Trude Nygård Evensen tne@ssb.no Division for National Accounts

1. Eurostat Task Force on Goods sent abroad for processingNorway: Country experience and Case Studies. Presentation for the 2nd Meeting, February 2012 Trude Nygård Evensen tne@ssb.no Division for National Accounts

2. NA Manufacturing. Sources (existing) NA figures for output, VA, operation surplus, employment, gross fixed capital formation • Structural Business statistics (main annual source) • Cover local kind-of-activity units in manufacturing, mining and quarrying. • Based on information from questionnaires and data from administrative registers. A copy of the standard financial report that the tax authorities collect from the enterprises (the Standard Industry Form) • Prodcom - Manufacturing statistics, commodities (annual) • covers large enterprises with local KAUs in manufacturing, mining and quarrying (represent 90 per cent of the total production) • based on information collected in questionnaires sent to the respondents • Producer price index, Index of production (for Quarterly NA figures), Quarterly Investment statistics, wage and employment statistics Eurostat Task Force on Goods sent abroad for processing

3. NA export and import. Sources (existing) NA (and BOP) figures for export and import of products (in SUT) In Norway: BOP is integrated in the NA: • Division for national accounts responsible for calculation and publishing NA and BOP figures • BOP figures for export of import of products - part of (consistent with) NA SUT figures for export and import of products • Trade statistics • External trade in goods • Administrative data from customs declarations • Exports of crude oil and natural gas: reports from the enterprises operating the petroleum fields, terminals and pipelines, and the Petroleum Directorate. • Imports and exports of ships and oil platforms: reports from Norwegian companies • External trade in services • Reports from non-financial enterprises, quarterly sample survey (No distinction between IntraStat and ExstraStat) Eurostat Task Force on Goods sent abroad for processing

4. Goods produced abroad Internal working group in Statistics Norway 2011 • Structural Business statistics includes incomes and costs from activities abroad • Output and intermediate consumption in the Norwegian NA includes output and intermediate consumption that according to ESA95 should be non-resident • How much? The data are to weak to tell • Inward processing: Reported figures from 1 unit in the structural statistics (of significant importance) has been adjusted • Value added (and GDP) accordingly affected? • Implementing ESA 2010: Extra data are needed to calculate export and import due to processing (as well as merchanting) • Difficult in practise to distinguish between processing, merchanting and production in subsidaries (MNE: Often not possible to separate this based on their accounts) Eurostat Task Force on Goods sent abroad for processing

5. Processing – what do we know (1)? • Prodcom • Includes a question about production abroad Part (percent) of the reported sales which are produced abroad • In 2010 about 10 percent of reported sales were reported as production abroad • The 10 largest reporting units, with output abroad: 59 % av of measured output abroad • The 3 largest reporting units with output abroad: 41 % av of measured output abroad • National Oilwell Varco, establishment in Kristiansand (28 %). • STX OSV AS (8 %). • AKER MH AS (5 %). • Uncertain data • Almost 25 percent has not answered. • The question may be misunderstood. • What kind of production abroad? Processing? Eurostat Task Force on Goods sent abroad for processing

6. Processing – what do we know (2)? • Labelling companies and establishments in the Norwegian Business register • Based on response to the question in PRODCOM and other information about specific companies, enterprises/establishments with production abroad are “marked” in the register. • Per February 2011: 37 establishments and 29 enterprises are marked with output abroad • What kind of production abroad? Processing? • Goods for processing - export, from processing - import, or to internal processing – import (Trade statistics – trade of goods): • There are procedure codes that are supposed to be used for goods sends abroad for processing, and for reimported goods after processing. • The procedures are not always followed. • An analyse of the results were done å few years ago, but the data seems not to be rational. • The procedures are no improved, so that they may be more easy to understand and follow. Eurostat Task Force on Goods sent abroad for processing

7. Processing – what do we know (3)? • Import and export of processing services (Trade statistics – external trade of services): Contract work and other manufacturing services • Income: Export value of payment for contract work and other manufacturing services from non-resident costumers. Inlcudes, among else, processing services • Cost: Import value of contract work and other manufacturing services paid to non-resident suppliers. Includes, among else, processing services Figures for the period 01.01.2011 - 30.09.2011: Export Import 2 282 MNOK 2 108 MNOK Eurostat Task Force on Goods sent abroad for processing

8. Processing – what do we know (4)? • International sourcingSample survey in 2007, Initiated by Eurostat • 12 EU land + Norway • In Norway the survey was sent to 1620 enterprises with more than 100 employees (with response rate on 85 %) about ; • International Sourcing i perioden 2001-2006 • Plans for International Sourcing in the perioden 2007-2009 • To which countries? • Which functions? • Motivation for IS • Barriers for IS • Uncertain data • A new survey are planned for 2012 • Problem (in our context): Do not separate between goods sent abroad for processing and other kinds of international sourcing. Eurostat Task Force on Goods sent abroad for processing

9. Case study 1Xstrata (Falconbridge until 2006 ) About the company: • Xstrata Nikkelverk AS is a nicel refiner plant situated in Kristiansand in Norway. Refines nicel and produces also other metals. • The Norwegian plant employs about 500 persons (in 1974 about 1600 persons) • Norwegian board and management and an organization in accordance to Nowegian laws and regulations History: • Kristiansands Nikkelraffineringsverk A/S was founded in 1910 of Norwegian and Swedish engineers, based on local natural resources (nicel ore mines) and patent on a process to extract nicel by using electrolysis. • The Canadian mining company Falconbridge Nicel Mines Ltd. was looking for refining capacity, and more limited access to raw materials in Norway and difficult economic circumstances led to a sale to the Canadian company in 1929. • In October 2006 the Swiss company Xstrata bought Falconbridge Ltd. Eurostat Task Force on Goods sent abroad for processing

10. Case study 1 – follow upXstrata (Falconbridge until 2006 ) Adjusting figures for the company in the NA: • In the company accounts: Income as processing fees (the Canadian/Swiss parent company owns the imported raw materials and the exported products). • In the structural business statistics and NA: Figures related to this company has been adjusted (gross recording). • It has historically been easy to get “correct” figures (more information) from the company in Kristiansand, so that the figures can been adjusted. • In the future (implementing ESA 2010): No need to adjust the figures related to this company in the structural statistics and/or NA, however extra information are still needed to correct import and export data from the trade statistics to establish import and export figures in the BOF/NA. Eurostat Task Force on Goods sent abroad for processing

11. Case study 2 National Oilwell Varco Norway AS • Part of a MNE, with head Office is in Houston, Texas. • worldwide leader in providing major mechanical components and equipment for land and offshore drilling rigs, as well as supply chain services • National Oilwell Varco Norway AS was established in 1985 • The head office and the biggest establishment is located in Kristiansand. Other establishments are in Stavanger, Molde and Asker • Parts of the output produced abroad, but keeps ownership to the concept and finished goods • The subcontractors abroad seems in general not to be a part of the same company/concern • The contractor promotes for, and make sale arrangements of, finished goods to the costumers • Costumers in Norway and other countries Eurostat Task Force on Goods sent abroad for processing

12. Case study 2 (follow up)National Oilwell Varco Norway AS • We do not have all account information about the establishment I Kristiansand • For the enterprise, National Oilwell Varco AS, we do not have the necessary information about export and import of processing fees • Lacking also other information • The company reports that it will be difficult to report the information we will need (they do not have that information in their accounting systems) Eurostat Task Force on Goods sent abroad for processing

13. Other problems • SUT as a database for technical production analysis • productivity • energy use • emissions • Links between Structural data, used for annual NA, and production indices, used for quarterly NA • Prices Eurostat Task Force on Goods sent abroad for processing

14. Future work • Concepts: Criteria (operational) to distinguish between processing and merchanting, as well as other forms for global manufacturing. Especially: Factoryless Goods Producers (FGP) • Estimations of processing and merchanting flows (ESA 2010), based on • Reported data • Study of micro data from trade statistics and the link to structural statistics • Different reporting units (for example logistics companies that take care of and reports customs declarations, rather than the owner of the goods) • Different reporting periods • Close contact with selected companies Eurostat Task Force on Goods sent abroad for processing