United Nations Statistics Division

ISIC Rev.4 ISIC Rev.4 Changes in manufacturing and Changes in manufacturing and

business register recodingbusiness register recoding

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Status of ISIC Rev.4Status of ISIC Rev.4

• ISIC Rev.4 has been officially released in ISIC Rev.4 has been officially released in electronic form and hardcopyelectronic form and hardcopy• Translation is ongoingTranslation is ongoing

• Final version of ISIC Rev.4 is very similar Final version of ISIC Rev.4 is very similar to the draft published in Nov. 2006to the draft published in Nov. 2006• Only limited set of changes (mostly editorial)Only limited set of changes (mostly editorial)

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ISIC structure changesISIC structure changes

• Increase in top-level categoriesIncrease in top-level categories

• Increase in overall detailIncrease in overall detail

• New concepts (information, professional New concepts (information, professional services, support services)services, support services)

• New application rules (vertical integration, New application rules (vertical integration, top-down method, outsourcing)top-down method, outsourcing)

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High-level concordanceHigh-level concordanceISIC Rev.4

A Agriculture, forestry and fishing

B Mining and quarrying

C Manufacturing

D Electricity, gas, steam …

E Water supply; sewerage, waste …

F Construction

G Wholesale and retail trade; …

H Transportation and storage

I Accommodation and food service activities

J Information and communication

K Financial and insurance activities

L Real estate activities

M Professional, scientific and technical activities

N Administrative and support service activities

O Public administration …

P Education

Q Human health and social work activities

R Arts, entertainment and recreation

S Other service activities

T Activities of households …

U Activities of extraterritorial organizations …

ISIC Rev.3.1

A Agriculture, hunting and forestry

B Fishing

C Mining and quarrying

D Manufacturing

E Electricity, gas and water supply

F Construction

G Wholesale and retail trade; …

H Hotels and restaurants

I Transport, storage and communications

J Financial intermediation

K Real estate, renting and business …

L Public administration …

M Education

N Health and social work

O Other community, social, personal …

P Activities of private households

Q Extraterritorial organizations and bodies

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Continuity in ISIC Rev.4Continuity in ISIC Rev.4

• Despite many changes, a lot of areas in ISIC Despite many changes, a lot of areas in ISIC have not changedhave not changed

• Manufacturing as a “historical” area remains Manufacturing as a “historical” area remains relatively stablerelatively stable

• Most application rules remain intactMost application rules remain intact

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Changes in ISIC Rev.4Changes in ISIC Rev.4

ISIC 3.1ISIC 3.1 ISIC4ISIC4

SectionsSections 1717 2121

DivisionsDivisions 6262 8888

GroupsGroups 161161 238238

ClassesClasses 298298 419419

• Changes in detailChanges in detail

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Changes in ISIC Rev.4Changes in ISIC Rev.4

ISIC 3.1ISIC 3.1 ISIC4ISIC4

SectionsSections 11 11

DivisionsDivisions 2323 2424

GroupsGroups 6161 7171

ClassesClasses 127127 137137

• Changes in detail for ManufacturingChanges in detail for Manufacturing

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Changes to the scope of Changes to the scope of ManufacturingManufacturing

• Publishing is now part of the “Information” sectionPublishing is now part of the “Information” section• Activity is the mass distribution of information, not a physical Activity is the mass distribution of information, not a physical

transformation processtransformation process• Separate transformation component (Printing) remains in Separate transformation component (Printing) remains in

manufacturingmanufacturing

• ““Recycling” is now part of “Waste treatment” Recycling” is now part of “Waste treatment” (“Materials recovery”)(“Materials recovery”)• Process converts waste into other forms of wasteProcess converts waste into other forms of waste• A manufacturing process cannot result in waste as the main A manufacturing process cannot result in waste as the main

outputoutput

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Structural changes in ISIC Rev.4Structural changes in ISIC Rev.4

• Structural changes take different forms:Structural changes take different forms:• Splitting of existing divisions, i.e. elevating Splitting of existing divisions, i.e. elevating

of activities to a higher levelof activities to a higher level• Separation of certain activities, i.e. Separation of certain activities, i.e.

recognition as separate activitiesrecognition as separate activities• Complete reorganization of clusters of Complete reorganization of clusters of

activitiesactivities

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ISIC3.1-ISIC4 (manufacturing)ISIC3.1-ISIC4 (manufacturing)

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Structural changes in ISIC Rev.4Structural changes in ISIC Rev.4

• Splitting of existing divisions, i.e. elevating of Splitting of existing divisions, i.e. elevating of activities to a higher levelactivities to a higher level

• Food and beverage manufacturingFood and beverage manufacturing• Furniture manufacturingFurniture manufacturing• PharmaceuticalsPharmaceuticals

• These changes can be implemented through These changes can be implemented through recodingrecoding

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Structural changes in ISIC Rev.4Structural changes in ISIC Rev.4

• Separation of certain activities, i.e. Separation of certain activities, i.e. recognition as separate activitiesrecognition as separate activities• Repair and maintenance and installation of Repair and maintenance and installation of

machinery and equipmentmachinery and equipment

• Requires surveying to identify the units Requires surveying to identify the units that specialize in repair and/or that specialize in repair and/or installationinstallation

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Structural changes in ISIC Structural changes in ISIC Rev.4Rev.4

• Complete reorganization of a Complete reorganization of a cluster of activitiescluster of activities• ISIC 3 Divisions 29-33ISIC 3 Divisions 29-33

have been regrouped into have been regrouped into ISIC 4 Divisions 26-28ISIC 4 Divisions 26-28

• This a major change (but the only This a major change (but the only one).one).

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ISIC3.1-ISIC4 (manufacturing)ISIC3.1-ISIC4 (manufacturing)

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Changes for machinery (1)Changes for machinery (1)

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Changes for machinery (2)Changes for machinery (2)

• Repair and installation is a major changeRepair and installation is a major change• Other changes based on product detailOther changes based on product detail

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Other issues affecting Other issues affecting recodingrecoding

• Vertical integrationVertical integration• May affect only textile May affect only textile

manufacturingmanufacturing

• OutsourcingOutsourcing• Requires question on whether unit Requires question on whether unit

operates own production facilityoperates own production facility• Can shift units out of manufacturingCan shift units out of manufacturing

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Changes in implementation rulesChanges in implementation rules

• Vertical integrationVertical integration• Unit is now classified to production step that Unit is now classified to production step that

generates the most value addedgenerates the most value added• Expected impact: minimalExpected impact: minimal

• Previous exceptions in ISIC will become Previous exceptions in ISIC will become obsoleteobsolete

• Companion guide to ISIC and CPC will provide Companion guide to ISIC and CPC will provide a list of default assignments in case of missing a list of default assignments in case of missing data to make a clear decisiondata to make a clear decision

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Changes in implementation Changes in implementation rulesrules

• Outsourcing treatment clarifies previous ISIC Outsourcing treatment clarifies previous ISIC treatment (not a change)treatment (not a change)

• For manufacturing activities:For manufacturing activities:• Contractor is classified in Manufacturing Contractor is classified in Manufacturing

(producing a good or service)(producing a good or service)• Principal is classified in Manufacturing only if he Principal is classified in Manufacturing only if he

owns the raw materialsowns the raw materials

• Consistent with SNA and BOP for “goods for Consistent with SNA and BOP for “goods for processing”processing”

• Impact: depends on interpretation of previous Impact: depends on interpretation of previous rulerule

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Correspondence tablesCorrespondence tables

• Developed for two purposes:Developed for two purposes:• Complete correspondenceComplete correspondence

• Used for recoding individual unitsUsed for recoding individual units

• Includes all theoretical linksIncludes all theoretical links

• ““Essential” correspondenceEssential” correspondence• Used to convert dataUsed to convert data

• Ignores insignificant linksIgnores insignificant links

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Implementing ISIC in the BRImplementing ISIC in the BR

• Intent:Intent:• Reduce reporting burden on Reduce reporting burden on

businessesbusinesses

• Requires automatic recoding for Requires automatic recoding for large numbers of unitslarge numbers of units

• Problems for 1-n and m-n linksProblems for 1-n and m-n links• About 2/3 of all cases (classes)About 2/3 of all cases (classes)

• Product data often sufficientProduct data often sufficient

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SourcesSources

• Internal sourcesInternal sources

• Existing business activity descriptionsExisting business activity descriptions

• External sourcesExternal sources

• Profiling Profiling

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Internal sourcesInternal sources

• Used to avoid load on businessesUsed to avoid load on businesses• Existing information from statisticsExisting information from statistics• Information from profiling of the large and Information from profiling of the large and

complex enterprisescomplex enterprises• Information from branch specialists of NSOs Information from branch specialists of NSOs

within their own competence fieldswithin their own competence fields• additional detailed code based on old additional detailed code based on old

classification (if exists)classification (if exists)

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Existing business activity Existing business activity descriptionsdescriptions

• Can sometimes be used to allocate split Can sometimes be used to allocate split codes between old and new classificationcodes between old and new classification

• Business activity descriptions from non-Business activity descriptions from non-statistical sources need to be checkedstatistical sources need to be checked• may contain legal or statutory descriptions, may contain legal or statutory descriptions,

rather than actual activity informationrather than actual activity information

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External sourcesExternal sources

• necessity to use and adapt external sources to necessity to use and adapt external sources to statistical needsstatistical needs

• NSO may depend on external registers (business NSO may depend on external registers (business registration by tax, social security, Chambers of registration by tax, social security, Chambers of Commerce etc.)Commerce etc.)

• NSO may have restricted capacityNSO may have restricted capacity

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External sourcesExternal sources

• This process includes:This process includes:• Early warning to enable sources to implement changes Early warning to enable sources to implement changes

at a convenient timeat a convenient time• Provision of instruments like explanatory notes, Provision of instruments like explanatory notes,

indexes, correspondence tables to the external sourcesindexes, correspondence tables to the external sources• Assistance with the adaptation of computer systems and Assistance with the adaptation of computer systems and

coding toolscoding tools• Dissemination of information to the employees of the Dissemination of information to the employees of the

external source who operate the system, assign codes or external source who operate the system, assign codes or audit (presentations, guides, training)audit (presentations, guides, training)

• timing is essentialtiming is essential

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External sourcesExternal sources

• The ideal situation:The ideal situation:• administrative sources convert to the new classification administrative sources convert to the new classification

at exactly the same time as the statistical business at exactly the same time as the statistical business registers of NSOregisters of NSO

• In this case these sources can help to determine In this case these sources can help to determine the correct new code for a businessthe correct new code for a business

• Sharing of information (incl. codes) should be Sharing of information (incl. codes) should be explored to avoid work duplication and optimize explored to avoid work duplication and optimize cooperationcooperation• if legally possibleif legally possible

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External sourcesExternal sources

• Possible external sources (as a source of Possible external sources (as a source of information):information):• Chambers of Commerce, taxes (VAT, wages Chambers of Commerce, taxes (VAT, wages

etc.), social security (activity, existence)etc.), social security (activity, existence)• Trade associations, Yellow Pages, telephone Trade associations, Yellow Pages, telephone

directoriesdirectories

• External sources are especially important External sources are especially important for information on medium sized for information on medium sized enterprises.enterprises.

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ProfilingProfiling

• One method for determining the correct One method for determining the correct new code for key businesses :new code for key businesses :• "a method to analyze the legal, operational and "a method to analyze the legal, operational and

accounting structure of an enterprise group in accounting structure of an enterprise group in order to establish the statistical units within that order to establish the statistical units within that group, their links and the most efficient group, their links and the most efficient structure for the collection of data"structure for the collection of data"

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ProfilingProfiling• Can be carried out in three ways:Can be carried out in three ways:

• Face to face meetings: expensive but essential for the Face to face meetings: expensive but essential for the larger and more complex groupslarger and more complex groups

• Other contact, by telephone, fax, e-mail or post, with Other contact, by telephone, fax, e-mail or post, with details gathered to determine structuresdetails gathered to determine structures

• Using existing information for relative simple groups, Using existing information for relative simple groups, where information available from administrative where information available from administrative sources, surveys or even web-sites may suffice. Annual sources, surveys or even web-sites may suffice. Annual accounts may be helpful as well.accounts may be helpful as well.

• number of units coded by information from number of units coded by information from profiling is not highprofiling is not high

• but: relative importance is much higher because but: relative importance is much higher because the information concerns larger unitsthe information concerns larger units

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ToolsTools

• IndexesIndexes

• Automated coding systemsAutomated coding systems

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IndexesIndexes

• generally a good toolgenerally a good tool

• can be used manually or with computer can be used manually or with computer lookuplookup

• currently being developed for ISIC Rev.4currently being developed for ISIC Rev.4

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Automated coding systemsAutomated coding systems

• in use in some countriesin use in some countries• based on text search within indexbased on text search within index

• Statistics Canada uses a similar system using Statistics Canada uses a similar system using weighted index searchweighted index search

• use of linguistic techniquesuse of linguistic techniques• Often works well for long texts, but not for activity Often works well for long texts, but not for activity

descriptionsdescriptions

• parsing and scoring of descriptions against parsing and scoring of descriptions against classifications text and additional informationclassifications text and additional information

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General issuesGeneral issues

• Assigning new codesAssigning new codes• efficient and reliable coding is importantefficient and reliable coding is important• all unit types need to be recodedall unit types need to be recoded• activity descriptions and product descriptions activity descriptions and product descriptions

can be usedcan be used• although there is not always a 1-1 correspondence, although there is not always a 1-1 correspondence,

product descriptions may help in many of the product descriptions may help in many of the smaller changes, especially in manufacturingsmaller changes, especially in manufacturing

• double coding of existing product lists is helpfuldouble coding of existing product lists is helpful

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General issuesGeneral issues

• larger units get "special treatment" - profilinglarger units get "special treatment" - profiling• for small units (i.e. statistically not important for small units (i.e. statistically not important

units), codes could be assigned on a group basisunits), codes could be assigned on a group basis• for 1-n and m-n links a case evaluation should be made for 1-n and m-n links a case evaluation should be made • disadvantage: impossible to assign accurate codes to disadvantage: impossible to assign accurate codes to

individual unitsindividual units• use should be carefully evaluateduse should be carefully evaluated

• at individual level, units may be wrongly coded, at individual level, units may be wrongly coded, but at aggregated level, the statistics is acceptablebut at aggregated level, the statistics is acceptable

• in case of splits at class level, only most probable in case of splits at class level, only most probable correspondence could be usedcorrespondence could be used

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Conversion matricesConversion matrices

• one tool: probabilistic conversion matricesone tool: probabilistic conversion matrices• recode units for which sufficient information is recode units for which sufficient information is

availableavailable• cross-tabulate units by old and new codecross-tabulate units by old and new code• remove invalid codes (masking with established remove invalid codes (masking with established

correspondence table)correspondence table)• calculate percentages of remaining datacalculate percentages of remaining data• create conversion matrixcreate conversion matrix

• conversion matrix needs updating over timeconversion matrix needs updating over time

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When is automatic recoding When is automatic recoding necessary?necessary?