1. Tatiana Mrlianova SBS ESTP training, 14 March 2013
Foreign Affiliates Statistics (FATS): concepts, requirements, data production
Tatiana Mrlianova
SBS ESTP training, 14 March 2013

2. Foreign affiliates statistics (FATS)
Outline
General concepts
EU data requirements
Data production
Examples of data analysis
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3. How do we understand FATS?
Abbreviation:
In the past: Foreign Affiliates’ Trade in Services
Now extended: Foreign AffiliaTes Statistics
Statistics describing the overall operations of foreign-controlled affiliates (direct investment enterprises)
part of AMNE statistics (Activities of Multinational Enterprises)
Traditional focus on services now extended by including manufacturing sector
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Foreign affiliates statistics (FATS)

4. Rationale for compiling FATS
extend the information provided by international trade statistics (transactions) and FDI statistics (transactions, stocks, income)
describe international commercial presence of enterprises
measure the economic impact of one country on another one
very relevant for research on economic globalisation – both in terms of reasons and effects/impacts
policy relevant – GATS, taxation, investment
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Foreign affiliates statistics (FATS)

5. Foreign affiliates statistics (FATS)
Inward vs. Outward FATS
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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
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7. Foreign affiliates statistics (FATS)
Dimensions of FATS
Economic activity of the foreign affiliate
MSITS: ISIC (ICFA groupings, focus on services)
EU: NACE (EU implementation of ISIC, goods and services)
Partner country
Inward FATS: country of the (ultimate) controlling investor
Outward FATS: country of residency of the foreign affiliate
Characteristics (variables)
Product – longer-term goal, applicable to some variables
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8. 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 2012 edition (not legally binding)
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9. UCI concept vs. national perspective
UCI = Ultimate Controlling Institutional Unit
UCI in the most cases is global group head, i.e. the enterprise on the top of the control chain in a multinational corporation, able to influence the management of lower level enterprises (i.e. appoint the board), but not controlled itself by any other unit
UCI approach (required for data sent to Eurostat):
Inward FATS: partner country is the country of ownership/control where the UCI of a foreign affiliate is resident
Outward FATS: data are collected only from resident companies being UCI’s of an enterprise group = having foreign affiliates
UCI approach necessary in order to avoid double-counting when data aggregated for the whole European Union
National perspective: data on all affiliates irrespective UCI collected and published by some EU Member States for their national purposes but UCI-based data transmitted to Eurostat
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10. 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
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11. Foreign affiliates statistics (FATS)
Data requirements
Periodicity: annual (first compulsory reference period 2007)
Timeliness: t+20 months (2 months after the final SBS data)
Classification: NACE Rev. 2 (in Outward FATS from the reference year 2010)
Dimensions:
Inward FATS: 1) main partners x detailed activities
2) all partners x total economy (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 (B-S excl. O)
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12. Data collection of Inward FATS
institutional framework: collected usually by national statistical institutes
data sources: annual business survey (synergies with SBS: subsets of SBS population and variables), business register, dedicated surveys
foreign affiliates encoded in SBS by a dedicated question or linking with other sources: FDI, tax data, annual financial reports, commercial databases, media
variable definitions and activity codes as in SBS (but less detail)
partner country: country of the UCI
economic activity: principal activity of the affiliate, consistent with SBS
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13. Data collection of Outward FATS
institutional framework: responsibility at NSIs or/and NCBs
first step: population frame (profiling of enterprise groups, UCI attribution), based on the FDI register, business register, annual financial statements, media information and direct contacts with enterprises
second step: data collection - separate survey or part of the FDI survey
variable definitions as in SBS
partner country: country of residence of the affiliate
economic activity: principal activity of the affiliate, activity codes as in FDI statistics (~same level of detail)
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14. 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
knowledge of corporate structures (shares’ distribution, control) is never perfect; many groups are very intransparent; rapid changes of ownership, large impact on FATS possible; constant updates of enterprise groups registers necessary; risk of double counting or missing of some affiliates/parents; solution: consultation between countries (inward vs. outward FATS, registers); intransparent Special Purpose Entities (SPE); equally shared control (joint ventures etc.); multiple minority ownership
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15. OFATS data production - workflow
Countries send the data by 31 August (20 months after the reference period)
– via edamis using gesmes format
Correct gesmes format?
Yes: data automatically uploaded in db
No: contact the country to re-transmit the file
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16. OFATS data production - workflow
Data treatment
Basic controls (data availability, check for double values, confidential data, comparability with previous years etc)
Verify the validation rules – data consistency
If something can be repaired here, it is preferred to do so instead of asking the country for a new transmission  save time
Secondary confidentiality (S.C.)
Send report and harmonized datasets to the country for agreement/confirmation (in particular S.C. treatment)
Dissemination
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Foreign affiliates statistics (FATS)

17. OFATS data production – some facts
Ref. year 2009
first year when no derogation any more, all the 27 MSs delivered data, however not all of them according to the legal deadline
3 obligatory variables (EMP, ENT, TUR)
Voluntary variables : 8 countries for the ref. year 2008
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Foreign affiliates statistics (FATS)

18. OFATS data production – some facts
Legal request on the detail by country of location and activity – 3 datasets/variable
Voluntary request on the detail by country of location and activity , in particular for:
Total World , EU27, EU countries
Agriculture, forestry and fishing - Sec. A
Ref year NACE Rev.1.1 data (+ NACE Rev 2 for 3 countries)
Ref. year double codification (NACE Rev NACE Rev.2) on a voluntary basis
Ref. year NACE Rev.2 data, legal request
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19. OFATS data production – some issues
Incorrect gesmes format - still many countries
Files sent by (instead of edamis)
Duplicated records/values – correct technical format but several identical records or double values for a same cell (more serious)
Comparability of data (over time)
Different concepts (until 2006, from 2007 on)
Different units (for ex. Thousands/millions EUR)
Different response rates, different estimation methods (imputing or not imputing missing data…)
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Foreign affiliates statistics (FATS)

20. Foreign affiliates statistics (FATS)
Data coverage
Inward FATS:
2006: 15 Member States
2007: 24 Member States + Norway
2008: 22 Member States + Norway
2009: 27 EU Member States + Norway
first EU aggregates published for 2009 data
2010: 27 EU Member States + Norway + Croatia
Outward FATS:
2006: 12 Member States
2007: 23 Member States + Croatia (derogations: ES, LU, PL, UK)
2008: 23 Member States + Croatia (derogations: ES, FR, LU, UK)
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21. FATS in Eurostat's database
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22. Outward FATS data – some figures…
2009 data, the biggest partners of the reporter EU according to employment:
Reporting country
Partner country
% share on the total extra-EU-27 employment
EU-27
US United States of America 26
CN China 8
BR Brazil 7
C Offshore financial centers 4
IN India
RU Russia
MX Mexico 3
AU Australia
CA Canada
HK Hong Kong 2
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Foreign affiliates statistics (FATS)

23. Outward FATS data – some figures…
2009 data, the biggest partners of reporter EU-27 according to turnover
Reporting country
Partner country
% share on the total extra-EU-27 turnover
EU-27
US United States of America 35
BR Brazil 6
C Offshore financial centers
CH Switzerland
6,5
NO Norway 4
CN China 5
CA Canada
AU Australia
JP Japan 3
RU Russia
2,8
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24. Outward FATS data – some figures…
data, total of non-EU affiliates, total economic activity
variable
No. of enterprises
Turnover (in bn €)
Employment (x1.000)
Country of UCI
2009
2008
Germany
11,447
11,552
664
682
2284
2309
France (*2007)
13,846
10,300*
425
443*
2383
1785*
Italy
8,239
7,765
137
142
806
739
Netherlands
6,726
6,056
228
295
647
666
Sweden
5,478
4,244 98 88
511
568
Denmark
3,095
2,915
n.a.
242
250
Finland
1,664
1,512 64 67
218
214
Slovenia
1,500 3 47
Belgium
883
1,176 26 19 96
110
Austria
1,143
1,049 29 35
164
153
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25. …and interesting facts
in 2008, Germany was the biggest contributor in all 3 variables and almost all destinations, however in 2009 the situation differs: France has got most number of affiliates abroad as well as is the largest employer
the highest employment per affiliate: Luxembourg: 835 number of persons employed, the lowest in Latvia: 21 persons employed people per affiliate
in 2009, 39 % of ‘German’ turnover and almost a half of the UK turnover (49.8%) that was created by the US affiliates
activities of US affiliates are very important also for France, the Netherlands, Italy and Spain
Italy particularly present in Africa, Netherlands in S-E Asia
18% of turnover for the Netherlands recorded by affiliates resident in offshore financial centres
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Foreign affiliates statistics (FATS)

26. Inward FATS data overview
data, total of foreign affiliates controlled from outside the EU, total economy activity
variable
No. of enterprises
Turnover (in bn €)
Employment (x1.000)
Country
2009
2008 UK
12,810
13,206
617
793
2,006
2,102
Germany
10,191
9,231
398
558
1,013
1,429
Italy
5,144
5,331
181
197
453
482
Hungary
7,100
6,381 40 49
179
Bulgaria
4,625
3,847 10 80 74
Sweden
4,408
4,206 69 84
226
246
Austria
2,408
2,383 61 70
123
121
Czech Republic
7,555
3692 47 50
243
260
Luxembourg
6,483
n.a. 20 39
France
5,280
5,635
269
316
651
717
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Foreign affiliates statistics (FATS)

27. Some IFATS related facts and interpretations
for most of the EU countries the US parent companies play the most important role as regards the share on the total turnover in non-EU controlled enterprises
in Ireland 89%,
in the Netherlands 67%
- in France 62%
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 Slovenia (39%) and in Germany (21%) and Austria (22%)
Portugal with 42% and Cyprus with 35% out of non-EU controlled affiliates controlled from offshore financial centres
affiliates controlled from another EU Member State more numerous than those controlled by non-EU countries (except for UK)
importance of neighbours’ links
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