Strengthening Accounting Infrastructure for BRI

Li Kouqing

Overview

BRI and Accounting Infrastructure

Accounting Infrastructure in BRI

Countries – Central Asia Example

Enhancing Accounting Infrastructure –

What We are Doing

BRI and Accounting

Infrastructure

BRI – Belt and Road Initiative

• President Xi gave the historic speech and proposed an “economic belt along the Silk Road” back in 2013 at Nazarbayev University in Astana, Kazakhstan.

• In 2013 president Xi further proposed the “Maritime Silk Road” in his speech at the parliament of Indonesia.

• To promote the new economic Belt and the maritime silk Road for a shared future, President Xi suggested the following focuses:

1. Policy Coordination2. Facilities Connectivity3. Unimpeded Trade4. Financial Integration5. People-to-People Bond

BRI Achievements

• Since 2013, great achievements have been made, for instance:1. Policy Coordination

• Up till 2019 March, China has signed 173 cooperation agreements with 125 countries and 29 International Organisations.

• BRI participated countries have now extended from Asia and Europe to Africa, Latin America, South Pacific…etc.

2. Facilities Connectivity• Railways – China Laos PDR railway, China Thailand Railway, China Euro intercontinental railways

(links 16 countries and 108 cities)• Sea Ports – China has signed 38 sea freight agreements with 47 countries• Air Routs and Air Freights – Signed air freight agreements with 126 countries, increased 1,239

international routes 3. Unimpeded Trade

• Proposed “Initiative on Promoting Unimpeded Trade Cooperation”, 83 countries and International Organisations have actively participated in such proposition

• China has set up 12 pilot free trade zones• The average tariffs has reduced from 15.3% to 7.5% since joint the WTO• From 2013 – 2018 the total amount of import and export with the BRI countries has over 6 trillion,

account for 27.4% of China’s total amount of trading goods.

• Since 2013, great achievements have been accomplished in BRI:• Financial Integration

• The Silk Road Fund and the European Investment Fund jointly established a China-EU Investment Fund, which has started to operate.

• 27 countries Ministry of Finance has approved the guideline of “Guiding Principles on Financing the Development of the Belt and Road”

• Up till 2019, there are more than 20 International Special Investment Funds have been established• E.g. Russia-China Investment Fund, UAE-China Joint Investment Fund, China-Eurasian Fund, Green

Investment Principles for the Belt and Road…etc.

• People-to-People Bond• Has established Chinese traditional medicine centre and 45 Chinese traditional medicine

international cooperation bases in 35 BRI countries • Has signed mutual education degree recognition with 24 BRI countries• 56 Hygiene and Health promotional agreements has been signed with many countries and

international organisations

BRI Achievements

Mombasa–Nairobi Standard Gauge Railway - Kenya

Addis Ababa–Djibouti Railway – Ethiopia Djibouti

Accounting Infrastructure and BRI

• Facilities Connectivity, which includes infrastructure connectivity, is the Foundation for Unimpeded Trade and Financial Integration

• Accounting Infrastructure is part of the Facilities Connectivity.

Accounting Infrastructure refers to the soft infrastructures including Accounting Standards, Accounting Regulations, and Accounting Professions that provides quantitative data support

for a country’s economic performance and cross-border transactions.

Regulation

Accounting Standards

DataRegulators

AccountantsAuditors

People

People

The Importance of Accounting Infrastructures in BRI

• Quality of Accounting Data – Accuracy, Timeliness, Sufficiency and Relevance

• Influence investors’ investment decisions

• Accounting Data can have a impact on the accuracy of the Macroeconomic data

• It can further influence the formulation and the results of National Finance, Taxation, and Monetary Policies.

• The inconsistency of accounting standards, regulations, and the quality of professions will create barriers and increase cross-border trading cost; thus it will hinder the trade and economic cooperation at multiple level.

MicroLevel

Macro Level

GlobalLevel

• Accounting Infrastructure is one of the key important elements that can influence BRI countries at three different levels

Accounting

Infrastructure in BRI

Countries – CAREC

Region Example

• A research that was done by Shanghai National Accounting Institute, ZTE, and ACCA to find out the state of accounting infrastructure in the Central Asia Regional Economic Cooperation (CAREC) Region.

• Focusing on three areas• Accounting Standards• Accounting Regulations• Accounting Professions and Talent Cultivations

• Several of the CAREC Countries have started to or already have adopted the International Financial Accounting Standards (Fully) and/or IFRS for Small and Medium Enterprises.

• However, marked differences in the region

Accounting Infrastructures in CAREC Nations

Required • Requires the public interest entities to use IFRS or their small and medium enterprises to use IFRS for SMEs.

• To fit into this category, a country must implement IFRS and/or IFRS for SMEs without or with minimal modification and at the same time remain consistent with the original IFRS guidelines.

Permitted • It refers to the dual practice of national accounting standards and IFRS.

• In this category entities are given the right to decide whether to use IFRS/IFRS for SMEs or to implement the national standards. In addition, same as the first category, to be considered as “Permitted” the level of the IFRS and/or IFRS for SMEs adoption must be complete or with minimal amendments.

Converging • Even though the modified version of IFRS or IFRS for SMEs (that is greatly different from the original IFRS) is in used, the country is in the process of negotiating and working with IASB to gradually eliminate the gap between local standards and IFRS.

Yet to Adopt • A country is still implementing its national accounting standards with significant difference from IFRS.

Accounting Infrastructures in CAREC Nations – Accounting Standards

The Four Degrees of IFRS Adoption in CAREC Nations

Accounting Infrastructures in CAREC Nations – Accounting Standards

The Degree of IFRS Adoption in CAREC Nations Countries IFRS Types Required Permitted Converging Not Yet Applied

PakistanFull IFRS √

IFRS for SMEs √

UzbekistanFull IFRS √

IFRS for SMEs √

KazakhstanFull IFRS √

IFRS for SMEs √

AfghanistanFull IFRS √

IFRS for SMEs √

AzerbaijanFull IFRS √

IFRS for SMEs √

TurkmenistanFull IFRS √

IFRS for SMEs √

TajikistanFull IFRS √

IFRS for SMEs √

KyrgyzstanFull IFRS √

IFRS for SMEs √

GeorgiaFull IFRS √

IFRS for SMEs √

MongoliaFull IFRS √

IFRS for SMEs √

Azerbaijan

Passed the new accounting law in 2004 – the new law requires public interest entities to adopt IFRS

• Since 2007, strengthen the corporate governance, sustainable growth, … etc.

• In 2012 ,updated the requirements on auditing

• In 2007 ,further amended its accounting law

• New audit regulations required accounting profession bodies to perform quality assessment.

Georgia Kazakhstan

• Currently the accounting regulations in many of the CAREC countries are continuously being strengthen by the governmental authorities. For instance:

Accounting Infrastructures in CAREC Nations – Accounting Regulations

• However, there is a long way to go to strengthen regulations in some countries• More works are still needed to further improve the accounting regulations in the CAREC

region.

Accounting Infrastructures in CAREC Nations – Accounting Professions

Accounting Talents Cultivation in CAREC Countries• Currently many of the CAREC countries are trying to improve their accounting talents cultivation

training system. For example:• Pakistan

Over 22,000 accounting professions In 2019, around 70,000 students sit the professional accountant examinations On average the number of students tend to increases by 10% annually. The Institution of Chartered Accountants of Pakistan (ICAP) is taking the lead in

internationalising the accounting education in Pakistan • Georgia

Has over 20,000 accounting professions including certified accountants and auditors Universities, institutions, and business schools provide fundamental accounting and audit

educations to students.• Mongolia

Has around 1,718 registered public accountants 3 universities now has embedded IFRS and international audit standards in their

accounting courses

• Though many CAREC Countries have started to or already have emphasised on cultivating their accounting talents, more work is still needed to further improve the accounting education and professional training system.

Accounting Infrastructures in CAREC Countries – Accounting Professions

Enhancing

Accounting

Infrastructure – What

China Is Doing

Convergence with IFRS

2005

2008

2010

CASC-IASB Memorandum On Continuing Convergence Work Mechanism

Roadmap for Continuing Convergence of Accounting Standards for Business Enterprises with IFRS

2015

MOF and IFRS Foundation Joint Statement

Joint Statement with IASB

Development and InternationalConvergence of Accounting Standards in China

Accounting Supervision in China

• Internal supervision

• Social supervision

• Governmental supervision

• Establishing National Accounting Institutes

• National Leading Accounting Talent Training Program since 2005

• International High-level Accounting Talent Development Program since 2018

• Customised Corporate Talent Development Programs

• Professional Talent Development Programs designed by China Association of Chief Financial Officers

• Management Accountant Training Program – 4 Levels

• Professional Talent Development Programs designed by Chinese Institute of Certified Public Accountants (CICPA)

• International Leading Accounting Talents Exchange Program• China-Central Asia Accounting Elite Exchange Program

Accounting Talents Cultivation in China

Talent Cultivation

International Financial Management Talents Training Project

50 students 6 intensive training sessions 133 days off-the-job study 45 teachers 110 class hours in English 1584 hours of online learning 9 ACCA standard examinations

1. Clarify the training objectives and elaborate the training plan

2. Online and offline training design

3. Multi-form long-term communication mechanisms

4. International quality courses

Talent Cultivation

China-Central Asia Accounting Elites Exchange Program

The program aims to achieve the following objectives through continuous communication and knowledge sharing among accounting elites between China and other CAREC member countries. kick off in 2019 with each cycle running for 2 years 2 workshops per year, each of which lasts for 5 days, one in

China and one in other CAREC member countries For each cycle, 2-3 representatives of each CAREC member

country will be invited to participate in the program 5-10 participants from China may be invited to join each

workshop. SNAI(AFDI), CAREC Institute, ADB and ACCA are the joint

founding partners of the program

Thank You