Part one Introduction
3 Chapter I Overview 1. The International Standard Industrial Classification of All Economic Activi- ties (ISIC) consists of a coherent and consistent classification structure of economic activities based on a set of internationally agreed concepts, definitions, principles and classification rules. It provides a comprehensive framework within which economic data can be collected and reported in a format that is designed for purposes of eco- nomic analysis, decision-taking and policy-making. The classification structure repre- sents a standard format to organize detailed information about the state of an economy according to economic principles and perceptions. 2. In practice, the classification is used for providing a continuing flow of information that is indispensable for the monitoring, analysis and evaluation of the performance of an economy over time. In addition to its primary application in sta- tistics and subsequent economic analysis, where information needs to be provided for narrowly defined economic activities (also referred to as “industries”), ISIC is increas- ingly used also for administrative purposes, such as in tax collection, issuing of busi- ness licenses etc. 3. This fourth revision of ISIC enhances the relevance of the classification by better reflecting the current structure of the world economy, recognizing new indus- tries that have emerged over the past 20 years and facilitating international compari- son through increased comparability with existing regional classifications. Main features of the classification 4. The scope of ISIC in general covers productive activities, i.e., economic activities within the production boundary of the System of National Accounts (SNA).9 A few exceptions have been made to allow for the classification of activities beyond the production boundary but which are of importance for various other types of sta- tistics.10 5. These economic activities are subdivided in a hierarchical, four-level struc- ture of mutually exclusive categories, facilitating data collection, presentation and analysis at detailed levels of the economy in an internationally comparable, standard- ized way. The categories at the highest level are called sections, which are alphabeti- cally coded categories intended to facilitate economic analysis. The sections subdivide the entire spectrum of productive activities into broad groupings, such as “Agricul- ture, forestry and fishing” (section A), “Manufacturing” (section C) and “Information and communication” (section J). The classification is then organized into successively more detailed categories, which are numerically coded: two-digit divisions; three-digit groups; and, at the greatest level of detail, four-digit classes. 6. The classification is used to classify statistical units, such as establishments or enterprises, according to the economic activity in which they mainly engage. At each 9 The 1993 SNA has been revised in 2008. New concepts introduced in the revised SNA have been taken into account during the preparation of ISIC, Rev.4. All remarks citing SNA refer to the revised version of SNA as prepared in 2008. However, since the final print publication of the revised SNA (2008 SNA) was not available at the time of preparation of this introduction, no references to specific paragraphs or chapters in 2008 SNA could be given. 10 See para. 29 below.
International Standard Industrial Classification of All Economic Activities (ISIC), Revision 4 4 level of ISIC, each statistical unit is assigned to one and only one ISIC code, as set out below. The set of statistical units that are classified into the same ISIC category is then often referred to as an industry, such as “the furniture industry”, which would refer to all units classified in ISIC division 31 (Manufacture of furniture), or the “construction industry”, which would refer to all units classified in ISIC section F (Construction). This standardized categorization or subdivision of the complete set of producing units in an economy makes ISIC an important tool for socio-economic statistics that need to be arranged in accordance with the productive system of the economy. Principles, definitions and classification rules 7. All categories at each level of the classification are mutually exclusive. The principles and criteria that have been used to define and delineate these categories have not changed from previous versions of ISIC and are based on the inputs of goods, serv- ices and factors of production; the process and technology of production; the charac- teristics of outputs; and the use to which the outputs are put. Economic activities that are similar in respect of these criteria have been grouped together in the categories of ISIC. At the most detailed level of the classification, preference has been given to the process and technology of production to define individual ISIC classes, particularly in the classes related to services. At higher levels, characteristics of outputs and the use to which outputs are put become more important to create analytically useful aggrega- tion categories. For many analytical purposes and for reasons of historical continuity, a strict application of these criteria has not proven useful. The weight that has been applied to each of these criteria will therefore invariably change throughout the clas- sification. In addition, practical considerations, such as the organization of economic production in most countries and the need for stability of the classification, are factors that have also influenced the way categories have been defined at different levels of the classification. 8. The content and scope of each category in the classification is defined through a detailed explanatory note, which also highlights boundary issues by provid- ing examples of activities that may appear similar but are classified elsewhere in ISIC. 9. In order to apply the classification to a particular statistical unit, informa- tion on the activity in which the unit engages has to be obtained. This information is then used to find the category in ISIC that corresponds to this activity, based on the definitions provided in the explanatory notes. 10. In practice, it will often be the case that a statistical unit (no matter how narrowly defined) engages in a variety of activities, which may be linked to each other or be completely independent. In order to arrive at a single ISIC code for these units, ISIC provides a set of rules that have to be applied in the process of classifying a given unit. Section II.C below outlines these rules and gives examples for their application in special cases. Harmonization with other statistical classification systems 11. ISIC has a central position among existing classifications of economic activities, as well as other economic classifications, such as those for products. ISIC provides the internationally accepted standard for categorizing producing units within an economy, which allows for data comparison at the national and international levels. During the revision process of ISIC, Rev.4, special attention was paid to improving the links between existing activity classifications, especially at the regional level, to
Introduction 5 facilitate future international data comparison. In the course of this revision, a review of other activity classifications was undertaken, and subsequent changes to ISIC were introduced to further harmonize these existing classifications with ISIC. This harmo- nization has led to the adoption of new concepts in ISIC that were developed and tested in other classifications, as well as a review of individual category definitions (in ISIC and other classifications) to improve the comparability of these classifications with ISIC. 12. Harmonization of ISIC with other classifications that have conceptual link- ages to some part or all of the economic structure has also been considered in the process of developing ISIC, Rev.4. This applies in particular to product classifications. Aggregates of ISIC 13. ISIC disaggregates the economy into the more detailed levels of industries and industry groups, as well as the more aggregated levels of divisions and sections. It can be used to examine particular industries or industry groups or to analyse the econ- omy as a whole by disaggregating it to different levels of detail. For analytical purposes, it is important to implement ISIC at its lower levels of detail to be able to observe and analyse the economic interactions taking place between the different activities, allow- ing understanding of the interlinkages of the production of an economy. 14. The categories of ISIC (especially higher-level categories) have become an accepted way of subdividing the overall economy into useful coherent industries that are widely recognized and used in economic analysis, and as such they have become accepted groupings for data used as indicators of economic activity. 15. While ISIC provides a standard way of grouping economic activities, there is sometimes a need to provide data on other sets of economic activities that may cross the boundaries of existing high-level ISIC categories but have become of interest to the statisticians, economists and policy makers. An example of this is the interest in measuring the information economy, which includes activities from a wide range of ISIC sections, including section C (Manufacturing), section J (Information and com- munication) and others. Since such groupings cannot be built into the existing ISIC structure, additional alternative aggregations can be created to serve these special data needs and provide a standard way of presenting such data. The present publication provides a set of internationally agreed alternative aggregations that have been defined for ISIC, Rev.4. International acceptance of ISIC 16. ISIC was developed with rigorous consultation and collaboration among all stakeholders—national statistical offices, international organizations, academia and others. Through this inclusive revision process, it has been possible to include fea- tures in ISIC that make it useful and attractive for the majority of countries around the world. ISIC has been recommended to countries as an international standard and model in the development and/or adaptation of their national activity classifications. 17. While ISIC was developed with a view to categorizing economic activi- ties for national accounts and other economic analysis purposes, its use extends to data collection, tabulation, analysis and presentation for a variety of social and envi- ronmental applications, such as the link between the economy, education and health sectors and the environment at the national and international levels. Moreover, at the
International Standard Industrial Classification of All Economic Activities (ISIC), Revision 4 6 national level, ISIC and its national versions are increasingly used for administrative and business purposes, such as the categorization of revenues and expenditures. 18. Previous versions of ISIC have been used—either directly or through compatible national adaptations—by the majority of countries around the world. It is expected that ISIC, Rev.4 will continue to play this role as the only fully interna- tionally accepted activity classification. Apart from the increasing number of coun- tries that have adapted their national activity classifications or can provide statistical series according to ISIC, the classification is used by many international organizations when publishing and analysing statistical data by economic activity. Those organi- zations include the United Nations and its specialized agencies, the International Labour Organization (ILO), the Food and Agriculture Organization of the United Nations (FAO), the United Nations Educational, Scientific and Cultural Organization (UNESCO), the United Nations Industrial Development Organization (UNIDO), the International Monetary Fund (IMF), the World Bank and other international bodies. 19. In its function as the internationally accepted reference classification for economic activities and its strong link to other existing activity classifications, ISIC can be viewed as an effective tool for the harmonization of economic statistics. Structure of this publication 20. The present ISIC publication is organized into five parts, as follows: Part one describes the underlying principles that are used in constructing the classification. Apart from facilitating the understanding of the current classification structure, the principles may assist in developing national classifications by applying criteria consistent with those of ISIC. Part one also describes the application rules that allow for the correct and consistent classification of any given production unit in ISIC. It concludes with a description of the relationship between ISIC and other classifica- tions. Part two shows the complete structure of the classification in a condensed form, allowing for easy viewing of the format in which ISIC subdivides economic activities. Part three provides a detailed description of the classification, with full explana- tory notes that describe the content of each ISIC category. Part four shows a number of internationally agreed alternative aggregations that provide standard ways of presenting data on special topics that cannot be addressed in the ISIC structure itself. Part five outlines the major changes in ISIC, Rev.4 as compared to the previous version (ISIC, Rev.3.1), covering both methodological and major structural changes. 21. While it may be intuitive to immediately use the detailed definitions of part three of this publication, users are strongly encouraged to first familiarize themselves with the application rules set out in part one so as to correctly understand and use the classification.