1. Sectorization and measurement of production

2. The Main Issues When Classifing Public Sector Units 1.Residency 2.Institutional units – statistical classification of Public Sector Units 3.Government control 4.Market producers vs. nonmarket producers 5.What is market prices? – What is economically significant prices? 6.Why look at the public sector as whole – fiscal policy! Financial corporations Nonfinancial corporations General government Nonprofit Institutions Serving Households PNFC PFC Private sector State governments Central government Households Public sector Local governments Social Security accounts Extra Budgetary accounts Budgetary accounts

3. No Yes Is the entity a resident? Is the entity an institutional unit? Is the unit controlled by government? Does the unit produce financial services? Is the unit market producer? Yes Integral part of the institutional unit that controls the entity Public Sector Unit Public Corporation Public Financial Corporation Rest of the World No Households, NPISH or Private Corporation No Is there a market establishment that meets the definition of an institutional unit within the nonmarket producer? Classify the market establishment as a quasi- corporation Yes No Public Nonfinancial Corporation No Is the entity a nonresident SPE of government? Classify the entity as a nonresident institutional unit and impute fiscal transactions of SPE in general government sector and rest of the world But Is the unit a financial auxiliary? No Yes General Government No

4. Residency The total economy consists of the set of all resident institutional units and the general government sector consists of all resident general government units An institutional unit is resident in a country if it has a center of economic interest in the economic territory of that country. The economic territory of a country consists of the geographical territory administrated by a government ( subject to its jurisdiction and includes airspace, territorial water, continental shelf, territorial enclaves, free zones, etc.). Center of economic interest when some location exist from which it engages in its economic activities. All general government units are considered to be residents in their own country regardless of their physical location. Corporations subject to the control of a government that is resident in a different economic are not classified as public corporations. Fiscal activities of nonresident government-controlled SPEs should be reflected in GFS ( e.g. all flows and stocks positions between GG and SPE ). International organizations are no resident of national economy.

5. An institutional unit is an economic entity that is capable, in its own right, of owing assets, incurring liabilities, and engaging in economic activities and in transactions with other entities The ability of an institutional unit to own goods or assets in its own right means that it is also able to exchange the ownership of goods and assets in transactions with other institutional units; An institutional unit is able to take economic decisions and engage in economic activities for which it is itself held directly responsible and accountable by law; An institutional unit is able to incur liabilities on its own behalf, to take on other obligations or future commitments, and to enter into contracts; and Either a complete set of accounts, including a balance sheet of assets, liabilities, and net worth, exists for an institutional unit, or it would be possible and meaningful, from both an economic and legal viewpoint, to compile a complete set of accounts if they were required.

6. Government Control of Nonprofit Institutions Control of an NPI is defined as the ability of determine its general policy and program. To determine if a NPI is controlled by the government, the following five factors are of most importance and my imply control: If the government has the right to appoint the officers managing the NPI. If other instruments allow the government to determine significant aspects of the general policy and programs (e.g. approval of various activities and decisions made by the NPI). If there are contractual agreements between a government and an NPI that allow the government to determine key aspects of the NPI’s general policy and program. An NPI that is mainly financed by government may be controlled by that government. If the government is exposed to most of the financial risks associated with an NPI’s activities, then A single factor could be sufficient to establish control in some cases, but in other cases, a number of factors may collectively indicate control.

7. Government Control of Corporations Control is defined as the ability to determine the general corporate policy of the corporation: To determine if a corporation is controlled by the government, the following eight factors are of most importance and my imply control Ownership of the majority of the voting interest. Control of the board or other governing body Control of the appointment and removal of key personnel. Control of key committees of the entity. A government may own a “golden share”, particularly in a corporation that has been privatized. Regulation and control. Control by a dominant public sector customer or group of public sector customers. Control attached to borrowing from the government. A single factor could be sufficient to establish control in some cases, but in other cases, a number of factors may collectively indicate control.

8. A market producer is an institutional unit that provides all or most of its output to others at prices that are economically significant. A nonmarket producer provides all or most of its output to other for free or at prices that are not economically significant. Economically significant prices are prices that have a significant effect on the amounts that producers are willing to supply and on the amounts purchasers wish to buy.  The producer has an incentive to adjust supply.  Consumers make choice on the basis of the prices charged. A price is not economically significant when it has little or no influence on how much the producer is prepared to supply and on the quantities demanded. There is no prescriptive numerical relationship between the value of sales and the production costs, but one would expect the value of the sales public corporations to average at least half of the production costs over a sustained multiyear period. Distinction between market and nonmarket producers should be made on a case of case basis. Corporations receiving substantial government financial support or that enjoy other risk- reducing factors are more likely to be classified as nonmarket producers.

9. SNA 2008/GFSM 2001: Economically significant prices p q D S q p D S p1p1 ESA 2010: 50% criterion; if more than 50% of production cost is financed by sale. Sale 60% Contribution 40% Production cost Sale to private sector Sale to GG (unit related) Contributions (subsidies) 35% 45% 20% Sale Contrib. 40% 60% Market output versus Nonmarket output Market producer versus Nonmarket producer

10. The Public Sector and Its Main Components Other Public Financial Corporations Public Financial Corporations General government Public Deposit-taking Corporations State governments Central government Public Nonfinancial Corporations Local governments Social Security Funds Extra Budgetary Budgetary Public Sector Public Corporations Central Bank Public Deposit-taking Corporation - CB

12. The Sectorization in Indonesia Public sector General governmentPublic corporations Central government Extrabudgetary CG 110 units Budgetary CG 21 PFC (SOEs) BLU 144 entities 120 PNFC (SOEs) Local government LGs (+PGs) Precise sectorization needed of BLU, ECG and SOEs! The BLU entities do not fulfill the requirement needed to be an institutional unit! The main financing of the ECG units are from the Budget. Six units have the majority of the financing from other sources, but they operate in like religion affairs, housing, AIDS, assistance with poor, etc. The SOE units were all seen as public corporations. The mission‘s recommendation in this regard is consistant with the national accounts.

13. GFSM2001 as a fiscal policy instrument Corporate sectors + Revenues - Expenditures = Net L/B = Financing Households & Nonprofit Institutions Rest of the world General Government sector + Revenues - Expenditures 1) = Net L/B = Financing + Revenues - Expenditures = Net L/B = Financing + Revenues - Expenditures = Net L/B = Financing Internal sectors (domestic sectors) External sector 1) Acquisition of nonfinancial assets is included in expenditure + Surplus (CS) + Deficit (GG) + Surplus (HH) = Balance (RW) => Deficit (Net L/B) financed internally + Deficit (CS) + Deficit (GG) + Deficit (HH) = - Deficit (RW) => GG ↑ taxes or↓expenditures Fiscal policy / many combinations