Activities of multinational enterprises – Eurostat’s approach Szymon Bielecki European Commission Eurostat, Unit G2 Structural Business Statistics

13/09/2015 Foreign Affiliates Statistics (FATS)2 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

13/09/2015 Foreign Affiliates Statistics (FATS)6 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

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

13/09/2015Foreign Affiliates Statistics (FATS)9 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 dissemination in the European Union

13/09/2015 Foreign Affiliates Statistics (FATS)12 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 Implementing regulations of the European Commission on derogations, definitions, classifications, quality reporting FATS Recommendations Manual 2009 edition

13/09/2015 Foreign Affiliates Statistics (FATS)13 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

13/09/2015 Foreign Affiliates Statistics (FATS)14 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) 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)

13/09/2015 Foreign Affiliates Statistics (FATS)15 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 France (2007) Italy Netherlands Sweden Denmark2.9n.a.250 Finland Slovenia Belgium Austria (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 Germany Italy Hungary Bulgaria Sweden Austria Netherlands Portugal Spain 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

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

13/09/2015 Foreign Affiliates Statistics (FATS)25 EuroGroups Register Register of multinational corporations active in the EU Ongoing project, 5000 biggest groups, soon 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

13/09/2015 Foreign Affiliates Statistics (FATS)26 Thank you very much for your attention! Contact: