REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART III:
enterprise (affiliate). Ultimate investor is the first person (company or individual) at the
head of a chain of companies that directly or indirectly controls all the enterprises in the
chain without itself being controlled by any other company or individual. We have given
the two examples in Figure 1, where the chain of ownership runs from top to bottom. In our
first case company G is the foreign parent (direct investor) of company H, while company
F is its ultimate investor (company F’s indirectly held ownership in company H is 42%).
In our second case, company J is both, the foreign parent and the ultimate investor of
company K. Company I is not the ultimate investor because it is not the majority owner of
company J.
I
Company F
I
70%
I
Company G
I
60%
I
Company H
Figure 2: Ultimate investors
II
Company I
I
30%
I
Company J
I
80%
I
Company K
However, considering that information on immediate investors may be available from
linkages to FDI data (FDI flows, in BPM5 and BD3 framework, are compiled only in respect
of the immediate investing country) and to facilitate comparisons with these data, countries
are encourages to compile data in which variables are attributed according to the country of
the immediate investors.
For outward FATS, two options are possible. The variables may be attributed to the country
of location of the affiliate (immediate host country) or, if the ownership is through a directly
held affiliate located in another country – to the country of that affiliate (ultimate host
country). It is recommended attributing them to the country of the affiliate whose operations
are described by the variables, for that is the country in which the foreign direct investor’s
commercial presence exists. For example, if a British company owned an affiliate in the
United States through a holding company located in Bermuda, then in British outward FATS
the affiliate should be classified in the United States rather than in Bermuda.
According to primary industrial activity of the producer that indicates which sector of activity
is concerned, it is recommended that FATS variables be classified by activity according to
ISIC, Rev.3, and grouped according to the ISIC Categories for Foreign Affiliates (ICFA)
which have been derived from ISIC. ICFA is given in MSITS. These categories cover all
activities, but with more detail provided for services than for goods.
Some variables may be classified by product, according to the types of goods or services
produced. As a longer term goal, countries are encouraged to work toward disaggregating
by product some variables such as sales, output, exports and imports (other variables, such
as value added and employment, can not be classified by product). This breakdown should
190