Marine economy: Sources and methods

Marine economy The marine economy is a satellite account, which cuts across traditional industry definitions by grouping common activities to increase the understanding of and provide analysis for specific sectors or functional activities within the national economy. The marine economy is not described in the SEEA but is produced as part of Stats NZ’s environmental-economic accounts to help assess the impacts and dependencies of the marine economy on marine environmental assets. The marine economy is a function of both industry and geography. It is the sum of the economic activities that take place in or use the marine environment, or that produce goods and services necessary for those activities and make a direct contribution to the national economy. The marine economy does not attempt to value natural capital, nor does it distinguish between marine-based activities that are extractive or non-extractive, use or non-use, or that enhance or degrade the marine environment. Blue and green economies Studies similar in scope to New Zealand’s marine economy sometimes use the terms ‘ocean economy’ or ‘maritime economy’ – these terms are broadly equivalent. The United Nations Environment Programme (UNEP) launched the Green Economy Initiative in 2008, as a global tool to achieve sustainable social, economic and environmental development. Under this initiative, a green economy is defined as "one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities (UNEP, nd) In 2018, the Sustainable Blue Economy Initiative was launched, with similar aims to the Green Economy Initiative, but with a specific focus on sustainable development in the realm of oceans and coasts. For more information see Enabling sustainable, resilient and inclusive blue economies. About the marine economy The marine economy is calculated using internationally accepted methodology and the following Stats NZ data: annual enterprise survey (AES) and national accounts to derive value added, linked employer-employee data for the number of wage and salary earners and earnings in marine-related industries. *overseas merchandise trade and construction statistics may also be used to provide complementary information on exports and consents related to marine construction. Methods To produce an estimate of the marine economy, data is compiled on those industries identified as engaged in marine-based economic activities according to the definition of the marine economy accepted for this study. After identifying and categorising the industries of interest, industrial classifications are identified that contain these industries based on the Australian and New Zealand Standard Industrial Classification (ANZSIC06). Direct value added Direct economic impacts result from the flow of money between an organisation and its stakeholders. This also describes the direct contribution to the economy when this flow of money is estimated at industry level. Direct value added is estimated by using data from Stats NZ’s AES and from the annual national accounts. It is preferable to use national accounts estimates where possible, as these include conceptual adjustments. However, the national accounts are not compiled at the level of industry detail sufficient to provide data on the marine economy. Therefore, detailed AES data is used to provide ratios to split the national accounts data into the categories of interest. In this way, a dataset is provided that is consistent with and directly comparable with the national accounts annual GDP series while using, where possible, the individual ANZSIC06 classes that fall within the scope of the marine economy. Classes are aggregated to category level and summed to produce an overall estimate of the New Zealand marine economy and its contribution to national GDP. AES is New Zealand’s most comprehensive source of financial statistics. It provides annual information on the financial performance and financial position for industry and sector groups operating within New Zealand, and is the primary source data for GDP, which is used to calculate detailed annual national accounts. Value added is calculated as the value of output (the value of goods and services produced) less the value of intermediate consumption (the value of goods and services used to produce that output). Marine economy estimates are in current prices (or the prices current at the time the production takes place), so changes in estimates for a particular activity may come from: movements in prices or volumes of goods and services produced movements in prices or volumes of goods and services used in production. Indirect value added Indirect marine economy value added is derived as a residual item. The total value added of the marine economy is calculated by using the table of industry-by-industry total requirements from national account’s input-output tables for the March 2020 year and the direct value-added estimates (An input-output table shows how much extra output is required from every industry if a particular industry is to produce more of its own output, defined as direct requirements.). Indirect estimates are then calculated as the total less direct marine economy value added. This approach is consistent with that used in the tourism satellite account. These contributing industries would then need further input into their own production processes or indirect requirements. The input-output method used to estimate indirect effects assumes the inter-industry coefficients are stable over time. It captures the first round of indirect supply but does not account for contributions further down the value chain. An alternative approach is to use a computable general equilibrium (CGE) model to allow for input constraints, changes in prices, and reallocation of input resources across sectors. CGE models can be used to identify the economy-wide impacts of a shock to marine sectors, distinguishing direct from indirect impacts. Contribution to GDP It is important to note the difference between gross value added (GVA) and gross domestic product (GDP). GVA is defined as the value of output less the value of intermediate consumption and is a measure of the contribution to GDP made by an individual producer, industry, or sector. The GDP of a country, viewed as an aggregate measure of production, is equal to the sum of the GVA of all resident institutional units engaged in production (plus any taxes and minus any subsidies on products not included in the value of their outputs). As taxes less subsidies will generally be positive, any industry breakdown compared with GDP will be a lower percentage than the same breakdown compared with GVA. For the offshore minerals, fisheries and aquaculture, shipping, marine tourism and recreation, and marine services classifications, value added information is derived from AES and the national accounts as described above. For these groups, the calculation of value added is gross output minus intermediate consumption. The government and defence group, while still consistent with the national accounts, is derived from the local authority census and the calculation of value added is the sum of costs: compensation of employees, depreciation, and taxes on production less subsidies. Employment and earnings Information on wage and salary earners and earnings is from linked employer-employee data (LEED). LEED uses existing administrative data from the taxation system together with business data from Stats NZ's Business Frame to provide statistics on filled jobs, job flows, worker flows, mean and median earnings for continuing jobs and new hires, and total earnings. This information gives an insight into the operation of New Zealand's labour market. Previously jobs were reported on where the term ‘jobs’ refers to a unique employer-employee pair present on an Employer Monthly Schedule in the reference quarter. For the revised tables released in 2019 the jobs measure was replaced with wage and salary earners. The values presented are total earnings (before tax) paid in the reference quarter. LEED information is presented for March years. Note that self-employed individuals are not included in these figures. For the report LEED data is reported on a kind-of-activity unit (KAU) basis to be consistent with the collection unit used for AES. This means there may be some differences in comparing these LEED estimates with published LEED series, which use the geographic unit (GEO) structure. By definition, a KAU is engaged in predominantly one activity for which a single set of accounting records is available. The Business Frame is a database of all known individual private and public sector businesses and organisations engaged in producing goods and services in New Zealand that meet significant criteria. The structure of each business on the Business Frame consists of an enterprise, a KAU, and a geographic unit. Collectively, they are referred to as statistical units. Larger or more complex businesses may have a number of statistical units. Each statistical unit is given an industry classification based on its predominant activity. Different divisions of a company may be spread across several industries, depending on how the company is structured. Coverage All marine activities included in the report have been classified into nine categories, following international studies in other Asia-Pacific Economic Cooperation economies (McIlgorm, 2004, 2016; Kildow & McIlgorm, 2010). The nine categories are the same as those used in New Zealand’s Marine Economy 1997–2002. Industries or sectors are placed in the appropriate category following international best practice and with regard to New Zealand’s economic structure. However, some marine studies have grouped their marine sectors differently or use different terminology (eg, Australian Institute of Marine Science, 2014; Morrissey & O’Donoghue, 2012). There is a recent European proposal to use a similar breakdown, but with a living and non-living resources breakdown in a framework that groups activities as completely marine based, mainly marine, and partially marine. This proposal (Surís- Regueiro et al, 2013) was developed for use by European Union economies using the Statistical Classification of Economic Activities in the European Community (NACE). An initial examination of this proposal showed it will not easily concord with ANZSIC06. Using national accounts data reduces the risk of double-counting any economic activity. However, the industrial classifications used by Stats NZ to produce the national accounts were not designed to separate marine from land-based economic activity. The categories are: offshore minerals* fisheries and aquaculture shipping government and defence marine tourism and recreation marine services Although the limitations of using national accounts data in these valuations are well known, it is essential in reducing the risk of double-counting, and it aids comparability (McIlgorm, 2016). *The offshore minerals activity category is made up of ANZSIC06 classes, covering units engaged in oil and gas extraction and petroleum exploration. Not all of this activity occurs in the offshore environment, so location information provided by the Ministry of Business, Innovation and Employment is used to provided proportions for the AES estimates. This split is not appropriate to use for LEED data, so total earnings and employee numbers are provided for the entire offshore minerals activity category. Excluded activities GDP is measured as the value added from production by industry, where GDP equals the sum of value added for all producers, plus taxes on production and imports. To isolate the marine component of GDP, the report cuts across traditional industry boundaries and uses information from industries that specifically use the marine environment. This leads to an estimate of the marine economy’s direct contribution to New Zealand’s economy. Note that the methodology used can not capture some activities that take place in the marine environment. Because some activities can not be included, the value of the marine economy and its contribution to the total economy is understated. Although some marine categories in the report are underestimated and others are partly represented, the final figure for the New Zealand marine economy is deemed to be a good but conservative estimate. Because the marine economy crosses a broad range of ‘conventional’ industries, problems arise when attempting to isolate the marine component of industries without a clear land/marine split. For example, fish retailing could not be included, as it is covered in an industrial classification that also includes fresh meat and poultry retailing (G412100). Overall, it is anticipated that except for government and defence and marine tourism and recreation, the industries not measured would not have made up a major component of the marine economy. Marine tourism Marine tourism is difficult to measure. Although Stats NZ produces a tourism satellite account that measures the sector’s contribution to the economy, no attempt has yet been made to estimate the marine component of tourism. Government and defence New Zealand’s marine economy 1997–2002 included partial estimates for the government and defence category, which were not updated for the 2007–13 report. These estimates were based on data provided directly from a selected group of units, but this approach was not directly comparable with the official estimates in the national accounts. Due to changes in industrial classification from ANZSIC96 to ANZSIC06, government-owned units have moved from ANZSIC96 division M government administration and defence to one that records the type of service delivered. ANZSIC06 prioritises a production function concept, where ownership is not a criterion for classification; therefore, only units engaged in providing public administration and safety (some of which are private sector units) are recorded in ANZSIC06 division O public administration and safety. Central government administration, which includes units whose primary activities are policy and administration, is recorded in a separate ANZSIC06 (O751000); defence is recorded in O760000. However, it is not possible to separate the marine component from the non-marine component of these activities with any precision. For example, armed forces are included within O760000 but includes naval as well as ground and other support forces. The primary source of information for the government sector accounts is the Crown's Financial Information System, which is not set up to classify expenditure in terms of activities. The latest estimates include a partial measure of government and defence, which uses local government information (from city, district, and regional councils) from the local authority census, which recorded expenditure under the activity code for marine safety. Data availability for the local authority census is from 2009. References Australian Institute of Marine Science (AIMS) (2014). The AIMS index of marine industry (PDF, 1.07MB). Retrieved from www.aims.gov.au. Kildow, JT, & McIlgorm, A (2010). The importance of estimating the contribution of the oceans to national economies. Marine Policy 34,(3), 367–74. McIlgorm, A (2004). Economic value of the marine sector across the APEC marine economies. Draft report to the APEC Marine Resource Conservation Working Group Project. The Centre for Marine Policy, University of Wollongong: Australia. McIlgorm, A (2016). Ocean economy valuation studies in the Asia-Pacific region: Lessons for the future international use of national accounts in the blue economy (PDF, 805kb) Journal of Ocean and Coastal Economics, 2, Special Issue: Oceans and National Income, accounts: An International Perspective. Article 6. Morrissey K, & O’Donoghue, C (2012). The Irish marine economy and regional development. Marine Policy, 36, 358–364. Surís-Regueiro, JC, Garza-Gil MD, & Varela-Lafuente, MM (2013). Marine economy: A proposal for its definition in the European Union. Marine Policy 42, 111–24. United Nations Environment Programme (UNEP) (nd). What is an “inclusive green economy”? Retrieved August 2019. en-NZ