Transcript 1.3 New Price Index (Deflator) for the ICT Component of GDP

Arab Republic of Egypt
Ministry of Communications
& Information Technology
1st GCC e-Government Conference
MUSCAT 2009
Egypt’s ICT Sector Experience
in the National Accounts
Dr. Nagwa El-Shenawy
Ministry of Communication &
Information Technology
Contents
 Introduction
 Background on ICT sector in National Accounts

Development of ICT sector in National Accounts of
Egypt
Methodology for calculating ICT sector’s GDP
New Price Index (Deflator) for the ICT Component of
GDP developed by MCIT
 Main economic Indicators for ICT sector





The ICT Component of GDP
Real Growth Rates of ICT sector
ICT sector’s contribution in the Egyptian Economy
 Future vision of the ICT sector in Egypt’s National
Accounts


Challenges facing those in charge of National
Accounts for the ICT sector
Steps forward by MCIT
Introduction

Over the past years the inclusion of ICT sector in the
National
Accounts
has
witnessed
remarkable
development from being integrated with the
Transportation sector to gaining independence as a
separate sector since 2004 due to its growing size and
importance.

Ever since, the methodology for collecting data on the
sector’s activity has been developed by the Ministry of
Economic Development – the entity in charge of Egypt’s
National Accounts - in cooperation with the Ministry of
Communications & IT (MCIT) .
1. Background on ICT sector in National
Accounts
1.1 Development of ICT sector in National
Accounts of Egypt

Egypt follows the rules and recommendations of the System of National
Accounts (SNA) 1993 which follows the latest requirements by the IMF for
Special Data Dissemination Standard (SDDS). This alignment of the
Egyptian National Accounts System with International practices allows the
follow up of international developments in that area and comparing Egypt’s
figures with countries that follow the same standards.

The National Accounts of Egypt includes all commodity and service
activities in the economy whose total value added constitutes the Gross
Domestic Product (GDP).

Until 2004 the ICT sector was integrated with the Transportation sector in
the National accounts. With the remarkable growth in the fixed lines, mobile
& Internet the sector’s size and activity grew tremendously and was
separated to become an independent sector in 2003-2004. Going backward
a time series was generated for the CIT sector till 2001-2002.
1.2 Methodology for calculating ICT sector’s GDP
Calculation of this component of GDP is done by the Ministry of
Economic Development (MED) using the Value Added Approach as
follows:
1.2 Methodology for calculating ICT sector’s GDP
…Cont’d
1.3 New Price Index (Deflator) for the ICT
Component of GDP developed by MCIT

It has been suspected that the real CIT component of GDP underestimates
the sector performance, because the deflator that it uses overestimates the
prices of its services.

MCIT in cooperation has developed a new price Index to reflect accurately
the changes in telecommunications services prices and which can be used
as a deflator for the ICT component of GDP. The new index has four
subcomponents:
Fixed line telecommunication services.
Mobile telecommunication services.
Internet services.
Postal services.
•
Each of the subcomponents is based on a representative basket of the
telecommunication services available in Egypt, starting from first quarter of
the year 2002 to the present on a quarterly basis.
1.3 New Price Index (Deflator) for the ICT
Component of GDP developed by MCIT…Cont’d

The detailed structure of the basket depended on the OECD services producer
price index (SPPI) for telecommunication services, which is based on the business
telecommunications activity that is defined within the ISIC v3.1. This structure has
been slightly adjusted according to the nature of the telecommunications services
available in Egypt.

Weights for the detailed items included in the index subcomponents were
determined based on the revenues generated from each of them through sales of
services as it is considered indicative to producers’ prices. The OECD advocates
using the producer price index (SPPI) as a deflator for value data and this is
adopted by several countries such as (UK, Germany, Korea, Sweden, Czech
Republic).

After the four sub-indices are calculated, one composite index is compiled by giving
weights to each of those four sub-indices based on the revenue generated from
each of them. The base period for the index is fiscal year 2006/07, which is the
same base period for the quarterly national accounts in Egypt. It is also the base
year for the five year plan 2006/07 – 2011/12.
1.3 New Price Index (Deflator) for the ICT
Component of GDP developed by MCIT…Cont’d

The importance of using the PPI is revealed in
being the most appropriate deflator for the ICT
component of GDP because it is composed only of
services prices and not the goods which are mostly
imported unlike the services which are locally
produced.

Using this new deflator has produced noticeable
variations in the results for the economic indicators
for the ICT sector.
2. Main economic Indicators for ICT sector
Million EGP
The ICT Component of GDP at current prices
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
8796
7785.8
6707.8
5117.5
Q1 2006/2007
5626.9 5610.2
Q3 2006/2007
6021.2
Q1 2007/2008
6639.7 6704
Q3 2007/2008
7771
7600
7953
6792
Q1 2008/2009
Q 3 2008/2009
Q1 2009/2010
MCIT
The ICT component of GDP at current prices has increased
from 5.12 Billion EGP in Q1 2006-2007 to 7.95 Billion EGP in
Q1 2009-2010 at a growth rate of 55.2%.
The deflator used by Ministry of economic
Development (MED) & Ministry of
Communications & IT (MCIT)
108.00
106.00
105.91
105.42
105.77
105.70
104.00
Points
100.00
102.57 102.51
101.76 102.16
102.00
100.31
100.00 100.00 100.00 100.00
98.00
97.62
101.15
98.51 98.51
98.48 98.48 98.48
97.44
96.00
96.79 96.55 96.79 96.97 96.97
94.00
92.00
90.00
Q1
2006/2007
Q3
2006/2007
Q1
2007/2008
Q3
2007/2008
MOED
Q1
2008/2009
Q3
2008/2009
Q1
2009/2010
MCIT
The trends of the price indices differ noticeably where the MED’s
deflator takes an upward trend rising by 5.8% while the MCIT’s
deflator takes a downward trend decreasing by 8.01%.
The ICT Component of GDP at fixed prices
10000
9000
8049
5764
Million EGP
6000
5697
6707.80
5626.90 5610.20
7747
7591.00
6811
7000
6114
5917.00
7017
6814
6805
6499.10 6330.00
9071
8696
8202
7904
8000
5000
7852
7190
7519
6626
5117.50
4854
4000
3000
2000
1000
0
Q1
2006/2007
Q3
2006/2007
Q1
2007/2008
MOED
Q3
2007/2008
Q1
2008/2009
Q3
2008/2009
Q1
2009/2010
MCIT
The values of the ICT component of GDP at fixed prices using MCIT’s
methodology are higher than those calculated by MED which reached
7.5 billion EGP during Q1 2009-2010 compared to 8.2 billion EGP by
MCIT during the same period.
Correcting the ICT component of GDP at
current prices (Annual figures)
MED started
publishing the
corrected figures
since this year
The values of the ICT component of GDP at current prices increased after
correcting it using MCIT’s methodology in comparison to that of MED.
While the value by MED registered 14.5 billion EGP in 2006-2007, MCIT
registered 23 billion EGP for the same period.
Real Growth Rate of the ICT ‘s sector GDP
30
25
25.95
19.46
20
18.22
19.20
18.11
%
16.04
15
15.62
15.50
16.88
15.38
13.59
14.77
12.83
13.17
14.77
14.56
13.48
11.98
10
5
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2007/2008 2007/2008 2007/2008 2007/2008 2008/2009 2008/2009 2008/2009 2008/2009 2009/2010
MOED
MCIT
The Real growth rate of ICT’s GDP reached 16.88% during Q1 2009-2010
using MCIT’s methodology compared to only 13.48% using MED’s
methodology. The same applies for most of MCIT’s figures compared to that
of MED during Q1 2007-2008 till Q1 2009-2010.
Contribution of ICT sector in GDP
5
4.44
5
4.05
4
3.61
4
%
3
3.22
3.12
3.45
3.63
4.09
3.95
3.90
3.48
3.30
3.39
3.99
3.67
4.27
3.89
3.57
3
2
2
1
1
0
Q1
2007/2008
Q2
2007/2008
Q3
2007/2008
MOED
Q4
2007/2008
Q1
2008/2009
Q2
2008/2009
Q3
2008/2009
Q4
2008/2009
Q1
2009/2010
MCIT
The contribution of ICT sector in GDP reached 3.89% during Q1
2009-2010 using MCIT’s methodology compared to 3.57% using
MED’s methodology.
The contribution of ICT sector in the GDP
growth rate
0.80
0.70
0.71
0.62
0.65
0.65
0.66
0.65
0.60
0.60
percentage points
0.45
0.40
0.53
0.52
0.50
0.55
0.47
0.42
0.59
0.57
0.46
0.44
0.37
0.30
0.20
0.10
0.00
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2007/2008 2007/2008 2007/2008 2007/2008 2008/2009 2008/2009 2008/2009 2008/2009 2009/2010
MOED
MCIT
The ICT sector contributed 0.59 percentage points from the overall GDP growth rate
of the Egyptian economy which reached 4.7% during Q1 2008-2009 according to
MCIT’s methodology compared to 0.44 percentage points according to MED’s
methodology.
Coordination between MED and MCIT

After reviewing the process between MED & MCIT, they concluded
that it is best to use the new deflator for the ICT services instead of
the one used previously while correcting for the values for the
sector’s real GDP.

MED started publishing the corrected figures for the ICT’s GDP and
its growth rates since 2007-2008. This has impacted positively its
position among other sectors in the Egyptian economy to become
one of the leading sectors in terms of growth rate registering the
highest growth rate in 2008-2009 compared to the other sectors at
14.5%.
3. Future vision of the ICT sector in Egypt’s
National Accounts
3.1 Challenges facing those in charge of
National Accounts for the ICT sector
The GDP data is composed of 2 parts:
First
Actual data for major Telecom operators that includes their
Investment and production which constitutes the highest proportion
of the sector’s total investment and production.
Includes Postal activities and informal sector’s companies and the
Second communications companies with no data available on their
revenues and IT companies.
Estimated using statistical tools and
experts’ advise. It is important however
to collect actual data for these activities.
3.1 Challenges facing those in charge of National
Accounts for the ICT sector…Cont’d

The difficulty of obtaining actual data from some entities in the
second group as a result of their reluctance to disclose financial data
fearing its leakage to competitors or Regulatory bodies or from
raising taxes imposed on them.

The difficulty of getting actual data from entities not listed in the
formal sector.

Delays from the four major Telecom operators in providing data
which requires a lot of coordination between MCIT and the
responsible persons in those companies.
3.2 Steps forward by MCIT

MCIT has started investigating the possibility of estimating the
official part of the sector with no available data through projects to
estimate the digital economy in Egypt following International
standards and in cooperation with large Multinationals in that field as
well as through Field surveys.

MCIT is coordinating with Egypt Post to obtain its quarterly data
such that what is left for estimation is only the informal sector.

Currently, other countries’ experiences and International
recommendations on how to estimate for unavailable data are being
studied.
Thank You
Web site:
www.egyptictindicators.gov.eg
E-mail:
[email protected]