1. 6. Foreign Affiliate Statistics (FATS)
THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

2. Introduction
Foreign AffiliaTes Statistics (FATS) aim at describing the overall operations of foreign-controlled affiliates (affiliates in which a single investor owns more than 50% of the voting power).
A major mode of supply for trade in services: need of a close and continuing contact between a supplier and a customer through commercial presence.
But also mode of supply for trade in goods.
Commercial presence (GATS mode 3) reflected by FATS, a set of variables measuring the activity of foreign affiliates.

3. GATS Mode 3: Commercial Presence
Country A
Country B
GATS Mode 3: Commercial Presence
Mode 3 covers the supply of a service by a service supplier of the country A, through a commercial presence in the country B of the service consumer
Service
supplier
Service
consumer
© WTO/OMC 3 3

4. What do FATS measure ? The overall economic activity of affiliates
Activity of foreign controlled affiliates in the reporting economy (inward FATS).
Activity of foreign controlled affiliates of the reporting economy (outward FATS).
FATS is at the crossroad of business statistics, balance of payments and IIP
BOP and IIP: flows and stocks of FDI to identify the foreign-owned subset of companies.
Business statistics: for the identification of the relevant economic variables.

5. FATS v Foreign Direct Investment
Enterprises covered in FATS are a subset of FDI enterprises built on the majority owned or controlled affiliates.
FDI relationship establishes a lasting interest by a resident enterprise from one economy (the direct investor, or DI) in an enterprise which is resident in another economy (the direct investment enterprise, or DIE).
FDI relationship:
More than 50% of the equity capital or voting power: control
Between 10% and 50%: influence
Less than 10%: no influence
10% for defining FDI, majority ownership for FATS.

6. FDI and FATS enterprises

7. Inward and outward FATS
Inward FATS: a measure of the activity of foreign controlled affiliates in the reporting economy.
Outward FATS: a measure of the activity of foreign controlled affiliates of MNEs of the reporting economy.
Priority given to inward FATS: easier to compile and more meaningful for the GATS.
Inward FATS: statistical unit (resident affiliate) = reporting unit (resident affiliate)
Outward FATS: statistical unit (non-resident affiliate) different from reporting unit (resident mother company)

8. Priority variables for FATS
Sales or output: directly comparable with cross-border trade in services and as such the most important information on FATS to be collected.
Employment: assess the impact of affiliates on labour market.
Value added: output originated from the affiliate itself (total output less intermediate output).
Exports and imports of goods and services: to be computed separately, and between related and unrelated parties.
Number of enterprises: to be compared with the total of firms in the compiling economy.
Also country and Industry breakdown

9. Additional variables Total of financial and non-financial assets
Net worth: assets - liabilities
Compensation of employees
Research and development
Gross capital formation

10. Country classification of FATS
In what country does the production of the affiliates take place? and what country is the owner of the producing affiliate?
There are two possibilities for FATS:
Immediate host / home country.
Ultimate beneficial owner (UBO) - known in FDI as the Ultimate Controlling Institutional Unit (UCI).
MSITS recommends UBO for FATS in contrast to FDI statistics which use the Immediate country of investment. UBO is more meaningful:
Derives the benefits from controlling the direct investment affiliate
Country of the immediate owner may be used when UBO is not known and to align on FDI concepts.

11. Looking for UBO C is directly controlled (60%) by D (country 4)
A (country 1) is directly controlled (70%) by C (country 2)
C is directly controlled (60%) by D (country 4)
D directly controlled by F which is not controlled by another company
C is the A’s mother company and F (country 6) is its UBO 11

12. Example of inward FATS
Three new enterprises in the compiling economy (France):
A: 100% owned by USA parent company, with no other foreign ownership.
B: 30% owned by a Dutch parent company
C: 51% owned by a Luxembourg holding company. Owner of holding company is from USA.
Classified as follows
A: FATS and FDI: UBO and UCI = USA;
B: FDI only: UCI = Netherlands
C: FATS and FDI: UBO = USA, UCI (immediate ownership)= Luxembourg

13. Industry and product classification
FATS variables need to be classified on an activity basis
Foreign affiliates are classified by their primary activity, according to ISIC categories for foreign affiliates (ICFA)
ICFA can be linked to EBOPS
In the long term
FATS variables such as sales, imports or exports should also be broken down by product
More appropriate to be compared with data on services delivered through cross-border trade (EBOPS)
and product breakdown needed for GATS

14. The 100 per cent rule
FATS variables for a given affiliate need to be attributed in their entirety to a single country of owner.
No adjustment should be made for the percentage of foreign ownership.
Example: a domestic enterprise in which foreigners own 65% of the voting shares export US$ 100 million. All of the exports should be treated as the exports of this foreign-owned enterprise and not the foreigner owners’ share of US$ 65 million.

15. 4. Data collection

16. Two main data collection approaches
FATS surveys
Survey to MNEs resident affiliates for inward FATS, survey to resident parent companies for outward FATS
Alternative: FDI stock survey with an extra sheet for FATS or separate survey with foreign controlled subset of the FDI population
Add questions to existing surveys
Identification of the foreign controlled subset of FDI enterprises
Cross-cutting with Structural Business Statistics (SBS)
Mixed approach

17. Inward FATS data collection
As affiliates relate to resident enterprises, source data describing their activity directly from structural business statistics (SBS)
Data still collected for national accounts GDP calculation
Linking FDI survey with SBS data through common identifiers.
Priority variables (sales, employment, value added, exports and imports, number of enterprises) with a breakdown by activity are easily available.
Ensures the consistency with local enterprises data and comparisons are easier.
The only additional data needed is the country of control allocation

18. Outward FATS data collection
Data cannot be collected directly
Foreign affiliates are located outside the compiling economy,
Resident parent companies need to be surveyed on their activity abroad.
Use of existing FDI survey
Identification of all stakes above 50%
One extra sheet for FATS variables
Limits the burden (one survey)
New surveys as an alternative
Targeted on those enterprises with foreign-controlled affiliates

20. Main issues (3) Asymmetries Inward vs. Outward FATS
Inward FATS ‘easier’ and thus more complete
International comparisons and consultations very useful in order to improve Outward FATS
Asymmetric burden distribution between countries
Level of business internationalisation different
Number of Outward FATS statistical units ranging from less than 50 to more than …..it depends on the country
Countries with the most impact on global figures have the most burden to cope with

21. FATS compilation in the EU
A common legal framework
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.
FATS Recommendations Manual 2009 edition
Mandatory FATS variables
Outward FATS: number of enterprises, turnover, persons employed
Inward FATS: number of enterprises, turnover, number of persons employed, value added, gross investment in tangible goods, personnel costs, production value, total purchases of goods and services, purchases for resale, total intra-mural R&D expenditure, total number of R&D personnel.
Breakdown by activity and partners

22. Austria
Statistics Austria is responsible for compiling the FATS statistics. It is however the result of a collaborative effort with the OeNB which provides FDI data.
Inward FATS statistics
Two major sources: the comprehensive structural business statistics from Statistics Austria and the FDI survey (OeNB). OeNB provides the list of foreign-controlled enterprises and the country of the UCIs.
Statistics Austria links the OeNB list of enterprises with its own business register and SBS database to get FATS variables.

23. Austria (cont) Outward FATS statistics
Adaptation of the FDI questionnaire to collect the company name, address, employment and sales figures of all enterprises abroad controlled by Austrian direct investors, irrespective of the length of the chain of control.
The survey applies a reporting threshold with a possible under-reporting as there is no grossing-up of the survey results.
Cross-checking with the European Groups Register (EGR) including information available from commercial sources and from counterpart countries.

24. United States
FATS are compiled by the US Department of Commerce (BEA) under the authority of the International Investment and Trade in Services Survey Act.
The collection method relies on FDI surveys
Benchmark surveys every 5 years
Most comprehensive for coverage and data content
Different forms depending on firm size
Basis for estimates between benchmark years
Annual surveys in interim years
Smaller affiliates do not report
Statistical sampling

25. United-States
Link to Census Bureau establishment-level data every 5 years
Provides increased industry detail
Facilitates the comparison with domestic economy
Types of data collected
Balance sheets, income statements, sales, employment and employee compensation, R&D expenditures, taxes, trade in goods and services, value added.
Special focus on services
Majority-owned affiliates only: US affiliates and foreign affiliates
Sales broken down between goods, services, and investment income,
Sales recorded by destination,
More detailed industry classification, aided by the use of the NAICS
A costly process.

26. US inward FATS questionnaire

27. US outward FATS questionnaire

28. Importance of FATS Growing importance of MNEs in the world economy.
Need to evaluate the economic impact of these MNEs.
FATS are particularly important for analysing trade in services, as lot of them need a close contact between the consumer and the producer.
Despite extra costs to statistical agencies and respondents, the globalisation of the world economies has motivated a number of countries to develop such data.
FATS compilation should focus first on inward side and priority variables. SBS may be the easier approach for data collection in most circumstances.