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Revising the Consumer Price Index

Revizaun ba Índise Presu Konsumedór

22 November 2012.    Updated 10 June 2013

Link to the submission below as a printable PDF in English or Tetum.

Timor-Leste's National Statistics Directorate (DNE), part of the Ministry for Finance, has been reporting on the Consumer Price Index (CPI) in Dili (monthly) and nationwide (quarterly) for many years, based on a system set up in 2001. They are currently updating the system, especially the relative weights given to different kinds of products in calculating the overall CPI, which can be used to indicate the level of inflation. As DNE explains, "The Consumer Price Index (CPI) measures the rate of changes over time in the prices of consumer goods and services, purchased or otherwise acquired by households, which households use directly, or indirectly, to satisfy their own needs and wants."

With technical help from the Australian Bureau of Statistics (ABS) and financial support from AusAID, DNE is revising the way CPI is calculated here. Using information from the 2011 Household Income and Expenditure Survey (HIES), they will revise the weights for different product groups, and also hope to produce a monthly CPI in the future. DNE recently circulated an Information Paper on Issues for Consideration. They organized a workshop on 16 November with government officials, La'o Hamutuk, and other stakeholders, where two ABS experts explained how CPI is derived and presented proposals for revising and updating it. A lively discussion ensued, and participants were encouraged to share additional ideas. La'o Hamutuk's submission follows below, elaborating on some of the subjects raised during the workshop and introducing some new ones.

In May 2013, the renamed General Directorate of Statistics (GDS/DGE) launched the revised "Series 2) CPI calculation, and released four months of reports. Under the new methodology, separate CPIs are calculated for Dili and the rest of Timor-Leste, reflecting the different lifestyles of the urban middle class and the rural poor, as shown on the graph at right. GDS has produced several English-language documents to help people use the CPI and understand the new methodology:

Additional and updated information will be on the CPI page of the DGS website, although technical problems sometimes make access difficult.

Diresaun Nasionál Estatístika (DNE), parte ida husi Ministériu Finansas RDTL nian, fó sai ona relatóriu kona ba Índise Presu Konsumedór (CPI/IPK) iha Dili (mensal) no nasionál (trimestral) dezde tinan balun, bazeia ba sistema ne’ebé kria iha 2001. Agora daudaun, sira atu atualiza sistema ida ne'e, liu liu todan ne’ebé atu fó ba tipu produtu ne'ebe diferente atu kalkula CPI, ne’ebé bele uza hanesan indikadór ba inflasaun. Hanesan DNE esplika, "Índise Presu Konsumedór sukat mudansa iha presu sasán no servisu ne’ebé uma-kain sosa, katak uma-kain uza, direta ka la direta, hodi satisfás sira nia presiza no hakarak rasik."

Ho asisténsia tékniku husi Australian Bureau of Statistics (ABS) no apoiu finansiál husi AusAID, DNE halo revizaun ba métodu kalkula CPI iha Timor-Leste. Ho informasaun husi Estudu Rendimentu no Despeza Uma-kain nian (Ing.), DNE sei muda todan ba grupu produtu balun, no mós espera katak sei kalkula CPI nasionál kada fulan iha futuru. DNE foin sirkula artigu ida kona-ba Asuntu atu Konsidera (Ing.). Sira organiza ona seminar ida iha loron 16 Novembru ho ofisiál sira husi Governu, La'o Hamutuk, no stakeholder sira seluk. Peritu na’in rua husi ABS esplika oinsá kalkula CPI no aprezenta proposta balun atu halo revizaun no atualiza métodu CPI. Iha diskusaun tuir mai, DNE fó korajen ba partisipante sira atu fó hanoin tan. La'o Hamutuk hakerek submisaun tuir mai, hodi dezenvolve asuntu balun no loke tópiku foun balun.


La'o Hamutuk Submission to National Statistics Directorate, 21 November 2012 (emphasis, graphics and links added)

To: Sr. Antonio Freitas, Director-General for Policy Analysis and Research, Ministry of Finance, RDTL
Sr. Elias dos Santos Ferreira, Director, National Statistics Directorate, RDTL
Ms. Judy Henson, Australian Bureau of Statistics
Mr. Mark Jorgensen, Australian Bureau of Statistics

Re: Revision of Timor-Leste’s Consumer Price Index (CPI)

Thank you for inviting La’o Hamutuk to participate in the 16 November workshop and for encouraging us to give input to the process of updating Timor-Leste’s Consumer Price Index. We appreciate DNE’s focus on providing information which is useful to Government, civil society and others as we work together to develop Timor-Leste for the benefit of all of its people. We believe that a solid understanding of today is essential to developing good strategies for tomorrow, and are glad that DNE has asked users of your publications for input.

We are not academically-training economists or experts in statistics, but we offer a few comments which may improve the accuracy and usefulness of the CPI as a tool for advancing economic and social justice here. Representing inflation is a challenging undertaking which cannot be reduced to a single monthly number, and we hope our observations will help you support policymakers and others to measure, understand and control the increasing cost of living for Timor-Leste’s citizens.

Timor-Leste’s economy and consumption patterns are very different from Australia or other developed countries. There must be experts who understand how to measure CPI in a place like Timor-Leste, and we hope that they can tapped, either now or in the future.

Timor-Leste has a varied economy, and the small size of the country makes this diversity more extreme and more difficult to average. In addition to the obvious differences for the 25% of Timorese who live in Dili (who are generally wealthier, have more consistent income (albeit with a “13th month” salary payment), and purchase from stores and importers), there are differences within and among the districts. Those which border Indonesia are more likely to purchase “informal” imports, while those with coffee production have seasonal variations. In each district, those who live in towns with shops and services have different consumption patterns from those in more remote areas. Therefore, we are concerned that increasing the frequency of national CPI statistics by reducing the breadth of places sampled may introduce unintentional biases.

We appreciate that the CPI measures the effect of price changes on households, rather than counting money. In an economy like Timor-Leste, where a small fraction of the population has the great majority of wealth and income, measures based on dollars (such as GDP and GNI) give a misleading picture of the lives of most of our citizens. In spite of double-digit GDP growth in recent years, the percentage of people living in poverty has increased to more than 50%, and we hope that the revised CPI can reflect the costs of living for that disadvantaged and vulnerable majority, nearly all of whom live outside Dili. [1]

Economists observe that market principles often don’t apply here, in spite of our “free market” economy. When buyers are unaware that a product is cheaper in another store or neighborhood, or if going to that location is too difficult or expensive, sellers can charge more. When vendors don’t understand that it is better to get something than lose everything, they ask the same price for fish or produce until it becomes unsellable. The “law of supply and demand” is often broken. We suggest that the collection and publication of price data could include the variation of prices among stores or localities, not only the averages, to help understand and reduce inflation from lack of information.

Timor-Leste is extremely import-dependent, and the prices of imports (when available) are often very different than the prices of local products for which they substitute. We are afflicted with the “Dutch Disease” which often affects countries whose rentier economies depend on exporting natural resources.[2] The DNE’s recent trade report shows that our 2011 exports were only $13 million (90% of which was coffee), while we imported $319 million worth of merchandise. The Central Bank’s Balance of Payments is more striking – during 2011 $1,764 million left Timor-Leste while only $381 million came in (plus $3,240 million in oil income, which could drop to zero in about 12 years). For reasons suggested below, import price changes are often mysterious, uncontrolled or volatile, and we hope that the CPI process can help us understand them.

Imports are mostly purchased by more affluent, urban people, and a CPI which mainly includes imported goods will not reflect most people’s lives. Is it possible to disaggregate the data, to enable comparison of changes in price differences between, for example, imported and locally produced rice? Increasing local production to substitute for imports is essential to Timor-Leste’s future, and such data would assist policy development.

Approximately half Timor-Leste’s population lives below the poverty line, largely in rural areas, and we suggest that a separate CPI be calculated to indicate their costs of living. With fewer options and less resources, they are hit harder by inflation, and it is important to measure and understand these effects.

For example, a significant portion of Timor-Leste’s imports are for vehicles and fuel, but almost no rural people have cars or motorcycles. They walk, occasionally using horses or public transportation when they require goods or services not available in their vicinity, such as health care or education. Rather than purchase Aqua, they walk long distances to undrinkable sources. Rather than purchase LPG or kerosene, they gather firewood. They cannot purchase many tradable items which others buy, sometimes doing without, producing for themselves or bartering in the nearby subsistence economy. But when they really need to purchase something, inflation makes their small amount of money buy even less. How can the CPI reflect their reality?

The workshop stimulated a discussion about how to identify the causes of inflation, which may include high government spending inside the country, lack of local productive capacity, foreign exchange rates, supply bottlenecks, price-fixing, importer or retailer oligopolies, limited consumer choice and knowledge, and others. We agree that a better understanding is needed for developing effective economic and budgetary policies, but perhaps it is asking too much for CPI to explain it. Can ABS, and/or DNE, with support from AusAID or other donors, undertake an in-depth analysis to supplement initial work already done by the IMF and the Ministry of Finance?

On another topic, we wonder about excluding the costs of owner-occupied housing from the CPI. While imputed rent may not be appropriate, construction and maintenance of homes is a significant part of most household’s expenditures. For poor people, dwellings may require frequent repair or rebuilding, and when purchased materials are needed, they can be expensive. However, the lack of facilities in many poor people’s homes (such as plumbing, electricity, sanitation and indoor kitchens) makes it difficult to compare them with those of more affluent people. We do not know how to incorporate housing costs, but hope that you can find a good way.

Thank you very much for considering our ideas, and we are happy to engage in further discussion. We wrote this in English to facilitate understanding by ABS people, but can translate it into Tetum if you wish, as we believe that Timorese people are the ultimate owners of this process, as well as the ones most affected by it.


Submisaun husi La'o Hamutuk ba Diresaun Nasionál Estatístika, 21 Novembru 2012 (ho gráfiku no ligasaun sira adisionál)

Bodik Ba: Sr. Antonio Freitas, Diretór Jerál Analiza Polítika no Peskiza, Ministériu Finansa, RDTL
Sr. Elias dos Santos Ferreira, Diretór Nasionál Estatístika (DNE), RDTL
Sra. Judy Henson, Australian Bureau of Statistics (ABS)
Sr. Mark Jorgensen, Australian Bureau of Statistics (ABS)

Asuntu : Revizaun ba Índise Presu Konsumedór iha Timor-Leste

Obrigado barak hodi konvida La’o Hamutuk atu partisipa seminar iha 16 Novembru no fó korajen ba ami atu fó hanoin ba prosesu hodi atualiza Índise Presu Konsumedór (CPI/IPK) nian. Ami apresia DNE nia foka hodi fornese informasaun ne’ebé util ba Governu, sosiedade sivíl no sira seluk ne’ebé servisu hamutuk atu dezenvolve Timor-Leste hodi benefisia povu tomak. Ami fiar katak ho komprendesaun ne’ebé solidu ohin loron nian, esensiál duni atu dezenvolve estratéjia di’ak ba aban, no ami kontente katak DNE husu input ba sira ne’ebé uza ita-boot sira nia publikasaun.

Ami la’ós peritu ka ekonomista hosi kursu akadémiku iha area estatístika nian, maibé ami oferese komentáriu balu ne’ebé bele hadi’ak fidelidade no utilidade CPI nudár instrumentu ida atu la’o ba oin justisa ekonómiku no sosiál iha Timor-Leste. Reprezenta inflasaun nudár problema difisil ida ne’ebé labele hamenus ba númeru mensal ida de’it, no espera katak ami nia observasaun sei ajuda ita-boot sira hodi suporta polítika na’in no sira seluk atu sukat, komprende no kontrola kreximentu kustu moris ba Timor-oan sira.

Timor-Leste nia ekonomia no lala’ok konsume nian diferente liu ho Australia no nasaun dezenvolvidu sira seluk. Tanba ne’e tenke iha peritu sira ne’ebé komprende oinsá bele sura CPI iha rai hanesan Timor-Leste, no ami espera katak Timor-Leste bele hetan apoiu husi sira, ohin ka iha futuru.

Timor-Leste iha ekonomia diversa, no parte ki’ik iha rai ne’e halo diversidade ne’e sai extreme no difisil liu atu kaer iha númeru rata-rata ida de’it. Aleinde iha diferensa ne’ebé klaru ba 25% Timor-oan sira ne’ebé moris iha Dili (jerálmente sira ne’e riku-liu iha rendimentu ne’ebé konsistente liu (maske sira simu saláriu ba “fulan ba dala 13”), no sosa sasán hosi loja no importadór sira), maibé mós iha diferensa entre distritu sira no iha diferensa laran iha kada distritu. Distritu sira ne’ebé iha fronteira ho Indonesia, barak liu sosa sasán importasaun “informal”, nune’e mós distritu sira ne’ebé ho produsaun kafé iha variasaun tuir fulan (musiman-Indo). Iha kada distritu, ema sira ne’ebé moris iha vila ho loja no servisu sira, iha lala’ok konsume ne’ebé diferente kompara ho ema sira ne’ebé moris iha area remotas sira. Tanba ne’e, ami preokupa katak hasa’e frekuénsia hosi estatístika CPI nasionál nian liu hosi hamenus númeru sampel ba fatin sira bele introduz distorsaun la intensionál.

Ami apresia katak CPI sukat impaktu mudansa presu ba uma-kain sira duke konta osan. Iha ekonomia hanesan Timor-Leste, ne’ebé parte ki’ik hosi populasaun hetan maioria riku-soin no rendimentu boot, sukat ho dolar (hanesan GDP no GNI) hatudu imajen la los hosi maioria povu nia moris. Maske iha kreximentu GDP double-digit iha tinan balu kotuk ne’e, maibé persentajen populasaun ne’ebé moris iha pobreza aumenta ba liu 50%, no ami espera katak revista CPI nian bele reflete kustu moris ba maioria ema sira ne’ebé vulneravel no laiha vantajen, besik sira ne’e tomak moris li’ur Dili.[1]

Ekonomista sira observa katak prinsipiu merkadu nian dala barak la aplika iha ne’e, maske ho ita nia ekonomia “merkadu livre”. Bainhira sosa na’in sira la hatene katak produtu ida baratu liu iha loja seluk ka iha fatin ne’ebé besik sira, ka karik ba fatin sira ne’ebé difisil no karun liu, fa’an na’in sei fó presu as liu tan. Bainhira fa’an na’in la komprende katak di’ak liu atu hetan buat ruma duke lakon buat hotu, sira husu presu ne’ebé hanesan ba ikan ka buat ne’ebé sira prodús to sasán sira ne’e sai dodok no labele fa’an tan. Lei “atu fornese no atu husu”/supply and demand dala barak la aplika. Ami sujere katak kolesaun no publikasaun ba dadus presu bele inklui variasaun presu entre loja ka lokalidade sira, la’ós de’it presu rata-rata, atu ajuda komprende no redús inflasaun hosi informasaun ne’ebé durante ne’e menus hela.

Timor-Leste nudár nasaun ne’ebé depende demais liu ba importasaun, no presu importasaun (bainhira iha) dala barak diferente liu kompara ho presu hosi produtu lokál ne’ebé sasán importasaun sira ne’e substitui. Ita agora sofre ona ho “Moras Olanda” ne’ebé dala barak afeta ba nasaun sira ho ekonomia rentier ne’ebé depende ba esportasaun rekursu naturais.[2] Relatóriu Komérsiu DNE nian foin daudauk hatudu katak ita nia esportasaun iha 2011 iha de’it tokon $13 (90% mai hosi fa’an kafé), no ita importa tokon $319 ba sasán merkadorias nian tomak. Banku Sentrál nia Balansu Pagamentu hanehan liu ita, katak durante 2011 tokon $1,764 sai hosi Timor-Leste no iha de’it tokon $381 mak tama mai (aumenta ho tokon $3,240 hosi reseita petrolíferu, ne’ebé bele sei tun ba zero iha tinan 12 oin mai). Ba razaun sira ne’ebé sujere iha okos, mudansa presu importasaun dala barak akontese susar atu komprende, labele kontrola, ka tun sa’e lalais, no ami espera katak prosesu CPI nian bele ajuda ita atu komprende buat sira ne’e.

Sasán importasaun ne’e barak liu sosa hosi ema sira ne’ebé riku liu, sira ne’ebé hela iha sidade, no CPI ne’ebé inklui sasán importasaun nian sei labele refleta povu barak nia moris. Posivel ka lae atu halo dadus disagregadu, atu bele halo komparasaun ba entre diferensa ba mudansa presu nian, ezemplu, foos importasaun no foos hosi produsaun lokál? Aumenta produsaun lokál atu substitui sasán importasaun ne’e esensiál duni ba Timor-Leste nia futuru, no dadus sira hanesan ne’e sei ajuda polítika dezenvolvimentu nian.

Kuaze metade hosi populasaun Timor-Leste moris iha liña pobreza nia okos, largamente iha area rural, no ami sujere katak CPI ne’ebé ketak-ketak bele kalkula atu indika sira nia kustu moris. Ho opsaun ne’ebé uitoan liu no menus rekursu, sira ne’e hetan impaktu maka’as hosi inflasaun, no ida ne’e importante atu sukat no komprende efeitu hirak ne’e.

Ezemplu, porsaun boot hosi importasaun ne’ebé Timor-Leste halo mak ba veíkulu no kombustivel, maibé besik ema sira ne’ebé moris iha area rural laiha karreta no motorizada. Sira la’o ain diet, dala ruma uza kuda ka transportasaun públiku bainhira sira hakarak sosa ka servisu ne’ebé labele hetan iha sira nia fatin, hanesan asisténsia saúde no edukasaun. Duke ba sosa Aqua, sira la’o ain dook ba be matan atu kuru bee matak. Duke sosa LPG ka mina-rai, sira ba buka ai-sunu. Sira labele sosa sasán merkadu nian ne’ebé ema riku sira sosa, dala ruma sira la ba sosa, prodús ba sira nia an ka troka ho sasán seluk iha fatin ekonomia subsistensia seluk ne’ebé besik liu sira. Maibé bainhira sira presiza duni atu sosa buat ruma, inflasaun halo sira nia osan uitoan ne’e hodi sosa sasán uitoan de’it. Oinsá CPI bele refleta sira nia realidade?

Seminar estimula diskusaun ida kona-ba oinsá atu identifika kauza ba inflasaun, ne’ebé bele inklui despeza as governu ba iha rai laran, kapasidade produsaun lokál ne’ebé menus, mudansa valor moeda kompara ho rai-seluk nian, fornesimentu ne’ebé limitadu, mudansa presu, importadór ka fa’an na’in mak uitoan liu, limita konsumidór sira nia hatene no nia preferénsia, no buat sira seluk tan. Ami konkorda katak komprendesaun ne’ebé di’ak liu tan presiza duni atu dezenvolve polítika ekonomia no orsamentál ho efetivu liu, maibé karik ida ne’e husu barak liu ba CPI atu esplika ida ne’e. Bele ABS, no/ka DNE, ho suporta hosi AusAID ka doadór sira seluk, hala’o analiza ida ne’ebé kle’an liu atu suplementa servisu inísiu ne’ebé halo tiha ona hosi FMI no Ministériu Finansa nian?

Ba tópiku seluk, ami preokupa kona-ba esklui kustu ba uma na’in ne’ebé hela iha nia uma rasik hosi CPI. Konstrusaun no manutensaun hosi uma sira ne’e nudár parte despeza boot uma kain nian. Ba ema kiak sira, sira nia uma ne’e dala barak presiza hadi’ak no harii foun beibeik, no bainhira tenke sosa material sira, material sira ne’e sei karun. Maske, fasilidade menus iha ema kiak sira nia uma (hanesan torneira, eletrisidade, sentina no dapur iha uma laran) halo difisil atu kompara sira ho ema sira ne’ebé riku liu. Ami la hatene oinsá atu inklui kustu uma nian, maibé espera ita-boot sira bele hetan dalan di’ak ida.

Obrigado barak hodi konsidera ami nia ideia sira, no ami kontente atu nafatin involve iha diskusaun oin mai. Ami fiar katak povu Timor-Leste mak tenke sai na’in loloos ba prosesu ida ne’e, no mós ida ne’ebé hetan impaktu maka’as hosi ida ne’e.

Ami be saran lia,

Juvinal Dias                                  Charles Scheiner                                   Tonilia dos Santos
Researchers, Natural Resource and Economy Team          Peskizadór, Ekipa Rekursu Naturais no Ekonomia, La’o Hamutuk


[1] According to Table 2.1.1 of the 2009-2010 Demographic and Health Survey, 94% of households in the poorest two quintiles by household wealth are in districts other than Dili, although only 78% of the total population lives outside Dili district.[1] Bazeia ba Tabela 2.1.1 hosi Demographic and Health Survey iha 2009-2010, 94% hosi uma kain sira ne’ebé kiak liu iha rua kintál ki’ik liu bazeia ba riku-soin uma-kain nian, iha distritu sira duke iha Dili, maske iha de’it 78% hosi populasaun moris la’ós iha Distritu Dili.

[2] Timor-Leste is the second most petroleum-export-dependent country on earth. During 2011, 97% of state revenues and 79% of our entire GNI came from converting nonrenewable petroleum wealth to cash.

[2] Timor-Leste nudár nasaun segundu iha mundu mak depende liu ba esportasaun petróleu. Durante 2011, 97% reseita estadu nian no 79% hosi ita nia GNI tomak mai hosi konversaun riku-soin naun renovavel petróleu ba osan.

The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)
Institutu Timor-Leste ba Analiza no Monitor ba Dezenvolvimentu
Rua dos Martires da Patria, Bebora, Dili, Timor-Leste
P.O. Box 340, Dili, Timor-Leste
Tel: +670-3321040 or +670-77234330
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