Implementing New classifications
Workshop on National Accounts
6-9 July 2009, New Delhi, India
UN Statistics Division
1
Presentation Plan
 Introduction
 Overview of ISIC changes
 Implementation process - Steps


Structuring national classifications
Adaptation of business register
 Points for discussion
Introduction

Since its creation in 1948, ISIC had two goals:
 Provide a tool for international comparison
 Provide guidance to countries for a national activity
classification structure

ISIC periodically updated to keep it relevant
with economic developments.
 Side effect: Increasing need for detailed data has
lead to more detailed versions of ISIC
Structuring national classifications


Creation of a new national version of national
classification (NSIC) according to ISIC Rev.4 for
national use
Recoding Business Register


Switchover in the Business Register to new NSIC
Statistics update process


Co-ordinate simultaneous switchover in statistics
to new NSIC and the control of the quality of time
series
 Increase in top-level categories
 Increase in overall detail
 New concepts (information, professional services,
support services)
 New application rules (vertical integration, top-down
method, outsourcing)
ISIC Rev.3
ISIC Rev.4
Sections
17
21
Divisions
60
88
Groups
159
238
Classes
292
419
6



Despite many changes, a lot of areas in ISIC have
not changed
Manufacturing as a “historical” area remains
relatively stable
Most application rules remain intact
ISIC Rev.4
ISIC Rev.3.1
A
Agriculture, forestry and fishing
B
Mining and quarrying
A
Agriculture, hunting and forestry
C
Manufacturing
B
Fishing
D
Electricity, gas, steam and air conditioning supply
C
Mining and quarrying
E
Water supply; sewerage, waste management and ……
D
Manufacturing
F
Construction
E
Electricity, gas and water supply
G
Wholesale and retail trade; Repair of motor vehicles …
F
Construction
H
Transportation and storage
G
Wholesale and retail trade; …
I
Accommodation and food service activities
Hotels and restaurants
J
Information and communication
H
K
Financial and insurance activities
I
Transport, storage and communications
L
Real estate activities
J
Financial intermediation
M
Professional, scientific and technical activities
K
Real estate, renting and business …
N
Administrative and support service activities
L
Public administration …
O
Public admn and defence; compulsory social sec
M
Education
P
Education
N
Health and social work
Q
Human health and social work activities
O
Other community, social, personal …
R
Arts, entertainment and recreation
P
Activities of private households
S
Other service activities
Q
Extraterritorial organizations and bodies
T
Activities of households as employers…
U
Activities of extraterritorial organizations and bodies
58 - Publishing activities
59 - Motion picture, video, television programme
production, sound recording and music publishing
activities
60 – Programming and broadcasting activities
61 - Telecommunications
62 – Computer programming, consultancy and related
activities
63 - Information service activities




221 ”Publishing” ( in “Manufacturing”)
72 “Computer and related activities” except 725
(in “Real estate, renting and business activities”)
642 “Telecommunications” (in “Transport, storage
and communications”)
92 “Recreational, cultural and sporting activities”
(9211, 9212, 9213, 9220, 9231 in “Other
community, social and personal service activities”)

Major tasks and challenges:
 Defining a new classification and associated tools
 Reclassification of all units on the business
register according to the revised classification
 Maintaining two classifications for an interim
period
 Sampling and weighting under the new
classification

Major tasks and challenges:
 Simultaneous estimation and results assessment
under both new and old classification
 Construction of industry weights
 Construction of back series in terms of the
revised classification
 Handling of the national accounts move to the
revised classification
How can national classifications be structured?
1. Using ISIC as a starting point
2. Based on historical national versions
3. Starting completely from scratch
Link link
between
ISIC
and NACEtruncation”
Combining
ofthrough
ISIC
categories
ISIC
“numerical

Countries that use ISIC as a basis for their national
ISIC Rev.4
Nationaldegrees:
Classification
classification,
can do this to varying
ISIC
Rev.4
NACE
Rev.2
ISIC Rev.4
National
Classification
2311
Manufacture
of
flat
glass
1. Adopt ISIC “as-is”2311 Manufacture
Manufactureof
offlat
flatglass
glass
2310 Manufacture of glass and glass 23101
2319 Manufacture and processing of other glass
2312
Shaping
and
processing
flatglass
glass to
23102
processing
ofofflat
2. Use the
complete
ISICShaping
and and
add
subdivisions
products
2310 Manufacture of
of glass
glass and
and
2313 Manufacture
Manufactureof
ofhollow
hollowglass
glass
2391 Manufacture
of refractory
glass
products
products
reflect
nationally23103
important
industries
(but maintain
2314
Manufacture
of
glass
fibres
23104
Manufacture
of
glass
fibres
products
2390 Manufacture of refractory products and clay
the ISIC coding structure)
–materials
can
be “numerically
2319
Manufacture
andprocessing
processing
otherglass,
glass,
23109 building
Manufacture
and
ofofother
including
technicalglassware
glassware
including
technical
truncated”
back to ISIC
[Example]
2392 Manufacture
of clay building
of refractory
refractory
2320 Manufacture
Manufactureof
ofrefractory
refractoryproducts
products
2391 Manufacture of
23910
materials
3. products
As above, but with changes of the coding structure
2331
Manufacture
ofceramic
ceramictiles
tilesand
andflags
flags table
Manufacture
of
(example: NACE)23921
– requires
correspondence
of clay
clayis
building
2392 Manufacture
of
building
International
comparability
reduced
2332 Manufacture
Manufactureof
ofbricks,
bricks,tiles
tilesand
andconstruction
construction
23922
[Example]
materials
products, in
inbaked
bakedclay
clay
products,
Correspondence table is required.
4. Elevating lower level ISIC categories to higher
national
levels,
(e.g. combine ISIC categories at 2comparability is
is maintained.
maintained.
International comparability
or
3-digit
level)
[Example]
However,
correspondence
table is required.
No
additional
tools
are required.



The first three methods maintain full
comparability with ISIC at all levels
Option 4 limits internationally
comparability to a higher aggregation
level only
Is use of the same coding as ISIC 4 a
requirement? - No, but it makes
comparisons easier.

Using non-ISIC based classifications
always creates difficulties for international
comparison
 Correspondence tables are necessary
 May limit data conversion due to splits

Efforts are encouraged to line the historical
versions up to ISIC
 At detailed level (without considering
aggregation structures) or
 By lining up individual sections

The United Nations Statistical Commission
recommends that detailed categories of a national
classification can be rearranged and aggregated so
that they correspond with the 2-digit level of ISIC
without loss of data.

However, most statistics and users will require more

Countries might want to add detail for industries of
particular importance to the national economy.

Countries might want to remove detail for reasons
involving size and relevance, confidentiality or
homogeneity
Classification for collection may be more
detailed than for distribution of data
 Using more detail for collection allows for future
adjustments if individual industries are growing
 Level of detail for publishing depends on type of
statistics anyway
No fixed guidelines exist for the proper
choice of detail
ISIC
Possible approaches
Based on variables like:
• # of statistical units
• # of employees
• value added
With chosen variable,
compute ratio R between what
is found within a category and
average among “siblings”:
• R < 0.5 => delete
• R  [0.5, 1.5] => keep
• R > 1.5 => split
Drawbacks:
•Hard to define levels/weights
• Level of detail influence
outcome
• Ignore dynamic aspects
Homogeneity
based
Based on:
Homogeneity ratios (as
described in ISIC Rev. 3)
Compress or expand
classification based the
value of these ratios
Drawbacks:
• Not enough usable data
• No definitive and
mutually exclusive
definition of activities by
products
Based on:
• Input from data users
• Special concerns
(confidentiality, extra burden,
growing industries)
• New subclasses only created
if user demand
• Data users must justify their
needs for splits, and estimate
number of affected units and
turnovers
• Take confidentiality and
extra burden into account in
advance
• No strict thresholds
Drawbacks:
• Challenging and intense
discussions, not all user needs
can be met
 ISIC structure and definition are based on few
criteria (input, process, output, use of
outputs)
 Should other criteria be added for national
purposes, such as private vs. public entity,
manufacturing by hand (crafts) vs.
manufacturing by machines?
 What are the applications?
 Generally, avoid unnecessary addition of
detail

When following the ISIC structure and coding system,
don’t renumber codes if you want to skip a code
number
 Regardless of legality, size or other concerns, it is still within
conceptual scope, and must be accounted for in the SNA.
 Renumbering makes the ISIC link less intuitive
Rules for good housekeeping


If a category at level n is not further subdivided, the
code at level n+1 should be the same code with a “0”
appended
Use digit “9” for residual categories
Expert Group


Expert Group discussed a proposal for the
implementation of ISIC and CPC at its meeting
in April 2007
Main recommendations relate to:




Timetable
Documentation and tools
Regional workshops
Technical cooperation
EG recommended two milestones:
 Countries should adapt their national classification to
ISIC Rev.4 by 2009
 To meet population census target of 2010
 International data reporting in ISIC Rev.4 format
should begin in 2012
 No specific dates have been recommended for
completion of:
 Adaptation of business register
 Sample designs and weights for surveys
 Backcasting
 Reasons:
◦ The timing and organization of surveys varies by country
◦ Scope (length) of backcasting differs by country

UNSD will develop:
 A Companion Guide to ISIC and CPC that helps
to understand:
 the concepts and structure of the classifications
 Application of the classification
 Correspondence tables
 ISIC and CPC indexes
 UNSD will also set up an open discussion forum
and expand the classifications website into a
larger knowledge platform
Major tasks and challenges:
 Defining a new classification and associated tools
 Reclassification of all units on the business register
according to the revised classification
 Maintaining two classifications for an interim period
 Sampling and weighting under the new classification
 Simultaneous estimation and results assessment
under both new and old classification
 Construction of industry weights for short term
statistics
 Construction of back series in terms of the revised
classification
 Handling of the national accounts move to the
revised classification
Sources:
 Direct (straight) recoding (1:1 link)
 Problems for 1-n and m - n links

Internal sources

External sources
 Information from profiling of large and complex enterprises
 Existing business activity descriptions can some times be
used to allocate split codes between old and new
classifications
 NSO may depend on external registers (tax registration,
social security, chambers of commerce etc.)
 If admin sources convert to new classification at exactly
the same time as the statistical BR of NSO – then admn
source is helpful to determine the correct new code for
the business

Has the process for implementing new
classifications been set up by the South
Asian countries? If
 Yes – Status
 No – Plan for implementation
Thank You