ESSnet on « profiling large and complex MNEs »

1. Profilage des Groupes Multinationaux « grands et complexes »:un projet européen: objet, échéancier, expérience des partenaires Paris I - 23 mars 2010

2. ESSnet on « profiling large and complex MNEs » • the context * slides 3 to 8 • current state of operations slides 9 to 10 • about definitions of enterprisesslides 11 to 13 • about operational options slide 14 to 16 • examples slide 17 • next work slide 18 • As presented at the 6-7 October 2009 Luxemburg Seminar • Suivi de “expériences des autres pays” 19

3. ESSnet on « profiling large and complex MNEs »the context * • part of the MEETS programme(Modernisation of European Enterprise and Trade Statistics) • to achieve a streamlined framework of business-related statistics • as a part of the system of the EGR (Euro Groups Register) • to achieve coordinated and meaningful statistical unit structures for enterprise groups • (with maximum use of existing knowledge (EU and non EU)) * As presented at the 6-7 October 2009 Luxemburg Seminar

4. ESSnet on « profiling large and complex MNEs »the general approach * • objectives & results structured into 3 steps: • 2009-2010: a positioning paper on feasibility of profiling; an input on statistical units for an eventual change of EU regulation • 2010-2012: methodology, tools, guidelines … • 2013 & on: full implementation of profiling inside EU • throughout the project: testing, iterations and early results * As presented at the 6-7 October 2009 Luxemburg Seminar

5. ESSnet on « profiling large and complex MNEs »the work programme * • ESSnet, a new way for developing European Statistics: • a partnership of NSIs • cooperating to develop a common methodology • willing to disseminate the results to the whole ESS • with the strong support of Eurostat • The « profiling » partnership: • 7 NSIs : CBS –NL, DESTATIS –DE, ISTAT –IT, ONS –GB, SF –FI, OFS –CH , INSEE –FR coordinator * As presented at the 6-7 October 2009 Luxemburg Seminar

6. ESSnet on « profiling large and complex MNEs »the actions planned under the partnership * • WP A.To define the feasibility and the scope of ‘profiling’ large and complex MNEs. • WP B.To develop a common conceptual framework, methodology, rules and standards for profiling • WP C. To develop processes / workflows, tools,operational guidelines and quality control of profiling, organisational and financial models • WP D.  To test and implement 'profiling' • WP E.To develop a model for sharingof 'profiles' (including legal framework) • WP + To disseminate and train • WP M To manage the ESSnet WP = working package; managed by a leading partner (LP), 1 to 3 working partners (WP), all others being reviewing partners (RP) * As presented at the 6-7 October 2009 Luxemburg Seminar

7. ESSnet on « profiling large and complex MNEsthe partnership * * As presented at the 6-7 October 2009 Luxemburg Seminar

8. ESSnet on « profiling large and complex MNEsgeneral organisation ** As presented at the 6-7 October 2009 Luxemburg Seminar

9. ESSnet on « profiling large and complex MNEscurrent state of operations (1) • Framework partnership agreement: signed in October 2009 • Specific Grant Agreement: signed in December 2009 • Kick-off meeting, 2 all-partners coordination meetings • 2 Workshops: • London 13-14 Jan on feasibility - the “why” and the “who” with the stress on stakeholder views • Amsterdam 24-25 Feb on Statistical Units • An organised cooperation between Work package leaders with trilateral meetings.

10. ESSnet on « profiling large and complex MNEscurrent state of operations (2) • Consultation with stakeholders is ongoing • When and if trade-off will be necessary, setting priorities among their wishes could become unavoidable • Current list of main stakeholders : • National Accounts • Balance of Payments • FATS and FDI • SBS

11. ESSnet on « profiling large and complex MNEs »definitions of « enterprise » In the present EU regulation: Enterprise, defined as the smallest combination of legal units - that is an organisational unit - producing goods and services (for the market) - … with a certain degree of autonomy in decision making - especially for the allocation of its current resources is used at national level, without international comparability: - the sum of the parts usually differs from the total - the required level is not specified (national, European or global?) - the standards for data collection are not consistent either conceptually or in practice so that the ultimate question will be one of « global profiling » versus profiling relative to any kind of territory

12. ESSnet on « profiling large and complex MNEs »definitions of « enterprise » Issues coming from London Workshop Probably necessary to choose between: • present definition of enterprise (easy to use with legal administrative or fiscal data, but not consistent with management structure) • a new one (at least partly) based on group operational segments or divisions (GODs) (found in Annual Reports according to IFRS) GODs definition, usually crosses national boundaries, thus needs choice : • enterprises crossing national boundaries • GODs split into enterprises within national boundaries • with a classification dilemma (simplest example next slide) GODs definition not directly related to legal units: • (some) legal units may be split into more than one enterprise • need to find a way to relate the enterprise to the institutional unit • need (eventually) to create “rest of world” units for outside EU No role in the EU for the local unit

13. ESSnet on « profiling large and complex MNEs »definitions of « enterprise » The territorial classification dilemma: What is • global classification? • national classification? • when France and Germany • distribute GB output

14. ESSnet on « profiling large and complex MNEs »five types of operational options (1): ** • 1 Sharing a model: • a “model” of statistical units is essential for successful profiling • all countries need to use the same standards (for profiling both MNEs and large domestic groups) • we recognise that new SNA/ ESA manuals focus on the legal units • 2 Dealing with complexity: • we cannot deal with all cases (initially or indeed in the future) • we need a mechanism to develop rules based on new cases (within the BRWG or the EGR Steering Group?) rather than a complete set of new rules • new rules and mechanism must include treatment of holdings, SPEs, off-shoring, family closed companies, family groups, accountancy firms and other partnerships, etc ** suggested by London and Amsterdam Workshops

15. ESSnet on « profiling large and complex MNEs »five types of operational options (2): • 3 Using, first, top-down profiling, then complete with bottom-up information: • delineating the global enterprise group by creating a cluster of all legal units belonging to the group • investigating the operational structure (as independently as possible from “legal” or administrative structure) • identifying all market-oriented entities (the future enterprises) and allocating all other entities to these • link (at least try to ) all legal units to enterprises (recognising that relationships can be: 1 to1; several to 1; many to many) • Which is different from the present definition (clearly bottom-up): • only way to deal with groups with hundreds of affiliates, • avoiding time lag and quality problems of administrative data, • improving the cost /efficiency ratio But leading to the following questions

16. ESSnet on « profiling large and complex MNEs »five types of operational options (3): • 4 Using (largely) the IFRS, we need to study their pros and cons: • Pros: • Most widespread “administrative” “ EU” standards • Good standardisation of elementary flows and stocks • Compulsory for stock-traded and bond-traded groups • Include “operational segments” (with turn-over, operational results and employment figures) • Cons: • Consolidated data(no national figure if intra-group flows) • No standardised publication tables • Uncertain stability for the operational segments • 5 to restore consistency between EU and national statistics, assigning dual (plural) classifications to statistical units • Group-consistent classification • Own-activity classification (solves ancillary activities problem and also commercial but not trade activities problems)

17. ESSnet on « profiling large and complex MNEsthe first « examples » studied • testing, iterations and early results are objectives throughout the project • but restricted to “examples” until now • first “cases” studied in common: ** • 4 groups within the motorcar industry (to check their similarities and differences) • A large integrated European group • Several differentiated MNEs • Several MNEs with so-called SPEs seen both from the country of origin and from the country of SPEs

18. ESSnet on « profiling large and complex MNEsthe future work • Next Workshop in Paris in June, main discussion on: • Options for the profiling • Draft report on statistical units • Development of current “examples” and new ones (choosing MNEs but not only the very complex ones) • Next coordination meeting in London (14-15 April) • New “state of the art” presentation at Q2010 in Helsinki

19. ESSnet on « profiling large and complex MNEsexperience des autres pays • 20 ans de profilage aux Pays-Bas & en Grande-Bretagne • Objectif GB: • Lié à absence de fichier central d’UL ou d’Entreprises • => nécessité de constituer ce fichier statistique • Avec structures juridiques très complexes depuis longtemps • Objectif NL: • Structure économique très concentrée • Données disponibles consolidées • Dissociation structure légale / structure managériale • Expériences au Canada, Australie, NouvelleZélande … • “Seeing the whole elephant” suivi de “Project MNEs”