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5494.0 - Economic Activity of Foreign Owned Businesses in Australia, 2000-01, 2000-01  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 09/01/2004   
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COMPARISONS TO RELATED DATA


Counterparty data

Australia's inward foreign affiliate (Footnote: A foreign affiliate is synonymous with a majority foreign-owned business.) data correspond to the outward foreign affiliate data of other countries and vice versa. At present, few countries collect inward and outward foreign affiliate statistics. The USA has collected both since 1982. A comparison study has been undertaken between 2000-01 ABS data and Statistics on the Activity of US Multinational Companies for 2000, published by the Bureau of Economic Analysis (BEA). Since most US affiliates in Australia have a financial year ending in December (so that their accounts line up with those of their US parent), they tend to report on that basis when reporting to the ABS. US and Australian estimates of the contribution of US affiliates to the Australian economy are very similar. As a percentage of the Australian total, the estimates agree to within 1.5 percentage points. For example, ABS has estimated that USA-owned businesses contributed 9.0% of industry value added, while the BEA estimate was 9.8%.


Limited data about employment in Swedish and Swiss-owned businesses in Australia is available from UNCTAD for 2000 - in each case the ABS estimate is higher than the UNCTAD estimate. These differences may be due to sampling errors or to differences in scope or coverage. UNCTAD data about the activities of Japanese affiliates in Australia (for reference year 1999) is in reasonable agreement with ABS estimates. Published data for the activities of UK affiliates do not provide data for Australia as a separate country. The situation is similar for some other countries (e.g. France and Italy). New Zealand does not compile statistics for outward foreign affiliate activity.



Level of inwards foreign investment

Limited data on the contribution of foreign-owned enterprises to aggregates such as employment and industry value added are available for other countries. Most of the data relate only to selected industries, such as Manufacturing or a range of service industries. By international standards, the contribution of foreign-owned enterprises in Australia is comparatively high for Manufacturing but similar to most other developed countries for Services.



Previous Foreign participation studies

The ABS conducted a series of foreign participation studies between 1965 and 1986-87. These studies involved conducting surveys of businesses to measure foreign ownership and foreign control for a number of key industries, including;

  • Mining
  • Manufacturing
  • Construction
  • Finance
  • Insurance
  • Tourist Accommodation
  • Transport
  • Agriculture

These studies included some business activity data that approximates the data compiled in the 2000-01 study. However, some of the definitions used in the foreign participation studies changed during the period for which data was collected in response to changes in international statistical standards.


In general, the proportion of business activity attributable to foreign-owned businesses(Footnote: The discussion of foreign-owned businesses in this section refers to businesses categorised as under foreign control in the previous foreign participation studies.) has experienced little change, but the country with the largest ownership share has shifted from the UK to the USA.


For the Mining industry, the ABS conducted a number of foreign participation studies between 1965 and 1984-85. In the 1980s foreign-owned businesses accounted for between 52% and 58% of value added, higher than the outcome for this study (45%). The 1984-85 foreign participation study found foreign-owned businesses accounted for approximately 36% of the workforce, higher than the current study (28%).


Foreign participation studies of the Manufacturing industry were conducted between 1972-73 and 1986-87 that used similar classifications and scope to the current exercise. During this period, foreign owned businesses accounted for between 33% and 35% of value added, similar to the estimate for the Manufacturing industry in the current study (34%).


A foreign participation study of the Construction industry was conducted in 1984-85, which found that foreign-owned businesses accounted for 10% of value added. This is two percentage points higher than the estimate for the Construction industry in the current study (8%).


A foreign participation study was conducted in 1973-74 for the Accommodation, cafes and restaurants industry that provided an estimate of 9% for the contribution of foreign-owned businesses to total takings (a concept similar to operating income). The current 2000-01 study found that foreign-owned businesses accounted for 7% of operating income for the Accommodation, cafes and restaurants industry.


Further data validation work is currently underway comparing the data from the 2000-01 study with data from the previous foreign participation studies and with counterparty data. The data validation project is expect to yield insight into the relative merits of compiling foreign ownership data by survey or by data matching exercises and Internet searches. It is expected that the results of this data validation exercise will be published in mid 2004.



STATISTICAL FRAMEWORK


INTERNATIONAL STANDARD

Economic globalisation is not a new phenomenon; there have been trade and investment flows between countries for centuries. However, the intensity of transactions and interdependency of economies gathered pace rapidly over the 1980s and 1990s compared to the middle part of the 20th century, and has given rise to economic, social and environmental issues which need to be taken into account by policy makers and economic analysts. Traditional balance of payments statistics provide useful data for the measurement of international transactions; however new statistical needs have developed for measures of the impact of these transactions. To enable international comparisons and statistical consistency, a working party under the sponsorship of the OECD is developing a framework to guide national statistical agencies in their development of statistical indicators of economic globalisation.


This framework for statistical indicators is currently in draft form. The Manual on Economic Globalisation Indicators (MEGI) outlines three types of indicators characteristic of economic globalisation:


1. Indicators relating to trade.


2. Indicators involving direct foreign investment and the structure of the activities of multinational firms.


3. Indicators of international dissemination of technology.


The most recent completed statistical manual that relates to globalisation is the Manual on Statistics of International Trade in Services (MSITS), published in 2002. In particular, MSITS extends the traditional balance of payments statistics definition of international trade in services to include the value of services provided through foreign affiliates established abroad and calls for the separate measurement of business activity data for affiliates.


MSITS sets out an internationally agreed framework for the compilation and reporting of statistics on international trade in services which conforms with and explicitly relates to the System of National Accounts 1993 (SNA93) and the fifth edition of the Balance of Payments Manual (BPM5). MSITS provides for the collection of international trade in services statistics for the four modes defined in the 1995 General Agreement on Trade in Services (GATS). The four modes of supply are:

      Mode 1. Cross border supply
      Mode 2. Consumption abroad
      Mode 3. Commercial presence
      Mode 4. Presence of natural persons

MSITS extends the BPM5 definition of international trade in services to include the value of services provided through foreign affiliates established abroad, described in MSITS as foreign affiliates trade in services (FATS). These services correspond to Mode 3, as defined in GATS, although Mode 3 also includes the provision of goods.


Data about multinationals are collected in studies of inward and outward foreign affiliate trade, where inward foreign affiliate trade is the activities of foreign-owned affiliates in the host economy (i.e. Australia) and outward foreign affiliate trade is the activities of foreign affiliates of Australian parent companies in their host economies abroad.


The ABS is currently developing statistics for inward and outward foreign affiliate trade. The current study provides some of the required indicators for inward foreign affiliate trade, namely: number of businesses, employment, value added, gross fixed capital formation, gross operating surplus and total assets.


Related publications

Publication
Source
Issue

Foreign Ownership and Control of the Banking Industry, Australia
5347.0
Jun 1986
Foreign Control of Registered Financial Corporations
5328.0
1976
Foreign Control of Registered Financial Corporations
5334.0
1984
Foreign Ownership and Control of the General Insurance Industry
5309.0
1983-84
Foreign Ownership and Control of the Life Insurance Industry
5311.0
1983-84
Foreign Ownership and Control of the Transport Industry, Australia
5335.0
1983-84
Foreign Ownership and Control of Tourist Accommodation Establishments
5319.0
1973-74
Foreign Ownership and Control of the Private Sector Construction Industry, Australia
5343.0
1984-85
Overseas Participation in Australian Mining Industry
1963 to 1968
Foreign Ownership and Control of the Mining Industry
Ref. no. 10.42
1971-72 to 1974-75
Foreign Control in the Mining Industry
5329.0
1976-77
Foreign Ownership and Control of the Mining Industry and Selected Mineral Processing Industries, Australia
5317.0
1981-82
Foreign Ownership and Control of the Mining Industry - Australia
5317.0
1982-83 and 1984-85
Foreign Ownership and Control of the Manufacturing Industry, Australia
5322.0
1972-73 and 1982-83
Foreign Ownership and Control of the Manufacturing Industry, Australia
5317.0
1986-87
Foreign Ownership and Control in Agriculture, Australia
5336.0
1983-84
Balance of Payments and International Investment Position, Australia
5302.0
Business Operations and Industry Performance
8140.0
2000-01
Australian System of National Accounts
5204.0
2000-01
Foreign Ownership Characteristics of Information Technology Businesses, published in Australian Economic Indicators
1350.0
Mar 2002 and Mar 2003
Foreign Ownership Characteristics of Businesses Undertaking Research and Development Activity in Australia, published in Australian Economic Indicators
1350.0
Aug 2002
Globalisation and Foreign Investment special article in Australian Mining Industry
8414.0
1998-99
Manual on Economic Globalisation Indicators, OECD, Paris (in progress)
Ownership Characteristics of Businesses Undertaking Capital Expenditure in Australia, 1998-1999, published in Australian Economic Indicators
1350.0
Jul 2001


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