Annexes

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Annex 1.1 - Improvements/changes incorporated in the 1993 revision of the system of national accounts
Annex 2.1 - The historical developments
Annex 2.2 coverage of agricultural activity in SEAFA
Annex 2.3 Sub-division of the households sector
Annex 2.4 Entrepreneurial income
Annex 2.5 Food balance sheets
Annex 2.6 Framework for satellite accounts for food balances
Annex 2.7 Reflecting the full value of forests in SEAFA
Annex 2.8 Fisheries in SEAFA
Annex 2.9 List of supporting statements
Annex 4.1 An overview of sector models appearing in the FAO's publication agricultural sector analysis and models in developing countries
Annex 5.1 List of important FAO publications

Annex 1.1 - Improvements/changes incorporated in the 1993 revision of the system of national accounts

(with special reference to Agriculture Sector)

The 1993 revision of the System of National Accounts (called the 1993 SNA) retains the basic theoretical framework of the 1968 SNA. The revision contains:

· clarifications of the concepts presented;
· harmonization with other supporting statistical systems, such as balance sheets and reconciliation accounts, tangible assets and income distribution, that were finalized after 1968;
· establishment of clear links with other related statistical systems such as Balance of Payments, Government Finance Statistics and Money and Banking Statistics prepared by IMF;
· added features that reflect the new analytical and policy concerns of countries and international organizations.

Apart from all of the above, which enhance the usefulness of the 1993 SNA in the day-to-day work of planners and policy-makers in all fields, the 1993 SNA has also given particular attention to the delineation of production boundaries, explicit coverage of own account production and modified presentation of accounts to make them more compatible with analytical requirements. Some of the features of the 1993 SNA that are directly relevant to the compilation of SEAFA follows:

(a) The 1993 SNA partitions the production account of the 1968 SNA into two accounts: a Production Account, where the balancing item is "value added" and a Generation of Income Account, with "operating surplus/mixed income" as the balancing item.
(b) The 1993 SNA includes production accounts for all institutional sectors in addition to a production account for establishment-based industries of the 1968 SNA. In order to link these two types of production accounts, the 1993 SNA recommends a cross-classifcation of output, intermediate consumption, gross value added and its components by type of sector and industry.
(c) The 1993 SNA introduces a distinction not made in the 1968 SNA, between the operating surplus of certain unincorporated enterprises owned by households and the operating surplus of other enterprises. For this purpose, it introduces a new name for the net operating surplus arising from the production activities of unincorporated enterprises owned by households (except for the surplus arising from the production of housing services for own consumption by owner occupiers) which is called "mixed income" and represents a mixture of two very different kinds of value added components i.e. compensation of employees and operating surplus.
(d) The 1993 SNA introduces a distinction between an analytical unit and an observable unit, when referring to the unit of classification in the production account, in the supply use and in input output tables. An analytical unit is defined by the 1968 SNA in reference to one activity and one location, but for practical reasons the 1993 SNA introduces an observable unit version of the analytical unit which, in addition to its main activity, may also cover secondary activities of different types.
(e) The 1993 SNA recommends that in agriculture the statistical unit and the definition of output should be the same as those proposed for other market producers. The establishment in agricultural activities refers to the agricultural holding. As in the case of other activities, the output includes transactions among agricultural holdings but excludes products for intermediate consumption within the same agricultural holding. (Statistical information in agriculture is often not available in this form and it may be necessary to use either the gross-gross measurement of output, which includes products used for intermediate consumption in the same agricultural holding, or the concept of the "national farm", in which agricultural products used in either the same or other agricultural holdings are entirely omitted.).
(f) The output of agricultural, forestry and fishery sectors includes the growth of so called cultivated assets including the growth of livestock and fish stocks, vineyards, orchards, plantations and timber tracts, as well as the growth of agricultural crops and fruits that are products of plantations and the like. The 1968 SNA included only the natural growth of livestock and fish stocks as output (and subsequently as gross capital formation). Output of agricultural products, orchards and timber tracts were recorded at the time of harvest. In the 1993 SNA, the growth of agricultural crops, orchards and timber tracts, prior to the use of products, is recorded as work-in-progress during growth if this exceeds more than one period/year.
(g) The 1993 SNA recognizes the distinction between formal and informal sectors of the economy, although clear criteria for distinguishing one from the other have not been described yet. It has been recommended, however, that this distinction be used for presenting data for analysis and policy making in specific country circumstances.
(h) The production boundary in the 1993 SNA is slightly different from the 1968 SNA. The 1993 SNA distinguishes between goods and services and includes the production of all goods in its production boundary, while only those services that are exchanged in the market and/or generate income for economic units are included as production. The 1993 SNA clearly indicates the coverage of own-account production has been clearly indicated, such as the storage of agricultural goods produced by the household, and includes it in the production boundary.

(i) The 1993 SNA has also suggested that for more refined analysis of the production process, use may be made of an analytical unit of production which is not always observable. The production unit is termed the "unit of homogeneous production" and covers no secondary activities. (Agricultural commodities for which data are collected directly from the field come under this category, and the production account, similar to that prepared for agricultural establishments, can also be prepared for this group of "homogeneous industries" for the formulation of economic plans on the pattern of input-output tables.)

Annex 2.1 - The historical developments

The need for a coherent accounting system for agriculture has long been recognised by the FAO. Work on the creation of the system started in 1949 with the publication of food balance sheets. Food balance sheets present comprehensive pictures of the patterns of individual country's food supply during specified reference periods and are the main source of data used in the assessment and appraisal of the world food situation made by FAO from time to time. The preparation of food balance sheets required the organisation of data on production, consumption (both intermediate and final), stocks and foreign trade of food which in turn became a starting point for establishing a system of agricultural statistics. Basic work in this direction was started in 1956 when the first international standards for agricultural sector accounting were released in the publication" Agricultural sector accounts and tables. a handbook of definition and methods" by the Joint ECE/FAO Agriculture Division for European countries. This handbook was based on the experiences gained in producing the recurring publication "Output, expenses and income of agriculture in European Countries which was first issued in 1953.

Although the initial efforts were directed towards countries in Europe, the importance of improving the agricultural sector accounts for developing countries has gradually been recognized and at the Twelfth Session of the Conference of FAO, special attention was drawn to "the benefits that developing countries would derive from the standardization of accounts data in the formulation of economic policy". Similar recommendations were made at the subsequent FAO Conferences in 1966 and 1968.

In 1969 the FAO Statistics Advisory Committee of Experts recommended that the preparation of a world version of the Handbook on Economic Accounts for Agriculture should be accelerated and gave the following specific recommendations on its contents:

· it should include adequate exposition of the system consisting of three essential accounts -- production, income and outlay and capital formation;
· it should be in a form suitable for use by statisticians not necessarily specialized in this field;
· it should emphasize the need of developing a system suitable to the conditions of developing countries, including those countries with predominantly subsistence agriculture;
· it should deal with the practical problems of estimating economic accounts for agriculture from limited basic statistics.

Considering the recommendations and suggestions of the Advisory Committee FAO released a provisional Handbook of Economic Accounts for Agriculture (EAA) in 1974.3 This handbook was jointly prepared by Statistics Division of FAO and the Statistical Office of the United Nations. The economic accounts for agriculture discussed in the handbook cover the agricultural activity of a country as a whole. EAA in this case included only production, commodity and capital formation accounts. EAA basically followed the concepts and format recommended by SNA. Some of the special features of EAA (1974) follow:

· Statistical units for the purpose of EAA are the agricultural holdings which can be classified into: agricultural households; corporate units with large farms, which generally deal with cash crops such as sugarcane, tea, coffee and rubber; producers of government services, i.e. government experimental farms attached to the ministry of agriculture, research organisations or universities or to institutions such as prisons; and producers of private non-profit services serving households, such as agricultural holdings in hospitals and religious places. As the last three categories are usually very small and the purposes of production activity by these institutional units are different one production account was recommended for the first unit only.
· Other products of the agricultural holding include forestry and fishery production when these are carried out as ancillary activities on a holding and do not form part of own account capital formation such as land improvements. Any other production activities, such as wine, cheese and sugar extraction, that may be carried out on farms, are not considered except when it is impossible to separate such activities from agricultural production.
· The concept of gross output of SNA does not include the seed and feed that are used in production on the holding if these items are produced during the same accounting period by the same establishment. Since the usual statistics measure total production or harvest, including seed and feed, the EAA worksheet for estimating the gross output of agriculture starts with total production.
· In national accounts, an accounting period is usually taken as a calendar year or financial year, which is different from a crop year. EAA recommended that the total production of a crop may be counted in the accounting period in which the majority of that crop is harvested. This method ensures correspondence between inputs and outputs if all the inputs have also been used in the same accounting year. However, EAA has also suggested that if such correspondences do not exist footnotes may be given showing the relevant data for the benefit of users.
· The capital formation account of the 1968 SNA (on which the handbook was based) covers reproducible tangible assets along with transfer costs on purchase of land. For agricultural holdings, it is also important to have information on the changes in the agricultural land owned by the holding. Therefore an item of net purchases of agricultural land by holdings, excluding transfer costs, has been added in EAA to the capital formation account of SNA.

The EAA Handbook released in 1974 consisted of two parts. Part one gave the conceptual framework while part two presented the steps involved in compiling accounts with the aid of basic agricultural statistics. Since that time, the Statistics Division of FAO has been actively involved in assisting developing countries in the improvement of their statistical database used for the compilation of economic accounts. FAO issued precoded computerized questionnaires and approached other international organizations to obtain data on Production Account and Capital Formation Account at both current and constant prices. The data were published in three volumes released in 1974, 1979 and 1986.5 The latest issue covered about 60 countries for the period 1976 to 1985.

The 1974 draft of the EAA Handbook was considered at a meeting of the FAO/ECE/CES Study Group held in May 1974. The Study Group recommended that a European variant of this handbook should be prepared explicitly to take care of the specific requirements of the region vis-à-vis the system for data collection. This European handbook was also to take into account the different national accounting systems in use across the region. Accordingly the work was taken up by the Secretariat of ECE as well as the Statistical Office of the European Community (SOEC).

The SOEC started preparing EAA in 1964 (cf. "Agricultural Statistics 1963/64"). The concepts, definitions and rules of accounting in this publication were not uniform for the first few years. However, in 1969 the original Member States started using the European System of Integrated Economic Accounts (ESA) which was formulated on the pattern of SNA and, at the same time, the framework for EAA supplemented by the System of Economic Accounts for Forestry (EAF), which was based on ESA, was introduced. The work was subsequently expanded and the latest manual of SOEC was released in 1992.

The ECE Secretariat in cooperation with FAO also initiated work to develop a European Handbook of Economic Accounts for Agriculture which was released in 1983 at the Conference of European Statisticians. This handbook is directly based on the framework recommended by SNA and the latest version was released in 1989.9

The conceptual framework for both these European handbooks is basically the same as that of FAO (1974), but for the inclusion of an additional account relating to income and outlay in the ECE system. However, the fundamental difference between the two handbooks concerns the statistical unit applied. In the ECE handbook, similar to FAO (1974), the concept of the production holding has been used. The latter includes the total activities of the holding related to agriculture as per ISIC/CBNE". SOEC, on the other hand, used the production branch concept, in which units of homogenous production (i.e. units producing goods of a similar type) are grouped together. This concept is based on an evaluation of "final production of all agricultural products, as per NACE, no matter where or in what type of unit they are produced, but only those products".

Work on the revision of the 1974 handbook started in 1983. To learn more about the problems confronted by developing countries during the preparation of economic accounts for agriculture, a number of country case-studies were commissioned in 1984 from national institutions in selected Member Countries. These countries were provided with adequate instructions and were requested to fill in a questionnaire on production and capital formation accounts for the years 1978 to 1982 and then to state the use and problems encountered during the exercise. Simultaneously, United Nations Statistical Office initiated work on revision of the 1968 version of SNA. The draft of the revised version of SNA was approved by UNSO in 1993. In April 1993 FAO organized a regional expert consultation on Economic Accounts for Agriculture at Bangkok. The present version of the handbook draws heavily on all the work done and efforts made in the Statistics Division since 1974, numerous comments and suggestions received from the national statistical offices of the member countries and the recommendations of the revised SNA.

Annex 2.2 coverage of agricultural activity in SEAFA

Annex 2.3 Sub-division of the households sector

The 1993 SNA suggested that the households sector be divided into sub-sectors on the basis of different criteria such as type of income, economic or socio-economic status or geographical area depending on the needs of different users, analysts and policy-makers. Two of the criteria are important for SEAFA. They relate to geographical area classification, i.e. to subdivide larger countries into smaller regional units depending on administrative/agro-climatic/ecological boundaries, and formal and informal sectors for arranging production activity into strata of uniform production technologies.

The informal sector' may broadly be characterized as consisting of units engaged in the production of goods or services with the primary objective of generating employment and incomes for the persons concerned. These units typically operate at a low level of organisation, with little or no division between labour and capital as factors of production and on a small scale. The fixed and other assets used do not belong to the production units as such but to their owners. The informal sector is defined irrespective of the kind of workplace where the production activities are carried out, the extent of fixed capital used, the duration of the operation of the enterprise (perennial, seasonal or casual), and its operation as a main or secondary activity of the owner. The informal sector is comprised of informal own-account enterprises, and enterprises of informal employers. The former are owned and operated by own-account workers, either alone or in partnership with members of the same or other households. These enterprises may employ contributing family workers and employees on an occasional basis, but do not employ employees on a continuing basis. Enterprises of informal employers, on the other hand, employ one or more employees on a continuing basis. For particular analytical purposes, more specific definitions of the informal sector may be developed at the national level depending on needs.

The geographical sub-division of the country may generally be adopted either to meet the need of regional plan formulation or to adopt new techniques. For regional planning the most common approach is to adopt administrative sub-division for the easy monitoring of programmes and funds. In the case of needs such as technological up-grading of crop production programmes dealing with irrigation, pest and disease control or use of improved seeds, it is useful to divide the country into homogeneous areas based on agro-climatic factors (namely, soil type, climate -- particularly temperature and rainfall and their variations, water demand and supply characteristics including quality of water and aquifer conditions) which are also known as ecological zones.

Annex 2.4 Entrepreneurial income

Entrepreneurial income is defined in paragraphs 7.18 to 7.20 of the 1993 SNA, where it is stressed that it may be difficult, if not impossible, to calculate such income for an unincorporated enterprise owned by a household because of the difficulty of separating property incomes payable and receivable by the owners in a personal capacity from those attributable to the enterprise. Nevertheless, in the case of agricultural households it could be assumed that property incomes receivable on assets owned by the enterprise are non-existent, or at least negligible in most cases, and that most or all of the interest payable is attributable to liabilities incurred as a result of engaging in production. On these assumptions, the household's entrepreneurial income would be approximately equal to: mixed income minus rent on land and interest payable by the household.

The concept of entrepreneurial income is a better measure than mixed income of the return from production because it allows for rents and capital (or financing) costs as well as for the intermediate and labour costs recorded in the production and generation of income account. Of course, if it is possible to separate interest payments into those attributable to production and those attributable to household consumption, it should be possible to measure entrepreneurial income correctly, but even the approximate measure in which total interest is deducted provides useful information about the profitability of household agricultural production. It should be noted, however, that entrepreneurial income does not allow for the implicit rent and interest charges incurred when the land and fixed assets used in production are purchased by the owners of unincorporated enterprises out of their own funds. The derivation of entrepreneurial income is given in a sub-account shown in the table below. Entrepreneurial income, whether exact or approximate, can be shown as a memorandum item with the allocation of income account.

ENTREPRENEURIAL INCOME SUB-ACCOUNT FOR THE AGRICULTURAL HOUSEHOLDS SUB-SECTOR

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Annex 2.5 Food balance sheets

Introduction

A Food Balance Sheet is a system of presenting a comprehensive view of a country's food supply for human consumption at national level. The food balance sheet shows for each food item -- i.e. for each primary commodity and for a number of processed commodities potentially available for human consumption -- the sources of its supply and its utilization. Thus it employs a supply and utilization account framework to arrive at apparent consumption (of food) of the population of the country defined in the following manner:

Apparent Consumption = (commercial production + estimated own account production for self consumption + import + opening stocks) minus (exports + usage input for processed food + seed + feed + non-food usage + wastage + closing stocks) where:

COMMERCIAL PRODUCTION (OF FOOD) is the total supply of food products (including derived products) available for human consumption. Food can be reported in terms of primary product equivalents, such as wheat and milk, or in the form in which the products will actually be consumed, such as flour and cheese.

OWN-ACCOUNT PRODUCTION FOR OWN-CONSUMPTION includes noncommercial production, production from kitchen gardens, food gathered from forest areas etc.

IMPORT and EXPORT include recorded as well as unrecorded foreign trade including food aid.

OPENING and CLOSING STOCKS include governmental, commercial and farm held stocks.

USAGE OF PROCESSED FOOD includes quantities of primary agricultural commodities used for production of processed food products such as cheese, alcoholic beverages, flour, pasta or pastry.

SEED is an estimate of the amount of the agricultural product set aside for reproductive purposes, such as seed and sugar-cane for planting, eggs for hatching and fish for bait, whether domestically produced or imported.

FEED is the amount of a commodity fed to livestock during the reference period, whether domestically produced or imported.

NON-FOOD USAGE is a miscellaneous category of utilization of food products that are neither identified nor used as food for the population of the country. This includes items such as use of oils and fats to produce soap and food used to feed tourists or refugees. This item is also sometimes used to record suspected statistical discrepancies arising from unrecorded exports.

WASTE is an estimate of what is wasted at all stages of food production and distribution from the point at which production is first recorded. It includes waste in processing, storage and transportation. Waste from losses occurring before and during harvest as well as wastage by ultimate consumer household are excluded. Losses identified as waste normally occur as a result of inadequate storage practices, but also in cases where food remains unsold or there is wilful destruction of a product because of an imbalance between supply and demand. This is particularly true of perishable foods such as fresh fruits and vegetables.

The food balance sheet presents data on: selected food product items in quantity terms, giving distribution of domestic supply and domestic utilization by broad categories as listed above; total per caput supply per year in quantity terms; and per caput per day supply in terms of quantity and also in terms of caloric value, protein and fat content (calculated by applying appropriate food composition factors for all primary and processed products).

Limitations of Food Balance Sheets

Food balance sheets are a method of measuring food consumption from the food supply perspective. The data used for preparing food balance sheets are assembled from a variety of official and unofficial sources and, their quality and coverage varies considerably among countries and commodities. Thus while interpreting the results of food balance sheet data, it is necessary to pay due attention to the inaccuracies and errors that may have occurred at each stage of the balance sheet construction. The sources of errors follow:

First, the total food supply is difficult to measure especially in countries where people (in order to be more self-sufficient), grow, gather or hunt for a portion of their food. In addition, data on fruit, vegetables and root crops, which are often grown on small subsistence holdings, tend to be incomplete.

Second, estimates of agricultural products that are in storage, wasted or used as animal feed as well as data on stocks are very often imprecise. Similarly the end uses of animal offal are difficult to identify as some is used for food, some processed as pet food and some left as waste. The proportions can vary from year to year and depend on demand, quality and relative prices.

Third, the conversion of the food supply into an estimate of energy, protein, fats and micronutrients is based on food composition information from various sources and the results need to be treated with caution. The energy and nutrients available from foods depends on a number of factors such as storage, processing, preparation and cooking methods.

Fourth, food balance sheets cannot keep track of developments in consumer behaviour. For example, in the case of milk products it is impossible to fully capture the ever-increasing number of derived products (such as low-fat yoghurts and mixed drinks) and to derive meaningful intake figures. Similarly the application of conversion rates to express a primary product in an "edible" equivalent is difficult because the old factors are approximate in nature and new technologies are being introduced to improve the extraction rates.

Additional limitations which must be kept in mind by the users of food balance sheets follow:

(i) The balance sheets cannot provide information on who is eating the food and are unable to help answer questions on the distribution of food among various segments of the population or as to whether the elderly, the poor or children are receiving enough food. Moreover, food balance sheets cannot help determine whether people are receiving the type of food necessary to meet their dietary requirements.

(ii) Food balance sheets provide estimates of food supply. Food supply is not an estimate of the food actually consumed but of the amount of food apparently available for consumption. Household budget and food consumption surveys are more appropriate methods for obtaining estimates of the amount of food acquired or actually consumed.

Uses of Food Balance Sheets

In spite of their limitations, food balance sheets represent the only comprehensive source of worldwide information on food supplies. Their primary contribution is to provide statistical information quantifying world supplies, as well as to reflect changes that have occurred in per caput dietary energy supplies and food supplies patterns. The estimates of national aggregate are suitable for assessing the overall shortages and surpluses in the food supply of the country.

FAO's food balance sheets: are based on a series of Supply and Utilization Accounts (SUAs) which are prepared on a calendar year basis. Annual food balance sheets tabulated regularly over a period of years will show the trends in overall national food supply, disclose changes that may have taken place in the type of food consumed, i.e. the pattern of diet, and reveal the extent to which the food supply of the country, as a whole, is adequate in relation to national requirements.

By bringing together the major part of the food and agricultural data in each country, food balance sheets also serve for the detailed examination and appraisal of the food and agricultural situation in a country. A comparison of the quantities of food available for human consumption with those imported will indicate the extent to which a country depends on imports (the import dependency ratio). The amount of food crops used for feeding livestock in relation to total crop production indicates the degree to which primary food resources are used to produce animal feed which is in turn a useful indicator to formulate crop and animal husbandry policies. Data on per caput food supplies serve as a major element for the projection of food demand, together with other elements such as income elasticity coefficients, and the projection of private consumption expenditure of the population.

International organisations, governments, planners and researchers concerned with the assessment of food supplies and the nutritive value of food, use the food balance sheets to evaluate the ability of the food supply to provide the essential elements for the national diet and to identify changes in the food supply over time as well as the relationships between national food supplies and famine and malnutrition.

References

1. Australian Bureau of Statistics - Apparent Consumption of Foodstuffs and Nutrients, Australia, 1990-91, ABS Catalogue No.4306.0

2. FAO - Handbook for the preparation of Food Balance Sheets, Washington, D.C., U.S.A., April 1949

3. - Food Balance Sheets, Asia and Pacific Commission on Agricultural Statistics,

Thirteenth Session, Bangkok, Thailand, 29 October -2 November 1990

4. - The ICS: The Interlinked Computerized Storage and Processing System of Food and Agricultural commodity data, Users' Manual, Statistics Division, 1985

5. - Food Balance Sheets, 1984-86 average, 1991

6. Trant, M. - Food Balance Sheets: Their Strengths and Limitations, Proceedings of the workshop hosted by the State Committee on Statistics and the Ministry of Agriculture and Food of Belarus, organised by the Centre for Co-operation with Economies in Transition, financed by the OECD and EUROSTAT (TACIS), FAO and ECE, 25 to 29 April 1994

7. Lindner, A - OECD's Work on Supply Balance Sheets (SBS) and Their Use, details of reference- same as 6

Annex 2.6 Framework for satellite accounts for food balances

Account 1: Food Producing Establishments
Account 1.1: Production Account

Account 1.2: Generation of Income Account

Account 1.3: Capital Account

Account 2: Goods and Services Account for food products

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