TFHPSA: Government / public
/ private sector delineation
SNA Advisory Expert Group
Frankfurt am Main, February 2006
Delineation issues
Question: Does the AEG agree that SNA should be
clarified to improve the consistency of the
application of current SNA principles in the
delineation government / public / private ?
What implies:
 The recommendation to use a decision tree
 Additional guidance on the criterion of control
 Additional guidance on economically significant
prices

2
Delineation issues
Recommendation 1: use a decision tree
Answer 3 questions:
1. Is the entity an institutional unit ?
2. Is the institutional unit part of the public
sector ?
3. Is the public institutional unit market or
non-market ?
3
Delineation issues: Control
Recommendation 2: Government
control on corporations
Definition: control is the ability to determine the
general corporate policy of an entity;

8 major indicators:
1.
Ownership of the majorityof the voting interest
2.
Control of the board or other governiong body
3.
Control of the appointment and removal of key
personnel
4.
Control of key committes of the entity
4
Delineation issues: Control
Government control on corporations
(continued)
5. Golden shares and options
6. Regulation and control
7. Control by a dominant customer
8. Control attached to borrowing from the
government
5
Delineation issues: Control
Recommendation 3: Government control on
non-market NPIs
5 major indicators:
1.
Appointment of officers
2.
Other provisions of enabling instrument
3.
Existence of contractual agreements
4.
Degree of financing by government
5.
Level of risk exposure
6
Delineation issues: ESP
Recommendation 4: guidance to use
Economically significant prices to


answer question 3: is the public unit
market (a public corporation) or nonmarket (a government unit)?
ESP is the criterion that is used to classify
output and producers as market or nonmarket
Recommendation 4 supported by 5 and 6
7
Delineation issues: ESP
For a public unit whose production is sold primarily
to corporations and households:
 to qualify as market producer, the general rule is
that the majority of the production costs are
expected to be covered by the value of the sales
(over a sustained multi-year period).
 However, no numerical rule is agreed on at
international level.
 In principle, this assessment is to be made for
each institutional unit individually.
8
Delineation issues: ESP
For public units whose production is sold only to
government, 2 cases may be considered:
 The public entity provides ancillary services: the
accounts will be consolidated
 The public entity is an institutional unit that can
be:
- the only supplier: it is always treated as a nonmarket unit (unless it competes in tendering for
contract on commercial terms)
- One of several producers: it is treated as a market
producer if prices are ESP and if it competes with
other producers.
9
Delineation issues: ESP
Recommendation 5: definition of sales (to



implement the general assessment of ESP)
The business notion of sales
Excluding taxes on products and subsidies
on products (except subsidies granted to all
producers including private ones for this
type of activity)
Excluding own-account production
10
Delineation issues: ESP
Recommendation 6: definition of production
costs
Production costs are the sum of:
 Intermediate consumption
 Compensation of employees
 Costs of capital services (or CFC)
 Other taxes on production (other subsidies
on production are not deducted)
11
Delineation issues
Questions to the AEG:
 Does the AEG agree with recommendation 1 to
use a decision tree relevant for the delineation
government / public / private?
 Does the AEG agree with the additional guidance
on control in recommendations 2 (corporations)
and 3 (NPIs)?
 Does the AEG agree with the additional guidance
on ESP in recommendation 4, supported by
recommendations 5 and 6?
12