International Recommendations for
Industrial Statistics (IRIS)
Workshop on Economic Statistics
and Informal Sector
UN Statistics Division/ESCAP
Teheran, 10-13 November 2007
International Recommendations for Industrial
Statistics (IRIS)
Outline of presentation
1. Background
2. Need for revision of IRIS
3. Main recommendations
a.
b.
c.
d.
e.
f.
Scope and coverage
Statistical units
Treatment of ancillary activities
Data items
Valuation
Data items for international reporting


Annual
Quarterly
1.



Background
Since 1950s, UN has published international
recommendations – to establish a coherent
and uniform measurement of industrial
activities – 1953, 1960, 1968 and 1983
UNSC in 2006 reviewed the industrial
statistics and endorsed the proposal for
revision of IRIS.
Expert Group Constituted to guide the
revision which met in


Sept 2005 – considered proposals for revision and
July 2007 – considered the draft IRIS
2.
Need for revision
Some important factors which necessitated revision are:

1993 SNA update
• Units undertaking ancillary activities treated as a separate
establishment in some specific circumstances,
• Additional element for the measure of COE like ‘employees
stock option’
• Treatment of goods sent abroad for processing,
• Changes in terminology and classification of assets,
• Capitalisation of database development, and capitalisation
of R&D expenditures


Revision of International Standard Industrial
Classification of all economic activities (ISIC Rev. 4) and
Central Product Classification (CPC Ver. 2).
Consistency with changes in concepts, definition and
terminology in publications and regulations of other
international organisations. For example, revision in the
IMF manual on BOP, EU regulations on statistical units,
structural business statistics etc.
2.



Need for revision
Cont.
Inclusion of aspects of globalisation of the
industrial production process including
‘outsourcing’ and use of e-ecommerce,
Efforts of countries to minimise the
differences between the concepts of
‘census value added’ and ‘national account
value added’,
Change in valuation of industrial output to
basic prices in accordance with the SNA
valuation principle,
2.


Need for revision
Cont.
Extension of the link between the economy
and the environment by extending the
coverage of the data items to include the use
of natural resources like energy, water,
mineral, generation of solid waste and waste
water and by-products,
Experience of countries both in developing an
industrial statistics system and conducting an
integrated system of annual and infra-annual
industrial inquiries adapted to the needs of
NA and the measurement of industrial sector
for the economy as a whole
3a.

Scope of industrial sector
Economic activities included in terms of ISIC
Rev. 4 are:
• Mining and quarrying (section B)
• Manufacturing (section C)
• Electricity, gas, steam and air conditioning supply
(section D), and
• Water supply; sewerage, waste management and
remediation activities (section E)


(Scope has been broadened as compared to the 1983
recommendations with inclusion of sewerage, waste
management and remediation activities)
Industrial activities in international waters,
such as the operation of petroleum and
natural gas wells, should be included if these
activities are subject to the laws, regulations
and control of the country concerned.
3a.
Scope of Manufacturing
Manufacturing



Includes the physical or chemical
transformation of materials, substances, or
components into new products.
Substantial alteration, renovation or
reconstruction of goods is generally
considered to be manufacturing.
Assembly of the component parts of
manufactured products is considered
manufacturing. This includes the assembly
of manufactured products from either selfproduced or purchased components
3a.
Scope of Manufacturing
Manufacturing


Specialized maintenance and repair of
industrial, commercial and similar
machinery and equipment is included in
manufacturing. However, the repair of
computers and personal and household
goods and the repair of motor vehicles are
not included in this section.
The recovery of waste - the processing of
waste into secondary raw materials though may involve, physical or chemical
transformations, is not considered to be a
part of manufacturing.
3a.
Scope of Manufacturing
Manufacturing


The boundaries of manufacturing and the other
activities can be somewhat blurry. As a general rule,
the activities in the manufacturing section involve the
transformation of materials into new products.
Some activities, although sometimes involving
transformation processes, are not classified as
manufacturing. They include:
• Logging - classified in Section A (Ag, forestry & fishing)
• Construction of structures and fabricating operations
performed at the site of construction - classified in section F
(construction)
• Activities of breaking bulk and redistribution in smaller lots,
including packaging, repackaging, or bottling products; mixing
paints to customer order; and cutting metals to customer
order, produce a modified version of the same product are
classified to section G (wholesale and retail trade; repair of
motor vehicles and motorcycles
Boundary between Mfg and Wholesaling
Outsourcing


Principal unit (principal) contracts another
production unit (contractor) to carry out
specific aspects of the production activity of
the principal, in whole or in part in the
production of a good or a service.
It should be noted that the activity
classification of the contractor does not
change with the outsourcing but that of the
principal is very much affected by the nature
and extent of the outsourcing
Boundary between Mfg and Wholesaling


Trend of outsourcing the mfg
activities has been growing recently.
Criteria for the classification of the
principal need to be clarified to
ensure international consistency in its
classification.
Classification of the principal should
be based on its ownership of the
physical input materials
Boundary between Mfg and Wholesaling
1. Outsourcing of support functions
• Principal carries out the core production
process but outsource certain support
functions, such as accounting or computer
services, to the contractor.
• In such a case, the principal remains classified
to the same ISIC class that represents its core
production process.
• The contractor is classified to the specific
support activity it is carrying out, e.g. ISIC class
6920 (Accounting, bookkeeping and auditing
activities; tax consultancy) or 6202 (Computer
consultancy and computer facilities
management).
Boundary between Mfg and Wholesaling
2. Outsourcing of part of the production
process
• The principal outsources a part of the
production process to the contractor.
• The principal owns the (material) inputs to be
transformed by the contractor and thereby has
ownership over the final outputs.
• The principal is to be classified as if it were carrying out
the complete production process.
• The contractor is classified according to the portion of the
production process that it is undertaking. In case of the
transformation of a good, the contractor is classified in the
same or separate ISIC category.
Boundary between Mfg and Wholesaling
2. Outsourcing of the complete production
process
Outsourcing of mfg activities to contractor
whereby the principal does not physically
transform the goods at the location of its unit:
(a) Principal owns the material inputs and has
economic ownership of the outputs,
• Principal is classified to section C (manufacturing),
specifically to the classification category that corresponds
to the complete (outsourced) manufacturing activity.
• Contractor is classified to section C (manufacturing),
specifically to the classification category that corresponds
to the mfg activity performed by the contractor.
Boundary between Mfg and Wholesaling
2. Outsourcing of the complete
production process
Outsourcing of mfg activities to contractor
whereby the principal does not physically
transform the goods at the location of its unit:
(b) Principal has the production done by others, but
does not own the material inputs,
• Principal is classified to section G (wholesale and retail
trade; repair of motor vehicles and motorcycles) .
• Contractor is classified to section C (manufacturing),
specifically to the classification category that corresponds
to the mfg activity performed by the contractor.
3a. Coverage of industrial activities

In conformity with the 1993 SNA
production boundary all units
engaged in economic activities
within the scope should be covered.


Units of all sizes (with and without fixed
locations) and
Units of all types of ownership including
the govt. and household units


Household unincorporated enterprises
Goods produced by households engaging in
industrial activities for own consumption
should also be covered.
3a. Coverage of industrial sector

cont.
Departments, establishments and similar
units in general Govt. should be included if
they are mainly engaged in production of
goods and services within the scope and
identifiable by accounting records kept by
them.


Some of units may not be operating for profit, or
May not dispose of their output in the market. Produce
of such units may be sold at prices below cost of
production because of govt policy.
• Govt. units may furnish goods and services to itself of a
kind provided by privately owned establishments – printing
and publishing services, ammunitions, etc.

All types of units not necessarily covered through
the same survey instrument.
3a. Coverage of industrial sector





cont.
Actual enumeration of establishments in the
various activities will in practice vary
according to the
Frequency with which the data are required
Difficulty of obtaining them,
Existence of alternative sources and the
resources available to the statistical
authorities.
Recommended coverage may be attained by
a complete enumeration of relevant
establishments or by using sample surveys.

The method of enumeration chosen will depend on
the circumstances in each country.
3b.

Statistical unit
1993 SNA recommends establishment as the most
appropriate statistical unit (SU) for production and
employment data
• Countries are encouraged to use establishment as a SU
for industrial statistics

Choice of establishment vs enterprise as SU reflects
balancing of data availability against homogeneity of
economic activity.
• Using establishment as a unit enables




Homogeneity in the measurement of the economic activity
More accurate presentation of regional economic reality
Choice of SU may be guided by factors such as purpose of
study, the availability and quality of requisite data,
therefore, enterprise can also be used as SU
In majority of cases establishment and the enterprise are
same except in case of multi-establishment enterprises.
3c. Treatment of Ancillary activities


A productive activity undertaken with the sole
purpose of producing services for intermediate
consumption within the same enterprise is
defined as an ancillary activity. Examples are
record keeping, personnel management,
warehousing etc
Ancillary activities are integrated with the
establishments they support. This approach depicts
the production process as it is performed but has the
following disadvantages
• Not recognized by its own activity, structural decomposition
of GDP by economic activities not depicted correctly, and
• Regional GDP can not be compiled accurately when the
ancillary unit and the establishments it serves are located in
different regional economies
3c. Treatment of Ancillary activities
cont.
Units undertaking ancillary activities to be
treated as an establishment in certain cases




Enterprise in which different kinds of activities
undertaken by it or either horizontally or vertically
integrated;
When an establishment undertaking ancillary
activities is statistically observable, i.e. records of
its transactions are readily available, and
When the ancillary units are in a geographical
location different from the establishments they
serve.
Such an establishment should be classified
according to its own principal activity.
3c. Treatment of Ancillary activities cont.
Output of ancillary establishment

Output of ancillary establishment should be
derived on sum of cost basis i.e. all costs of its
production including the cost of the capital used.


Output deemed to be market output when the
parent enterprise is a market enterprise and nonmarket otherwise.
Output of the ancillary unit is treated as
intermediate consumption of the establishments it
serves and should be allocated to them using an
appropriate indicator such as their value added,
output or employment.
3d.
Data items
Characteristics of statistical units
• Location
• Type of economic organisation
• Type of legal organisation and ownership
• Size (in terms of persons employed)
Recommended size classes: (1-9, 10-19, 20-49,
50-249, 250+)
• Kind-of-activity
• Type of unit
• Period of operation
3d. Data items
cont.
Employment (by gender)
• No. of persons employed
Working proprietors, Unpaid FW, employees
 Employees engaged in own-account
production of intellectual property products
(software & database, R&D, mineral
exploration and evaluation, entertainment,
literary and artistic originals)
 Employees engaged in own account fixed
asset formation and construction)

• Average number of persons employed
• Hours worked
• Leased employees
3d. Data items
cont.
Compensation of employees in cash and in kind
Additional element pursuant to 1993 SNA revision
Stock options (income in kind)
• Employer giving employee an option to buy stocks (shares)
at some future date at a given price (strike/exercise price)
subject to certain conditions (employee is still on the
enterprise pay roll).
• Employee may not exercise the option:
• Share price is now lower than his option price
• No longer in the employment of the company
• The ‘grant date’ is when the option is provided, the
‘vesting date’ is the earliest date when the option can be
exercised (or lapses)
• Value of the stock option may be estimated as the
difference between the market price and the stock price at
vesting date or using using a stock option pricing model.
3d. Data items
cont.
Other expenditures

Cost of material, parts and supplies except gas,
fuels and electricity (purchased form other enterprises and
delivered by the other establishments of the same enterprise)



Cost of gas, fuels and electricity purchased
Cost of water and sewerage services
Purchase of services except rental
• Cost of industrial services purchased and also delivered by
other establishments of the same enterprise
• Cost of non-industrial services purchased and also
delivered by other establishments of the same enterprise



Purchase of goods and services for resale in the
same condition as received
Rental payments
Non-life insurance premiums payable on
establishment property
3d. Data items
cont.
Data items on Quantity
• Quantity of individually important materials and
supplies
• Quantity of gas, fuels purchased
 Quantity of electricity (Kwh)





Total energy consumed (tera joules)*
Cost of water





Purchased
Generated
Sold
Purchased
Abstracted for own use
Sold
Total water used
Quantity of waste water


Treated on site prior to discharge
Discharged without being treated
3d. Data items
cont.
Sales/shipments and other revenues
 Sales/shipment of goods produced





Sales/shipment of goods and services purchased
for resale in the same condition as received
Receipts for industrial work done
Other receipts
Value of own account fixed assets*
E-commerce sale/value of shipment/receipt for
services and other revenues
Quantity
 Quantity of individually important products
(UN list of Industrial Products)
3d. Data items
Inventories
Capital formation

Dwellings

Other buildings and structures

Machinery and equipment
• Transport equipment
• ICT equipment
• Other machinery and equipment

Intellectual property products
•
•
•
•
•
Computer software and database
R&D
Mineral exploration and evaluation
Entertainment, literary and artistic originals
Others
Orders

New orders received

Unfilled orders during the reference period

Environmental protection expenditures
cont.
3d. Data items
cont.
Environmental protection expenditures
• Environmental protection groups together all actions
and activities that are aimed at the prevention,
reduction and elimination of pollution as well as any
other degradation of the environment. This includes
measures taken in order to restore the environment
after it has been degraded due to the pressures from
human activities


As environmental protection is prime objective,
actions and activities which have a favourable impact
on the environment but which serve other goals do
not come under environmental protection.
Excluded are activities from field of environmental
protection, which while beneficial to environment
primarily satisfy technical needs or the internal
requirements for hygiene or security of an
enterprise.
3e. Valuation


Value added at basic prices (preferred)
Situations where it is difficult to
segregate taxes and subsidies on
products and production - Value added
at factor cost (second best option)
Total value added vs Census value added


National account value added (total
value added) recommended.
Census vale added optional - if countries
desire to maintain their earlier time series
3f. Data items for International Reporting
Annual statistics
Data item
Level of
details
Reporting level
(in terms of
ISIC Rev. 4)
Time-lag
After close
of yr
Demography
Number of
enterprises
By economic
activity and
size class
3-digit by economic
activity
1-digit level for size class
distribution
18 months
Employment
Total number of
persons
employed
--do--
----do---
18 months
Total number of
employees
--do--
---do---
18 months
3f. Data items for International Reporting
Annual statistics
Data item
Level of
details
Reporting
level
Time-lag
Compensation of employees
Wages and salaries in
cash and in kind of
employees
By economic
activity
3-digit level
of ISIC, Rev.4
18 months
By economic
activity
3-digit level
of ISIC, Rev.4
18 months
By economic
activity
3-digit level
of ISIC, Rev.4
18 months
Output
Gross output at basic
prices
Value added
Total value added at basic
prices
Gross fixed capital formation
18 months
3f. Data items for International Reporting
Annual statistics
Data item
Level of
details
Reporting
level
Timelag
Environment
Environmental protection
expenditure
By economic
activity
3-digit level
of ISIC, Rev.4
18 months
Total energy consumed
(terajoules)
By economic
activity
3-digit level
of ISIC, Rev.4
18 months
Total water used
(cubic meters)
By economic
activity
3-digit level
of ISIC, Rev.4
18 months
3f. Data items for International Reporting
Quarterly statistics
Data item
Level of
details
Reporting
level
Timelag
Employment
Total number of
persons employed
By economic
activity
2-digit level of
ISIC, Rev.4
3 months
Total number of
employees
By economic
activity
2-digit level of
ISIC, Rev.4
3 months
By economic
activity
2-digit level of
ISIC, Rev.4
3 months
--- do --- --- do ---
-- do ----- do ---
3 months
3 months
2-digit level
3 months
Compensation of employees
Wages and salaries in
cash and in kind of
employees
Orders
New orders received
Unfilled orders
Index of industrial production
Data Sources
Two basic sources for economic data
(a) Administrative sources: Administrative processes
are set up in response to legislation and regulation. Each
regulation results in a register of the institutional units –
enterprises, persons, etc. – bound by that regulation and
in data resulting from application of the regulation. The
register and data are referred to collectively by the
statistical office as an administrative source

Main advantages of the administrative source
•
•
•
•
•
•
Complete coverage of the concerned population;
Avoidance of response burden: the responding units
make available the information as part of the
administrative procedure;
Cheaper for the statistical office to acquire data from
an administrative source than to conduct a survey;
Negligible non-response;
No sampling errors; and
Data reported may be more accurate because of
intense data checks by administrative authorities.
Data Sources
contd.
Main disadvantages of the administrative source



Discrepancy between administrative and statistical
concepts,
Poor integration with other data of the statistical systems.
AUs do not correspond to SUs; even if
does matching
problem can prevent from using them.
Risks with respect to stability: Administrative processes
are subject to change in response to new legislation - may
cause systematic bias.

Data may become available with unacceptable delay

Legal constraints with respect to access and
confidentiality
Privately controlled administrative data sources – can serve
as an important supplement to official statistics – should
be thoroughly checked for coverage and quality and
considered for use only when found to be of acceptable
quality.
Data Sources
contd.
(b) Statistical surveys


Both, the census and the sample survey
techniques are used for collecting economic data.
Sample survey is less costly way of data
collection of precision with high frequency
Disadvantages of survey approach

Resource intensive (both financial and
manpower),

Additional respondent burden,

Higher non-response rates and sampling errors.

Respondents may not trust the confidentiality
clause.
Data Sources
contd.
Two types surveys
(i) Enterprise Survey

Sampling frame of enterprises engaged in
relevant economic activities – from current upto-date BR, is a prerequisite

For countries with no BR, list of enterprises
drawn from EC conducted in the past

Depending upon the source of the sampling
frame surveys may also be classified as either
list-based or area-based.
• In list-based survey the initial sample is selected from a
pre-existing list of enterprises,
• In an area-based survey the initial sampling units are a
set of geographical areas. After one or more stages of
selection, a sample of areas is identified within which
enterprises or households are listed. From this list, the
sample is selected and data collected.
Data Sources
contd.
Two types surveys
Mixed household-enterprise surveys

Sample of households is selected



Each household is asked whether any of its
members own and operate an unincorporated
enterprise.
The list of enterprises thus compiled is used as
the basis for selecting the enterprises from
which desired data are finally collected.
Mixed household-enterprise surveys are useful to
cover only unincorporated (or household)
enterprises which are numerous and cannot be
easily registered.
Data Collection strategy


For complete coverage of the industrial activity, data
collection strategy should be based on an integrated
approach covering in principle all production units across
all class sizes including micro and small enterprises.
The legal organisation (incorporated or unincorporated),
size (from large to small and micro enterprises) and the
ownership pattern (public sector, privately owned and
foreign controlled) of units within the scope of the
industrial statistics differ significantly.
•

At one end of the spectrum are the corporate units which are
incorporated under the statute of a country and are
comparatively large, while at the other end are the
unincorporated enterprises characterised by low level of
organisation.
In view of this diversity, it is difficult, if not impossible, to
devise a single strategy for data collection that is
appropriate for all units in the scope.
Data Collection strategy



Incorporated units - popularly known as
companies, a list of such units is always
available.
Public sector enterprises – Complete
enumeration
The coverage of the private and foreign
controlled incorporated enterprises should
be achieved by dividing them into two
segments –
• large-scale units – complete enumeration, and
• the rest – cover through sample survey
Data collection strategy
Universe of units engaged in industrial activities
Not in BR
(Non-list frame Segment)
In BR
(list-frame segment)
Large units
Public sector
Complete
enumeration
Private
Sector
Segment 1:
Large units should be
covered on a complete
enumeration basis
Segment 2:
Remaining through
sample surveys
With fixed
premises
Small units
Covered either
Through
sample
Surveys or
Administrative
data
Without Fixed
Premises
 1
Area frame
 2
Should be covered through
Sample surveys
1. All units on the business register are excluded from the area frame (i.e. non-list frame segment).
2. All units in the sample that are part of a list frame segment and included therein are excluded from the sample of
non-list frame segment.
Thank You