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24 November 2003

2003 quest.-Summary of question 23 and ISIC section 12 responses

Question 23 in the "questions" document: Do you support the approach taken in the ISIC structure draft with respect to Real estate activities? The proposed two-digit level structure for Section 12 " Real Estate, rental and leasing activities": 12.1 Real estate 12.2 Rental and leasing 12.3 Leasing of intangible assets (except copyrighted works)

Summary of responses to question 23 and section 12: Responses to Q 23: 1. Support approach taken in the ISIC Structure Draft, 34 responses. Support approach taken in the ISIC Structure Draft (for reasons of continuity), 7 responses. 2. Support alternative (Leave Real Estate by itself, move Rental and Leasing under Administrative and Support Services), 5 responses. 3. Inconclusive on items 1 and 2 above (see comments in 12.1 below), 8 responses. 4. Demotion of leasing of intangible assets along with further study of area, 7 responses. Section12 In commenting on the ISIC Structure Draft, recommendation was made by four respondents for change of the title of this Section. Titles suggested indicated that respondents would like to see full representation of the three constituent elements in the title. The current name appears to imply that there are only two Divisions: "Real Estate" and "Rental and leasing", with the third division "Leasing of Intangible assets subsumed under the "Rental and leasing " division. It was suggested to add "and" between real estate and rental; or change the order of the divisions as they are mentioned in the Section title and/or use a synonym such as "hiring" to distinguish between "rental and leasing" and "leasing of intangible assets". 12.1 - Real Estate Boundary questions addressed Concerning the boundary question on real estate developers, the six respondents who addressed this question suggested that real estate developers (the term "land developers" was also used), where they are involved in construction or have the physical responsibility for construction, even though they may not actually carry it out, should be treated "like converters" and placed in construction. Of the respondents (3) who addressed the question of inclusion of the activities of lessors/owners of railroad terminals in real estate, all recommended their exclusion. Short term/long term accommodation Of the three respondents who addressed the distinction between real estate and accommodation, two welcomed the short term/long term distinction, but noted the difficulty of arriving at a definition for residential or long term vs. visitor or short term. Thailand proposed that short term be defined as "persons who do not have any intention to stay permanently because they already have their permanent residence in another place". The WTO proposal for Accommodation services did not define short or long term, but associated long-term status with units engaged in providing accommodation for "more permanent use, typically on a monthly or annual basis" and supports classifying such units to Real Estate. 12.2 - Rental and leasing Boundary questions addressed The two respondents (NAICS) who provided answers with regard to the treatment of long-term leases noted that the SNA treatment of long-term leases does not work well as a practical matter (e.g. leasing of cars for 3-5 years - this is considered neither operating nor financial lease). As solution, both suggested that the NAICS approach to classify with Division 11 - Financial and Insurance Services, if sales financing is included, is the preferred treatment. 12.3 - Leasing of Intangible Assets Of the nine respondents who addressed the subject of Leasing of Intangible Assets, a majority indicated that "further study on the content and importance" of this proposed division is needed. Specific comments suggested that a clearer definition and examples should be produced, in consultation with National Accounts experts and an assessment of the relative importance of the division should be undertaken, to determine whether its placement at division level is warranted - doubt was expressed that there is a significant number of statistical units which have leasing of intangible assets as a primary activity. Seven respondents would like to see the division demoted to a lower level. Among the respondents who want to see this category demoted, no requests were made to place it within another Section, it is assumed therefore that the "lower level" they refer to means placement under "Rental and leasing". Action to be taken 1. A large number of respondents recommended that there be further study of the Leasing of Intangible Assets to assess content and relative importance. National Accounts Experts should be integrally involved (See 12.3 below). 2. Develop a more representative title for Section 12. 3. Good working definition of operational, long-term leases should be arrived at with help of National Accounts experts.