Dominique FRANCOZ INSEE, DSE 18 septembre 2007 Groups and Globalization

Page 2 Groups and Globalization Dominique FRANCOZ18 septembre 2007 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”

Page 3 Groups and Globalization Dominique FRANCOZ18 septembre 2007 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

Page 4 Groups and Globalization Dominique FRANCOZ18 septembre 2007 The CNIS working party on « Structural business statistics based on groups and their sub-groups » › How does 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 needs of statistics on globalization –Auditions : ‐ Statistics users (academics) ‐ Financial analysts ‐ MNE representatives

Page 5 Groups and Globalization Dominique FRANCOZ18 septembre 2007 The market economy in a globalized world › International exchanges of good and services have grown up

Page 6 Groups and Globalization Dominique FRANCOZ18 septembre 2007 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 ) –Intra-group relationships : 36% of imports et 41% of exportations (enquête sur les échanges internationaux intra- groupes – 1999)

Page 7 Groups and Globalization Dominique FRANCOZ18 septembre 2007 World economy under French control vs. Economy in France under foreign control 6,3 2,0 4,2 2,1 Indep. groups 3,6 100% Fr Foreign control France RdM Millions of employees

Page 8 Groups and Globalization Dominique FRANCOZ18 septembre 2007 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 –Worldwide organization of production ‐ Defines the MNE’s strategy : choice between export and produce abroad (offshore outsourcing)

Page 9 Groups and Globalization Dominique FRANCOZ18 septembre 2007 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, …)

Page 10 Groups and Globalization Dominique FRANCOZ18 septembre 2007 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

Page 11 Groups and Globalization Dominique FRANCOZ18 septembre 2007 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 »

Page 12 Groups and Globalization Dominique FRANCOZ18 septembre 2007 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

Page 13 Groups and Globalization Dominique FRANCOZ18 septembre 2007 Statistical needs in terms of globalization › The available statistics : –Lifi (Financial Links) database : survey improved with external sources on links (DGTPE, Banque de France) et 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

Page 14 Groups and Globalization Dominique FRANCOZ18 septembre 2007 Statistical needs in terms of 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

Page 15 Groups and Globalization Dominique FRANCOZ18 septembre 2007 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)

Page 16 Groups and Globalization Dominique FRANCOZ18 septembre 2007 The recommendations of the WP linked with globalization › Recommendation 4 › 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.

Page 17 Groups and Globalization Dominique FRANCOZ18 septembre 2007 Thank you for your attention