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REVISIONS ON THE DIRECT MEASUREMENT METHODOLOGY USED FOR NON-OBSERVED ECONOMY: A CASE FOR SMALL-SCALE GOLD MINING By Dean Joseph A. Villanueva and Reynaldo F. Fulleros Presented by Dean Joseph A. Villanueva Macroeconomic Accounts Service Philippine Statistics Authority 13th National Convention on Statistics October 3-4, 2016, EDSA Shangri-La Hotel, Mandaluyong City OUTLINE OF THE PRESENTATION I. Introduction II. Current estimation procedure of the small scale gold mining III. Proposed estimation methodology IV. Findings, conclusions, and recommendations 13th National Convention on Statistics October 3-4, 2016, EDSA Shangri-La Hotel, Mandaluyong City I. Introduction: Context of small scale gold mining SMALL SCALE PURCHASES OF BSP 7,000,000,000 4,000 6,000,000,000 3,500 3,000 5,000,000,000 2,500 4,000,000,000 2,000 3,000,000,000 1,500 2,000,000,000 1,000 1,000,000,000 500 - (2,000,000,000) 2015M5 2015M3 2015M1 2014M11 2014M9 2014M7 2014M5 2014M3 2014M1 2013M9 2013M11 2013M7 2013M5 2013M3 2013M1 2012M9 2012M11 2012M7 2012M5 2012M3 2012M1 2011M11 2011M9 2011M7 2011M5 2011M3 2011M1 2010M9 2010M11 2010M7 2010M5 2010M3 2010M1 2009M11 2009M9 2009M7 2009M5 2009M3 2009M1 (1,000,000,000) (500) (1,000) Production Volume Production Value Source: Mines and Geosciences Bureau 13th National Convention on Statistics October 3-4, 2016, EDSA Shangri-La Hotel, Mandaluyong City Linear (Production Volume) Linear (Production Value) I. Introduction: Context of small scale gold mining Small scale gold mining as a non-observed economy • There are specific approaches in quantifying the production of the non-observed economy. • Eurostat’s Tabular Approach to Exhaustiveness: N1 N2 Producer should have registered (underground producer) Illegal producer that fails to register The producer does not register in order to evade taxes and social security obligations. Type N1 excludes producers that fail to register on the basis of activities illegal in nature Type N2 includes activites that avoid registration completely N2 excludes illegal activties by registered legal entities that report (or misreport) their activities under legal activity codes. Source: Eurostat 13th National Convention on Statistics October 3-4, 2016, EDSA Shangri-La Hotel, Mandaluyong City II. Current estimation procedures Formula: SSM Production = BSPgold purchases + Undercoverage “Resulting estimates are used to extrapolate quarterly and yearly outputs based from a benchmark.” Limitations: Under coverage mining uses a fixed ratio This fails to capture behavior of production during structural changes in the industry 13th National Convention on Statistics October 3-4, 2016, EDSA Shangri-La Hotel, Mandaluyong City III. Proposed estimation procedures: Methods in estimating the non-observed economy Method Labor Input Method SupplyUse Method Description Data Availability Data Limitation • Derives labor input • Labor Force estimates through weight Survey factors to obtain estimated total output and gross value added • Census of Population Data • Only captures labor of the metallic mining industry • • Structural changes may not be captured by the ratios provided by the accounts This is contingent on supply of inputs data that are used in producing goods and services. • Input-Output Accounts • Census does not cover details covering gold mining industry Source: Organisation for Economic Co-operation and Development; Philippine Statistics Authority 13th National Convention on Statistics October 3-4, 2016, EDSA Shangri-La Hotel, Mandaluyong City III. Proposed estimation procedures: Alternative data and source Agency Permit/Clearance Remarks Provincial LGU Small Scale Mining Permit Per contract, renewable every 2 years Delivery Receipt Ore Transport Permit Application OTP Renewal (every 15 days) Barangay LGU Barangay Clearance Annual Transport Fee Per day Source: Environmental Management Bureau and Provincial LGU of South Cotabato 13th National Convention on Statistics October 3-4, 2016, EDSA Shangri-La Hotel, Mandaluyong City III. Proposed estimation procedures: Labor input method Step 1: Derive the basic indicators: • Total Production • Labor Productivity • Specific Gravity • Recovery Rate Step 2: Estimate for the total level of production • Ore mining • Gold panning Step 3: Compute for the total production of the identified area/mining site • By identified provinces • By identified regions Step 4: Use the growth rate of the employment level in extrapolating the total level of production (by mine site, by identified province, by region) 13th National Convention on Statistics October 3-4, 2016, EDSA Shangri-La Hotel, Mandaluyong City IV. Findings, Conclusions And Recommendations: Findings and conclusions 1. The devolution of power vested by the Local Government Code (LGC) to the LGUs significantly affected the capacity of the national government (through the MGB) to monitor activities of SSM. 2. The CPH and LFS are potential sources of data on Labor, however, the classification level is still highly aggregated. 3. Small scale mining industry is not entirely homogenous in terms of labor inputs, capital and technology, among others. 13th National Convention on Statistics October 3-4, 2016, EDSA Shangri-La Hotel, Mandaluyong City IV. Findings, Conclusions And Recommendations: Recommendations 1. Develop a well defined coordination system among government agencies from both national and LGUs, that will perform the following major tasks: a) Overall monitoring, data collection and processing of administrative based information. b) Conduct of benchmarking, surveys and other forms of data collection when necessary. c) Regular evidence gathering of illegal activities in small scale mining. d) Validation of reports and information. This inter agency cooperation should be bonded by formal agreements, administrative orders or a Presidential decree, if necessary. 13th National Convention on Statistics October 3-4, 2016, EDSA Shangri-La Hotel, Mandaluyong City IV. Findings, Conclusions And Recommendations: Recommendations 2. Push for the establishment of “Minahang Bayan” which operations are directly monitored the MGB and jointly with the LGU (following LGC). 3. OTPs issued by the MGB for the first issuance and LGUs for the succeeding periods must be processed for quarterly estimation, meantime proposed systems are still not in place. 4. Generation of the parameters suggested in the proposed benchmarking and surveys, can be included as requirements in the issuance of OTP, as another alternative. 5. There is the need to regularize the conduct of benchmarking to monitor and reflect effects of structural changes in the market. 13th National Convention on Statistics October 3-4, 2016, EDSA Shangri-La Hotel, Mandaluyong City