Impacts of the 2015 ASEAN economic

integration on the accounting and finance

profession in Cambodia

By

Dr. Sam Ghanty

Royal University of Law & Economics

February 22 & 24, 2014

1

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.

2

Presentation Outline

1. The vision on economic and financial integration

under the ASEAN Economic Community (AEC)

2. The areas of economic and financial integration and

its accomplishments as of 2013

3. The benefits and challenge for Cambodia in

engaging in the ASEAN Economic Community (AEC)

4. An examination of a case of Finance and Accounting

education and training in Cambodia

5. Conclusion

3

I. The vision on financial integration under

the ASEAN Economic Community (AEC)

Key characteristics are:

•A single market and production based

•A highly competitive economic production

•A region of equitable economic development

•A region fully integrated in the global

economy .

4

Core Vision

The 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.

5

6

The Ten ASEAN Member Countries

(Competitive markets of over 600 million people)

GDP per capita (US$): 2011 2012

1.Brunei Darussalam 50,790 50,000

2.Indonesia 6,728 4,700

3.Malaysia 13,385 15,800

4.Philippines 3,383 4,100

5.Singapore 49,754 60,500

6.Thailand 7,907 9,500

7.Cambodia 1,818 2,200

8.Lao PDR 2,054 2,700

9.Myanmar 1,040 1,300

10.Vietnam 2,589 3,400

Source: CIA World Fact Book (2013)

7

II. AEC Core Areas of Integration

1. Human resource development and capacity building

2. Recognition of professional qualifications

3. Closer consultation on macroeconomic and financial

policies

4. Trade financing measures; enhanced infrastructure and

communications connectivity

5. Development of electronic transactions through e-

ASEAN

6. Integrating industries across the region to promote

regional sourcing

7. Enhancing private sector involvement for the AEC

8

Five Core Elements

of a Single Market and Production Base

1. Free flow of goods: removal of tariffs or through

removal of non-tariff barriers.

2. 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.

9

3. Free flow of investment: To enhance ASEAN’s

competiveness in attracting foreign direct

investments as well as intra-ASEAN investments

to promote and ensure dynamic development of

ASEAN economies.

4. Freer flow of capital: To strengthen ASEAN

capital market development and integration, and

allow greater movement of capital.

5. Free flow of skilled labor: To allow managed

mobility and entry for the movement of people

engaged in goods, services and investment. 10

Summary of Areas

of Economic and Financial Integration

Financial integration of ASEAN will be as follows:

1. Financial services liberation, including banking

integration

2. Capital account liberation: removing restrictions on

foreign exchange transactions on current account,

foreign direct investments, portfolio investments, etc.

3. Capital market development: harmonization of laws

and regulations, and linkage of market infrastructure,

etc.

4. Harmonized payments and settlement systems. 11

III. Benefits and Challenges for Cambodia in

Engaging in the ASEAN Economic Community

Benefits:

1.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.

3.More government support to the private sector in developing

capacity, financing, technology, etc.

4.Focus on a knowledge-based economy through an

educational system focused on innovation, creativity, and

entrepreneurship development. 12

Challenges:

1.Cambodian public administration is viewed as insufficient by the

private sector in meeting the ASEAN criteria in terms of

effectiveness and efficiency.

2.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.)

4.An insufficient overall education policy coordination body, of a

well-functioning accreditation institution, a good labor market

information system, etc.

13

• 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.

14

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 services in the participating ASEAN Member

States; and

•exchange information in order to promote adoption of

best practices on standards and qualifications.

15

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.

16

Challenge to Our Existing Finance

and Accounting Program

• We 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.

17

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 and

•to liberalize trade beyond those undertaken by ASEAN

Member States.

18

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 services in the participating ASEAN

Member States; and

•exchanging information to promote adoption of best

practices on standards and qualifications.

19

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.

20

21

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) 22

Key Requirements by IFAC

• International Accounting Education Standards

• International Auditing and Assurance Standards

• International Public Sector Accounting

Standards

• International Ethics Standards for Accountants

• International Financial Reporting Standards

23

• 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. 24

Basis for Recognition among ASEAN countries

25

Education

License

Competencies

Experience

IFAC Standards and Guidelines

Note:

• 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)

26

MRA for Professionals Year Venue Date Signed

Engineering Services 2005 Kuala Lumpur 9 Dec 2005

Nursing Services 2006 Cebu 8 Dec 2006

Architectural Services 2007 Singapore 19 Nov 2007

Framework on surveyors 2007 Singapore 19 Nov 2007

Framework on accountancy 2009 Chan-am 26 Feb 2009

Medical Practitioners 2009 Chan-am 26 Feb 2009

Dental Practitioners 2009 Chan-am 26 Feb 2009

ASEAN Federation of Accountants (AFA)

27

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

28

Brunei - BICPA

Lao - LICPA

Cambodia - KICPAA Indonesia - IAI

Malaysia - MIA Myanmar - MAC

Philippines - PICPA

Singapore - ISCA

Thailand - FAP

, Vietnam - VAA

AFA’s Role in MRA

29

ASEAN Federation of Accountants (AFA)

1.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 AFA’s Easy Guide to Setting up Accountancy

Practices in ASEAN Countries

3. Issue on equivalency among ASEAN Nations in

terms

of compensation, benefits and qualifications of

practitioners.

V. Conclusion

By the year 2015 and beyond, the ASEAN Framework

Agreement on Services (AFAS) are:

1.to enhance cooperation in services among ASEAN

member states to improve the efficiency and

competitiveness,

2.to eliminate substantially restrictions to trade in services

amongst ASEAN Member States and

3.to liberalize trade beyond those undertaken by ASEAN

Member States.

30

• 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.

31

Thank you

for your attention and

Q & A

32