Frameworks

4.39. Ideally, it would be possible to attribute all FATS variables on the basis of the industrial activities of producers and, in addition, particular variables, such as sales or output, exports and imports by the types of services products produced and sold. Data on a product basis would identify the specific types of services

in one country of an affiliate located in another country to or from an individual or firm resident in a third country.

delivered through the commercial presence mode of supply and could most readily be compared with data on services delivered through trade between residents and non-residents. However, some FATS variables, such as value added and employment (discussed below), do not lend themselves to a product classification. Also, for some countries, FATS statistics may be developed as a subset of domestic enterprise or other statistics that are classified only on an activity basis. On this basis, all of the data for a given enterprise are classified in the single activity––often termed the “primary” activity––that, based on some key variable (such as employment or sales), is the largest. Finally, for some purposes, the data may need to be viewed in conjunction with data on stocks and flows of foreign direct investment, which normally would be classified by activity but not by product.

4.40. Taking these factors into account, an activity basis is recommended as the first priority for FATS statistics. However, as a longer-term goal, countries are encouraged to work toward providing product detail for the items that can be classified on this basis. Countries that are building on existing data systems that already include product detail will probably wish to use this detail from the outset in their tabulation and presentation of FATS statistics, because it could help them in monitoring commitments under GATS that are specified in terms of services products. Similarly, countries that are building their FATS data systems from the ground up should consider the feasibility of providing for a product dimension.

(a) By activity

4.41. The present Manual recommends that, for reporting to international organizations, FATS variables be classified by activity according to ISIC, Rev.3 and grouped according to the ISIC Categories for Foreign Affiliates (ICFA), which have been derived from ISIC. These categories, shown in table 3, cover all activities, but with more detail provided for services than for goods.67 This all-inclusive basis of presentation allows activities of services enterprises to be viewed in the context of the activities of all enterprises. In addition, it provides a framework for displaying services produced

67

The OECD manual of economic globalisation indicators is also expected to recommend use of an ISIC-based classification of measures of foreign-affiliate operations and performance, but with categories representing goods and services in more even proportions.

as a secondary activity by enterprises classified as goods producers. Finally, this all-inclusive approach has been adopted by the countries and international organizations that are actively developing FATS statistics.68

4.42. Primarily because the activities carried out by a given firm are usually not limited to its activity of classification, the data recorded against any given activity must be interpreted as an indication of total activity of firms for which the given activity is the most important, or primary, activity, rather than as a precise measure of the activity itself.69 For the same reason, as well as because of differences in the classifications themselves, the extent to which data on resident/non- resident trade classified according to EBOPS can be aligned with data on FATS variables classified according to ICFA is inherently limited. Nonetheless, a correspondence between the two bases of classification may be useful for some purposes, mainly involving activities that tend to be carried out only by firms that are specialized in the activity and tend not to have significant secondary activities.70 For such purposes, the EBOPS categories corresponding most closely to the ICFA categories for services activities have been indicated in annex IV, table A.IV.1. The reverse correspondence is shown in annex IV table A.IV.2.

4.43. The present Manual recognizes that data for particular ICFA categories may sometimes have to be

68

The prototype questionnaire in the Eurostat FATS task force report, the Joint OECD/Eurostat survey on the activity of domestic firms and of foreign affiliates in the service sector, and the United States annual presentation on sales of services by foreign affiliates all are based on all-inclusive industry breakdowns, with a higher level of disaggregation for services than for goods.

69

For example, computer services may be provided not only by firms classified in the computer services industry but also by firms classified in computer manufacturing and computer wholesale trading. Similarly (although this is less common in practice), computer services firms may engage in manufacturing or wholesale trade as secondary activities. Statistics shown for the activity “computer services” would misstate the value of the activity by excluding the computer services provided by manufacturers and wholesale traders and by including the manufacturing and wholesale trade activities of computer services firms.

70

For example, if legal services were performed only by law firms and law firms tended to perform only legal services, sales recorded under the “legal services” activity would correspond closely to sales of legal services because they would be recorded in a product classification; this is unlike the example in the previous footnote involving computer services.

suppressed (that is, not separately shown) to preserve the confidentiality of data for individual companies. This will most often happen at the most detailed level of the classification, or in the case of smaller countries, or where the data are cross-classified by country or area.

(b) By product

4.44. As a longer-term goal, countries are encouraged to work toward disaggregating by product some or all of the variables––which include sales (turnover), output, exports and imports––that lend themselves to this basis of attribution. Product-based statistics are free of problems of interpretation related to secondary activities,

are consistent with the basis on which GATS commitments are made, and are consistent with the basis of classification used for trade between residents and non-residents.

4.45. To the extent possible, the breakdown should be on a basis compatible with EBOPS for services and according to the Harmonized System for trade in goods, to facilitate comparisons with resident/non-resident trade classified on this basis. If this level of specificity cannot be achieved, countries may wish to disaggregate sales in each industry as between sales of goods and sales of services as a first step toward a product basis (see paras. 4.52 and 4.53 below on the sales variable for a discussion of this option).

Table 3. ISIC Categories for Foreign Affiliates (ICFA)

ICFA headings / elements

ISIC code 1. Agriculture, hunting, forestry, and fishing 01, 02, 05 1.1. Agriculture, hunting, and related service activities 01 1.2. Forestry, logging, and related service activities 02 1.3. Fishing, operation of fish hatcheries and fish farms; services activities

incidental to fishing

05

2. Mining and quarrying 10, 11, 12, 13, 14

Of which: Services activities incidental to oil and gas extraction excluding surveying

112

3. Manufacturing 15 to 37

4. Electricity, gas, and water supply 40, 41

5. Construction 45

6. Trade and repair 50, 51, 52

6.1. Sale, maintenance, and repair of motor vehicles and motorcycles; retail sale of automotive fuel

50

6.2. Wholesale trade and commission trade, except of motor vehicles and motorcycles

51

6.3. Retail trade, except of motor vehicles and motorcycles; repair of personal and household goods

52

7. Hotels and restaurants 55

8. Transport, storage, and communications 60, 61, 62, 63, 64

8.1. Transport and storage 60, 61, 62, 63

8.1.1. Land transport; transport via pipelines 60

8.1.1.1. Transport via railways 601

8.1.1.2. Other land transport 602

8.1.2. Water transport 61 8.1.2.1. Sea and coastal water transport 611

8.1.2.2. Inland water transport 612

8.1.3. Air transport 62

8.1.3.1. Scheduled air transport 621

8.1.3.2. Non-scheduled air transport 622

8.1.4. Supporting and auxiliary transport activities; activities of travel agencies

63

8.1.4.1. Supporting and auxiliary transport activities 6301, 6302, 6303, 6309 8.1.4.2. Activities of travel agencies and tour operators; tourist

assistance activities, not elsewhere classified (n.e.c).

6304

8.2. Post and telecommunications 64

8.2.1. Post and courier activities 641

8.2.2. Telecommunications 642

9. Financial intermediation 65, 66, 67

9.1. Financial intermediation, except insurance and pension funding 65 9.2. Insurance and pension funding, except compulsory social security 66

9.2.1. Life insurance 6601

9.2.2. Pension funding 6602

9.2.3. Non-life insurance 6603

9.3. Activities auxiliary to financial intermediation 67 9.3.1. Activities auxiliary to financial intermediation, except insurance

and pension funding

671

9.3.2. Activities auxiliary to insurance and pension funding 672

10. Real estate activities 70

11. Renting of machinery and equipment without operator and of personal and household goods

71

12. Computer and related activities 72

13. Research and development 73

14. Other business activities 74

14.1. Legal, accounting, market research, and consultancy 741

14.1.1. Legal activities 7411

14.1.2. Accounting, bookkeeping, and auditing activities; tax consultancy

7412

14.1.3. Market research and public opinion polling 7413 14.1.4. Business and management consultancy activities 7414 14.2. Architectural, engineering, and other technical activities 742

14.3. Advertising 743

14.4. Business activities, n.e.c. 749

15. Education 80

16. Health and social work 85

17. Sewage and refuse disposal, sanitation, and similar activities 90 18. Activities of membership organisations, n.e.c. 91

19. Recreational, cultural, and sporting activities 92 19.1. Motion picture, radio, television, and other entertainment activities 921

19.1.1. Motion picture and video production and distribution; motion picture projection

9211, 9212

19.1.2. Radio and television activities 9213

19.1.3. Other arts and entertainment activities 9214, 9219

19.2. News agency activities 922

19.3. Library, archives, museums, and other cultural activities 923 19.4. Sporting and other recreational activities 924

20. Other service activities 93

Note: The following ISIC categories have been excluded from ICFA because they are not relevant to foreign direct investment or

FATS: public administration and defence; compulsory social security (ISIC division 75), private households with employed persons (division 95); and extraterritorial organizations and bodies (division 99). All other ISIC categories are included.