Asean Economic Community And Opportunities For Accountants And Professional Service Providers

ASEAN Economic Community and Opportunities For Accountants and Professional Service Providers

Nik Mohd Hasyudeen YusoffCEO and Thought LeaderInovastra

Competitiveness Through Innovation and Strategy


ASEAN – an Overview•The Association of South East Asian Nations

(ASEAN) was established on 8 August 1967• It consists of 10 countries•As of 2006 ASEAN has a population of 560

people, total land areas of 4.5 million square kilometres, combined GDP of US 1,100 and total gross trade of US 1,400 billion


ASEAN - Membership•Brunei Darussalam•Cambodia• Indonesia• Lao PDR•Malaysia•Myanmar•Philippines•Singapore•Thailand•Viet Nam


Some Indicators of demand Population GDP Total trade No of

Accountants

‘000 US $million US $million Membership

Brunei Darussalam 396 12,317 9,108 79

Cambodia 14,475 8,662 6,437 799

Indonesia 224,905 431,717 161,864 7,171

Lao DPR 5,608 4,128 990 166

Malaysia 27,174 186,960 285,543 25,309

Myanmar 58,605 12,632 5,630 502

Philippines 88,875 146,894 99,183 20,486

Singapore 4,589 161,546 510,089 20,257

Thailand 65,694 245,701 248,688 49,244

Viet Nam 85,205 71,292 77,270 7,500


ASEAN Economic Community• The ASEAN Economic Community shall

be the end-goal of economic integration measures as outlined in the ASEAN Vision 2020. Its goal is to create a stable, prosperous and highly competitive ASEAN economic region in which there is a free flow of goods, services, investment and a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities in year 2020.


ASEAN Economic Community• The ASEAN Economic Community shall

establish ASEAN as a single market and production base, turning the diversity that characterises the region into opportunities for business complementation and making the ASEAN a more dynamic and stronger segment of the global supply chain. ASEAN’s strategy shall consist of the integration of ASEAN and enhancing ASEAN’s economic competitiveness.


Initiatives Pursued So Far• Mechanisms and measures to strengthen the

implementation of its existing economic initiatives including the ASEAN Free Trade Area (AFTA), ASEAN Framework Agreement on Services (AFAS) and ASEAN Investment Area (AIA)

• Accelerate regional integration in the following priority sectors by 2010: air travel, agro-based products, automotives, e-commerce, electronics, fisheries, healthcare, rubber-based products, textiles and apparels, tourism, and wood-based products


Initiatives Pursued So Far• Facilitate free flow of goods, services,

investment, capital and labour• Allow foreign participation of foreign equity:

49% by 2008, 51% by 2010 and 70% by 2015• Strengthen the institutional mechanisms of

ASEAN, including the improvement of the existing ASEAN Dispute Settlement Mechanism to ensure expeditious and legally-binding resolution of any economic disputes

• The above initiatives are pursued through negotiations involving the government and private sectors


Initiatives Involving the Accountancy Profession

• Based on the ASEAN Framework Agreement on Services

• Focus on providing market access to accountants into various ASEAN countries and how the services of foreign accountants would be recognised by each government (national treatment)

• ASEAN Mutual Recognition Arrangement Framework on Accountancy Services was signed in 2009


ASEAN Mutual Recognition Arrangement Framework on Accountancy Services

• To facilitate the negotiations of MRAs on Accountancy Services between or among ASEAN Member States by providing a structure towards the conclusion of such MRAs

• Areas covered:▫ Education▫ Licensing▫ Demonstration of competency▫ Experience▫ Reference to IFAC standards▫ Domestic regulation


Opportunities Drivers• The need to continue developing the

economies within ASEAN; there are developed, developing and newly developing countries

•Globalisation of regulation and standards – IFRS, Basel II

• Improvement of governance, both in the public and private sectors

• ASEAN transforming itself into a ruled-based regional body with the adoption of ASEAN Charter


Risks and Challenges•Domestic regulation which may not be

transparent and consistently applied•Culture and practices which differ

from one country to another• Changing business environment and

disjointed responses from various countries


Export of “Accounting” so far

•Mode 1 – Business Process Outsourcing services in accounting and finance is taking shape in Malaysia. The presence of captives, which serves a particular company on a global basis, as well as general outsourcing companies is beginning to position Malaysia as a hub of BPO in outsourcing of accounting and finance.


Export of “Accounting” so far•Mode 2 – More local and international

higher education institutions in Malaysia offering accounting courses. International accounting bodies are offering their qualification through collaborations with local education institutions. Presence of international students to study accounting is building up.

• Singapore is positioning itself as the hub of accounting services.


Export of “Accounting” so far•Mode 3 – The larger global accounting firms are

structuring themselves on regional basis and sharing profit and loss across borders while continuing to comply with domestic regulations of each jurisdictions.

• Services offered cover wide range of areas and not limited to accounting and auditing.

•More new accounting groupings are having presence in this part of the world as well.


Export of “Accounting” so far

•Mode 4 – Some small accounting firms have started operations in Asean countries such as Cambodia, Indonesia and Vietnam.

•These operations are through collaboration with local partners, through partnerships or loose arrangements.


Some observation• Export of accounting should be viewed holistically and

not limited to the CPC categories• Opportunities not limited to accountants• Equity is not really a critical aspect in liberalisation,

profit sharing structure goes beyond equity and driven more by competencies and intellectual property

• Competencies demanded in target countries are the critical driver of market access, not what we believe we could export

• There are enough rooms for smaller players, however having access to accounting network helps in opening new markets for smaller firms


Potentials for further export• ASEAN Economic Community provides access

to other economics with higher GDP and has larger market demands

• Globalisation of regulation such as implementation of International Financial Reporting Standards would create demands for competent accountants and BPO

• Firms with specialist knowledge and competencies would continue to be able to create opportunities for themselves

• Education and training in accountancy offer great potential for export


Issues and Challenges• Attitude towards competition – even when the

market is closed, firms are not excited to compete• Export ready products and services (Capabilities) –

cannot promote good and services which have no demand

• Capacity – most firms, especially professionals, are small and has limited capacity in terms of brainpower and financial capabilities – export through networks would be the way forward

• Government, the largest customer in any economy, should encourage competitive practices

• Over-coordination is not welcomed


ASEAN Federation of Accountants• The ASEAN Federation of Accountants (AFA) was

organized in March, 1977. It was established to serve as the umbrella organization for the national associations of accounting professionals of the member countries ASEAN

• Vision - To be globally recognised as the body that represents the accountancy profession in the ASEAN region

• Mission - To develop and promote the accountancy profession in the region in support of the socio-economic enhancement of the AFA member countries


ASEAN Federation of Accountants•AFA’s strategic objectives:▫Strengthening AFA institutional

capabilities▫Supporting capacity building of

member institutions▫Championing specific issues which

would promote the standing of the accountancy profession within the ASEAN region