Economic Globalization and Multinational Enterprises Statistics

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Economic Globalization and Multinational Enterprises Statistics

Israel Central Bureau of Statistics

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Economic Globalization and Multinational Economic Globalization and Multinational EnterprisesEnterprises

The term “economic globalization” has been widely used to describe the increasing internationalization of financial markets and of markets for goods and services.

Globalization refers above all to a dynamic and multidimensional process of economic integration whereby national resources become more and more internationally mobile and national economies become increasingly interdependent.

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Major forces contributing to the Globalization process:

The liberalization of capital movements

The further opening of markets to trade and investment, spurring the growth of international competition

The pivotal role played by information and communication technologies

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Key role of Multinational Enterprises in the Globalization process:

International capital movements, organization of production and transfer of technologies

Developing of broader and more sophisticated worldwide network structures, through the adoption of strategies of mergers and acquisitions, network organization and cooperation agreements.

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Main characteristics of the economic Main characteristics of the economic globalization processglobalization process

Increasing volume of international trade, foreign direct investments and general international capital movements

Increasing amount of assets and liabilities of each country with the rest of the world

Simultaneous competition in markets between new competitors from all over the world places acquired positions at risk, necessitating extremely rapid structural adjustments in numerous areas

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Increasing number of multilateral frameworks for international trade and investments

Intra-firm trade has become a significant proportion of world trade

Location strategies of MNEs are strongly influenced by comparative advantages of countries and regions, leading also to the “fragmentation of production”

Commercial foreign presence is often a necessary condition for accessing foreign markets, particularly with respect to trade in services

Main characteristics of the economic Main characteristics of the economic globalization processglobalization process

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US sales of services to other countriesUS sales of services to other countries

0

100

200

300

400

500

600

700

800

900

Bil

lion

US

D

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Source: Bureau of Economic Analysis

U.S. Total services exportsU.S. FATS Outward

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Statistics of Globalization and Statistics of Globalization and Multinational EnterprisesMultinational Enterprises

The Globalization process has accelerated over the past 20 years and is linked to significant economic developments.

Understanding Globalization based on facts and findings is indispensable for policy making and strategic decisions.

There is a need of finding/developing/ adapting analytical tools to measure and asses the Globalization process:

– Traditional statistics no longer suffice for the full analysis of magnitude and consequences of Globalization

– New concepts and factors have to be identified and integrated– Comparable statistics based on international standards, must

be developed

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“Handbook of Economic Globalization Indicators “OECD

(IMF, WTO, UNCTAD, World Bank, Eurostat, European Commission)

The Handbook covers the measuring of magnitude and intensity of the Globalization process and it is not intended to asses its economic impact and/or structural adjustments in policies needed.

Further developments and revisions are currently discussed , together with a parallel activity in several working groups in the OECD and other international organizations.

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AMNE – Activities of Multinational Enterprises

Globalization of International Trade

Foreign Direct Investment

International dissemination of technology

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Globalization of International TradeGlobalization of International Trade

How important are affiliates controlled abroad in delivering goods and services to international markets, compared with direct exports from the parent company ?

Do MNEs trade more with their affiliates abroad than with unaffiliated firms ?

What is the role and importance of MNEs in trade ?

How much of sales of CAs abroad derive from production by CAs and how much from imports (particularly from their parents) ?

How much of the sales of CAs abroad is sold to the home country ?

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Activities of Multinational EnterprisesActivities of Multinational Enterprises

What is the share of foreign controlled affiliates in economic output, GDP , employment and employee compensation in the compiling country ?

What is the share of foreign CAs in gross fixed capital formation in the compiling economy ?

What is the share of parent companies in output, gross fixed capital formation, employment and employees compensation in their own compiling country ?

What are the output and employment generated by CAs abroad of domestic parent companies, in relation to output and employment of these parent companies in the compiling country ?

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Foreign Direct InvestmentForeign Direct Investment

What are FDI position and flows (inward and outward) as a share of GDP ?

What is the dependence of economic sectors on investments from abroad ?

What is the relative penetration of FDI according to economic activities ?

What is the geographical distribution of FDI – By immediate investor and by UBO (Ultimate Beneficiary Owner) ?

How investments in SPEs (Special Purpose Entities) are affecting FDI by partner countries ?

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Internationalization of TechnologyInternationalization of Technology What is the share of foreign controlled R&D in the

overall R&D of the host country ?

What is the share of R&D expenditures and researchers in MNEs (parent companies and foreign CAs) operating in a given country ?

What share of a country’s industrial R&D is financed from abroad ?

What are the expenditures on R&D performed by CAs abroad, as a percentage of domestic R&D expenditures ?

What share of GDP is accounted for by overall technology receipts and payments ?

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Statistics of Globalization – Target Statistics of Globalization – Target populationpopulation

Activities of Multinational Globalization of Internationalization

Enterprises International Trade of Technology

Foreign Controlled Affiliates (IN companies)

Parent Companies (OUT companies)

Controlled Affiliates abroad

(At least: 50% ownership on share’s capital – Unambiguous control)

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Foreign Direct Investment

Direct Investment Enterprises (Incorporated domestic enterprises in which foreign direct investor invest)

Direct Investors (Enterprises, individuals or governments having Direct Investment Enterprises in other economies)

(At least: 10% ownership on share’s capital )

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OUT companies

– Parent company in the compiling economy stands for the “Parent Enterprise Group”, comprising the company investing abroad and all domestic firms in a chain of more than 50% ownership, including the domestic UBO (Ultimate Beneficiary Owner).

IN companies

– Parent company abroad of a Foreign Controlled Affiliate in the compiling economy, is the “Foreign Parent Group”, comprising the foreign company investing directly in the IN company and all foreign firms in a chain of more than 50% ownership, including the foreign UBO.

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Exports involving parent companies and Exports involving parent companies and their CAs abroadtheir CAs abroad

Total Exports by parent companies in the compiling economy

To their CAs

abroad

To other foreigners

Total To their foreign

parent groups (if they are

foreign-controlled)

To their associates

abroad

To unaffiliated foreigners

(1) (2) (3) (4) (5) (6)

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Exports by foreign CAs in the Exports by foreign CAs in the compiling economycompiling economy

Total To the foreign parent group

To other foreigners

Total To foreign affiliates

To unaffiliated foreigners

(1) (2) (3) (4) (5)

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Statistics of Globalization Statistics of Globalization Coverage and MethodologyCoverage and Methodology

Estimations of annual Globalization indicators for AMNE, MNE International Trade and Internationalization of Technology statistics are based on:

– Administrative annual files Customs Income tax VAT files Social Security files ITRS

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– A biennial sample survey

Framework population based on the MBR (Multinational Business Register), which includes direct and indirect domestic control/controlled companies (OUT-IN)

Survey population in three groups: IN, OUT and IN-OUT companies

Sstratified sample according to:

Group (IN, OUT)ISIC Economic activities – Two digitsSize – Total revenues

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The survey for years 2006-2007 is currently been conducted and includes also – for the first time – a questionnaire on MNEs’ activities related to R&D

Results related to R&D will be complemented by results from the R&D business survey together with the new ITSS (International Trade in Services Survey), currently conducted by CBS

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Statistics of Globalization Statistics of Globalization Improvements plansImprovements plans

FDI statistics will be improved and will include geographical and economic activities breakdown, according to the OECD Benchmark – 4th edition and following commitments of Israel in the Accession Process to the OECD.

Additional features of improved FDI are also included in a working plan submitted by Israel to the OECD, as:

– compilation according to the directional principle– records of local SPEs– compilation according to the UBO– identification of investments through foreign SPEs

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Statistics of Globalization Statistics of Globalization Improvements plansImprovements plans

The outsourcing of production by domestic companies abroad and by foreign companies in compiling economies is not fully reflected in the statistics of Globalization currently compiled, as outsourcing abroad not involving subsidiaries is not covered

Statistics of offshore outsourcing is related also to the new recommendations included in BPM6 with respect to “Goods for processing”

Development of methodology for the compilation of data on outsourcing of production is needed. This methodology may be based on future surveys and in comparison of data from administrative files - as customs files - and data from enterprises reports on exports and imports.

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Thank you

Documents

Economic Globalization and Multinational Enterprises Statistics