## BPM7 Chapter 15/2025 SNA Chapter 23. Globalization: Annotated Outline

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**Canonical URL:** [BPM7 Chapter 15/2025 SNA Chapter 23. Globalization: Annotated Outline](https://www.imf.org/-/media/files/data/statistics/bmp7/chapters/ao-sna-ch-23-bpm-ch-15.pdf)

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### I. Introduction
- The annotated outline was prepared jointly to cover topics for a new thematic chapter on globalization to be included in the 2025 SNA and BPM7, with SNA and BPM editors coordinating to include only issues relevant to their respective domains.
- Core observations:
  - Globalization—"the economic integration of countries around the world"—has fragmented production across national economies in production chains between resident and non-resident firms due to reductions in transportation costs, the information technological revolution, lower production costs, and more open economic policies.
  - Capital has become increasingly intangible, and capital and people move more freely across borders.
  - Multinational enterprises (MNEs) have developed complex cross-border corporate structures for reasons including geographical diversification, responding to trade barriers, proximity to markets, and reducing costs of labor, transportation, and taxes.
  - Concepts of residence and economic presence central to macroeconomic statistics are more difficult to interpret for MNEs whose activities extend across national boundaries.
- Purpose and scope:
  - The chapter will elaborate on issues touched throughout the manuals and refer to other sources, including manuals and guides published since the last update of the standards, to help compilers address globalization issues.
  - It will explain measurement challenges and motivate proposed supplemental presentations that provide alternative views or additional detail important for understanding connections between economies.
  - Guidance is intended to remain useful even if headwinds develop to some drivers of globalization.

### II. Multinational Enterprises (MNEs)
- Definitions and alignment:
  - The section will begin with the definition of MNE (also introduced in 2025 SNA Chapter 5/BPM7 Chapter 4) and highlight the definition of control as stated in BPM6 paragraphs 6.12–6.14, which in the updated SNA will be aligned per GN G.2.
- What MNEs do:
  - MNEs manage production, trade, direct investment, and international transfer of knowledge and technology with the aim of maximizing their global after-tax profits.
  - MNEs increasingly set up global structures to benefit from different legal and tax regimes and employ tax planning strategies, such as profit-shifting, that exploit gaps and mismatches in tax rules to shift profits to low or no-tax locations where there is little to no economic activity.
  - MNEs establish special purpose entities (SPEs) not only to channel financial investments globally, but also increasingly to manage intellectual property rights, research and development, and trade.
- SPEs and intellectual property products (IPPs):
  - The section will refer to a standardized and internationally agreed definition of SPEs (from GN G.4) and discuss a classification of SPEs introduced in 2025 SNA Chapter 5/BPM7 Chapter 4.
  - A typology of SPEs (GN G.4, Annex V) will be included.
  - Because IPPs are not physically contained and can be used simultaneously by different parts of an MNE, MNEs may register previously produced IPPs in an economy with a more favorable tax regime.
  - The chapter will recommend use of the decision tree from the UNECE Guide to Measuring Global Production (GMGP) to identify economic owners (parent, producer, or production affiliate) of previously produced IPPs (GN G.5) and clarify that SPEs can be the economic owners of IPP assets.

### III. Global Production
- Core description:
  - The section will describe how globalization has changed production processes, fragmenting production across economies and forming global value chains (GVCs).
- Production arrangements covered:
  - Factoryless goods production.
  - Manufacturing services performed on inputs owned by others.
  - Merchanting (GN C.4, expected to be finalized soon).
- Cross-references and classifications:
  - The typology for global production arrangements (GN C.4, Annex III) will be introduced.
  - Links to the International Standard Industrial Classification of all Economic Activities (ISIC) will be provided where classification of these units is covered.
  - References to where these concepts are discussed elsewhere in the manuals (e.g., BPM7 Chapter 10, Goods Account, Box 10.1; BPM7 Chapter 11, Services Account, Box 11.1).

### IV. Measurement Challenges
- Overview:
  - MNEs and global production arrangements present measurement challenges for both national accounts and balance of payments. Fundamental conceptual challenges are summarized here; details will be covered in the Balance of Payments Compilation Guide or other guidance.
- Specific measurement challenges identified:
  - Allocation of activities across different economies given complex global corporate structures and fragmented production.
  - Complex financing and ownership structures can mask ultimate ownership links and "inflate" DI flows and positions as each flow into and out of each economy is counted even if funds or income are just passing through.
  - Production fragmentation inflates gross trade flows; this effect will be illustrated in a figure (see GN G.7, Annex II).
  - Cross-border mobility of corporate assets—including intangible assets such as IPPs—ease of changing legal domicile, transfer pricing, and intra-group services can make the true location of profit and value-added generation ambiguous.
  - Ensuring all activity of an MNE is captured, not duplicated, and properly allocated by economic territory is challenging since current standards do not view the MNE as a single entity; misallocation can result in mismeasurement of GDP and severely distort macroeconomic indicators.
- Drafting note:
  - For the purpose of this high-level outline, measurement challenges are presented separately; at the drafting stage they may be incorporated differently in the SNA and BPM context.

### V. Alternative Indicators and Supplementary Information to Monitor the Impact of Globalization and Meet Users' Needs
- Objectives:
  - Emphasize macroeconomic indicators within the existing frameworks, develop more granular supplemental data consistent with the core framework, and provide alternative presentations that extend beyond the core frameworks to inform users on impacts of globalization.
- Emphasize existing macroeconomic indicators within SNA:
  - Indicators less distorted by globalization and less sensitive to MNE activity include gross/net national income (GNI/NNI), gross/net national disposable income (GNDI/NNDI), and household (adjusted) disposable income; these indicators better reflect underlying economic activities of MNEs (G.2).
  - Statistics on the Activities of Multinational Enterprises (AMNE) and Foreign AffiliaTes Statistics (FATS) provide additional information on foreign-controlled enterprises beyond traditional FDI statistics covered in balance of payments and IIP accounts.
  - The chapter will bring in discussion of coverage, statistical units, time of recording and valuation, attribution of AMNE variables and compilation issues from BPM6 Appendix 4, with updates and references to the OECD Benchmark Definition of Foreign Direct Investment and the Manual on Statistics of International Trade in Services.
  - Reconciling FDI and AMNE statistics is emphasized to address measurement challenges and support analysis, policymaking, and data integrity checks (GN D.9).
- More granular or supplemental data consistent with the core framework:
  - Supplemental presentations of DI statistics by ultimate investing economy, by ultimate host economy, etc. (to be covered in updated BPM7 Annex 6) can help address challenges (GN D.6).
  - Additional granularity in institutional sector accounts (ISAs), based on control and ownership of corporations, can be implemented based on statistical infrastructure, resources, and policy needs (GN G.2); the chapter can include a figure showing additional granularity in ISAs based on GN G.2, Annex II.
  - A supplemental presentation of trade and investment income by characteristics of the enterprise, including ownership (e.g., domestically controlled or foreign-controlled) and size, can help identify the role of MNEs in the current account (GN C.2, C.4, D.6, and G.7). The chapter will provide general criteria for thresholds (as in paragraphs 12–15 of GN C.2) but leave thresholds to compilers; the template (Annex I of GN C.2) will be introduced as a table.
  - Separate identification of SPEs within cross-border statistics: the SPE data collection within ESS and encouraged breakdowns of data for SPEs, including extensions (per GN G.4), are important. For countries where SPEs are significant, the chapter recommends national accounts compilers identify SPEs within ISAs as an "of which" supplementary category for both foreign-controlled financial and non-financial corporations. Enhanced imputations for government-sponsored SPEs (GN D.5, expected to be finalized soon) will be covered in the updated Financial Account chapter (BPM6, paragraphs 8.24–8.26).
  - Supplemental statistics within the BPM framework, such as additional detail by geography or by product, can improve indicators for GVC analysis (see GN G.7 Annex V).
- Alternative presentations or extensions outside SNA/BPM conceptual framework:
  - The chapter will encourage a voluntary option to extend the core framework with a supplemental presentation of SPEs reclassified from their countries of legal incorporation to the countries of their parents for economies where SPEs are important.

### VI. Analytical Tools
- Trade in Value Added (TiVA):
  - Introduction to TiVA, which measures value added by each country and industry in the production of goods and services traded and consumed worldwide.
  - Overview of resulting TiVA indicators and reference to initiatives such as the OECD-WTO TiVA initiative.
- Global Value Chain (GVC) satellite accounts:
  - Introduction to the GVC satellite account and explanation of how it identifies and articulates a GVC for specific products or product groups.
  - GVC satellite account comprises GVC-specific SUTs (national or multi-country) based on an enterprise-centered approach using integrated and detailed business statistics and information on business lines/functions, and GVC-specific ISAs.
  - Compilation guidance will refer to materials such as the 2019 GVC Handbook.
- Extended Supply-Use Tables (eSUTs):
  - Introduction to eSUTs designed to provide granularity on MNE roles in production processes and to aid GVC and TiVA analysis.
  - Compilers are expected to implement eSUTs flexibly to suit specific circumstances.
  - The section will describe possible extensions and refer to UN guidelines on Accounting for Global Value Chains: GVC Satellite Accounts and Integrated Business Statistics and the forthcoming OECD Handbook on Extended Supply and Use Tables for full details.

Schematic elements included in the annotated outline:
- Boxes and figures: Typology of SPEs; GMGP Decision Tree; Typology of Global Production Arrangements; Figure showing effect of production fragmentation on gross trade flows; Figure: ISAs: Financial and Non-financial Corporations; Table: Template for Identifying the Role of Enterprise Characteristics in the Current Account (from GN C.2, Annex 1).
- Cross-references to guidance and materials: BPM6 Appendix 4; GNs G.2, G.4, G.5, G.7, C.2, C.4, D.5, D.6, and D.9; UNECE Guide to Measuring Global Production; UNECE Impact of Globalization on National Accounts; UN Accounting for Global Value Chains: GVC Satellite Accounts and Integrated Business Statistics; IMF reports on BOP statistics for GVCs and on Special Purpose Entities; IMF Special Purpose Entities: Guidelines for a Data Template; OECD Benchmark Definition of Foreign Direct Investment, fourth edition.
- Key stakeholders consulted: SNA and BPM Editors; IMF Statistics Department GO and FI; GZTT Secretariat.

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/chapters/ao-sna-ch-23-bpm-ch-15.pdf_