Integrated Survey Framework for Inward and Outward FATS Statistics

1. Set up and maintenance of an integrated survey framework for the compilation of Inward and Outward FATS Statistics MEDSTAT III-Workshop and Study visit in Rome on BOP statistics Stefano Menghinello and Emanuela Trinca “Foreign trade and multinational enterprises statistics” Division Italian National Statistical Institute (ISTAT) Rome Rome, 8 June 2011 – 14.00-14.45 pm

2. Issues covered by this presentation • The development of FATS statistics: an historical perspective • ISTAT project for the development of FATS statistics • The nature of our approach • The organization of production • Why an integrated system for the production of FATS statistics? • Key features for the maintenance and quality improvement of FATS statistics

3. The development of FATS statistics: an historical perspective • The idea of a EU Regulation on MNE statistics was developed in late ’90s. • The new regulation benefits from the international debate on the limits of FDI statistics to assess the “real impact” of MNE activities. These limits include not only the nature of variables but also key conceptual definitions such as “control” and “ultimate controlling institutional units” • The Regulation was designed as “output oriented”, so each MS is free to choose the most convenient statistical framework: administrative data, additional questions on FDI surveys, a new and independent survey….

4. FATS Regulation focuses upon two different target populations, but indeed they are three….. Foreign resident companies Companies resident In Italy INWARD FATS OUTWARD FATS DOMESTICOWNED ECONOMY all the variables, but intra-firm trade, are already available from other existing sources No variables are available,including economic classification

5. The UCI definition is crucial in order to properly identify the target population for Inward FATS statistics 5 6 4 7 3 2 1- Italian first shot 2- foreign first shot 3 – foreign intermediate controller 4 – regional headquarter 5- Foreign UCI 6- foreign holding company 7- Italian UCI 1 A B Inward FATS Population Companies resident in Italy

6. ISTAT project for the development of FATS statistics • Started in late ’90s and was supported by Eurostat with a number of financial grants. ISTAT was a “late comer” in this area of statistics, since statistics on FDI are produced by the central bank of Italy. • The implementation of FATS definitions was a real challenge for Italy (the LUX effect…) • There were already at the national level other MNE data sources, not official but with a good reputation • The project required a huge effort in a period of decreasing human and financial resources • The key question was: What’s the nature of the approach we want to follow to set up FATS statistics?

7. The nature of our approach • The measurement of MNE is a complex business. Two alternative approaches can be considered: • Statistical approach: frame consistency and no undercoverage, but problems of poor data quality and information update • Economic approach: high quality and updated information on key MNEs. Problems of under coverage and frame inconsistency • Amixed approach: this approach combines monitoring on key MNE companies with the use of a statistically consistent approach. ISTAT’ Choice!!!

8. ISTATorganisation of production for FATS data • In line with the peculiar nature of our approach, we shape our organisation of FATS statistics production accordingly. • BEA was our benchmark: but we are 5 people MNE business analyst INWARD SURVEY PRODUCTION LINE OUTWARD SURVEY PRODUCTION LINE • BA Tasks: • Frame consistency • Entry and exit monitoring • Inward – Outward Shifts • Outward FATS consolidated accounts analysis • Use of international databases • MNE group profiling

9. ISTAT project for the development of Inward FATS statistics • ISTAT project started with the production of statistics on foreign MNEs in Italy (Inward FATS statistics), which was set up as a new survey on companied resident in Italy under foreign control • The survey collects limited but essential information on control structure according to the UCI definition • The set of requested variables for the activities of foreign affiliates in Italy is produced by linkages with other SBS surveys • Threats: a lot of companies with foreign direct control (first shot) are indeed Italians as UCI • Coverage for micro-businesses (use of administrative data and enterprise group register)

10. ISTAT project for the development of Outward FATS statistics • The ISTAT project on Italian affiliates abroad (Outward FATS statistics) started relatively late (2008) to meet FATS Regulation deadlines • This is the most complicated and labour intensive section of the FATS Regulation • Key threats are: • - correct identification of the target population (huge amount of work to detect Italian MNEs) • - massive data collection • - poor response rate • Innovation introduced by ISTAT: • - use of international databases to integrate survey not respondents • - development of estimation procedures that minimise sources of errors by size, industry and geographical areas

11. FATS statistics as an integrated production system • Since Inward and Outward FATS populations tend to overlap and interact in time, but Inward and Outward should be mutually exclusive • Inward, Outward and SBS data lead to the production of an integrated system of indicators. For instance, employment can be classified as: • - resident in Italy but under foreign control • - resident in Italy but under domestic control • - resident abroad but under domestic control

12. Key features for the set up and maintenance of high-quality FATS statistics • The production of MNE statistics in line with the FATS Regulation requires to combine different skills: Statistical, economic and legal knowledge • The nature of the approach must be mixed: economic and statistic • High financial and human resources investments in the start up phase • Definition of a proper division of labour within the FATS unit: statisticians carry out the surveys and the business analysis interact with them at different stages • Close cooperation with external units (Business register; SBS survey, Enterprise group register)