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. And, 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water supply, electricity generation, telecommunications, public parking management and the gaming sector in Macao are withdrawn from the total receipts or sales of the respective industries, but not in the form of an additional levy.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, GDP estimates of Macao at producers’ prices has to be compiled as supplementary information. In fact, many countries such as mainland China, the United States and Japan 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 proportions of different economic activities in an economy. Usually, the percentage share of value added of an economic activity in the total value added of all economic activities is 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 on gaming tables, slot machines, etc., by establishments engaging in games of chance. Also included are receipts from greyhound or horse racing, lotteries, etc., by other gaming establishments.
Non-gaming receipts of gaming concessionaires
Receipts earned by gaming concessionaires from operating non-gaming activities (e.g. catering, accommodation, retail trade, entertainment and rental/use of spaces).
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.
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.
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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 the lessee’s instructions, or built as indicated by 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 or for financial leasing transactions for funding specific financial leasing contract.
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.
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.
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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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), CEPA Agreement on Trade in Goods (12 December 2018) andAgreement Concerning Amendment to the CEPA Agreement on Trade in Services (20 November 2019), 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.
The mainland agrees to apply zero tariff to all goods of Macao origin, except for goods that are prohibited from importing into the Mainland, starting from 2006. To enjoy zero tariff treatment, goods of Macao origin exported to the mainland must fulfill the rules of origin stipulated under CEPA and be accompanied by the specific Certificate of Origin as an evidence of being qualified as “Made in Macao”.