1. Progress Report and Recent Developments Carol S. Carson AEG Meeting March 19-23, 2007

2. 2 Plan of the presentation Background: Timeline since last AEG meeting Overview: Project Manager’s progress report of February 25, 2007 Statistical Commission, 2007 –ISWGNA report to the Statistical Commission –Statistical Commission discussion, February 27-28

3. 3 Timeline since last AEG meeting March-September: consistency issues, e-consults April: Full Set of Provisional Recommendations Mid September: close of country comment period October: First draft chapters posted for comment October-November: ISWGNA review of comments December: ISWGNA report to Statistical Commission, along with … –January: Full Set of Consolidated Recommendations –February: Supplement to the report February: Statistical Commission

4. 4 Project Manager’s Report Recommendations for Rev. 1 –Five-step process—agreement on a list of issues, research by experts, consideration of proposals by AEG, circulation of recommendations for comment, review of comments by ISWGNA—was professional and transparent –Wide agreement of international statistical community on most recommendations (more later)

5. 5 Project Manager’s Report (cont’d) Drafting and review of the chapters –Status: 10 chapters (of a total of 27) have been posted (two more circulated to AEG) Include the 8 about the sequence of accounts and two new chapters Account for about two-thirds of the occurrences in existing text in which changes are needed to incorporate recommendations –Comments received: 17-19 sets of comments on most chapters Wide range, some far-reaching

6. 6 Project Manager’s Report (cont’d) Drafting and review of the chapters (cont’d) –Stock take is underway From perspective of schedule –Sequence of steps prior to posting a chapter is taking longer than had been anticipated –Comments have been more far-reaching than anticipated such that the processing will take longer than anticipated From reviewers’ perspective? –Some adjustments have been agreed, notably on a two-phase delivery of Rev. 1 (more later)

7. 7 Project Manager’s Report (cont’d) Groundwork for implementation –Background: ISWGNA committed to presenting a strategy to the Statistical Commission in 2008 –ISWGNA is taking first soundings; see agenda item on Friday Research —again see agenda item on Friday –Carry forward recommendations as agreed by the Statistical Commission –Long-term research agenda for issues outside the scope and timetable of the update

8. 8 Project Manager’s Report (cont’d) Message of the report: –Overall: good process, but some adjustments are necessary –There are risks, of course: Issues may unravel Two-phase delivery of chapters may … –Lead us to “relax” too much –Involve tough (that is, time-consuming) considerations about where to put some material Size and complexity of the whole process –With hard work and focus, we can pull it off.

9. 9 ISWGNA report Background: –Comments were a “gold mine” –Brought out differing perspectives on national accounts Unanimous or near-unanimous agreement on all but five AEG recommendations (as presented in the FSCR) ISWGNA in-depth review of the five issues: –Issue specific –General factors

10. 10 ISWGNA report (con’t) The five issues: –R & D (issue 9): proposes adoption of the principle of treating research and development expenditure as fixed capital formation and the encouragement of focused work to implement that principle in a sound and internationally comparable way.

11. 11 ISWGNA report (con’t) The five issues ( cont’d ): –Cost of capital services (issue 15): proposes for adoption the recommendation incorporated in the Consolidated Recommendations with the understanding that the identification of the cost of capital for market producers is voluntary within the recommended supplementary accounts

12. 12 ISWGNA report (con’t) The five issues ( cont’d ): –Capital services on assets owned by non-market producers (16): brings to the Statistical Commission the view that more research should be undertaken in a manner… – that deals squarely with the unresolved points, – tests as conclusively as possible the impact on GDP, and –takes into account the differing degrees of data availability around the world. The ISWGNA is prepared … – to coordinate this research and – to report to the Statistical Commission on progress.

13. 13 ISWGNA report (con’t) The five issues ( cont’d ): –Military expenditures (issue 19): considers that the recommendation in the Consolidated Recommendations should be adopted –Goods for processing (issue 40): considers that the recommendation should be adopted Summary: took forward the AEG recommendation on three issues and presented compromise on two

14. 14 Statistical Commission Setting: long discussion, with 30 + interventions spread over two days Key points in the “decision” relevant to AEG: – Adopted the package of recommendations –Emphasized need for… guidelines on when to recognize pension entitlements in the core accounts additional research on R&D guidelines on goods for processing considering I-O and trade statistics guidelines on integrated measurement of the informal sector within national accounts

15. 15 Statistical Commission Key points in the “decision” (cont’d) –Reiterated its request for the ISWGNA to submit an implementation strategy in 2008 –Took note of the proposal by the ISWGNA to present the draft of the update in two volumes: - framework in 2008 - interpretation and extension in 2009 ISWGNA had reached the conclusion that this was a necessary step just below the Commission ISWGNA consulted informally with some countries before the Commission discussion More about this on Friday

16. 16 Statistical Commission (cont’d) Key points in the “decision” (cont’d) –Supported the formation of a high-level group to examine long-term implications of SNA and possible future changes, taking into consideration… rapid changes of the global economy, the need to balance users’ needs, theory and the ability to collect primary data, the choice between imputed versus observable transactions, and the role of satellite accounts vis-à-vis the core accounts.

17. 17 Statistical Commission (cont’d) Now that the dust is settling: –AEG can be pleased with the Statistical Commission’s decision on the Update recommendations –The pulls and pressures on national accounts will continue –Acceptance of the proposal for two-volume Rev. 1 should be taken as a good omen for the remaining efforts

18. 18 Thank you Contact:: ccarson@imf.org