegal or operational
Helsinki Q-2010 22
The SBR (EGR) model (global --> truncated)
Legal/administrative World (global)
Legal or operational unit (sub global)
Economic/statistical World (global)
Global Enterprise group
Legal entity
Local (legal) entity
Global Enterprise
Local unit
EGR
Economic/statistical World (sub-global)
Truncated Enterprise group
Truncated Enterprise
Local unit
Legal/administrative World (sub-global)
Local unitlegal or operational
Helsinki Q-2010 23
Requirements
- Autonomy (still possible at sub-levels?)
- Identifiability
- Recognition (administrative, operational and statistical)
- Accepted and acceptable (both MNE and statistics)
- Data availability
- Observable
- Meaningful data at all levels (global and sub global) and for the specified uses
Related to the available information systems
Helsinki Q-2010 24
Classifications
- SIC (Standard Industrial Classification), industries
- Institutional classification (IC)
- Classification of changes
SIC and IC lead to homogeneous groups (by industry or institutional)
Institutional classification applies to the Enterprise Group unit
SIC relates to units related to production processes (Ent, KAU, Local Unit)
Firstly the unit should be established, that has to be classified thereafter! Depending on purpose dual or multiple classifications
Helsinki Q-2010 25
SU – special issues
Special issues:
– The subsidiarity principle
– The response burden
– The relationship with other unit systems (ISIC)
Elaboration is dependent on the scope.
Helsinki Q-2010 26
How will subsidiarity be affected?
From strict decentralised (national) to centralised
1. Strict subsidiarity: pure bottom up: existing practise
2. National authorities are responsible but based on harmonised rules and definitions
3. National authorities follow centralised group profile and are responsible for data collection accordingly nationally
4. Centralisation: Agency of country responsible for profile of the group collects data of the whole group and disseminates data to agencies of countries in which the group carries out activities
Helsinki Q-2010 27
Conclusions
- Globalisation leads to the need of adaptation of systems (frames and processes)
- More and more mutual interdependencies- Globalisation goes beyond European boundaries need for tuning different statistical systems (e.g. EU and UN)
- Profiling MNEs requires international communication and co-operation
- Implementation using prototyping approach and gradually
- Revision SU-regulation to be considered