Guam may have a Gross Domestic Product calculation in the next few months — a figure it hasn’t had since 1997.

Deloitte & Touche LLP estimated Guam’s GDP or Gross Island Product at $2.5 billion for 2004. Actual GDP rose from $1.7 billion in 1988 to $3.4 billion in 1997. GDP — the gross market value of the total output of goods and services produced by labor and property in a region — is a prime economic indicator.

Funded by the U.S. Department of Interior the renewed interest in establishing a GDP for Guam comes from the Office of Insular Affairs at the Interior Department. “The Office of Insular Affairs is currently undertaking a major effort to develop National Income and Product Accounts and other economic indicators for the island areas. Reliable estimates are necessary to fulfill the Department of Interior’s commitment to improve their performance measures and standards ” said John Dela Rosa acting director of the Bureau of Statistics and Plans.

“We cannot expect investors to bring millions in investment dollars to our island without a sense of our economic environment ” he said. “The GDP is one of several economic indicators that will give them a better sense of the potential for business growth on our island.”

The bureau heads an interagency working force established by the government of Guam to compile financial and economic information needed to develop a current GDP. “The Bureau of Statistics and Plans has been designated as the point of contact to facilitate matters regarding the Gross Island Product ” Dela Rosa said. “The Guam Department of Labor’s chief economist is providing the technical expertise and guidance to ensure that the information provided fulfills the data requirements of the project.”

Gary A. Hiles chief economist at the Department of Labor said his office is involved in the project in a number of respects. “The Department of Labor’s Bureau of Labor Statistics and Economic Research Center is involved in collecting survey data which included the final data collection for the 2002 Economic Census which is the primary data source for the GDP effort in process.”

Representatives from the private sector are also participating including Joseph Bradley vice president and economic and market statistics officer at the Bank of Guam. “The Gross Domestic Product is the single most important measure of the performance of an economy ” he said. Bradley was also asked to participate because of his previous experience. “Because I once served as the chief economist for the now-defunct Guam Department of Commerce I have been asked to review the project and its progress by a representative of the Bureau of Statistics and Plans and will happily do so when there is something of substance to review.”

Dela Rosa said lack of suitable staff had been a major factor in the lack of a GDP in recent years. “The departure of the former Guam Department of Commerce chief economist retirements loss of senior staff and finally the closure of the Guam Department of Commerce has contributed to the lack of continuity in generating the Gross Island Product for Guam and other economic indicators over the last several years ” he said.

Hiles said the Commerce department did produce such statistics for a time. “The program stopped because of increased security and confidentiality controls put in place at the tax department. The controls didn’t permit Commerce statisticians to access the tax data necessary to make the tabulations. The tax department didn’t have the staff internally to make tabulations of tax data by industry and with Commerce staff denied access the raw data to produce GDP statistics didn’t exist and the program ended.”

Hiles said the production of GDP figures had a problematic history. “In 1993 the Guam Finance Commission — initially created as the Guam Tax Commission — contracted KPMG Peat Marwick to produce GDP estimates. Gross Island Product and Personal Income statistics were produced from 1988 to 1993 under the contract using the ‘Income Approach.’ Subsequent to that Guam Finance Commission staff attempted to continue production of the estimates but again ran into problems getting the data on corporate revenues profits and other elements used in the process from Revenue and Taxation. Once again the process came to a halt and later the Finance Commission was abolished.”

Bradley said the importance of having GDP information was not recognized in all quarters. “The truth is that the collection compilation and publication of socio-economic information especially data holds a very low priority among government officials particularly the elected variety who seem to fear that they may be made to ‘look bad’ if the numbers are anything less than favorable ” he said. “The convincing lie would be that the successive models that have been developed to measure GDP over the years suffer from the underlying data no longer being collected in the form necessary to run the models the personnel who were trained to administer the models are no longer employed by the government or have been assigned to other responsibilities and the software and/or hardware necessary to run the models is no longer available.”

Recent GDP estimates have been developed but not sanctioned Bradley said. “There have been estimates of GDP developed since 1997 including one that I developed in collaboration with Dr. Roseann Jones and Mr. Gary Hiles during our analysis of the prospective economic impacts of Guam’s political status options ” he said “but none of these has ever been officially adopted.”

The next official GDP for Guam could come soon. “The Department of Interior is preparing Guam’s 2002 Gross Island Product estimate based on information made available from the recently released 2002 Guam Economic Census and information provided by the government of Guam ” Dela Rosa said.

Hiles said a formula for calculation had been developed. “The plan is to initially produce the estimates using the ‘Value Added’ approach and later calculate the GDP using the ‘Income’ and ‘Expenditure’ approaches ” he said. “As the Economic Census is conducted every five years the proposal is to continue on an annual basis using information such as tax data from the business returns gross receipts and payroll employment data to produce the estimates.”

The department has not given any indication of what the estimated GDP will be nor when the report will be released. “A release in late 2004 or early 2005 wouldn’t surprise me ” Hiles said. The process is lengthy and despite Guam’s size national methodologies are used. “The development of Guam’s Gross Island Product follows the U.S. Bureau of Economic Analysis methodology as used to generate the U.S. Gross Domestic Product ” Dela Rosa said.

Bradley is skeptical these methodologies will produce accurate results. He said “While we may be able to obtain reasonably accurate figures for wages and salaries as a portion of labor income and calculate the employers’ share of FICA based thereon we would have a difficult time measuring the value of other employers’ contributions to total labor compensation such as fringe benefits such as the employers’ share of medical dental and life insurance travel allowances above costs et cetera he said. Since the ratios of these items to base wages and salaries are not measured for Guam U.S. figures are to be substituted as estimates. This is but one of several areas in which such substituted estimates will be necessary.”

While waiting the release of Guam’s 2002 GDP research for 2003 continues through the working group which includes representatives from the Bureau of Budget and Management Research Bureau of Statistics and Plans Department of Administration Department of Labor Department of Revenue and Taxation the University of Guam and the Guam Bankers Association.

“I consider the GDP to be the most fundamental economic measurement that any community can take ” Bradley said. “It is truly unfortunate that the government of Guam has been unable for these many years to compile and publish GDP figures along with many of the other socio-economic statistics that are absolutely necessary to make sound and informed governmental and private decisions. Along with population figures it provides a reasonable proxy for a measurement of the standard of living within a society. It also is essential in making forward-looking decisions and formulating plans not to mention attracting outside investment. ”

Hiles said GDP statistics were one of the most frequently requested statistics that were unavailable. “GDP statistics can be an important tool for economic decision making. Having said that it is important to note that GDP statistics are not the only statistical tool and that there are currently substantial statistical resources available about Guam produced by both the federal and Guam governments which may be ideal for a particular analysis need.”

Dela Rosa said the project is significant. “The government is not only determining the current GDP estimate but we are putting a system in place to track the GDP on a consistent and accurate basis. Gov. Felix P. Camacho has made a commitment to re-establish the GDP which is critical in investor confidence and why the Department of Interior has been willing to assist in this effort.” MBJ