Experts: GDP should not include non-observed economy

03:48' PM - Wednesday, 31/01/2018

Experts have called for a second thought on a plan of the General Statistics Office (GSO) to include the non-observed economy in the calculation of Vietnam’s gross domestic product (GDP), reports Tien Phong newspaper.

At a conference on GSO’s plans for this year, Prime Minister Nguyen Xuan Phuc said GDP had yet to consist of the non-observed economy, which includes underground, illegal and informal economic activities, and household production for own final use.

GSO general director Nguyen Bich Lam said the office had collected, calculated and processed data about non-registered household businesses, household production for own consumption and omitted economic activities. However, underground and illegal economic activities are not yet monitored by GSO.

Lam dismissed the claim that the non-observed economy represents 30% of GDP, saying it is hard to gather accurate data about underground and illegal economic activities. In many foreign countries, gambling and prostitution are legal but illegal in Vietnam, so their data is not yet included in GDP in Vietnam, he reasoned. Therefore, GSO, ministries and agencies would discuss ways to collect data from illegal economic activities.

Nguyen Duc Thanh, director of the Vietnam Center for Economics and Policy Research (VEPR), said statistics on the informal sector are needed for the Government to map out proper economic development strategies. But the underground economy should not be added to GDP, he said, adding the inclusion of the informal economy would lead Vietnam’s GDP to rise, thus making it possible to lower the State budget deficit and the ratio of public debt to GDP.

Le Dang Doanh, an economic expert, said the best way to manage enterprises in the informal sector is to establish an e-Government. The Government should make conditions favorable and transparent for enterprises so that they can do business transparently.

Vo Tri Thanh, former deputy director of the Central Institute for Economic Management (CIEM), said underground economic activities accounted for over 10% of GDP in 1990. Ten years ago, certain agencies and organizations put the percentage at 30-35%.

Research by the International Finance Corporation (IFC) in 2003 showed tighter controls by the Government had resulted in the informal economy expanding. In the localities where the research was conducted, IFC found strict regulations had paved the way for the informal economy to grow, said Dau Anh Tuan, head of the Legal Department at the Vietnam Chamber of Commerce and Industry (VCCI).

Unreasonable regulations have made life hard for enterprises, so if enterprises comply with those regulations, they could not compete with those trying to dodge them.

The underground economy affects significantly legitimate businesses as it robs them of business opportunities, and creates fertile ground for corrupt State employees to ask for bribes.

The underground economy will also make products of legitimate enterprises uncompetitive in local and foreign markets.

Tuan said the national economy may lag further behind other countries, especially in the ASEAN region.

Underground economic activities are those conducted in a way that avoids obligations to pay taxes and social insurance premiums, and dodge regulations on minimum wages as well as legal and administrative procedures. - Source: SGT -

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