## cr1752 - 1. A technical assistance (TA) mission was conducted during September 5–9, 2016,

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### Mission purpose and context
- A technical assistance (TA) mission was conducted during September 5–9, 2016, to support the National Statistical Office of Mongolia (NSO) improve measurement of, and decision making with, natural resources in national accounts statistics.
- The mission was funded by the Topical Trust Fund on Managing Natural Resource Wealth and furthered development of Guide to Analyze Natural Resources in National Accounts (the Guide).
- The mission built on work undertaken by the NSO since the previous TA mission conducted in December 2015.

### Policy importance of reliable national accounts in Mongolia
- Reliable national accounts statistics are essential inputs for: the private sector, foreign investors, rating agencies, the public, IMF surveillance, and domestic policy-making.
- Natural resource industries are key drivers of the Mongolian economy; comprehensive and well-presented statistics for the mining industry are particularly important.

### Key facts on mining and the Mongolian economy
- Mining directly constituted 17 percent of GDP in 2015.
- Between 2010 and 2015, mining value added at constant prices grew by 88 percent, compared to 55 percent for the rest of the economy.
- The implicit price deflator for mining value added fell by 11 percent from the commodity price peak in 2011 to the most recent data for 2015.
- For the rest of the economy, the deflator rose by 39 percent during the same period.

### Assessment of current national accounts and NSO progress
- Mongolia’s national accounts statistics: considered broadly adequate for Fund surveillance but require further development for domestic policy work.
- NSO actions to date:
  - Compiled existing GDP and continued implementation of the System of National Accounts 2008 (2008 SNA).
  - Added quarterly GDP and Supply and Use Tables over the past decade.
  - Improved data sources and techniques.
- The mission developed a work plan to assist further national accounts development (Annex I).

### Main areas for improvement identified by the mission
- Cement NSO’s new institutional structure and enhance staff skills mix.
- Improve coordination among stakeholders (NSO, Bank of Mongolia, Ministry of Finance, Mongolian Customs).
- Improve existing survey forms to compile enhanced GDP estimates.

### Natural Resource Industries Template findings
- The draft IMF Natural Resource Industries Template is applicable to Mongolia and brings together indicators (production, exports, employment, investment, financing, linkages) in a standard framework.
- Analysis emphasized price and purchasing power effects and underlined need for better Supply and Use Tables compiled with improved source data.
- Cross-country comparisons (e.g., government revenue to value added ratios) will be possible when more countries’ data are available.
- Mongolia contributed to the project by participating and hosting the Ulaanbaatar Group on Statistics for Economies based on Natural Resources.

### Two priority TA focus areas
- Improvements to source data and GDP compilation focusing on natural resource industries (Section II).
- Reviewing the Guide and completing its Template Tables (Section III); NSO provided feedback and completed the Template Tables for Mongolia.

### Priority actions in the developed 18‑month work plan (selected)
- Modify the Annual Enterprise Survey (AES) form and procedures to support improved measurement of natural resources.
- Support data collection with visits to major enterprises.
- Improve selected items on coal export duties, volumes, and capital work on own accounts.
- Progress to be reviewed in future TA missions; Fund provided training during the mission and remains available for ongoing assistance.

### Improvements to source data and GDP compilation (Section II) — findings and recommendations
- Source data used by NSO: Annual Enterprise Survey (AES); Monthly Report on Industrial Production; Mongolian Customs exports/imports records; Balance of Payments by the Bank of Mongolia; Government Finance Statistics by the Ministry of Finance.
- NSO methods are based on international standards.
- Need to resolve inconsistencies and improve coherence of source data; improved coordination between stakeholders recommended (e.g., Bank of Mongolia adjustments to customs exports data likely to assist NSO).
- Mission outputs:
  - Developed AES form improvements (Annex V) and provided guidance (Annex VI) to ensure consistency of transactions in natural resources across source data.
  - Recommended extending international best practice methodology used for copper mining to other natural resources.
  - Identified improvements including better estimation of investment activity by extraction industries expected to increase Mongolia’s GDP level.
- NSO institutional restoration:
  - National accounts compiled by eight staff within NSO Economic Statistics Department; several staff are relatively new and would benefit from experience and IMF training courses.
  - Recommendation: increase contact with largest enterprises; establish a Large Business Team for face-to-face visits.

### Specific AES and data collection improvements identified
- AES usability:
  - Add completion instructions and a contact name, e-mail address, and phone number.
  - Clarify accounting basis (cash or accrual) reporting.
- Product quality and quantities:
  - Account for quality mix of mineral products in production and export data (Annex IX); separate ore grades and use dry weight consistently.
- Capital formation:
  - Include mineral exploration and site preparation in capital formation; AES should explicitly capture own-staff work.
- Export duties:
  - Export duties on coal should not be included in output or value added at basic prices; enterprise sales values reported did not exclude export duties and duties should be deducted when exporter has paid the duty.
- Valuation timing:
  - Output and value added should be valued at time of production; inventory valuation adjustments or quantity data are needed to remove effects of subsequent price movements when sales occur months after production.
- Revisions and coverage:
  - Current tax amnesty has identified that production in previous years may have been understated; liaison with tax authorities and enterprises needed to identify revisions.
  - Informal sector poorly covered, including artisanal mining; gaps could be assessed from household expenditure survey data and labor force surveys and population census indicators.

### Reviewing the Guide and completing Template Tables (Section III) — findings
- Template feasible in Mongolia; allows systematic presentation focused on resource extraction industries.
- Emphasis on income data: falling commodity prices can reduce real income even if GDP volumes are unchanged.
- Several template items depend on Supply and Use Tables or other sophisticated sources; some items may be supplementary to keep core items timely and universal.
- Suggested enhancements:
  - Include a table on the extent minerals are processed locally or sent abroad unprocessed.
  - Add resource and non-resource GDP volume growth rates to the tables.

### Annex I: Selected items from the work plan (verifiable indicators and completion dates)
- Modify the Annual Enterprise Survey form to support improved measurement of natural resources.
  - Verifiable indicator: Modified survey form used for 2016 Annual Enterprise Survey.
  - Completion Date: December 2016.
  - Priority: H
- Establish a Memorandum of Understanding with EITI Secretariat, Mongolia for annual reconciliation between (a) financial data reported by enterprises and (b) coverage of units in the extractive industries.
  - Verifiable indicator: Memorandum of Understanding agreed and first meeting held.
  - Completion Date: November 2016.
  - Priority: M
- Complete implementation of revised organizational structure re-establishing NSO as an independent statistical office; ensure national accounts methodology development is undertaken by Economic Statistics Department.
  - Verifiable indicators: Organizational structure, policies, and procedures established; National Accounts development activity undertaken by Economic Statistics Department.
  - Completion Date: December 2016.
  - Priority: H
- Export duty paid to Mongolian Customs is excluded from output and intermediate consumption.
  - Verifiable indicator: Export duty paid to Mongolian Customs is excluded from output and intermediate consumption.
  - Completion Date: December 2017.
  - Priority: H
- Own account capital formation is included in output and capital formation.
  - Verifiable indicator: Own account capital formation is included in output and capital formation.
  - Completion Date: December 2017.
  - Priority: H
- Volume movements for output of the natural resources industry and exports reflect quality changes.
  - Verifiable indicator: Volume movements for output and exports of natural resource products other than coal reflect quality changes.
  - Completion Date: December 2017.
  - Priority: M
- Establish Balance of Payments Committee with membership from NSO, Mongolian Customs and BoM.
  - Verifiable indicator: Initial meeting held.
  - Completion Date: December 2016.
  - Priority: H

### Annex II: Template Tables — key figures (2014, selected items)
- Importance of the Natural Resource Industries in GDP (Template Table 1) — sector-level contributions [2014, million togrog]
  - ISIC 0500 Mining of coal and lignite: Consolidated Output 1,081,730; Value Added (VA) 383,903; Taxes on Products 6,086; Subsidies on Products 0; VA plus taxes less subsidies (GDP) 389,989; Percent of GDP 1.75%
  - ISIC 0600 Extraction of crude petroleum and natural gas: 1,125,185; 442,283; 0; 0; 442,283; 1.99%
  - ISIC 0700 Mining of metal ores: 6,451,581; 2,636,387; 18; 0; 2,636,405; 11.86%
  - ISIC 0800 Other mining and quarrying: 137,913; 39,990; 3,113; 0; 43,103; 0.19%
  - ISIC 0900 Mining support service activities: 458,987; 158,467; 323; 0; 158,790; 0.71%
  - Aggregates:
    - Natural Resource Industries: 9,252,387; 3,661,031; 9,540; 0; 3,670,571; 16.51%
    - All Industries in the Economy: 28,171,199; 20,151,728; 2,075,327; 0; 22,227,055; 100

- Disposition of the Income of Natural Resource Enterprises (Template Table 2) — [2014, million togrog]
  - Line 1 Output: 9,271,286; 41.71%
  - Line 2 Natural resource products: 7,932,108; 35.69%
  - Line 3 Other products: 1,339,178; 6.02%
  - Line 4 Intermediate consumption at purchasers’ prices: 5,610,255; 25.24%
  - Line 8 Value added at basic prices: 3,661,031; 16.47%
  - Line 9 Compensation of employees: 765,780; 3.45%
  - Line 12 Other taxes less subsidies on production: 87,875; 0.40%
  - Line 13 Gross operating surplus: 2,807,376; 12.63%
  - Line 28 Consumption of fixed capital: 455,570; 2.05%
  - Line 32 Acquisitions less disposals of non-produced, non-financial assets: 0; 0.00%
  - Line 33 Net Lending: na; 41.71%
  - Trade and exports:
    - Exports of natural resource products (in local currency): 8,138,585; 36.62%
    - Memo: Total exports: 11,371,881; 51.16%
  - Large data gaps flagged as "na" for many items (e.g., property income, taxes by category, reinvested earnings, gross saving, gross capital formation components, depletion of reserves, value of reserves, total assets).

- Labor in the Natural Resource Industries (Template Table 3)
  - Natural Resource Industries: 43,600 employees; Compensation of Employees 765,780; Compensation per employee 17,563,761; hours worked "na"
  - All other industries: 641,700 employees; Compensation of Employees 5,086,706; Compensation per employee 7,926,922
  - All Industries (TOTAL): 685,300 employees; Compensation of Employees 5,852,486; Compensation per employee 8,540,035

- Contributions of Natural Resource Industries to GDP Volume Change (Template Table 4) — Volume change, 2013 and 2014 (2010 base year, billion togrog)
  - Mining of coal and lignite: Value Added t-1 696.0; t 594.6; Difference -104.4; Contribution to percentage change in GDP -0.7
  - Extraction of crude petroleum and natural gas: 131.3; 189.6; 58.3; 0.4
  - Mining of metal ores: 1,924.6; 2,545.0; 620.5; 4.3
  - Other mining and quarrying: 22.1; 20.8; -1.3; 0
  - Mining support service activities: 131.9; 119.3; -12.5; 0
  - Natural resource industries (aggregate): 2,905.8; 3,469.3; 563.5; 3.9
  - All other industries: 9,506.1; 10,231.3; 725.2; 5.1
  - VAT or Taxes on products and imports less subsidies: 1,938.8; 1,781.7; -157.1; -1.1
  - Gross Domestic Product: 14,350.7; 15,482.3; 1,131.6; 7.9

- Contributions of Prices Paid and Received by the Natural Resource Industries to Change in the GDP Price Index (Template Table 5) — Price-level contributions (billion togrog)
  - Mining of coal and lignite: Value Added in year t at base prices 594.6; in 2014 at current prices 362.6; Difference -232.6; Contribution to percent change in GDP Deflator -1.5
  - Extraction of crude petroleum and natural gas: 189.6; 442.3; 252.7; 1.6
  - Mining of metal ores: 2,545.0; 2,628.4; 83.4; 0.5
  - Other mining and quarrying: 20.8; 47.4; 26.6; 0.2
  - Mining support service activities: 119.3; 180.4; 61.1; 0.4
  - Natural resource industries (aggregate): 3,469.3; 3,661.0; 191.7; 1.2
  - All other industries: 10,231.3; 16,490.8; 6,259.5; 40.4
  - Net Taxes on Products: 1,781.7; 2,075,3; 293.6; 1.9
  - Gross Domestic Product: 15,482.3; 22,227.1; 6,744.8; 43.6

- Effect of Natural Resources on the Terms of Trade (Template Table 6) — Index numbers (2010 = 100)
  - Export price index: 100; 113.3; 115.2
  - Import price index: 100; 114.7; 115.7
  - Terms of trade index: 100; 98.8; 99.6
  - Export price index excluding natural resources and associated products: 100; 118.5; 130.9
  - Import price index excluding natural resources and associated products: 100; 115.0; 115.8
  - Terms of Trade index excluding natural resources and associated products: 100; 103.0; 113.0
  - Addendum:
    - Implicit price deflator for GDP: 100; 133.2; 142.9
    - Implicit price deflator for gross final domestic expenditures: 100; 130.0; 141.7
    - Effect of export and import prices on real gross domestic income (100 * (7) / (8)): 100; 102.5; 100.8
    - Implicit deflator for GDP excluding exports and imports of natural resources and associated products: 100; 138.3; 163.8
    - Effect of export and import prices on real gross domestic income excluding natural resources and associated products (100 * (10) / (8)): 100; 106.4; 115.6
  - Selected percent changes (2014):
    - Export price index: 1.7
    - Import price index: 0.9
    - Terms of trade index: 0.8
    - Export price index excluding natural resources and associated products: 10.5
    - Import price index excluding natural resources and associated products: 0.7
    - Terms of Trade index excluding natural resources and associated products: 9.8
    - Implicit deflator for GDP: 7.3
    - Implicit deflator for gross final domestic expenditures: 9.0
    - Effect of export and import prices on real gross domestic income: -1.7
    - Implicit deflator for GDP excluding exports and imports of natural resources and associated products: 18.4
    - Effect of export and import prices on real gross domestic income excluding natural resources and associated products: 9.4

### Extractive Industries Transparency Initiative (ANNEX III) — highlights
- Chronology and governance:
  - Mongolian Parliament agreed to adherence to EITI in October 2015; Government approved adherence at Cabinet meeting on January 4, 2006.
  - EITI in Mongolia coordinated by National Council of 33 members including Prime Minister, Minister of Mining, Government representatives (including Chair of NSO), enterprises and civil society.
- Reporting and coverage:
  - Since 2006, nine Annual Reports produced based on enterprises holding exploration licenses.
  - From 2014 reporting improvements; 2015 e-reporting launched with more than 900 enterprises submitting forms electronically in 2015 to EITI.
  - Total enterprises included in 2014 (2015) Annual Report: 1,973 (1,920).
  - EITI reports information from more than 90 percent of total holders of mineral exploration licenses.
- Data validation recommendation:
  - Mission compared EITI enterprise records and NSO Business Register (BR); 2014 BR included 1,616 enterprises in the mining industry (894 considered active).
  - Recommendation: NSO should analyze EITI data to validate coverage of BR and AES.
  - EITI web portal provides access to accounts of individual enterprises for validation with AES data.

### Officials and stakeholders consulted (ANNEX IV) — summary
- Institutions consulted included: NSO; AES respondent enterprises (multiple mining and energy enterprises); EITI Secretariat (Mongolia); Mongolian Customs; Ministry of Finance; Mineral Resources and Petroleum Authority of Mongolia; The Bank of Mongolia.
- AES respondents included heads and finance/accounting officers from Erdenes Tavan Tolgoi LLC; Energy Resources LLC; Altain Khuder LLC; Mongolyn Alt Corporation LLC; Oyu Tolgoi LLC; Centerra Gold Inc; Petrochina Daqing Tansag LLC; Dongsheng Petroleum Mongolia LLC.

### Recommended Changes to the Annual Enterprise Survey (ANNEX V) — key findings and policy recommendations
- AES objective: compile annual national accounts for non-agricultural and non-financial enterprises; AES contains nine modules (I Identification; II Total income; III Breakdown of turnover by activities; IV Total expenditures; V Stocks; VI Cost of services; VII Breakdown of raw material expenditures by types of products; VIII Employment and wages; IX Gross capital formation).
- Recommendations to align with 2008 SNA and improve data utility:
  - Update guidelines for 2008 SNA concepts (e.g., accounting basis of turnover; inclusion/exclusion of taxes on products).
  - Include direct NSO contact details on AES forms.
  - Modify Module IX (Gross Capital Formation) to explicitly collect own account investment activity details.
  - Define “Cost Penalty” (Module IV) to ensure correct reporting of intermediate consumption; price reductions due to quality changes should be in Total income (Module II), not Expenditure.
  - Disaggregate taxes paid by enterprises to distinguish taxes and rent for 2008 SNA treatment.
  - Disseminate industry-specific reports based on AES to inform decision makers and reinforce respondent cooperation.
  - Develop a customized mining industry form to capture production phase and contractual arrangements (e.g., production sharing).
- Operational notes:
  - AES sample selection in 2014: mining industry sample comprised 782 of 894 active enterprises.
  - Simplified AES form exists for small enterprises.
  - AES uses four-digit CPC and ISIC; reporting conducted during March.

### Items to clarify to ensure adequacy of national accounts statistics (ANNEX VI)
- High priority items:
  - Contractual currency: clarify whether contracts specified in domestic or foreign currency and implications for output and exports.
  - Timing of change of (economic) ownership: validate SNA 2008 FOB assumption and whether adjustments to output/exports are required.
  - Treatment of own account mineral exploration: ensure expenses are recorded in intermediate consumption and compensation of employees; value of own account exploration identified and included in fixed capital formation; where not provided, estimate via non-market valuation.
  - Prices used to value output: ensure output is valued at basic prices per 2008 SNA para 3.146 and clarify whether reported prices are spot, contract, regulated, or net of hedging.
  - Consistency of quantity data: annual reconciliation between monthly production survey and AES-reported quantities.
  - Appropriateness of quantity data for volume extrapolation: assess quality changes over five years; revise volume estimates if quality has changed.
  - Reporting of “Lease” payments: exclude lease payments from intermediate consumption where appropriate; distinguish financial vs. operating leases.
  - Subcontracting: confirm subcontracting expenditures are for services, not goods; significant for labor hire companies and compensation of employees.
  - Treatment of export duties: export duties are taxes on product and should be excluded from basic price output; if enterprises report sales including export duties, deduct duties from reported sales.
- Low priority items:
  - Reference period of reported data: ensure survey reporting aligns with calendar year national accounts.
  - Major destinations of the natural resource product: country detail of sales to non-residents would assist reconciliation with merchandise exports.

*IMF staff technical assistance report (September 5–9, 2016 mission) — Annexes and template materials referenced in the text are part of the original document.*

### 1. A technical assistance (TA) mission was conducted during September 5–9, 2016,

### cr1752 - 1. A technical assistance (TA) mission was conducted during September 5–9, 2016,

### Mission purpose and context
- A technical assistance (TA) mission was conducted during September 5–9, 2016, to support the National Statistical Office of Mongolia (NSO) improve measurement of, and decision making with, natural resources in national accounts statistics.
- The mission was funded by the Topical Trust Fund on Managing Natural Resource Wealth and furthered development of Guide to Analyze Natural Resources in National Accounts (the Guide).
- The mission built on work undertaken by the NSO since the previous TA mission conducted in December 2015.

### Policy importance of reliable national accounts in Mongolia
- Reliable national accounts statistics are essential for informed decision-making, economic analysis, and policy-making, and provide inputs for the private sector, foreign investors, rating agencies, the public, IMF surveillance, and domestic policy.
- Natural resource industries are key drivers of the Mongolian economy; comprehensive and well-presented statistics for the mining industry are therefore particularly important.

### Key facts on mining and the Mongolian economy
- Mining directly constituted 17 percent of GDP in 2015.
- Between 2010 and 2015, mining value added at constant prices grew by 88 percent, compared to 55 percent for the rest of the economy.
- The implicit price deflator for mining value added fell by 11 percent from the commodity price peak in 2011 to the most recent data for 2015.
- For the rest of the economy, the deflator rose by 39 percent during the same period.

### Assessment of current national accounts and NSO progress
- Mongolia’s national accounts statistics were considered as broadly adequate for Fund surveillance according to the most recent IMF Staff Report but require further development to enhance suitability for domestic policy work.
- The NSO is commended for compiling existing GDP and continuing to implement the System of National Accounts 2008 (2008 SNA).
- Over the past decade, the NSO added quarterly GDP and Supply and Use Tables and improved data sources and techniques.
- The mission developed a work plan to assist further development of national accounts statistics (Annex I).

### Main areas for improvement identified by the mission
- Cement the NSO’s new institutional structure and enhance its staff’s skills mix.
- Improve coordination among stakeholders—notably the NSO, Bank of Mongolia, Ministry of Finance, and Mongolian Customs.
- Improve existing survey forms to compile enhanced estimates of GDP.

### Natural Resource Industries Template findings
- The draft IMF Natural Resource Industries Template is applicable to the Mongolian context and provides important information by bringing together a range of indicators in a standard framework (production, exports, employment, investment, financing, and linkages).
- Analysis emphasized the importance of price and purchasing power effects and underlined the need for better Supply and Use Tables compiled with improved source data.
- When more countries’ data become available, cross-country comparisons (e.g., ratios of government revenue to value added or involvement in secondary processing) will be possible.
- Mongolia contributed to the project via participation and by hosting the Ulaanbaatar Group on Statistics for Economies based on Natural Resources.

### Two priority TA focus areas
- Improvements to source data and GDP compilation focusing on the natural resource industries (Section II).
- Reviewing the Guide and completing its Template Tables (Section III); NSO provided feedback on the Guide and completed the Template Tables for Mongolia (Annex II). Discussions were held with the Extractive Industries Transparency Initiative (EITI) Secretariat, Mongolia and other stakeholders (Annexes III and IV).

### Priority actions in the developed 18‑month work plan
- Modify the Annual Enterprise Survey (AES) form and procedures to support improved measurement of natural resources.
- Support data collection with visits to major enterprises.
- Improvements on selected items on coal export duties, volumes, and capital work on own accounts.
- Progress will be reviewed in future TA missions; the Fund provided relevant training during the current mission and remains available for ongoing assistance.

### Improvements to source data and GDP compilation (Section II) — findings and recommendations
- Source data used: NSO’s Annual Enterprise Survey (AES); Monthly Report on Industrial Production; exports and imports records from Mongolian Customs; Balance of Payments compiled by the Bank of Mongolia; Government Finance Statistics (GFS) compiled by the Ministry of Finance.
- Methods used by the NSO are based on international standards.
- Need to resolve inconsistencies and improve coherence of source data; improve coordination between stakeholders (e.g., Bank of Mongolia adjustments to customs exports data likely to assist NSO).
- The mission developed AES form improvements (Annex V) and provided guidance (Annex VI) to ensure consistency of transactions in natural resources across source data; discussions held with Mongolian Customs, Bank of Mongolia, and Ministry of Finance and the mission recommends improved coordination (Annex VII).
- Recommendation: NSO should extend the international best practice methodology underlying estimates of copper mining to other natural resources; following AES improvements, appropriate source data are expected to be available to implement international standards.
- Several improvements identified (Annex VIII), including improved estimation of investment activity undertaken by the natural resources extraction industries which is expected to increase the level of Mongolia’s GDP.
- NSO institutional restoration: national accounts compiled by eight staff within the NSO Economic Statistics Department; several staff are relatively new and would benefit from experience and IMF training courses.
- NSO should increase contact with the largest enterprises; best practice is a Large Business Team for face-to-face visits to improve motivation, answer questions, and enhance data quality and timeliness.

### Specific AES and data collection improvements identified
- AES could be more user-friendly by having completion instructions and a contact name, e-mail address, and phone number (example: uncertainty over reporting on a cash or accrual basis).
- Quality mix of mineral products should be accounted for in production and export data (Annex IX); example: black coal and copper ore come in different grades yielding different prices; questionnaires should separate ore grades and clarify that dry weight should be used consistently for statistical reporting.
- Mineral exploration and site preparation should be included in capital formation; some own-staff work may be omitted and the AES could be clearer.
- Export duties on coal should not be included in output or value added at basic prices; enterprise sales values reported did not exclude export duties (i.e., were at producers’ prices) and duties should be deducted from sales value when the exporter has paid the duty.
- Output and value added should be valued in the national accounts as at the time of production; inventory valuation adjustments or quantity data are needed to remove the effect of subsequent price movements when sales occur months after production.
- The current tax amnesty has identified that production in previous years may have been understated, even by large enterprises; liaison with tax authorities and enterprises is needed to identify any need for revisions to earlier data.
- The informal sector is poorly covered, including artisanal mining; extent of gaps could be assessed from household expenditure survey data on coal purchases and from labor force surveys and the population census for indicators of mining employment outside large corporations.

### Reviewing the Guide and completing Template Tables (Section III) — findings
- The mission found that the template was feasible in Mongolia and allows systematic presentation of data focused on resource extraction industries.
- Importance of price and purchasing power effects: national accounts data focus on production, but income data are particularly needed because falling commodity prices can mean real income is falling even if GDP volumes are unchanged.
- Several template items depend on Supply and Use Tables or other sophisticated data sources; these items may preclude some smaller countries from completing the data or mean other countries can only complete them annually and for less recent periods. Consideration: make sophisticated items supplementary and keep core items more timely and universal.
- Suggested enhancements: include a table on the extent minerals are processed locally or sent abroad unprocessed; add resource and non-resource GDP volume growth rates to the tables.

### Annex I: Selected items from the work plan (verifiable indicators and completion dates)
- Modify the Annual Enterprise Survey form to support improved measurement of natural resources.
  - Verifiable indicator: Modified survey form used for 2016 Annual Enterprise Survey.
  - Completion Date: December 2016.
  - Priority: H
- Establish a Memorandum of Understanding with EITI Secretariat, Mongolia to ensure an annual reconciliation between (a) financial data reported by Mongolian enterprises; and (b) coverage of units in the extractive industries.
  - Verifiable indicator: Memorandum of Understanding agreed and first meeting held.
  - Completion Date: November 2016.
  - Priority: M
- Complete implementation of revised organizational structure, policies and procedures implementing re-establishment of the NSO as an independent statistical office; ensure national accounts methodology development is undertaken by Economic Statistics Department.
  - Verifiable indicators: Organizational structure, policies, and procedures established; National Accounts development activity undertaken by Economic Statistics Department.
  - Completion Date: December 2016.
  - Priority: H
- Export duty paid to Mongolian Customs is excluded from output and intermediate consumption.
  - Verifiable indicator: Export duty paid to Mongolian Customs is excluded from output and intermediate consumption.
  - Completion Date: December 2017.
  - Priority: H
- Own account capital formation is included in output and capital formation.
  - Verifiable indicator: Own account capital formation is included in output and capital formation.
  - Completion Date: December 2017.
  - Priority: H
- Volume movements for output of the natural resources industry and exports of natural resources products reflect quality changes in natural resources products.
  - Verifiable indicator: Volume movements for output and exports of natural resource products other than coal reflect quality changes.
  - Completion Date: December 2017.
  - Priority: M
- Establish Balance of Payments Committee with membership from NSO, Mongolian Customs and BoM.
  - Verifiable indicator: Initial meeting held.
  - Completion Date: December 2016.
  - Priority: H

*IMF staff technical assistance report (September 5–9, 2016 mission) — Annexes and template materials referenced in the text are part of the original document.*

### ANNEX II. TEMPLATE TABLES FOR THE GUIDE

### ANNEX II. TEMPLATE TABLES FOR THE GUIDE (cr1752)

### Importance of the Natural Resource Industries in GDP (Template Table 1)
- Data reference: [2014, million togrog]
- Sector-level contributions (Consolidated Output; Value Added (VA); Taxes on Products; Subsidies on Products; VA plus taxes less subsidies, or GDP; Percent of GDP)
  - ISIC 0500 Mining of coal and lignite: 1,081,730; 383,903; 6,086; 0; 389,989; 1.75%
  - ISIC 0600 Extraction of crude petroleum and natural gas: 1,125,185; 442,283; 0; 0; 442,283; 1.99%
  - ISIC 0700 Mining of metal ores: 6,451,581; 2,636,387; 18; 0; 2,636,405; 11.86%
  - ISIC 0800 Other mining and quarrying: 137,913; 39,990; 3,113; 0; 43,103; 0.19%
  - ISIC 0900 Mining support service activities: 458,987; 158,467; 323; 0; 158,790; 0.71%
  - ISIC 2420 Manufacture of basic precious and other non-ferrous metals, components involving initial processed of extracted minerals: 0; 0; 0; 0; 0; 0%
  - ISIC 4930 Transport via pipeline of natural resource products: 0; 0; 0; 0; 0; 0%
  - ISIC 5221 Service activities incidental to land transportation, LNG liquefaction component: na; na; na; na; na; na
- Aggregates
  - Natural Resource Industries: 9,252,387; 3,661,031; 9,540; 0; 3,670,571; 16.51%
  - All Industries in the Economy: 28,171,199; 20,151,728; 2,075,327; 0; 22,227,055; 100
- Notes
  - a. ISIC Rev.4.
  - b. Taxes on products omit VAT deductible to purchaser; total VAT included in total for all resident units.
  - c. Total for all resident units equals GDP.
  - d. Only relevant parts of ISIC code included.

### Disposition of the Income of Natural Resource Enterprises (Template Table 2)
- Data reference: [2014, million togrog]
- Key aggregates and shares of GDP
  - Line 1 Output: 9,271,286; 41.71%
  - Line 2 Natural resource products: 7,932,108; 35.69%
  - Line 3 Other products: 1,339,178; 6.02%
  - Line 4 Intermediate consumption at purchasers’ prices: 5,610,255; 25.24%
  - Line 8 Value added at basic prices: 3,661,031; 16.47%
  - Line 9 Compensation of employees: 765,780; 3.45%
  - Line 12 Other taxes less subsidies on production: 87,875; 0.40%
  - Line 13 Gross operating surplus: 2,807,376; 12.63%
  - Line 28 Consumption of fixed capital: 455,570; 2.05%
  - Line 32 Acquisitions less disposals of non-produced, non-financial assets: 0; 0.00%
  - Line 33 Net Lending: na; 41.71%
- Trade and exports
  - Exports of natural resource products (in local currency): 8,138,585; 36.62%
  - Memo: Total exports: 11,371,881; 51.16%
- Large data gaps flagged as "na" for many items (e.g., property income, taxes by category, reinvested earnings, gross saving, gross capital formation components, depletion of reserves, value of reserves, total assets).
- Addendum and methodological notes
  - a. Government revenue from payments by natural resource enterprises is the sum of lines 6, 12, 17, 20, 22, 23, and applicable portions of 32.
  - b. Deductible or reimbursable VA is excluded.
  - c. Re-exports are excluded; presence of downstream products from local resources should be noted.
  - d. Allocation of intermediate consumption between imports and domestic production is undertaken in basic prices.
  - e.–g. Several items not compiled at industry detail or not available during the mission; some could be compiled from AES or Revenue Template if available.

### Labor in the Natural Resource Industries (Template Table 3)
- Employment and compensation (units: employees; million togrog)
  - Natural Resource Industries: 43,600 employees; Compensation of Employees 765,780; Compensation of Employees per employee 17,563,761 (hours worked column shows "na")
  - All other industries: 641,700 employees; Compensation of Employees 5,086,706; Compensation per employee 7,926,922
  - All Industries (TOTAL = 1+2): 685,300 employees; Compensation of Employees 5,852,486; Compensation per employee 8,540,035
- Notes
  - a. If actual hours worked are not estimated, FTE or unadjusted employment may be used.
  - b. Definitions of natural industries may differ between tables; differences should be noted.

### Contributions of Natural Resource Industries to GDP Volume Change (Template Table 4)
- Volume change, 2013 and 2014 (both in 2010 base year) (billion togrog)
  - Mining of coal and lignite: Value Added in year t-1 696.0; in year t 594.6; Difference -104.4; Contribution to percentage change in GDP -0.7
  - Extraction of crude petroleum and natural gas: 131.3; 189.6; 58.3; 0.4
  - Mining of metal ores: 1,924.6; 2,545.0; 620.5; 4.3
  - Other mining and quarrying: 22.1; 20.8; -1.3; 0
  - Mining support service activities: 131.9; 119.3; -12.5; 0
  - Transport and processing of crude natural resource commodities: na; na; na; na
  - Natural resource industries (aggregate): 2,905.8; 3,469.3; 563.5; 3.9
  - All other industries: 9,506.1; 10,231.3; 725.2; 5.1
  - Either VAT or Taxes on products and imports less subsidies: 1,938.8; 1,781.7; -157.1; -1.1
  - Gross Domestic Product: 14,350.7; 15,482.3; 1,131.6; 7.9
- Note: Under annual chaining, prices of year t-1 would be used in lieu of prices from a fixed base year.

### Contributions of Prices Paid and Received by the Natural Resource Industries to the Change in the GDP Price Index (Template Table 5)
- Price-level contributions (billion togrog)
  - Mining of coal and lignite: Value Added in year t at base prices 594.6; in 2014 at current prices 362.6; Difference -232.6; Contribution to percent change in GDP Deflator -1.5
  - Extraction of crude petroleum and natural gas: 189.6; 442.3; 252.7; 1.6
  - Mining of metal ores: 2,545.0; 2,628.4; 83.4; 0.5
  - Other mining and quarrying: 20.8; 47.4; 26.6; 0.2
  - Mining support service activities: 119.3; 180.4; 61.1; 0.4
  - Transport and processing of crude natural resource commodities: na; na; na; na
  - Natural resource industries (aggregate): 3,469.3; 3,661.0; 191.7; 1.2
  - All other industries: 10,231.3; 16,490.8; 6,259.5; 40.4
  - Net Taxes on Products: 1,781.7; 2,075,3; 293.6; 1.9
  - Gross Domestic Product: 15,482.3; 22,227.1; 6,744.8; 43.6
- Note: Under annual chaining, prices of year t-1 would be used in lieu of prices from a fixed base year.

### Effect of Natural Resources on the Terms of Trade (Template Table 6)
- Index numbers (2010 = 100)
  - Export price index: 100; 113.3; 115.2
  - Import price index: 100; 114.7; 115.7
  - Terms of trade index: 100; 98.8; 99.6
  - Export price index excluding natural resources and associated products: 100; 118.5; 130.9
  - Import price index excluding natural resources and associated products: 100; 115.0; 115.8
  - Terms of Trade index excluding natural resources and associated products: 100; 103.0; 113.0
- Addendum
  - Implicit price deflator for GDP: 100; 133.2; 142.9
  - Implicit price deflator for gross final domestic expenditures: 100; 130.0; 141.7
  - Effect of export and import prices on real gross domestic income (100 * (7) / (8)): 100; 102.5; 100.8
  - Implicit deflator for GDP excluding exports and imports of natural resources and associated products: 100; 138.3; 163.8
  - Effect of export and import prices on real gross domestic income excluding natural resources and associated products (100 * (10) / (8)): 100; 106.4; 115.6
- Percent change since preceding year
  - Export price index: (2013) [blank]; (2014) 1.7
  - Import price index: (2013) [blank]; (2014) 0.9
  - Terms of trade index (≈ (12) – (13)): (2014) 0.8
  - Export price index excluding natural resources and associated products: (2014) 10.5
  - Import price index excluding natural resources and associated products: (2014) 0.7
  - Terms of Trade index excluding natural resources and associated products (≈ (15) – (16)): (2014) 9.8
- Addendum percent changes
  - Implicit deflator for GDP: (2014) 7.3
  - Implicit deflator for gross final domestic expenditures: (2014) 9.0
  - Effect of export and import prices on real gross domestic income (≈ (18) – (19)): (2014) -1.7
  - Implicit deflator for GDP excluding exports and imports of natural resources and associated products: (2014) 18.4
  - Effect of export and import prices on real gross domestic income excluding natural resources and associated products (≈ (21) – (19)): (2014) 9.4
- Note: a. Also known as the “trading gains index.”

### Extractive Industries Transparency Initiative (ANNEX III)
- Chronology and governance
  - Mongolian Parliament agreed to adherence to EITI in October 2015; Government approved adherence at Cabinet meeting on January 4, 2006.
  - EITI in Mongolia coordinated by National Council composed of Prime Minister, Minister of Mining, Government representatives (including Chair of NSO), enterprises and civil society; total 33 members.
- Reporting and coverage
  - EITI produces Annual Reports with enterprise-level analysis; since 2006, nine Annual Reports produced based on data from enterprises holding exploration licenses.
  - From 2014 reporting improvements; 2015 e-reporting launched with more than 900 enterprises submitting forms electronically in 2015 to EITI.
  - Total enterprises included in 2014 (2015) Annual Report: 1,973 (1,920).
  - EITI reports information from more than 90 percent of total holders of mineral exploration licenses.
- Data validation recommendations
  - Mission conducted initial consistency comparison between EITI enterprise records and Business Register (BR) held by NSO.
  - 2014 BR included 1,616 enterprises in the mining industry (894 considered active); differences arise from enterprises classified to other industries (e.g., manufacturing).
  - Mission recommendation: NSO should analyze data collected by EITI to validate coverage of the BR and AES.
  - EITI web portal provides access to accounts of individual enterprises (http://e-reporting.etimongolia.mn); these accounts should be validated with AES data to ensure consistency.

### Officials and Stakeholders Consulted (ANNEX IV)
- Mission met a range of officials and private sector respondents across institutions including: National Statistics Office of Mongolia, Annual Economic Survey respondents (multiple mining and energy enterprises), EITI Secretariat (Mongolia), Mongolian Customs, Ministry of Finance, Mineral Resources and Petroleum Authority of Mongolia, and The Bank of Mongolia.
- Representative counts and roles (selected)
  - NSO: Chair and multiple Directors and statisticians listed.
  - AES respondents: Heads and finance/accounting officers from Erdenes Tavan Tolgoi LLC, Energy Resources LLC, Altain Khuder LLC, Mongolyn Alt Corporation LLC, Oyu Tolgoi LLC, Centerra Gold Inc, Petrochina Daqing Tansag LLC, Dongsheng Petroleum Mongolia LLC.
  - EITI Secretariat: Coordinator and IT Consultant.
  - Other institutions: Lead of Statistical Department at Mongolian Customs; Directors at Ministry of Finance; specialists at Mineral Resources and Petroleum Authority; multiple economists and directors at The Bank of Mongolia.

### Recommended Changes to the Annual Enterprise Survey (ANNEX V) — Key Findings and Policy Recommendations
- Objective and current structure
  - AES objective: provide sufficient detail about activities and expenditures to compile annual national accounts for non-agricultural and non-financial enterprises.
  - AES contains nine modules: I Identification; II Total income; III Breakdown of turnover by activities; IV Total expenditures; V Stocks; VI Cost of services; VII Breakdown of raw material expenditures by types of products; VIII Employment and wages; IX Gross capital formation.
- Recommendations to improve alignment with 2008 SNA and data utility
  - Update guidelines to facilitate reporting consistent with 2008 SNA concepts and definitions (e.g., accounting basis of turnover, inclusion/exclusion of taxes on products).
  - Include direct NSO contact details on AES forms to assist respondents during completion (forms currently lack officer contact information).
  - Modify Gross Capital Formation module (Module IX) to explicitly collect details of own account investment activity; current form lacks categories to identify own account investment important for mineral exploration and site preparation.
  - Define “Cost Penalty” (Module IV) to ensure correct reporting of intermediate consumption; current guidelines may mislead enterprises regarding treatment of price reductions due to quality changes — these should be reflected in Total income (Module II), not Expenditure (Module IV, row 413).
  - Disaggregate taxes paid by enterprises to distinguish taxes and rent to implement 2008 SNA distinction between taxes and rent in national accounts. Current AES provides aggregate detail for taxes; disaggregation required.
  - Disseminate industry-specific reports based on AES to inform decision makers; NSO compiles specific analyses but does not disseminate results. Minimal additional cost and confidentiality procedures could enable dissemination to:
    - Provide better knowledge of Mongolia’s industry activity.
    - Reinforce importance for respondents of completing AES forms.
  - Develop a customized mining industry form to capture:
    - Phase of production (exploration, development, extraction, environment remediation).
    - Contractual arrangements (production sharing, revenue sharing, etc.).
- Operational note
  - AES sample selection: in 2014, mining industry sample comprised 782 of 894 active enterprises approximating NSO's objective to fully enumerate the mining industry.
  - Simplified AES form exists for small enterprises.
  - AES uses four-digit level CPC and ISIC; reporting is conducted during March.

*Source: cr1752 - ANNEX II. TEMPLATE TABLES FOR THE GUIDE (cr1752 - ANNEX II. TEMPLATE TABLES FOR THE GUIDE).*

### ANNEX VI. ITEMS TO CLARIFY TO ENSURE ADEQUACY OF NATIONAL ACCOUNTS

### ANNEX VI. ITEMS TO CLARIFY TO ENSURE ADEQUACY OF NATIONAL ACCOUNTS STATISTICS

### HIGH PRIORITY
- Contractual currency  
  - Mongolia’s national accounts are denominated in domestic currency. If contracts for natural resources are specified in domestic (foreign) currency, changes in the exchange rate will not (will) impact output and exports of the natural resources industry.

- Timing of change of (economic) ownership  
  - SNA 2008 values exports of natural resources products at free on board (fob) and therefore assumes the change of economic ownership occurs at the port. This is a pragmatic approximation as some transactions will occur at the mine head, others at the non-resident’s location. Information is required to validate the appropriateness of this assumption, and therefore whether adjustments to output and / or exports are required to ensure consistency between GDP x production and GDP x expenditure.

- Treatment of own account mineral exploration  
  - Own account mineral exploration refers to mineral exploration undertaken: (a) for the unit; and (b) by the unit’s own employees. It is essential to ensure: (a) expenses are recorded in data items used to construct intermediate consumption and compensation of employees; and (b) the value of the own account mineral exploration is separately identified (so it can be added as a secondary output); and (c) the value of own account output is included in fixed capital formation. Where no separate value is provided by the survey respondent, the value can be estimated using a non-market valuation.

- Prices used to value output  
  - 2008 SNA para 3.146 requires output to be valued at basic prices which describe the prices receivable by the producer from the purchaser. It is necessary to understand whether this valuation refers to the spot price (at time of ownership change), a fixed long term contract price, a variable long term contract price, a regulated value, or some other arrangement.  
  - Another possibility is where the reported price is net of proceeds from hedging with financial derivatives (transactions involving hedging should be recorded elsewhere). It is therefore necessary to ensure the basic price is reported in source data for both output and exports.  
  - Note: A possible arrangement is that the price is not determined until the purchaser takes economic ownership of the natural resource and can assess its quality (e.g., water / metal content or a given ore via an agreed procedure at a later date. The price is determined according to an agreed schedule specified in the contract. In the case, estimates should be used and revised once prices are determined at a later date.

- Consistency of quantity data  
  - An annual reconciliation should be undertaken to ensure the quantity reported by the monthly production survey (used to compile quarterly GDP) is consistent with the quantities underpinning values reported in the Annual Enterprise Survey.

- Appropriateness of quantity data for volume extrapolation  
  - Movements in the quantity (i.e., tons of natural resource) are appropriate when there is negligible change in quality. Anecdotal evidence should be obtained from Annual Enterprise Survey respondents to determine whether the quality (e.g., water / ore content) of natural resources produced in the current period differs from five years ago. If so, revisions to volume estimates of GDP are warranted.

- Reporting of “Lease” Payments  
  - “Lease” payments made by AES respondents should be excluded from data items which comprise intermediate consumption. Further questions should be asked to ensure the (2008 SNA) distinction between financial and operating leases is approximated by financial reporting standards and therefore data reported in the Annual Enterprise Survey.

- Subcontracting  
  - Where mining enterprises report expenditure for subcontracting, this should be confirmed as expenditure for the relevant service, not goods provided by the subcontractor. This issue is especially significant for labor hire companies and impacts compensation of employees.

- Treatment of export duties  
  - Export duties are a tax on product and should be excluded from (included in) the basic (purchasers’) price used to construct output (exports) in current prices. We understand that resident units have not excluded export duties from sales. If they have not excluded export duties from sales, the value of export duties (presumably recorded in expenses) must be deducted from the reported value for sales.

### LOW PRIORITY
- Reference period of reported data  
  - Mongolia’s national accounts are compiled for a calendar year. It is critical to ensure value and volume data reported by survey respondents matches this requirement - especially when there are significant changes in volumes (e.g., a project starts or concludes) and / or material changes in the price of natural resources during the calendar year. Mismatched reporting periods are most likely where resident units are controlled by a nonresident parent who faces a different set of regulatory requirements. Instance of annual reporting for periods other than a calendar year are immaterial in Mongolia.

- Major destinations of the natural resource product  
  - Allocating output of natural resource products between intermediate consumption (i.e., sales to resident units) and exports (i.e., sales to nonresident units) is critical to correctly estimate GDP. This detail is currently collected on the AES form. If possible, country detail of sales to non-residents will enable confrontation with merchandise exports.

*Annex VI, ITEMS TO CLARIFY TO ENSURE ADEQUACY OF NATIONAL ACCOUNTS STATISTICS*

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_Source: https://www.imf.org/-/media/files/publications/cr/2017/cr1752.pdf_