Gross domestic product by the production approach
Gross Domestic Product (GDP) is primarily used to compute the gross value of goods and services produced by an economy in an accounting period which is usually a year or a quarter. Production-based GDP at current producers’ prices is the sum of gross value added of local producers of all economic activities (industries) valued at basic prices in the accounting period, plus taxes on products. Gross value added at basic prices equals the value of gross output at basic prices less intermediate consumption at purchasers’ prices.
According to the recommendations of the System of National Accounts (SNA), DSEC adopt basic prices in compiling output of the production-based GDP. Currently, most of the advanced countries and territories also use basic prices in output estimation.
Besides, the SNA also states that output can be estimated at producers’ prices. For the case of Macao, output estimated at producers’ prices serves as a valuable reference, as taxes on exclusive concessions (a type of tax on products) of water supply, electricity generation, telecommunications, public parking management and the gaming sector in Macao are withdrawn from the total receipts or sales of the respective industries, but not in the form of an additional levy. This kind of tax is generated through economic activities and considered as part of an industry’s output; therefore, it should be included in the gross value added of the industry. Moreover, as the gaming sector assumes a leading role in the economy of Macao and gaming tax is enormous, incorporating gaming tax into the output of the industry brings about considerable changes to the sector and the whole industrial structure of Macao. Hence, it is necessary for Macao to compile GDP estimates at producers’ prices as supplementary information. In fact, many countries such as the United States, New Zealand, etc. also compile GDP estimates at producers’ prices.
Entropy Index of Economic Diversity1
The entropy index is one of the indicators used in academia to measure economic diversity. The formula is as follows:
∑
=
=
Ni
i
i
S
S EDI
1
) / 1 ln(
where N is the number of economic activities in an economy, Si is the share of value added of the ith economic activity in total value added, and ln is natural logarithm. The entropy index is 0 if all value added is concentrated in one economic activity. The maximum value is ln(N) as the number of economic activities increases continuously. Therefore, higher entropy index values indicate greater economic diversification, while lower values indicate more specialisation.
Besides using the value added of economic activities, the entropy index can also be calculated by using the number of employees in the economic activities to measure the concentration of employed population in the economic activities.
1 Research and Economic Analysis Division, Department of Business, Economic Development and Tourism, Hawaii. December 2011.
MEASURING ECONOMIC DIVERSIFICATION IN HAWAII. Hawaii Economic Issues. P6.
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Industrial structure
Refers to the proportion of each economic activity in an economy. Usually, the percentage share of value added of an economic activity in the total value added of all economic activities are used to reflect the relative importance of the economic activity to the economy of a country/territory.
Gross gaming revenue
Totals receipts, before deduction of taxes, generated from gaming activities conducted on gaming tables, slot machines, etc., by establishments engaging in games of chance, and from greyhound or horse racing, lotteries, etc., by other gaming establishments.
Receipts from non-gaming activities of concessionaires engaging in games of chance
Receipts earned by concessionaires engaging in games of chance from operating non-gaming activities (e.g. food and beverage, room sales, retail trade, entertainment and rental of space).
It is worth noting that the holding companies of the six enterprises granted the concession to operate casino games of chance are listed in Hong Kong and the United States, and these concessionaires engage mainly in games of chance activities. Meanwhile, a considerable part of the other business activities operated in Macao by the investors of the gaming concessionaires are conducted through the listed holding companies, and their other subsidiaries or associates. Therefore, receipts from non-gaming activities invested by the groups of the gaming concessionaires will be underestimated if only the financial information of the six gaming concessionaires published on the Official Gazette is taken into account.
Besides, the gaming concessionaires often provide rooms, food and beverage, entertainment and other related services to customers for free or at discounted prices, and the production of these free or discounted services involves the use of various economic resources. In order to make a comprehensive estimation of the non-gaming receipts of the gaming concessionaires, the fair retail values of these free or discounted services are included in the total receipts according to the Generally Accepted Accounting Principles. Such information can be derived from the annual reports of the Hong Kong listed holding companies that owned the six gaming concessionaires.
Visitor
A person taking a trip to a main destination outside his/her usual environment, for less than a year, for any main purpose other than to be employed by a resident entity in the country or place visited.
Overnight visitor
Visitor who stays at least one night in a residential accommodation or casino in the place visited, or has accommodation arrangement with a hotel/guesthouse.
Same-day visitor
Visitor who does not spend the night in any residential accommodation, hotel/guesthouse, or casino in the place visited, nor does he/she have accommodation arrangement with a hotel/guesthouse.
Spending of visitors
The amount paid by visitors for the purchase of goods and services for own use or to give away, including expenses paid by the visitors or reimbursed by others such as relatives, friends or employers. Spending of visitors excludes gaming expenses, donations, expenses on purchase of assets and goods for resale.
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Conference & exhibition organising services
Provision of services to organisers for planning and organising conferences, exhibitions and other events, including proposing ideas on the style, size and time of event, venue selection and decoration, equipment setup, staffing for master of ceremonies, public relation reception, translation or interpreting, food and beverages, transportation, etc.
Financial leasing2
Financial leasing is a contract by which the lessor is obliged, in return for remuneration, to provide the temporary economic benefits from the use of the asset to the other party. Most of the risks (e.g. maintenance costs) and rewards (e.g.
right of use) associated with ownership are transferred to the lessee. The lease subject specified in the contract is acquired either from the lessee, from a third party according to lessee’s instructions, or built upon indication of the lessee. After an agreed period, the lessee can purchase the subject at a price fixed in the contract or the price determined according to the criteria set.
Loans for financial leasing projects
These are loans granted by financial institutions to financial leasing companies for financial leasing contracts.
Wealth management
Wealth management is a combination of personal investment management, financial advisory and financial planning services for the benefit of customers.
Clearing
It is the procedure by which banks clear bilateral or multilateral claims and liabilities among themselves when handling settlements and payments for customers.
Receipts
Receipts from selling of goods and provision of services before any deduction of costs.
Establishment
An economic unit which engages in one or predominantly one kind of economic activity at a single location.
Person engaged
Individuals who work for the establishment, including paid and unpaid workers. Also include individuals who are temporarily absent for a short period, on sick leave, on holiday or other reasons, but exclude those who are absent for an indefinite period.
2 Based on the concept of financial leasing as stated in Article 889, Chapter 8 of the Commercial Code of Macao.
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Direct investment
Refers to an investment made by a resident entity in one economy with the objective of obtaining a lasting interest and a significant degree of influence on the management of an enterprise resident in another economy. For statistical purposes, the guideline of ownership is determined at 10% or more of the equity share capital in the enterprise. Direct investment includes equity capital, reinvested earnings and other capitals. Equity capital includes capital of branches, subsidiaries and associates. Reinvested earnings consist of the investors’ share of total profits earned by the branches, subsidiaries and associates but were not distributed as dividends. Other capitals include inter-company debts between the direct investor and its affiliates or affiliates of the parent company abroad.
Inward direct investment
Refers to direct investment made in Macao by residents of another economic territory (region).
Outward direct investment
Refers to direct investment made by Macao enterprises in another economic territory (region).
Stock of direct investment
Refers to the accumulated value of direct investment over the past years.
Contracted foreign capital
Refers to the amount of capital in direct investment contracts between Mainland China and foreign investors (including overseas Chinese, compatriots from Hong Kong, Macao and Taiwan, as well as Chinese enterprises registered abroad).
Realised foreign capital
Refers to the amount of capital actually used regardless of the contracted value agreed between Mainland China and foreign investors (including overseas Chinese, compatriots from Hong Kong, Macao and Taiwan, as well as Chinese enterprises registered abroad).
Mainland and Macao Closer Economic Partnership Arrangement
Mainland and Macao Closer Economic Partnership Arrangement (CEPA) is a Free Trade Agreement (FTA)-like arrangement concluded between two separate customs territories of a single sovereign state. The Arrangement is in conformity with the World Trade Organization (WTO) rules, with the objective of promoting joint economic prosperity and development of the Mainland and the Macao Special Administrative Region.
The Mainland and Macao signed CEPA on 17 October 2003, which came into full implementation from 1 January 2004. The two sides subsequently signed the Supplement to CEPA (on 29 October 2004), Supplement II to CEPA (21 October 2005), Supplement III to CEPA (26 June 2006), Supplement IV to CEPA (2 July 2007), Supplement V to CEPA (30 July 2008), Supplement VI to CEPA (11 May 2009), Supplement VII to CEPA (28 May 2010), Supplement VIII to CEPA (14 December 2011), Supplement IX to CEPA (2 July 2012), Supplement X to CEPA (30 August 2013), CEPA Agreement between the Mainland and Macao on Achieving Basic Liberalisation of Trade in Services in Guangdong (18 December 2014), CEPA Agreement on Trade in Services (28 November 2015), CEPA Investment Agreement (18 December 2017), CEPA Agreement on Economic and Technical Cooperation (18 December 2017) and CEPA Agreement on Trade in Goods (12 December 2018), with a view to further broadening and enriching the scope of CEPA.
CEPA covers three main areas, namely trade in goods, trade in services and trade and investment facilitation.