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9th World Telecommunication/ICT Indicators
Meeting (WTIM-11) Mauritius, 7 - 9 December 2011
Contribution to WTIM-11 session Document C/18-E 8 December 2011
English
SOURCE: Ministry of Communication & Information Technology, Egypt
TITLE: Egypt’s Experience in Measuring ICT Economic Indicators
December 2011
Arab Republic of Egypt
Ministry of Communications and
Information Technology
Dr. Nagwa El Shenawy
Information Center Director Ministry of Communication & Information Technology
Outline Introduction.
Measuring ICT Economic Indicators
Measuring ICT output.
Overview
Importance
ICT output Methodology
Results
Challenges
Measuring ICT investment
Importance
Definition
Methodology
Measuring Foreign investment (objective – methodology – results – changes)
Challenges ahead
Recommendations
Measuring ICT Economic Indicators
In measuring ICT economic indicators, MCIT has
determined the most important indicators to measure as
follows:
ICT Output
Indicators ICT Investment
Indicators
Foreign Trade
Indicators
Revenues
ICT output (component of GDP)
ICT growth rate
ICT contribution to
GDP
Foreign Direct
Investment (FDI)
Local Investment ICT Exports
Goods & Services
ICT Imports
Goods & Services
1 2 3
This presentation will focus on
sections (1) and (2) to show MCIT
experience in measuring these
indicators
Overview
The ICT sector was merged with the Transportation sector in Egypt’s
National Accounts until 2004 when the sector activities have increased
significantly, especially with the increasing usage of mobile phones and
internet. Hence, it was separated to become an independent activity
named “Communications Sector”, to have the first separate data for the
sector in 2003/2004.
Egypt’s National Accounts include all the activities of goods and
services included in the economy, which equals in their value added the
summation of GDP.
Egypt follows the System of National Accounts (SNA) for 1993, which
fulfills the requirements of the International Monetary Fund (IMF)
regarding the Standardized Data Dissemination System (SDDS).
System of National Accounting has developed to accommodate recent
changes in the global economy. Hence, MCIT Information Center (IC)
has started to follow the latest SNA 2008 for reliable and comparable
measurement of economic indicators within National accounting
framework.
Importance It was clear that the a lot of data regarding the Economic performance of the ICT
sector has been either incomplete or inaccurate. This was an obstacle towards:
1. Measuring the sector performance, its growth rate and contribution to the
economy
2. Formulation of policies, to foster the strength points and improve the weak
points inside the sector.
Following its role to support the decision making process, MCIT-IC has started
efforts to provide accurate and reliable indicators concerning the economic
performance of the ICT sector, based on:
Cooperation with ICT companies performing in the sector.
A robust scientific methodology.
Following international standards recommended by international organizations
concerned with ICT indicators, such as the OECD, ITU, World Bank,
UNCTAD….etc.
ITU Telecom Revenue Definition Total revenue from all
telecommunication services
This is the total (gross) telecommunication revenue earned from all (fixed, mobile and data
including Internet) operators (both network and virtual operators) offering services within the
country. This should exclude revenues from non-telecommunications services. Revenue
(turnover) consists of telecommunication service earnings during the financial year under review.
This should refer to actual revenues earned by retailers and not from wholesale. Revenue should
not include monies received in respect of revenue earned during previous financial years, neither
does it include monies received by way of loans from governments, or external investors, nor
monies received from repayable subscribers' contributions or deposits. Revenues should be net
of royalties. It should exclude revenues generated from traditional broadcasting.
Revenue from fixed
telephone service
Revenues from fixed telephone services includes: Revenue received for the connection
(installation) of telephone service (this may include charges for transferring or cancelling a
service); Revenues from recurring charges for subscription to telephone (and broadband and
Internet access if can not be separated from fixed telephone) including equipment rentals where
relevant; and Revenue from calls (local, national and international calls).
Revenue from mobile
networks
Revenues from the provision of mobile cellular communications services including all voice and
data (narrowband and broadband) services. This should refer to actual revenues earned by
retailers and not from wholesale.
Revenue from leased lines Revenue from the provision of leased lines. This should refer to actual revenues earned by
retailers and not from wholesale.
The ICT component of GDP is calculated through the Value Added Approach, as follows:
ICT Output Methodology
ICT Output
(Component of GDP)
ICT Output
(Component of GDP) + = Communications Output Communications Output IT Output IT Output
80% 20%
Includes only
services, as
most of the
goods in the
sector are
imported from
abroad, and
only a small
portion is
assembled in
Egypt.
Includes only
services, as
most of the
goods in the
sector are
imported from
abroad, and
only a small
portion is
assembled in
Egypt.
-
Revenues of
Telecom
Companies
(Production)
Revenues of
Telecom
Companies
(Production)
= 70%
30%
Revenues for the main
telecom companies
(fixed and mobile)
Revenues of: Post
sector+ NTRA +
Companies in the
informal sector
+ companies with no
data available (public
phones, and small
shops)
Operating
Expenditures (OPEX)
-
wages
cost of
intermediate
goods and
services
cost of
intermediate
goods and
services
Mobile operators:
-GSM
- Airtime, sms &
other value added
services.
- Interconnect &
roaming.
- Handsets &
accessories
- Connection fees….
-Internet
Fixed operators:
-Retail
- Access
- Voice
- Internet & data
-Wholesale
-Domestic
-International
Results
ICT Sector Revenues
Results … cont’d
ICT Output (Component of GDP) at current prices
ICT Real Output (at constant prices)
ICT Real Output
(Component of GDP)
ICT Real Output
(Component of GDP) +
-
Revenues of
Telecom
Companies
(Production)
Revenues of
Telecom
Companies
(Production)
= Communications Output Communications Output IT Output IT Output
=
80% 20%
Includes only
services, as
most of the
goods in the
sector are
imported from
abroad, and
only a small
portion is
assembled in
Egypt.
Includes only
services, as
most of the
goods in the
sector are
imported from
abroad, and
only a small
portion is
assembled in
Egypt.
70%
30%
Revenues for the main
telecom companies
(fixed and mobile)
Revenues of: Post
sector+ Companies in
the informal sector
+ companies with no
data available (public
phones, internet cafés
and small shops)
MCIT Deflator (Communications Producer Price Index)
ICT Product in
current prices is
divided by the ICT
deflator of the
period to get the
ICT Product in
constant prices
Operating
Expenditures (OPEX)
- wages
cost of
intermediate
goods and
services
cost of
intermediate
goods and
services
To get ICT output at constant (fixed prices), MCIT has decided to compile a
quarterly Producer Price Index for communication services, that is based on a
representative basket of the telecommunication services available in Egypt,
starting from first quarter of the year 2002 to the present.
The structure of the basket depended on the OECD services producer price
index (SPPI) for telecommunication services, which is based on the business
telecommunications activity that is defined within the ISIC v3.1. This structure
has been slightly adjusted according to the nature of the telecommunications
services available in Egypt.
The index has four subcomponents:
Fixed line telecommunication services.
Mobile telecommunication services.
Internet services.
Postal services.
Different types of services for each of those four subcomponents have been
included in the index.
MCIT Deflator (Communications Producer Price Index)
Weights for the detailed items included in the index subcomponents were
determined using revenues generated from each of them through sales of
services.
After the four sub-indices are calculated, one composite index is compiled by
giving weights to each of those four sub-indices based on the revenue
generated from each of them.
Detailed disaggregated data for rate structures and revenues of such services
have been used for compilation of the index. Data was obtained from the fixed
and mobile telephone companies operating in Egypt, the National Telecom
Regulatory Authority (NTRA) and Egypt Post.
Data for price rate structures cover the period 2002 until the present and reflect
all the changes in price rate for this period. Due to the complexity of the mobile
phone component and internet ADSL connection, a typical simplified rate
structure was used.
MCIT Deflator (Communications Producer Price Index)… cont’d
MCIT Deflator (Communications Producer Price Index)… cont’d
Communication Services (Composite Price Index)
Results (ICT Real Output)
ICT Real Output (Component of GDP) at constant prices
Results (ICT Real Output)… cont’d
ICT Sector Real Growth Rate
ICT Output (Discrepancy between MCIT and MOP)
After MCIT adopted the new deflator, calculation of ICT output has shown a
notable difference between MCIT and MOP, as follows:
MOP MCIT
MCIT has exerted many efforts with MOP to make them adopt the new deflator compiled by MCIT, so as to get
accurate figures for the ICT output. This has resulted in much better estimates published by MOP and validated by
MCIT.
Main Challenges in Calculating ICT Output
The difficulty of getting some requested data from the Telecom
companies (financial data – tariff and traffic data), due to
confidentiality in addition to other reasons.
The communications price index (Deflator for output) requires
continuous methodological updates in order to follow up with
the different updates and developments occurring in the ICT
sector.
The main Challenges MCIT has been facing since it started its
calculation of ICT Output:
Correct measurement of ICT investment in both nominal and volume terms is crucial for estimating the contribution of ICT to economic growth and performance.
Investment in physical capital
Expand and renew the capital stock
+
enable new technologies to enter the production process
Economic Growth
Total annual investment in
telecom
Also referred to as annual capital expenditure, this is the gross annual investment in
telecom (including fixed, mobile and Internet services) for acquiring property and network.
This should include all operators (both network and virtual operators) offering
services within the country. The term investment means the expenditure associated with
acquiring the ownership of property (including intellectual and non-tangible property such as
computer software) and plant by the operator. This includes expenditure on initial
installations and on additions to existing installations where the usage is expected to be
over an extended period of time. Note that this applies to telecom services that are
available to the public, and excludes investment in telecom software or equipment for
internal use. Excludes expenditures on research and development and fees for
operating licenses and for the use of radio spectrum.
Fixed telephone service
investment
Annual investment in fixed telephone service for acquiring property and network within
the country.
Fixed (wired) broadband
investment
Annual investment in fixed (wired) broadband service for acquiring property and network
within the country.
Mobile communication
investment
Annual investment in mobile telephone service for acquiring property and network within
the country. It should include investments made for mobile broadband services.
Foreign investment Annual investment in telecom (for fixed, mobile and Internet) services coming from foreign
sources, also referred to as Foreign Direct Investment (FDI). This is usually collected by
national banks as part of the Balance of Payments.
Wide discrepancies between different sources measuring the
investment figure for the ICT sector resulted in different numbers.
A need aroused to validate the correct methodology for calculating
Investment in the ICT sector according to International
Organizations’ standards for sake of accuracy and comparability.
Source Telecom
Companies
GAFI Ministry of
Planning
Value (Billion EGP)
7.4
0.4 17.3
Time period 2009 FY 2009-
2010
2009
Interviews were held with all officials
measuring the investment figure to
understand the source of difference.
Research is being conducted to document
the different international experiences in
measuring the Investment in ICT sector.
An outline was set to define steps and
mechanisms to validate and calculate a
more accurate figure.
Why conduct a research? No precise accurate figure for FDI in ICT existed
Absence of clear methodology of calculation
Differences in the two measures of FDI by CBE and GAFI
CBE figure based solely on the foreign exchange records and is therefore an inadequate measure
Values in million USD
CBE GAFI FDI in ICT sector
1’921 1’164 2006
10.1 19.3 2007
Meanwhile the Ministry (MCIT) estimated the value of FDI flows to be
around 1 billion USD annually.
What is FDI?
Direct investment relationships arise when a direct investor directly owns equity that entitles it to 10
per cent or more of the voting power in the direct investment enterprise.
The FDI stock is the accumulation of investment while the flow is the annual change in FDI.
This project was conducted based on the IMF Balance of Payments Manual definitions of
FDI.
A clear definition was adopted of which businesses are in scope (FDI enterprises in the ICT
sector)
Defined the sample
Started with 16 major MNCs in the ICT sector
Conducted a test survey to examine feedback
Designed the Survey
Collected Data through:
Filled surveys
Financial Statements
Interviews
New Investment
New Investment
Reinvested earnings
Reinvested earnings
Net claims and
liabilities with
related companies
Net claims and
liabilities with
related companies
FDI flow FDI flow
598
2,849
3,093
2,773
0
500
1,000
1,500
2,000
2,500
3,000
3,500
FDI stock (Million USD)
2005/06 2006/07 2007/08 2008/09**
** FDI in 2008/09 shows a decrease because not all companies responded and the figure was partly
estimated from the figures obtained the pervious year.
Continue the improvement of the total investment figure.
Treatment of License payments & fees and what to
include in the calculation of telecom investment.
Data required to measure FDI can be taken readily from
the balance sheet and profit and loss statements of FDI
enterprises but unless they are listed in stock market
they are sometimes reluctant to share such information.
Some estimation work was involved in case of no figures
for reinvested earnings were obtained , hence they were
estimated from a series of assumptions that lead to an
estimated net profit figure from which reinvested
earnings was estimated.
Countries are encouraged to unify and update the National Accounting
framework used in calculating the sector’s economic indicators by applying
the SNA 2008 (IMF, World Bank, OECD, EU).
As illustrated in the OECD Manual, a deflator specific to the ICT sector ,
whether its hedonic or a Producer Price Index (PPI), should be created in
order to calculate GDP in real terms.
Countries who still have the ICT sector clubbed with other sectors are
advised to separate it to be able to start measuring indicators which help
evaluating its performance and are useful in policy making process.
Investment methodology of ITU is recommended (added to EGTI future
activities) and asking other International organizations for their cooperation
to improve and update this methodology of measurement (OECD, IMF,
World bank, EU).
The Value Added approach is recommended for calculating the sector’s
component of GDP as it is a simple and robust approach.
Special request to international org and MN to solve one of the major
problem which is availing financial data.