GDP and INFORMAL SECTOR in Mongolia

1. GDP and INFORMAL SECTOR in Mongolia National Statistical Office, Mongolia DEMBEREL Ayush Director, Statistical Research Department LKHAGVAJARGAL Baasantseren Senior Officer, Macro Economic Statistics Department

2. Contents • Gross Domestic Product • Scope and Coverage • Data and Indicators • Informal Sector • Scope and Coverage • Conducted surveys • Some issues/concerns

3. Gross Domestic Products What is the GDP? • GDP (production) is the market value of all final goods and services produced within a country during a given time period. • GDP (income) is sum of compensation of employees, consumption of fixed capital, net taxes on product and net operating surplus or mixed income. • GDP (expenditure) approach is the value of final consumption expenditure, gross capital formation and net exports of goods and services.

4. GDP approaches Gross Domestic Products Total Output GDP (value added + net tax) Intermediate Consumption GDP, production approach Wage Profit Net tax Capital consumption GDP, income approach Statistical changes Consumption Capital consumption Net Export GDP, expenditure approach

5. 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

6. 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 Classifications and frame

7. 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

8. Gross Domestic Products

9. Gross Domestic Products

10. Gross Domestic Products

11. Gross Domestic Products

12. Gross Domestic Products

13. Total economy Official economy Shadow economy Non market and Statistical Non-observed economy INFORMAL SECTOR Definitions for Non-observed economy: “Activities which should be included in GDP but are not covered in statistical surveys or administrative records used in National Account compilation” Non-observed economy handbook of OECD (2002)

14. INFORMAL SECTOR Shadow economy is called as follows: • Shadow economy • Non observed economy • Hidden economy • Irregular economy • Unofficial economy • Parallel economy

15. INFORMAL SECTOR 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

16. INFORMAL SECTOR 5(1) of the 15th ICLS Resolution “The informal sector may be broadly characterized as consisting of units 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 of organization, withlittle or no division between labor and capital as factors of production and on a small scale. Labor relations – where they exist – are based mostly on casual employment, kinship or personal and social relations rather than contractual arrangements withformal guarantees.”

17. INFORMAL SECTOR The Methods of Estimating the Size of the Shadow Economy Direct 1. Sample survey 2. Other source (tax auditing…) Indirect 1. SNA approaches (Discrepancy between expenditure and incomemeasurements of GDP and IOT ) 2. Labour method

18. 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

19. INFORMAL SECTOR Conducted Surveys in Mongolia

20. 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. 2. The Mongolian Informal Sector 1999, Bill Bikales

21. INFORMAL SECTOR • 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 3. “Informal Sector Survey, 2003”, NSO

22. INFORMAL SECTOR • 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. 4. “Enterprise Census, 2006”, NSO

23. INFORMAL SECTOR 5. Informal Sector and Informal Employment • 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.

24. INFORMAL SECTOR 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.

25. 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)

26. SOME ISSUES/CONCERNS • 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)

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