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From Arab Awakening to Regional Strength and Stability – the role of PAOs in the MENA Region. Jelil Bouraoui IFAC Board Member The Exchange: Strengthening Accountancy as a Foundation for MSME Sector Development and Job Creation Amman, Jordan June 18-20, 2013. The Arab Awakening.

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from arab awakening to regional strength and stability the role of paos in the mena region
From Arab Awakening to Regional Strength and Stability – the role of PAOs in the MENA Region

JelilBouraoui

IFAC Board Member

The Exchange: Strengthening Accountancy as a Foundation

for MSME Sector Development and Job Creation

Amman, Jordan

June 18-20, 2013

the arab awakening
The Arab Awakening
  • It all started at SidiBouzid in Tunisia
  • On January 14, 2011 the Revolution for the Arab Awakening was launched
  • Then it spread over many countries, Egypt, Libya, Yemen, Syria and now Turkey?
  • After 2.5 years many of the benefits of the Awakening are yet to be seen – e.g., drop in the Gross Domestic Product (GDP) per Capita, reductions in retails sales, declines in tourism activity, etc..
  • The World Factbook has estimated the unemployment rate for Egyptian citizens at 12.2% for 2012. In Tunisia, unemployment was officially posted at 18% and has even been known to be as high as 25% in some parts of the interior of the country. Libya has also suffered with a very high unemployment rateat about 30%.
  • The Arab Awakening and its impacts in neighboring countries have brought our region significant increases in our freedom of expression, but we now must begin to address the unintended impacts it has had on our political, economic and social stability.
the need for deep reform
The need for deep reform
  • MajidJafar of UAE-based Crescent Petroleum was right to worry at the recent World Economic Forum. His proposal of an Arab Stabilization Plan, inspired by the post-1945 Marshall Plan in Western Europe, is laudable. The imperative for large-scale coordinated action is overwhelming. But is the Marshall Plan the right model, he asked?
  • What the Arab Region needs are micro-oriented, project-based, and governance-heavy investments conditioned on deep reform of a business environment that can be improved
  • Perhaps surprisingly, there is widespread consensus in the Arab Awakening countries that the private sector is central to sustained job creation and growth.
  • The existing banks have failed to serve small-business and farming constituencies. Achieving ambitious goals for inclusive growth and job creation quickly without an enabling State and without using the banking system will be extremely difficult.
importance of micro small and medium enterprises msmes
Importance of Micro, Small and Medium Enterprises (MSMEs)
  • Region’s private sector is central to sustained job creation and growth according to European Bank for Reconstruction and Development (EBRD) and World Economic Forum.
  • MSMEs are the engine room of private sector, accounting for majority of GDP, employment and growth.
  • Most importantly they offer an avenue for addressing the economic conditions the MENA region faces in a post-Arab Awakening environment.
slide5
Importance of MSMEs in regaining economic stability and strength in a post Arab awakening environment

Source of Wealth

EmploymentCreator

MSME

Research and DevelopmentCenter

Source of Innovation

Export Generator

what role can professional accountants play
What role can professional accountants play?
  • MSMEs typically look to professional accountants, especially those in Small and Medium Accounting Practices (SMPs), for range of professional services (e.g., assurance, advisory services and consulting).
  • Accountants can help ensure both conformance (with regulation) and performance
  • SMPs need to build advisory capacity to help MSMEs grow
    • Financial management, international development, tax etc.
professional accountants can
Professional Accountants Can…
  • Develop knowledge and information resources to guide MSMEs through the red tape;
  • Build relationships with banks to facilitate introductions between funding sources and the MSME;
  • Be the most trusted advisor to go to for the MSME when establishing, developing and growth their businesses;
    • International Federation of Accountants (IFAC) research confirms that accountants are often a preferred source of advice for MSMEs
challenges for smps
Challenges for SMPs
  • SMPs are faced with a range of challenges, the greatest of which is the lack of in-house resources/expertise
  • SMPs seek support
    • Implementing standards (ISAs, Code of Ethics, IFRS for SMEs etc.)
    • Managing their practice (marketing, HR, IT, networking etc.)
    • Building business advisory capability (staff etc.)
how can national and regional paos help
How can National and regional PAOs help?
  • Building and sharing knowledge, including access to resources and tools, amongst SMPs
  • Undertaking training on subjects such as quality control
  • In larger economies professional accountancy organizations (PAO) often fill the gap
    • Private Companies Practice Section of AICPA in US acts as the national office for small firms
  • In smaller economies, lacking economies of scale, maybe need to collaborate across region or sub-region (e.g., Arab Federation of Accountants and Auditors AFAA)
supporting paos in strengthening smps msmes is a group effort
Supporting PAOs in strengthening smps / Msmes is a group effort -
  • In all of MENA region only NINE countries maintain an IFAC Member PAO (Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Morocco, Saudi Arabia, Tunisia)
  • Only two applications from MENA region this year: Palestine and Yemen
  • Developing a PAO to act as a centre of excellence and resource for its country takes support, communication and cooperation between many stakeholders including government, professional accounting firms (small and large), business community, oversight boards, etc.
making aspirations a reality
Making Aspirations a reality

If we are serious about supporting PAOs, SMPs, and SMEs. And we are committed to building upon an Arab Awakening to achieve an ‘Arab Success’ then all of us in this room and beyond need to start working together to make these aspirations a reality.

but changes can start small
BUT Changes can start small…
  • Strengthened dialogue between government and PAOs;
  • Reflections and consideration of accounting and auditing laws and their degree of modernity and relevance to an ever-evolving financial environment;
  • Reviews of the internal governance and by-laws of PAOs to ensure that they are up to date and in-line with best international practices; and
  • Comparison (Gap) analysis between IFAC Statements of Membership Obligations (SMOs) and the structure and processes of the PAO.
and grow into larger reform over time
And grow into larger reform over time…
  • Legal recognition of associations and their role in the financial architecture of a country;
  • Legislative reforms which adopt international standards (IFRS, International Standards of Auditing, International Public Sector Standards, etc.);
  • Technical support to our PAOs to design, develop and undertake core functions (e.g., investigation and discipline, quality assurance, education and certification);
  • Formal channels for communication and cooperation between PAOs and regulatory bodies; and
  • Development of sound systems of independent oversight.
slide15

It is unrealistic to believe that all of this will happen today and through this conference.

  • However, through small steps such as the World Bank Exchange and other regional activities, we can move one step closer to stability and growth for our countries.