Non-observed economy in Kyrgyz Republic

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Agenda item 6d
The National Statistical Committee of Kyrgyz
Republic
Non-observed economy inKyrgyz Republic
Sultanaliev M.K. Leading specialist of the
Department of National Accounts
Workshop on the Implementation of the 2008 SNA,
Kiev, 29 November 2 December 2011
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Content

1. Non-observed economy (NOE) by activities
2. Dynamics, structure and methods for estimation of
   NOE production, expenditure, income
3. Applying the Eurostat Tabular Approach
4. Alternative surveys
5. Conclusions, proposals, issues

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The presence of NOE is typical for any economy to
some extent, but in many cases for transition
economies its size became a national problem.
NOE in the Kyrgyz Republic is an admitted fact
as well. Taking into consideration the
relevance of the issue the National Statistical
Committee constantly improves the methodology and
calculation methods of NOE.

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In execution of Order ? 38 On Action Plan on
Legalization of  Shadow Economy as of July 6,
2008, a Methodology for estimation of
non-observed economy volumes1 was developed and
accepted by Order No. 30 by the Board of the
National Statistical Committee as of May 25,
2009. 1 Placed at National Statistical
Committee web-site www.stat.kg

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Non-observed economy by activities(data
sources) Agriculture, hunting and forestry

• Data from sample surveys of agricultural
  (farming) and own account production households.
• It is reflected as an element of NOE only in the
  Eurostat Tabular Approach.

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• Industry
• Tax Inspectorate data on patents granted
• Data on average output per worker of small-size
  enterprises
• Adjustment for own account production of flour
  and bread by households

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• Construction
• Tax Inspectorate data on patents granted
• Data from sample surveys on persons, carrying out
  construction and conversion of projects
• Data from sample surveys on actual cost of a
  square meter of floor area in an expensive
  domestic house

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Trade hotels and restaurants

• Tax Inspectorate data on patents granted
• Data on industry average performance indicators
  obtained through one-time surveys and
  supplementary questionnaires and revisions
• Data from regular sample surveys of all types of
  markets

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• Transport
• State Transport Inspection data on the quantity
  of technically sound freight and light motor
  vehicles
• Average mileage, freight and income from freight
  and passenger transportation
• Data from specialized surveys of freights and
  passenger land transport

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• Financial services
• Data of National Bank on the number of licensed
  exchange offices
• Data on income, expenses and number of employed
  in legal entities

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Real estate, renting and business services
education health and social services communal,
social and personal services

• Data on issued patents and specialized surveys
• Data from sample surveys by types of services
  provided to the population
• Income from rentals

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Parameters of non-observed economy(excluding
agriculture)
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The structure of the NOE, 2009 in of GDP
(production method)
Construction 0.7
The manufacturing industry 2.3
Mining and quarrying 0
Trade 13.3
Transport 2.2
Kyrgyz Republic 19.8
Real estate, renting and business activities
0.1
Hotels and restaurants 0.2
Financial services 0.1
Health 0.1
Communal, social and personal services 0.1
Education 0.1
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Official Estimates of Non-Observed Economics,
2009 (Production Method)
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Official estimates of non-observed economy,
2009(according to the expenditure method )

• In addition to the calculation of NOE parameters
  on the production side there is an analysis of
  the structure of final consumption and capital
  formation of households in order to have an
  adequate idea of the level of their prosperity
  including the one coming from hidden or informal
  sources

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Official estimates of non-observed economy,
2009(according to the expenditure method )

• Consistency with the production method
• Hidden turnover corresponds to household
  consumption from hidden sources
• The correction to the value of residential
  private construction costs corresponds to the
  adjustment on the production side
• The value of informal consumption of agricultural
  products corresponds to the production for own use

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The NOE adjustments by expenditure component
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NOE types in Kyrgyzstan

• N 1 Non-observed for statistical reasons the
  lack of answers from respondents
• N 2 Non-observed for statistical reasons old
  registers
• N 3 Non-observed for statistical reasons units
  are not entered in the register or not examined
• N 4 Unobservable due to economic reasons
  under-reporting of turnover / profit
• N 5 Unobservable due to economic reasons the
  units are not registered consciously
• N 6 The informal sector (lack of registration,
  under-reporting)

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Non-observed economy by types and methods of
adjustment, 2009
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Assessment of hidden wage
(million soms)            
  2004 2005 2006 2007 2008 2009

Total 3640,1 2440,0 4968,4 4130,1 3575,9 5536,7
Agriculture, hunting and forestry 193,1 67,7 69,4 77,2 99,3 126,9
Industry 1474,2 1323,7 3060,5 2049 1193,2 1774,2
Constructions 128,9 71,4 83,9 248,8 416,8 448,5
Trade 794,2 43,9 59,1 237,5 362,4 504,9
Hotels and restaurants 10,0 27,9 36,3 38,8 43,1 57,7
Transport and communications 158,7 319,8 463,7 495,9 634,5 736,6
Financial activities 183,5 221,9 389,7 155,5 76,1 82,0
Real estate transactions 270,7 159,9 226 299,2 536,4 555,7
Other activities 426,8 203,8 579,8 528,2 214,1 1250,2
             

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Alternative surveys in Kyrgyz Republic

• Shadow economy in Kyrgyz Republic trends,
  estimates and policy variants
• 1. Sample (implicit) survey of enterprises
• share of shadow economy 53 (UNDP, 2004)
• Survey via energy consumption method
• share of shadow economy - 33 (UNDP, 2004)
• Sizes and development of shadow economy and
  shadow labor market What do we actually know?
  (Schneider Ph., 2003) 41

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CONCLUSIONS and PROPOSALS
Results of independent surveys carried out by
scientific institutions, universities, public
organizations and individual experts should be
treated carefully. These surveys may contain
useful information, but it should be applied
after thorough check both of the methodology
used and of the reliability of primary
information.
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ISSUES

• Quality of register updating only of legal
  entities
• Frequent change of activity both in small and
  medium-size enterprises
• Big share of household sector
• Different accounting standards (the Republic has
  not changed over to IAS and IFRS completely)

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• Thank you!