Agenda item 6d

ՀՀ ԱԶԳԱՅԻՆ ՎԻՃԱԿԱԳՐԱԿԱՆ ԾԱՌԱՅՈՒԹՅՈՒՆ NATIONAL STATISTICAL SERVICE OF RA

Exhaustiveness of National Accounts, NOE and informal sector of Armenia

Workshop on Implementation of the 2008 SNA Kiev, 29 November - 2 December 2011

Structure of presentation

• • • • Brief overview of National Accounts in Armenia Exhaustiveness of NA, NOE in Armenia’s GDP • Measuring the contribution of the informal sector (IS) to the total economy, Informal Sector Survey, ADB (RETA 6430) Presentation of IS GVA estimates/shares by industry.

Which activities noted high contribution of informal sector (in proportion to total) GVA? The characteristics of these industries that could explain why IS contribution is high. Description of the IS labor productivities in each industry. Comparison with the labor productivity in the formal sector.

Characteristics of informal sector enterprises.

Implementation of Eurostat Tabular approach to Exhaustiveness of GDP 2

BRIEF OVERVIEW OF NATIONAL ACCOUNTS IN ARMENIA

National accounts of Armenia are compiled in accordance with the fundamental concepts, categories, accounts’ conception of SNA 1993. Simultaneously, the implementation of the ESA 95 continues.

Since 1990 the ANNUAL accounts are available Since 1992 the QUARTERLY accounts are available GDP is compiled by three methods : -production (according to NACE - Rev.1.1), annual and quarterly (current and constant prices, sseasonally adjusted) -expenditure, annual and quarterly (current and constant prices, seasonally adjusted) -income (only for annual data, current prices)

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Exhaustiveness of NA, NOE in Armenia’s GDP

According to the conceptual framework of Measuring the Non-Observed Economy

– Handbook, ILO, IMF, CIS ISC, 2002

GDP includes an estimate of Non-observed economy (NOE) since 1994. NOE in Armenia’s GDP includes: - underground production, - deficiencies in the basic data collection system - informal sector production and - production of households for own final use.

Illegal production is out of GDP estimate.

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Exhaustiveness of NA, NOE in Armenia’s GDP

Estimations are based on following data sources: -employment data (formal employment reported by companies) -labour force survey (total employment received from households) -ILCS -special one-off sample surveys (construction, education, healthcare, trade, NPISH) -other indirect methods Special round of surveys focused on informal activities was held during1997-1998: -small size enterprises - labor force survey - survey of self-employed

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A,B D E F G H I K M N O

Exhaustiveness of NA, NOE in Armenia’s GDP by industries,%

GDP Agriculture Manufacturing Electricity Construction Trade Hotels and restaurants Transport Real estate, renting Education Health Other services 2005 27,3 24,1 42,7 0,0 36,3 55,3 5,5 11,2 20,5 6,5 56,0 43,0 2006 27,4 24,7 41,8 0,0 38,0 53,5 17,0 9,1 16,9 7,0 50,9 34,9 2007 26,3 22,5 38,5 0,0 41,4 49,4 8,0 8,0 17,2 7,4 49,9 31,4 2008 25,0 22,3 36,0 5,2 38,4 49,2 6,4 10,0 13,9 7,0 31,6 25,9 2009 24,8 22,1 49,7 7,4 36,3 45,8 21,1 13,8 11,5 7,0 44,7 26,1

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Exhaustiveness of NA, NOE in Armenia’s GDP by industries,% 30,0 25,0 20,0 15,0 10,0 5,0 0,0 2005 Agriculture Trade Education 2006 Manufacturing Hotels and restaurants Health 2007 Electricity Transport Other services 2008 Construction Real estate, renting 2009 7

MEASURING THE CONTRIBUTION OF THE INFORMAL SECTOR (IS) TO THE TOTAL ECONOMY Informal Sector Survey, ADB (RETA 6430)-2009

IS According to the Delhi Group The Delhi Group (Expert Group on IS set up by UNSD) proposed the following criteria to identify the IS:

• • • •

Legal organization (unincorporated enterprises) No complete set of accounts With at least some market output Employment size (less then 5) For statistical and SNA purposes, the IS is defined in terms of enterprise (producing unit). Thus, measuring its contribution to GDP is made more explicit. It is defined as part of household unincorporated enterprises and a subsector of the national accounts.

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MEASURING THE CONTRIBUTION OF THE INFORMAL SECTOR (IS) TO THE TOTAL ECONOMY Informal Sector Survey, ADB (RETA 6430)-2009

NSS RA applied mixed survey approach in 2009 through the ADB Regional Technical Assistance (RETA) 6430: Measuring the Informal Sector. It had two phases: 1. Expanded Labor and Employment module of the Integrated Living Conditions Survey (ILCS), with additional questions - identifying household unincorporated enterprises with at least some market production (HUEMs), - distinguishing informal employment from formal employment, - the extent of social protection mechanisms. 2. the Informal Sector Survey, covered 624 PSUs. The sampling frame constituted the list of HUEMs identified in phase 1. A total of 548 HUEMs were included in the ISS.

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MEASURING THE CONTRIBUTION OF THE INFORMAL SECTOR (IS) TO THE TOTAL ECONOMY Informal Sector Survey, ADB (RETA 6430)-2009

Structure of ISS Questionnaire in Armenia Section A Section B Organization of Business Employment and Compensation Section C Section D Production and Sale Expenditures on Raw Materials and Stock Section E Section F Section G Capital Expenditures Credit Information Other Information

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MEASURING THE CONTRIBUTION OF THE INFORMAL SECTOR (IS) TO THE TOTAL ECONOMY Informal Sector Survey, ADB (RETA 6430)-2009

ISS Questionnaire Section B, Employment and Compensation Section C, Production, Inventory and Sale Section D, Expenditures on Raw Materials and Stock Section E, Capital Expenditures Change in inventories Activity fluctuations during last 12 months Description – gathers information on the incomes paid from the production and other components of GVA under the income approach – information include sales, revenues, inventories and own consumption of the enterprise from production, either in agriculture or non-agriculture enterprises.

– data gathered are on expenditures on inputs to production incurred by the enterprise, either in agriculture or non-agriculture enterprises.

– consists of items on the types and costs of fixed capital purchases / sold by the enterprise.

- gathers estimates of changes in inventories of output - records the sales trend of the business which can be utilized to approximate the annual level of production and verify degree of activities NA components Income approach operating surplus Production approach – compensation and – output Production approach – intermediate input other variables – gross fixed capital formation Other variables Inventories Annualization of GVA estimates

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Informal sector GVA by industries

TOTAL GVA A,B Agriculture, hunting and forestry, fishing C D E F Mining and quarrying Manufacturing Electricity, gas and water supply Construction G H Wholesale and retail trade, repairs, etc. Hotels and restaurants I J K L M N O Transport, storage, and communications Financial intermediation Real estate, renting, and business activities Public administration and defense, social security Education Health and social work Other community, social and personal services Share in total GVA of industry, % 11.2

22.4

0.0

5.0

0.0

15.4

14.8

0.0

Share in informal sector total GVA 100.0

36.2

0.0

4.3

0.0

26.6

18.6

0.0

3.7

0.0

8.7

0.0

7.0

4.9

16.6

2.9

0.0

4.2

0.0

2.5

1.8

3.0

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Informal sector GVA by industries

Trade:

-

average share in GDP 2002-2008 – about 11.0%, 2009 – 12.7%, 2010 - 13.0%

-

influenced by large imports of goods, which comprised about 38 39% in GDP of recent years

-

many informal small trade points (boutiques) mainly in rural areas Other community, social and personal services:

-

includes Recreational, cultural, sport, sewage and refuse disposal and other personal services,

-

share in GDP is small – 1.8% in 2009 and 2010

-

informal production mainly in personal services like hairdressing

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RURAL 39,89%

Informal Sector GVA by urbanity in Armenia

URBAN 60,11%

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Agriculture and non-agriculture GVA in the Formal and Informal sectors

90,00 80,00 70,00 60,00 50,00 40,00 30,00 20,00 10,00 0,00 in % 81,80 84,08 63,79 36,21 18,20 15,92 Total Agriculture Formal Non-agriculture * Informal

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Labor productivity

Agriculture, hunting and forestry, fishing Construction Education Health and social work Manufacturing Other service activities Real estate, renting and business… Transport and communication Wholesale and retail trade; repair 0 3 646 304 2 902 991 1 758 2 169 4 039 1 081 991 4 065 8 613 11 039 1 332 4 269 3 199 5 000 10 000 15 000 Thousand drams Formal labor productivity Informal labor Productivity 15 688 19 718 20 229 20 000 25 000

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Type of premises where business activities are conducted

Location Farm or individual agriculture / subsidiary plot Home or workplace of the client Transport vehicle At home with no special work space Market, bazaar stall, trade fair At home with work space inside / attached to the home Street, pavement or highway with fixed post No fixed location (e.g., mobile, door-to-door, street w/o fixed post Construction site Business premise with fixed location independent from home Employer's home Others Proportion (%) 84.25

4.34

2.60

2.25

1.94

1.20

1.11

0.75

0.59

0.38

0.21

0.38

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Average Employment of IS Enterprises by Industry

Industry Agriculture, hunting and forestry, fishing Manufacturing Construction Wholesale and Retail Trade Transport and Communication Real Estate, Renting Education Health and Social Work Other Service Activities Workers 2.3

1.9

1.2

1.3

1.3

1.0

1.0

1.0

1.25

Max of workers - 6, paid workers - 5: in Agriculture.

Paid Workers 1.1

1.0

1.1

1.1

1.0

1.0

1.0

1.0

1.1

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Reason for choosing the business activity

Reason Family tradition More stable returns than other products / services It is the profession that I know It gives better income / higher profits than other products or services Others % 41.8

12.2

7.6

5.9

32.5

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Source of Financing of IS enterprises

Source Private bank Private money lender / pawnshop Relative / neighbor / friends Cooperative Employer / landlord Others Proportion (%) 77.7

12.8

11.2

1.3

0.0

16.1

Reason for not availing of any loan to finance business activity - High interest rate for loans – 52.1%, - Burdensome requirements – 30.8%, - Other source of income – 16.7%.

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Implementation of Eurostat Tabular approach to Exhaustiveness of GDP

Current TWINNING project from January 2011 to January 2013 with Statistics of Denmark as the core partner includes also project component for Exhaustiveness of GDP with aim to introduce Eurostat Tabular approach to Exhaustiveness into practice.

Table 1A is already completed for all industries and 7 types of non-exhaustiveness and draft Table 2A is completed for one industry.

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ՀՀ ԱԶԳԱՅԻՆ ՎԻՃԱԿԱԳՐԱԿԱՆ ԾԱՌԱՅՈՒԹՅՈՒՆ NATIONAL STATISTICAL SERVICE OF RA

THANK YOU!

Workshop on Implementation of the 2008 SNA Kiev, 29 November - 2 December 2011