TFHPSA: Government public private sector delineation

1
TFHPSA Government / public / private sector
delineation

• SNA Advisory Expert Group
• Frankfurt am Main, February 2006

2
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

3
Delineation issues

• Recommendation 1 use a decision tree
• Answer 3 questions
• Is the entity an institutional unit ?
• Is the institutional unit part of the public
  sector ?
• Is the public institutional unit market or
  non-market ?

4
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
• Ownership of the majorityof the voting interest
• Control of the board or other governiong body
• Control of the appointment and removal of key
  personnel
• Control of key committes of the entity

5
Delineation issues Control

• Government control on corporations (continued)
• Golden shares and options
• Regulation and control
• Control by a dominant customer
• Control attached to borrowing from the government

6
Delineation issues Control

• Recommendation 3 Government control on
  non-market NPIs
• 5 major indicators
• Appointment of officers
• Other provisions of enabling instrument
• Existence of contractual agreements
• Degree of financing by government
• Level of risk exposure

7
Delineation issues ESP

• Recommendation 4 guidance to use Economically
  significant prices to answer question 3 is the
  public unit market (a public corporation) or
  non-market (a government unit)?
• ESP is the criterion that is used to classify
  output and producers as market or non-market
• Recommendation 4 supported by 5 and 6

8
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.

9
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
  non-market 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.

10
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

11
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)

12
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?