Impacts of the 2015 ASEAN economic integration on the accounting and finance profession in Cambodia

ByDr. Sam GhantyRoyal University of Law & EconomicsFebruary 22 & 24, 2014*

Dr. Sam GHANTY was the head of the finance program and professor of Finance, Investments and Banking at the University of Wisconsin (USA) from 1977 to 1996.

He worked for ADB and the World Bank from 1996 to 2004 as advisor and training coordinator at the National Bank of Cambodia and Ministry of Economy and Finance.

He served as an independent member of the Board of Directors for the Foreign Trade Bank of Cambodia (2001-2005), Canadia Bank (2006-2007) and Arial Global Group of Singapore (2004-2007).

He currently serves as advisor at the National Accounting Council (NAC) of the Ministry of Economy and Finance, a member of the Board of Directors at the Securities and Exchange Commission of Cambodia (SECC), a member of the Board of Directors at the Parliamentary Institute of Cambodia (PIC) and a member of the Board of Directors at the Cambodian Public Bank.

*

Presentation OutlineThe vision on economic and financial integration under the ASEAN Economic Community (AEC)

The areas of economic and financial integration and its accomplishments as of 2013

The benefits and challenge for Cambodia in engaging in the ASEAN Economic Community (AEC)

An examination of a case of Finance and Accounting education and training in Cambodia

5. Conclusion *

I. The vision on financial integration under the ASEAN Economic Community (AEC)

Key characteristics are:

A single market and production basedA highly competitive economic productionA region of equitable economic developmentA region fully integrated in the global economy .*

Core VisionThe AEC will transform ASEAN into a region with free movement of goods, services, investment, skilled labor, and freer flow of capital.

Each ASEAN member country shall abide by and implement the AEC by 2015.

The declaration on the ASEAN Economic Blueprint was signed by the heads of ASEAN members countries.*

*

The Ten ASEAN Member Countries(Competitive markets of over 600 million people)GDP per capita (US$): 20112012

Brunei Darussalam50,79050,000Indonesia 6,728 4,700Malaysia13,38515,800Philippines 3,383 4,100Singapore49,75460,500Thailand 7,907 9,500Cambodia 1,818 2,200Lao PDR 2,054 2,700Myanmar 1,040 1,300Vietnam 2,589 3,400Source: CIA World Fact Book (2013)

*

II. AEC Core Areas of Integration Human resource development and capacity buildingRecognition of professional qualificationsCloser consultation on macroeconomic and financial policiesTrade financing measures; enhanced infrastructure and communications connectivityDevelopment of electronic transactions through e-ASEANIntegrating industries across the region to promote regional sourcingEnhancing private sector involvement for the AEC

*

Five Core Elements of a Single Market and Production BaseFree flow of goods: removal of tariffs or through removal of non-tariff barriers.

Free flow of services: No substantial restriction to ASEAN service suppliers within the ASEAN subject to domestic regulations.

By 2015 ASEAN is also working towards recognition of professional qualifications with the view of facilitating movement within the regions.*

Free flow of investment: To enhance ASEANs competiveness in attracting foreign direct investments as well as intra-ASEAN investments to promote and ensure dynamic development of ASEAN economies.Freer flow of capital: To strengthen ASEAN capital market development and integration, and allow greater movement of capital.Free flow of skilled labor: To allow managed mobility and entry for the movement of people engaged in goods, services and investment.*

Summary of Areas of Economic and Financial IntegrationFinancial integration of ASEAN will be as follows: Financial services liberation, including banking integrationCapital account liberation: removing restrictions on foreign exchange transactions on current account, foreign direct investments, portfolio investments, etc.Capital market development: harmonization of laws and regulations, and linkage of market infrastructure, etc.Harmonized payments and settlement systems.*

III. Benefits and Challenges for Cambodia in Engaging in the ASEAN Economic CommunityBenefits:

Cambodia needs to speed up the economic reforms through strengthening good governance, infrastructure development, human resource development and research and development.

2. Enhance the development of public-private partnership.

More government support to the private sector in developing capacity, financing, technology, etc.Focus on a knowledge-based economy through an educational system focused on innovation, creativity, and entrepreneurship development. *

Challenges:

Cambodian public administration is viewed as insufficient by the private sector in meeting the ASEAN criteria in terms of effectiveness and efficiency.

High production costs such as electricity compared to other ASEAN countries

3. Lack of sufficient level of skilled labor and critical professionals such as engineering, business (CPA, CFA, Financial Analysts, Economists, etc.)

An insufficient overall education policy coordination body, of a well-functioning accreditation institution, a good labor market information system, etc.*

Due to a large amount of important issues dealing with the integration of Cambodia in the ASEAN Economic Community (AEC) by the year of 2015, I would like to focus only on one area dealing with the preparation of our human resource to be ready for a full benefit in this integration process.

To do this, let me focus my presentation on the field of finance and accounting in order to stress on the need to urgently reform the program and training that are urgently needed to meet the ASEAN educational requirement in this field.*

IV. An Examination of an Area of Training need: The Area of Finance and Accounting The objectives of ASEAN Framework Agreement on Services (AFAS) are to:facilitate mobility of accountancy services professionals across participating ASEAN Member States;enhance the current regime for the provision of accountancy servicesin the participating ASEAN Member States; andexchange information in order to promote adoption of best practices on standards and qualifications.

*

This means:the cross-border movement of professional accountants providing accountancy and public auditing services that require domestic licensing in ASEAN Member States may be facilitated through:

a. bilateral Mutual Recognition Agreements (MRAs) b. multilateral MRAs between or among the Member States.

*

Challenge to Our Existing Finance and Accounting ProgramWe need to review the process for integrating a proposed standardized accounting syllabus recommended by the World bank and ADB in the present accounting and finance programs of Cambodian universities, and to proceed to the transformation of those programs as smoothly and practically as possible.

Our universities may need the assistance of the Kampuchea Institute of Charted Accountants and Auditors (KICPAA) to speed up the process of this integration.

*

By the year 2015 and beyond, the ASEAN Framework Agreement on Services (AFAS) which enhances the cooperation in services among ASEAN Member States are designed: to improve the efficiency and competitiveness,to eliminate substantially restrictions to trade in services amongst ASEAN Member States andto liberalize trade beyond those undertaken by ASEAN Member States.*

ASEAN countries, including Cambodia, agreed on the objectives of:facilitating mobility of accountancy services professionals across participating ASEAN Member States,enhancing the current regime for the provision of accountancy servicesin the participating ASEAN Member States; andexchanging information to promote adoption of best practices on standards and qualifications.*

We need to standardize the accounting and finance syllabus throughout Cambodian universities by:

developing and producing a number of needed accounting and finance textbooks that facilitate the implementation of the standardized accounting and finance syllabus,

standardizing the delivery of quality teaching and method of assessment of the accounting knowledge that can help produce qualified accounting graduates in Cambodia to met the ASEAN challenges. *

*The Challenges are:

To rebuild the accountancy reputation in Cambodia

To bring back the confidence in audited financial statements

To adopt and implement international standards and get the commitment of an internationally accepted curriculum

To establish a strong accountancy profession at the international regional, and domestic level.

The role of the International Federation of Accountant (IFAC)The International Federation of Accountants (IFAC), composed of 173 member-bodies in 130 countries, in different stages and adoption of international accounting standards.

KICPAA, representing the Cambodian accounting profession, is a member of IFAC.

Member- bodies are required to demonstrate compliance with international accountancy standards through the Statements of Membership Obligations (SMOs)*

Key Requirements by IFACInternational Accounting Education StandardsInternational Auditing and Assurance StandardsInternational Public Sector Accounting StandardsInternational Ethics Standards for Accountants International Financial Reporting Standards*

An ASEAN Mutual Recognition Agreement (MRA) enables professional service providers registered in signatory countries to be equally recognized in another signatory country.

It allows professionals in one country to move to another country, with their existing credentials being recognized by passing an exam on corporate and taxation laws and regulations in order to obtain a license to practice the profession in that country.*

Basis for Recognition among ASEAN countries *EducationLicenseCompetenciesExperienceIFAC Standards and GuidelinesNote: All ASEAN accounting and finance professionals adopt the IFAC educational and professional guideline.The next slide lists other ASEAN professional membership agreements.

Other ASEAN Mutual Recognition Agreements (MRA)*

MRA for ProfessionalsYearVenue Date SignedEngineering Services 2005Kuala Lumpur 9 Dec 2005Nursing Services2006Cebu 8 Dec 2006Architectural Services2007Singapore 19 Nov 2007Framework on surveyors2007Singapore 19 Nov 2007Framework on accountancy2009Chan-am 26 Feb 2009Medical Practitioners2009Chan-am 26 Feb 2009Dental Practitioners2009Chan-am 26 Feb 2009

ASEAN Federation of Accountants (AFA)*Established in 1977, led by a council consisting of the representatives of the national accounting bodies of Asian Nations (ASEAN)

Composed of ten (10) ASEAN member bodies and four (4) Associate member bodies Objective is for regional cooperation and exchange of best practices among ASEAN Accountants for professional development

AFA Ten Regular Members* Brunei - BICPA Lao - LICPA Cambodia - KICPAA Indonesia - IAI Malaysia - MIA Myanmar - MAC Philippines - PICPA Singapore - ISCA Thailand - FAP ,Vietnam - VAA

AFAs Role in MRA*ASEAN Federation of Accountants (AFA)

Analyse the country requirements for the Accountants and Practicing Public Accountants.

2. Coordinate with each countries focal points to confirm and update the information contained in The AFAs Easy Guide to Setting up Accountancy Practices in ASEAN Countries3. Issue on equivalency among ASEAN Nations in terms of compensation, benefits and qualifications of practitioners.

V. ConclusionBy the year 2015 and beyond, the ASEAN Framework Agreement on Services (AFAS) are: to enhance cooperation in services among ASEAN member states to improve the efficiency and competitiveness, to eliminate substantially restrictions to trade in services amongst ASEAN Member States and to liberalize trade beyond those undertaken by ASEAN Member States.*

Keeping this development in mind, the reform of the present capacity building programs to improve the Cambodian accounting education is perceived to be a necessary policy option in the Financial Sector Development Strategy 2011-2020 of the Royal Government of Cambodia.

We must provide future Cambodian finance and accounting professions the necessary academic and professional skills that enable them to be competitive and ready to face the influx of internationally qualified accountants in the ASEAN region as well as globally.*

Thank you for your attentionand Q & A*