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Notes


About this issue

This is a new issue which presents the results of a study of the foreign ownership characteristics of businesses engaged in economic activity in Australia in 2000-01. This study is the first to cover all industries (except Agriculture, forestry and fishing) for the same reference year.

Comments

The ABS welcomes comments and suggestions from users. Comments should be addressed to the Director, Globalisation Section, Australian Bureau of Statistics, Locked Bag 10, Belconnen ACT 2616.

Rounding

Where figures have been rounded, discrepancies may occur between the sum of component items and the total.

Inquiries

For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070 or Glen Malam on Canberra 02 62525040.



Summary Commentary


Introduction

The ABS has compiled traditional economic indicators for foreign trade and foreign direct investment for many years. While these data give some structural information, the ABS has not regularly compiled data for the economic activity of multinational firms, nor the international dissemination of technology (both important globalisation indicators). In recent years the ABS has embarked on a series of case studies to test the feasibility of synthesising activity data for multinationals and indicators of technology dissemination by combining data from a number of sources. Early studies examined new capital expenditure by multinationals, the economic activity of multinationals in the mining and information technology industries, and research and development activities of multinationals in Australia.

This study is the most ambitious to date. It covers the economic activities of identified majority foreign-owned businesses(Footnote: Country of majority ownership could not be identified for a large number of businesses (see Explanatory Notes). Hereafter the words 'identified majority' are omitted but are implied.) in the Australian economy, covering all employing businesses in all industries except agriculture, forestry and fishing.

This study uses source data collected by the ABS as part of the 2000-2001 annual Economic Activity Survey (EAS), published in Business Operations and Industry Performance, 2000-2001 (cat. no. 8140.0). This survey was based on a sample of about 20,000 management units selected from the ABS Business Register. Foreign ownership characteristics of businesses responding to the EAS were identified by matching the data for the EAS businesses with the foreign ownership data for the same businesses from the ABS Survey of International Investment for those businesses included in both surveys. For other businesses, a number of other sources were used, with most ownership data compiled from extensive Internet searches.

The range of statistics about foreign-owned businesses presented in this study is similar to that presented in Business Operations and Industry Performance. Note that EAS data relate to the management unit, defined as the highest level unit within a business for which a set of management accounts is maintained, rather than to the enterprise or establishment (as required by the international standard for globalisation statistics). Further information about the scope and coverage are provided in the explanatory notes.

PREVIOUS STUDIES

Several globalisation case studies were undertaken prior to this exercise to examine the foreign ownership characteristics of businesses in particular areas of interest. The study of businesses in the Mining industry in 1997-98 showed that foreign-owned businesses made a larger contribution to industry turnover than Australian-owned businesses(Footnote: Identified as majority Australian-owned.), but a lower contribution to industry employment and capital expenditure. Expenditure on wages and salaries by the Mining industry was shared evenly between foreign-owned and Australian-owned businesses.

A study of the ownership of businesses undertaking capital expenditure for the 1998-99 financial year showed the lower contribution of foreign-owned businesses to capital expenditure was not restricted to the Mining industry, with the capital expenditure by foreign-owned businesses less than half the capital expenditure by Australian-owned businesses.

A study of research and experimental development activity for the 1999-2000 financial year found that foreign-owned businesses spent almost as much on research and experimental development as Australian-owned businesses. The Manufacturing industry experienced the largest levels of research and experimental development activity, with foreign-owned and Australian-owned businesses contributing equally. Foreign-owned businesses dominated research and experimental development activity by Wholesale and Retail businesses, both in terms of research and experimental development expenditure and human resources devoted to research and experimental development.

Two studies were undertaken examining the foreign ownership characteristics of specialist Information Technology (IT) businesses. The most recent examined the activity of IT businesses in 2000-01 and updated a previous study of IT businesses for 1998-99. In both studies, foreign-owned businesses dominated the IT components of the Wholesale industry. Foreign-owned businesses significantly increased activity in the IT components of the Manufacturing industry between 1998-99 and 2000-01 to the extent that, by 2000-01, they dominated that industry also. In the Computer services industry, both Australian-owned and foreign-owned businesses increased economic activity by roughly the same magnitude so that, as with the 1998-99 study, the 2000-01 study found that foreign-owned businesses provided a similar level of employment to Australian-owned businesses, but they accounted for more than half the income. In both studies, majority USA-owned businesses had the largest economic activity of foreign-owned businesses to the extent that they were comparable to Australian-owned businesses in terms of employment and exceeded Australian-owned businesses in terms of income.

Summary

As part of an initiative to provide a range of economic globalisation indicators, the ABS has embarked on a series of studies of the economic activity of majority foreign-owned businesses in Australia(Footnote: Businesses are deemed to be majority foreign-owned if more than 50% of their equity is held by non-residents.).

The most recent study examines the foreign ownership characteristics of a wide range of businesses engaged in economic activity in Australia in 2000-2001. Majority foreign-owned businesses made a significant contribution to the Australian economy overall (21%), with notable contributions in the Mining and Manufacturing industries where they contributed 45% and 34% of industry value added, respectively.

Majority Foreign-Owned Businesses: Industry Value Added by selected Country of Owner, All industries excluding agriculture, forestry and fishing, 2000-01

Majority USA-owned businesses accounted for the largest contribution to industry value added for each of the industry groups included in the study except the Transport, storage and communication services industry. Majority UK-owned businesses dominated the Transport, storage and communication services industry, with New Zealand-owned businesses accounting for the second-highest industry value added in that industry.

ALL INDUSTRIES

The estimated number of foreign-owned businesses in Australia was 7,864 at the end of the 2000-01 financial year (approximately 1% of all businesses in Australia). They employed 783,300 workers (12% of all employees in Australia), contributed $12,566m to gross fixed capital formation (25% of all gross fixed capital formation in Australia) and contributed $78,056m to value added (21% of total value added in Australia). A country breakdown of business activity by country is provided in Table 1.

In terms of business numbers, USA residents owned significantly more businesses in Australia than the residents of any other foreign country and more than four times as many businesses as the UK (3,439 and 792 respectively). The contribution by USA-owned businesses was approximately twice the contribution of UK-owned businesses in terms of employment (331,000 and 140,500 employees, respectively) and industry value added ($33,911m and $17,119m respectively). In contrast, UK-owned businesses accounted for $3,685m of gross fixed capital formation, 90% of the contribution by USA-owned businesses ($4,114m); and accounted for higher operating profit than USA-owned businesses ($9,602m and $8,821m respectively).

Business Activity and Characteristics by Country of Owner, All industries excluding agriculture, forestry and fishing, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
Austria	7	1.9	*-5	78
Belgium	8	3.6	34	110
Canada	49	20.5	337	1,732
Finland	**36	**5.4	**60	*523
France	113	23.9	-1,152	1,837
Germany	*378	28.3	1,152	3,557
Hong Kong	**440	*11.6	296	1,162
India	**24	**1.1	np	*132
Italy	*8	3.7	75	211
Japan	*347	41.9	1,128	6,424
Netherlands	45	43.3	979	1,208
New Zealand	**871	39.4	1,060	2,440
Singapore	*47	5.7	33	900
South Africa	**632	13.6	196	925
Sweden	*101	14.6	np	1,396
Switzerland	**167	40.2	295	2,953
UK	792	140.5	3,685	17,119
USA	*3,439	331.0	4,114	33,911
Other countries	*359	13.1	278	1,438
Total foreign	7,864	783.3	12,566	78,056
np not available for publication but included in "Other countries". * estimate has a relative standard error of between 25% and 50% and should be used with caution. ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use.

In 2000-01, foreign-owned businesses played an important role in the Mining, Manufacturing and Wholesale industries, contributing 45%, 34% and 31% of industry value added respectively. Foreign-owned businesses were also significant contributors to industry value added in the Electricity, gas and water, Property and business services, and Transport, storage and communication industries (21%, 18% and 13% respectively).

Industry Value Added Accounted for by Foreign-Owned Businesses, By industry, 2000-01

Business Activity and Characteristics by Country of Owner, Mining Industry, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
Canada	7	1.3	*127	304
China	5	np	np	64
Japan	40	1.0	419	2,574
South Africa	6	2.5	163	474
Switzerland	12	1.7	36	397
UK	*21	6.3	120	4,573
USA	*60	6.4	1,403	6,397
Other countries	18	0.3	898	503
Total foreign	169	19.6	3,167	15,286
np not available for publication but included in "Other countries". * estimate has a relative standard error of between 25% and 50% and should be used with caution.

In terms of business numbers, USA residents owned 60 mining businesses (4% of all mining businesses), while residents of Japan owned 40 businesses and UK residents owned 21. In terms of employment, USA-owned businesses and UK-owned businesses accounted for approximately the same number of employees (6,400 and 6,300 employees respectively). In contrast, USA-owned businesses were by far the biggest investors in gross fixed capital formation, followed by Japan, South Africa, Canada and the UK. USA-owned businesses contributed 19% of industry value added, while UK-owned businesses contributed 13%. More detailed information is provided in Table 2.

Industry Value Added by selected Country of Owner, Mining, 2000-01

MANUFACTURING

Foreign investment in the Manufacturing industry totalled $107.2 billion in 2000-01, accounting for 13% of all foreign investment in Australia. In 2000-01 foreign-owned businesses employed 23% of the workers in the Manufacturing industry, accounted for 38% of total industry income and 44% of the gross operating profit, and contributed 34% of industry value added. Foreign-owned businesses owned 36% of total assets and contributed 42% of total fixed capital formation in Manufacturing in 2000-01.

Business Activity and Characteristics by Country of Owner, Manufacturing Industry, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
Austria	3	0.5	np	36
Canada	*31	9.7	163	806
Finland	5	1.9	5	180
France	30	7.9	47	1,115
Germany	46	6.8	267	792
Italy	3	3.5	np	188
Japan	39	16.7	365	1,710
Malaysia	**17	*0.8	np	*54
Netherlands	13	6.2	217	1,027
New Zealand	24	7.1	112	536
Singapore	**16	*1.2	8	75
Sweden	9	6.1	38	456
Switzerland	23	9.3	168	1,144
UK	105	40.4	757	5,052
USA	373	89.2	1,137	10,600
Other countries	**83	7.0	212	1,016
Total foreign	821	214.4	3,497	24,787
np not available for publication but included in "Other countries". * estimate has a relative standard error of between 25% and 50% and should be used with caution. ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use.

In 2000-01, USA-owned businesses spent more on gross capital formation than businesses owned by any other foreign country (accounting for nearly 14% of the total), contributed more to industry value added (approximately 15% of the total) and employed the most workers (more than 9% of the total). More detailed information on foreign-owned businesses in the Manufacturing industry is provided in Table 3.

Industry Value Added by selected Country of Owner, Manufacturing, 2000-01

Industry Value Added by Foreign-Owned Businesses, Manufacturing—Detailed Industry, 2000-01

Business Activity and Characteristics by Country of Owner, Electricity, gas and water industry, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
USA	10	2.6	190	1,291
Other countries	13	5.6	406	1,823
Total foreign	23	8.2	596	3,114

USA-owned businesses made the largest contribution to industry value added, with nearly 3%, followed by the UK with nearly 1%. Since the Construction industry includes a high proportion of small, highly mobile, businesses, it has not been possible to ascertain the ownership characteristics of a comparatively high number of them, but the majority were most probably Australian-owned.

Business Activity and Characteristics by Country of Owner, Construction, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
UK	*8	2.6	23	192
USA	10	8.3	15	636
Other countries	**791	9.0	15	*815
Total foreign	**809	20.0	53	1,644
* estimate has a relative standard error of between 25% and 50% and should be used with caution. ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use.

WHOLESALE TRADE

Foreign-owned businesses made a significant contribution to the Wholesale trade industry in 2000-01 (refer to Table 7). Only 4% of Wholesale businesses were foreign-owned; however they employed 20% of the work force, owned 36% of the total assets, accounted for 34% of the industry's profit and contributed 31% of industry value added.

Business Activity and Characteristics by Country of Owner, Wholesale, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
Germany	**295	*13.6	*117	*1,710
Japan	**224	*14.1	93	1,305
Netherlands	5	3.3	np	141
South Africa	6	4.1	12	213
Sweden	*68	7.8	np	906
UK	*78	*6.7	49	*661
USA	**949	36.8	202	3,883
Other countries	**122	6.2	74	643
Total foreign	*1,746	92.7	547	9,462
np not available for publication but included in "Other countries". * estimate has a relative standard error of between 25% and 50% and should be used with caution. ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use.

Businesses owned by USA residents made the largest contribution to industry value added (13%), with German and Japanese-owned businesses also being significant contributors (6% and 4% respectively).

Industry Value Added by selected Country of Owner, Wholesale, 2000-01

Business Activity and Characteristics by Country of Owner, Retail, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
Japan	*11	*2.2	*4	*111
New Zealand	4	5.4	24	174
South Africa	4	4.4	14	152
USA	**33	39.1	*133	*1,541
Other countries	*47	34.2	169	*658
Total foreign	*99	85.3	343	*2,635
* estimate has a relative standard error of between 25% and 50% and should be used with caution. ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use.

USA-owned businesses accounted for nearly half of total employment by foreign-owned businesses and over half of the industry value added of foreign-owned businesses.

Industry Value Added by selected Country of Owner, Retail, 2000-01

Business Activity and Characteristics by Country of Owner, Accommodation, cafes and restaurants, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
Japan	7	3.4	np	123
Singapore	**6	1.7	1	71
UK	7	6.6	1	190
USA	**35	*8.1	*17	*282
Other countries	**58	*12.4	44	*401
Total foreign	*114	32.2	63	1,067
np not available for publication but included in "Other countries". * estimate has a relative standard error of between 25% and 50% and should be used with caution. ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use.

Japanese-owned businesses owned nearly 7% of total assets, but employed less than 1% of workers. On the other hand, USA-owned businesses owned 3% of total assets but employed more than twice as many workers as Japanese-owned businesses.

Industry Value Added by selected Country of Owner, Accommodation, cafes and restaurants, 2000-01

Business Activity and Characteristics by Country of Owner, Transport, storage and communication, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
France	**25	*1.2	*31	*110
Germany	**12	1.6	*3	95
Japan	4	0.8	np	43
New Zealand	**11	15.7	np	941
Switzerland	*9	2.1	9	*125
UK	34	19.5	np	3,369
USA	*31	6.5	421	786
Other countries	**160	13.2	3,366	**-34
Total foreign	*287	60.6	3,830	5,434
np not available for publication but included in "Other countries". * estimate has a relative standard error of between 25% and 50% and should be used with caution. ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use.

UK-owned businesses employed over 4% of workers and contributed 8% of industry value added, ahead of New Zealand (3.5% and 2%) and the USA (1.5% and nearly 2%). There were a large number of very small operators in this industry whose ownership characteristics could not be established, however most were probably Australian-owned. It was necessary to combine Communication with Transport and storage for confidentiality reasons as both the Transport and storage industry and Communication industry are dominated by a very small number of comparatively large businesses.

Industry Value Added by selected Country of Owner, Transport, storage and communication, 2000-01

Businesses owned by USA, UK and French residents made significant contributions to total assets (5%, 4% and 3% respectively) and employment (7%, 5% and 1% respectively). Only sparse data for gross fixed capital formation can be published, for confidentiality reasons.

Business Activity and Characteristics by Country of Owner, Finance and insurance, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
France	*30	3.7	np	. .
Japan	*8	*0.2	np	. .
Netherlands	11	2.3	34	. .
Switzerland	*18	3.7	np	. .
UK	**133	15.8	*85	. .
USA	**308	22.9	np	. .
Other countries	**124	5.5	*-887	. .
Total foreign	*632	54.0	*-768	. .
. . not applicable np not available for publication but included in "Other countries". * estimate has a relative standard error of between 25% and 50% and should be used with caution. ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use.

Business Activity and Characteristics by Country of Owner, Property and business services, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
Germany	4	0.8	np	218
Japan	*11	2.4	np	451
Netherlands	4	1.7	np	96
Norfolk Island	3	-	-	*1
UK	*301	28.4	51	*2,086
USA	**1,504	89.3	290	6,203
Other countries	**773	32.1	64	1,782
Total foreign	*2,600	154.8	404	10,837
- nil or rounded to zero (including null cells) np not available for publication but included in "Other countries". * estimate has a relative standard error of between 25% and 50% and should be used with caution. ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use.

Industry Value Added by selected Country of Owner, Property and business services, 2000-01

Business Activity and Characteristics by Country of Owner, Private community services, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
UK	**68	6.3	8	79
USA	*75	8.7	57	245
Other countries	7	5.2	4	*-25
Total foreign	*150	20.2	69	298
* estimate has a relative standard error of between 25% and 50% and should be used with caution. ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use.

CULTURAL, RECREATIONAL, PERSONAL AND OTHER SERVICES

There was little foreign involvement in the Cultural, recreational, personal and other services industries, with foreign-owned businesses contributing less than 6% of industry value added (refer to Table 14). It was necessary to merge the Cultural and recreational services industry with the Personal and other services industry as the data were dominated by a small number of larger businesses.

Business Activity and Characteristics by Country of Owner, Cultural, recreational, personal and other services, 2000-01
	Operating Businesses	Employment	Gross Fixed Capital Formation	Industry Value Added
	no.	'000	$m	$m
USA	*51	13.1	np	731
Other countries	**364	8.4	765	*242
Total foreign	**415	21.5	765	973
np not available for publication but included in "Other countries". * estimate has a relative standard error of between 25% and 50% and should be used with caution. ** estimate has a relative standard error greater than 50% and is considered too unreliable for general use.