UNECE – Group of Experts on National Accounts, 8 May 2014, Item 7: Global Production

Mark de Haan (editor)

Guide to Measuring Global Production

- State of play -

Two consultations: main findings

1. Factorless goods producers (FGPs)Task Force consultation on FGPs:

‐ Defining output of FGPs;‐ The transaction between supplier and

principal;‐ Branding.

2. Preliminary review of the GuideMain feedback coming from a global consultation based on a first (almost) complete version of the Guide.

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1. TF consultation on FGPs

FGP, main features:‐ Outsourcing physical transformation to a contract

producer (similar to outward processing);‐ Contract producer purchases material inputs

(different from processing);‐ FGP provides the blueprints of production and

owns the underlying intellectual property products (IPPs), or obtained the rights to IPP use;

‐ Controls the output of the production process and manages the production chain;

‐ Controls customer relationships. 3

1. TF consultation on FGPs

Recording principles agreed so far:‐ Conclusion of the TF is that FGPs differ

fundamentally from traders/distributers;‐ Alternatively FGPs should be classified as a

special case of manufacturers;‐ This point of view is supported by the

Advisory Expert Group on national accounts;‐ Implications for ISIC need to be further

considered by the UN Classifications Expert Group.

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1. TF consultation on FGPs

Open issues:‐ Is the output of a FGP a good?

TF: yes‐ Should the international transactions be recorded

under general merchandise or merchanting? TF (large majority): general merchandise

‐ What is the nature of the transaction between the contractor and the FGP, a service or a good? TF (large majority): a goodThis point may require further clarification

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1. TF consultation on FGPs

Open issues (continued):‐ What is the nature of the transaction between

the contractor and the FGP, a service or a good?Two options:(1)The GFP purchases an intermediate good

excluding the IPP content:(2)The FGP is the economic owner of the

produced good from the start.‐ Option (2) implies FGP is a special case of

processing leading to the purchase of a processing service.

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1. TF consultation on FGPsOpen issues (continued):

‐ How does Branding relate to FGP? Branding: principal purchases goods for resale under the entity’s brand name and may spend substantial amounts on marketing assets.

‐ Key considerations: • Branding is often part of FGP type of activities• marketing assets are according to 2008 SNA not fixed

assets (and thus not IPPs) (cf. SNA research agenda)‐ Differentiating FGPs from traders (TF conclusion):

FGP are substantive IPP investors, more than 50% of value added originates from activities such as innovation, supply chain management and market research and marketing

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Guide to Measuring Global Production

2. Global consultation‐ February – March 2014;‐ Based on a preliminary version excluding text on

the open FGP issues;‐ Comment form with questions on e.g. usefulness

of guidance, recommendations, coverage, areas for future work and chapter specific issues;

‐ 35 responses;‐ Generally responses were quite positive;‐ Nevertheless a range of suggestions for further

improvement were made. 8

2. Global consultation, main issues‐ Following up on FGPs: classification and recording of

transactions.‐ Data issues: extension of surveys and response burden;

new ways of collecting data; confidentiality issues and data exchange; international co-ordination.

‐ Principles of economic ownership: Could more be done in the area of IPP holding special purpose entities and economic (in contrast to legal) ownership of the IPPs?

‐ Adaption to country specific needs: e.g. link of agriculture and fishing to global value chains.

‐ The goods/services distinction: probably an issue for future work (beyond scope of the TFGP).

‐ More guidance, more case studies…..?

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Thank you!mark.dehaan@cbs.nl