Transcript The impact of globalisation on defining the NACE code

The impact of globalisation on
defining the NACE code
Nordisk Statistikermøde i København
11.-14. august 2010
Tema 1. Udvikling af statistikken: Globalisering
[email protected]
Disposition

Introduction




Context
The phenomenon of International sourcing
”The jungle” of concepts
The problem statement

A fictitious example
Contradictory international recommendations and
practices?
 Conclusions

Tarja Hatakka / Business Register
2
Introduction
Tarja Hatakka / Business Register
12/08/2010
3
Context

Programme for the Modernisation of European Enterprise
and Trade Statistics (MEETS)


One of the objectives: reviewing and further developing indicators
related to globalisation
EuroGroups Register (EGR) as a basis for production of comparable
statistics on globalisation of the economies
 ESSnet to develop and implement a methodology for 'profiling’ of
large and complex multinational enterprise groups
 Nace Rev. 2
• Rules for classification of units outsourcing
Tarja Hatakka / Business Register
12/08/2010
4
The phenomenon of International sourcing
Production of goods or services outside the compiling
country by non-affiliated or affiliated enterprises.
 Becoming more and more common
 In Finland (+other Nordic countries and NL) the main
business function sourced abroad has (in 2001-2006) been
the core business activity
 Most often the model has been insourcing, i.e. the
enterprise sources business functions within the same
enterprise group


Source: joint publication by the national statistical offices of Denmark, Finland, the
Netherlands, Norway and Sweden (2008), International Sourcing - Moving Business
Functions Abroad.
Tarja Hatakka / Business Register
12/08/2010
5
”The jungle” of concepts

Insourcing


Outsourcing


production within the enterprise group
production outside the enterprise group
Offshoring

outsourcing activities abroad
however, terms are not used unambiguously
 another general term used: Global manufacturing
• can include several types of arrangements: re-exporting, goods

under merchanting, goods under processing
Tarja Hatakka / Business Register
12/08/2010
6
The problem statement
Tarja Hatakka / Business Register
12/08/2010
7
Enterprise group is a manufacturing group. What is
the NACE code for enterprise A?
Enterprise A
Global decision centre
Own activity: head office activities,
R&D, marketing, distribution
Finland
Affiliate B
Contractor
Own activity: manufacturing
Poland
A owns raw materials
used by B
Affiliate C
Contractor
Own activity: manufacturing
Germany
A sells all products
further to end
customers all over the
world or to the
distribution affiliate D in
Netherlands
Affiliate D
Distribution
Own activity: trade
Netherlands
C owns raw materials
itself
Tarja Hatakka / Business Register
12/08/2010
8
Contradictory international recommendations and
practices?
Tarja Hatakka / Business Register
12/08/2010
9
International recommendations
NACE Rev. 2 and ISIC Rev. 4
Units, which completely (or partly)
outsource the transformation
process, should be classified into
manufacturing only if they own the
raw material used as input to the
production process
 The rule is also valid if the
contractor is a subsidiary unit
(=insourcing)

 Should we classify enterprise A
under Manufacturing?
BR manual

The purpose of the principal activity
code: ”…important in judging the role
of certain units in the enterprise group
structure, mainly the group head, the
head office and special purpose
entities (SPEs included in NACE Rev.
2 class 6430), but also in general in
enterprise group structuring and
demography. The enterprise group’s
worldwide dispersion of employment by
activity can also be studied by its
constituent units.”
 Should we classify enterprise A
under Services?
Tarja Hatakka / Business Register
12/08/2010
10
International practices

Finland queried the national practices from different EU
countries concerning the turn-key projects (a special case
of global manufacturing)

National practices were largely disparate concerning both the
classification issue and the treatment of transactions
 Global view vs. national view

Should we approach the definition from a global or national point of
view when the activity is defined?
•
an issue discussed in the context of ESSnet on Profiling MNE’s
Tarja Hatakka / Business Register
12/08/2010
11
Conclusions
Tarja Hatakka / Business Register
12/08/2010
12
Conclusions
More guidelines are needed on the issues concerning
international sourcing and especially insourcing (sourcing
within the enterprise group)
 Different solutions concerning the classification can have a
great impact on the structure of the economy.



Different solutions create a risk for significant incomparability in data
collection and compilation of statistics in and between different
countries
Solutions need to be found in international co-operation.

For example “ESSnet on Profiling of MNEs” is a good forum to
discuss such things
Tarja Hatakka / Business Register
12/08/2010
13