Framework of Compilation of Regional (Governorate) Domestic

Product

UN-ESCWA

22 – 25 September 2007

Cairo

2

Regional Accounts

• Like the national accounts, Regional Accounts should provide an integrated and comprehensive set of estimates of macroeconomic aggregates like production, income, consumption and investment.

• But development of regional accounts has lagged far behind, owing mainly to a number of conceptual, estimational and operational issues involved, which are not encountered in such serious form in national accounting.

3

Regional Accounts – Main Problems

• Regions within countries are open economies – constant flow of men, materials and means of

transportation between regions – for which hardly any data are available.

• Much need data are compiled only at the national level – thru sample surveys that do not produce reliable estimates at the sub-national levels.

• Definition of ‘resident’ in the context of regional accounts.

4

Aggregates Estimated at Regional Level

• Owing to these problems, no country attempts full system of accounts at regional level.

• Mostly, regional accounts are limited to estimation of production by industry, capital formation by broad categories of assets and rarely estimates of household and government consumption.

• In this workshop, only estimation of production by industry would be attempted.

5

Regional Accounts in UN-SNA

• The UN-SNA does not make any specific recommendation about system of regional accounts.

• It has left the countries to develop their own systems of regional accounts.

• The 1993 SNA has identified three types of institutional units– Those with centre of interest in and most of its activities

confined to one region – Multi-regional units with centre of interest in more than

one region, but does not relate to the entire country.– Units functioning at a national dimension – whose centre

of interest can not be attached to geographical domains of the country (Supra-regional sectors).

6

The Concept of Regional Income

• Regional Income or Regional Domestic Product (RDP) is a measure in monetary terms of the

volume of all goods and services produced in the region or residents of the region during a given

period of time (generally a year) accounted without duplication.

• The estimates of Regional Income can be prepared by adopting two approaches, namely

– income accruing and – income originating.

7

Income Accruing Approach

• Definition: The income accruing to the normal residents of a Region.

• Since this measures the income that become available to the residents of a region, it provides a better measure of

welfare of the residents of the state. • This corresponds to the concept of GNI at the national

level.• But, this needs data on flows of factor incomes across the

boundaries of the regions as well as flows to/from abroad. • The boundaries of regions being open to all kinds of

economic transactions, it is very difficult to obtain data on flows of factor incomes to/from outside the region.

8

Income Originating Approach

• Definition: Income originating to the factors of production engaged in economic activities that

are carried out within the geographical boundary of the region.

• This represents the volume, in monetary terms, of gross/net value of goods and services produced within the region – Regional Domestic Product

(RDP) current-price. • Corresponds to the concept of domestic product

at the national level.• Most commonly used for regional accounting.

9

Supra-regional Sectors

• Certain economic activities, by their very nature are carried out cross regional boundaries. These

are called ‘Supra-regional sectors’. • Examples: Railways, Communication, Banking &

insurance, and federal governance.• Their economic contribution cannot be attributed

to any one region or group of regions. • The estimates for these supra regional activities

are compiled for the economy as a whole and allocated to the regions on the basis of relevant

indicators.

10

General Principles of RDP Compilation (1)

• Regional economic territories should be clearly defined. For Iraq - Governorates

• Ideally, the sum of regional-level estimates should be equal to the national-level estimates.

• But, there are territories – extra-regional – that do not form part of any region like national air space, territorial waters, territorial enclaves

(embassies) located outside the country.• Contribution of extra-regional territories are not

included in RDP of any region.

11

General Principles of RDP Compilation (2)

• The data sets used for national level estimation should be used.

• Methods – estimation, indicators/ indices for deflation / extrapolation – used for

regional estimation should be the same as, or at least consistent with, those used for

national level estimation.

12

General Methodology of RDP Compilation

• Mostly, one of the two methods – top-down and bottom-up – for an economic activity.

• Bottom-up Method: Regional level estimates are independently arrived at from data collected at

the unit level.• Top-down method: National level estimate is

distributed over the regions using appropriate indicators.

• In principle, priority is given to bottom-up method.

13

Top-down Method (1)

• This is used when only national level estimates are available, in case of economic activities like:

– unscheduled road transport, retail trade (survey-base national level estimate & regional-level estimates not

reliable)– Telecommunication (supra-regional)

• When a volume or a quantity indicator is found most suitable, the current-price and constant-price national-

level estimate is distributed over the regions. • The constant price /current-price estimate at regional

level is derived from the current-price /constant price estimate, using a suitable price index or indicator, which

is also used at national level.

14

Top-down Method (2)

• Examples of volume / quantity indicator: – Number of employees in the region for distributing CE, and volume of credit for

distributing OS for banking;

– Number of taxis in the region for unscheduled road transport;

– Number of telephone connections in the region for telecommunication

– Length of railway track in the region for railways

We will now examine availability of Production-related statistics at the

Governorate level