Gross Fixed Capital Formation GFCF International Workshop on

Gross Fixed Capital Formation (GFCF) International Workshop on Measuring GDP by Final Demand Approach, Shenzhen, China, 25 -27 April 2011 Prepared By : Nursinah Amal Urai STATISTICS INDONESIA

Gross Fixed Capital Formation (GFCF) is measured by the total of a producer’s acquisition, less disposals, of fixed assets during the accounting period plus certain specified expenditure on services that adds to the value of non produced assets. Fixed assets are produced assets that are use repeatedly or continuously in production processes for more than one year

Gross Fixed Capital Formations includes: 1. Acquisitions less disposal of new or existing produced asset, such as dwelling, other building structure, machinery and equipment, weapon system, cultivated assets, intellectual property product (e. g. , research & development, mineral exploration, computer software, entertainment, literary or artistic originals, and other intellectual property products; 2. Cost of ownership transfer on non produced, nonfinancial assets, such as land patented assets; 3. Major improvement to produced and non produced assets that extend the lives of assets (e. g. , reclamation of land from sea, clearance of forests, draining of marches or irrigation of forests, and prevention of flooding or erosion; 4. Acquisition can be in terms of purchase, own-account production, barter, capital transfer in kind, financial leasing, growth of cultivated assets and major repairs of produced assets; 5. Disposal can be in term of sale, barter, capital transfer in kind or financial lease, exceptional losses, such as those due to natural disasters (are not recorded as disposal).

Assets in the 1993 SNA Financial assets Non-financial assets Non-produced Produced Fixed Inventories Tangible Valuables Intangible Tangible - Land - Buildings - Structures - Machinery & Equipment - Mineral exploration - Computer software - Entertainment, literary or artistic originals - Other - Subsoil assets - Non-cult biological resources - Water resources Intangible - Patented entities - Leases and contracts - Purchased goodwill

Assets in the SNA update Financial assets Non-financial assets Non-produced Produced Fixed Buildings Structures Machinery & Equipment Inventories Valuables - R&D - Mineral exploration and evaluation - Computer software and databases - Entertainment, literary or artistic originals - Other IP products Goodwill and marketing assets Contracts, leases and licenses Natural resources - Natural land - Mineral & energy reserves - Non-cult biological resources - Water resources - Other natural resources

GROSS CAPITAL FORMATION GFCF ∆ Inventories ∆ Valuables • Construction • Machinery & equipment • Cultivated biological resources • Ownership transfer costs • Weapons systems • Intellectual property products) 01/01/2022 6

Gross Fixed Capital Formation (In Practice) Type of Assets: ØBuildings & Constructions ØMachinery ØTransport ØOthers o. Prime movers engine o. Machinery and apparatus o. Electric generator and electrical motor o. Electrical machinery and apparatus o. Communication equipment and apparatus o. Other electric appliances o Dwelling o Construction on agriculture o Public work on roads, bridges and harbor o Construction and installation on electricity, water supply, gas & communication o Other constructions o. Ship and its repair o. Train and its repair o. Motor vehicle o. Aircraft and its repair o. Other transport equipment o. Cultivated assets o. Mineral explorations o. Make up textile goods except wearing apparel o. Manufacture of carpet, rope and textile o. Hand tools and agricultural tools o. Measuring, Photography and optical equipment o. Musical instruments o. Others

GFCF Measurement There are two methods for measuring GFCF: § Direct method § Indirect method (commodity flow) In Practice : § Conventional approach: By estimating based on the collecting data for business and public sector, especially commercial accounting § Commodity flow approach : By estimating supply (output plus net import for related product) which is allocated to expenditure component.

Fixed Capital Formation: Valuation and Time of Recording ◦ Valuation: - Market prices (included installation cost and other owner transfer cost) - Cost plus mark up (for net operating surplus or mixed income for self production) ◦ Time of recording: - Change of ownership - Time of initiation of use 9

GFCF by Institutions Ø Ø Ø Government Household NPISHs Financial Corporation Non Financial Corporation GFCF by sector 1. 2. 3. 4. 5. 6. 7. 8. Agriculture Mining & Quarrying Manufacturing Electricity, gas and water supply Construction Trade, restaurant & hotel Transport & communication Financial intermediaries, real estate and business services 9. General government 10. Other services

Source of Data 1. Primary Survey : Annual Survey of Fixed Assets 2. Secondary data : • Foreign trade statistics (net import capital goods value) • Corporate Annual reports • Statistics of Mining • Statistics of Large and medium Industries • Statistics of Construction • Government Capital Expenditure

Fixed Capital Formation : Main Types: • Construction • Machinery & equipment • Cultivated biological resources (livestock, timber and fruit trees) • Artistic products used in production (e. g. movies) • Major improvements to tangible non-produced assets (e. g. land) • Ownership transfer costs • Weapons systems • Intellectual property products (Research & Development, Mineral exploration, Computer software)

Non Produced Asset 1. Natural Resources • Land • Mineral & energy reserves • Non cultivated biological resources • Water resources • Others

2. Contracts, leases, and licenses • Marketable operating lease • License to use natural resources • Permits to undertake specific activities • Entitlement to future goods and services on an exclusive basis 3. Goodwill and marketing asset

Worksheet of Measuring Gross Fixed Capital Formation Based on SNA 2008 ( For the future rebasing new year 2010 )

THE INDONESIA ECONOMIC GROWTH, 2008 Expenditure Contribution (%) Ch 5, 34 % 60, 62 Cg 10, 43 % 8, 42 GFCF 11, 89 % Contribution (%) 27, 70 14, 48 G D P 6, 01 % Export 9, 53 % 29, 81 Agriculture 4, 83 % 10, 94 Mining & Quarrying 0, 71 % 27, 81 Manufacturing 3, 66 % 0, 83 Elct, , Gas& Water Supply 10, 93 % 8, 48 Construction 7, 55 % 13, 97 Trade, hotel, & restaurant 6, 87 % 6, 31 Transportation & Communication 16, 57 % 7, 44 - Import 10, 00 % Production Finance, Real estt, Bus Service 8, 24 % 28, 75 9, 74 Services 6, 24 % 16

THE INDONESIA ECONOMIC GROWTH, 2009 Expenditure Contribution (%) Ch 4, 85 % 58, 72 Cg 15, 67 % 9, 59 GFCF 3, 30 % Contribution (%) 31, 13 15, 30 G D P 4, 58 % Export - 9, 69 % 24, 17 Agriculture 3, 98 % 10, 56 Mining & Quarrying 4, 44 % 26, 37 Manufacturing 2, 16 % 0, 84 Elct, Gas & Water Supply 14, 29 % 9, 91 Construction 7, 07 % 13, 28 6, 29 Trade, Hotel, & Rest 1, 30 % Transportation& Communication 15, 50 % 7, 21 -Import - 14, 98 % Production Finance, R. Estt. Bus service 5, 05 % 21, 36 10, 24 Services 17 6, 42 %

THE INDONESIA ECONOMIC GROWTH 2010 Expenditure Ch 4, 63 % Cg 0, 29 % Contribution (%) 15, 34 56, 70 11, 15 24, 82 9, 06 G D GFCF 8, 50 % 32, 15 P 6, 10 % Export 14, 92 % 24, 61 0, 78 Agriculture 2, 86 % Mining & Quarrying 3, 48 % Manufacturing 4, 48 % Electricity, Gas, Water Supply 5, 31 % 10, 29 13, 72 Construction 6, 98 % Trade, Hotel&Restaurant 8, 69 % 6, 50 Transportation & Communication 13, 45 % 7, 21 -Import 17, 28 % Production Finance, R Est, & Bus Services 5, 65 % 22, 98 10, 19 Services 18 6, 01 %