GDP and INFORMAL SECTOR in Mongolia

National Statistical Office, Mongolia

DEMBEREL AyushDirector, Statistical Research

Department

LKHAGVAJARGAL Baasantseren

Senior Officer, Macro Economic Statistics Department

Contents

1. Gross Domestic Product1. Scope and Coverage2. Data and Indicators

2. Informal Sector1. Scope and Coverage2. Conducted surveys

3. Some issues/concerns

What is the GDP?

1. GDP (production) is the market value of all final goods and services produced within a country during a given time period.

2. GDP (income) is sum of compensation of employees, consumption of fixed capital, net taxes on product and net operating surplus or mixed income.

3. GDP (expenditure) approach is the value of final consumption expenditure, gross capital formation and net exports of goods and services.

Gross Domestic Products

GD

P a

pp

roac

hes

Statistical changes

GDP, expenditure approach

Total Output

GDP (value added + net tax)Intermediate Consumption

Capital consumptionNet tax

ProfitWage

ConsumptionCapital

consumptionNet Export

GDP, income approach

GDP, production approach

Gross Domestic Products

Production approach: GDP, by sectors, yearly, current and

constant 2005 prices GDP, by sectors, quarterly, constant 2005

price GDP, by aimags and sectors, current price GDP, by type of owner and sectors, current

price Expenditure approach: GDP, yearly, current

price Income approach: GDP, yearly, current price WB Atlas approach, GDP per capita, US dollar

Gross Domestic Products

Classifications International Standard Industrial

Classification (ISIC) Classification of Individual Consumption

of Purpose (COICOP) Classification of Function of Government

(COFOG) Harmonized systems (HS)

Business Register

Cla

ssif

icat

ion

s an

d f

ram

e

Gross Domestic Products

Methods of data collection: Census (Livestock) Fully Covered Survey for large and medium

sized enterprises (Industry, construction, transportation and communication etc)

Sample survey (industry, whole and retail trade and restaurant etc)

Data sources: Annual balance sheet of enterprises Result of sample survey Administrative statistical information

Gross Domestic Products

GDP estimation Year QuarterProduction approach: GDP, current and constant 2005 prices

1990-2008 2000-2008

Expenditure approach: GDP, current price

1995-2008 -

Income approach: GDP, current price

1990-2008 -

Aimag GDP, current price 2000-2008 -

GDP per capita (WB approach) 1991-2008 -

Gross Domestic Products

Gross Domestic Products

Gross Domestic Products

Gross Domestic Products

Gross Domestic Products

Definitions for Non-observed economy:“Activities which should be included in GDP but are notcovered in statistical surveys or administrative records used in National Account compilation”

Non-observed economy handbook of OECD (2002)

Total economy

Non market and StatisticalShadow economyOfficial economy

Non-observed economy

INFORMAL SECTOR

INFORMAL SECTOR

Shadow economy is called as follows: – Shadow economy– Non observed economy– Hidden economy– Irregular economy– Unofficial economy– Parallel economy

Non-observed economy consists of 5 subgroups1:

Underground Illegal Shadow Economy Informal Do-It-Yourself Statistical

1 – OECD (2002), Measuring the Non-Observed Economy, a hand book

INFORMAL SECTOR

5(1) of the 15th ICLS Resolution

“The informal sector may be broadly characterized as consisting ofunits engaged in the production of goods or services with the primary objective of generating employment and incomes to the persons concerned. These units typically operate at a low level oforganization, with little or no division between labor and capitalas factors of production and on a small scale. Labor relations –where they exist – are based mostly on casual employment, kinshipor personal and social relations rather than contractualarrangements with formal guarantees.”

INFORMAL SECTOR

The Methods of Estimating the Size of the Shadow Economy

Direct 1. Sample survey 2. Other source (tax auditing…)

Indirect1. SNA approaches (Discrepancy between expenditure and income measurements of GDP and IOT ) 2. Labour method

INFORMAL SECTOR

3. Monetary method

a. Transaction method

b. Currency method

4. Physical input method

a. Kaufman-Kaliberda method

b. Lacko method

5. MIMIC method

INFORMAL SECTOR

Con

du

cted

Su

rvey

s in

Mon

goli

a

Conductor YearResults, %

of GDPSurvey units

1 James H. Anderson 1997 5 % 770 units

2Bill Bikales,

Chimed Khurelbaatar1999 13 % 4042 units

3 NSO of Mongolia 2003-2004 10.5 % 1000 units

4 Establishment census 2006 8 % -

5Informal Sector and

Informal Employment 2007-2008 -

1558 households

INFORMAL SECTOR

Period: 1999 Sample technique: three-stage stratified cluster Variables: average revenue per month, purchases of goods

for resale per week, various purchased services and employment

Survey frame: “economic units under single ownership engaged in one kind of economic activity at a fixed place of business” – a total of 25282 units, and for taxi service (16320 vehicles)

Sample size: 6 regions for 17 activities, 4042 economic entities or 9.7 percent of the population of 41602

Survey result: total value added of 117,255.3 mln.tog and total employment 60283 workers.

INFORMAL SECTOR

2. T

he

Mon

goli

an I

nfo

rmal

S

ecto

r 19

99, B

ill B

ikal

es

Period: 2003-2004 Sample technique: sample survey by region Variables: revenue, operating expenses and number of

employees Survey frame: for trade sector: “patent” business – a total of

29296 units; for transportation: procedure similar to to 1999 survey, and number of vehicles for taxi service (28000 vehicles)

Sample size: all regions, for trade 700 units (of 21496), for transportation 300 units of the population of 28000

INFORMAL SECTOR

3. “

Info

rmal

Sec

tor

Su

rvey

, 20

03”,

NS

O

Period: 2006 Sample technique: census Variables: gross income, number of employed workers Survey frame: unincorporated businesses “with

indeterminate income” under the taxation legislation (patents)

Survey result: according to the result of this census VA of informal sector was about 8 percent of GDP.

INFORMAL SECTOR

4. “

En

terp

rise

Cen

sus,

20

06”,

NS

O

With the support of UNESCAP, Informal employment data is collected, using and informal employment module in Labor Force Survey in two phases:

- In phase 1: Informal employment data is collected, using Labor Force Survey.

- In phase 2: Informal sector enterprise data is collected . Out of 7008 households selected in the Labour Force Survey,

1558 households that met criteria has used for HUEM Survey.

Survey period: Data covers the period from July 2007 to June 2008.

INFORMAL SECTOR

5. I

nfo

rmal

Sec

tor

and

In

form

al

Em

plo

ymen

t

Before 2006 we estimated VA of informal sector only in retail trade, restaurants (cafeteria) and transport sectors. For estimation of informal sector we used result of “Informal sector survey” which conducted on 1998/1999. Survey result shows output and intermediate consumption of unincorporated enterprises.

In 2006, NSO provide “Enterprises census” which also collect data on unincorporated enterprices.

INFORMAL SECTOR

In 2007, the share of informal sector to the GDP was about 7.5 percent.

NSO is not finish yet the compiling of GDP for 2008. In Mongolia indirect methods are used for

– Time series data– Compare with other countries’ informal economy– Compare with other indirect methods’ results

Two reports are published about indirect methods of NOE (informal economy)

INFORMAL SECTOR

In the future, it is possible to conduct this survey as a module of LFS in every 3 years, estimations can be made based on LFS survey results. In order to conduct the survey, a financial assistance from international organization will be needed.

Apply the estimation of informal sector by some model approaches (MIMIC method)

SOME ISSUES/CONCERNS

Thank you for your Thank you for your attentionattention

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