Download Economic Globalization Indicators

Economic Globalization and
Multinational Enterprises Statistics
Israel Central Bureau of Statistics
17.08.2009
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Economic Globalization and Multinational
Enterprises

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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Economic Globalization and Multinational
Enterprises
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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Economic Globalization and Multinational
Enterprises
Key role of Multinational Enterprises in the
Globalization process:

International capital movements, organization
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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of
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Main characteristics of the economic
globalization 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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Main characteristics of the economic
globalization process

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
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US sales of services to other countries
900
U.S. Total services exports
U.S. FATS Outward
800
Billion USD
700
600
500
400
300
200
100
0
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Source: Bureau of Economic Analysis
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Statistics of Globalization and
Multinational 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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Statistics of Globalization and
Multinational Enterprises
“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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Statistics of Globalization and
Multinational Enterprises

AMNE – Activities of
Multinational
Enterprises

Foreign Direct
Investment

Globalization of
International Trade

International
dissemination of
technology
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Globalization 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 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 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 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
population
Activities of Multinational
Enterprises
Globalization of
International Trade
Internationalization
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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Statistics of Globalization – Target
population
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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Statistics of Globalization – Target
population

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
their CAs abroad
Total
(1)
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Exports by parent companies in the compiling economy
To their
CAs
abroad
To other foreigners
Total
To their
foreign parent
groups (if
they are
foreigncontrolled)
To their
associates
abroad
To unaffiliated
foreigners
(2)
(3)
(4)
(5)
(6)
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Exports by foreign CAs in the
compiling economy
Total
(1)
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To the foreign
parent group
(2)
To other foreigners
Total
To foreign
affiliates
To
unaffiliated
foreigners
(3)
(4)
(5)
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Statistics of Globalization
Coverage 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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Statistics of Globalization
Coverage and Methodology
– 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 digits
 Size – Total revenues
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Statistics of Globalization
Coverage and Methodology

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
Improvements 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
Improvements 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
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