The 2007 Revision of ISIC and CPC

1. The 2007 Revision of ISIC and CPC A Concepts Paper Jürgen Schwärzler, UN Statistics Division, Classifications Section

2. Overview • ISIC • Purpose and criteria • Statistical units • Classification Principles • Principle of grouping and Production Process Principle • Activity-Product link • Hierarchical structure and country adaptation • CPC • Purpose, scope and coverage • Aggregation structure; links to other classifications

3. About the Revision Process • Revision process initiated at the 30. session of the Statistical Commission • 5 year update cycle, 10 year major revisions • Purpose: • Adapt to economic/technological changes • Data demand • Comparability and convergence of classifications systems • Serve national and international needs • Allow calculability of revisions

4. Revision schedule • 2002 • Statistical Commission endorsed ISIC 3.1 and CPC 1.1 • Questionnaire: focus on ISIC principles • Workshop ASEAN • 2003 • Presented Concepts Paper to the Statistical Commission • Questionnaire: focus on top-structure of ISIC • Workshops: ECLAC, ESCAP, ASEAN, Afristat • 2004 • First draft of CPC (wait for input from IMF); elaborate detail of ISIC • Country consultations? Workshops? • Prepare final draft of ISIC, CPC for EG in 2004, SC in 2005 • 2005 • Preparation for publication; available by 2006 • 2007 • ISIC and CPC will come into effect

5. Driving factors • Relevance – why is the change justified? • Comparability – how does it affect the comparison with other Classifications? • Continuity – how does it affect time series? methodologically sound classification, that unifies different national classifications, without unnecessary changes

6. ? rental/leasing of household property • ? trust funds ISIC Scope and Purpose • “economic activities” = production of goods and services of the CPC within the SNA boundary • + services through licensing of intangible non-produced assets (e.g. patents, franchise, trademarks) • + household production for own use

7. ISIC Scope and Purpose • i.e. all economic functions, whether they produce goods and services (SNA: transactions) or not • Transactions in goods and services • Financial transactions • Distributive transactions

8. Statistical Units • Enterprises • Establishments (1 location, 1 activity) • Smallest entity differs between countries • Names as well (kau, tau) • Ancillary activities as defined in the SNA, no changes anticipated, but dual coding recommended • Differences in NAICS!

9. Classification Principles • Unit should have 1 activity (theoretically) • Multiple, impartial activities: • Top-down principle • … by value-added • … otherwise by a proxy: gross output, sales, employment • Vertical integration: final product, value-added?

10. Classification Principles

11. Classification Principles • Principles for grouping • Input • Process (technology) • Output (use) • NAICS uses production process principle (PPP), but not totally consistent • 2002 Questionnaire: mixed approach favored

12. Classification Principles • Activity-Product link: • Exist “by nature” • Not always on a 1:1 basis • Provide that link • Very vague about 1:n links, quote: “(…) In such cases where a 1:1 relation is not possible a more flexible treatment should be developed.”

13. Country adaptation • Recommendation should change (Currently) the Statistical Commission recommends: • Adopting the system as a national standard • or rearranging their national data in accordance to the system for purposes of international comparability • (In the future) prescribe only a certain level of detail, e.g. ISIC 3.1, two-digit level

14. CPC – Conceptual Issues • Purpose, scope and coverage: • Primarily designed to be used in statistical programmes OR • Central link to other existing product classifications, filling gaps in uncovered areas, etc. • Decision: What should be in the CPC? • cover produced products + non-produced assets (financial, non-financial) + by-products (+ used goods) – • (?) in separate parts • (?) 1 publication

15. =CPC? CPC - scope

16. CPC – Conceptual Issues • Aggregation Structure - options: • Industry of origin approach • (+) Increased ease of use for different purposes • (+) SNA, Supply and Use tables • (--) Should serve more functions that could need different aggregation • (--) Would tie CPC to ISIC

17. CPC – Conceptual Issues • Aggregation Structure - options: • Demand-based approach • Use COICOP, COPNI, COPP as directions as well as the experience of the NAPCS development (done for services so far, no final results available)

18. Next steps - Options • Elaborate demand based and industry of origin based structure simultaneously? • With standardized aggregations for different purposes? • Demand-based structure would require more time and input from NAPCS • Eventually, 2007 could be too timely

19. Questionnaire • Value-added principle for integrated activities? • Country adaptation – top structure only? • Purpose and scope of CPC? • Aggregation structure of CPC – Industry of origin vs. demand based? • Is aggregation structure of CPC used?

20. End Thank you for your attention!