Alternative to GDP
In Rio de Janeiro in 2012, more than fifty countries and 86 private companies united to support the UN's proposal to account for the value of natural assets, such as clean air, clean water, forests, and other ecosystems, in decision-making related to economic activities and in national accounting systems.
Seventy-five countries and the European Commission supported a communiqué calling on governments, the United Nations system, international financial institutions, and other international organizations to take more active measures to ensure the accounting of natural capital worldwide.
In September 2015, the UN adopted a resolution stating that by 2030, in addition to GDP indicators, which can no longer adequately reflect how well a country is developing, other indicators for measuring progress in sustainable development must be developed. The accounting of natural capital was adopted as such an indicator.
– There is an element called national wealth, which is accounted for in gross domestic product. By this, we mean the stock of non-financial tangible and intangible assets that society possesses, and the balance of its financial assets and liabilities in relations with other countries. The change in national wealth over a certain period is accounted for by the gross domestic product indicator and other indicators of the national accounts system, – notes Kanykey Orozbaeva.
Measuring national wealth
According to the expert, the national accounts system is necessary for analyzing the state of the economy, assessing the effectiveness of its functioning, and conducting state policy. To regulate it, a comprehensive system of interrelated macroeconomic indicators has been developed, which are systematized and calculated in the System of National Accounts. It is adopted in most countries and used in UN statistics. The national accounts system is periodically refined and improved. The latest such refinements were made in 2008.
– The modern national accounts system represents an economic international language, on which economists of various schools and directions, statisticians, state officials and politicians, businessmen, and investors communicate, on which reports of government institutions and international organizations are compiled, – notes the UNDP expert. – The essence of the national accounts system is to form aggregate indicators of economic development at various stages of the reproduction process and to interlink these indicators with each other. Each stage of reproduction corresponds to a special account or group of accounts. They reflect the movement of flows of goods, services, and income through all stages – from production to use, as well as changes in non-financial assets and financial assets and liabilities.
How many trees are in the forest?
As Kanykey Orozbaeva noted, work is beginning in Kyrgyzstan to create environmental accounts. They should show the impact of the environment on economic development.
– For an example of how important environmental accounts are, we don’t have to look far. In 2011, when "Kumtor" suspended its operations for six months, the growth rate of Kyrgyzstan's economy was only 0.2 percent. And when the gold mining enterprise resumed its work, the growth rate, according to the following year's data, was 10.7 percent. Even China doesn’t have such growth rates! And "Kumtor" suspended its activities due to glacier melting! Here you have a direct impact of the environment on the economy of the entire country, – noted Orozbaeva.
According to the head of the environmental statistics department of the National Statistical Committee of Kyrgyzstan, the first step in creating environmental accounts will be the accounting of forests. Moreover, this accounting will be conducted using a geographic information system, which will eliminate any distortions in calculations. The data obtained will be used by researchers as well as decision-makers at the state level.
– It would be more reasonable to start with water accounting, but we cannot afford that right now, as there are many political questions involved. Kyrgyzstan has a lot of transboundary waters. Also, we still do not have a water cadastre, which ceased to exist back in the Soviet times. Therefore, we decided to start with the most neutral indicator – forests. This is necessary to show decision-makers that based on this tool, all other sectors of the economy can be brought to light, – explained Kanykey Orozbaeva.
A reason to think
The UN's engagement with the issues of irrational use of natural resources is not without reason. The seriousness of this problem is fully illustrated by the case of the small Pacific state of Nauru, which in the late 1980s was forced to declare itself bankrupt.
– In its time, Nauru was very rich in phosphates and in the 70s and 80s, due to the development of natural resources, it became one of the richest countries in the world. The income per capita in this prosperous country was 13 thousand dollars a year. And the gross national product in 1986 was as much as 20 thousand dollars per person. Moreover, we are talking about the dollar rate of the 80s. But the extraction of phosphates had a devastating impact on the relief and vegetation cover of the plateau in the central part of the island. By 1989, active mining was taking place on about 75 percent of the country’s territory. About 90 percent of the forest that covered the plateau was destroyed. From a prosperous country, Nauru turned into a bankrupt state, and much of it is now a desert resembling a lunar landscape, – noted Orozbaeva.