COMMONWEALTH OF THE BAHAMAS

SOURCES AND

METHODS OF THE NATIONAL ACCOUNTS

OF THE BAHAMAS

DEPARTMENT OF STATISTICS

Clarence Bain Building Regent Center P.O.Box N-3904 P.O.Box F-42561 Nassau, Bahamas Freeport, Bahamas Telephone: (242) 325-5606 Telephone: (242) 352-7196 Fax: (242) 325-5149 Fax: (242) 352-6120 E-mail: dpsdp@batelnet.bs E-Mail: ct@batelnet.bs

ACKNOWLEDGEMENTS:

The Department of Statistics wishes to convey appreciation to the staff of National Accounts for their contributions to this manual.

Also, Mr. Hans Adler (consultant), for the excerpts from

a report he wrote on the Bahamas National Accounts Methodology and Mr. Joseph Nartey (consultant), for the excerpts from report he is currently writing on the Sources and Methods of the Bahamas National Accounts.

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TABLE OF CONTENTS PAGE # Acknowledgments ………………………………………………………………………… i Introduction………………………………………………………….…………..………..… ii 1. Business Establishment Surveys ……………………………………………....…… 1 a. Interest treatment in SNA ………………………………………………….… 1 b. International Standard Industrial Classification ………………...……… 2 c. Fiscal vs. Calendar Year ………………………………………………………. 2 d. Public Corporations Contribution …………………………………...……… 2 2. Gross Domestic Product by Kind of Activity …………………………………….…. 4 a. Agriculture, Hunting and Forestry ……………………………………...…… 4 b. Fishing ……………………………………………………………………….....… 5 c. Mining and Quarrying ……………………………………………………....… 7 d. Manufacturing ……………………………………………………………………. 7 e. Electricity and Water ……………………………………………….……….… 9

f. Construction …………………………………………………………….……… 9 g. Wholesale and Retail Trade ………………………………………………...…. 10 h. Hotels and Restaurants ……………………………………………………… 11

i. Transport, Storage and Communication ………………………………….… 12

1. Transport ……………………………………………………..……….… 12 2. Storage ……………………………………………………………..….… 14

ii 3. Communication ………………………………………………….………

14 j. Financial Intermediation ……………………………………………….…..….. 15 1. Banking ………………………………………………..……………….. 15 2. Insurance ………………………………………………………………….. 16 k. Real Estate, Renting and Business Activity ………………………………..

21 1. Real estate …………………………………………………………….…… 21 2. Business Services & Renting of equipment …………………………

22 l. Public Administration and Defense ………………………………………..….

22 m. Education ……………………………………………………………………….… 24 1. Public Education …………………………………………………..……. 24 2. Private Education ……………………………………………………….. 25 n. Health and Social Work ………………………………………………..………..

25 1. Public Health ……………………………………………………..…….. 25 2. Private Health ………………………………………………………..…. 25 o. Other Community, Social and Personal Services ……………………... 26

1. Casino ………………………………………………………………………

27 p. Indirect Taxes and Subsidies ……………………………………………..… 28 q. Extra-territorial organizations & bodies …………………………………. 29

2. Expenditure on the Gross Domestic Product …………………………………… 31

a. Government Final Consumption Expenditure ……………………....… 31 b. Private Final Consumption Expenditure …………………………..…….. 32 c. Gross Capital Formation …………………………………………………..… 38 d. Exports and Imports of Goods and Services …………………...……… 40

4. Gross National Product ……………………………………………………..……….. 42

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INTRODUCTION: 1. This paper is an internal document and its intent is to describe in fair detail the sources of the Bahamian national accounts and how the accounts have been estimated. In so far as local conditions permit, the national accounts follow the revised 1993 UNSNA manual. 2. At the outset, it cannot be over-emphasized that this paper is a description of presently available practices. It is not a prescription of how to construct the accounts forever into the future. While consistency of definitions and methods is important, as new sources and methods become available, and old sources dry up, and as new economic conditions demand different information for sensible interpretation, not only can and must the methodology be changed - and hopefully improved - but even definitional changes should never be completely excluded from the national accountant's arsenal. It must also be admitted at the outset that certain arbitrary assumptions employed in the present estimates, while rooted in economic theory and practical business experience, were also influenced in an under-whelming manner by a desire to balance the accounts. These assumptions should therefore not be considered to be carved in stone. 3. In conformity with UN recommendations, the major economic aggregates for the Bahamian national accounts are Gross Domestic Product at market prices (GDP) and Expenditure on Gross Domestic Product (GDE). The source for the largest part of the GDP estimate is the annual establishment survey, which in 1992 has been expanded to include a greater proportion of the economy than in previous years. With the exception of production originating in government, agriculture, fishing and part of the finance industry, it is hoped to extend the coverage of establishment surveys to the remaining industries in the near future. While it would have been preferable to have completely different sources for the estimation of GDE, this unfortunately is not possible. Expenditure on government goods and services and exports and imports of goods and services are based on data from the government accounts and the export and import data, but a

significant proportion of the remainder of the expenditure side is also derived from the establishment survey. This, it should be noted, is a significant break from the past methodology of estimating GDE, where the estimates of consumer expenditure were based on projections from a 1983 consumer expenditure survey.

iv 4. The expenditure side of the national accounts is usually shown in only one way - fundamentally by final purchases by the main sectors - persons, government, businesses and the rest of the world. Within each sector, any amount of commodity and service detail can of course be shown (all final goods and services could of course be shown without a sector breakdown). The only other variation to the above might be a finer sector classification -e.g. by level of government, by socio-economic class of households or by households or non-profit institution by incorporated or un-incorporated businesses etc. 5. The income or product side of the accounts can be shown in many more ways i.e. by type of income or by institutions (not too common) or by production originating. The latter can be shown in different ways: production originating by sector or by function or by industry. Production by sector would be akin to the one described above on the expenditure side, by industry would normally follow the rules laid down in the ISIC while the functional break-down is one usually only employed for data in the government sector. 6. The production originating approach will by and large be used. In this approach the ISIC will be adhered to as much as possible. However, in the case of production originating in government, a mixture rather than a strictly ISIC approach is more efficient when analytical results are compared with the inputs required to achieve them. There are three ways of classifying product originating in government: (a) the sector approach, where all activities of all government

agencies are classified to the government. (b) the functional approach where government activities are classified to their appropriate functions - i.e. schools and ministries of education, (general administration of education, the education function) to the industry

education, hospitals and ministries of health to the health industry etc. Most of the department of agriculture would be classified to agriculture etc. Only broad general government functions such as Ministry of Finance would be left in the government classification.

(c) the third way would be strict adherence to the ISIC structure where all administrative units such as the ministry of education, health ministry (but not schools and hospitals), the department of agriculture etc. would be

v included with general administration (government) rather than with the industry for which they perform their administrative function. A compromise has been adopted. In general the ISIC will be adhered to, with the exception of Education and Health, where the respective administrative activities for these functions will be included with the industries Education and Health rather than broken out and put into general government classification. 7. In addition to the GDP and GDE tables, a government sector account in terms of income and expenditure by government is, as in the past, included. In this table, a breakdown by broad function of government revenue and expenditure is provided. A foreign sector income and expenditure statement will also be provided. Unfortunately, the prospects of establishing a personal sector income and expenditure account - are for the near future pretty dim. In the absence of any reliable information on investment income of persons and having so far no way of estimating the reliability of unincorporated net value added (assuming it can be separately tabulated in the establishment survey), the income side of the account cannot be completed, nor can an estimate of personal saving - which is a residual - be derived. 8. GDE and GDP are also available in Constant dollar estimates. The indexes are the best indicators available at this time but they will be improved when more appropriate data becomes available.

vi BUSINESS ESTABLISHMENT SURVEYS:

The major source of the national accounts, are the results of business establishment surveys. In so far as applicable to Bahamian circumstances, the following industries of the UN (ISIC): (At the most aggregate or tabulation category level).

In a few instances, e.g. wholesale and retail trade, finer levels of industrial classification can be published if desired.

9. From the survey, details on gross operating income, as well as cost of goods sold, other expenses, value of change in inventories, labor cost, proprietor's income etc. are obtained. For each industry GDPf is thus calculated as the difference between operating income and cost of goods sold and expenses less depreciation.

i.e. Operating revenue

minus cost of goods sold

minus other expenses equals Gross value added (GDPf)

minus Salaries and wages

equals Gross operating surplus

minus Depreciation equals Net operating surplus

10. The GDPf thus calculated is composed of gross operating surplus and salaries and wages. Gross operating surplus differs from normal business accounting practices because gross operating surplus is struck before deducting interest paid and depreciation, which are considered as expenses in ordinary business accounting. (Labor would of course also be considered as an expense.) 11. Interest, according to standard SNA practices, is part of the value added by the industry which pays it or in other words it is included in the value added by the industry using the capital, and not in that of the industry

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owning the capital. This it might be noted is exactly opposite to the treatment of net rent which is counted in the real estate owning industry and not in the real estate using industry. 12. International Standard Industrial Classification utilized: The industrial detail for 1989 is based on the ISIC revision 2, and from 1990 on the data is based on the ISIC revision 3. There is, however, no discontinuity in the data. They are either published at a sufficiently broad level to encompass shifts within the categories of industry or data were not available prior to 1991 - the year in which the scope of the establishment survey was extended - and have been extrapolated to 1989 on existing related industries. 13. The industries, which were not covered prior to 1991, were therefore dealt with as follows: Repair services extrapolated on the basis of retail trade (where they are published now), construction and architectural services on the basis of the sale of lumber yards; transportation, communication and storage on the basis of value added by public corporations in this industry, and the remainder - mainly accounting, law and medical practice on the overall movement in value added of the total establishment survey. 14. Fiscal Versus Calendar Year in the Establishment Accounts:

At the moment we put the results of an establishment's entire fiscal year into that calendar year which contains the greatest number of months of the establishment's fiscal year. (Establishments whose fiscal year ends June

30, calendar year + 1 are put into calendar year + 0). The non-coincidence of calendar and fiscal years appears too widespread to continue this practice. The simplest adjustment is to assume that business occurs evenly throughout the year. This is obviously incorrect with businesses, which have a pronounced seasonal pattern especially Private Education. However, in the absence of any monthly or quarterly information any other assumption would be even more arbitrary than the above. All annual income and expense, (but not asset, or liability) items should therefore be split on a straight monthly proportionality basis into their respective calendar years.

Since such an operation can be easily made part and parcel of a computer program, it is suggested that in the future, establishment fiscal year end is incorporated into the computer program and the information stored in an appropriate format for each establishment. 15. Public Corporation contribution to Industries: It should also be noted

2 that the value-added data by industry contain value added by public corporations in the industries covered by the establishment survey. The Department of Statistics obtains either from published reports or from inquiries information on those corporations not in the survey. The corporations and their industrial classification are as follows: FROM ESTABLISHMENT SURVEY (OR FROM OTHER SOURCES, BUT INCORPORATED INTO THE SURVEY)

E - ELECTRICITY, GAS & WATER SUPPLY Bahamas Electricity Corp. Water & Sewerage Corporation (Water portion)

Coverage: All Bahamas

H - HOTELS & RESTAURANTS Hotel Corp. of the Bahamas

Coverage: All Bahamas

I - TRANSPORT, COMMUN. & STORAGE: Coverage: New Providence & Grand Bahama

FROM PUBLIC CORP. REPORTS BaTelCo, Bahamasair, Port and Marine and Civil Aviation departments, Paradise Island Bridge.

FROM TREASURY ACCOUNTS Included in establishment survey, but data obtained from Treasury Accounts.

i.e. Post Office.

J - REAL ESTATES AND BUSINESS ACTIVITIES. Bahamas Agricultural & Industrial Corp.

K - OTHER COMMUNITY, SOCIAL AND PERSONAL ACTIVITIES

Water and Sewerage Corp. (Sewerage portion). Broadcasting Corporation of The Bahamas

3 GROSS DOMESTIC PRODUCT BY KIND OF ACTIVITY 16. The basic methodology for measuring the Gross Domestic Product at market prices (GDPm) in the Bahamas is to sum the gross value added in each industry to arrive at Gross Domestic Product at factor cost (GDPf). Plus indirect taxes less subsidies are then added to this total, (GDPm) is reached. Less Depreciation and Net Domestic Product (NDPf) is reached.

The next few paragraphs will give a more detailed description of the sources and methods to derive NDPf in each industry, commencing with those covered by the survey of establishments and then covering the industries estimated by a different methodology. A. Agriculture, Hunting and Forestry. Main source of the data: is the Department of Agriculture (DOA). The

producer prices of agriculture crops are determined by the committee set up by the DOA on a weekly basis through the Produce Exchange. Meanwhile, the DOA also monitors the Export prices of agricultural crops, which are exported to the United States of America particularly in the South Florida Market. Since the 1993/1994 Agricultural Census was conducted, the DOA has revised its estimates of the quantities and values of Agricultural Crops from 1989 to date.

Current Prices: output of farmers is estimated by the department, by

types of vegetables and fruits produced on the basis of deliveries to packing houses as well as commercial wholesalers. The output of eggs, poultry and other meat products is based on reports from the large commercial producers and government abattoirs. Estimates of produce destined for exports are also obtained from the department.

The cost of inputs into the production of agricultural products is

estimated at 34.3 percent of the value of gross output. This input/output ratio has been provided by the DOA and has been used to calculate intermediate consumption/inputs. In terms of subsistence farming, an estimate of ten percent of Gross Output and this figure is also included as such on the expenditure side.

4 If agricultural value added increases significantly in the future because

of rising exports, this percentage should not be applied blindly. Increased production for export does not imply increased subsistence farming. The same caution applies to the subsistence-fishing estimate in the following paragraph. As far as could be determined, there is no hunting or forestry industry in the Bahamas.

Constant Prices: Agricultural Crops: the average producer prices per pound of each

agricultural crop in 1991 and their respective quantities measured in pounds. The gross output at 1991 is the quantities multiplied by their corresponding average producer prices in 1991 for each year. The sum of the values of the agricultural crops at 1991 prices is taken as the total output of agricultural crops for each year.

Poultry: The value of output from slaughtered broilers for each year is

obtained by multiplying the quantity pounds by its corresponding average producer price in 1991. In the case of eggs, the value of output at 1991 prices is arrived at by multiplying the quantity collected by the average producer price per dozen in 1991. The sum of broilers and eggs give the total for poultry.

Livestock: The value of output from each type of animal at 1991 prices is

calculated by multiplying the total weight of each animal by it’s corresponding average producer prices in 1991 for the appropriate periods. Dairy products: the value of output from this economic activity is calculated by multiplying the total quantity produced (gallons) for the appropriate period by the average producer price per gallon in 1991.

The cost of production in all of these areas is the input/output ratio of

34.3 percent, which was provided by the DOA. B. Fishing.

Main source of data: a. The Department of Fisheries provides information on value and

quantity by type of Fish produced. b. This industry also includes a number of fish and/or seafood farming

5 establishments. This industry called Mariculture, is carried out on small scale in The Bahamas. The usual establishment output and input information was obtained by establishment surveys. Current prices:

Again in the absence of any census in this industry, a largely similar methodology to the one described in the preceding paragraph was employed. From the Department of Fisheries, we obtained value of fish landings as reported to fish houses and other commercial establishments (and confirmed by and large by the value of fish export data). The gross output figure was enlarged by applying:

a) an increase of 25 percent to represent non-reported catches. b) an increase of 25 percent to represent subsistence fishing.

No input data are available at all and we have employed an arbitrary

input ratio of 30 percent of Overall Gross Output, based on what little information we could establish for agriculture. We were informed that the department is planning to undertake a census probably next year and as in the case of agriculture, the above estimates will obviously have to be re-examined in the light of such a census.

The Department of Fisheries also indicated that they might eventually

undertake a survey of sport fishing establishments. If this ever comes off, the DOS should be involved and assist in such a survey. It should be borne in mind, however, that such activities should eventually be classified to level O - "other community, social and personal services activities" rather than to Fishing.

Constant prices: The average prices of different types of fishery product landed for the year 1991 in the Bahamas as well as the quantities for the appropriate years. The average prices are prices per pound of each type of fishery product in 1991 and the quantities for the period in question has been measured in pounds. The value of fishery product has been arrived at by multiplying the 1991 average price per pound per fishery product to the corresponding quantity for each year. The products generated for each fishery product were added up to obtain the total value of fishery product landed for each year at 1991 prices for the period in question.

Mariculture: gross output at current prices is deflated by the implicit price index of gross output from fishery product. The input /output ratio for the year 1991 has been applied to the value of gross output at 1991 prices to

6 estimate intermediate consumption at 1991 prices for the period in question. C. Mining and Quarrying: Main source of data: Establishment Surveys Current Prices: Under normal circumstance, the valuation of output from these economic activities is done at the pit-head prices. The pit –head price represents the value of the commodity/good per unit of quantity in the

state in which it is extracted from the earth or sea, together with such processing which is usually carried out by the establishment before marketing.

Constant Prices: The total value of output from Mining & Quarrying at

current producer prices is deflated by the combined Laspeyres Price Index Numbers of Aragonite and Solar Salt. These two activities were used because they alone represent 71.8% of overall output in 1991. The intermediate consumption at 1991 prices was calculated using input/output ratio for 1991 multiplied by the value of output at 1991 prices for each year. The depreciation at 1991 prices is calculated using the depreciation/Gross Value Added ratio at current prices of each year multiplied by the gross value added at 1991 prices for each year. D. Manufacturing: Main source of data: Establishment Surveys Current Prices: Information is obtained at the four-digit level of ISIC Rev 3. These are then converted to three-digit level. This includes the value of main products, by-products and services rendered to other establishments. The total output is obtained by adding up all the value of output at the four- digit level of ISIC before the conversion to the three-digit of ISIC. The Commodity taxes i.e. excise duties are indirect taxes levied by the Government on locally manufactured goods. All import duties waived by the Government under the various Encouragement Acts are treated in National Accounts as subsidies.

7 Constant Prices: There are three methods which have been used and the first is the calculation of the Laspeyres Producer Price Index numbers for ISIC codes at the four digit level which have data on the quantity of goods sold and the equivalent value of sales. These Laspeyres Producer Price Index numbers have been used to deflate the value of output at current producer prices to obtain the value of output at producer prices for the respective ISIC codes at the four-digit level. The ISIC codes for which the Laspeyres Producer

Prices have been calculated at the four digit level are 1541, 1551 and 1554. In fact, the Laspeyres Producer Price index numbers have been calculated for establishments in each of these ISIC codes which provided data on the “quantity “ of goods sold and the corresponding value of sales at the four digit level.

In the case of business establishments in ISIC codes 1551 and 1554, which did not provide data on the quantity of goods sold, the combined Laspreyres Producer Price Index numbers/Implicit Deflators derived from the establishments which provided the data on “quantity of goods sold” and the corresponding “value of sales” in the respective ISIC codes have been used to carry out the deflation. The second method is the construction of Index Numbers of the Number of persons employed at the four-digit level of ISIC with 1991 as the base year. These index numbers of the number of persons employed have been used to extrapolate forward and backward the 1991 estimate of the output for the relevant ISIC codes at the four digit level to generate the value of output at 1991 Producer Prices. The third method is the utilization of Implicit Deflators with 1991 = 100 derived from the output at current and constant producer prices of the four-digit level. The implicit deflator so derived have been used to deflate the value of output of goods produced at current prices for establishments in the ISIC codes at the four digit level which responded to the Establishment surveys in 1989 and 1990 but closed down in 1991 the base year and new establishments which responded to the surveys after 1991 and thirdly, establishments in the various ISIC codes which did not provide data on the quantities of goods produced and sold and the estimates of the output prepared by using the index numbers of the number of persons engaged with 1991 as the base year which did not look realistic or satisfactory. The intermediate Consumption and Depreciation at 1991 prices are

8 calculated following the method mentioned in section c pg. 7. The Commodity taxes and subsidies are deflated by the implicate deflator for Indirect taxes with 1991 = 100.

E. Electricity and Water: Main source of data: Establishment Surveys, Bahamas Electricity Corporation and the Water & Sewerage Corporation annual financial reports. Current Prices: Gross output is the sum of water and electricity sold and services rendered etc. Constant Prices: These items were deflated by the Laspreyres Price index numbers. Utilizing from the major producers, the calculation of unit values/prices of the good sold. The Intermediate consumption and Depreciation at 1991 prices were calculated following the methods in section c pg. 7. F. Construction Industry: Main source of data: Establishment Surveys and the Central Bank Current Prices: the results of the establishment survey of the value of income generated (or value added) by housing construction and the total value of housing construction must be expanded to allow for people who do their own contracting. It is assumed that people who construct their own houses would employ 50 percent of the sub-contracting trades reported as expenditure by general construction in the establishment survey. These sub-contractors, it is assumed, would not be caught by the establishment survey. It is further assumed that the payment by general contractors to these sub-trades is for labor only. The value added in construction is therefore increased by the above proportion of value of the sub-trades hired by general contractors. On the expenditure side, the value of construction includes the insurance fees, architect’s fees and interest paid. On both the production and expenditure sides an estimate is made for the Family Islands Residential Construction, based on the Family Island's percentage of the number of Building Permits approved. Also, too properly measure construction

9 put in place in terms of the Gross Output, the Construction results also

include the Construction Services Imported as prepared by the Central Bank in the Balance of Payments table. This has become very important between 1993 to present, when major renovations and construction of Hotels and occurred in the Bahamas.

The intermediate Consumption, Depreciation, Wages and Salaries are calculated based on the percentage these items represent of the Gross Output for the Construction results obtained by the Establishment survey. These same percentages are applied to the Gross Output that’s the Construction Services Imported figure.

All estimates of value added was taken back on the basis of certain

Imported items that are used in the construction Industry the value of construction are driven back to 1989 and 1990 on the basis on the assumption that 1989 was better than 1990 and that 1990 was better than 1991.

Constant Prices: The value of gross output at current prices for each year has been deflated by the fixed weighted price index numbers of construction of the United States of America because the Bahamas does not currently have a useable construction index and we do import most construction materials and some labor from the USA. The fixed weighted price index originally has the year 1992 as the base year but these were rebased to 1991 to match DOS base year. The Intermediate consumption and Depreciation at 1991 prices were calculated following the methods in section c pg. 7. G. Wholesale & Retail Trade: Main source of data: Establishment Surveys Current Prices: The gross output is the sales at selling prices minus the cost of goods sold plus other revenues/incomes generated by the establishment.

Straw market: (Part of Retail Trade): It should also be noted that straw market vendors were not covered in this establishment survey. This deficiency should be remedied in the future. It should also be realized that there is a branch of the straw market in Cable Beach, Paradise Island and

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three straw markets in Grand Bahama and one in Exuma. For the moment the estimate of income originating is taken as one third of the sales of straw vendors as reported as expenditures on this item in the tourist survey results. However, in 1995 the Ministry of Tourism presentation of the data changed and they lumped this item with others into a category called Handicrafts & Shopping. Therefore, a percentage was applied to this group based on the previous years data to get the straw market Gross Output. The Gross Output is found by applying 1.25% to the Tourism Expenditure figure. Cost of Goods Sold, Intermediate Consumption, and Salaries & Wages the percentage these items represent of the Retail Trade Gross Output is applied to the straw market Gross Output figure.

Constant Prices: The sales from Wholesale and Retail Trade at 1991 market prices were calculated using the total sales from Wholesale and Retail Trade at selling prices for the year 1991 is calculated forward and backward with the Volume/quantum index numbers of commodity imports. This index quantum index is calculated based on the import of goods at constant prices (i.e. the current price divided by the USA Laspeyres Import price index numbers – all items USA export price index numbers) in each year divided by the 1991 figure. This USA index is used because a major portion of goods which enter the Wholesale and Retail trade are imported into the Bahamas. The Cost of Sales at 1991 prices is calculated by finding the ratio of Cost of sales/Sales then applying this ratio to the estimated Sales at 1991 prices over all periods. The Intermediate consumption and Depreciation at 1991 prices were calculated following the methods in section c pg. 7. H. Hotels and Restaurants: Main source of data: Establishment Surveys and Government Treasury Accounts. Current Prices: The gross output is the sales at selling prices minus the cost of goods sold plus other revenues/incomes generated by the establishment. Indirect taxes are taken from the treasury accounts, which measures the Hotel Occupancy tax, which is 4% of room sales. The subsidies given under the Hotel encouragement Act, which is basically a refund of

import duties levied by the government.

11 Constant Prices: The Sales at 1991 prices are calculated by multiplying the overall sales by the Index numbers of the Number of Visitor Nights ( number of Stopover Visitors multiplied by the average length of stay). To obtain the index numbers of the number of visitor nights with the year 1991 as base, the number of visitor nights for 1991 has been used to divide the number of visitor nights for the years in question. The quotient is then multiplied by 100 to calculate the Index number of the number of visitor nights. The cost of sales is calculated as in section g pg.11. The Intermediate consumption and Depreciation at 1991 prices were calculated following the methods in section c pg. 7. The indirect taxes (Hotel Occupancy tax) at 1991 prices is calculated by using the tax in 1991 has been multiplied forward and backward by the Index numbers of the Number of Visitor nights with 1991 as the base year. The subsidies have been deflated by the Implicit Deflator of overall indirect taxes with 1991 as base. I. Transport, Storage and Communication: 1) Transportation:

Main source of data: Establishment Surveys, Road traffic department, The Bahamas Handbook and Paradise Island Bridge Authority.

Current prices: The transportation is divided into Land, Marine and Air.

a) The land transport includes Jitneys, taxis, trucking, car rentals, tour buses and Paradise Island bridge. In calculating the Gross output, intermediate consumption and depreciation. The results of the annual surveys of taxis, jitneys and trucking has had poor responses therefore, their revenue/sales are estimated. This is done by calculating the average revenue/sale from the sample total to obtained from the information given by those

establishments that responded. This is calculated on a yearly basis. The next step is to multiply the number of registered vehicles by type provided by the Road traffic Department i.e. jitneys, taxis and trucking by the average revenue/sales by island.

12 The product of the multiplication generates the overall revenue \sales\gross output for each island. However, in the case of jitneys and trucking an adjustment is made for the number of registered vehicles because not all of the jitneys and private trucks registered at the road traffic department and published in the annual Bahamas Handbook are used for the operation of commercial jitneys and trucking. It is therefore assumed that fifty percent of the jitneys registered is used for public transportation. With respect to trucking it has to be mentioned that a larger proportion of private trucks which are registered annually at the road traffic department are owned by private individuals who use these trucks as their means of transport and not for commercial freight transport. It should be noted that in 1993 the response to the survey was very high. The data collected from the establishments engaged in the operation of jitneys, taxis, trucking, car rental and Tour buses for 1993 have been used as the basis to streamline the previous year’s estimate by island by employing the method of ratio estimates for the value of output, intermediate consumption, wages and depreciation.

With respect to Car rental and tour operators/buses, the response from the establishments engaged in these economic activities is reasonable and so the data obtained from the Establishment surveys have been used to prepare the production accounts for these activities. Thus, the revenue data provided by the respective establishments have been taken as the value of gross output at current prices.

In the case of the Paradise Island bridge, the annual financial statements obtained from the PI bridge authority detailed information on revenue received from the tolls collected at the bridge, current operating expenses and the balance sheet.

b) The Marine transportation current price data includes data on shipping and services allied to shipping.

c) The Air transportation current price data is collected from domestic and foreign airlines and is divided between airlines and services allied to air transport.

Constant prices: i) The land transport is deflated using:

a) NP RPI # for jitney fares for Jitneys and Trucking (rebased)

13 b) NP RPI numbers for Taxi fares and car rentals (rebased) c) Number of tourist days for Tour operators/buses d) Price index of numbers for Bridge tolls

ii) The Marine transport is deflated by index numbers of cargo landed at Nassau Harbour. iii) The Air transport is deflated by index numbers of passenger miles run by Bahamasair.

The Intermediate consumption and Depreciation at 1991 prices were calculated following the methods in section c pg. 7.

2) Storage: Main source of data: establishment surveys

Current Prices: the gross output is the sum of rental revenue and other revenue/income. Constant Prices: the gross output is deflated using index numbers of the number of persons engaged in this activity. The Intermediate consumption and Depreciation at 1991 prices were calculated following the methods in section c pg. 7.

3) Communications:

Main source of data: Government treasury reports (Post office) and the Establishment surveys (which includes such establishments as Bahamas Telecommunications Corporation (public corp.), the courier services and Cable Bahamas.

Current Prices: The gross output, intermediate consumption and

depreciation is calculated following the normal production approach. Constant Prices: The combined estimates of the value of gross output from Batelco and the Post Office constituted more than ninety percent of the overall value of gross output of the activity of Communications at current market prices. Information on the number of chargeable minutes of conversation (both national and international) is obtained from the Batelco. The information obtained from Batelco is used to construct Index numbers of chargeable minutes of conversation with 1991 = 100 and the index numbers are used to extrapolate the value of

14 gross output from Batelco for the year 1991, to generate the value of gross output at 1991 prices. The Post Office provided data on number of articles delivered locally in the Bahamas are used to calculate the index numbers with 1991 as base. These are used t extrapolate the value of gross output in 1991 to estimate the value of gross output at 1991 prices.

To arrive at the estimates of total value of gross output at 1991 prices for the economic activity of communications the sum of the value of gross output at 1991 prices for i) Batelco and ii) the National Post Office at 1991 prices for each year is divided by the corresponding percentage share of Batelco and the National Post Office for the appropriate periods.

The Intermediate consumption and Depreciation at 1991 prices

were calculated following the methods in section c pg. 7. J - Financial intermediation In the financial intermediation Group (J) a variety of methods and sources are used to estimate gross value added. i) Banking

Main source of data: a) information comes from two studies carried out by the Central Bank of The Bahamas:

1) the Bank Profitability Study ( resident commercial banks and trust companies).

2) the Gross Economic Contribution of Banks and Trust Co's. b) Annual financial Reports of the Central Bank of the Bah. c) Annual financial Reports of:

1) Bahamas Development Bank 2) Bahamas Mortgage Corporation

Current prices: The Value of Gross Output is taken to be the sum of:

i) actual service charge and ii) imputed service charges.

The components of actual service charges are the revenues obtained

15 from “Fee Income” i.e. a commission/foreign exchange transactions b) service charges /deposit account c) Loans d) rental Income/safety Deposit boxes. The item “Foreign Exchange Profit/Loss “ from the “Bank Profitable Study” is not included in the value of gross output because it relates to the change in the exchange rate and therefore it should be classified as holding gains/losses and should be shown in the “Revaluation account”. The effect of this adjustment in the Production Account is that the service charges (in the production-based estimates) and not operating surplus (in the income–based estimates) will both be less by the amount of holding gains.

In the case of Bahamas Development Bank and the Bahamas Mortgage Corporation, there are other service charges such as (i) Bond Sinking Fund Income (ii) Administrative Fees and (iii) Other Income; these service charges have been included in the Production Account. The Central Bank of the Bahamas, the detailed financial statements have been analyzed on the basis of the format of the “Bank Profitability Study”. The data so analyzed have been used to prepare the estimates. Imputed Service Charges are estimated by deducting interest paid to depositors from the investment income.

The Financial Intermediation Services Indirectly Imputed is found from Interest Income minus Interest Expense.

2) the Intermediate consumption items are also available from these reports.

Planned improvements: The Credit Unions, money lenders,

Securities Commission of the Bahamas, The Bahamas Stock Exchange and the Mutual Funds are not presently included in the estimates and this we hope to change soon.

Constant Prices: The value of gross output at 1991 market prices is

extrapolated using an index of the “number of Deposit Accounts in the Bahamas”. The Intermediate consumption and Depreciation at 1991 prices were calculated following the methods in paragraph 21.

ii) Insurance:

Main source of data: is the Registrar of Insurance. At the moment, data compiled by the Registrar for life insurance companies also include data for

16 health insurance. Since we are already asking the Insurance Registrar for a number of finer break-downs than are presently published or collected, it seems strategically wise not to demand a break-down between life and health insurance (and place the latter with non-life where it should really go). This is a further refinement of the data, which should be attempted in two or three years' time when the proposed method of estimation has become more firmly established. The Registrar of Insurance is proposing a new questionnaire which we hope would provide the data in the way needed by the SNA 1993. The questionnaire is awaiting approval by Parliament. Current Prices: For the insurance industry as a whole, what is conceptually required is the income originating in the insurance industry consisting primarily of salaries and wages and operating surplus i.e. premiums - claims - operating expenses. The data, of course, should also include interest paid and depreciation. However, I think we can ignore these for the time being.

Insurance Brokers and Agents: are not currently included, but With respect to commissions paid, those paid in the life insurance group are usually paid directly to agents. Such agents have only few expenses connected with the earning of these commissions, and the commissions are

therefore very close to salaries and wages and can be included with ordinary individual remuneration.

This, however, is not the case with non-life commissions paid. In this

industry the commissions paid constitute the gross income of separate business establishments -i.e. insurance agencies, which in addition to insurance agents usually have other office employees and rent separate premises etc. The labor income and profits earned in these agencies must therefore be separately estimated.

It is evident from the above description that income originating in the

insurance industry does not differ significantly from other industries. However, when it comes to a consideration of the product sold by the industry, the treatment required by the accounts is quite sui generis and requires further elucidation. For this purpose, life insurance, fire insurance and all other insurance are three distinct services, which require significantly different treatments.

Life insurance transactions basically consist of people exchanging

17 present for future money - to be paid under certain agreed conditions and/or events. Life insurance in the aggregate is thus an exchange of present for future money, (or perhaps an exchange of money in the present by many for the payment of sums to a few). The money thus exchanged is ignored in the accounts - i.e. the "pure premium" is not part of consumer expenditure nor are life insurance payments part of personal income. Any aggregate net difference between these two flows for a given year is considered part of personal saving.

What is included in consumer expenditure consists of the expenses of

life insurance companies necessary to render this service. The expenses so reported by the Registrar are: Local management expenses, Management expenses charged to Bahamian operation (this is the Bahamian share of foreign companies' head office expenses), commissions expense, other charges, operating gain/loss.

With respect to personal casualty insurance a similar argument as above

can be posited. The one significant difference, however, is that most of the

interpersonal transfers in casualty insurance take place in the same accounting period. Little saving takes place and the net cost of the service can be calculated by taking the difference between premiums and claims.

It is necessary, therefore to obtain a separate estimate of insurance

bought and paid for by individuals in order to make a separate estimate of personal insurance expenditure. The Registrar of Insurance thinks that it may be possible to split the premiums and expenses between persons and the businesses. Should this turn out not to be the case, a split of either premiums or expenses between persons and businesses would still permit us to make this estimate. (If such a ratio is worked out for any year it can probably be used for a number of years since there is a certain amount of stability in the industry.) The premium for casualty insurance paid for by businesses is of course part of the cost of doing business and as such will be reflected in the price of goods and services sold (and no specific national accounts calculations is required.)

By far the major portion of fire insurance relates to business premises

(building and content) and personal housing. If it is remembered that the latter is always considered to be in the business sector, (the purchase of a house is included in gross domestic investment on the theory that all home owners are in that capacity unincorporated business), fire insurance

18 premiums can be considered a business expense included in the price of goods and services and particularly in rent.

The premium for fire insurance is thus included implicitly in the price of

final goods and services. On the income side the service portion of this premium will be included with labor income and profits of the insurance sector while the actual losses (claims) incurred which we again hope to obtain from the insurance registrar, will be a special adjustment in depreciation. It might be mentioned, however, that it would be very advantageous if we could obtain fire insurance premiums paid either by individuals or on housing from the Registrar. Our rent estimates would be improved because this is a significant expenditure in gross rents.

To the extent there is some fire insurance on personal belongings (the

content of houses), this treatment is incorrect. However, for the time being

we can probably live with this. Moveable possessions such as cars and boats etc. are usually covered by specific multiple risk insurance included with casualty insurance. Calculations for Insurance Value of Output/Service:

1: Total Actual Premiums: a. Gross Premium Income from Life b. Gross Premium Income Other Than Life

plus

2: Total Premium Supplements: a. Local Investments Income b. Other Income Derived From Bahamas Operations

less 3. Claims Paid/Due: a. Claims & Amt. Paid to Policy Holders (Life Insurance) b. Claims Paid (Other than Life & Life Insurance) c. Claims Outstanding (Other than Life & Life Insurance) d. Claims Outstanding (Life Insurance)

19 less 4. Additions to Reserves:

a. Increase in Life Fund/Reserves b. Unearned Premium Reserves

less 5. Reinsurance Ceded Externally

a. Life b. Other Than Life

Intermediate Consumption: The details, apart from commissions paid to brokers and agents, have been compressed under the following headings: (I) Local Management Expenses (ii) Management Expenses charged to Bahamas Operations and (iii) Other Charges.

Depreciation on fixed assets is difficult to obtain from the compressed data. In view of this what has been done to provide rough estimates for this variable is to calculate the Depreciation/Gross Value Added Ratio at current market prices for the Banking subsector for each year and then multiply this ratio at current market prices for the Banking subsector for each year and then multiply this ratio by the corresponding Gross Value Added at current market prices from the Insurance Companies.

Wages and Salaries also have the problem of compressed information the data on the wages and salaries paid to employees cannot be obtained at the present time. In the DOS publication called “Census of Insurance” for the year 1989, has a table showing the wages and salaries paid to employees. These figures are used to represent 1989. The wages and salaries/Gross Value Added ratio for the year 1989 has been calculated and has been multiplied by the Gross Value Added at current market prices to estimate wages and salaries paid to employees from 1990 to present.

Constant Prices: The value of gross output /service at current market prices for each year is deflated by the corresponding Implicit Deflator of Gross Output of the Banking Sub-sector. The Intermediate consumption and Depreciation at 1991 prices were calculated following the methods in section c pg. 7.

20 K. Real Estate, Renting and Business Activities Main source of data: Bahamas Agricultural and Industrial Corporation financial report, 1990 Census of Population, Central Bank, Registrar of Insurance, Establishment Surveys and Government Treasury Accounts. Current Prices: 1) Real estate includes the following information:

a) Gross Rents

b) Mortgage Interest c) Real Estate Agents d) Bahamas Agricultural & Industrial Corporation

The biggest item in this category is obviously residential rental income

and its derivation is outlined below. However, this category also includes business activities. The establishment survey of the legal, accounting and architectural professions will be representative of these activities. These estimates are blown up by an arbitrary figure to take care of such activities as data processing, software consultants, computer related activity etc. - see the ISIC for details. Also photographers should be placed here rather than left in Industrial Group O.

a) Gross Rents: is the biggest item in this category is, of course, the

actual and imputed net residential rental income. Since gross paid and gross imputed residential rents are also required in consumer expenditure, starting the estimation with gross rents is the most efficient way to proceed. From the 1990 Census gross rents paid as well as the total number of dwellings can be obtained. If the dwellings on which rent is paid are deducted from total dwellings, the number of owned dwellings could be obtained. An average per rented dwelling rent can then be calculated and the average rent so derived then becomes the gross imputed rent for owned dwellings. For this round of estimation any quality differences which probably exist between owned and rented accommodations can be ignored.

For the future, however, it might be worthwhile to see what

the difference in quality or quantity between owned and rented accommodation is. Some adjustment to take care of this difference might then have to be made to the imputed rent. Real estate taxes can be obtained from the government sector. Total mortgages held

21 by various institutions are known as well as some information on interest rates from the central bank. Private holdings of mortgages in the Bahamas are insignificant. We will therefore apply the interest rates mentioned above to outstanding mortgages to obtain mortgage interest expense. Applicable taxes are estimated as 50% of Real Property taxes. An estimate is also made for Insurance Fire

Premiums. Both the depreciation and other costs are guesstimated at the

present stage. As long as depreciation is not shown separately, no estimate of it has to be made. If we have to show it separately, reference to informed opinion suggests a range of 2.5 percent of gross rents. Repairs are guesstimated to be 7.5 percent of gross rents.

It might also be noted at this stage that unlike interest, rent is

ascribed to the owning rather than the using industry and any rental income accruing to owning industries will in the establishment survey be counted as income originating in that industry. It may be further noted that if any residential property is owned by any other than the real estate industry, there will unfortunately be some double counting. It is felt however that is not a major problem and property owned by business establishments other than in the real estate group is in the majority of cases for commercial and industrial use and is therefore part of their income originating.

b) Real Estate Agents: data comes from establishment Business surveys

conducted by the DOS. This survey began in 1993 with a census of the industry and was conducted in New Providence and Grand Bahama where more than ninety five percent of the establishments engaged in this activity are based. The National Accounts Section undertook a small survey of this area. The estimates made for 1989-91 were revised based on the results obtained from the survey.

c) The Bahamas Agricultural & Industrial Corporation: provide

annual financial reports that offer information on their inputs and output items.

2) Business Services & Renting of Equipment:

This data is collected by Establishment survey conducted in New

22 Providence and Grand Bahama. These islands represent more than ninety five percent of businesses engaged in this activity. This covers activities such as legal, Accounting, Market Research, Architectural and Engineering,

Advertising, Security, Photography etc. This data is blown-up by 30 percent to take account of Renting of Equipment and Computer Services. Constant Prices:

a) Real estate: This includes BAIC, Gross Rents, Mortgage Interest and Real Estate agents. The gross output at current prices is deflated using the corresponding NP RPI numbers of Rent Paid. This number had to be rebased to 1991.

b) Business Services: The gross output for each year is deflated by the corresponding overall NP RPI numbers (rebased).

L. Public Administration and Defense:

Main source of data: Information on salaries and wages in this industry, are the Treasury accounts of the government of the Bahamas and the records of the National Insurance Board, which is also classified to general government.

Current Prices: By and large the ISIC is followed here except that the

administrative functions in the education and health industries are included with those industries. (see also para. 6b pg. v). The same sources also furnish the data for estimates of purchases of final goods and services by government on the expenditure side, although the latter concept is based of course on the government as a sector and thus includes areas covered in industries M. (Education) and N. (Health and social work) on the income side. On the income side, depreciation is measured on a straight line based on purchases of furniture, motor vehicles and buildings.

The value of gross output is the sum of i) intermediate consumption and ii) gross value added which comprises a) Wages and salaries and b) imputed depreciation of fixed assets. Constant Prices: The components of the value of gross output i.e. gross value added and intermediate consumption, are converted to 1991 prices and then added up to obtain the value of gross output at 1991 prices. The procedure for carrying out the conversion to 1991 prices is as follows: in the case of gross value added, the number of persons employed in Public

23

Administration and Defense is calculated and this is done by deducting the number of persons employed by i) the Ministry of Education ii) the Ministry of Health, iii) the Post Office, iv) Civil Aviation Department and v) Post and Marine Department from the total number of persons employed by the Government of The Bahamas.

The next step is to calculate the Index numbers of the number of

persons employed in Public Administration and Defense with 1991 as the base year. The third stage is to use the Index numbers of the number of persons employed in Public Administration and Defense with 1991 = 100 to extrapolate the gross value added which comprises wages and salaries and imputed depreciation of fixed assets for the year 1991 for the period in question. Intermediate consumption at current prices which consists of current operating expenses is deflated by the combined price index numbers of Intermediate consumption for New Providence with 1991 = 100 to obtain intermediate consumption at 1991 prices. Depreciation at 1991 prices was calculated following the methods in section c pg. 7.

M. Education 1) Public Education:

Main source of data: Government Treasury Accounts and College of The Bahamas. Current Prices: Gross output is the sum of intermediate consumption, gross value added. Note the gross valued added includes these imputations: i) Wages and Salaries of technical assistance personnel ii) government contribution to the National Insurance Board and iii) depreciation of fixed assets. The wages imputation it is assumed that donor government/institutions transfer funds to the government of the Bahamas which uses the funds to pay the wages and salaries. Depreciation is measured as previously outlined.

Constant Prices: The value of gross output at 1991 prices is estimated for the period in question by extrapolating the value of gross output from the Public Sector Education for the year 1991 by the index numbers of the number of students enrolled in schools in the Public Sector. The intermediate consumption at current prices is deflated by

24 the combined NP RPI, with 1991 as the base year.

2) Private Education:

Main source of data: Establishment surveys conducted in New Providence and Grand Bahama, which represent more than ninety percent of businesses engaged in this activity. Current Prices: In the Bahamas an important portion of education is provided by the private (read mainly religious) sector. The gross output includes school fees and other charges. The inputs consist of the normal current operating expenses.

Constant Prices: The current price estimates are deflated by the Average NP RPI numbers for school fees and charges with 1991 as base year. The Intermediate consumption and Depreciation at 1991 prices were calculated following the methods in section c pg. 7.

N. Health and Social Work 1) Public Health:

Main source of data: Government Treasury Accounts Current Prices: In so far as this production originates in government, remarks made in the respective write-ups on Public Administration and education apply. Constant Prices: In the case of gross value added, the overall number of employees in Ministry of Health is used to calculate the index number of persons employed with 1991 as the base year. This index is used to extrapolate gross value added for the period in question. The departments of government that are included are: Ministry of Health Administration, Dept. of Environmental Health, Rand Hospital, Princess Margaret Hospital, Sandilands Rehabilitation Center and Dept. of Public Health. The intermediate consumption at current prices is deflated by the combined NP RPI, with 1991 as the base year.

2) Private Health: Main source of data: Establishment surveys

25 Current Prices: Income originating in the private sector, mostly that of medical practitioners, dentists, two private hospitals and their employees is collected by Establishment survey the years prior to the 1991 survey are extrapolated based on the movement of the public health sector. The hospitals data was estimated for 1989 to 1992 based on a per bed estimate of income based on an arbitrarily enlarged per bed cost incurred in government hospitals.

Constant Prices: The value of gross output at current prices is deflated using NP RPI numbers of medical care and health with 1991 as the base year.

The intermediate consumption at current prices is deflated by the combined NP RPI, with 1991 as the base year.

O. Other Community Social and Personal Activities

Main source of data: Establishment surveys Current Prices: This category is truly "a mixed bag" both in terms of its

contents and coverage. The Sewerage and Refuse Disposal group (90) is probably reasonably well covered by including here the sewerage portion of the Sewerage and Water Corporation (estimated by the government sector).

In 1993, the Establishment Section surveyed septic tank companies, and

therefore income originating and the amount spent by households for removing the content of septic tanks was obtained from the results. The Sewerage and Water Corporation charges an $8.00 fee for every septic tank truck unloaded at its facility. The number of loads is also available from this source. A few calls elicited the fact that the average charge per truckload for this service is about $100 and includes the unloading fee. When this charge is multiplied by the number of loads, the total thus derived is then consumer expenditure and 60 per cent of it is assumed to be income originating in this

industry. (The water part of the corporation's business is covered in its appropriate industrial classification by the establishment surveys). The Activities of Membership Organizations Not Elsewhere Classified (91) is represented by the income originating in a number of scientifically selected religious and charitable organizations multiplied by the total known number

26 of such organizations. Unions are also included here (see also pg. 36)

Radio and television activities are covered by the inclusion of ZNS here.

The remainder of this industry was covered, in 1992 by a special survey, which the National Accounts Section undertook for 1991 and is extrapolated to 1989 and 1990 on the basis of total establishment data covered by the establishment survey. The special survey consisted of a complete survey of the service groups covered in this industry in two census districts in New Providence (Centreville 3 and Shirlea 9) multiplied by the ratio of the number of all establishments in this industry and the number in the special survey. (see original methodology). These service industries were included with the establishment survey in 1993. For funeral parlors, in 1992 income originating was deemed to be 60 per cent of revenues these were surveyed in 1992. Sporting activities other than golf are also included here at 50 percent of total revenue (These were surveyed in 1992). The estimate for golf was based on reference to informed opinion.

The casinos are also included here. These estimates are based on the

casino’s statements, which were obtained from the Gaming Board. The gross take of the casinos is published in the report, of the Gaming Board. Expenses of the casinos and tips of croupiers are obtained directly from the Gaming Board. (see also pg. 35)

As recommended in 1992 the Establishment Section conducted a survey

of the Other Communication & personal & Social services Sector. The areas still estimated are Golf Clubs, Other Sports and Exterminators.

Informal Economy is estimated by: a) five percent in 1989, 1990 and 1994 to present b) seven percent in 1993 & 1992 c) six percent in 1991

of a subtotal Private Final Consumption Expenditure for the informal

economy is also included here, basically following the trend of Retail Trade Sales in those years. The years when the Bahamian economy suffered a negative growth has the highest percentage because those were the years we saw more lunch vendors, roadside stalls etc. For more details, see pg. 37.

Private Domestic workers: This basically constitutes salaries and wages

of household employees and the figure calculated here is also part and parcel

27 of consumer expenditure. The figure for 1990 is based on a special census run of number of household employees by income ranges. To arrive at the total, the mid point of the range was multiplied by the number of employees, with the figure of $15,000 per annum being the assumed mid point of the open-ended group (a very small number indeed.) 1989 and 1991 figures are projections based on labor income in the hotel industry. The 1992 to present are calculated based on the New Providence Consumer Price Index. An estimate of 41 percent of gross output is used to estimate intermediate consumption.

Constant Prices: It is suggested that indexes be created for major areas in this category. However, until they are available we use the overall implicit deflators of all the economic activities excluding “Other Community, Social and Personal services at current prices. These are implicit deflators for gross output, intermediate consumption, indirect taxes, subsidies and depreciation with 1991 as the base year and then use these implicit deflators to deflate the corresponding variables of the activity of Other Community, Social and Personal Services, domestic workers and informal economy. For the casinos, an index of tourist days should be considered. P. Indirect Taxes and Subsidies:

Main source of data: Govt. Treasury Accounts, Establishment surveys, Public Corporations, Ministry of Finance and Office of The Prime Minister.

Current Prices: The government provides detail of all of the taxes paid and subsidies granted. The data obtained are used with the appropriate ISIC

code at the four-digit level. Constant Prices: The estimation procedure for Indirect Taxes is as follows: At current prices, the combined percentage share of i) Export Duties ii) Hotel Occupancy Tax and iii) Import Duties and stamp Tax from the Customs Department, in overall Indirect Taxes ranges between 69.4 percent and 85.1 percent during the period in question. To calculate Total Indirect Taxes at 1991 prices, the estimates of i) Export Duties ii) Hotel Occupancy Tax and iii) Import Duties and stamp tax from Customs at 1991 prices are calculated separately and the results are summed for each year. The combined total of these three items at 1991 prices for each year is then divided by the corresponding combined percentage share to arrive at the estimates of

28 overall Indirect Taxes at 1991 prices. The estimate of each of the components at 1991 prices is calculated as follows: I) in the case of Export Duties, the 1991 figure of this item is extrapolated with the “Quantum Index numbers of Commodity Exports” with the year 1991 as the base year (this is calculated by using the Commodity Exports at constant prices in each year divided by the 1991 commodity export at constant prices). With respect to Hotel Occupancy Tax, the estimates at 1991 Prices are prepared by extrapolating the 1991 Hotel Occupancy Tax figure with the Index numbers of the number of Visitor nights with 1991 as the base year (see paragraph on Hotels). With reference to Import Duties and Stamp tax from Customs Department, the 1991 figure of this variable is extrapolated with the Quantum Index numbers of commodity Imports. The next step is to add the estimates of the three components at 1991 prices together to estimate the overall Indirect Taxes at 1991 prices for the period in question. The Implicit Deflator of overall Indirect Taxes with 1991 = 100, is obtained by dividing I) the overall Indirect Taxes at current prices for each year by the corresponding Overall Indirect Taxes at 1991 prices and ii) by multiplying the quotient obtained by 100. In this case, the calculation is done by dividing Total Indirect Taxes at current prices by estimates of Overall Indirect Taxes at 1991 prices for each year and then multiply the quotient by 100.

Subsidies: The current price estimates of this variable are deflated by the Implicit Deflators of Indirect Taxes with 1991 = 100 to obtain the estimates of Subsidies at 1991 prices. Q. Extra-territorial organizations and bodies To my knowledge, there are three such bodies in the Bahamas:

1. the Inter American Development Bank, 2. the Organization Of American States and 3. the Pan American Health Organization.

It should be noted that the premises of these organizations are not

29 extraterritorial in the same sense as those of embassies, which are, considered part of their home countries. The earnings of the national employees of embassies are deemed to be part of the national and domestic income of their mother country. International agencies have no home country as such and income originating in these organizations must thus be counted in their country of actual residence. Information on the salaries and wages paid by these organizations was obtained by telephone.

30 EXPENDITUIRE ON THE GROSS DOMESTIC PRODUCT

In terms of terminology and composition of detail, the product side has by and large followed the International Standard Industrial Classification (ISIC). On the expenditure side it is desirable to follow the United Nations System of National Accounting (UNSNA) classification as closely as local circumstances permit and to the degree to which such terminology agrees with well-established local nomenclature. A. Government Final Consumption Expenditure

Main source in data: Government Treasury Accounts Current Prices: The main items are: compensation of employees,

consumption of fixed capital and net purchases of goods and services. The net here refers to purchases after the deduction of items sold to the public by government departments. A very detailed description of how these items are obtained from the Treasury accounts is on file in the national accounts

section. Government Final Consumption Expenditure is divided into:

1. Collective Consumption Expenditure and 2 Individual Consumption Expenditure

Individual consumption expenditure consists of expenditure on

Education and Health. When data permits this should also include social security and welfare, sports and culture. The purpose of this breakdown and the order in which it is shown is to permit the public to see and evaluate the portion of individual consumption provided by government. The U N also recommends this method of presentation. It permits true individual consumption to be shown, irrespective of the method of its financing or its institutional delivery. This presentation also permits international and inter-temporal comparisons without distortions due to differing institutional arrangements. By breaking down government consumption in the order suggested above, total government consumption can be obtained by adding collective and individual government consumption expenditure and total individual consumption can be obtained by adding individual government consumption expenditure to the next item which is Private Final Consumption Expenditure.

31 In order to avoid any misunderstanding, however, it should be clearly

pointed out that although government- financed individual consumption can be added to either government or private final expenditure, it cannot of course be added to both at the same time!

Constant Prices: This is the constant price figures from the Public Administration & defense, Public Education and Public Health. B. Private Final Consumption Expenditure:

Main source of data: Establishment Surveys, Ministry of Tourism, Central Bank, registrar of Insurance, Batelco, Bahamas Electricity Corp., Post Office and Water & Sewerage.

Current Prices: It is recommended that this total NOT be broken down

(as in previous Bahamian publications) into Expenditure by Households and Private Non-profit Institutions Serving Households.

There are basically three methods to measure private final consumption

expenditure. There is the methodology anchored to a consumer expenditure survey, the methodology rooted in commodity flows or input/output tables, and the methodology tied mainly to retail trade and related surveys. The choice basically depends on the availability and soundness of the data underlying each approach.

The previous Bahamian private consumption expenditure estimate was

based on the consumer expenditure survey methodology. The fundamental drawback in this method is that:-

(a) the survey is considerably out of date (1983) and (b) no good measures of projecting it forward exist.

The second methodology requires a great number of industrial surveys with a large supply of detailed information. This is not within the present survey capability of the department.

This then leaves us with the third method which basically consists of basing private consumption expenditure on retail trade and related surveys and adjusting the survey by deducting for items not bought by consumers and adding other expenditures by consumers not covered by such surveys.

32 In 1994, a new consumer expenditure survey was conducted; private

consumption expenditure derived in the above manner was carefully evaluated against this survey. We found that the estimates for PFCE were not very different from the household expenditure survey results.

The basic start for estimating Private Final Consumption Expenditure is the total of Retail Trade Sales from the establishment survey. Minor adjustments to eliminate business purchases have to be made to this item and then a whole host of other consumer expenditures not covered by the retail trade survey have to be added to arrive at Private Final Consumption Expenditure.

Business purchases are deemed to be 50 percent of sale of lumberyard

stores; these are removed from retail sales. Such purchases are either mainly

made to business (building contractors) or if bought by individuals are purchased by them as homeowners that is businesspersons. The same reasoning applies to a portion of sales of office and business machine equipment. In the Bahamas, there are one or two retailers selling specialized kitchen equipment almost exclusively to caterers and so this is also eliminated (further reasonable contributions to this list of exclusions are welcome). If we are to deduct a little too much for these enterprises, that is, if they sell some stuff to final consumers this will in all likelihood be counterbalanced by sales to business on the part of stationers, hardware and furniture stores and other establishments which include some businesses in their roster of clients.

For reasons outlined on pg. 36, sales of imported new cars and

imported used cars should be omitted from sales of car dealers. Sales of car dealers should therefore be adjusted to consist of sale of parts and services to private individuals as such. At the moment, this adjustment is rather arbitrary and is based on the same relationships as we use to estimate imports of cars to individuals and businesses. If we can obtain a differentiation between sales of imported used cars and Bahamian used cars, only the mark-up on the latter - if obtainable or somehow estimable - should be included with car dealer sales. We also assume that Bahamian used cars are not sold by business (other than car dealers) to Bahamian and vice versa and that intra-personal sector transactions cancel each other.

An adjustment in the opposite direction that is, final purchases by

consumers from wholesalers will also have to be made. This was determined by using the Retail Sales of Wholesalers as obtained from the Establishment.

33 An estimate for subsistence farming and fishing is also included here.

(see pg. 5).

Sales of restaurant and gross revenue of hotels must be added to personal consumption expenditure. However, the greater portion of such sales are no doubt made to tourists and we want to count tourist expenditures in exports. Such expenditure must be removed from personal consumption expenditure. However, in order to subtract the tourist portion we must make sure that such expenditures - made by all possible spenders - are included in the first place in our total personal consumption expenditure.

Since we did not undertake a survey of the straw market and since it is unlikely that residents buy significant quantities of goods from these vendors. (see pg. 10). These are then added to final private consumption expenditure figures and in the Production Approach Retail Trade figure. We will also accept the estimate of spending on sports activities (less expenditure on golf counted in other services) as reported in tourist expenditure.

In a modern economy, a large portion of final personal consumption consists of services. We obtain expenditure on medical (including dental and veterinary services) from the establishment surveys. Before being included in the survey that the revenue of private hospitals was estimated as three the per bed expenditure of the government hospitals. This was done on the assumption that more services are performed in the private medical facilities than in the government one. For the GDP side 60 percent of the total revenue was deemed to be salaries and wages and 12 percent was estimated to be gross profits.

Transportation services were also obtained from the establishment survey and were reduced somewhat to account for the business portion of such services. The percentages assigned to persons:

1) The Land Transportation is broken down into: a) land transportation – 80% b) motor vehicle – 80% c) Car Rentals – 100% d) Tour operators – 100% e) Paradise island Bridge – 80%

2) The Air Transportation is broken down into: a) Foreign Air – 25% b) Local Air – 80%

3)The Marine Transport uses 20%

34 4) The Storage uses – 10% Since, air travel will also include some business and government travel,

these revenues must be excluded from consumer expenditure. One of the major travel agency hazarded the guess that business and government travel total 25 percent of foreign airline revenue.

We must also take a certain proportion of business services as personal services. From the establishment survey we will obtain the gross revenue of lawyers, architects and photographers. The proportion of such services utilized by final consumers will have to be arbitrarily determined and included in final consumption. For now I suggest an arbitrary ratio of 20 percent as consumer services. We currently ask these establishments for their source of revenue (business, government, and persons) the data still needs some refining.

The Other personal service expenditures were in the past based on the

national accounts survey of two census districts in New Providence which was adjusted by 5% for non-coverage of such businesses. It was then blown up by the total number of all such businesses in the Bahamas. The Business Services survey was expanded to form a properly structured survey in this area, which commenced in 1992. The 1989 to 1991 data was adjusted based on the totality of other data, which we have for those years.

A separate estimate for expenditure on funerals was also included here;

Establishment in 1992 conducted a survey. This price was then multiplied by the number of deaths obtained from vital statistics. Since that time they have been included in the Other Community, Social & Personal Services survey and the figure is taken from there. Expenditure in golf clubs is also based on reference to informed opinion.

Expenditure in casinos is taken directly from the reports of the Gaming

Board of the Bahamas and is equal to the gross income of the casinos. This gross income (including a small portion of miscellaneous revenue) is basically the money gambled by persons minus their winnings paid out by the casinos. Tips to croupiers (again obtained from the Gaming Board) are also included here.

Expenditure by persons on water, sewerage, electricity and

communication is broken down between services to persons and others by

35 the respective suppliers and obtained directly from them. For expenditure on private septic tank services, see pg. 26. Expenditure by persons on postal services is a direct (arbitrary) estimate by the DOS. Estimates of household employees must also be included in consumer expenditure. These have been

described in pg. 27.

Calculation of the New and Used Cars Estimate: The present method of estimating car sales directly from imports should be maintained. Since many persons (and probably also some businesses) import cars directly from the USA (and other countries) reliance on retail sales of automobiles would be misleading. The relevant imports of cars - particularly from the USA - comprise both new and used cars. The reason for this is quite simply that imported used cars have not been previously counted in Bahamian GDP and are "new" to the Bahamian economy. The total value of the imports of vehicles is divided between passenger cars and other vehicles. Arbitrarily, 80 percent of passenger vehicles is allocated to household consumption, and the remainder together with all commercial vehicles is included in gross fixed capital formation. An estimate of import duties and transport & trade mark-up are added to these figures

Expenditure on gross rents - including the imputed portion of financial services of banks, (imputation) the administrative portion of consumer interest and the purchase of insurance services have already been described when these items were discussed on the product side. (see section on Financial Intermediation)

Consumer expenditure also includes the total payment for goods and services of all associations of individuals serving households, that are, charitable, religious and private educational institutions. The Establishment Section first surveyed this area, in 1992. Both religious and private institutions play a very important role in the social and economic fabric of the Bahamas. However, this survey was discontinued in 1993 because of the objections of certain religious leaders. Since that time the data has been estimated based on the CPI until the survey can be resumed. These include estimates for Associations, Libraries, sporting activities and Health clubs.

Mutatis mutandis the same general remarks apply to labor unions of which there are about 40 in the Bahamas according to the Department of Labor. The membership in the union is about 26,000. Based on known membership fees the total income (and therefore expenses) of such union is

36 $5 million. We will also assume that 80 percent i.e. $4 million of these

expenses goes towards the remuneration of union officers and employees.

Since there is no income tax in the Bahamas and few indirect taxes except import duties, probably little "underground" activity takes place. Underground activity is here defined as economic activity hidden from government's (and probably the statistician's) view in order to escape taxation. However, the informal economy defined as small-scale entrepreneurship with its base in the home and mainly as a secondary economic activity is alive and doing well in the Bahamas. At some stage it might well pay to undertake a survey of such activity either from the demand side (where it cannot always be evaluated as such) or from the supply side (where there might be a "natural” reluctance to disclose both the activity and its economic remuneration).

However, in the short run there are many more important statistical

shortcomings to be overcome. The Bahamas had negative growth years in 1991 & 1992; therefore there was a growth of lunch vendors, roadside vendors etc. Therefore, it was suggested that for the time being, an arbitrary percentage - (1989,1990 and 1994 to present = 10%; 1993 & 1992 = 12% and 1991 = 11% of private consumption expenditure be allocated to this expenditure following the trend of Retail Trade Sales during this period. A slightly lower figures (see pg.27), of production subtotal be put on the income side to differentiate material supplies included on the expenditure side. These figures are based on the fact that in many tax economies after every effort has been made to estimate all specific activities the remaining underground effort has been estimated between 3 to 5 percent of GDP.

Lastly we turn to foreign sector adjustments. Since the way in which we have estimated final private consumption expenditure up to this point includes the sales of all goods and services in the Bahamas both to residents and foreign visitors, sales to the latter group must be deducted from all sales to final consumers and included as exports. The basic data for such sales come from the Ministry of Tourism and are based on their exit survey of departing tourists.

Constant Prices: The PFCE is deflated using the Average NP RPI all items index rebased to 1991. In the future it is recommended that appropriate indexes be developed for the major areas.

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C. Gross Capital Formation Main source of data: Establishment surveys, Central Bank, DOS External Trade Report, Public Corporations and USA Statistical Abstract.

Current Prices: Gross Capital Formation is composed of Change in Stocks and Gross Fixed Capital Formation. The latter is composed of Residential Building Construction, Other Construction, and Machinery and Equipment. It might be noted here that this is the only instance where we depart from UN terminology. However, we consider the term Change in Stocks more neutral and meaningful than “Increase in Stocks”. We suggest the term "Other Construction" because we cannot make the UN distinction between "non-residential buildings" and "other construction and land improvements". Finally, we consider the term Machinery and Equipment more meaningful than the U.N term "other".

The value of the change in stocks is probably at the moment the weakest estimate. It is the actual change in stocks reported by government corporations and in the retail and wholesale trade. The response to the change in values question reported by other industries was not considered good and is probably reasonably insignificant. It should be borne in mind however, that the value change in inventories reported in the establishment survey contains no information on inventory valuation practices by the respondents. Since there is also no price index available other than retail prices, the value of the change of stocks could not be adjusted to reflect the physical change in the value of inventories and the change here is therefore exactly what it says - the change in the value of inventories. Significant improvement will have to be made to this item in the future.

The Residential and Non Residential Construction data is obtained from the Establishment survey of the construction industry. The residential & non-residential data is further adjusted for:

a) interest fees (value of mortgages times interest rate) b) Insurance Fees

(i) fire ins premium * (ii) % Residential & Non-Res. represent of total buildings i.e. # of Res. & Non-Res. completed divided by # of buildings (figure from Census 1990 adjusted in each year for new buildings

constructed).

38 c) Architects fees:

Average Architects fees for Res. & Non- Res. Construction (i.e. 1997 estimate of fees adjusted in each year by % change of Res. Construction Permits.) multiplied by mortgages of New Res. & Non-Res. Construction

The Residential construction is adjusted for the family island to account for the value of Res. Construction put in place in the islands. This is calculated by applying the % Family Island represent of total Building Permits approved.

The government construction has been removed since we feel that this figure is already counted in residential & non-residential construction items since this data is based on receipts by construction firms who also do work for government. The only construction done by government is carried out by ministry of works and this is on roads /bridges etc. therefore we use 20% of the government figure from Government Treasury for "Other Construction" as the work done by Min. of Works we assume the remaining 80% is bided out.

The total construction estimates for 1991 are interpolated back to 1989 and 1990 on the basis of building material imports other than cement. (The value of cement imports revealed some peculiar movements and it was deemed best to ignore cement imports as a projector.)

The value of Machinery & Equipment and Transportation equipment is directly taken as the value of all relevant imports. These imports are adjusted upwards for:

i) Import duties paid: a) In 1998 the External trade section was able to produce the

amount of duty paid in 1998 by the finest detail b) In 1999 we used the Import Duty for 1998 for Machinery &

Equipment and Transport equipment items and find % each represent of this total multiplied by Machinery & Equipment and Transport equipment 1999 items that recorded duty paid.

c) 1997 to 1989 is the 1998 figure adjusted for External trade Import data of Machinery & Equipment and Transport

equipment % changes. ii) Stamp Tax – from Central bank Report of stamp taxes on import times % Machinery & Equipment and Transport equipment for

39 1998 duty represent of total duty paid. iii) Estimated mark-up by the importer (60% on all items and 38% certain on Transport items). Certain selected items - such as cars already previously described - and other items, which can be either consumer or capital expenditures, are split between capital formation and implicit consumption expenditure on the basis of ratios based on judgment.

Constant Prices: The Construction items are deflated using the USA Construction cost index discussed in paragraph on construction. The Change in stock is deflated using NP RPI all items index (rebased). The Machinery and Transport equipment is deflated using the USA Export Price Index (the machinery and transport equipment indexes) again rebased. D. Exports and Imports of Goods and Services

Main source of data: DOS External Trade Report and Ministry of tourism, Central Bank and USA statistical abstract.

Current Prices: The value of services Imported & Exported are taken

from the Balance of Payments published by the Central Bank of the Bahamas. The balance of trade portion of the balance of payments, however, is estimated by the DOS External Trade section and is taken directly from these records except the local consumption of oil which is taken from the Central Bank Balance of Payment table.

Constant Prices: Export of goods and services are deflated using a

combined index of Commodity Exports and the index of average Expenditure per Tourist days.

The index of Commodity Exports is calculated by a Laspreyes price/unit

value index numbers of commodity exports which is based on the major selected domestic produce exported. These include solar salt, Barcardi Rum, Crawfish, Sponges, Queen Helmet Shells, Avocado Pear, Grapefruit, Lemon, Lime, tomatoes, stone crab claws and conch meat.

The index of average expenditure of tourist days is calculated based on

40 the Tourist expenditure divided by the number of tourist days (i.e. average length of stay multiplied by number of visitors) and then each year’s result is divided by 1991 as this is the base year.

41 GROSS NATIONAL PRODUCT: This is GDP minus Net property & entrepreneurial income received from abroad.

Main source of data: Central Bank and USA Statistical Abstract Current Prices: This item is the net of i) official transactions ii) Royalty and License fees and iii) Other private interest and dividends, received from and sent abroad. Constant Prices: The portion received from abroad is deflated using the combined Laspreyres price/unit value of commodity exports and the index of Average Expenditure per Tourist day. The portion sent abroad is deflated using USA Export Price Index.

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