March 2007 AEG meeting Chapter 6 Main substantive comments

Comments Chapter arrived late. Deadline not yet over: you can still input. Comments from: UNSD, OECD, Russia, Australia, ECB, Eurostat, IMF, USA 3 major substantive questions to the AEG 23 comments will be considered by the ISWGNA 35 comments will be considered by the editor

Question 1: services The AEG (Bangkok, 2005) first decision: –goods for processing that are imported and re-exported after processing will be valued at the amount of the processing (imports = zero; exports = value of processing) –consistent with BPM (which was divided on this) –Important decision: implies that the value of imports and exports of China in Chinese national accounts are divided by two compared to Chinese customs data

Question 1: services The first AEG decision implied that the output of a firm which processes goods for export would be valued at the value of the processing By consistency: AEG second decision: –the output of a firm which processes goods for export or not for export should be valued at the value of the processing –Thus the output of any firm which processes goods but does not own the goods is valued at the value of the processing.

Question 1: services Paragraph 6.12: when goods are dispatched to another unit for processing do not include change in ownership the work done on them constitutes a service. The decision of the AEG on the value of output has been transformed in a definition of services. Do we need a new definition of services in the SNA?

Question 1: services There was no mandate for a new definition of services. The SNA is not interested in differentiating goods from services: they are to be treated alike, as « products ». The definition proposed is internally contradictory: retailers own the goods that they sell, but they are classified in services (see paragraph 6.139) The SNA is a user of the ISIC classification and should not impose its own classifications (Nokia)

Question 1.a Do we need this new definition of services based on the ownership of the good? ******************

Question 1.b The editor has introduced three new classes of services: –Margin services –Transformation services –Knowledge-capturing products

Question 1.b Terminology: –Margin services: The definition proposed includes securities’ brokerage and real estate brokerage. But these sectors are not viewed as « margins » in the supply and use framework, when they are based on fees. Better terms could be used. –Knowledge capturing products: better terminology could be « information products ». Should these categories be included in the SNA? Is the terminology acceptable? ****************************

Question 1.c Paragraphs 6.28 to 6.31 (old SNA) explain that the household production of most services are excluded from the production boundary. With the introduction of the concept of knowledge-capturing products, should it be made clear that these are excluded from the production boundary? *************************

Question 2.a Intra-establishment flows –6.115: it may be desirable to record an output for a good or service used as intermediate consumption within the same establishment. –This is a change in the SNA: the old paragraph said: when goods and services produced within the same establishment are fed back as inputs into the production within the same establishment, they are not recorded as part of intermediate consumption or the output of the same establishment.

Question 2.a Intra-establishment flows Three reasons seem to be given to record such an « own account intermediate consumption »: –6.116: delivery services? –6.117: deliveries between separate establishments? –6.118: output placed in inventories for use as intermediate consumption in the future?

Question 2.a Intra-establishment flows The AEG decision: if an establishment undertaking purely ancillary activity is statistically observable, in that separate accounts for the production it undertakes are readily available, or if it is in a geographically different location from the establishment it serves, it may be desirable and useful to consider it as a separate unit. Does the AEG agree to the new model proposed for intra-establishment flows?

Question 2.c Intra-enterprise flows New paragraphs 6.95 (d) and regarding intra-enterprise flows propose the following new criterion: –Intra-enterprise deliveries should only be recorded when there is a change of ownership. By definition, there is hardly never a change of ownership between two establishments of the same enterprise, Legal ownership is at the level of the enterprise, not the establishment.

Question 2.c Intra-enterprise flows Does the AEG agree that paragraphs 6.95 (d) and should be amended to avoid introducing any change of the old SNA based on this criterion?

Question 3: FISIM Paragraph says: the reference rate should represent a risk free rate of interest such as prevailing for inter-bank borrowing and lending. The task force recommendation, confirmed by the AEG, was: the reference rate is a risk-free rate that has no service element in it and that reflects the maturity structure of the loans and deposits to which FISIM applies.

Question 3: FISIM The AEG reference rate did not specifically mention inter bank rates. The AEG reference rate mentioned the maturity structure. Does the AEG prefers the wording of paragraph 6.158?