Shadow economy measuring scheme to be proposed in Q1

The Ministry of Planning and Investment has been seeking advices from relevant ministries and agencies on the statistical scheme, with one of the key issues being the definition of the unobserved economy that consists of five elements.

The first element comprises underground economic activities that are legal but deliberately concealed from the public authorities to avoid payment of taxes and social security contributions; or complying with certain legal standards, such as minimum wage, maximum working hours, and safety or health standards, and with administrative procedures, such as completing statistical reports.

The second comprises illegal economic activities that generate goods and services forbidden by law, for example, drug trafficking, prostitution, and human trafficking. Legal economic activities carried out by unauthorized producers also belong to this category.

The third one is the informal sector including productive activities conducted by households with the main objective to generate employment and income for the people involved. The production is operated on a small scale, at a low level of organization and generally based on casual employment, kinship or personal and social relations, and not on contractual agreements.

The fourth element is the household production for self-consumption including productive activities that result in goods or services consumed or accumulated by the households that produced them, for instance, producing crops and livestock, weaving cloth, and building one’s own house.

The last one comprises economic activities that are missed out by data collection programmes due to problems arising either from statistical coverage or statistical errors.

Vo Tri Thanh, former deputy director of the Central Institute for Economic Management (CIEM), said that since 1990, the GSO estimated the size of the underground economy to be more than 10% of GDP.

About 10 years ago, reports of evaluations conducted by other agencies and organisations measured the amount of cash outside official circulation. The results showed that the value of this area was about 30 to 35% of GDP.