TimorLeste Informal Sector Statistics Training Bangkok Thailand 14

Timor-Leste Informal Sector Statistics Training Bangkok, Thailand | 14 -15 November 2017

Outline of presentation • • Definition of informal sector Status of the informal sector in Timor-Leste Country policies for informal sector Current statistics being produced National Accounts and the informal sector Country specific issues in statistics Development plans How development partners can help

Definitions • Definition of informal sector – a policy perspective The informal sector represents an important part of the economy, and certainly of the labor market, in many countries and plays a major role in employment creation, production and income generation. In Timor-Leste those industries which considered to be engaged in the informal economy is categorized as other informal activities. - Other informal activities Activities which are not covered in the Business Activity Survey (BAS) of which all informal and other activities by households and unincorporated businesses, such as: informal mining and quarrying, piecemeal manufacturing, and own account construction by HHs, street vendors, agricultural markets, own-operator transport operations

Definitions • Definition of informal sector – statistical definitions adopted in the 2013 LFS In line with the international statistical standards (15 th ICLS, 1993), informal employment is defined to include: • Employees with no formal relationship with their employers. For operational purposes, informal employees are defined as those who do not benefit from paid sick leave and paid annual leave. • Employers and own-account workers of informal sector enterprises. For operational purposes, informal sector enterprises are defined as all economic units engaging fewer than 5 workers and are not registered under specific forms of national legislation (tax office and procurement office). • All contributing family workers.

Status of informal sector statistics • As recalled from the National Accounts results, the share of informal sector over the GDP (GDP-P) can be seen as follows: Informal Industries % of total GDP 2010 2011 2012 2013 2014 2015 20. 9 17. 0 17. 9 17. 4 17. 2 15. 8 0. 00 0. 09 0. 08 0. 19 0. 18 0. 17 0. 37 0. 34 0. 31 0. 29 0. 27 Agricultural Markets 2. 2 1. 7 1. 8 1. 7 1. 5 Street Vendors 0. 8 0. 7 0. 6 0. 5 Owner-operator taxis 1. 3 1. 5 1. 6 Owner-operator trucks 1. 5 1. 7 2. 0 1. 9 27. 26 23. 21 24. 37 23. 64 23. 54 21. 82 Agriculture, forestry and fishing Subsistence Ag. Less Coffee Mining Informal Mining and Quarrying Manufacturing Piecemeal Manufacturing Construction Own account construction by households Retail and Wholesale Transport Total Share of Informal Sector of the GDP

Status of informal sector statistics Further results in the LFS 2013 show that: - There were 136, 600 people in informal employment, representing more than 71% of the employed population. - In addition to informal own-account workers (36. 7%) and contributing family workers (18. 8%), informal employment included many informal employees (25. 1%) and informal employers (1. 9%). Comparing with the LFS 2010, persons who are engaged in informal employment based on their main activity are 45, 000, representing only 17. 8% of the employed population. informal employees are those who do not benefit from paid sick leave and paid annual leave. Employers and own-account workers in informal sector enterprises are those operating economic units engaging less than five workers and are not registered under specific forms of national legislation.

Country polices • According to National Employment Strategy 2017 -2030, started from 2010 -2013, there were 50, 643 job had been created but only 16. 4% of that were in formal sector, the rest 83. 6% were in informal sector. Looking from the demographic view, Timor-Leste’s economically-active population will increase from 696, 300 until 913, 800 in 2023. it means that there will be 200, 000 economically active persons in the next 10 years.

Country polices • Creating larger numbers of formal sector jobs will not happen automatically. The Government of Timor-Leste needs to put in place policies, legislation, programmes and activities that can maximize the employment impact of economic growth and that target both men and women. Maximizing employment will require all Government, civil society, trade unions and private sector to work together. • A large number of micro and small enterprises operate in the informal sector and their legalization or formalization is not easy. Commercial law requires obligations for the formalization of companies. This is addressed in the scope of the new Commercial Companies Law approved in the first quarter of 2017, which aims to facilitate the creation of trading companies

Country polices • The 2017 – 2030 NES builds on the previous NES, approved by Council of Ministers in 2011 but never fully implemented, and as such, it keeps the same structure of the three pillars:

Data sources • Labor Force Survey (2010, 2013) • Timor-Leste Living Standard Survey (2007, 2014) • Population Census (2004, 2010, 2015)

National Accounts • In TL-NA, informal sector was categorized as other informal activities that cover all informal and other economic activities by households and unincorporated businesses that were not covered by the BAS, or reflected under other sectors, such as public administration, NPISHs, agriculture, forestry and fishery, and owner occupied dwelling services, or elsewhere as described above.

Industry Source Informal Mining and Quarrying Value added was calculated as 700 persons with an 2010 LFS estimate of $150 per month ($1800 per year) assuming that VA = IC, the output was found to be $2. 5 M Piecemeal Manufacturing Own account construction by households Procedure 2010 Census The 2010 VA for piecemeal and other informal manufacturing is estimated as 4000 persons engaged in this activity with an estimate of $50 per month ($600 per year) giving a total estimate of $2. 4 million. The intermediate consumption is assumed as being equal to the value added, suggesting the value of output of $4. 8 M TL-SLS 2007 The base estimate for own account construction by households for 2007 is derived from GDP-E estimates on GFCF, calculated as follows: 2007 TL-SLS data on expenses on renovation of destroyed house of M$2. 6, plus an estimate of another M$2. 6 (1: 1 ratio) for unpaid expenses on intermediate consumption (IC) goods, and of M$5. 2 for provided labor inputs (2: 1 VA to IC ratio). The output was then estimated at M$10. 4 (2. 6+5. 2) and the value added at M$5. 2 through deduction of intermediate consumption of M$5. 2 (paid and expenses by households on IC goods). The approach adopted is consistent with 2008 SNA (paragraph 6. 127)

Industry Agricultural markets Owner-Operator Transport Operations Street Vendors Source Procedure FAO The output at market prices of trading activities on agricultural markets is estimated at about 7 percent of agricultural output at purchaser prices on farm food crops, livestock, forestry and fishery. The intermediate consumption is then assumed at the rate of 10 percent of the output. DNTT The data on the output and value added of owner taxis, microlets and trucks are data model based estimates that use the data of the Ministry of Infrastructure on state registration of vehicles by type (micro-lets, taxis, and light and heavy cargo vehicles); number of 2010 Census The 2010 value added for the component of street venders is estimated as 12, 000 persons engaged in this activity (from 2010 population census) and an estimate of $50 per month ($600 per year) value added person giving a total estimate of $7. 2 million of value added. The output is then assumed at the rate of 10 percent for intermediate consumption.

Issues • There is no social security currently being applied in most businesses of private sector • Most of small scale businesses are still operating in the informal sector • There is no specific survey to collect information regarding informal sector. Thus the contribution of informal sector towards economy is not clearly seen. • To GDS, need to align the indicators of SDG goal 8 and 10 with NSDP 2011 -2030, thus it is necessary to put the indicators-related question in survey questionnaire and some administrative data collection must be held in order to obtain information that is necessary to compile those indicators.

Development plans for NSO • The agricultural census (2018) will provide basic data to improve the estimation of informal production in the agriculture • The priorities for the development of informal sector statistics are: – Agriculture Census – Updating yearly indicator for Labor Force Survey

Development partners • The Development Partners can help the NSO in terms of: – Best practices, methods, concepts, etc.

Q&A