United Nations Statistics Division

1. ISIC Rev.4 Changes in manufacturing and business register recoding United Nations Statistics Division

2. Status of ISIC Rev.4 • ISIC Rev.4 has been officially released in electronic form and hardcopy • Translation is ongoing • Final version of ISIC Rev.4 is very similar to the draft published in Nov. 2006 • Only limited set of changes (mostly editorial)

3. ISIC structure changes • Increase in top-level categories • Increase in overall detail • New concepts (information, professional services, support services) • New application rules (vertical integration, top-down method, outsourcing)

4. High-level concordance

5. Continuity in ISIC Rev.4 • Despite many changes, a lot of areas in ISIC have not changed • Manufacturing as a “historical” area remains relatively stable • Most application rules remain intact

6. Changes in detail Changes in ISIC Rev.4

7. Changes in detail for Manufacturing Changes in ISIC Rev.4

8. Changes to the scope of Manufacturing • Publishing is now part of the “Information” section • Activity is the mass distribution of information, not a physical transformation process • Separate transformation component (Printing) remains in manufacturing • “Recycling” is now part of “Waste treatment” (“Materials recovery”) • Process converts waste into other forms of waste • A manufacturing process cannot result in waste as the main output

9. Structural changes in ISIC Rev.4 • Structural changes take different forms: • Splitting of existing divisions, i.e. elevating of activities to a higher level • Separation of certain activities, i.e. recognition as separate activities • Complete reorganization of clusters of activities

10. ISIC3.1-ISIC4 (manufacturing)

11. Structural changes in ISIC Rev.4 • Splitting of existing divisions, i.e. elevating of activities to a higher level • Food and beverage manufacturing • Furniture manufacturing • Pharmaceuticals • These changes can be implemented through recoding

12. Structural changes in ISIC Rev.4 • Separation of certain activities, i.e. recognition as separate activities • Repair and maintenance and installation of machinery and equipment • Requires surveying to identify the units that specialize in repair and/or installation

13. Structural changes in ISIC Rev.4 • Complete reorganization of a cluster of activities • ISIC 3 Divisions 29-33 have been regrouped into ISIC 4 Divisions 26-28 • This a major change (but the only one).

14. ISIC3.1-ISIC4 (manufacturing)

15. Changes for machinery (1)

16. Repair and installation is a major change Other changes based on product detail Changes for machinery (2)

17. Other issues affecting recoding • Vertical integration • May affect only textile manufacturing • Outsourcing • Requires question on whether unit operates own production facility • Can shift units out of manufacturing

18. Changes in implementation rules • Vertical integration • Unit is now classified to production step that generates the most value added • Expected impact: minimal • Previous exceptions in ISIC will become obsolete • Companion guide to ISIC and CPC will provide a list of default assignments in case of missing data to make a clear decision

19. Changes in implementation rules • Outsourcing treatment clarifies previous ISIC treatment (not a change) • For manufacturing activities: • Contractor is classified in Manufacturing (producing a good or service) • Principal is classified in Manufacturing only if he owns the raw materials • Consistent with SNA and BOP for “goods for processing” • Impact: depends on interpretation of previous rule

20. Correspondence tables • Developed for two purposes: • Complete correspondence • Used for recoding individual units • Includes all theoretical links • “Essential” correspondence • Used to convert data • Ignores insignificant links

21. Implementing ISIC in the BR • Intent: • Reduce reporting burden on businesses • Requires automatic recoding for large numbers of units • Problems for 1-n and m-n links • About 2/3 of all cases (classes) • Product data often sufficient

22. Sources • Internal sources • Existing business activity descriptions • External sources • Profiling

23. Internal sources • Used to avoid load on businesses • Existing information from statistics • Information from profiling of the large and complex enterprises • Information from branch specialists of NSOs within their own competence fields • additional detailed code based on old classification (if exists)

24. Existing business activity descriptions • Can sometimes be used to allocate split codes between old and new classification • Business activity descriptions from non-statistical sources need to be checked • may contain legal or statutory descriptions, rather than actual activity information

25. External sources • necessity to use and adapt external sources to statistical needs • NSO may depend on external registers (business registration by tax, social security, Chambers of Commerce etc.) • NSO may have restricted capacity

26. External sources • This process includes: • Early warning to enable sources to implement changes at a convenient time • Provision of instruments like explanatory notes, indexes, correspondence tables to the external sources • Assistance with the adaptation of computer systems and coding tools • Dissemination of information to the employees of the external source who operate the system, assign codes or audit (presentations, guides, training) • timing is essential

27. External sources • The ideal situation: • administrative sources convert to the new classification at exactly the same time as the statistical business registers of NSO • In this case these sources can help to determine the correct new code for a business • Sharing of information (incl. codes) should be explored to avoid work duplication and optimize cooperation • if legally possible

28. External sources • Possible external sources (as a source of information): • Chambers of Commerce, taxes (VAT, wages etc.), social security (activity, existence) • Trade associations, Yellow Pages, telephone directories • External sources are especially important for information on medium sized enterprises.

29. Profiling • One method for determining the correct new code for key businesses : • "a method to analyze the legal, operational and accounting structure of an enterprise group in order to establish the statistical units within that group, their links and the most efficient structure for the collection of data"

30. Profiling • Can be carried out in three ways: • Face to face meetings: expensive but essential for the larger and more complex groups • Other contact, by telephone, fax, e-mail or post, with details gathered to determine structures • Using existing information for relative simple groups, where information available from administrative sources, surveys or even web-sites may suffice. Annual accounts may be helpful as well. • number of units coded by information from profiling is not high • but: relative importance is much higher because the information concerns larger units

31. Tools • Indexes • Automated coding systems

32. Indexes • generally a good tool • can be used manually or with computer lookup • currently being developed for ISIC Rev.4

33. Automated coding systems • in use in some countries • based on text search within index • Statistics Canada uses a similar system using weighted index search • use of linguistic techniques • Often works well for long texts, but not for activity descriptions • parsing and scoring of descriptions against classifications text and additional information

34. General issues • Assigning new codes • efficient and reliable coding is important • all unit types need to be recoded • activity descriptions and product descriptions can be used • although there is not always a 1-1 correspondence, product descriptions may help in many of the smaller changes, especially in manufacturing • double coding of existing product lists is helpful

35. General issues • larger units get "special treatment" - profiling • for small units (i.e. statistically not important units), codes could be assigned on a group basis • for 1-n and m-n links a case evaluation should be made • disadvantage: impossible to assign accurate codes to individual units • use should be carefully evaluated • at individual level, units may be wrongly coded, but at aggregated level, the statistics is acceptable • in case of splits at class level, only most probable correspondence could be used

36. Conversion matrices • one tool: probabilistic conversion matrices • recode units for which sufficient information is available • cross-tabulate units by old and new code • remove invalid codes (masking with established correspondence table) • calculate percentages of remaining data • create conversion matrix • conversion matrix needs updating over time

37. When is automatic recoding necessary?