1. METAC Workshop March 14-17, 2016 Beirut, Lebanon National Accounts Compilation Issues Session 5: Construction

2. Construction Activities and Actors Transactions Specifics Conclusions/References

3. Activities and actors Construction activity, defined by ISIC Rev. 4, Section F: new work, repair, additions and alterations, the erection of prefabricated buildings or structures on the site and also construction of a temporary nature: – 41General, complete construction of buildings; – 42Civil engineering; 421Construction of roads and railways; 422Construction of utility projects; 429Construction of other civil engineering projects – 43General, complete specialized construction activities 431Demolition and site preparation; 432Electrical, plumbing and other construction installation activities; 433Building completion and finishing; 439Other specialized construction activities

4. Activities and actors Correspondence between ISIC Rev 4 and ISIC Rev 3.1: In 42 ISIC Rev 4: – Subdividing and improving buildable lots for sale, code 7010 of ISIC Rev 3.1; In 43 ISIC Rev 4: – Repair maintenance of lifts and escalators, code 2915 of ISIC Rev 3.1; – Installation of self-manufactured carpentry or joinery, codes 2022, 2520, and 2811 (depending of wood, plastic, or metal)of ISIC Rev 3.1; Out of ISIC Rev 3.1: – Clearing of landmines, now in 39 ISIC Rev 4; – Installation of bowling alley equipment, now in 33 ISIC Rev 4

5. Activities and actors Corporate sector, non- financial enterprises … when a contract of sale is agreed in advance for the construction of buildings and structures – the output produced each period is treated as being sold to the purchaser at the end of each period, that is, as a sale rather than work-in-progress; – … recorded as output (sold in stages) by producer and as GFCF (acquired in stages) by purchaser; … when the contract calls for stage payments: – … the value of the output may often be approximated by the value of stage payments made each period; Sub- contracting, – Gross or net treatment

6. Activities and actors Corporate sector, non- financial enterprises Speculative construction, no contract – … dwellings built speculatively (without a prior contract) remain in the inventories of the construction company until sold: – changing status within inventories from work-in- progress to finished products if they remain unsold on completion;

7. Activities and actors Households – Self employed construction workers – Informal construction Building of dwellings on own account Foreign companies – Mainly carrying out construction services – … when involved directly in GFCF ?

8. Transactions Market output = – Sales of goods and services (+) own produced (+) construction work abroad, based on residency criteria goods purchased for resale, secondary activity (+) adjusted by the purchased value of the goods sold (-); – goods and services bartered (+); – operational leasing of own assets (+); – deliveries between establishment belonging to the same enterprise (+); – changes in inventories of finished goods and work-in- progress (+) Own account production

9. Transactions Intermediate consumption (IC): value of the goods and services consumed as inputs in the process of production, excluding fixed assets – Borderline cases between IC and other NA categories Small tools used mainly at work as IC, not gross fixed capital formation (GFCF) and not compensation of employees; Clothing or footwear used mainly at work as IC; Ordinary, regular maintenance and repair of a fixed asset used in production, not GFCF; – … when maintenance and repairs do not change the fixed asset, but simply maintain it in good working order or restore it to its previous condition – Expenditures for research and development - as GFCF, 2008 SNA requirement Impact on the treatment of sub-contracting

10. Transactions Time of recording: – Gross output: in stages when the construction work takes long time: – … when a contract of sales is agreed in advance the contract calls for stage payments speculative construction: work in progress – Intermediate consumption: when the good or service enters the process of production, as distinct from the time it was acquired by the producer – … it requires adjustments of purchases with changes in inventories of raw materials and supplies. Valuation: – Gross Output at basic/producer prices – Intermediate Consumption at purchaser prices

11. Basic data sources: Economic census Set of questionnaires, example – Standard forms B, C, D, and E – Specific form for Construction, F … to determine the designation of the construction output: important for reconciliation of the construction output among the demand categories … to specify in more details types of construction work.

12. Basic data sources: Economic census Income, form Expenditure, form

13. Basic data sources: Economic census Construction specific form – Type of construction work

14. Basic data sources: Economic census Construction specific form – By type of contractors

15. Basic data sources: Economic census Requirements: – … is a part of a coordinated and sustain program for data collection and compilation of economic statistics – … relationship between the EC, the annual and short-term (monthly, quarterly, etc.) statistical surveys, and administrative sources: use of EC results in connection with other sources ensure consistency in the concepts and definitions throughout an integrated economic statistics program

16. Basic data sources Regular statistical surveys, annual, quarterly – … recommended as the best approach – … providing basic data through simplified questionnaires, then further purified using the detailed benchmark structural information Annual Company reports – … but supported with other information obtained directly from other sources – … assessment on how the applied accounting standards correspond to the SNA requirements – … important to keep good relations with the big producers

17. Basic data sources Administrative sources – … available for satisfying administrative purposes, but very useful for statistics: – infrastructural projects of the government; – VAT returns for companies covered by the VAT legislation; – building permits, provided by municipalities: to be used as a basis for further inquiries and estimation of construction work performed by households … requires efficient collaboration with government and other public institutions.

18. Basic data sources Demographic sources: sample surveys on income and expenditures of households, conducted irregularly in 5 – 10 years intervals, – a basis for the estimates of households construction activity, including building of own houses; Other household surveys: – Labor Force Survey (LFS), a basis for “Labor input” approach for ensuring exhaustiveness of the accounts; – Informal sector survey; – Continuous multi-purpose household survey

19. Compilation Direct approach: – … is preferable for formal construction, collecting regular information from companies and their establishments, – … also for big investment projects carried out by the government, based on fiscal data Extrapolation of the benchmark estimates, based on the available regular information/indicators, for: – … small scale businesses, – … informal households activities, mainly using the available quantitative information, – … limited capacity when there are no appropriate indicators – … structural indicators from the last benchmark year to be applied to the available regular information for the formal business – … need for introduction of continuous multi-purpose household survey

20. Compilation Main features/issues: – Not properly updated business register, weak information on regular basis; – Difficulties in specifying exhaustively the enterprises/establishments during the economic census – Incomplete coverage of small scale businesses in construction, including households; – Need for development of price statistics for national accounts purposes

21. References 2008 SNA, Chapter 6, par. 6.139 – 6.140; 2008 SNA, Chapter 20, par. 20.63

22. Thank you