Content:

1. THE REAL SITUATION ON DATA SOURCE OF NON-FARM INDIVIDUAL BUSINESS HOUSEHOLD SURVEY AND INFORMAL SECTOR for COMPILING GDP IN VIETNAM By Nguyen Van Nong Deputy Director, SNA Department General Statistics Office,Vietnam

2. Content: • Overview of the non- farm individual business household survey in oder to compilate SNA Vietnam. • Real situation on operation of non-farm individual business households from the results of survey. • Several existing problems of using data sources to estimate output and value added for the informal sector based on the survey result of non-farm individual busines households ( units) in Vietnam. • Action plan of data source collection and compilation of output and value added of the informal sector for extral estimation of GDP in Vietnam.

3. I. Overview of the non- farm individual business household survey in oder to compilate SNA Vietnam. 1. Necessary and importance of the non- farm individual business household survey If comments only on the informal sector, up to now in Vietnam, there has not been a limited special survey of the informal sector for estimating GDP. Nevertheless,In Viet nam, along with aggriculture, forestry and fishery households (farm households) sector, non-farm individual business households (units) contribute an important part of Vietnam’s economy. Non- farm individual business sector is a speciality of Vietnam’s economy, they have been in operation for a long time, significantly contributed to economic development, generated millions of jobs, reduced poverty. There are about 72% number of business non-registered units and 50% of value added in non-farm individual business sector.

4. I. (Continue….) With above-mentioned importance on December 1st every year, the General Statistics Office carry out the survey to collect information about the result and expenses on individual business establishments (households) in all economic sectors in the country (except agriculture, fishery and forestry sector) in order to: - Provide the basic information to consider and estimate statistical indicators and its major as: Gross output, intermediate expense, value added of individual business households as well as informal sector. - Meet the requirement to serve management, planning and policy development production, business of non farm individual business households of all levels and sectors.

5. I. (Continue….. ) 2. Scope of Survey: The survey is carried out over 63 cities and provinces. However, this survey collects samples from general survey on basic economy and administration, so the scope is limited. 3. Units of Survey: Units of Survey are non-farm individual business households, include following criterions: - Run business and production activities, service providing in all economic activities and sectors ( except agriculture, forestry, and fishery sector) ; - Belong to owner, a group or a family; non-registering business sectors ( households); - Have definable place; - Operate continuosly or in seasonal period or business habits. 4. Survey methodology: Direct survey: Interview owners or managers of individual business households and units to get information and fill in survey questionnaires.

6. II. Real situation on operation and data source for estimating GDP from the survey result of non-farm individual business household sector The statistical survey data in the year 2007 has reflected the business and production results as well as the development of non-farm individual business household sector as following: 1. Number of non- farm individual business household sector: 1.1 The survey result of table 1: has shown that number of non-farm individual busines establishments (units) has increased from 3.05 million ones in 2005 to 3.75 million ones in 2007. Comparing with the perious year, in the year 2007 the number of individual business establishments (units) is 13.6% higher than 2006. If we purely consider the quantitative aspect, the number of individual business establishments ( units) in many time higher than number of enterprises operating at the same time 2007 year ( 3748138/ 156000)

7. 20% 80% Urban area Rural area II. (Continue….. ) 1.2 The allocation of non-farm individual business establishment ( units) in urban, rural: Grasp 1a: Allocation establishments Grasp 1b: Allocationestablishments is industry, construction sector is trade, services Sector

8. II. (Continue….. ) The statistical data by year also shown that the picture on the allocation of non-farm individual business establishments (units) in urban, rural, 8 geographical economic regions and 63 provinces/cities. According to the survey results, about 42.9% of non-farm individual business establishments ( units) located in urban area while 57.1% of them operates in rural areas. From the allocation of individual business establishments (units) by economic industry ( pleasely refer to the chart 1a and 1b). It shows that up 80% of non-farm individual business establishments ( units) operating in industry and contruction sector located in rural area; 51% of individual business establishment ( units) operating in trade, service sectors located in rural area, that it shown the success of economic development strategy of Vietnam “ leaving agriculture but not leaving native land”.

9. person 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 2005 2006 2007 year II. (Continue….. ) 2. Labour in non-farm individual business households sector. • Grasp 2: The number of employees working in non-farm individual business households sector

10. II. (Continue….. ) According to survey result, the number of employees working in non-farm individual business households sector is quite high, which has constantly increased for 3 years, from 5.58 million in 2005 to 5.76 million in 2006 and 6.5 million in 2007. In 3 years period ( 2005-2007), the number of employees increased by nearly 1 million persons. 3.Capital sources, assets and turnover of individual business household sector. According to the survey results, capital sources and assets of non-farm individual business household sector as of september 1, 2007 is VND 242 billions ( equivalent to 20.6% of GDP)of which, fixed assets is worth VND 150.4 billion, share 62.15% of capital soures, liquid assets is VND 91.6 billion, share 37.8%. Average assets/ establishment ( units) is VND 64.6 million, average assets/employees is VND 36.7 million.

11. II. (Continue….. ) Capital sources, assets in non-farm individual business households mainly concentrate in service sector, the data in the table 2, nearly 83% of total capital is for the investment in service sector, while only 17% is for material manufacturing sector. With regard turnover, the total turnover created by non-farm individual business household sector in 2005 is VND 439,364.2 billion, of which: service sector shares 66.6%; in 2006 is VND 479,541.3 billion, of which service sector shares 67.9%; in 2007 is VND 672,087 billions, of which service sector shares 60%; average turnover per establishment ( unit) in 2007 is VND 179.3 million/establishment; average turnover per employee is VND 101.9 million.

12. II. (Continue….. ) 4. Basing on the survey results of non-farm individual business establishments (units) to estimate GDP of individual ( household) sector by the kind of economic activity as belows: According to the data in the below table 3: Value added created by individual sector ( including agriculture, forestry and fishery sector) accounts for 29.68% of GDP in 2006, 30.28% GDP in 2007 and 31.1% of GDP in 2008; of which non-farm individual business household sector ( industry, construction and service sector) accounts for nearly 15% of GDP in 2006, 14% of GDP in 2007 and 13.5% of GDP in 2008 and 52.14% in 2006, 47.48% in 2007 and nearly 43% of the individual sector in 2008. The movement in non-farm individual business household sector is from industry and construction to trade and service. Value added created by trade and service sector account for 49.34% of non-farm individual busines household sector in 2006, increased 52.42% in 2007 and 57% in 2008, while industry and construction sector has continuosly decreased year by year ( in 2006 is 50.66%, in 2007 is 47.58% and in 2008 is 43% of non-farm individual business household sector).

13. III. Several existing problems of using data sources to estimate output and value added for the informal sector based on the survey result of non-farm individual busines households ( units) in Vietnam. Beside achieved results, some existing prolems of estimating Gross output and Value added for the informal sector in Vietnam are summarised as belows: 1. In non-farm individual business households ( units) survey, there are problems of informing of false turnover and cost of production to avoid taxes and payment of social security, or registration of business for hiding illegal activities or production of a mumber of products different from the number allowed to be produced, for instance, publishing houses produce an excess of publication, units exploit more wood than what is permitted and don’t record….etc… these isues, now, there is not any reasonable basis and adjustment method for data included in GDP. 2. Production by military forces for own final consumption or assistant to local goverment and habitants or support in cases of natural disaster or service accidents do not estimated in GDP.

14. III. (Continue….. ) 3. Production by prisons or re-education camps. Every year, these units also make a significatant amount of products for own final consumption and sale in markets also don’t including in GDP. 4. products of activities of farm households such as gathering, picking and processing in the form of making soft noodles, cakes, fish sausce,… for service and own final consumption are not fully estimated. 5. GO, VA of other own –account production such as construction and repair of owner- occupied dwelling, contribution by habitants of building small rural public structures such as irrigation works, roads, schools, ..etc… are not fully recorded. 6. Series of other activities by farmer are moving to cities, town to work during period of non-season agriculture activities. Activities which farmers usually do are simple and hand-made works, trade of refuse materials, street vending, transportation of goods and passengers by motobicycle,..etc,.. Number of these kinds of labor and their income are not official recorded.

15. IV. Action plan of data source collection and compilation of output and value added of the informal sector for extral estimation of GDP in Vietnam. 1. Deeper study in type, scope, calculation method and mobilization of essential statistics data on the informal sector is very crucial for not only enough evaluation of GDP but also request of enhancing gradually capacity and davelopment of Vietnam National Account Statistics. 2. Checking through the remaining activities and sectors not covered in GDP. 3. Setting up and re-organise the information sources, restructure other branch statistics to meet better data collection requirement of the informal sector and SNA.

16. IV. (Continue….. ) 4. According to the Decision of Vietnam goverment, begining from year 2010, with cycle every two years the General Statistics Office will be conducting surveys of all activities of informal sector in the whole country. 5. Implementing some other special surveys for SNA in fields of estimating quarterly GDP by final expenditure approach, building major coefficients on intermediate consumption and VA of base year for compiling Goss output, Value added of informal sector and other sectors.