WHAT COUNTS IN THE FUTURE Challenges of official statistics

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Challenges of official statistics

Statistics Denmark

Statistics Finland

Statistics Iceland

Statistics Norway

Statistics Sweden

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ISBN 951-727-977-9 © Statistics Denmark Statistics Finland Statistics Iceland Statistics Norway Statistics Sweden

Printed by Statistics Finland

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Preface

At the meeting of the Directors General of the Nordic national statistical institutes in September 2000 a decision was made to form a working group, which was given a mandate to evaluate critical challenges in the business environment of the Nordic National Statistical Institutes during the forthcoming 4-7 year period. In particular the working group was asked to evaluate how changes in society, technology, international environment and EU integration would effect the demand for statistics and the way official statistics should be produced.

In the last few years the environment of official statistics has not become any easier. The trends brough about by all the changes in society and in statistical offices call for several responses. First of all the systems of statistical description will need to be improved with respect to their contents in order to meet the new user needs. Furthermore, the users are changing their demand for how statistics should be served. The change in user needs will also have an effect on the needs for primary data and accordingly on the work with data capture. In addition, the working methods, management and organisation in the production of statistics will need to be developed.

Monitoring the modern society and the economy, in particular, is a challenging task in our world of rapid change. High-tech innovations, in particular, are transforming the nature of the economy and the society in general and have seriously challenged the monitoring system. There are also a number of other relevant factors, which are often closely interwoven with technology and globalisation. These kinds of derivatives include the emergence of new products and services, quality changes in old products and services, structural changes in business companies, changes in the labour and financial markets, the emergence of immaterial economy etc. New technology and globalisation are both adding to the inherent complexity of economic and social phenomena.

Helsinki, December 2001

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1. Mandate of the Nordic Strategy Group

At the meeting of the Directors General of the Nordic national statistical institutes in September 2000 a decision was made to form a working group, which was given a mandate to evaluate critical challenges in the business environment of the Nordic National Statistical Institutes during the forthcoming 4-7 year period. In particular the working group was asked to evaluate how changes in society, technology, international environment and EU integration would effect the demand for statistics and the way official statistics should be produced.

Heli Jeskanen-Sundström from Statistics Finland was appointed head of the working group. The members of the group were Eirikur Hilmarsson (Statistics Iceland), Hans Lindblom (Statistics Sweden), Olav Ljones (Statistics Norway) and Karsten Stetkaer (Statistics Denmark). The group asked Heikki Tulokas from Statistics Finland to work as its secretary.

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2. General factors behind operating

environment of NSIs

Monitoring the modern society and the economy, in particular, is a challenging task in our world of rapid change. In general, statistics provide quite an accurate picture of the traditional part of the society, but they are certainly less accurate with new phenomena. To some degree, this is an inherent feature of statistics production. In recent years, however, the number of new phenomena entering the scene that statistics are supposed to describe has increased to such an extent that the whole system of economic and social statistics may well have lost some relevance with respect to the information needs of politics, business, researchers etc.

High-tech innovations, in particular, are transforming the nature of the economy and the society in general and have seriously challenged the monitoring system. Both globalisation and technological development gathered further momentum in the latter half of the 1990s.

Furthermore, there are a number of other relevant factors, which are often closely interwoven with technology and globalisation. These kinds of derivatives include the emergence of new products and services, quality changes in old products and services, structural changes in business companies, changes in the labour and financial markets, the emergence of immaterial economy etc. New technology and globalisation are both adding to the inherent complexity of economic and social phenomena. Consequently, statistical systems are becoming increasingly diversified and thus harder to handle. In the last few years the environment of official statistics has certainly not become any easier.

In the late 1990s there was talk about a paradigm shift in the economy. In the final report of the OECD growth project it was concluded that “the evidence suggests that something new is taking place in the structure of OECD economies.” Recent slowdown in the pace of global economic activity has increased doubts about future prospects of the technological development and its impact on economic and social activity. In the medium

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and longer term the rapid pace in technology, in particular, is expected to continue.

It is unlikely we will see the New Economy become an analytic instrument in its own right, backed up by specific new theories, even though digital products and services do have some distinctive economic characteristics that set them apart from those of more traditional goods.

Structural changes in the economy have created new information needs in almost all areas of economic statistics. Challenges to the substance of statistics are perhaps most prominent in the measurement of price and volume indices. There is continued lacking information on the services sector. The role of human and social capital in economic growth will require further measurement and investigation. Industries are converging and statistical classifications, definitions and standards are becoming outdated at breakneck pace. It is increasingly difficult to construct statistical variables for purposes of describing the operation of global enterprises. Atypical employment contracts are more and more common. Rewards and pay systems are changing. Furthermore, there is a major knowledge gap regarding which impact, if any, the new economic environment will have on the shape and duration of the business cycle.

Questions are also being asked about the relevance of the business companies’ traditional bookkeeping practices in the New Economy, where immaterial production inputs assume greater significance than earlier. Huge sums of money are invested in new technology, but there are no satisfactory tools with which to assess the impacts of those investments with sufficient accuracy, either at the level of companies or at the level of the national economy.

On the capital market the freedom of capital movement has led to lively product development in the recent few years. It does not seem to be very easy for companies operating on these markets, let alone for statistical agencies, to monitor all the different kinds of derivative markets. The IMF, for instance, has repeatedly pointed out that the systems for monitoring the money and capital markets have been lagging behind the innovations on the markets.

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The recurring crises in the international financing and currency system during the 1990s led to a reassessment of the principles of the world’s financial system. With the increasing calls for openness and transparency in this system, statistical issues were also quite prominent in these assessments. It was widely concluded that the only way to avoid systematic crises was to improve the general economic information systems. The market parties must have sufficient information so that they can reliably weigh their overall risk positions.

International collaboration has become increasingly important to statistics production. Co-operation between international and national statistical agencies in different forms is important. Work for creating common standards and principles, and exchange of information about best practices are important.

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3. Demand in the information markets

3.1. Information needs of EU policies

The search for a common policy line is based on processes of political debate as well as on groundwork done by civil servants. An important part of this effort consists in the maintenance and development of information and indicator systems. However, statistics and indicators cannot take over the role of political debate in the development of societies. In order that the increasingly complex trends in development can be properly followed, it will also be necessary to have more detailed and sophisticated monitoring systems.

In recent years the development of economic statistics in Europe has mainly concentrated on the information needs related to the start-up of the third phase of EMU and the common monetary policy of the European Central Bank. Work is going on according to the EMU Action Plan. In the areas of fiscal policy the Stability and Growth Pact as well as the procedure of excessive deficits have among others led to intensified monitoring of economic development in Member States. Fiscal policy monitoring may now be described as everyday routine. EU-wide employment policy and the discussion on the co-ordination of economic policy have also created new statistical needs. Since the emergence of the Euroregion the main focus of policy interest has been turning to longer-term structural issues, the quality of the public economy and to sustainable development.

The most recent decisions by the European Council are also indicative of the new emphases. The Lisbon Summit highlighted the eEurope project, the objective of full employment and the reform of the welfare state. At Nice, the Union’s decision-making procedures were revised. The priorities identified by Sweden for its EU-presidency were EU enlargement, the ageing of the population, employment and sustainable development. The social dimension is increasing in significance at European level. Since the Lisbon European Council, the consolidation and adjustment of the European social systems has become firmly on the European agenda.

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These policy priorities clearly underline the key role of structural statistics. Projects concerning the information society and the New Economy are highly prominent in EU framework programmes for research funding. Indeed there will probably be growing external pressures to develop structural statistics, much in the same way, as there were pressures to develop short-term statistics in the 1990s. Environment statistics as well as information society statistics are examples of the areas which are increasingly important to decision makers. The information needs of both politics and business companies may change quite rapidly as their problems and challenges change. Statistics production must also show sufficient flexibility and a capacity to respond to changes.

Harmonisation is a key challenge to European statistics. The harmonisation of statistics has in many respects proved more difficult than was first anticipated. However, the commitment of the European countries to increasingly genuine market economy is quite a strong cohesive force that is bringing institutions, policies and the behaviour of economic units more and more in line. In the future, this will make it easier to produce harmonised statistics, which in turn will allow the EU to focus its attention on developing the contents of statistics.

3.2. Business sector information requirements

Both economic and social developments became more market- and business-driven in the course of the 1990s. In Europe, too, the markets and the private sector have largely taken over from politics and public sector as a key agent of change. The role of the central government has been effectively reduced to providing the basic infrastructure and to laying down a set of stable rules for enterprises and households. The latest research on economic growth makes it clear that micro-level factors have a key role to play in boosting economic growth.

These changes in ways of thinking are also reflected in the information market: business enterprises are more and more often in the role of requesting information and knowledge. The demand for information in

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public administration is also increasingly explained by the drive to maintain and improve business conditions.

Business companies began to show a greater interest in information and R&D during the 1990s. The competitiveness of high technology companies, in particular, rests essentially on their human or knowledge capital. Likewise the companies in the old economy are also keen to increase their knowledge capital with a view to breaking into new growth areas. Also the increased supply of information has forced companies to develop their knowledge management and business intelligence systems.

The role of knowledge and information is set to change to some extent in the future. Professor Danny Quah has introduced the concept of a “weightless economy” which revolves around “strings of information”. Knowledge used to have a more indirect role when it was applied to develop products, industrial processes and productivity. Now, consumers are more directly customers of companies that are in the business of producing knowledge and information. Knowledge has become not only an important production factor, but also an important product in its own right.

Information obtained through data networks and the tacit information produced in social relations have assumed ever greater importance alongside knowledge in the form of hard facts. The high technology companies, in particular, are steered not only by means of hard facts, but also by means of intuition. The boundary line between fact and fiction is becoming increasingly blurred.

Globalisation and ICT, in particular, have in many cases led to a replacement of economies of scale by economies of speed and flexibility. Groups, networks and clusters are getting bigger, but companies and business units are getting smaller. A growing proportion of companies are in the SME category, where a special effort is required to maintain adequate levels of response motivation as regards statistical surveys. This trend will have an impact on the demand side of information, too.

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4. Technological challenges of NSIs

Technological development has to a great extent influenced on the production environment for statistics. There is expected to be a lot of new users with the more user-friendly ways to get hold of statistical results. New data sources are emerging and the overwhelming amount of information that is available from other sources, could perhaps be a challenge for official statistics. Anyone with a powerful PC is able to collect, process and disseminate data and call the results as statistics. The possibilities to process large data materials outside resourceful institutions have increased to the advantage for i.e. researchers. The competition in the information market has markedly increased.

One of the lessons to be learnt from the Internet revolution is that efficient software together with some basic standards creates very efficient tools. Standardisation will become more and more important as a tool for communication and interchange of information. There are some important steps to be taken, especially to develop common standards for both the commercial sector and official statistics. National statistical offices are likely to have a growing role to play in the national and international community in the managing of the process behind both the development and the use of common standards.

Modern ICT makes it easier to respond to problems of quality in statistics production. Progress is being made not only in ICT but also in statistical methods. New electronic data sources are being created and new ways of linking different data sources are evolving. Rapidly growing ICT penetration among companies and households is paving the way to cost savings in statistics production. Digital technology and interactivity will open up new opportunities to satisfy current information needs. All in all, closer interaction between information producers and consumers is emerging, allowing for a stronger customer orientation of NSIs.

Users will have a variety of devices to access statistical data in the coming years. The Internet and printed materials are currently the primary devices

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for accessing statistical data. Quite soon, many more will be available, such as third generation mobile phones, interactive televisions and interactive visual telephones. These prospects mean that statistical institutes will have to make good use of the new technology.

NSIs need to disseminate statistics to the users in the most appropriate manner. They must select the procedures that are best suited for the purpose and best meet the users’ needs. The users are a heterogeneous group and statistical institutes must bear this in mind when selecting the means of data distribution. The level of detail of the data and the format of presentation must reflect the different needs of different users. The broad view is that the development of dissemination and accessibility technologies will bring in new users of statistics.

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5. New information sources

As regards the capture of data, ICT development will create some new possibilities and challenges to NSIs. The so-called electronic traces and the commercial databases that are being built up will create new possibilities. There are enormously rich data sources that, theoretically, could be arranged to be utilised by NSIs. If such data were to be made available for official statistics it would be beneficial from the point of response burden.

There have been suggestions that cash register data could be used as a data source for household budget surveys and as an instrument for establishing weights for the CPI. Another possibility would be to use databases containing price data (scanner data) for periodic price collections. Furthermore, it has been pointed out that it might also be possible to use Electronic Funds Transfer at Point Of Sale (EFTPOS) data.

Enormous amounts of data will be created and it will be absolutely essential to establish common standards for their use. It will be crucial that NSIs build bridges between the applicable commercial standards (Bar Codes or EAN) and the statistical standards.

Traditionally, NSIs collect a lot of data based on institutional measurement. Another way of collecting data for statistics is to gather data concerning observations of performed transactions on the “market”. Examples of this would be export and import statistics based on customs data and transport statistics based on observations of traffic from one observation point. The observations can be performed with low response burden while still achieving high actuality.

The use of electronic traces in official statistics can open up opportunities for more functional observations. Some traditional functional observations that have been used for official statistics have been created as part of public control or taxation. Resulting from widespread changes in politics and international co-operation, and from deregulation, some of these control

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elements are disappearing. One example of this is statistic based on settlement system.

Another strategic question that needs addressing is whether data should be captured direct from the observation units or indirect from others. The Nordic tradition, with its heavy use of public administrative data, is an example of indirect data collections.

If, in the future, official statistics could get access to, and were able to exploit, various commercial databases, this would, in principle, open up even more opportunities for indirect data capture. Examples of this can be drawn from the retail trade business, which in many cases contains national store chains. If data could be collected direct from the head office, they would be captured much more efficiently as compared to collecting them from each individual retail shop. Indirect data capture will normally be more efficient, but may raise some questions concerning strategy and legal position.

Partnership between the NSI and the respondents has to be based on real co-operation, also as regards the use of ICT programs and installations.

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6. Toughening competition on the

information market

A lot of new users are expected on the information market. Furthermore the structure of the users will change and customers’ data needs are growing increasingly diversified. The demand on the information market is for superficial information consumed by the masses on the one hand, and for in-depth and detailed information needed by the professionals, on the other. This dichotomy presents new challenges to the production of official statistics.

New data sources are emerging and the overwhelming amount of information that is available from other sources could perhaps become a challenge to official statistics. Information is distributed and can be retrieved very efficient by super effective Internet search engines. Everyone seems to have access to information.

The basic output of NSIs consists of the value added they generate from heavy data sets and coherent statistical systems. The system of national accounts is perhaps the most prominent example in this respect. Systems for environmental accounts and other systems for e.g. structural statistics, population statistics and social statistics are also important parts of the output of NSIs. Users will also turn to the NSIs for support when they try to compare and combine statistics from several sources and when they look for explanations for inconsistencies and quality problems.

The trends in information and communication technologies are increasing the supply of information and thus creating ever harder competition on the information market, thereby pushing prices down. However, because of strong demand of relevant information, there are really no limits to how it can be priced – so long as the information is of a sufficiently high quality and relevant. With an overwhelming amount of information available from various sources, it is increasingly difficult to make high-quality information stand out.

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To be competitive, NSIs have to develop their knowledge of topics and industries. The NSIs should also be prepared to bring their documentation in line with the requirements of those unaccustomed to using statistics and statistical series. To keep the costs down, NSIs should develop their technologies to support self-service systems, so that simple data selections, compilations and retrievals would be possible even by inexperienced users.

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7. Definitions, standards, classifications

International collaboration has become increasingly important to statistics production. The main obstacles to the development of statistics are increasingly originating from shortcomings in international statistical classifications and standards and from the problems of defining new phenomena. Due to various new trends in the business environment, statistical definitions, standards and classifications are becoming outdated. Some updating is in the pipeline following international work in this area. The timetable seems to be too slow, however.

It is very important to focus here on the serviceability of the classifications to ensure they are better balanced, not necessarily by increasing the number of classes, but by making them more evenly spread. It is also very important to maintain continuity so that users and national accounts do not meet insurmountable problems in repairing breaks in the data. All statistics have to be based on clear and precise definitions of basic units, individuals or economic units. In this regard there are some challenges both for household statistics and for economic and business statistics.

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8. The principle of confidentiality

One of the foundations for official statistics is the principle of confidentiality towards primary data. An NSI is dependent of public confidence, which is affected by the way it treat the rules of data confidentiality. At the same time, the rule of confidentiality is also challenging because of the growing demand from all kinds of users for more access to microdata. Market concentration represents yet another challenge in this respect – important industry groups are dominated by one or few enterprises. There are cases where statistics may be published more deliberately for government economic units than for private units. Increasing mixing of private and public ownership can also distort this tradition.

Some data that are reported to the government by the private sector are made public by government agencies other than NSIs. This applies to some main account information (annual reports of corporations). Certain public databases are not totally open but can be partially open, that is open for information about individuals, upon request. To some extent, these open, or partly open, databases will alleviate the obligation of strict confidentiality imposed on the NSIs. One should, however, not forget that these open public databases could be used as a back door to identification.

To uphold the confidentiality issue, NSIs must play an active role on two fronts. They must build up processes and procedures, which ensure data secrecy, and they must inform the public about the ways they maintain the highest possible level of security. The perceived standard of security should not be underestimated because, in the building of confidence, perceived reality can be just as important as facts. To generate public confidence in them, NSIs must be seen spearheading the work to maintain data secrecy and they must educate the public about security procedures, access to confidential data, laws and regulations, international agreements, security standards, etc.

Visible identification of NSIs as the sources of data is important as regards dissemination strategy. Many NSIs have considered it important to design

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programs for their publications and own Internet pages. It is also common for official statistics to be used and passed on - reused - by other parties. In this context, too, the Internet represents a challenge to NSIs.

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9. Co-operation with scientific community

The demand for new statistical information will continue and is most likely to even accelerate. This development requires close co-operation with the scientific community. National statistical institutes must strengthen their co-operation both with their local and with the international scientific society. They must call upon scholars in different fields to work with them on developing further the methods for collecting, analysing and interpreting data; and for building up measuring instruments that are in harmony with the theoretical concepts.

This kind of co-operation will lead to valuable interaction between the two partners. It will strengthen the position of NSIs as scientific institutes and it will help the scientific community solving important practical and theoretical problems. The NSIs must create a financial and physical environment that will encourage the two partners to co-operate.

Co-operation between NSIs in different forms is important. Work for creating common standards and principles, and exchange of information about best practices and statistics are important. Whenever possible, they should also lead to co-operation in the processes of data editing and quality control. Experiences of international co-operation in the field of export and import statistics – the so-called mirror statistics – is a good testimony of the value of the kind of international co-operation that allows NSIs to compare micro data and to use this as a tool in the process of quality control.

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10. Conclusions

Over the past few years, compilers of statistics the world over have been forced to realise that the descriptive systems used in statistics are not keeping up with the pace of social, economic and environmental change. The more complex social phenomena and linkages become the greater and more specific will be the needs of the users of statistics. The potential of statistical organisations to respond to these challenges varies from one country to another. The countries with the most sophisticated statistical systems are currently making a concerted effort to find new statistical standards that would be more appropriate than those currently in use to describe the modern economy and society.

Some of the challenges in the monitoring of economic, social and environmental phenomena are handled in more details in the three Annexes of this report. The production of reliably descriptive statistics requires broad revisions of the concepts, contents and methodologies of the used data systems. It is essential to find ways of implementing these revisions so as to make the systems capable of answering new questions while still retaining connections to the data produced so far.

The Nordic countries have been active in the international development of the information society statistics and environment statistics, in particular. In these two areas the Nordic perspective is quite easy to see. More generally, the Nordic countries face the same challenges in the development of statistics as most other developed countries. There is one distinctive feature in the Nordic countries, which has an impact on the production of statistics: Administrative registers and databases of different kinds serve governmental sector quite widely in all the Nordic countries. These databases are valuable source for development and maintenance of statistics and give the statistical offices the chance to develop new products.

Statistics production is a high technology field in which investment in research and development plays a prominent role. The growing investments in research and development could be better integrated than now into the

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development of products and production processes. This is also the prevalent trend in the enterprise sector’s R&D activity. The enterprise sector can also offer models for the development of strategic management of statistics production. Due to the paucity of resources, prioritisation of development projects and a certain degree of returning “back to basics” may be necessary in the field of statistics.

When new statistics are being developed, it is crucial that there is smooth co-operation between the users of statistics, researchers, and data providers. It is increasingly important that the statistical institutions from different countries work closely together. The international statistical organisations should co-ordinate and direct the work on standards and frameworks. The creation of a new statistical system usually takes several years and the cost is also considerable. So it seems more sensible to divide the work between several countries than to invent the wheel once again in each country separately. The experience of the co-operation of the Nordic countries shows that a small group of countries can work efficiently together and share the workload so that all the parties can benefit.

A new management and leadership culture is needed in the production of statistics. A better management and strategic planning system, better management of processes, better customer intimacy and better management of people will be necessary. Focusing on the future, and the enablers, instead of measuring only consequences of past actions is essential. In the medium term, the goal should be the development of NSIs into top quality organisations that are lead according to modern management doctrines. However, acute problems with the contents of statistical descriptions demand focused and pragmatic development work at a faster timetable.

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Annex

1 Critical problems in economic statistics

Set up on the recommendation of the UN Statistical Commission, the Expert Group on Critical Problems in Economic Statistics was convened in the mid-1990s to review the general environment of economic statistics and to look into ways of how statistics production could be improved. The main influential factors, according to the working group, were globalisation and technological development.

As for areas that needed a stronger development input, the working group referred among others to the statistical description of the immaterial economy, labour markets, prices and wages, capital stock, materials flows and the grey economy. The expert group also discussed certain basic principles of statistics production. Since the publication in 1997 of the expert group’s report, the environment of official statistics has certainly not become any easier.

Short-term statistics

In the last few years, the focus of attention in the European statistical system has been markedly on short-term statistics. Following the launch of the third phase of the EMU, the markets were fairly critical in their assessment of the short-term statistics: ‘too little, too late’. Short-term statistics were not considered to be sufficiently up-to-date, and the time series provided were too short for purposes of a reliable analysis of business trends.

In the first phase, there were difficulties in producing EU- and Euro-level aggregates and not all the relevant data were even available. National publication schedules have not been tight enough, and not all countries have delivered the statistics required on time. The situation has been further complicated by several derogation and other compromises in EU statistical legislation.

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Another obstacle to the development of a European system of short-terms statistics is presented by disagreements among different EU bodies on the proper priority of things. The ECB stresses the speed factor at the expense of accuracy and detail. Some Commission Departments, on the other hand, want to have monthly and quarterly statistics with as accurate classifications and as broad coverage as possible. Both these needs are integrated in a legislative compromise. As far as the monitoring of business trends is concerned, this has led to unnecessary data production and slowed down the production schedules for important indicators.

Some short-terms statistics have lost their relevance as a result of management reforms in companies and the new political emphases. It is also possible to put the data collected to more efficient use and to analyse them more exhaustively. Different kinds of statistical and econometric methods can be used to produce leading indicators, rapid estimates or indicators of turning points in business cycles. Furthermore, we should be able to make more efficient use of season and trend adjustment methods. Along with technique, much help will come from new data sources, too.

In the meeting of the Statistical Programme Committee in autumn 2000, Sweden submitted a broad proposal concerning measures aimed at improving the production and use of short-term economic statistics in Europe. The measures proposed included both technical and practical steps for the development of statistics. The implementation of those proposals is in progress at the moment.

Business statistics in a globalized word

The number of business companies and organisations with global operations has increased very rapidly in the last few years. There are several reasons why it has become considerably easier for companies now to relocate their production in different parts of the country or around the globe.

The fact that national borders have lost their meaning as regards the operations of the big multinational enterprises is problematic from the perspective of economic statistics. These enterprises cannot easily report the production shares of individual countries from their global production

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network. Moreover, statistical concepts used are often not very well compatible with the accounting terminology and practices of the enterprises. The most urgent development requirements are directed to existing economic statistics, the system of national accounts, business statistics, balance of payments statistics, wage and price indices as well as statistics on production output and input. Statisticians should be able to develop new methods and new data sources in order to keep the overall quality of economic statistics good or even satisfactory.

Globalisation is a source of some difficulty among others for foreign trade statistics, for compiling data on companies’ turnover and production, as well as for price indices and national accounts. A common source of error is the so-called tripartite trade exercised by global companies and inadequate reporting on this trade. It is hard to compile statistics on deliveries between units within the same group or on the prices that are applied in these transactions. Many statistics being based on the concept of economic territoriality have difficulties in understanding the logic pursued by global entities.

An increasing proportion of world trade today consists of these kinds of internal transactions between multinational corporations. The extent of the statistical error caused by globalisation can be illustrated by the global asymmetry of the balance of current account: in 1999 the combined balance of all countries in the world showed a deficit of USD 128 billion, while in principle the figure should be zero. The asymmetry is due mainly to the unsatisfactory recording practices of production factor compensation.

National boundaries are no longer particularly relevant for monitoring the operation of major corporations. Understanding modern business processes is necessary to guarantee the accuracy of the statistical data. Another problem is that statistics are often produced using concepts that are not fully in line with those used in the companies’ internal information systems.

The problems of output statistics are further complicated by the fact that an ever greater proportion of companies’ turnover comes from sources other than the sale of manufactured goods. These will include royalties received

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from third countries, revenues from other service operations or shares trading. A growing proportion of value added is generated in a digital environment and comprises an ever greater number of items. More value is added through design, styling, manufacturing, engineering, advertising, marketing, servicing, selling, consulting, advising etc. As production becomes ever less material, it also becomes harder to capture in statistics. The boundary line between traditional commodity production and services is increasingly blurred.

In Sweden and Finland, for example, where business structures are highly centralised and internationalised, these kinds of statistical problems that follow from globalisation are a major concern. Some recommendations concerning the development of statistical description were made in the final report of the Globalisation Reflection Group.

Business companies’ balance sheets and profit and loss accounts are crucial source for statistical monitoring. The significance of these materials to steering investments and cutbacks in the global economy has continually increased. Although years of work have already been put into harmonising companies’ balance sheets and profit and loss accounts, only a little progress has been made towards true international harmonisation. Companies’ bookkeeping practices vary between Europe and North America. Even within the EU area there are quite many different practices.

At year-end 2000 the European Commission published a communication concerning the harmonisation of profit and loss accounts in business companies. Listed companies in the Member States will be required to submit consolidated accounts in line with the International Accounting Standards (IAS) recommendations.

Measurement of price and volume change

The quality problems of price indices have been a subject of long-standing debate. In the United States the so-called Boskin committee said in the early 1990s that the consumer price index used at the time overestimated the real price change by over one percentage point per annum. However this applied only to the situation in the US and not all experts fully agreed on the

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estimate. In Europe it was widely felt that the bias estimate given in this report could not be applied as such to other countries.

A wide range of methodological diversity is seen in both consumer and producer price indices. Quality change in products and services is widely recognised as one of the most difficult problems in the construction of price indexes. Furthermore, countries differ widely in terms of how quickly they incorporate new products in their price indices. Confidence in price indices for ICT production and products, in particular, is quite low. Economists more often than not use various reference indices rather than national price indices in their benchmarking analysis.

Problems are also caused by the slow changeover of the base years for price and volume indices. The problem of bias with index formulas also remains unresolved. For instance, it has been observed that the Laspeyres formula overestimates price trends. Even so the Laspeyres-type formula has been adopted as the method of choice in EU’s index regulations, and there has been hardly any discussion about other options. The work that has been done in Europe to develop new indices has also been criticised for its lack of a sound theoretical foundation and for its excessive reliance on ad hoc solutions dictated by practical requirements.

Growing interest in hedonic methods is apparent in many countries. Many studies have shown that hedonic price indexes for ICT equipment decline more rapidly than ‘conventional’ price indexes. The price index literature contains a good deal of speculation about whether hedonic indexes should or should not give the same result as matched model indexes with conventional quality adjustments.

The use of hedonic methods may also raise some questions. The selection of significant quality characteristics requires subjective assessments. The service life of many technology-intensive consumer and investment goods is relatively short, which also has a bearing on the overall quality of the product. Consumers do not necessarily make use of all the new and improved qualities of products/services, which means that hedonic indices may overestimate the impacts to consumers of lowered prices. Furthermore the

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cost of hedonic indexes is a great barrier to their more widespread adoption for ICT deflators.

Measurement of productivity

Productivity is at the centre of growing attention. In the late 1990s, many countries seemed to have turned the corner after an extended period of weak productivity growth. The success of the New Economy was described precisely by reference to its rapid productivity growth. Productivity is a key concept in both more recent and older economic growth theories. The rate of growth in both productivity and in labour supply determines the potential growth rate of GDP. The key significance of productivity to economic development is further underlined by its close association with other important growth factors, such as fixed or immaterial capital assets, technical development, competitiveness, profitability, etc.

Economic theory remains somewhat separated from the practice of measuring and compiling statistics on productivity by a gap that is extremely difficult to bridge. The factors that are emphasised in the latest economic growth theories – immaterial capital, innovativeness, entrepreneurship, corporate governance, etc. – do not lend themselves very well to quantification and therefore to statistical representation. The problem is further exacerbated by the relative backwardness of statistics on service industries. It is precisely in many service sectors, such as in banking, retail and wholesale trade and business services, that the new ICT has been widely adopted in recent years.

The growing interest in productivity throws up new challenges for the monitoring economic performance. It has even been argued that in Europe, quality problems in the measurement of productivity and with the underlying statistics have prevented the productivity effects of new technology showing up in the statistics.

The problems of productivity statistics culminate not only in price indices, but also in the definition of service industry output. The rapid development of ICT in particular is affecting the quality of products and services at an accelerating rate. Different countries have advanced at a different pace and

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used different methods in reforming their price and volume indices. This has added a new element of uncertainty in international comparisons of productivity level and performance. It would be important to make sure that methods reforms are well documented and made transparent.

Analysis of productivity also hampered by the lack of internationally comparable microdata. In many cases the basic factors of productivity will only be revealed in an examination at the company and business unit level. The fact that new technology is created and used in different industries further complicates the analysis of the relationship between technology and economic growth. Thus, data deficiencies make it nearly impossible to analyse the impact of ICT across the economies of OECD countries.

Measurement of technology and ICT

Production of science and technology statistics has been largely based on the OECD’s Frascati Manual that was published in the early 1960s. Most of the later work that has been done to improve the manual has concentrated on international comparability and only very limited effort has gone into developing its actual substance and content.

Some recent studies have taken a critical stance on the concepts and basic philosophy of science and technology statistics. It seems that the development of technology and innovation involves far more complex models and processes than is given to understand in the technology statistics. They should cover the innovative efforts of governments, business companies and individuals as fully as possible. The accent today is increasingly not on technology but on the role of knowledge.

Among the factors necessitating a revision of technology indicators are the growth of service industries and the emerging information society in particular. Statistics on the information society is perhaps one of the most urgent and demanding challenges for the statistical community.

There exists a considerable and increasing political focus on how the information society as such develops. The importance of ICT, in particular, as an economic and social factor has gathered greater attention during the last

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few years. Recent studies argue that the use of ICT is a significant source of economic growth and productivity. The previous success of the New Economy was commonly associated with breakthroughs in ICT and with the rapid adoption of new technology. Also in the final conclusions of the OECD’s Growth Project, the important role of ICT was recognised at a macroeconomic level. Interest of both the economic and the social impacts of the ICT diffusion is becoming more and more important

In the last few years, NSO’s have made enormous efforts to provide relevant statistics on the information society. However, serious gaps exist in that measurement exercise and many difficult measurement challenges still lay ahead of us. There are persistent concerns about whether the economic statistics correctly trace the changes in the information society.

Statistics on ICT infrastructure are generally well covered by NSO’s. On the other hand, statistics on usage and impact of technology is insufficient. The fact that electronic business is in its infancy, yet growing and changing rapidly poses special problems to the measurement. Definitions and concepts are important. The statistical unit and the survey instrument place significant constraints on what can be collected. Improved surveys of capital investment are needed. All of these challenges will require a crossing of statistical boundaries between enterprise statistics, national account and S&T surveys. Furthermore, there remain certain weaknesses in statistics on immaterial investments. Today immaterial capital in the form of knowledge capital accounts for a significant proportion of the business sector’s capital assets. In many high technology sectors, in particular, production relies almost exclusively on immaterial capital.

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Annex 2

Critical problems in social statistics

The social dimension is increasing in significance at European level. Since the Lisbon European Council, the consolidation and adjustment of the European social systems has become firmly on the European agenda. In the area of social statistics, too, users are becoming more demanding. There is a need for faster, cheaper and more accurate social statistics. Furthermore, social statistics must be more comparable and more comprehensive.

Social statistics have previously concentrated on labour market statistics. Due to the rapid technological and socio-economic changes, many new themes have emerged in the area of social statistics. These new themes include, among other things, social exclusion and social cohesion, poverty, consequences of ageing, digital divide and quality of life. The field of observation for social phenomena is thus expanding to accommodate new policy areas and the forthcoming enlargement. Some of these new themes are quite elusive and multi-faceted phenomena that are hard to measure. Social statistics and indicators are increasingly becoming an integral part of European policies.

Labour market and wage statistics

Labour market statistics have a very special part to play as a link – or rather interface – between social statistics, business statistics and economic statistics. Labour market statistics should therefore be structured with a view to both the information need for social and employment policy and for the need of business trend and structural policy.

As far as labour market statistics are concerned the main challenge is to secure the uniformity, consistency and contents of statistics produced by different sources. Therefore the work already started in the Netherlands, Norway and Denmark on labour accounts shall be further developed in the coming few years. Furthermore there is a growing need for descriptions of the quality of the labour force, labour flows, and labour reserves as well as the

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changing structures of the labour market. The subjective views and expectations of employers and employees should be surveyed in barometer-type studies.

The continuing internationalisation and deregulation of the labour markets present challenges for the development of wage statistics as well. Former wage statistics were almost entirely developed with a view to the needs of the collective bargaining. However many of the structural changes in the economy clearly underline the role of wage statistics in describing society more generally. With the introduction of the euro, data on wages and labour costs have assumed greater importance with respect to monitoring business trends, for instance.

At the company level the environment for wage formation has changed significantly in recent years towards a more flexible and individual wage setting. Standardised wage structures are losing their relevance and the performance-based bonuses have gained greater importance in wage packages. Furthermore, the structure of the whole wage-earning population is changing with the increasing use of part-time and fixed-term labour as well as rented labour. At the same time the wage statistics produced have to satisfy needs not only of the social partners, but also of the users of the statistical system more generally.

Improvements are needed not only in terms of speed with which wage statistics are produced, but also in terms of coverage and contents. The definition of earnings should be as comprehensive and uniform as possible in order to be applied to all sectors in an international frame. The coverage of wage statistics ought to be so expanded that they also comprise different groups in the labour market (part-time staff, employees on a fixed-term contract, students, rented labour etc.), whose position calls for special monitoring and who are beginning to have a major impact on the cost structure of the enterprises. Furthermore the different kinds of performance-based bonuses should be included in earnings for regular hours.

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Income and welfare statistics

Social statistics have traditionally been compiled through sample surveys and through periodic censuses of the whole population. Over the past 30 years however there has been a dramatic change in the production of statistics in the Nordic countries, where a considerable volume of statistics is now based on administrative registers. This development has made it possible to develop a consistent and flexible statistical system with a very broad range of details. In the 1990s policy developments in Europe concerning social policy have mainly focused on employment and lifelong learning. Since the Lisbon European Council the main political priorities have been widened to embrace social inclusion, education and social protection. The renewed commitment to these goals at the Stockholm Council has made it imperative to develop adequate statistical methods to provide relevant statistical information for strategic discussion and decisions. The main quality criteria for such information are policy relevance, accuracy and timeliness.

The growing demand for harmonised European social statistics makes it absolutely necessary for all member countries and EUROSTAT to put more emphasis into the development of a consistent European statistical system for social statistics. A prerequisite for this is an explanation of the future need for European social statistics and the need for further methodological work. This will concern the coverage of the system, definition of common variables, definition of timeframe etc. Furthermore the system must be developed in such a way, that different sources can be used – both traditional survey data and sources based on administrative registers.

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Annex 3

Challenges in environment and natural resource statistics

The role

The field of environment and natural resource statistics is rather new area of work for statistical agencies, compared to economic and social statistics. The keyword, “environment,” covers a broad range of often complex issues. Shortly expressed, environment statistics deals with interactions between man and nature.

The focus of different nations is diverse depending on which environmental problems are considered the most serious. This diversity makes it a challenge to attain consensus on an international priority subject list for environmental statistics and also presents challenges when trying to harmonise standards and methods for the preparation of environmental statistics. Such diversity in priorities is existing even between the Nordic countries.

Environment statistics are considered to be important by decision makers and economic actors. However, the attention to the topic by governments, as well as the public, varies both between countries, and within a country over the years. Political attention may be difficult to predict, and will often have some connection with disasters and the feeling of “nature strikes back”. Such unpredictable attention makes it a challenge for statistical agencies to keep a stable long-term focus on environment when setting priorities. To some extent a precautionary principle should be a guiding star and statistical agencies must have a sound basis in their statistical descriptions.

The role of environment statistics should be to inform policy makers as well as the public about the state of the environment. That should be done in a simple and comprehensive way by converting complicated measuring and calculated data into more simple information without losing the basic concept of the issue. As in other statistics, time series are important in order to monitor the development, as are harmonisation and international standards.

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The issues

The Nordic countries, being rather equal in economic and social development compared to the rest of the world, are no exception from this general description of varying attention to environment. However, the Nordic countries face the same environmental challenges as all nations, e.g. the greenhouse effect. Other problems are also shared with many nations. Nordic countries are vulnerable to long-range air-pollutants. Big parts of the Nordic coastal zones are exposed to excess discharges from phosphorus and nitrogen. It is a challenge to handle growing amounts of waste in a maximum environmental-friendly but also cost-effective way.

Development in construction activity and land use activities often creates conflicts with respect to nature conservancy, recreation purposes or soil or forest resources, though the population in the Nordic nations is scattered and there seems to be space enough for all.

Most urgent, global environmental problems need well co-ordinated actions from the whole international community. And such actions need harmonised statistical information both as basis for action and for monitoring purposes. The possibility of trading CO₂ quotas will demand common standards, definitions and methods for calculation from all partner nations. This example illustrates the great need for, but also that it is a huge task to organise a common, harmonised environmental statistical system

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The international needs

The issues of top priority for Nordic environmental and natural resource statistics should be those where there are obligations or demands from the international community. However, for environment statistics there is only one European legal act, the Regulation on Structural Business Statistics, covering the investments in environmental protection in the industrial sector. In the near future, the Regulation on Waste Statistics is expected. Most of the reporting to the various international statistical systems is accomplished through “gentlemen’s agreement”.

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Important topics that are reported on a voluntary basis are energy and emissions to air, water resources and emissions to water, waste and recycling. The availability and quality of these data are in most cases depending on other international agreements and conventions within the environmental area. Examples on such conventions area the UN Convention on Climate Change, the so-called Kyoto Protocol, and the Basel Convention on Hazardous Waste. Other areas where there are international conventions, are biological diversity and land use. In the future, we can expect these areas to move higher up in priority on the environmental statistical agenda.

International conventions are helpful in the process of developing statistical information, but not always. A recent convention, signed in 1999 but not yet ratified, is the Aarhus Convention. Although not regulating new needs for environmental statistics, it could have a strongly undesirable effect on it. The Aarhus Convention states, among other things, the publics right to environmental related information on a company level. The convention has already lead to demands from environmental agencies, to get access to company data in order to publish it. This is contradictory to the principal of statistical confidentiality and should not be accepted by the statistical offices. For the Nordic countries there exist some important topics of particular regional interest and only partly highlighted by the international reporting systems. These natural resource topics include forest and fish resources, sub-soil resources, and from the environmental topics, access to recreational areas etc.

The structure

Environment statistics and environmental indicators are structured according to the so-called DPSIR-chain. The theory behind the chain is that the economic and social “Driving forces” (D), put “Pressure” (P), which again leads to a change in the “State” (S). These changes will in turn lead to some certain “Impact” (I). These changes and their causes will lead to a society “Response” (R) which again will have influence on the driving forces, pressure and eventually also the state.

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An example is that economic development (D), leads to increased energy use and emissions to air (P), this in turn leads to changes in air quality, particularly in cities (S), which again will have effects on human health or biologic diversity (I). If considered serious, society can try to brake this trend by introducing taxes on gasoline and heating oil (R), which in turn will affect both the economic development and the emissions.

However, the connections between these dimensions are not always obvious. The chain evidence is often weak; nature sciences are complex subjects. The effect on one single kind of human pressure on a certain state of nature is often controversial and a matter of discussion. Rather than a chain of evidence, the DPSIR is more of an indication chain. Nevertheless, the chain is considered as a useful tool for organising the information hierarchy and the share of work between different institutions. The connection between human activity and the state of environment has been more generally accepted during recent years.

Different public agencies have different tasks in the DPSIR chain. The natural role of statistical offices is to produce statistics on the “Driving forces”

(D)and the “Pressure” (P), given that there is a close link between economic and social development and the pressure on the nature. From human activities, for example sales of oil for different purposes combined with activity data and emission factors, detailed statistics on emissions to air of important pollutants and greenhouse gases can be derived.

In most cases monitoring institutions are most proper to cover the “State” (S) and the “Impact” (I) information. This often requires field work and highly specialised professions, and the statistical bodies should normally not be pure specialists in nature sciences. However, it should be a task for statisticians to ensure that sound methods are used. Statistical offices must also have staff with knowledge about nature science, to evaluate and use such data in a proper way.

“Response” (R) information is a very complex task, but important for

showing the distribution of environmental burdens by different sectors and countries. Response statistics covers a broad amount of subjects; e.g. environmental taxes and other environmental expenditure, legal acts and also

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certain actions to conserve nature, such as liming of lakes etc. Response statistics can be produced both by governmental agencies and statistical offices. However, compared to governmental agencies, statistical institutions have the advantage of independence from political signals. In addition, there is a big need for sustainable standards and definitions, independent of political considerations, in this area. Statistical institutions are thus well suited for such long-term activities.

Response statistics should also be closely linked to changes in driving forces and pressure, to monitor the effect of society response. Taking the DPSIR chain into account, it is obvious that the D, P and R statistics have close connection to structural economic and also population statistics. The close relationship to basic statistics is one of the main reasons for statistical offices to work with environmental statistics.

Indicators and Accounts

Statistical agencies are highly specialised on complex relations, and are in constant danger of presenting figures, which cannot be communicated. The need to increase accessibility to environmental statistics and to publish information in a comprehensive way has resulted in the development of different kinds of environmental indicators. Examples are environmental top

indicators or key figures and environmental indices. Those indicators and

indices gather statistics on different topics to one or a few sets of figures. It is a serious task to develop such indicators, and attempts have been conducted by governmental agencies as well as by national statistical offices and international organisations like Eurostat and OECD.

Different terminology for the indicators has been used, such as environmental indicators, structural indicators, integration indicators, headline indicators, key figures and sustainable development indicators. The latter set, which will combine both the economic, social and environmental dimensions, should be the most important set, and will include some of the other indicators.

International bodies have been in a leading position on initiating and conducting indicator projects during the recent few years. This work gives a

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framework and put limitations for national initiatives. It is very useful tool for harmonising and structuring the national statistics and for improving comparability between countries and over time. On the other hand, it may obstruct development of national or regional indicators. The Nordic perspective in indicator work has been a rather pragmatic one, concentrating on practical results rather than irrefutable principles.

The Nordic countries conducted a pioneer work in 1996 with the release of the report “Nordic environmental indicators”; a project ordered by the Nordic Council of Ministers. The work was based on a core set of indicators defined by the OECD. Further development of indicators is now co-ordinated by international agencies, but three of the Nordic countries (Denmark, Finland, and Sweden) have gained experience with sustainable development indicators.

The Nordic national statistical offices should continue to play an active role in European indicator developing work, and their strength should be increased in common projects. It should also be discussed whether the global or European indicators should be the only ones to highlight, or if the Nordic countries should work with additional regional aspects and indicators. There are widely different natural and cultural conditions between different regions. Therefore, it should be discussed what is the Nordic perspective to environment statistics, what is considered to be the most specific environmental challenges in the Nordic countries, and how to serve the need for information. A project group highlighting the regional Nordic environmental challenges should be established, as a continuation of work conducted on Nordic indicators and also taking the Nordic NAMEA work into account. There is also a need for co-ordinating and setting priority in order to avoid information overload and double work. It will be an important task of statistical institutes to initiate co-ordination, harmonise methodological approaches and streamline data collection, both nationally and internationally.

The Nordic countries have been active in the international development of environmental accounting. The UN handbook on environmental accounts (SEEA) will soon be released in its second version, and including the

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NAMEA framework. This framework is the most promising approach of the 1990’s in Europe. NAMEA connects the economic activities with environmental pressures in a systematic way. Environmental accounts and NAMEA will be an excellent basis for internationally comparable indicators on sustainability.

Administrative registers as a source for statistics

Administrative registers and databases of different kinds serve governmental sector in all the Nordic countries. The existence of such databases is a distinctive feature for Nordic administration, and these databases are valuable data sources for development and maintenance of statistics and give the statistical offices the chance to develop new products.

The value of administrative information can even be enhanced in combination with surveys. Statistical offices worldwide should have unlimited access to such databases for statistical purposes, and limited access founded on administrative or commercial reasons should not be accepted. The Nordic countries should act as “pilot countries” to the world, showing which possibilities exist when using administrative information as a data source for environmental statistics.

Experience with administrative databases has shown that basic information is of varying quality. There has been much discussion with respect to the exact role statistical offices can have in raising the quality of the basic data without losing the integrity with respect to individual information. Quality enhancing work can be done only when there is no chance that individuals or individual companies could be prosecuted as a result of efforts conducted by statistical offices.

Collaboration at national level

The Nordic countries have in common an advanced public sector. There are a number of institutions dealing with environment, both at the national and at the local level in the municipalities. Co-ordination between environmental institutions should have been better, at all levels.

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The share of work between governmental agencies and statistical offices vary between the Nordic countries. Common for all the nations has been that some of the international reporting obligations closely related to statistics have been a duty of the governmental agencies. An example has been Corinair, which covers emissions to air, and where data is organised in a different way than in other international reporting obligations. In addition, there are also research and management institutions having their own data collection and information agenda.

Such “double reporting obligations” narrows the role of the statistical agencies, but it also represents new possibilities for collaboration between statistical and governmental agencies. It is a duty of the statistical agencies, however, to point out the fields where better co-ordination of international as well as national reporting obligations should take place.

The Nordic countries are known to have advanced routines for statistical work in the environmental sphere. Much of this success is founded on a tight co-operation within the governmental sector. This ensures good user-producer relations and helps to set priorities among possible topics for environmental statistics. For statistical offices, it is a challenge to maintain the good relationships within the governmental sphere without losing their independence, strength to set goals of their own and develop their own analyses. Statistical offices must highlight this independence, and environmental statistics should be given strength to follow priorities of the offices.

Governmental agencies should, on the long run, be aware of the advantage of having an independent “revision” of the results of their environmental policy. The ongoing collaboration between governmental sector and statistical offices is a great advantage for Nordic environmental statistics, and both parts in this process should respect the integrity and the power of the other.

Collaboration inside statistical offices

Co-ordinating is an important task, perhaps the most important, for environmental statistics within the statistical offices. Since various kinds of basic statistics are used as sources for environment statistics, environmental