NATIONAL ACCOUNTS OF PAKISTAN
The System of National Accounts (SNA) is a comprehensive, coherent and integrated national accounting system. The 2008 System of National Accounts (2008 SNA) is an improvement over its previous three versions of 1953, 1968 and 1993. The 2008 SNA is applicable to all the countries whether developed, developing or countries in transition to market economies. It provides sound basis for integrated economic analysis which may be useful in explaining the inter-action between the various sectors of the economy such as the corporate and un-incorporate sectors, the government and the rest of the world. It also encompasses the various emerging modern issues such as Satellite Accounts, Environmental Accounting and Social Accounting Matrix. Treatment of National Balance Sheets in an elaborated and systematic way is a praiseworthy addition to the new SNA which was earlier left for further research and agreement. However, the central framework of the SNA retains the supply & use tables/ input output tables as an integral part of the system particularly as the basis for balancing supply and demand.
The concepts of the 2008 SNA have been harmonized with those of Balance of Payments (BOP), Government Financial Statistics (GFS), Money and Banking Statistics of the IMF. As a result of this harmonization the important concepts which were previously difficult in treatment are now relatively more coherent.
Profiling National Accounts
In Pakistan, the National Accounts estimates may be divided in to two categories:
A) Annual Regular Accounts, and B) Adhoc Developmental Exercises.
- Annual Regular Accounts
- Gross Domestic Product (GDP)/Gross National Income (GNI) (At Current and Constant Basic Prices) Industrial Origin
- Expenditure on GDP (At Current and Constant Market Prices)
- Estimates of Gross Fixed Capital Formation (GFCF) by Industrial Origin at Current and Constant Market Prices in respect of Private & Public Sectors and General Government
- Composition of General Govt. Final Consumption Expenditure by COFOG
B. Adhoc Developmental Exercises
i) Input Output (Inter industry) Table for 1984-85, 1989-90 and 1990-91.
- Supply and Use Matrices
- Inter Industry Flow Matrix
- Direct & Total Requirement Coefficient Matrices
ii) Institutional Sector Accounts for 1984-85, 1989-90, 1990-91.
- Non-Financial Enterprises
- Financial Institutions
- General Government
- Household & Un-incorporated Enterprises
- Flow of Funds Accounts
- Rest of the World (ROW) Accounts
iii) Social Accounting Matrix (Aggregated) for 1984-85
APPROACHES FOR SECTORAL ESTIMATES
The primary purpose of national accounts is to provide a coherent and comprehensive picture of the economy. To be concise, these estimates tend to answer questions such as:
i) What is the output of the economy, its size, its composition, and its uses? &
ii) what is the economic process by which this output is produced and distributed?
In the following paragraphs these questions are addressed in relation to estimation of GDP/GNI and final uses of the GDP.
The GDP is the market value of all final goods and services, produced in the economy during a year. GDP is a better idea to visualize domestic production in the economy. GDP may be derived in three ways or in combination of them.
1: Production Approach: It measures the contribution to output made by each producer. It is obtained by deducting from the total value of its output the value of goods and services it has purchased from other producers and used up in producing its own output. Total value added by all producers, adjusting taxes and subsidies equals GDP.
Gross Value Added at basic prices= Output at basic prices - Intermediate consumption at purchasers’ prices
GDP = Output – Intermediate consumption + Taxes on products – Subsidies on products
GDP = Gross value added + Taxes on products – Subsidies on products
2: Income Approach: In this approach, consideration is given to the costs incurred by the producer within his own operation, the income paid out to employees, taxes (less subsidies) on production, consumption of fixed capital, and the operating surplus. All these add up to GDP at market prices.
GDP = Compensation of employees + Taxes - Subsidies + Gross operating surplus / Mixed income
3: Expenditure Approach: This approach looks at the final uses of the output for private consumption, government consumption, capital formation and net of imports & exports.
GDP = Final consumption + Gross capital formation + Exports – Imports
GDP in Pakistan is estimated as per guidelines provided by the UNSNA. For the purpose of GDP estimation by sectoral activities (current & constant basic prices) production, income and expenditure approaches are applied. The economy is divided into the following economic activities (sectors).
Agricultural Sector ( 1 to 4 )
1. Crops ( i+ii+iii)
i) Important Crops
ii) Other Crops
iii) Cotton Ginning
Industrial Sector ( 1 to 4 )
1. Mining and Quarrying
2. Manufacturing ( i+ii+iii)
i) Large Scale
ii) Small Scale
3 Electricity generation & distribution and Gas distribution
Services Sectors ( 1 to 6)
1. Wholesale & Retail trade
2. Transport, Storage & Communication
3. Finance & Insurance
4. Housing Services (including ownership of dwellings)
5. General Government Services
6. Other Private Services
As earlier mentioned GDP is also estimated through expenditure approach comprising the following elements.
- Households Final Consumption Expenditure
- General Government Final Consumption Expenditure
- Gross Fixed Capital Formation
- Changes in inventories
- Exports of Goods & Non-Factor Services and
- Imports of Goods & Non-Factor Services
SECTORAL ESTIMATES OF GDP
In Pakistan, GDP from production side is computed by a combination of production, income and expenditure methods. Production method is applied to compute value added in agriculture, mining and quarrying, manufacturing, electricity generation & distribution and gas distribution, wholesale & retail trade, transport, storage & communication, finance and insurance, housing services (including ownership of dwelling, real estates and cooperative societies), renting of machinery, computer related activities, education, health & social work, recreational, culture, sporting and other service activities whereas income method is used to work out income accruing from general government services, membership organizations, NGO’s and domestic staff. Expenditure method is used to estimate value added in construction on the basis of investment made and the co-efficient of value added relating to investment.
The coverage, nature and sources of data used and the methodology followed in compilation of these estimates are explained under respective sectors.
Crops production and livestock are the two major activities covered under this heading. Cotton ginning has been classified as agriculture activity instead of manufacturing, hence shifted to crops sub-class. Flower production has been estimated through survey and included in the sub-class. Animal husbandry and hunting (both other than government and hence private) are the new additions adjusted along with livestock. For the purposes of computation of value added estimates, the sector has been divided in to the following four sub-sectors.
- Important crops
- Other crops
- Cotton Ginning
The groups 011 and 014 of Division 01 “Agriculture, hunting and related service activities” mentioned in Pakistan Standard Industrial Classification 2007 have been covered in this sub-sector. Cotton ginning was a part of manufacturing, now it is a part of agriculture. It has been covered under class 0140. PBS has prepared PSIC 2010, rev. 4 in order to implement the internationally agreed latest version of the International Standard Industrial Classification (ISIC) which now is ISIC rev.4. According to the PSIC 2010, crop production is covered under codes 011, 012 and partly 016.
Figures on the volume of output of crops (except flowers) have been provided by the crop reporting system of the provinces. Figures on the volume of inputs such as water, fertilizer or seeds have been obtained from different sources. Prices have been taken from price statistics of PBS. The data on prices of the outputs and inputs as well as volumes of the remaining inputs such as lubricants, energy and the like as well as output and input of flower production have been obtained from the study on “Agricultural Input Output 2005-06” and survey on production of flowers. Cotton ginning has been shifted from manufacturing to agriculture and it has been adjusted in crops sub-sector. The overall production and value added (output minus inputs) for the subsequent years will be estimated until another survey or study has to update the underlying ratios and assumptions for the next rebasing / revision.
The production of flowers and their value have been obtained from two survey carried out to cover industrial consumption and consumption of private households. Inputs from horticultural experts were also sought. For the purpose of estimate, three groups have been formed. Export/ import of flowers, industrial consumption and household consumption were estimated separately. It is based on the overall leading equation that supply matches use while supply in principle is domestic production plus imports and use in principle is consumption plus exports.
Production + Imports = Consumption + Exports
Harvest prices are equivalent to producer prices. For calculating the value of output of crops the harvest prices of the study have been used. The data about the harvest prices and other variables were collected through survey from the sample villages of all the provinces. The survey was conducted on area sampling base. However, data on monthly average wholesale and retail prices for the years 2005-06, regarding agricultural and livestock commodities, for important markets of Pakistan, were collected from Agricultural and Livestock Products Marketing & Grading Department Karachi, for checking of consistency of field data. The prices of crops with insignificant production and for which prices were not reported in this survey have been imputed keeping in view the inflation of similar crops during the period 1999-2000 to 2005-06.
Output is the product of production and harvest prices, both, production and harvest prices have been applied to get the output.
Intermediate consumption for crops consists of the value of seed, fertilizer, pesticides, irrigation water and ploughing and planking. Local transport charges on seed, fertilizer and pesticide have also been in the inputs. Losses of crops during the transport of output from fields to home or market have also been taken as intermediate consumption.
a. Valuation of seed: The average use of seed per acre and its price varies from region to region due to soil fertility and climatic conditions. The data have been collected from the farmers in selected areas of four provinces. The seed of perennial fruits have not been taken into account as it becomes mature for production after few years. Rate of seed per unit and quantity of seed per hectare is the indicator of the cost of seed used per hectare. Area of each crop is available from the provincial crop reporting systems. Value of seed used has been estimated from these estimates.
b. Valuation of off-take of fertilizer: The data on off-take of fertilizer and its value is collected from National Fertilizer Development Centre, Planning & Development Division Islamabad.
c. Valuation of pesticides used: The data on use of pesticides have been taken from “Agricultural Statistics of Pakistan and Trade statistics of PBS.
d. Valuation of irrigation water: As no direct valuation is available, indirect estimates through expenditure approach has been prepared. Three separate strata have been formed for the purpose i.e., canal water, tube wells run by electricity and diesel.
i. Canal water: Different options were considered. The revenues collected by Provincial Boards of Revenues for irrigation water charges have been taken and used as value of the water.
ii. Tube well (Electrical): The number of electrical tube wells running in private sector has been taken from the annual publication “Agricultural Statistics of Pakistan” Ministry of food and Agriculture (Economic Wing) Islamabad. Electricity consumed by agriculture sector has been taken from the Pakistan Energy Year Book, published by Hydrocarbon Development Institute of Pakistan. The rates of electricity for agriculture have been taken from the Economic Survey of Pakistan. (Total electricity consumed has been broken into public and private tube wells run by electricity, according to their numbers.)
iii. Tube well (Diesel): Consumption of light speed diesel oil for agriculture has been taken from the Energy Year Book 2007 along with its price.
e. Ploughing and planking cost: The results used for ploughing and planking are based on figures of the survey related to the study. The results have been derived from the data by multiplying number of ploughs for each crop and rate of ploughing/acre for that province. To update the cost of ploughing and planking, some adjustments have been made in the light of the studies conducted by Agricultural Policies Institute (formally Agricultural Prices Commission). The data for those crops which could not be covered in survey has been imputed on the basis of similar crops/ fruits/ vegetables, for the base year.
f. Transport charges: The prices used for fertilizer, pesticides and seeds do not include any cost of local transport. Thus, some transport charges had to be estimated, separately. A uniform rate of 1.25% has been applied on fertilizer and pesticides values to reach at market prices whereas rate of 1% has been applied to seed value. This practice was also used in last base year of 1999-2000 as a result of study conducted for the base year 1999-2000.
g. Wastage charges: The wastages (or losses) have been recorded as intermediate consumption in order to arrive at correct figures of value added by applying a rate of 0.5% on the gross output value of all crops as recommended in the study conducted for the base year 1999-2000.
Gross value added is the difference between output and intermediate consumption.
The results of cotton ginning have been excluded from manufacturing and included in the crops subsector of agriculture. According to PSIC 2007and 2010 it falls under class 0140 and 0163 respectively. The raw data have been taken from the CMI 2005-06 files and edited.
Livestock is covered in the groups 012 and partly 014 of Division 01 ”Agriculture, hunting and related service activities” of PSIC 2007. In PSIC 2010 relevant codes for livestock are 014, 016 and 017.
The data on livestock for eight species i.e., buffaloes, cattle, sheep, goats, camels, horses, mules and asses are available. Livestock census is conducted by Agricultural Census Organization (ACO) and the geometric growth rates between two consecutive censuses are utilized by Livestock Division of Ministry of Food, Agriculture and Livestock for annual projection until the next census. For buffaloes and cattle, data are available for three age groups, i.e., (i) new born animals (less than one year), (ii) immature animals (between one to three years) and (iii) mature animals (three years of age and above). For sheep and goats, data are available for two age groups, i.e., of new born (less than one year), and mature (one year of age and above). For camels, horses, mules and asses, data are available for two age groups, i.e., of new born and immature (less than three years) and mature (three years of age and above). The data regarding animals for slaughter are provided separately. Data regarding dead animals are also provided but without age specification.
Buffaloes and Cattle:
The new born animals (having age less than one year) have been treated as output and may be assumed safely as own-account capital formation, acquired at the time of production. These have been valued at the average price for this category.
The immature category (equal to or greater than 1 & less than 3 years of age) is a mixture one. The average price of this group is taken for valuation. The livestock between one to two years of age totally come forward from the new born of the previous year excluding the dead and slaughtered animals during the period. The animals between two to three years of age have come from the category of one to two years net of died and slaughtered ones. It is assumed that the spread of animals between the groups is even. The output of this group is the enhancement in their value from the previous category. It is measured by multiplying the one half of the animals of this group with the price differential of this category with the new born category. The other half has no price differential and hence no marginal increase in value. The same output has been acquired as GFCF.
The half of immature animals enter in to the mature category net of died and slaughtered ones. This is a broad category and only the enhancement in the value of addition from immature category is taken as output. The change in stock for this category is the indicator of increase / decrease in the number in this group. The contribution towards GFCF is to be recorded as output for own-account capital formation.
Sheep and Goats
The data for these animals are available for two age groups.
a. The new born animals having age less than one year
b. The animals having age one year or above
Animals having age less than one year have been treated as new born. Next year these will be in the second age group. This group will totally be replaced next year by the new born ones. However the second group will be a combination of new entrance and the already existing ones. The changes are due to the death and slaughtering during the period. Category “a” has been assumed as own-account capital formation as well as output. The mature category (equal to or greater than 1 year of age) is a mixture one. This is a broad category. The already existing ones of this group have no incremental value. However the animals moved from category “a to b” have got the marginal increase which is output. The change in stock for this category is the indicator of increase / decrease in the number in this group. The contribution towards GFCF is the acquisition of this output.
Camels, Horses, Mules and Asses
The contribution towards output and GFCF of camels, horses, mules and asses has been worked out by taking the change in stock for each age group and value it with full price of that group. This gives the net output/ net fixed capital formation. By valuing died animals at the average price gives the consumption of fixed capital. Adding this figure to the net output/ net FCF gives the gross output/ GFCF.
The other livestock products are milk, draught power, dung and urine and wool and hair. The data on these products have been supplied by the livestock division of agriculture ministry. The milk production for human consumption only has been valued. Milk for breeding calves has been excluded from the production as well consumption. The valuation of draught power has been calculated by indirect method as it is not common to hire the animals for ploughing and planking. Equivalent output has been applied for valuation. Unit prices have been applied to the quantities of dung and urine and wool and hairs.
It consists of fodder, including green, dry and concentrates. Green and dry fodder is fed to all livestock. Concentrates are generally given to the buffaloes and cows in milk which improve the quantity as well quality of their milk. Poultry feed is provided to farming poultry only. Similarly value of chicks and rent of sheds, repairs etc. are also related to the farming poultry. However transportation and medical care costs relate to whole livestock and poultry. The ratios have been revised accordingly.
Poultry and Poultry products
The data are available on farming and on domestic poultry separately as a product of livestock census. Farming poultry is managed on scientific bases. Data are provided on number of layers, broilers, breeding stock and chicks and eggs in farming. This segment is called as commercial poultry. In domestic poultry, data are provided on number of hens, cocks, chicken and eggs. This category is generally available in the rural part of the population. Organized market structure does not exist for this segment. The price structure has been adopted from the price statistics of PBS. The major products are eggs and meat. Generally live birds are sold on the market. Poultry meat is also reported by the ministry.
According to PSIC 2007 and PSIC 2010, the provision of services of animal husbandry falls under agriculture (group 014, “Agricultural and animal husbandry service activities, except veterinary activities” and 0162 respectively). It includes activities related to promote propagation, growth and output of animals, herd testing services, poultry caponizing etc. The activities related to artificial insemination, stud services etc. are also covered. Data for the output of these services is not available unless provided by the government. The data on animal husbandry have been provided by provinces.
On the input side the payments of the farmers for animal husbandry are covered under “other inputs”. Hence this output is treated as value added.
According to the PSIC 2007, hunting is covered in class 0150 and according to PSIC 2010 it is class 017. The estimates prepared are totally based on an input approach assuming that inputs are widely made up of hunting fees as recorded in the Provincial Budget Documents 2006-07.
Forestry covers the production of round wood for the forest based manufacturing industries (PSIC rev. 4, division 16 and 17) as well as the extraction and gathering of wild growing non-wood forest products. Besides the production of timber forestry activities results in products that undergo little processing such as fire wood, charcoal, wood chips and round wood used in unprocessed forms. Natural and planted forests are both included. The activity pertains to PSIC rev. 4, division 02, section A.
There are three important types of data sets. Data on timber and fire wood from the public forests are provided by the Inspector General, forests, a government department. It provides quantity, cut and sold, as well as revenue earned from the sale proceeds. A bulk supply is from the private owned forests but it is not available directly. The non-wood forest products are another component. The data on this component is also scanty. A study was made for the base year 1999-2000 and its indicators have been applied to the relevant components.
The data needed for direct valuation of this sub sector through production approach is not available; hence it is measured indirectly from the use side. The uses of the timber and fire wood in the industry sector, i. e., mining and quarrying, large scale manufacturing industry, small and household manufacturing industry and construction have been taken from the surveys and census conducted for this purpose. Census of manufacturing industries (CMI 2005-06), Small and Household Manufacturing Industries (SHMI 2006-07) survey, Census of mining industries (CMI 2005-06) and Construction survey 2007-08 are the reference sources, adjusted to the base year. To make the output at producer’s prices, 40% has been deducted as trade and transport margins. Trade margins have been developed through wholesale and retail trade survey. To make the output net, 25% is assumed and deducted as smuggling. Consumption of fire wood in the households has been taken from the social and living standards measurement survey (PSLM) 2005-06. The contribution of the non-wood forest products and own-account capital formation has been adopted from the current estimates for 2005-06.
The input structure has been taken from the 1999-200 base work. The input cost for timber and firewood have been taken as 25% of the output. These are the findings of the study conducted for the base year 1999-2000.
Gross value added is output minus intermediate consumption.
Output, intermediate consumption and value added will not be calculated for each year as deep as for the new base year. The figures of 2005-06 will be extrapolated. The source of timber is its use in large scale industry it will be raised with QIM of wood products. The other component is firewood used in household and it will be raised with the constant figure of rural household growth calculated from the population censuses 1981 and 1998. One component is the use of firewood in small industry and it will be raised with the fixed growth of small and household manufacturing industries. Non-wood forest products will be raised with the indicator of firewood used in the household. Input – output ratios of the base year will be applied for the calculation of intermediate consumption and GVA. The deflators will be applied to have current estimates.
According to PSIC rev. 4, fishing activity pertains to division 03, section A. It covers marine fishing and freshwater fishing. Activities of aquaculture, marine as well as freshwater are included.
The data is being supplied by the Marine Fishery Department, Ministry of Livestock and Dairy Development, Government of Pakistan. Two studies have been conducted for the base year 2005-06 estimates, Study on Marine fishing and Study on Inland fishing. These results, after discussing with the relevant departments and experts on the subject, have been adopted for the base year 2005-06.
In marine fishing, crew is often paid a share of the value of landing. The landed fish is auctioned at the port. The fishermen directly pay the auctioneer or the auction hall for marketing their fish catch. Auctioneers or the auction hall have to pay some of this amount as a membership fee to the fishing cooperative society. The activities of the auctioneers belong to the PSIC, other business activities. Auction halls are to be classified under PSIC, wholesale and retail trade. Fishing cooperative society is to be classified under PSIC, other community, social and personal services. The fees have been treated as intermediate consumption as well as output.
Different species have been valuated separately. The auction charges etc. have not been deducted from the output as indirect taxes but as intermediate consumption.
Study on inland fishing to determine the parameters for the private fish farms is the source for contribution to gross output. Unit price (Rs. 80.0 per Kg.), i.e., average price per Kg. determined through this study is applied to the quantity reported by the department. The previous practice of assuming 100% under coverage is being continued.
The input structure regarding marine fishing has been determined through study. It includes fuel, ice, salt, water, medicine, repair and maintenance charges etc. The major components are fuel (82%) and ice (13%). The input-output ratio has been determined as 40%.
For inland fishing the inputs are seed, feed, POL/electricity, water and others. Others include transport charges used for farm inputs, gas, chemicals, medicine, cleaning materials etc. The major inputs are feed (49%), water (22%) and seed (13%). The overall input-output ratio is 30%.
Gross value added is output minus intermediate consumption.
1. Mining and Quarrying
According to the Pakistan Standard Industrial Classification (PSIC), 2007, mining and quarrying include the extraction of minerals occurring naturally as solids (coal and ores), liquids (petroleum) or gases (natural gas). Extraction can be achieved by underground or surface mining or well operation. It is covered in section C of PSIC 2007 and includes divisions 10 to 14. Latest revision PSIC 2010 rev. 4 which is parallel to the latest revision ISIC 4 covers in section B, from division 05 to 09. Mining and quarrying include the extraction of minerals occurring naturally as solids (coal and ores), liquids (petroleum) or gases (natural gas). Extraction can be achieved by underground or surface mining or well operation. It also includes services incidental to mining, e.g. drilling services, derrick erection and the like. The main approach for Pakistan’s National Accounts is a functional (or “commodity”) approach. This means that compilation of output, intermediate consumption and value added is based on commodity data.
For the base year data has been collected from all oil and gas corporations through their annual reports and through questionnaires. Data from the latest Mining Census has been used as well. In using these we apply an enterprise approach which, however, is confined to the oil and gas companies and which will be embedded in the overall functional approach for all minerals.
The input structure regarding natural gas and crude oil has been determined from the annual reports and data of oil and gas exploration companies. Exploration costs (if incurred on activities carried out by the companies themselves) are included in the input structure of the above companies. The inputs for the extraction of gas and oil have been taken from the respective companies. Input structure regarding coal and “other minerals” has been adopted from the census report CMQI 2005-06. It should be noted that intermediate consumption also includes some virtual payments: remuneration for financial services indirectly measured (FISIM) and insurance service charges.
Gross value added is output minus intermediate consumption. Output, intermediate consumption and value added will not be calculated for each year. The output at basic prices of 2005-06 has been extrapolated through quantities given by the mining departments. Intermediate consumption at constant prices has been calculated by multiplying the output at constant prices with the respective input-output ratio of the base year 2005-06. The output at constant basic prices and intermediate consumption will be converted into current prices by applying WPI of the group. Gross value added will be obtained by subtracting intermediate consumption from output for the constant and current prices respectively.
The manufacturing sector comprises of following three sub sectors:
- Large Scale Manufacturing
- Small Scale Manufacturing
i Large Scale Manufacturing Industries (LSMI)
Large Scale Manufacturing covers the establishments registered or qualified for registration under Section 2 (j) and 5 (i) of the Factories Act, 1934, whereas Small Scale Manufacturing includes all such manufacturing establishments not covered there under. Section 2 (j) refers to the factories which employ 20 or more workers on any working day during the year and use power in their manufacturing operation. Section 5 (i) pertains to factories wherein a manufacturing process is carried on or ordinarily carried on whether with or without the use of power wherein ten or more workers are working there in or have worked there on any day of the 12 months immediately preceding.
There are two sources of data on large scale manufacturing. One is the Census of Manufacturing Industries (CMI) and the other is Quantum Index of Manufacturing (QIM). The CMI is conducted on quinquennial basis and has been used to derive the base year estimates (2005-06). The contribution of cotton ginning and meat & meat products has been excluded from GVA of LSMI and the same have been added in the crops and slaughtering subsectors respectively following the Pakistan Standard Industrial Classification (PSIC 2010). GVA of newspapers & periodicals, derived from a special study, has been added to the results of “Paper and Board” of CMI. QIM with new base 2005-06 has been used to extrapolate the GVA at constant basic prices. The estimates at constant basic prices are converted into current basic prices by applying inflator which covers the items of manufacturing and their respective weights.
ii Small Scale Manufacturing
The base year estimates for small scale manufacturing for the year 2005-06 have been derived from the survey on “Small Scale and Household Manufacturing Industries (SHMI)” 2006-07 conducted for change of base of national accounts from 1999-2000 to 2005-06. A fixed growth rate of 8.20 percent, based on inter survey annual compound growth rate between SHMI 2006-07 and SHMI 1996-97, has been used to derive the estimates of GVA at constant basic prices. The estimates at constant prices are converted into current basic prices by applying an inflator which covers the items of manufacturing and their respective weights.
According to PSIC 2007 all three kinds fall under Section D “Manufacturing”, Division 15 “Manufacture of food products and beverages”, Group 151 “Production, processing and preservation of meat, fish, fruits, vegetables, oils and fats”, Class “Production, processing and preservation of meat and meat products”. Establishments (shops) where butchers just sell their meat products are not classified under manufacturing. They fall under Class “Retail sale of food, beverages and tobacco in specialized stores” of PSIC 2007. In PSIC 2010, rev. 4, the activities of slaughter houses and butcheries are covered in section C, in class 1010 of division 10. Then the meat is cut and sold in special shops. For this purpose the “Retail sale of food in specialized stores” category, 4721 of PSIC rev. 4 is reserved.
The data situation in Pakistan does not encourage an establishment approach to cover the output of slaughtering. It is considered to have a commodity flow approach, instead. This means that annual data about slaughtered animals are the basis for the calculation. The data, on regular basis, is available in the publication named “Agricultural statistics of Pakistan”.
The commodity flow approach is a functional one. At first, this means that we do not differ between the three kinds of slaughtering mentioned above. Secondly, we calculate slaughtering “pure” excluding any other secondary activity carried out by the slaughters. As a consequence of that we do not sub-classify slaughtering into large scale manufacturing and small scale manufacturing. Manufacturing as a whole will be the sum of large scale manufacturing (excluding slaughtering) plus small scale manufacturing (excluding slaughtering) plus slaughtering.
Output represents the total value of sales by producing establishment/ enterprises (their turnover/ gross earnings) in an accounting period (e.g. a quarter or a year), before subtracting the value of intermediate goods used up in production. For slaughtering, the output consists of meat (mutton, beef and poultry), edible offal and other products (blood, bones, horns and hooves, heads and trotters, animal fats, guts, casings, and hides and skins).
The major input in case of slaughtering industry is the live animals and poultry. Animals and poultry (farm and familial - layer and broiler both) are the output of livestock, where these are treated as “sold for slaughtering”, at basic prices viewed from the farmers’ end. Trade margins are represented by the payments to the middlemen working on the animal markets mediating between the farmer and the butcher. The same holds for transports if separately invoiced. Trade margins as well as transport margins are being covered in the respective functional approaches under the appropriate PSICs for that. However, in most cases transport of the animal to the market is born by the seller and further born by the purchaser.
Gross value added is output minus intermediate consumption. Output at basic prices of 2005-06 has been extrapolated through growth of meat. Intermediate consumption at constant prices has been calculated directly from the input quantities available and using the input-output ratios of the base year 2005-06 where needed. The output and intermediate consumption at constant prices have been converted into current prices by applying the inflator which covers the items of meat & chicken & their respective weights.
3. Electricity generation and distribution and gas distribution
The GVA of both Electricity generation & distribution and gas distribution have been compiled by applying the establishment approach. In 1999-2000 base, water supply was also part of this group but in 2005-06 base it has been shifted to general government sector being a non-market producer. It is also according to the revised classification (PSIC 2007 or PSIC 2010).
i. Electricity generation and distribution
According to Pakistan Industrial Classification (PSIC) 2007 the coverage is given by its incumbent group 401 “production, transmission and distribution of electricity”. In the revised version of PSIC which is PSIC Rev. 4 (2010) the activity pertains to class 3510 of 351 group of division 35.
The data is being supplied by the generating and distributing units regularly. Their annual reports have also been utilized. Pakistan Energy Year Book 2006, published by Hydrocarbon Development Institute of Pakistan (HDIP) is another authentic source for details. It throws light on the physical structure of output and of their inputs, including the primary energy sources like oil, gas or coal used for production of electricity. Moreover, Hydrocarbon provides the energy balance for Pakistan.
As indicated it is intended to reconcile and to combine the figures of National Accounts (monetary terms) with those of the physical side (Hydrocarbon Institute). To begin with the physical side: WAPDA is the sole producer of Hydel power. Its share is 33% in the generated units (GWH) of electricity in 2005-06. It also generates thermal power which contributed 24% to total generation in 2005-06. WAPDA alone contributed 57% to the total generation. KESC contributes 10% and IPPs contribute 31%. The share of nuclear energy generation is around 3% only. WAPDA and KESC purchase electricity from the other producers and distribute it. Captive units generally supply what is extra with them. In electricity industry the subsidies have been incorporated in the output.
WAPDA is the sole producer of hydel generation, it uses flow of water as one of the major inputs. Furnace oil and natural gas are the major inputs for thermal generation. The third component is the purchasing of electricity from IPPs for further distribution. The purchases are from the thermal energy production units. KESC has two types of inputs i.e., one is the thermal generation and the other is the purchase of electricity from IPPs for further distribution. IPPs have the input set of thermal generation. Nuclear generation has a separate input set. Intermediate consumption pattern differs accordingly.
GVA is derived from the output and intermediate consumption estimates. WAPDA is major the contributor, its contribution to value added is 45 per cent. IPP’s are the second major share holder in value added.
Output, intermediate consumption and GVA at current prices for WAPDA and KESC have been calculated for each year which has been converted into constant prices by applying the deflator of electricity. Output, intermediate consumption and GVA at current prices for Independent power producers have been calculated for each year which has been converted into constant prices by applying the deflators of electricity, furnace oil and gas. The base year ratios along with units produced have been applied to have constant estimates for nuclear power which have been converted into constant prices by applying the deflator of electricity. The captive units are being treated along with IPP’s.
ii. Gas Distribution
The according to PSIC 2007 gas distribution is covered in division 40, class 4020, under “Electricity, gas and water supply” whereas in PSIC 2010, this activity pertains to PSIC class 3520 of 352 group of 35 division. In Pakistan gas distribution only comprises of Sui Southern, Sui Northern and Mari Gas companies. For the base year estimates 2005-06, the data has been supplied by the distribution companies. The annual reports of the companies are a major source of mature data. Energy year book 2006 and onward are another authentic source for details. It has been tried to combine and to reconcile these two sources as far as possible.
Output for the base year has been calculated by using the annual reports of Sui Northern, Sui Southern and Mari gas companies. Taxes and subsidies on the production process are not observed in gas distribution and are negligible.
For Sui Southern and Sui Northern the major input is the gas they are purchasing from the mining companies, heavily taxed already. For Mari Gas the gas they are distributing is widely coming from own production in their mining establishments. According to their respective annual reports the input-output ratio for SNGC is 88% and for SSGC is 90%. For Mari Gas Company the input–output ratio is 10% for the base year which is due to heavy taxation.
Gross value added is calculated as output minus intermediate consumption. Output, intermediate consumption and GVA at current prices for gas distribution sub-sector have been calculated for each year by using data from annual reports which has been converted into constant prices by applying the deflator of gas.
Construction is covered as division 45 in section F of the Pakistan Standard Industrial Classification (PSIC 2007) which has been adopted from International Standard industrial Classification of all economic activities (ISIC rev 3.1). In the Pakistan Standard Industrial Classification (PSIC 2010, adopted from ISIC rev-4 it is covered as Section F with general construction and specialized construction activities for building and civil engineering works. It includes new work, repair, additions and alteration, the erection of pre-fabricated buildings or structures on the site and also a construction of temporary nature. In PSIC 2010 the section includes the complete construction of buildings (division 41), the complete construction of Civil engineering works (division 42) as well as specialized construction activities, if carried out as a part of the construction process (division 43).
The construction activity covers land improvement and construction of all type of buildings, roads, bridges, railway lines, utility lines (telecommunication lines, power lines, pipe lines) waterways, dams as well as repairs and maintenance of such infrastructure. The estimates of construction activity have been developed by a commodity flow approach on the basis of the expenditure, incurred by the establishments undertaking the construction or the contractors or the sub-contractors purchasing the construction material. The data on expenditure on construction of these activities have been obtained from data set of GFCF of all sectors of the economy. The coefficients for deriving gross value added from output have been adopted from base 1999-2000. They had been based on data collected from concerned agencies such as WAPDA, CAA, Railways, PWD, KPT, KDA, Irrigation Departments, Development Authorities and Construction Companies. The current estimates are calculated every year from the GFCF data which are converted into constant price by applying the PPI construction material.
C. Services industries
1. WHOLESALE AND RETAIL TRADE
Wholesale and retail trade covers a full Section (“G”) in the Pakistan Standard Industrial Classification (PSIC) 2007. The full title of this section is “Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods”. In the PSIC Rev. 4, 2010, the respective section ‘G’ now has a shorter title: “Wholesale and retail trade; repair of motor vehicles and motorcycles”.
The margins for agriculture and manufacturing have been derived from the survey on “Whole Sale and Retail Trade 2007-08”. The data on respective imports is being supplied by external trade section of PBS. The marketable portions of the commodities and trade margins ratios for imports have been determined through a study for 1999-2000 rebasing. For maintenance and repair of motor vehicles and motorcycles (group 452 of PSIC 2007) the output and the intermediate consumption are directly taken from the Wholesale and Retail Trade Survey. The output at basic prices and intermediate consumption for 2007-08 at the (estimated) rate of 10% has been extrapolated backward with the growth of output of road transport. The base year figures have been extrapolated with the mechanised road transport activity. Input-Output ratios of the base year will be applied for the estimates of intermediate consumption and gross value added. The portion which the farmers retained for their own final consumption has been determined through the Household Integrated Economic Survey 2005-06 of PBS. For fish the data sources are studies on marine fishing and on inland fishing for the purpose of rebasing of National Accounts. For forestry products the output is already calculated from the demand side like firewood. Thus, output is close to the marketable supply. For other minor forestry products like honey, herbs, the figures for 2005-06 of the old base have been adopted as starting point for the new base.
The applications of the respective ratios have been applied to the marketable supply at current as well as constant prices in order to get output, intermediate consumption and value added for both valuations.
The commodity flow approach has been used for extrapolation of output and GVA at current and constant prices. The non-trade sections of National Accounts have provided the output at basic prices of the respective commodity groups at current as well as at constant prices.
1a. Hotels and Restaurants
Hotels and restaurants are covered in section H (Division 55) of the Pakistan Standard Industrial Classification (PSIC 2007) under two broader categories i.e., 551-Hotels; camping sites and other provision of short stay accommodation and 552-Restaurants, bars and canteens. However, in Pakistan Standard Industrial Classification (PSIC Rev.4, 2010), hotels and restaurants are covered in section I-Accommodation and Food Service Activities under industry Divisions 55-Accomodation and 56-Food and beverage service activities.
PBS has conducted a Survey of Wholesale & Retail Trade and Hotels & Restaurants in 2006-07 for the change of base of national accounts from 1999-2000 to 2005-2006. The growth rate calculated from 1984-85 to 2006-07 based on the surveys, at the 1980-81 prices is 4.92%. The estimates of 1999-2000 base have been raised with fixed growth rate of 4.92 and same have been converted into current prices by applying CPI General to derive the base year estimate for the year 2005-06. The benchmark estimates of GVA at constant prices for the year 2005-06 have been extrapolated for subsequent years by applying a fixed growth rate of 4.92 per cent. The estimates at constant prices have been converted into current prices by applying the CPI general.
2. TRANSPORT, STORAGE AND COMMUNICATION
Transport, storage and communication sector has been covered according to the PSICs (2007 & 2010). The universe for this sector is comprised of the provision of passenger or freight transportation; by land, water and air. It includes rail, road, pipeline, water, air and associated activities such as terminal and parking, cargo handling, storage etc. The renting of transportation equipment with operators is also part of this sector. Postal and courier services, and Telecommunications and related services are also covered here.
A combination of survey/studies and company reports has been used as source of data to derive the base year estimates for this sector. To enhance the coverage and update the estimates, studies were conducted on Railways franchised booking agents, inter-city & intra-city road transport (Mechanized & Non-Mechanized) , Inland Water transport ( Boats Inland), Shipping, goods forwarding and custom clearing agents, International freight forwarders, Travel agents/ Tour operators, Courier services & franchised post offices, Cable operators & internet service providers and Public call offices & payphone companies. Un-registered part of non-mechanized road transport has been adjusted approximately as double of registered part of non-mechanized road transport. Data has also been extracted from the annual reports of Pakistan Railways, APL, PARCO (oil pipeline), FOTCO, Pakistan National Shipping Corporation (PNSC), Domestic airlines (PIA, SAI, Air Blue), Foreign airlines, KPT, PQA, KICT, QICT, PICT, Engro Vopak Container Terminal, CAA, Pakistan Post Office, PTCL, NTC, PTA, Pak Data Comm., Telecard, Telecom Foundation (TF) and World call Telecom Limited etc. The ratios of 1999-2000 base have been used to derive the estimates of Storage and warehousing activities.
The estimates for each category have been prepared separately following production approach whereas gross value added has been computed by deducting the value of intermediate consumption from the value of output.
3. FINANCE & INSURANCE
The production of financial services is the result of financial intermediation, financial risk management, liquidity transformation or auxiliary financial activities. According to SNA 2008 financial intermediation is carried out by financial corporations, exclusively. Financial corporations consist of all resident corporations that are principally engaged in providing financial services, including insurance and pension fund services, to other institutional units. In the International standard industrial classification (in Pakistan PSIC 2007) there is a special group 651, “monetary intermediation”, subdivided into 6511 “central banking” and 6512 “other monetary intermediation”. In the standard industrial classification, in Pakistan PSIC 2010 (equivalent to ISIC Rev. 4), of the United Nations (2008a) this sector is covered under section “K” and divisions 64, 65 and 66. In the “Central Product Classification (CPC)”, Ver. 2 of the United Nations (2008b), the services of the financial corporations are covered under Division 71 “Financial intermediation, insurance and auxiliary services.
Subsectors of the financial corporations sector
- Central Bank
- Deposit-taking corporations except the Central Bank
- Money market funds (MMF)
- Non-MMF investment funds
- Other financial intermediaries except insurance corporations and pension funds (ICPF)
- Financial auxiliaries
- Captive financial institutions and money lenders
- Insurance corporations (IC)
- Pension funds (PF)
The sub-sectors of financial corporations can more broadly be aggregated to:
- Financial intermediaries (S121 to S125, S128, S129): institutional units that incur liabilities on their own account for the purpose of acquiring financial assets by engaging in financial transactions on the market. They include insurance corporations and pension funds.
- Financial auxiliaries (S126): institutional units principally engaged in serving financial markets, but do not take ownership of the financial assets and liabilities they handle.
- Other financial corporations (S127): institutional units providing financial services, where most of their assets or liabilities are not available on open financial markets.
Financial services in return for explicit charges
Financial services may be paid for explicitly or implicitly or both. The financial services the clients directly pay for may be provided by different categories of financial institutions:
- Deposit taking institutions (i.e. such as banks) may charge households or enterprises to arrange a mortgage, manage an investment portfolio, etc.
- Specialized financial institutions may charge non-financial corporations to arrange a flotation of shares or to administer a restructuring of a group of corporations.
Most probably, the largest direct fee charged is the one by credit card issuers:
- to the units that accept credit cards as a means of payment for the goods and services they provide. The charge is usually calculated as a percentage of the sale.
- to a card holder who may also be charged an explicit fee, usually each year, for holding the card.
The fees constitute output of financial institutions. But for the commercial banks (also called “scheduled’ banks) it is not their most outstanding kind of output. Other kinds are treated below.
We get the figures for financial services in return for explicit charges out of the profit & loss accounts of the banks (position “fees, commissions, brokerage”). If possible we get some information about the structure of the clients absorbing these services.
Financial services linked to dealing in securities and in foreign exchange
In practice, virtually all transactions in foreign exchange and securities are carried out via financial corporations. In both cases – foreign exchange as well as securities – two prices are quoted: a bid price and an ask price. The first is the price which the potential buyer is to pay, and the second is the price that the owner receives on sale. This activity is called market making and may be undertaken by specialized financial corporations or financial corporations providing a wide range of financial services.
Financial Intermediation Services Indirectly Measured (FISIM)
The question of the definition and the measurement of the output of the banks exists since the birth of the National Accounts. Different solutions in subsequent versions of the SNA had to be built around the following axioms:
- Lending of money as such does not fall within the production boundary of GDP as it does not constitute a product or a service. The remuneration for lending of money (mainly interest) is to be booked as income from property.
- Income from property is to be recorded as distribution of income. It must not be double-counted.
- However, lending of money often is supported by services rendered by banks or similar institutions. This service is often referred to as financial intermediation. It is to be included when calculating GDP.
- The remuneration for financial intermediation can only be measured indirectly by imputing a service charge on account of the clients of the banks.
Financial institutions borrow funds which they lend at different terms to others, transforming the funds in ways more suitable to borrowers. They do not charge their clients explicitly for most of their services but do so implicitly by charging an interest on lent funds. The interest rates they receive are generally higher than the rates they pay to the depositors. The interest margin is not considered as a sale, but as an implicit payment for banking services. It represents charges for FISIM.
Intermediate consumption of the banks (others than State Bank)
In order to calculate value added we have to subtract intermediate consumption of the banks from their output. For this purpose we assume that the Profit & Loss Accounts of the banks are standardized and that the position “Non mark-up / interest expenses” consists of the three positions:
- Administrative expenses
- Other provisions / write offs net
- Other charges
With regard to eliminating inflation and to calculate figures at constant prices the output of financial services consists of two main components: financial services directly charged by financial corporations to their clients and financial intermediation services indirectly measured (FISIM). As direct financial services like those attached to activities related to currency exchange, financial advisory services etc., are charged explicitly, prices simply equal the actual fees or commissions charged for providing the services.
The PBS annually conducts a survey sending a questionnaire directly to the financial institutions. It contains all variables which are necessary to compile GVA and it is widely covering the positions of the profit & loss accounts of the banks.
Output and value added of the State Bank of Pakistan
The total output of State Bank of Pakistan is sum of intermediate consumption, compensation of employees and consumption of fixed capital. The market output of SBP is directly compiled and is comprised of all fees, charges etc. The difference between total output and market output is treated as the non-market output. Intermediate Consumption of SBP is comprised of note printing charges, agency commission, establishment costs and other charges.
Output and value added of the scheduled banks
The most relevant component of the output of the financial institutions is the “FISIM” of the scheduled ("commercial") banks. The FISIM has been calculated according to a reference rate, confined on the asset side of the banks to loans and on the liability side to transferable deposits and other deposits by using banking statistics of the State Bank of Pakistan which are published on its website. “KIBOR” (Karachi Inter-bank Offered Rate) has been used as the reference rate. The figures for financial services in return for explicit charges have been directly taken from the profit & loss accounts of the banks and it includes “fees, commissions and brokerage”, “income from dealing in foreign securities” and “income from dealing in foreign currencies”
Intermediate consumption for scheduled banks for the base year 2005-06 have been calculated as the difference between administrative expenses and compensation of employees and donations of the banks as per profit & loss account for each bank. For the non-base years administrative expenses have been multiplied with the ratio of those positions which in the base year really do fall under intermediate consumption.
The overall output of the “final” year has been extrapolated with the increase of deposits plus loans at current prices and at constant prices, respectively. For intermediate consumption we have applied the ratio of the “final” year at current and at constant prices (deflation with CPI), respectively.
Output and value added of the non-scheduled banks and auxiliaries
The term "non-scheduled banks" are classified as Non-Banking Financial Corporations (NBFC) by the State Bank. NBFCs also cover pension funds and insurance corporations. NBFCs are either "other deposit accepting institutions" or non-depository institutions. The non-depository institutions either are financial intermediaries (mainly mutual funds and asset management companies) or financial auxiliaries like stock exchange companies, stock exchange brokers or money exchange companies.
Other deposit accepting institutions includes investment banks and development financing institutions (DFIs), microfinance institutions, housing finance companies (under other deposit accepting), and leasing corporations (under other deposit accepting).
Non-Depository Institutions (financial intermediaries) includes Mutual funds, Housing finance companies, Leasing companies and Modarabas.
The ratios resulting from calculations with the scheduled banks have been applied to the loans and deposits of the non-scheduled banks. FISIM on deposits of the non-scheduled banks is calculated analogously, loans and deposits to be taken as annual average each.
Non-depository institutions (financial auxiliaries) include exchange companies, stock exchanges, brokerage houses, asset management companies.
Allocation of FISIM to users
The SNA 2008 is more challenging as it requires distribution of FISIM among the users of this service. The allocation of FISIM to users has been done for FISIM on deposits and for FISIM on loans separately, though with some simplifying assumptions in order to keep the compilation less sophisticated. The total amount of FISIM has been included in the intermediate consumption of the respective section of PSIC (sectors).
Financial services of insurance and pension funds
The insurance companies and the pension funds gather all institutional units aiming at insuring i.e. to transform individual risks into collective risks, by guaranteeing the payment of a sum (allowance or service) in case a risk is realizing. To guarantee such payments, the units of this sub-sector have to constitute reserves and they are responsible for their investment. The principal resources of these units are consisted of contractual premiums or voluntary contributions. Under the agreement of an insurance policy, the policy holder makes a payment (a premium) to the insurance corporation and, if or when a specified event occurs, the insurance corporation makes a payment (claim) to the policy holder. In this way, the policy holder protects himself or herself, respectively, against certain forms of risk. The insurance corporation is remunerated for its services by charging premiums that cover the claims as well as their cost. In the SNA insurances are sub-classified in two different ways i.e. direct insurance and reinsurance. Direct insurance is the common case: contract between an insurance corporation and its clients. In reinsurance protection is provided by one insurance corporation to another.
The second way of sub-classifying insurances is between life and non-life insurance. Non-life insurance consists of redistribution in the current period between all policy holders and a few claimants. In contrast to that, life insurance mainly redistributes premiums paid over a period of time as benefits paid later to the same policy holder or to his nominees or assignees. Essentially life insurance premiums and benefits are financial transactions while non-life insurance premiums and claims are current transactions.
The output of the insurance corporation represents the service provided to the policy holders. The output of direct non-life insurance is premiums earned plus premium supplements less adjusted claims incurred.
The output of life insurance is derived as premiums earned plus premium supplements less benefits due less increases (plus decreases) in life insurance reserves. The output of reinsurance is calculated in exactly the same way as for non-life insurance, regardless whether it is life or non-life insurance policies that are reinsured. However, for the insurers being the clients of the reinsurers there are different ways to calculate their output and their intermediate consumption.
Social security stands for social insurance organized by general government.
Social insurance schemes, social security and pension funds
A social insurance scheme is a form of contractual insurance scheme where the policyholder is obliged or encouraged to insure against certain contingencies by the intervention of a third party. For example, government may oblige all employees to participate in a social security scheme;
- employers may make it a condition of employment that employees participate in an insurance scheme specified by the employer;
- an employer may encourage employees to join a scheme by making contributions on behalf of the employee;
- or a trade union may arrange advantageous insurance cover available only to the members of the trade union.
Contributions to social insurance schemes are usually paid by, or on behalf of employees, though under certain conditions non-employed or self-employed persons may also be covered.
The two classes of social insurance schemes are:
- social security,
- employment-related social insurance schemes other than social security.
Social security schemes are run as part of the operation of general government. If separate units are distinguished, their output is determined in the same way as all non-market output at the sum of costs. If separate units are not distinguished, the output of social security is included with the output of the level of government at which it operates.
Pension funds make up a separate sub-sector of financial corporations consisting of those social insurance pension funds that are institutional units separate from the units that create them.
Allocation of insurance output to users
Once the output of insurance activity has been calculated it has to be allocated to the consumers of these services. it is assumed that all domestically produced services are consumed domestically and that there is no import of insurance services other than those of reinsurance.
4. Housing Services
Housing sector is comprised of three sub-sectors namely Ownership of Dwellings, Real Estate and Cooperative Housing Societies. The imputed output, intermediate consumption and value added of Ownership of Dwellings is recorded as part of PSIC 2007 section K division 70 Real Estate activities. There is a change in classifications for these activities at section level in PSIC 2007 (section K) and PSIC 2010 (section L). In the base 1999-2000, only housing services (Division 70 of section K) in the name of “Ownership of Dwellings” were covered and the remaining activities were covered under other parts of “services”. In PSIC 2010 (equivalent to ISIC Rev. 4), real estate services have been classified separately under section L, Division 68. Housing services is the major activity of the section and needed to be taken up separately and then summed up with other minor activities.
a. Ownership of Dwellings
According to the international recommendations and practices the estimates of value added in this sector are measured by the rent accruing from ownership of dwellings rented as well as of self-occupied or rent free. This requires cumulative increase of houses and their respective rent. To prepare estimates of value added, the number of occupied privately owned houses in urban and rural areas has been taken from the Housing Census, 1998 and 1981. The number of dwelling, gross rentals/output at basic prices, for the year 2005-06 has been estimated separately for urban and rural areas by applying the annual compound growth rate of dwellings between 1998 and 1981. The estimates of annual average rentals for urban and rural areas have been derived from the rent survey of 2007-08 conducted by PBS for the change of base of national accounts from 1999-2000 to 2005-06. The intermediate consumption for the base year 2005-06 includes the repair & maintenance and commission paid to real estate agents. The difference between output at basic prices and intermediate consumption at purchaser’s prices has been used to derive the GVA at basic prices for the base year 2005-06.
b. Real Estate and Cooperative Housing Societies
The estimates of GVA for the new base year 2005-06 for the Real Estate and Cooperative Housing Societies sub-sectors have been developed by using the information from Survey of “Social, Recreational, Community & Personal Services, Real Estate Activities and Renting of Machinery /Equipment 2007-08” and “Survey on Cooperative Societies 2007-08” conducted for the change of base of National Accounts from 1999-2000 to 2005-06. The results of the 2007-08 surveys have been extrapolated backward by applying the growth of CPI (rent) and dwellings. The activities of real estate are difficult to distinguish between residential and non-residential buildings; therefore, 50% has been taken for the housing services and the remaining 50% has been assumed for the other real estate activities.
Cooperative Housing Societies is a non-market production activity and has been estimated by applying cost of production approach. Intermediate consumption is negligible, therefore output is equivalent to value added (wages and salaries etc.). The estimates of GVA for the base year 2005-06 have been derived from the results of the survey of “Co-operative Societies 2007-08” by separating the housing societies from it. The estimates have been extrapolated backward by applying the growth of CPI rent and dwellings.
The estimates of housing services sector are extrapolated at constant basic prices by applying the fixed growth rate of 4.00 percent i.e. the annual compound growth rate of 2 rooms and more between 1998 and 1981 censuses. The estimates at constant prices are converted into current basic prices by applying the CPI (rent).
5. General Government Services
The activity was named as “Public administration and defence” in the previous rebasing and documentations. However it was covering all the activities of the general government. According to classifications PSIC 2007 and PSIC 2010, the activities of general government are dispersed over various industries, including public administration and defence, education, health and many others. The general government sector consists of the following groups of resident institutional units:
- All units of central, state or local government (as described immediately below);
- All non-market NPIs that are controlled by government units.
The sector also includes social security funds, either as separate institutional units or as part of any or all of central, state or local government. The sector does not include public corporations, even when all the equity of such corporations is owned by government units. Nor does it include quasi-corporations that are owned and controlled by government units. However, unincorporated enterprises owned by government units that are not quasi-corporations remain integral parts of those units and, therefore, must be included in the general government sector.
The sub-sectoring of general government applied in Pakistan is as follows:
a. Central government;
b. State government;
c. Local government; where it is understood that each of the subsectors a, b and c include both NPIs and social security funds at that level of government.
The final consumption expenditures of general government can be classified in several ways. In particular, they may be classified:
- According to whether the goods or services have been produced by market or non-market producers;
- According to whether the expenditures are on collective services or individual goods or services;
- By function or purpose according to the classification of the functions of government (COFOG); or
- By type of good or service according to the Central Product Classification (CPC).
Options b and c have been worked out. Expenditures on the outputs of non-market producers that are provided free, or at prices that are not economically significant, to individual households or the community account for most of the final consumption expenditure by general government. Government may produce output for own final use and some market output but most production by units of general government is non-market in nature. Non-market output is estimated by the sum of the costs involved in production.
The classification of the functions of government (COFOG) is a classification of transactions designed to apply to general government and its subsectors. There are ten classes in the classification as follows:
- General public services;
- Public order and safety;
- Economic affairs;
- Environmental protection;
- Housing and community amenities;
- Recreation, culture and religion;
- Social protection.
The sources for the Federal Government estimates are the federal budgets, the ministry of finance data. Expenditure and revenue data are available in detail. Autonomous bodies which are non-market producers have been allocated to the government while the autonomous bodies which mainly are market producers have been allocated to their respective corporation sector (in most cases non-financial corporations) and to their respective industries by PSIC. The data of other tiers of the structure are also available in the form of budget documents. The figures for provincial/ district governments, local bodies, cantonment boards etc. have been taken from their budgetary documents. The figures for social security funds have been taken as components of the federal and provincial level structure. However, the figures for the employees’ old age benefit institution (EOBI) has been included in the financial corporation sector, it deals with the pension fund. The statistical information is available on industry as well functional categorization.
Market output for the government is measured on the basis of receipts/ revenues from inspection fees, museum tickets etc.. The value of the non-market output provided without charge to household is estimated as the sum of costs of production as follows:
- Intermediate consumption,
- compensation of employees,
- consumption of fixed capital,
- other taxes (less subsidies) on production.
This is the output of the sector. From this the value of the market output is deducted to get the non-market output. For this purpose the actual expenditures of the respective government units are perused according to the ‘object code’, giving the kind of expenditure as classified by the Ministry of Finance at federal level, the Finance Departments of the provinces or the local authorities responsible for the performance of the budget. The value of its market output is given by its receipts from sales of market products, and output for own final use is equivalent to own gross fixed capital formation. It is valued at basic prices. The data have been examined to decide the activities of the government to be placed in which part, whether market or non-market. Public administration and defense, education and health categories are the major ones. Besides of that the activity of the government had to be classified according to PSIC. Thus, in principle each PSIC (unless public administration and defense) can be populated by market producers as well as non-market producers.
Intermediate consumption includes the expenditures on utilities, stationary, repair and maintenance, fees, occupancy charges (excluding residential component), etc. The data are available from the budget documents including the aforementioned object codes. Subsidies are not a part of intermediate consumption.
GVA of this sector has been compiled by income approach by adding compensation of employees both in cash & kind, consumption of fixed capital and other taxes less subsidies on production.
6. Other Private Services
A combination of production and income approaches have been applied to estimate the contribution of private services sector in national economy which involves collection of data on number of service establishments classified by type of service and data on components of value added. Production approach has been applied to estimate the GVA of renting of machinery, computer related activities, education, health & social work, recreational, culture, sporting and other service activities whereas income method is used to work out income membership organizations, NGO’s and domestic staff.
The base year GVA of Renting of Machinery and Equipment, Computer Related Activities (Software Export Board), education, membership organization, Recreational, Cultural and Sporting Activities, was obtained from the survey of “Social, Recreational, Community & Personal Services, Real Estate Activities and Renting of Machinery /Equipment 2007-08”. The 1999-2000 based estimates at current prices have been used as benchmark estimates for the new base year 2005-06 for Computer Related Activities (PASHA), social work, other business and other service activities. National health account data has been used to derive the estimate of health related activities. The contribution of NGO’s and domestic staff has been estimated from the NGO’s Survey 2005-06 and Pakistan Social & Living Standards Measurement (PSLM) Survey 2005-06.
For extrapolation at constant prices QIM of heavy machinery is used for renting of machinery & equipment, new registration of engineering firms for computer related and other business activities, new enrolment for education, growth in health personnel for health and social work whereas a fixed growth rate of 5.40 percent i.e. the annual compound growth rate of 3-4 rooms between 1998 and 1981 censuses has been used for membership organization, NGO’s, other service activities and domestic staff. The various categories of CPI i.e. general, communication, education, Medicare and recreation are being used as inflator/deflator to derive the estimates at current basic prices.
REST OF THE WORLD
For estimation of GNI, the net inflow of income from the rest of the world sector which consists of remittances, investment income, and royalties & trade marks etc. is added to GDP figure. Data on current flows from the rest of the world is compiled from the balance of payments figures of State Bank of Pakistan. To account for the non-cash remittances, an imputation based on special study conducted by PBS is added. Estimates thus obtained are at current basic prices. These are converted into constant values by using unit value index of imports as the net factor income from abroad is regarded as a means of obtaining imports. GDP at basic prices plus net factor income from the rest of the world is called GNI. Further, inclusion of indirect taxes less subsidies makes it GDP/GNI at market prices.
Expenditure on Gross Domestic Product
The estimate of expenditure on gross domestic product (GDP) is the total of final uses of goods and services measured in purchasers value less the value of imports of goods and services.
GDP (exp) = P31 + P32 + P51 + P52 +P53+ P6 – P7
The principal components of final uses of GDP are:
- Individual consumption expenditure (P31-Sector Households)
- Collective consumption expenditure (P32-Sector General Government)
- NPISH’s individual consumption expenditure (P31-Sector NPISH)
- Gross fixed capital formation (P51)
- Changes in inventories (P52)
- Acquisition less disposal of valuables (P53)
- Exports (P6)
- Minus Imports (P7)
The GDP viewed from the expenditure side captures uses only in case that they are “final”. In the national accounts, the uses of resources are described as intermediate or final. Intermediate uses consists of goods and services that are consumed, used-up or transferred in production process within the economic territory and during the accounting period. Final uses comprise all other goods and services which are used for final consumption, for capital formation or for exports (net of imports). Most of the expenditure by general government or NPISH is conventionally regarded as “final”, either as final consumption expenditure or as gross capital formation. Conversely, all spending by firms on goods and services is “intermediate” apart from capital formation. Exports are considered as “final” because they are final sales from the point of view of the exporting country.
Individual Consumption Expenditure of Households and NPISH
The final consumption of goods & services of households and non-profit institutions serving households (NPISHs) is made up of outlays on new durable and non-durable goods & services, reduced by net sales of second hand goods, scraps and wastes and is estimated at purchasers’ value. In principle, the aggregate can be measured in two ways:
- In a commodity flow approach we would look at the domestic supply and import of products and delineate thereof those which are absorbed for final consumption purpose of households and NPISHs.
- In special surveys we directly survey the consumption of households and NPISH by asking them. In Pakistan this is done in the Household Integrated Economic Survey (HIES).
In Pakistan as in some other countries we apply a third variant which is assessment of this aggregate as the residual of GDP. In other words it is calculated as GDP as determined from the production side minus the aggregates which can be calculated on empirical evidence (final consumption of the government, capital formation and exports minus imports). The reason for refraining from use of figures from HIES is that there are large gaps between HIES and the residual of GDP.
Collective Consumption Expenditure (General government)
The collective consumption is output of general government which has neither been utilized for own-account capital formation (e.g. in-house produced software) nor has been sold.
Expenditures on a wide range of consumption goods and services are incurred by general government, either on collective services or on selected individual goods or services. The collective consumption expenditures can be classified in several ways. In particular, they may be classified:
- According to whether the goods or services have been produced by market or non-market producers;
- According to whether the expenditures are on collective services or individual goods or services;
- By function or purpose according to the classification of the functions of government (COFOG); or
- By type of good or service according to the CPC.
Options ‘d’ is not materialized for Pakistan. Option d cannot be applied due to lack of data and to resource constraints.
Expenditures on the outputs of non-market producers that are provided free, or at prices that are not economically significant, to individual households or the community account for most of the collective consumption expenditure. Government may produce output for own final use and some market output but most production by units of general government is non-market in nature. The value of the non-market output is estimated by the sum of the costs involved in production. Although government delivers some goods and services to individually identifiable persons, the costs of so doing are shown as collective consumption expenditure. The value of collective consumption expenditure on non-market goods and services is not necessarily exactly equal to the value of government output of these goods and services. The values of these expenditures are equal to the estimated values of all types of output less the value of production for own capital formation and less the values of any receipts from sales. These receipts may be derived from sales of some goods or services at prices that are not economically significant or from sales of a few goods or services at prices that are economically significant (sales of secondary market output). Examples for the latter cases are sales from statistical yearbooks or from tickets of public museums and the like.
Gross fixed capital formation
There are two types of assets i.e. financial (money, shares etc) and nonfinancial. The non-financial assets are physical in nature and make up the capital stock of a country which is used as a factor of production to generate GDP. Non-financial assets are broadly categorized into non-produced assets such as natural resources, contracts, leases and licenses, and goodwill and marketing assets etc and produced assets which come into existence as outputs from production processes. There are three main types of produced assets: fixed assets, inventories and valuables. Both fixed assets and inventories are assets that are held only by producers for purposes of production. Valuables may be held by any institutional unit and are primarily held as stores of value.
Gross fixed capital formation (GFCF) is concerned with fixed assets which are produced ones and are used repeatedly or continuously in production processes for more than one year. GFCF is measured by the total value of a producer’s acquisitions, less disposals, of fixed assets during the accounting period plus certain specified expenditure on services that adds to the value of non-produced assets. GFCF may also take the form of improvements to existing fixed assets, such as buildings or computer software that increase their productive capacity, extend their service lives, or both.
GFCF can be broken down by the nature of the product or by investing industry or by type of asset. Their cross classification may also be useful for analysis purpose. In Pakistan we classify the GFCF by investing industry and by type of assets. The types of assets are:
A. Material fixed assets
ii. Other buildings and structures
iii. Machinery and equipment
iv. Cultivated assets
B. Intangible fixed assets
i. Mineral exploration
iii. Literary and artistic originals
Gross fixed capital formation is valued at purchasers’ prices, which for the capital goods include transportation and installation charges as well. For the measurement of GFCF in Pakistan all four possibilities or a mixture of them are exploited:
- Primary data from surveys by asking the investor
- Secondary data (i.e. without special survey) by utilizing data which are already available (government budgets and government finance statistics, banking statistics, company reports)
- Commodity flow approach: If information of the investor is not available the amount is derived from the domestic output or import of goods or services which presumably are object of the capital formation.
- Proxy estimates from variables which are considered to strongly correlate with capital formation e.g. loans from banks and other sources.
Estimation of GFCF
Estimates of GFCF are computed by a combination of commodity flow, expenditure (survey method) and financial approaches. Commodity flow approach which uses the net availability of capital goods in value terms from domestic production and imports and exports duly adjusted for various margins is applied to the following three sectors.
Expenditure approach (survey method) is applied to the following sectors:
- Mining and quarrying
- Large scale manufacturing industries (In-production units)
- Small and household manufacturing industries
- Electricity generation and distribution, and gas distribution
- Wholesale and retail trade
- Financial institutions
- Housing services, real estate including ownership of dwellings
- Other private services
- General government sector
Financial approach is used to estimate GFCF in under-construction large scale manufacturing industries and loans disbursed to different industries. Industry wise detailed methodology is given below.
Because of different sources of data GFCF in agriculture has been calculated for the private sector and for the public sector separately. Main components of private sector GFCF in agriculture are:
- Domestic production and imports of agriculture machinery
- Tube wells installed
- Cultivated assets (livestock and timber)
- Land improvement
- Farms and buildings
- Wells and bundats
- Farm transport
- Water courses
- Orchards and
- Non-monetized GFCF.
To estimate GFCF expenditure on farm machinery and implements, the “commodity flow approach” is applied, using domestic production of agricultural machinery and implements, adjusted for imports and exports. As the values of this approach are at output prices of the respective manufacturers or at import values, respectively, the figures have to be enhanced by the trade margins in order to arrive at GFCF at purchasers’ prices. The trade margin in base 2005-06 has been worked out at 37 per cent on the basis of CBR publication “Pakistan Custom and Tariff 2005-06”.
In the revised base estimates, the handling charges have been applied @ 3% on total value of imports, inclusive of all taxes. Note that it is neither trade margin nor transport margin. These are the services rendered by special agents but not independently covered, so as a special case are included over here. A flat rate of 43.7% (taken from the study on agriculture in 1999-2000) of total (other) monetized GFCF was used to derive the non-monetized GFCF in the old base and the same has been extrapolated. In the SNA terminology, it is own-account capital formation and is also a part of output.
Crops: The estimates of GFCF for agriculture crops production are separately prepared for private and public sectors. The public sector estimates are based on data supplied by the public sector organizations. Data on land improvement, farm buildings & sheds, wells & bundats, farm transport, watercourses and orchards have been taken from Agriculture Census 2000 and extrapolated by the growth rate of the respective items between the two censuses, i.e., 1990 and 2000 to have the constant estimates. It is converted in to current estimate by applying the deflator of agriculture. This estimate has been adopted for the base 2005-06. This practice is being continued for extrapolation in the new base. The GFCF in non-monetized is taken from Study on Agriculture 1999-2000 undertaken by National Accounts, FBS. It has also been extrapolated like the above mentioned items and the same practice is being continued in the base 2005-06. The primary activity is crop production in Pakistan therefore the GFCF have been allocated to crops part instead of distributing it between crops and livestock activities.
Livestock: Natural growth and regeneration has been captured comprehensively. In the base 2005-06 it has been valued in a much more detail, basing on the species of livestock individually. Detail is also available in the estimation of GVA.
Forestry: In 1999-2000 base the estimates of gross fixed capital formation in forestry were based on results of Study on Forestry conducted for rebasing purposes in 2001. Data was collected by category of forests and area under thereof. The benchmark estimates of 2005-06 have been derived as per existing practice of 1999-2000 base. Own account capital formation is like logging camps, temporary roads etc. developed by the contractors.
Fishing: GFCF for the base 2005-06 has been taken from the inland and marine fishing studies. Fishing crafts, gears and equipment added annually are the major part of GFCF in fishing. Value of fixed assets created as allied services by Fishermen's Cooperative Society, etc. is also added. Some of the private sector GFCF in the fishery sub-sector had been included in the public sector GFCF in 1999-2000 base which has been corrected for the new base year 2005-06.
Mining and Quarrying: The estimates of GFCF for the new base year of this industry have been derived using the information from annual reports of the individual companies instead of survey approach used in old methodology. GFCF have been estimated separately for coal, gas, oil and other minerals by capital assets (tangible & intangible) in line with SNA-2008. Acquisition of capital assets netting out their disposal at current price has been recorded as changes in fixed assets. According to the SNA 2008, exploration costs undertaken to discover new deposits of minerals are also treated as GFCF. GFCF deflators will be used to convert the estimates into constant prices.
Manufacturing is comprised of large scale, small scale and slaughtering. The methodology of compilation of GFCF in each sub-sector is given below:-
i) Large Scale Manufacturing Industries: GFCF of LSMI has been estimated by using a combination of expenditure & financial approaches. The expenditure approach is applied for ‘in production’ units, i.e., the units which have started production. The estimates are prepared for public and private sectors separately. The financing approach is applied for the units under construction and is not covered in the category of in production units.
a) In production units: For the base year 2005-06 the GFCF by units in production has been estimated through the Census of Manufacturing Industries (CMI) 2005-06. For the subsequent years, the companies listed on Karachi Stock Exchange (KSE) are covered through census approach. Non-listed companies are covered through sample survey. The results of both segments are combined together. The GFCF may be balancing, modernising and replacement of the existing assets.
b) Under construction units: GFCF by under construction units is estimated through financing approach i.e. loans disbursed by Development Financing Institutions (DFI’s) / Scheduled Banks, Leasing & Modarbas. It is treated as new capacity building and expansion. Existing practice is to use the 50% of these loans for GFCF purpose, the same has been continued for the base 2005-06 as well. The rationale is that especially in LSMI the big chunk of capital formation is done during the start-up phase while production (and thus reporting to statistics) has not yet commenced. These parts of capital formation must not be missed in assessing GFCF for the new base. For the current base the equity equivalent to 50% loans has also been assumed being used for GFCF. The figures for the public sectors comprise of GFCF of public corporations like Pakistan Steel Mill etc. and others whose major activity is in manufacturing. They have been excluded from the CMI 2005-06 results. Census approach is applied for the public sector. The deflator is being applied to compile the estimates at constant prices.
Foreign Direct Investment (FDI) which is a financial transaction has been excluded from the GFCF as it is covered in the sectoral estimation directly through surveys and reports. It is considered as double counting.
II. Small and Household Manufacturing Industries: The estimates for the new base year 2005-06 have been derived from the survey on Small and Household Manufacturing Industries 2006-07 conducted for the change of base of National Accounts. The GFCF at current prices for the year 2006-07 has been converted into constant prices by applying the deflator. The GFCF at constant prices for the year 2006-07 has been extrapolated backward by applying the constant growth rate of 7.36 (the inter survey annual compound growth rate of GFCF between 1996-97 and 2006-07). The annual estimates of GFCF at constant prices have been extrapolated by applying the constant growth rate of 7.36 per cent. The estimates at constant prices have been converted into current prices by applying the deflator.
III. Slaughtering: The GFCF in slaughtering is made in the construction of buildings, machinery and equipment. GFCF was estimated through study on slaughtering for the base year 1999-2000. Total GFCF in slaughtering during 2005-06 at 1999-2000 base was estimated as Rs. 7.54 million which has been adopted for the base year 2005-06. For subsequent years the estimates of GFCF at constant prices for slaughtering subsector is being extrapolated by using the growth rate of meat production. Specific deflator has been used to convert the constant prices GFCF estimates into current prices.
Electricity generation and distribution, Gas distribution and Water Supply: These industries cover expenditure on fixed assets by
- WAPDA, KESE, IPPs, CPPs, small hydle power plants, for electricity generation & distribution
- SNGC, SSGC & Mari gas for gas distribution including for CNG.
- Water works & supply (in the base 2005-06 it has been covered under general government sector)
It is worth noting that the supply or distribution of natural gas to gas stations for compression through mains is a component of SNGC and SSGC systems. However, the further distribution of CNG is a component of wholesale and retail trade. The other point to mention is that the GFCF of general government sector cannot be bifurcated according to the functions because it is available for the total government. Therefore GFCF of water supply cannot be taken separately. FDI has been excluded from the 2005-06 base as it was double counting. The production of LPG is covered in large scale manufacturing sector. The deflator is applied to convert the estimates from current prices into constant prices.
Construction: GFCF in construction is computed separately for private and public sector contractors. For private sector, GFCF is estimated through commodity flow approach taking into account the CIF value of imports of construction machinery and value of domestic production used for construction purposes namely concrete mixture, road rollers, etc. The import duty and sales tax, etc. are added to CIF value of import of construction machinery and equipment while value of export/ re–export is deducted. Trade Margin has now been worked out as 37 % for the new base year 2005-06 based on the FBR Publication “Pakistan Custom and Tariff 2005-06”. 3% of CIF value of import is added as handling charges which is a kind of service as explained in agricultural machinery. There are no trade services on the domestically produced construction machinery.
GFCF estimates of public sector construction include GFCF by capital assets i.e., expenditure on land improvement, machinery & transport equipment, furniture& fixture from autonomous bodies such as development authorities, National Construction Company, Indus Basin etc. Construction machinery imported or domestically produced and sold is estimated through commodity flow. Some of it has also been reported in the public sector. The figure equivalent to this figure has been reduced from the private estimation.
Wholesale, Retail Trade and Hotels & Restaurants: The GFCF in the wholesale and retail trade sector for the 1999-2000 was based on the study conducted in 2001-02 for rebasing purposes. The estimates of GFCF at current market prices for the benchmark year 1999-2000 were actual and collected directly from the trade and hotel establishments. For compiling the data, balance sheets or accounts registers were used in respect of establishments maintaining regular accounts, whereas, for establishments having no proper accounts, the estimates were based on respondents’ memory, trend and averages.
The GFCF estimates of WRT in the new base year 2005-06 have been adopted from the 1999-2000 base estimates. The existing estimates of GFCF at current prices of 1999-2000 base have been used to derive the figure of GFCF for the new base year 2005-06. For subsequent years the estimates of GFCF for Wholesale and Retail Trade (WRT) are being extrapolated by using the growth rate of Gross Value Added of the same sector. Deflators are being used to convert the constant prices GFCF estimates into current prices.
Transport, Storage and Communication: GFCF for Transport, Storage and Communication has been estimated has been estimated separately for public and private sectors and mainly includes acquisition of plant and machinery, transport and communication equipment. The major contributors for the base year 2005-06 are communication companies. The private sector GFCF for Transport, Storage and Communication has been estimated as follows:-
- CIF value of imports of transport machinery
- Add custom duty and sale tax (56% of 1)
- Less exports
- Less re-exports
- Balance of imported equipment available for domestic use
- Add handling charges @ 3% (on item 1)
- Trade mark-up to wholesale and retail dealers @ 37% of value (on item 5)
- Total (5+6+7)
- Domestically produced under LSMI transport machinery
- Trade mark-up @ 32.5% (on item 9)
- Total value of imported equipment and domestic production under large scale (8+9+10)
- Value of production under small scale manufacturing
- Trade mark-up @ 66% under small scale manufacturing (on item 12)
- Other private enterprises
- Total value of equipment, imported and domestic production (11+12+13+14)
The public sector GFCF for Transport, Storage and Communication has been estimated by using data from following public sector enterprises:-
- Pakistan Railways
- National Logistic Cell
- Pakistan International Airline
- Civil Aviation Authority
- Pakistan National Shipping Corporation
- Port Qasim Authority
- Karachi Port Trust
- National Highway Authority
- Pak Arab Refinery Ltd. (Pipeline)
- Pakistan Telecommunication Company Ltd.
- Pak Datacom
- National Telecommunication Corporation
- Telecom Foundation
- PTC Employees Trust
- Pak Telecom Mobile (U-Phone)
- Pakistan Telecommunication Authority
- Post Office
Financial and insurance services/ Financial Corporate Sector: The composition of the Financial Corporate Sector has been highlighted in the GVA estimation. GFCF of Financial corporations (private & public) have been estimated by using data from State Bank of Pakistan, Banks (Scheduled and Non-scheduled), Other credit granting, Insurance, Reinsurance and Pension funding except compulsory social security, Activities auxiliary to financial service activities and insurance activities. Deflators have been used to convert the estimates from current prices into constant prices.
Housing Services (including ownership of dwellings): Housing services is comprised of three sub-sectors namely Ownership of Dwellings, Real Estate and Cooperative Housing Societies. GFCF of this sector is compiled through expenditure on following by type of fixed assets.
- New Buildings
- Cost of ownership transferred
- Major Repair & Maintenance
The methodology for compilation of Gross Fixed Capital Formation in each component of the housing services is explained below. Other types of assets like computers, furniture and fixture etc. are components acquired by the real estate and cooperative housing societies and have been included in these sub-components.
i) Ownership of Dwellings: The estimates of GFCF for the new base year 2005-06 for the ownership of dwellings have been developed by using the information from Construction Survey 2007-08 conducted by Pakistan Bureau of Statistics for the change of base of National Accounts from 1999-2000 to 2005-06. The ratios have been developed from the said survey. The detail of methodology is given below:-
- Total new Construction (from survey)
- New Construction for Residential & Residential -cum-commercial @ 87.74%
- Purchase of Buildings (net) (from survey)
- Cost of ownership transferred @ 10% of purchase of buildings
- Alterations/ Additions (from survey)
- Repair and Maintenance (from survey)
- GFCF 2007-08 (2+4+5+6)
The GFCF for the year 2007-08 at current prices have been converted into constant prices by applying the building material deflator from WPI. The GFCF and its components for the year 2007-08 at constant prices have been extrapolated backward by applying the growth rate of dwellings 4.00 per cent (2 room & more between 1998 and 1981 censuses). The extrapolation at constant prices has been made by applying the constant growth rate of number of dwellings and the estimates at constant prices have been converted into current prices by applying the building material deflator.
ii) Real Estate and Cooperative Housing Societies: The estimates of GFCF for the new base year 2005-06 for the Real Estate and Cooperative Housing Societies sub-sectors have been developed by using the information from Survey of “Social, Recreational, Community & Personal Services, Real Estate Activities and Renting of Machinery /Equipment 2007-08” and “Survey on Cooperative Societies 2007-08” conducted for the change of base of National Accounts from 1999-2000 to 2005-06. The total GFCF of both real estate and cooperative housing societies at current prices have been converted into constant prices by applying the deflator of building material. The GFCF for the year 2007-08 at constant prices have been extrapolated backward by applying the growth rate of dwellings i.e., 4.0 per cent.
The extrapolation at constant prices have been made by applying the constant growth rate of number of dwellings and the estimates at constant prices have been converted into current prices by applying the building material deflator.
Other Private Services: “Other Private Services” are pure private sector services. It was named as “Social, Community and Personal Services” in the 1999-2000 base. They comprise Renting of Machinery and Equipment, Computer Related Activities (Software Export Board), Computer Related Activities (PASHA), Other Business Activities, Education, Health & Social work, Membership Organizations, NGO’s, Recreational, Cultural and Sporting Activities and Other Services activities. GFCF for each type of services were estimated separately. The methodology for compilation of Gross Fixed Capital Formation (GFCF) in each sub-sector of private services is explained below:-
The GFCF estimates for Renting of Machinery and Equipment, Education (private sector only), Membership Organizations and Other Services activities have been derived from the Survey of “Social, Recreational, Community & Personal Services, Real Estate Activities and Renting of Machinery /Equipment 2007-08”. Backward and forward extrapolation has been made by applying the growth rate of GVA of the same industry at current prices.
The GFCF estimates of Computer Related Activities (Software Export Board) have been compiled by using the information given in the ‘Study on Computer Related Services 2005-06. The extrapolation of GFCF at current prices has been made by applying the growth rate of GVA of Computer Related Activities (Software Export Board) at current prices.
The difference between the old base GFCF at current prices and the Computer Related Activities covered by Software Export Board has been used as the GFCF for the Computer Related Activities covered by PASHA. The estimates of GFCF at current prices have been extrapolated by applying the growth rate of Gross Value Added of Computer Related Activities (PASHA) at current prices.
The existing estimates of GFCF of 1999-2000 base in “Other Business Activities” and “Recreational, Cultural and Sporting Activities” at current prices have been used to derive the figure of GFCF for the new base year 2005-06. The extrapolation of Gross Fixed Capital Formation at current prices will be made by applying the growth rate of Gross Value Added of Other Business Activities at current prices.
The estimates of GFCF for Health & Social Work (private sector only) have been derived from the data on National Health Accounts for the year 2009-10 which have been extrapolated backward and forward by applying the growth rate of GVA at current prices of the same industry.
The estimates of GFCF for NGOs have been compiled by using the information given in the ‘Survey of NGOs 2005-06’ conducted for the change of base of National Accounts from 1999-2000 to 2005-06 which have been extrapolated forward by applying the growth rate of GVA of the NGOs at current prices.
The GFCF at constant prices of all the components of other private services have been derived by applying the growth rate of constant GVA of respective activities.
General Government: GFCF by general government consists of the acquisitions less disposal of fixed assets during an accounting period. The expenditure made by Federal, Provincial, local governments and defense services on fixed assets during the year are accounted as gross fixed capital formation by the institutional sector General Government. The expenditure made on residential construction for military personnel are included as part of fixed capital formation. Data on GFCF has been taken from published budget documents. Deflator (WPI General) has been used to convert the estimates from current prices into constant prices.
Changes in inventories and acquisitions less disposals of valuables
Inventory: ‘Changes in inventories’ refers to the value of physical change in the stocks of raw material, work-in progress and finished goods held by industries and producers of government services as per details given below:
Goods producing industries
- Material and supplies
- Livestock except breeding stock, dairy cattle and the like (which forms GFCF, instead)
- Finished goods
Wholesale & retail trade
Producers of government services
Inventories consist of stocks of outputs that are still held by the units that produced them prior to their being further processed, sold, delivered to other units or used in other ways and stocks of products acquired from other units that are intended to be used for intermediate consumption or for resale without further processing. In Pakistan it is taken as a ratio to GVA, based on an old study.
Valuables are not used primarily for purposes of production or consumption but are held as stores of value over time. Valuables are expected to appreciate or at least not to decline in real value, nor to deteriorate over time under normal conditions. They consist of precious metals and stones, jewelry, works of art, etc. Valuables may be held by all sectors of the economy. Costs of ownership transfer, such as valuers’ and auctioneers’ margins, are treated as gross capital formation and included in the value of the items.
Precious metals and stones are treated as valuables when they are not held by enterprises for sale or use as inputs into processes of production nor are held as monetary gold and are not held as a financial asset in the form of unallocated metal accounts. Paintings, sculptures, etc., recognized as works of art and antiques are treated as valuables when they are not held by enterprises for sale. In principle, museum exhibits are included under valuables. Other valuables not elsewhere classified include such items as collections of stamps, coins, china, books etc. that have a recognized market value and fine jewelry, fashioned out of precious stones, and metals of significant and realizable value. In Pakistan it is not valued and data are not available.
Exports and Imports of goods and services
In national accounts exports and imports are recorded at the moment at which the legal ownership of the goods passes between residents and non-residents or the services are rendered by either group or by one transactor to the other. This is usually the case when they cross the border and then are registered by the customs authorities. That is, these transactions are recorded on the basis of physical movement of goods and services and not on financial basis. The basic data on merchandise are taken from the foreign trade statistics of the PBS, whereas nonfactor services and other current transfers are extracted from the SBP’s balance of payments statistics. Besides, it includes imports under baggage, gifts in cash or in kind but excludes military equipment transferred between governments.
The imports are deflated by the imports price index and the exports by the exports price index to bring the same at constant prices.