Assessment of National Accounts Practices inESCWA Region

Majed Skaini, UN-ESCWA

Expert Group Meeting on National AccountsCairo, 12-14 May 2009

QuestionnaireA questionnaire on Sources and methodologies followed in compiling National Accounts Statistics in Western Asia countries was sent to all ESCWA countries in the end of March 2009;

The questionnaire covered the following topics:- General Questions on implementation status, classifications, and National Accounts Compilation; - Understanding of NA concepts and definitions;- Sources of data and methods of estimation;- Coverage of production and asset boundaries;- Compilation of institutional sector accounts;- Other related issues.

Objective of QuestionnaireThe responses to the questionnaire constitute the cornerstone for the overall assessment of the regional status of National Accounts compilation in ESCWA region;The assessment will form the basic input for a regional booklet on sources and methods of compiling National Accounts in the ESCWA region;The assessment will shape the implementation strategy plan of the ESCWA region.

Responses13/14 countries responded to the questionnaire;Some questionnaires were partially answered;Most of the countries did not provide sufficient info on sources and methods used in production-side, expenditure-side and income side estimation;Some responses need to be clarified and validated;Missing responses and vague ones will be discussed in this meeting.

General status of SNA implementation in the ESCWA region

SNA followedThere are differences between the ESCWA member countries in terms of application of many of the recommendations, definitions, concepts and calculations recommended by the System of National Accounts 19937/13 reported that they already are following SNA 1993

ISIC and CPCMost of ESCWA countries (8/13)* are following ISIC Rev 3.1, and almost half (6/13)* are following CPC Ver. 1.1Industrial Classification followed:

Product Classification followed:

COICOP and COFOGOnly Lebanon and Qatar are not using Classification of Individual Consumption by Purpose (COICOP) to classify consumption; Lebanon, Palestine, Qatar and UAE are not using Classification of Functions of Government (COFOG) to classify government transactions.

Assessment in terms of Concepts, definitions and methodology used

On ProductionTheoretically, all the countries agree on the concept of production, but the practical application of the concept of production often varies from: - one activity to another, - one sector to another, and - one country to another. The main reason might be attributed to deficiencies in the available data and difficulties in measurement or accessibility

Barriers and variationIn many ESCWA countries, social values and perceptions stand as barriers to the inclusion of illegal activities within the production boundary, and hence do not estimate the production of these illegal activities as they do not admit its existence Informal or statistically non-covered activities face many constraints in its calculation and inclusion within the production boundaryCountries differ in the valuation of expenditure on research and development and its treatment whether it is undertaken under own-account or outsourced by specialized research units

Barriers and variation (cont)Military expenditure presents a major weak point in the estimation of government expenditure and therefore of output and final consumption expenditure in most of ESCWA countriesIt appears that ESCWA member states that are still in the process of adopting SNA93 are focusing on the concept of production and output and its components from the expenditure side, whereas countries that already started application and dissemination of data as per SNA93 are trying to commit to the recommended concepts and definitions as much as possible, but still are facing many problems which they are addressing as a priority for improving their status of implementation of the NA system

On Institutional sectors7/12 (excl. Yemen) of the countries reported that the household sector includes unincorporated businesses, while only Bahrain and Oman compile separate estimates of mixed income for unincorporated enterprises Only Bahrain, Jordan, Oman and Qatar distinguish quasi-corporate bodies from other household sector unitsNone of the 13 countries treats the Issue Department of Central Bank as producer of government services

On Household sectorOnly Qatar reported that it includes some agriculture, transportation and construction activities under the household sector, other than Ownership of dwelling or private household employment.

On FISIM5/13* of ESCWA countries have started to address the financial intermediation services indirectly measured according to the recommendations of the SNA93, by allocating it to the users of these services as intermediate consumption to industries and as final consumption to final users, whereas the remaining countries are still dealing with FISIM on an aggregate basis as a notional industry;

On CFCESCWA countries differ in the approach used to estimate the Consumption of Fixed Capital;Most of the countries estimate CFC based on data on reported depreciation;Only Bahrain, Jordan and Oman follow Perpetual Inventory Method in estimating CFC.

The approach followed for estimating consumption of fixed capital (CFC)

Compilation of GDP aggregates (1) All 13 ESCWA countries compile GVA by type of economic activity at both current and constant prices;Whereas all 13* compile GDP main expenditure aggregates at current prices, only Iraq, Jordan and Yemen do not compile it at constant prices;Whereas all 13* compile GDP main income aggregates at current prices, only Bahrain, Oman and Palestine compile it at constant prices**;Only Lebanon and Syria do not compile current price expenditure at the disaggregated level of NPISHs;Only Egypt and Syria do not do valuation of output and value added at basic prices.

*Egypt and UAE did not reply**Qatar and Syria compile GNI only

Compilation of GDP aggregates (2)

Assessment in terms of Coverage

On Production Boundary Whereas only 3 countries reported that they do not include non-market agricultural crops under their production boundary, 6 countries in the region do not include other household production for own final use;

Informal Production Results of the questionnaire show that there are problems in establishing production coverage especially in the scope of unregistered businesses, informal sector activities or illegal activities. Most countries are posting these issues at the center of attention as a priority;Only 5 countries reported that their production boundary covers informal activities and hence include informal production;

Own account servicing 3/13 ESCWA countries do not include services of owner-occupied dwellings under their production boundary;Only 6 countries include domestic services produced by employed staff under their production boundary;7 countries include own-account fixed capital formation within production coverage;* Jordan did not answer** Yemen did not answer

On Asset BoundaryMany of the regions countries estimate the value of gross fixed capital formation as an aggregate without disaggregating at the level of asset industrial type (Buildings/ machinery/ ...... etc.) or engaging in the classification at the level of economic activity or beneficiary sector;8 countries include expenditures on mineral exploration under capital formation, whereas only 3 countries treat expenditure on R&D as capital formation;

Justifications!Why are some activities not covered?What is needed to ensure coverage of these activities?What is needed to get estimates and compile statistics for these activities?How much time is needed?

Assessment in terms of Sequencing of Accounts

Inquiry on Compilation statusAll 13 ESCWA countries were requested to fill in the following table, specifying which of the following institutional sector accounts are being compiled at present. Responses confirming compilation out of 13 countries were as such:

Institutional Sector Accounts Sudan, Syria and UAE do not compile a sequence of accounts for any of the institutional sectors; Palestine compiles a full sequence of accounts for whole economy only while Bahrain compiles for Financial Corporations and General Government; Lebanon compiles a full sequence of accounts for whole economy, General Government and ROW;All the rest (7/13 countries) compile full sequence of accounts for all institutional sectors, except for Qatar which does not compile for ROW.

Assessment in terms of General Challenges and Drawbacks

On transactions Problems in estimating gross and net values due to the lack of reliable estimates of the consumption of fixed assets;The estimation of some transactions as residuals as is the case with treating Change in inventory in most of the countries; (Worth mentioning that 6/13 countries reported that they do attempt to balance GDP estimates from demand, supply and income sides; how is it done?)The estimation of GFCF as an aggregate without trying to estimate its components at the lower level.Non separation of NPISH as a separate sector and non differentiation between private sector under local/foreign authority.

Possible obstaclesNon availability of recurrent statistical data covering all economic activities in all sectors;Ignorance of the importance of the use of National Accounts Statistics for economic and social analysis and its significance for policy making;Lack of capacity building and storage of national and international expertise at the National Accounts departments within countries due to frequent turnover of staff and the lack of practical training capabilities;Confidentiality restrictions on many important sets of statistical data such as oil and gas, military expenditure, infrastructure, etc

More obstaclesLack of strict statistical laws obliging the various units to provide the statistical bureau with the requested data;Lack of technology and the know-how to use advanced software for compiling sequential accounts and input/output tables;Difficulties in understanding certain recommended definitions and concepts;

Missing Questionnaire Information

Production side estimation

Expenditure and Income side estimation

Majed Skaini, UN-ESCWA

Expert Group Meeting on National AccountsCairo, 12-14 May 2009Thank you

* Syria and Jordan are following 2 Industrial Classification

* Jordan followig 2 ClassificationsSudan and Iraq did not specify any of the classifications