Manual on Statistics of International Trade in Services

particular, the Joint OECD-Eurostat survey on the 
activity of domestic firms and of foreign affiliates in the 
service sector requests that the data reported should 
relate to majority-owned affiliates.  Among the few 
national presentations, the United States annual 
presentation of data on sales of services by affiliates 
covers data for only those affiliates that are majority-
owned by direct investors.
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4.20.  Although it may in some respects have been 
conceptually more appealing to categorize firms on the 
basis of the actual presence or absence of foreign 
control, majority ownership of the ordinary shares or 
voting power by a single direct investor or by an 
associated group of investors acting in concert has been 
selected as the recommended ownership criterion for 
FATS statistics in the present Manual.
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  Unlike control, 
                                                       
 
60
  Statistical Office of the European Communities (Directorate 
B, Unit B-5), FATS Task Force Report (January 1997); the 
task force was formed to consider conceptual and practical 
issues involved in compilation of statistics on foreign 
affiliates trade and to design common OECD-Eurostat 
questionnaires that could be used to collect the data. 
61
  For inward FATS, data are also available for all affiliates, but 
they are not shown as a part of the annual presentation on 
services. 
62
  Majority ownership by an associated group of investors acting 
in concert is considered by the 1993 SNA as an unambiguous 
indication that the power to control a corporation exists, 
notwithstanding the diffusion of ownership among multiple 
institutional units.  Specifically, the 1993 SNA notes 
(paragraph 4.27) that “a small, organised group of 
shareholders whose combined ownership of shares exceeds 50 
per cent of the total is able to control the corporation by acting 
in concert.”  BPM5 and BD3, in defining the “direct investor,” 
likewise treat the ownership interest held by the members of 
associated group as equivalent to the same interest held by a 
single person (see box 7).  None of these guidelines offers 
operational guidance for identifying such an associated group.  
However, the definition of “associated group” used by the 
United States in its direct investment data collection system 
provides examples of criteria that could be considered.  By 
this definition, an associated group consists of “two or more 
persons who, by the appearance of their actions, by 
agreement, or by an understanding, exercise or appear to 
exercise their voting privileges in a concerted manner to 
influence the management of a business enterprise.”  The 
definition goes on to indicate that the following are deemed to 
be associated groups: members of the same family, a business 
enterprise and one or more of its officers or directors, 
members of a syndicate or joint venture, or a corporation and 
its domestic subsidiaries. 

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59 
its implementation does not require the use of subjective 
criteria, nor does it require that compilers examine the 
nature of investments on a case-by-case basis.  The 
absence of a subjective factor has the added benefit of 
eliminating a potential source of bilateral asymmetry - 
namely, the possibility that the issue of control will be 
assessed differently by home- and host-country 
compilers.  Finally, majority-owned foreign affiliates do 
fall within the scope of GATS definitions of ownership 
and - all but the rarest instances, typically involving 
highly regulated economies - control.  
4.21.  Although the measure of majority ownership 
recommended by the present Manual differs from the 
1993 SNA concept of a foreign-controlled enterprise, 
the two concepts are alike in that both refer to 
ownership by a single investor (or investor group).  
This approach is followed in the present Manual not 
only for consistency with the SNA (and with BPM5 
and BD3, both of which use ownership by a single 
investor or investor group in defining direct 
investment), but also because it is only through a single 
investor or associated investor group that control can 
be systematically exercised.  However, the relevance––
both for GATS purposes and for globalization 
analysis––of other criteria for selection is 
acknowledged, and the Manual encourages countries 
that can do so to provide supplemental statistics 
covering cases in which foreign control may be deemed 
to be present, even if no single foreign direct investor 
holds a majority stake. 
4.22.  Examples of investments that might be covered 
on a supplemental basis are majority ownership by 
multiple foreign direct investors, ownership of exactly 
50 per cent by a foreign direct investor, and cases in 
which a qualitative assessment has been made that 
effective control has been achieved through a minority 
stake in an enterprise.
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  These should be labelled in a 
way that indicates the nature of the investments in the 
firms covered by the statistics.  Similarly, countries for 
which any of these groups are embedded in the basic 
statistics should provide explanatory notes indicating 
their coverage and, if possible, the aggregate amounts 
accounted for by them. Such supplemental statistics on 
affiliates that are not majority owned may be