Pierre Teillet European Profiling of GEGs: progress, issues and proposals Joint UNECE/OECD/Eurostat Meeting on BR 03/09/2013

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Overview Objectives of the Profiling programme (reminder) slide 3 Context of the programme slide 4 Main results slides 5 to 8 Will we realise this dream ? slides 9 to 18 Annex: definition of the enterprise slide 20

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Reminder of the objectives of European Profiling  Allow the description of the globalised business economy - as well at international level as at national level; -as well for structural analysis (size, industries, etc) as for macroeconomics; - and a frame for supporting more detailed or specific investigations  Carry on previous research for the benefit of UN and OECD and cooperate with any interested country. In technical terms:  describe consistently the same MNEs in all EU+EFTA countries => “enterprises” linked between countries through the EGR  support efficient data collection in SBS, FATS, FDI & if possible in STS => a system of statistical units for all business statistics  for direct dissemination and indirect use (National accounts etc) => most statistical productions concerned

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Context of the programme Concerning the team:  benefits from the varied backgrounds of the experts …  and their open-mindedness: no-one remained stuck to his certainties;  uses the opportunities of working for/in international bodies;  and has (now) won the support of Eurostat … + yours ? Concerning the topic:  is closing the second cycle of post-war business statistics ? => first cycle: technical analysis of physical production (flows in volumes from intermediate consumptions); => second cycle: economic analysis of the production and its factors (incl. estimates of stocks) ;  opens the third cycle: => analysis of globalised production (ownership, values & margins); with the opened issue of linking the business internal analysis and the global value chains.

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Main results (reminder 1/4): Step 1 a new system of Statistical Units Step 2 Step 1 bis Step 3 with sequentially ordered steps Step 4 This model is “general”; it applies to all kind – domestic, GEGs – and all size of businesses. It changes very few units; but might change a lot in observing the productive variables. Global level National level

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Main results: process ( reminder 2/4)  3 objectives / 3 lines to start business analysis : - legal structure (for perimeter of the GEG) => top-down approach - management structure =>“operating segments” as starting points for enterprises - their own source of data (for EU/countries data consistency) => IFRS basis.  a cooperative process involving 3 types of actors, assessing the suitability to produce statistics (national and European) :

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Main results: methodology and tests blue = reminder 3/4; green = new  extensive testing in progress: at the end of intensive profiles produced (3 years programme), on agreed methods - 40 light(er) profiles, for proposals to come, - from 7 countries in 2009, to 15 in  methodology progressively integrated in the European System : -with “Consistency” programme for the definition of units, -with the European Group Register towards the future ESBRs, -with Structural Business Statistics for the future collection process, -hopeful and probable with OFATS (source for profiling medium-size GEGS, result of profiling for the largest); -same kind of concerns and same kind of approach (use business own data, “agree” with them, monitor “large units”) with the National Account(ant)s.

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Main results: guidelines and integration blue = reminder 4/4; green = new  Guidelines to be issued at the end of 2013: -for use in the future “Vision Implementation Programme” of the EU: “Vision” first decisions yet in progress a future common EGR/Profiling programme: ESBRs -include a segmentation for profiling “enterprise groups”: Large and complex GEGs  Intensive profiling Medium Size GEGs, and large but simpler  Light Profiling Small groups  Automatic profiling (research in complement to Profiling)  Profiling is as well an integrating device for SBS, NA, and all business statistics as a SBR programme: Results include: BR variables + economic “core variables” (even if the set of “core variables” is still under discussion).

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Will we realise this dream ? Our main issues are five:  Can our approach succeed ?  Will we get support from the businesses ?  Will we find an acceptable management of statistics ?  Can we remain outside political concerns?  How to finance it all ?

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Will our approach succeed ? – 1/3-  We are confident in the “top-down” approach for statistics: facilitates the understanding of the “business model” of the groups: gives clues to understand “what is on” => improves the global economic description; improves also the national one; as examples show: comprehensive coverage; limitation of double counting; improved economic significance of structural data  This approach is well understood by individual business officials, because close to theirs.  We foresee impacts on economic policies: National for sure (for an overview, see 2 following slides => how to apply the Lisbon programme on knowledge policies to SMEs ?) European probably

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Will our approach succeed ? – 2/3- an overview of potential impact Enterprises distribution far more concentrated than by legal units Source : Insee, Esane, Lifi 2009

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Source : Insee, Esane, Lifi 2009 Will our approach succeed ? – 3/3- an overview of potential impact Enterprises distribution far more concentrated than by legal units

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Will we get support from the businesses ?  Top-down approach is mostly welcome by individual business officials  But faces 4 types of technical critics: Usually implies initial investment: no priority => make it compulsory (more for boosting business internal priorities than for acceptance) Usually no country segments available. Profit and Loss statement rarely by “nature” (mostly by function) : could change to face sustainability and environmental concerns. Because data by country needed for the whole EU, frequent request for consistent questionnaires and for centralised collection. => No specific computations without counterparts  Probable, but yet unofficial, political concerns: difference appearing between individual / business position some data very sensitive: e.g operating surplus by enterprise x country

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/  We are aware of the organisational issues it reveals:  between NSIs: Networking between NSIs becomes critical with a lot of consequences on/from the Code of Practice: “punctuality”, updating, … Is it mainly a loss of autonomy/independence for each NSI + a longer process ? Necessary changes in confidentiality rules: access to be given to the European community of statisticians? Is it a revolution for confidence links with businesses and between NSIs ? Necessary creation and use of specific tools: as for example the IPT Leading to the implication of Eurostat in the production process ? An acceptable management of business statistics ? (1/3)

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ An acceptable management of business statistics ? (2/3)  We are aware of the organisational issues it reveals …(next)  inside each NSI: outstanding changes in the collection structure to be looked at: -creation of a large entities service (with an account management model for the largest); -skills to be updated (negociators, accounting specialists, etc); -collection model more diversified: differing collection of data for each type of enterprises; use of new accounting standards; usual administrative data no more relevant for large multinationals; etc breaks in series to happen: - need assessment: but if large and significant => are worth it communication(s) between services (incl National Accounts): -the ideal but impossible “big bang”; -re-scheduling and synchronisations (concerns always NA … at the end); questions on costs (investments and recurrent).

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/  We are aware of the organisational issues it reveals …(next)  the role of Eurostat: becoming one of the direct producers: -for the business register (non-EU GEGS; international financial links), -eventual direct collector of European data; -for the tools a role to be fully taylored in the coordination and in the financing: -defining the populations to be profiled and balancing them between countries; -organising a favourable cost-benefit result for each country to prepare, organiser and financer of research, tests and methods in or out of ESSnets An acceptable management of business statistics ? (3/3)

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Can we remain outside the political concerns?  Statistical independence does not prevent us from being hit by political issues.  We statisticians are requested: to produce economically significant data; to “re-build” national data from global stuff. when at the same time businesses (are allowed to) organize globally; and optimize at world level their regulatory and fiscal duties and burdens.  We share the same type of issues with: governments and international bodies such as OECD: in this context: -how to levy taxes at country level ? -how to organise economic policy without proper data ? NGOs (etc) e.g involved in economic development. Their solutions are mostly for us steps in a good direction  We are committed; but operate no magic  We prove(d) we can. We could do it better.

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ How to finance it all ?  Should be easy according to the 3 rd principle of “European Statistics Code of Practice”: The resources available to statistical authorities are sufficient to meet European Statistics requirements.  Results of a financing model awaited at the end of this year based on the overall time spent for profiling  Priorities to come from the Vision Implementation Programme…  then …

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ Remarks, comments, proposals etc are welcome

Joint UNECE/OECD/Eurostat Meeting on BR: Profiling 03/09/ The Enterprise is an organisational market oriented unit which benefits from sufficient degree of autonomy in decision-making. An enterprise carries out one or more activities at one or more locations [1].[1] The Enterprise can correspond either to - a single legal unit not controlled by any other legal entity=independent legal unit, - an enterprise group as a set of legal units under common control, or - an autonomous part of an enterprise group. Organisational means: for the economic activities in which the enterprise is engaged, a planned and formal structure is identified. This structure is able to govern the whole production processes managing the whole productive means. Market-oriented means: the enterprise sells in its own will goods and services to an independent buyer and the exchanges are made on the basis of commercial consideration only, called at “arm’s length” (at economically significant prices.). If not all of the exchanges are made at arm’s length, the 50% criterion has to be used: the unit is market oriented if more than 50% of its total cost is covered by exchanges made at arm’s length. Sufficient autonomy in decision-making means: the enterprise has the control of the use (may not be the owner from a legal point of view) of nearly the whole productive means, processes and outputs of the economic activities in which it is engaged. [1][1] The enterprise corresponds to the institutional unit contributing to the Gross Domestic Product identified in ESA 2013 as market producers (sectors S11, S12, S141 and S142) with the exclusion of the institutional units that in S14 are “producing for final use only” Definition of the enterprise [proposed by Eurostat; provisional]: