Groups and Globalization

Foreword - Definition of the « group » used in French statistics Set of companies controlled directly or indirectly by the same legal unit, that is not under the control of another one Control : to hold more than 50% of the voting rights Corresponds to the MNE or the “enterprise group”

Why this working party : The CNIS working party on « Structural business statistics based on groups and their sub-groups » Why this working party : Gap observed between organizational structure of economic actors and structures on which SBS are based Groups : major role in the economy Legal Units : easy use for statistics a weakened ability to satisfy needs in terms of economic information

The CNIS working party on « Structural business statistics based on groups and their sub-groups » How did this party works : Organized under the CNIS jurisdiction Forum of producers and users of public statistics Gives advices and recommendations The sub-group on globalization and its works : Problematic The state of art in terms of statistics on globalization The foreign experiences The needs of statistics on globalization Auditions : Statistics users (academics) Financial analysts MNE representatives CNIS : organisme de concertation présidé par le ministre de l’économie. Composé de 100 membres représentatifs des principales activités économiques et sociales. Organisations professionnelles et syndicats de salariés Associations, administrations, universitaires

The market economy in a globalized world International exchanges of good and services have grown up

The market economy in a globalized and moving world International exchanges of good and services have grown up The MNE activity took part to this growth : 88% of imports and 91% of exports (data douanes - 2004) Intra-group relationships : 36% of imports et 41% of exportations (enquête sur les échanges internationaux intra-groupes – 1999)

World economy under French control vs World economy under French control vs. Economy in France under foreign control France RdM Indep. 6,3 100% Fr 2,1 groups 3,6 4,2 Foreign control 2,0 Millions of employees

World economy under French control vs World economy under French control vs. Economy in France under foreign control 2,1

The market economy in a globalized and moving world MNEs’ Strategies to develop their activities at the global level MNEs are worldwide organized Economic organization vs. financial organization MNEs are organized by functions Production, R&D and innovation, logistic, accounting, advertisement… “support functions” used by all the MNE’s affiliates Close links between mother companies and their affiliates abroad

The question of actors’ nationality The nationality is still meaningful For MNEs, for analysts Criteria to define « nationality » According to Eurostat definition : « country of the main decision-center » Country where the most part of the value is produced Country where the « board » meets Country of which « board » members are citizens In a few cases, it is difficult to define nationality MNEs that claim a double nationality (Shell, …)

Statistical needs in terms of globalization Deeper need to take into account the global dimension In some cases, an analysis limited at the country level is not any more relevant Micro economic analysis – ex. BERD/turnover Information needs on French MNEs’ global activity But, there are still information needs at the national level All problematics linked with public policies National accounts

Statistical needs in terms of globalization Needs linked with the European FATS regulation « Regular and good quality Community statistics on the structure and activity of foreign affiliates in the whole economy are essential for an adequate assessment of the impact of foreign-controlled enterprises on the European Union economy. This would also facilitate the monitoring of the effectiveness of the internal market and the gradual integration of the economies in the context of globalisation. In this context, multinational enterprises are playing a leading role, but small and medium-sized enterprises can also be concerned by foreign control » .“La régularité et la bonne qualité des statistiques communautaires sur la structure et l’activité des filiales étrangères dans l’ensemble de l’économie sont essentielles pour établir un bilan adéquat de l’impact des entreprises sous contrôle étranger sur l’économie de l’Union Européenne. Cela faciliterait aussi le suivi de l’efficacité du marché intérieur et la graduelle intégration des économies dans le contexte de la mondialisation. Dans ce contexte, les entreprises multinationales jouent un rôle leader, mais les PME peuvent aussi être concernées par le contrôle étranger”

Statistical needs in terms of globalization FATS regulation : variables of interest For Inward Fats : number of enterprises, turnover, production, value added, purchases of goods and services, gross investment in tangible goods, number of employees, personnel costs, total intramural R&D expenditure, R&D personnel For Outward Fats : number of enterprises, turnover, number of employees Pilot studies for Inward FATS : Imports-Exports incl. intra group Pilot studies for Outward FATS : production, value added, purchases of goods and services, gross investment in tangible goods,personnel costs, total intramural R&D expenditure, R&D personnel, Imports-Exports incl. intra group

The state of the art in terms of statistics on globalization The available statistics : Lifi (Financial Links) database : survey improved with external sources on links (Orbis, DGTPE, Banque de France) and with economic information Appropriate to answer the FATS regulation (Inward) Not sufficient to answer all questions on globalization The database on consolidated accounts : 2600 accounts of French MNEs with information on the global activity Compare the global and the national activity of groups Follow the global activity along the time Frame for outward FATS

The state of the art in terms of statistics on globalization What can be improved Outward FATS statistics The follow up of global activity of French MNEs Improve the knowledge of French MNEs’ affiliates abroad Measure of the intra-group flows

The recommendations of the WP linked with globalization Preamble 4 : the multinational dimension of MNEs, is dominant toward its territorial dimensions. Preamble 5  : The WP considers it is necessary to follow, within each MNE, its restriction to the French territory (truncated MNE)

The recommendations of the WP linked with globalization The WP recommends to settle down a perennial and regular information system, that follows the activity of French MNEs abroad. This system should allow to fulfill the European obligations linked with the Fats regulation.   Recommendation 5  The WP notices that the intra-group flows play a significant role in international trade ; The WP recommends to settle down a regular publication on intra-group imports and exports.

Thank you for your attention Dominique.francoz@insee.fr