ICP Regional Coordinators Meeting 1

1. The regional activities Following the release of the final 2011 ICP results in February 2014, the Western Asia Regional Office completed the following activities:  Two missions to the National Bureau of Statistics in the United Arab Emirates to discuss, launch and follow up on the national project aimed at producing sub- national PPPs in UAE;  An innovative exercise for the computation of PPP estimates for the years 2012 and 2013 using methods developed by the Regional Office;  A regional workshop in Turkey – Istanbul to validate the produced price and national accounts data, and the release of the final PPPs for the years 2012 and 2013; 2

1. The regional activities (Cont’d)  Two missions to CAPMAS in Egypt to discuss, launch and follow up on the national project aimed at producing sub- national PPPs in Egypt;  A mission to Sudan to conduct a national conference for the release of the 2011 ICP results and the 2012 & 2013 PPP estimates, followed by a national workshop for launching a national project for the computation of sub-national PPPs;  Online release and promotion of the 2011 ICP Results;  Two special editions of the WA ICP Newsletters; the first edition featured highlights from the Final Regional ICP Workshop (Final results and booklet), while the second edition featured highlights from the regional workshop for the computation of 2012 and 2013 PPP estimates; 3

All the post 2011 Round activities in Western Asia Region originated from Sustain the capacity building benefits and capitalize on the experiences gained in the 2011 ICP Round, through the harmonization of price statistics and National Accounts activities and the production of regular PPP estimates in Western Asia region. 4

However, achieving this vision at the regional level is not as simple as one might hope, given the economical diversity of countries involved. The process is very long, difficult and demanding, and will require massive efforts from the Regional Office as well as the National Statistical Offices. 5

Thus, below is the outline of On the Short Term: Provide a smooth transition between ICP Rounds by computing interim PPP estimations. On the Medium Term: Produce sub-national PPPs by integrating ICP with national CPI and National Accounts activities and assess the feasibility of the exercise on the regional level. On the Long Term: Produce sub-regional and regional PPPs on a regular basis through the harmonization of Price Statistics and National Accounts Activities. 6

On the Short Term 7

1. Overview After the release of the 2011 ICP final regional results in February 2014, the ICP Regional Office for Western Asia developed a new methodology:  To guarantee the continuity of the ICP;  To provide the region’s countries with new and affordable means to produce accurate statistical indicators on a regular basis. The participating countries welcomed this unique initiative and provided all the required materials. Subsequently, the ICP regional team organized a regional meeting in Istanbul in December 2014 to validate the submitted data and produce the PPP estimates for 2012 &

2. The Computation Methodology Prices National Accounts HHC Special Surveys MORES Our methodology is based on the ICP main components:

3. Prices - HHC In order to facilitate the computation process and lighten the workload imposed by the exercise on the National Statistical Offices: The Regional Office at ESCWA assumed the HHC data section The RO requested and used the most detailed CPI data (2011 – 2013), which is most of the times not published (P2P mapping); The RO carefully assessed the CPI lists and treated the items on individual basis; The RO deliberately utilized ICP 2011 quarterly HHC data to: Preserve reliability and seasonality; Increase accuracy and precision. Quarterly inflation rates were applied on the quarterly 2011 average prices; The RO performed a thorough and systematic validation: Guaranteeing more precision and accuracy by double checking; Treating each item on an individual basis according to individual item specifications; Checking outliers using the ICP diagnostic tools (Dikhanov / Skainov Tables); Interpreting outliers by referring to CPI data and 2011 average prices; The RO successfully produced New 2012(2013) HHC average prices sets

Prices – HHC: CPI Lists Detailed CPI Lists were requested to produce more accurate results BEFORE AFTER

Prices - HHC: Validation (Seasonality)

4. Prices – Special Surveys The Special Surveys price data were handled by the National Statistical Offices (NSO) NSOs focused solely on estimating the special surveys data. However, their responsibilities will increase during the future exercises to include the preparation of HHC data; The devised plan did not request any price collection or survey implementation, each country was granted the freedom to apply the method it deemed adequate for the estimation of its price data; New 2012(2013) Special Surveys data sets were produced Machinery & Equipment Construction Private Education Rentals Government Compensation

4. Prices – Special Surveys Machinery & Equipment Development of a Machinery and Equipment Price Index (using Foreign Trade data and SITC Rev 4); The Global average changes of Metal Prices (IMF International Financial Statistics); The Producers Price Index (PPI),The Wholesale Price Index (WPI); The Machinery and Equipment Price Index (MEPI); The Cost of Living Index; The Consumer Price Index (CPI); Trade Statistics; Field Data Collection: Specialized Agencies, Suppliers,... (in some cases it reached 95% of M&E item List). Private Education The Consumer Price Index (CPI); The Cost of Living Index; National Statistical Offices databases; Contacting several qualified private tutors; Field Data Collection (Schools, Universities, Teaching and Learning centers).

4. Prices – Special Surveys RentalsThe Consumer Price Index (CPI) and the Cost of Living Index. Government Compensation Human Resources Management Law and National Salary Scales (44 Occupations – 4 Levels of experience). ConstructionThe Consumer Protection Directory – Ministry of Industry & Commerce (Construction Materials); The Consumer Price Index (CPI); National Oil & Gas Authority; Electricity and Water Authority; Labour Market Regulatory Authority; Ministry of Municipalities Affairs and Urban Planning; The Producers Price Index (PPI); The Wholesale Price Index (WPI); The Construction Input Cost Index; The Cost of Living Index; Development of an Annual Weighted Average of sub-indices; Field Data Collection: Contractors, Engineering Consulting firms, …

5. National Accounts The National Accounts component requiring the breakdown of GDP expenditure was handled by the NSOs under the supervision of the Regional Office Focus was on using MORES as the main tool for archiving the estimation of the detailed breakdown of the expenditure data; GDP expenditure weights were also verified and validated during the regional workshop, and expenditure patterns were crosschecked not only across countries, but also across the three years for the same country; This activity supported the documentation of the methodology used to breakdown the GDP for 2012 and 2013 through MORES and using the expenditure approach. New 2012(2013) expenditure weights were thoroughly estimated

The RO successfully produced New 2012(2013) HHC average prices sets New 2012(2013) Special Surveys data sets were produced NEW 2012(2013) SF01 New 2012(2013) weights were thoroughly estimated NEW 2012(2013) SF06 Updated Exchange Rates and Population figures were used NEW 2012(2013) SF05 & SF07 Western Asia is the first region to compute 2012 and 2013 PPP results

2011, 2012 and 2013 Regional Results PPP variations (2012/2011 and 2013/2012) – Oman as base

2011, 2012 and 2013 Regional Results

Per Capita Expenditure Shares (Region =100)

6. Added Value This exercise performed by the RO at ESCWA is a Double-Folded exercise:  1 st Fold - It serves the Short term objective: The computation of 2012 & 2013 PPPs  2 nd Fold - It serves the Long term objective: ICP – CPI Integration and Harmonization Promoting a strategic approach for the integration of CPI and ICP activities; Reviewing existing ICP and CPI item lists and constructing a harmonized list; Supporting data quality processes. Locating the statistical weak spots and limitations of some countries; Enhancing the statistical capacity of countries in the areas of price statistics and National Accounts, in addition to keeping the PPP concept alive; Giving Western Asia the opportunity to: Build the human capital; Share the know – how; Enhance the national statistical systems. A constructive national and regional exercise; Allowing for linking with Eurostat/OECD and the rest of the world to arrive at more reliable global PPP estimates.

7. A Promising Alliance The 2011 ICP round has very much enhanced the cooperation and coordination between Africa (AfDB) and Westrn Asia (ESCWA). Currently, and as the number of countries in common increases, we aim at increasing this level of collaboration, share the gained experiences, and harmonize the methodologies in order to arrive at improved mutual outcomes.

On the Medium Term 23

1. The Strategy… in brief  As is known, PPP production requires countries to collect price data for a series of identical items, through a preset structured product description;  Given the high cost of this process, and in order to maintain a regular PPP production between ICP rounds, we aimed at exploring and assessing the idea of merging ICP components within the regular CPI work;  Choice fell on couple pilot countries to start with and exploit the idea upon, as they resembled a regional nature;  Pilot case studies will simulate the execution of the project on a reduced scale in order to assess its feasibility on the sub- regional and regional levels. Should the trial be successful, the project will be attempted on a larger sub-regional/regional scale and will thus extend to the Harmonized CPI initiative on the long run. 24

2. The Benefits Besides serving as a Pilot Case Study, this exercise will bring many benefits to the implementing countries:  Help local statistical offices enhance their capacity in the fields of Price Statistics and National Accounts;  Provide a solid estimation of the cost of living in each of the country’s governorates/regions;  Allow local authorities to better assess their comparative growth and advantages, their national competitiveness, and patterns of specialization among industries;  Allow policy makers to better design and evaluate their tax and subsidy policies to better attract investments and industries;  Allow individuals to make a real assessment of income and purchasing ability when relocating from one region to the other for work purposes (real salary assessment). 25

3. Pilot Exercise: Case of UAE  The United Arab Emirates is a federation of seven Emirates (equivalent to principalities), each governed by a hereditary emir who jointly form the “Federal Supreme Council”. The Regional Office (RO) exploited these unique geographic and political structures for the implementation of a Pilot Case study.  The UAE was considered as a region and it’s governorates were considered as independent countries;  This allows the simulation of the exercise on a reduced scale before attempting to implement it on the regional level. 26

3.1. Case of UAE: Activities The WA Regional Office contacted the National Bureau of Statistics (NBS) and compiled basic information regarding the CPI and National Accounts processes in UAE. Subsequently, the RO performed two visits to NBS:  The first meeting was held in July 2014 and focused mainly on the price data and the CPI product lists in each of the seven UAE emirates;  The second meeting was held in December 2014 and tackled the National Accounts part in order to provide GDP expenditure breakdown over 155 basic headings for each of the emirates through the MORES. 27

3.2. Case of UAE: Main Findings Following the two visits to NBS, the main findings are:  The CPI is compiled independently in each of the seven Emirates;  The CPI base year in UAE is 2007 for all seven Emirates;  3 CPI Lists exist in UAE (one for each of Abu Dhabi, Dubai, and the Northern Emirates). CPI has 12 groups, and the lists are identical at the Basic Heading level. However, at the item level, the products differ from one list to the other;  Education, Housing and Health are covered by UAE's CPI basket. The estimation of Construction, M&E and Government Compensation data needs additional effort but should not pose a challenge;  National weights for 155 Basic Headings are needed for each of the seven Emirates. However, these disaggregated figures are not available. 28

3.3. Work Progress  The regional Office unified the 3 CPI lists used in UAE. The unified list was devised with the cost factor in mind. Thus, commonalities in the lists were exploited to the maximum in order to minimize additional work;  Based on the unified list, the Regional Office created the ICP Kit Master list for UAE, allowing NBS to proceed with the data entry and validation procedures;  The Regional Office and NBS agreed on the timing and recurrence of the Special Surveys data collection activities;  The Regional Office agreed with NBS on the methodology which will be applied to provide the GDP expenditure breakdown. 29

4. Other Ongoing Pilot Studies  Parallel to the Pilot Case exercise that is being implemented in UAE, the WA Regional Office initiated a similar study for Egypt and performed two missions (June 2014 and February 2015).  Moreover, the Regional Office suggested to launch an the same Pilot exercise in Sudan. This initiative was presented to the Central Bureau of Statistics during the national ICP workshop in Khartoum in February

On the Long Term 31

The way forward A regional project has been developed by the Regional Office under the title: ‘The Harmonization of Price Statistics and National Accounts Activities and Production of Biennial PPP Estimates in Western Asia Region’. 32