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ACCOUNTING AND BUSINESS MIDDLE EAST AND SOUTH ASIA SPECIAL EDITION 2014

SEIZE THE DECADE

THE ROLE OF FINANCE PROFESSIONALS IN UNLEASHING ECONOMIC POTENTIAL

FINANCE SPRINGBOARD

FAST-TRACK TO TOP ROLES FOR WOMEN IN BUSINESS CORPORATE REPORTING GOING GLOBAL AND BEYOND THE NUMBERS ISLAMIC FINANCE THE PATH TO HARMONISATION NEXT GENERATION CAREER OF CHOICE


WELCOME

Welcome The vibrant economies of the Middle East and South Asia might be hugely varied, but they share a thirst for expansion and diversification, and offer a wealth of potential. Our cover illustration of Dubai’s recordbreaking New Year fireworks display demonstrates the optimism and ambition of the region. Finance professionals have a central role to play in driving this growth and providing the strategic leadership and the organisational stewardship required. Employers tell us that they need finance professionals with a complete understanding of the financial value chain from budgeting through to strategy, reporting, risk and audit, underpinned by a strong understanding of ethics (see page 8). The ACCA Qualification, designed with this in mind, is regularly reviewed to ensure it meets these needs and anticipates new developments. Finance professionals will be at the heart of developing corporate reporting to meet the changing needs of investors and other stakeholders. They also have a key role in exploiting the benefits of diversity. ACCA itself has the most diverse membership of any professional accountancy body. Greater participation by women in business will help realise the region’s full potential (see page 9). All these issues and more will be discussed by ACCA’s Council of senior members at its annual meeting in Dubai – and at additional meetings in Bangladesh, Oman, Pakistan and Sri Lanka.

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ABOUT ACCA ACCA is the global body for professional accountants. We have 5,000 members, more than 70,000 students and 13 offices and centres across the Middle East and South Asia. We offer businessrelevant, first-choice qualifications to people of application, ability and ambition who seek a rewarding career in accountancy, finance and management. We support 162,000 members and 428,000 students around the world throughout their careers through a global network of 89 offices and active centres. www.accaglobal.com

Ahmad Darwish FCCA, chairman of the ACCA UAE members’ advisory committee Martin Turner FCCA, ACCA president

CONTENTS 04 Economy Solid growth and a huge market offer good prospects for finance professionals 08 Competency framework Delivering key business requirements

12 Dubai discussion Finance as a springboard for women’s careers 14 Reporting IFRS and sustainability are helping businesses add value

Accounting and Business is ACCA’s magazine for professional accountants. Recent issues can be viewed at www.accaglobal.com/ab

17 Islamic finance Convergence call 09 Women in finance The top jobs are no longer men-only positions

18 Comment Accountants required

Editors Lesley Bolton, Chris Quick Designers Jackie Dollar, Robert Mills Sub-editors Dean Gurden, Peter Kernan, Eva Peaty, Vivienne Riddoch © ACCA 2014. The Council of ACCA and the publishers do not guarantee the accuracy of statements by contributors or accept responsibility for any statement they may express in this publication. No part of this publication may be reproduced, stored or distributed in any way without the express permission of ACCA.

ACCA CONTACTS

Bangladesh Mohua Rashid mohua.rashid@accaglobal.com India Aziz Tayyebi aziz.tayyebi@accaglobal.com Oman and Qatar Ritu Nanda ritu.nanda@accaglobal.com Pakistan Arif Mirza arif.mirza@accaglobal.com Saudi Arabia and Bahrain Anis Motorwala anis.motorwala@accaglobal.com Sri Lanka Nilusha Ranasinghe nilusha.ranasinghe@accaglobal.com UAE Susie Isaacson susie.isaacson@accaglobal.com

RESEARCH AND INSIGHTS ACCA’s global research programme explores trends and issues crucial for business, economies, society and the profession now and in the future. Recent reports address finance diversity, risk management and finance transformation. For these and other insights, visit www.accaglobal. com/researchandinsights

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MIDDLE EAST AND SOUTH ASIA | ECONOMY

SEIZE THE DECADE

Middle East and South Asian countries have grown solidly since the global financial crisis broke – and are forecast to add another $4 trillion to their economies over the next 10 years

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he combination of the energy-rich nations of the Middle East with the densely populated emerging markets of sub-Himalayan South Asia produces a huge and vibrant economic zone. In sharp contrast to developed markets, which have been suffering since 2008, the region has been one of the world’s boom zones in recent years. And while downsides can always be found, the economies of the Middle East and South Asia appear still to be enjoying good times. Growth in India, for example, is projected to rise from 3.75% in 2013 to 5% in 2014, according to the most recent World Economic Outlook from the International Monetary Fund (IMF) – for the third quarter of 2013. Despite the

▼ THE CUP THAT CHEERS

The staging of the 2022 World Cup in Qatar is one of the events expected to accelerate economic activity in the Gulf

PAKISTAN Pakistan’s state-owned enterprises are generating demand for accounting professionals, notably through relationships with international donors and lending agencies, which seek comprehensive transparency and financial accountability. ‘To improve their financial management, big public-sector enterprises are being broken down into smaller, more efficient units that are increasingly relying on young ACCA members as part of their drive towards best practice,’ says Arif Masud Mirza, head of ACCA Pakistan. The government set up a commission in 2013 to appoint new CEOs in 70 state-owned corporations. Mirza says they will provide leadership for adopting even more modern accounting principles and practices. He adds that the government is switching its entire accounting system over to enterprise resource planning (ERP) software. ‘To ensure the ERP systems run effectively and truly, you require teams of highly qualified accounting professionals,’ Mirza points out.

brain drain in Egypt and the Levant driven by the ongoing political turbulence, the economies of the Middle East are expected to have grown by 2.25% in 2013 and to hit 3.6% in 2014, says the IMF, helped by recovering oil production. ACCA’s most recent General Economic Conditions Survey of members, carried out with IMA (Institute of Management Accountants), shows business confidence in Pakistan soaring Such events will require project after a year of gentler rises, financing expertise to deliver projects and businesses in the UAE on time, particularly in Qatar, which getting to grips with new is investing more than US$200bn in challenges after a long run of infrastructure projects including a metro positive sentiment. Meanwhile and railway. Al-Lawati says: ‘One-off market research company activities can create concerns post-event, Frost & Sullivan forecasts that as it can create a vacuum and experts the US$8.3 trillion combined lose their jobs. But one would hope GDP in 2012 of the economies such infrastructure developments create of the Middle East and South sustainable business opportunities.’ Asia will hit US$12.3 trillion within the next decade.

DUBAI EXPO 2020 AND QATAR WORLD CUP 2022 The Gulf will host two major global events in the next decade: World Expo 2020 in Dubai and the FIFA World Cup 2022 in Qatar. Both should boost the services sector and diversify Gulf economies. ‘The economic boom in the Gulf was driven by Dubai and spilling over to Oman and Qatar. Winning Expo 2020 will hopefully trigger activity in all Gulf countries,’ says Maqbool HM Yousuf AlLawati, of Oman-based MHMY Auditors.

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ECONOMY | MIDDLE EAST AND SOUTH ASIA

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▲ BUILDING GDP

In Sri Lanka, the fast-growing business-process outsourcing sector is already worth US$500m

SOUTH ASIA OUTSOURCING The outsourcing and shared financial services industry continues to grow in South Asia, which has an abundant supply of qualified accountants. India has a clear lead and, according to Sagar Ahuja, assistant vice president at Delhibased outsourcing firm Sand Martin Consultants, by 2017 will generate US$34bn of annual revenues from finance outsourcing. He says clients prefer firms that offer complete solutions. ‘In Sri Lanka the business process outsourcing industry generates annual revenue of about US$500m,’ says Nandika Buddhipala FCCA, CFO of Commercial Bank of Ceylon. ‘Further, the finance and accounting outsourcing industry would have grown at an annual rate of 30% during 2013 and is expected to grow further in the next few years.’ Jehan Perinpanayagam FCCA, CEO of outsourcing firm InfoMate, adds: ‘All major Sri Lankan companies have

In short, the region’s potential is enormous. And when it comes to the landscape for accountants, a common theme, despite the region’s highly diverse markets, is a growing and substantial demand for locally trained finance professionals. The markets of South Asia and the Middle East are keen to attract foreign direct investment to continue diversifying their economies and to comply with global regulatory requirements. Maqbool HM Yousuf Al-Lawati FCCA, former CFO of Oman LNG and MD of Oman-based MHMY Auditors, says: ‘Over the years, the accountancy profession has grown quite a bit within the Gulf as economies have grown. Stock exchanges are also vibrant, and there is a need for people to give good investment advice and enable companies to go public.’ Ahmad Darwish FCCA, chairman of the ACCA UAE members’ advisory committee and manager of the management accounting team at DP World UAE, says: ‘The

set up captive outsourcing units and will gradually move into the third-party outsourcing market.’ He says the island nation’s professional bodies are helping by grooming accountants willing to work in different shifts, who understand the importance of information security and data protection, and are familiar with finance platforms. In Bangladesh, Mohua Rashid, country manager of ACCA Bangladesh, says local companies are gradually outsourcing their finances. ‘They are increasingly going in for payroll services but the complete outsourcing of financial services to a different provider is still not happening.’ However, Md Sabur Khan, president of the Dhaka Chamber of Commerce and Industry, says: ‘The way the business is moving, within two to three years there will be a very good market for accounts outsourcing in Bangladesh.’

UAE is becoming a more developed economy, like the US and Europe. Employers are not just looking for number crunchers but business partners. They need financial professionals with a larger set of skills and roles so they can drive the organisation forward. ‘There’s currently a shortage of talent in the region. But there are plans to train hundreds of complete finance professionals locally. Today in the UAE, maybe 60% to 70% are recruited from outside the region, but after 2023 it could be 60% local and 40% from abroad.’

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MIDDLE EAST AND SOUTH ASIA | ECONOMY

VIEW FROM: DR HELMI AL-HAMMAMI

▲ EMIRATE EXPERTISE

Dubai banks will be looking to get involved in the vast amount of project financing taking place in the Gulf One of the areas where demand for local professionals to fill expert staff roles is likely to increase is project financing. An estimated US$452bn will be spent on infrastructure investment in the Gulf over the next decade, according to consultancy Ventures Middle East. Marc Nassim, partner at AR Advisory Partners in Dubai, UAE, says: ‘There are good opportunities for local banks to be more involved in project financing in the region, and to do this they need to think long-term and have people that really understand financing.’ Nationalisation programmes to boost the number of locals in the private sector are still ongoing in the Gulf. They have to overcome the higher pay and benefits offered by the public sector, where 67% of Gulf nationals work, according to IMF figures. Oman is to some extent a trailblazer for developing local talent. It has more of its nationals than in most Gulf countries working in both the private and public sectors, and state investment is driving financial services. Nassim adds: ‘Oman is doing a good job and working long-term. It has a huge investment programme under way in different sectors like oil and gas, logistics and hospitality.’ Iran is also nurturing local talent. For instance, the Iranian Association of Certified Public Accountants (IACPA), created in 2001, has more than 2,000 CPAs; the Iranian Institute of Certified Accountants has more than 5,000 professional members; and there are over 250 auditing firms in the country. There are also more than 350,000 students taking accounting and finance courses at Iranian universities. IACPA secretary general Nezamodin Molkaraie says: ‘There are issues about IT capabilities and the quality of analytical abilities, but curriculums are being revised. Additionally, International Public Sector Accounting Standards are being translated into Farsi and will then be implemented.’ In neighbouring Afghanistan, 30 years of conflict has stunted development. There is no accounting legislation nor any body to govern the profession. There are fewer than 1,000 qualified accountants in the country, according to the World Bank. Ahmad Reshad Popal, director of the Professional Development Institute (PDI) at the American University of Afghanistan, says: ‘Banks and some big corporations are required under the law to audit their accounts on a yearly basis, but most SMEs do not.’

ACCOUNTING AND BUSINESS

Head of accounting and IS, Qatar University ‘There is a huge demand for accounting professionals in Qatar due to the development of the economy. The number of accounting students at Qatar University has been growing at around 10% to 15% per year over the last five years. You will not be able to attract foreign investment if you don’t have an organised accountancy sector, and while the accountancy profession in Qatar is the youngest in the region it has been improving over the last 10 years with exponential speed, particularly since the establishment of the Qatari Association of Certified Public Accountants in 2008.’

ROBIN BUTTERISS

Head of financial advisory services, Deloitte Qatar ‘A finance function tends to be focused on financial control and reporting. However, it can also provide financial leadership to determine strategic business direction and align financial strategies to improve risk awareness and integrate performance management. And it can stimulate behaviour across the organisation to achieve a firm’s strategic and financial objectives.’

GINNIE CARLIER

Partner – assurance, EY Dubai ‘In rapid growth markets like the Gulf Cooperation Council region, the 2022 FIFA World Cup in Qatar, Expo 2020 in the UAE and the massive public spending programmes in Saudi Arabia are expected to bring about fundamental changes, accelerating the momentum of growth in these economies. Sound technical financial skills then become crucial. ‘In addition, diversity of experience goes a long way in the making of talented finance professionals. Those who have worked in both mature and emerging markets have very successful careers.’

Change is coming, however, and Popal says that companies are starting to offer good salary packages for professional accountants. PDI has offered ACCA and Foundations in Accountancy (FIA) classes since 2011 in Kabul, Herat and Kandahar, and is expanding this year into Mazar-i-Sharif and Jalalabad. Economic diversification in South Asia is also forcing financial professionals to sharpen their skills. As industry in Bangladesh adopts modern accounting methods, so accountants are being encouraged to groom themselves for higher positions. Mohua Rashid, country manager of ACCA Bangladesh, says: ‘They are topping up their academic qualifications with MBAs and other courses.’


ECONOMY | MIDDLE EAST AND SOUTH ASIA

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FUAD AZIM HASHIMI

President and CEO, Pakistan Institute of Corporate Governance (PICG) ‘Pakistan as a developing country will move steadily but surely over the next five years towards documentation of the economy. This alone will spur demand for finance professionals in the country. ‘As the private sector is the engine of growth for countries like Pakistan, there will be demand for capital to be raised through IPOs or private equity. Finance professionals are equipped to respond to such needs and will therefore continue to be in demand. ‘This will necessitate high ethical standards from them. In turn, this will require their professional institutes to seek global recognition by benchmarking their self-regulatory practices and governance standards with the best in the developed world.’

MD SABUR KHAN

President, Dhaka Chamber of Commerce and Industry ‘Bangladesh is seeing additional demand for holistic and sophisticated financial services because of the development of its banking sector. Financial institutions are very eager to comply with international standards. It is mandatory for any company seeking a bank loan to submit a financial compliance report. There is also a parallel process of ranking banks and financial institutions for their creditworthiness. ‘Due to industry demand, young accountants in Bangladesh prefer to get an ACCA Qualification.’

MALIK MIRZA FCCA

CFO, U Microfinance bank, Pakistan ‘If you give fish to a person, you feed them once; if you teach them how to catch fish, that skill feeds them for life. In today’s fast-changing world, finance professionals need to learn, unlearn and relearn the ethics of a changing economy, globalisation, market forces, dealing with uncertainty and working in a diverse/multicultural environment.’ Chair of ACCA Pakistan Members Network Panel

SAEEDA SABAH RASHID FCCA

Senior financial management specialist, World Bank ‘Weeks are devoted to the quality of audit and assurance in the private sector, but the accountability of trillions of dollars handled by the public sector does not receive the same air time. Accountants need to step forward to help raise the right questions because the impact of revenues uncollected, inefficient spending and funds unspent is not limited to shareholders; stakeholders include each of the seven billion people on this planet.’

▲ MEETING OF MINDS The minister with ACCA chief executive Helen Brand

SB DISSANAYAKE, MINISTER OF HIGHER EDUCATION, SRI LANKA ‘New entrepreneurial accountants can infuse greater revenue to the country through meticulous planning to optimise and use the right resources to the right requirements. The availability of a large pool of skilled finance and accounting professionals in Sri Lanka makes finance and accounting outsourcing one of the most logical niche competences to continue to build capacity. ‘Given the recognition of Sri Lanka as a service hub for financial services outsourcing globally, I see immense potential for young people and the country.’

In India, demand for greater financial expertise is evident from the increasing number of Indian firms now offering analytical services, managerial accounting and risk management, says Harinderjit Singh, a senior partner at PwC India. In Pakistan, talent is attracted by the private sector. Of the 600 new ACCA members qualifying every year, 60% go to private companies, says Arif Masud Mirza, head of ACCA Pakistan. Private-sector growth is also expected to fuel financial services related to initial public offerings (IPOs) and private equity, which demand holistic financial expertise and high ethical standards, notes Fuad Azim Hashimi, president and CEO of the Pakistan Institute of Corporate Governance. Ethics constitute an important aspect to accounting training in Sri Lanka as well. Jehan Perinpanayagam FCCA, CEO of accounting outsourcer InfoMate, says: ‘It is very pervasive and instilled into students from the start of their professional education.’ He adds that there is a focus on developing accounting professionals with a high degree of communication and all-round management skills. ■ Paul Cochrane, journalist based in Beirut, and Raghavendra Verma, journalist based in New Delhi

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MIDDLE EAST AND SOUTH ASIA | COMPETENCY FRAMEWORK

FULLY COMPETENT

To help develop complete finance professionals, ACCA has worked with employers to create a finance competency framework that delivers the key business requirements LEADERSHIP AND MANAGEMENT Managing resources and leading effectively and ethically, understanding stakeholder priorities

CORPORATE REPORTING Preparing high-quality business reports to support stakeholder understanding and decision-making

STRATEGY AND INNOVATION Assessing strategy and options to improve performance, change management and process improvement

FINANCIAL MANAGEMENT Investment appraisal, reorganisations, tax, risk, treasury and working capital management

SUSTAINABLE MANAGEMENT ACCOUNTING Accounting and performance management systems for planning, measuring, controlling and monitoring AUDIT AND ASSURANCE High-quality audits, evaluating systems and internal controls, gathering evidence and performing procedures

GOVERNANCE, RISK AND CONTROL Ensuring good governance, risk identification procedures and effective internal audit and control systems

PROFESSIONALISM AND ETHICS Principles of ethical behaviour and ensuring implementation of appropriate corporate ethical frameworks

STAKEHOLDER RELATIONSHIP MANAGEMENT Managing stakeholder expectations and needs, engaging effectively and relevant communication

TAXATION Tax regulation and systems, and communicating with tax authorities to establish and ethically manage liabilities

COMPETENCY FRAMEWORK ONLINE ACCA has made available online an interactive and more detailed version of its competency framework, an abbreviated version of which is shown here. This highly valuable tool allows finance and HR leaders to design and review the strength of their existing finance teams. You can find it at competencyframework.accaglobal.com

ACCOUNTING AND BUSINESS

STUART DUNLOP

ACCA market director – MENASA ACCA has surveyed nearly 500 CFOs in the UAE, the UK, Malaysia, Russia and China to find out what they consider to be the most important qualities for new qualified accountants. The vast majority said recruits need both breadth and depth of finance expertise and capabilities. More than 80% said it is critical to have a complete understanding of the finance value chain – from budgeting to reporting to external auditing principles – and how it all fits together. ACCA’s broad-based qualification helps to deliver this and keeps career doors open so holders can pursue a wide range of finance and business roles. ACCA’s report The complete finance professional is at www.accaglobal.com/complete

A special edition of ACCA’s Accounting and Business magazine explores the skills and attributes needed by today’s finance professionals. Find it at www.accaglobal.com/abcorporate


WOMEN IN FINANCE | MIDDLE EAST AND SOUTH ASIA

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BRIGHT FUTURE

Women working in finance in the Middle East and South Asia are starting to move into senior roles thanks to a growing respect for equality and a more flexible work ethic

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hroughout the Middle East and South Asia, more and more women are occupying mid- to high-level positions in the finance sector. In these relatively traditional societies, women face challenges such as family pressure and long working hours, but many of them – and the companies they work for – are beginning to find ways to make women working in finance a norm. In most countries in the region, the primary challenge that women working in finance face is balancing long working hours with family life. For women working in finance, a work day can mean more than 18 hours in the office, especially in accountancy and auditing firms. This results in very little time at home. ‘This is one of the challenges women face in Pakistan and Bangladesh: the long working hours. There’s no flexibility such as working from home,’ explains Dr Afra Sajjad, ACCA’s head of education – emerging markets. Even if they have full-time jobs, many women are still expected to care for children and, at times, elderly parents. For some, this may be a burden, while for others, stepping back from work in favour of motherhood is a choice. ‘When I talk to women there is a level of pride and a level of responsibility that they believe they owe to their families. They themselves don’t want to appear to be letting their

families down. They believe these are their responsibilities and they want to do them well,’ says Ginnie Carlier, a partner with EY in Dubai. Yet as economies develop and become more competitive, and costs of living rise, many women will need to continue working, and companies will want to keep them. To help women maintain a work-life balance, there is a lot that companies can do. The key is offering flexibility when it comes to working hours, allowing women to work from home, providing on-site childcare facilities, and increasing maternity leave which ranges from a low of 45 days in the United Arab Emirates to 16 weeks in Bangladesh. By providing such arrangements, companies can retain women, who in turn will have more opportunities to grow in their careers and be more committed to their employers. ‘This is about balancing life in a much more demanding world, so the more you can make accommodations for your talented employees, the more loyal, the more dedicated and the more productive they’re going to be,’ Carlier says. By overlooking the adaptations that working mothers need, companies may lose very skilled, bright women who would otherwise be a big asset for them. More companies in the region are realising this and, indeed, making changes. ‘Since the culture is changing, I think more companies are

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MIDDLE EAST AND SOUTH ASIA | WOMEN IN FINANCE

RANJANI JOSEPH FCCA, AUDIT PARTNER, KPMG, SRI LANKA When I look back at my professional life, I am reminded of Steve Jobs’ famous quote: ‘You can’t connect the dots looking forward; you can only connect them looking backwards.’ When I stepped out of university as a chemistry graduate, did I ever imagine that I would be working as an audit partner in KPMG Sri Lanka? Working as a female partner in a partnership and business environment dominated by males poses challenges. The expectations of the family, high benchmarks set by the firm on quality of work and portfolio growth, demands made by the clients regarding value addition and meeting deadlines, a stringent regulatory framework and so on make the work-life balance a big challenge. Although the challenges for women may remain similar in Western countries, there are added pressures due to the socioeconomic factors in

our region. The presumption that women need to be passive and may not be suitable for leadership roles is changing, but slowly. Women are still seen predominantly as homemakers; however, with the increasing trend in the literacy levels among women in the region, the business world is learning to embrace their entry into leadership roles. KPMG recognises that inclusion helps to sustain a high-performance culture, which in turn promotes business growth and profitability. Accordingly, flexi-working, global mobility programmes and availability of support-services roles – for women who prefer to avoid roles with client commitments – are some of the initiatives undertaken by KPMG, both globally and locally, to retain women employees. My career at KPMG was saved through a global mindset and a

forward-thinking partnership which found solutions to accommodate my personal commitments in Australia (as my daughter is a medical student in Melbourne), by enabling me to work from the KPMG Melbourne office for a few months a year. Over the years KPMG, both globally and locally, has seen a steady growth in the number of female members, and we also see the increasing trend of women joining the boards of many leading companies. As Jobs said: ‘We’re here to put a dent in the universe. Otherwise why else even be here?’

looking into the benefits needed to be given to women. Women are working in most companies, so they need to make sure they are retained,’ says Uresha Walpitagama FCCA, finance manager at the Sri Lankan Ministry of Finance and Planning.

Oman’s example

Ginnie Carlier, EY Dubai

In Oman, for example, companies including Petroleum Development Oman (PDO), Omantel, EY and HSBC are offering flexible hours for mothers, nurseries and other arrangements to make it easier for them to balance work with family responsibilities. In fact, women working in finance in Oman are proving themselves to be highly sought after and, in firms like EY and KPMG, the struggle to retain women has less to do with losing them to family responsibilities and more to do with bigger industrial companies offering them more lucrative jobs. ‘You see a lot of women who reach a senior manager position and then we lose them to industry, where they take top positions,’ says Mili Ramaiya FCCA, assistant manager, advisory, at EY Oman. As women make strides in their careers in Oman, more of them are also finding

▌▌▌‘THERE IS A LEVEL OF RESPONSIBILITY AND PRIDE… WOMEN DON’T WANT TO APPEAR TO BE LETTING THEIR FAMILIES DOWN’

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WOMEN IN FINANCE | MIDDLE EAST AND SOUTH ASIA

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▌▌▌‘PAKISTAN IS A LITTLE BEHIND THE REST OF THE WORLD, BUT THAT DOES NOT MEAN WOMEN CAN’T PURSUE A CAREER IN FINANCE’

positions on boards. There are no quotas for the numbers of women on boards but it’s understood that the female perspective is an asset. ‘I’ve seen so many companies that are literally fighting to get qualified women as their board members. They’re desperate to have women on their boards. They want to hear the women’s side of things,’ Ramaiya says. Haifa Al Khaifi, finance director at PDO, is among five female managing directors in her company. She says women are definitely respected by their male colleagues and, thanks to the support of Sultan Qaboos bin Said Al Said, who has ruled the country since 1970, there are many Omani women ambassadors, ministers and managers. ‘I believe Oman is way ahead in terms of women in the workforce, number of women ministers and number of women in boardrooms in comparison to our neighbours. I think Oman is becoming more and more progressive,’ says Al Khaifi. Sri Lankan Nisreen Rehmanjee FCCA, vice president at John Keells BPO Solutions India, says she has never felt held back by her gender and had many female role models while beginning her career. She says women are well represented in finance in Sri Lanka and India, and as more women graduate from business and financial studies, the number will rise. ‘In my whole career, even in school, I have never for a day felt that I was disadvantaged because I was female,’ explains Rehmanjee.

Other countries in which there are very few women working in finance are Iran, Iraq and Saudi Arabia. According to the United Nations, only 17% of Iraqi women even have jobs, figures that are similar in Saudi Arabia. Very few women in Saudi Arabia are employed in finance because, according to local laws, they can only work in jobs in which they only interact with other females. In Iran, meanwhile, the number of women working in professional and technical fields has risen noticeably since about 1990, especially in urban areas, but at about 15%, it is still relatively low. For many women who struggle to maintain a work-life balance, owning their own businesses often provides the

HELEN BRAND ACCA CHIEF EXECUTIVE Women have a key part to play in driving sustainable business growth across the economies of the Middle East and South Asia. There is a growing recognition that diversity can enhance business performance and the operations of a modern finance function. There is also a considerable body of evidence that the presence of women on company boards actively promotes good governance and sound management.

Resistance from society While in parts of the Middle East and South Asia it is becoming the norm for women to occupy prominent roles in finance or on boards, in Pakistan changes are slower. Ayla Majid ACCA, who heads a corporate brokerage house and serves on the board of the Islamabad Stock Exchange, says women not only have family responsibilities to bear; they also face resistance from society. Majid was the very first woman elected to a stock exchange board in Pakistan, and some men were reluctant to support her. ‘It was a challenging role, I must say. To begin with, it was taking space in a domain which was primarily dominated by men. It was kind of a cultural shock for a lot of people here,’ she says. Majid says that although Pakistan lags behind international standards, in the past 10 years more and more have women overcome social pressures. The environment is slowly changing for the better and there is more acceptance for women to work in the formal sector. ‘Pakistan is a little behind compared to the rest of the world, but that does not mean that the opportunities are not there or women can’t pursue a career in finance,’ Majid says.

flexibility they want, so throughout the region there is an rise in the number of female entrepreneurs. Whether it’s a catering business from home, a beauty salon or a shipping company, many women find that by having their own businesses they can still support their families financially, while spending time caring for their children and homes. ‘Women entrepreneurs like the flexibility it provides, giving the balance they require to look after their families, as well as their business, and still managing to fit in some “me time”,’ says Al Khaifi. As more young women in the Middle East and South Asia fill the universities and colleges, more of them show an interest in developing their careers before they marry and keeping their jobs after they have children, too. The general opinion from women currently working in finance in this part of the world is that the future is bright. ‘Generally more women are entering into the finance field and the retention of women is higher compared to previous years,’ concludes Walpitagama. ‘We know that women are equally capable.’ ■ Sarah MacDonald, journalist based in Oman

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MIDDLE EAST AND SOUTH ASIA | WOMEN IN FINANCE

SPRINGBOARD TO SUC Senior female finance professionals gathered at a recent ACCA event in Dubai to discuss what is needed to redress the gender imbalance in senior business roles

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emale finance professionals are leading the charge in the Gulf region for women to gain senior roles in countries where men have traditionally dominated. Twenty-three senior female business leaders – including finance directors and senior staff from private and government companies, auditors, consultants, enterpreneurs and treasurers – gathered in Dubai in January for an ACCA roundtable event entitled ‘Finance as a springboard’. They discussed how a career as a finance professional can be a catalyst for women to progress to management roles, as well as the challenges facing them in developing their careers and when they get to a senior position. Cynthia Corby FCCA, an audit partner at Deloitte & Touche Middle East and the event’s moderator, said:

noted Shrimati Damal, VP funding and deputy treasurer for shopping mall, retail and leisure group Majid Al Futtaim: ‘If you want to achieve something you feel strongly about, you have to go at it a bit fearlessly. It is also important to be yourself and maintain your individuality; each of us has some unique talent that’s our biggest leverage to success.’ Hilda Mulock Houwer, partner and global head – advisory, energy and natural resources at KPMG, said: ‘I see myself as no different from my male colleagues. As soon as you view yourself as a female and to be treated differently, people will see it. I’ve always looked for role models. Not just women, but anyone that would help me achieve my goals. At the same time, it’s important to be feminine. Being a female has helped me at times. But what you achieve is based on your qualification and competence – nothing else.’ Work-life issues, however, can be challenging. In the UAE, maternity leave is 45 days and flexible work policies, such as part-time arrangements or the option to work from home, are unusual. Deloitte has been proactive in this area, explained Corby, and has seen tangible performance benefits as a result. Jyothi Kasi, UAE-based international tax partner with KPMG, took a 10-month sabbatical and returned to the position she had vacated. ‘I wouldn’t consider working anywhere else because of the flexibility my employer showed me,’ she said. ‘But you need to set clear expectations for yourself and your team on how you’re going to manage your flexible hours.’

▌▌▌’WHAT IS OFTEN SEEN AS A KEY SOFT SKILL WOMEN HAVE IS TO INFLUENCE DECISIONS WITHOUT DIRECTING THEM’ ‘In general, women make 80% of consumer decisions. There are strong links between having women on boards and management success. What is often seen as a key soft skill women have is to influence people’s decisions without directing them.’ Mariam Al Rasasi, finance director for maritime terminal operator DP World, added: ‘You need to build credibility with your male colleagues around the table. Rather than enforcing my ideas, I tend to engage my colleagues with more of a focus towards what everyone needs to do as a team. Getting the buy-in of those around the table also means understanding the organisation’s culture and how it works. You yourself need to have a clear direction and to think strategically, not just operationally.’ Irrespective of being male or female, career success means taking a degree of personal risk,

ACCOUNTING AND BUSINESS


WOMEN IN FINANCE | MIDDLE EAST AND SOUTH ASIA

CCESS

▲ AROUND THE TABLE

From left: Susie Isaacson, head of ACCA UAE, Cynthia Corby FCCA, Nusrate Ibrahim FCCA, Racha Alkhawaja, Mariam Al Rasasi, Imelda Dunlop Sheena Ganesh, finance controller at Shell Iraq Petroleum Development, said: ‘I have found that, most often, female executives hesitate discussing flexible working, long maternity leave and sabbatical options for fear of losing position, being sidetracked for promotions, etc. It takes tremendous confidence in one’s own worth and the courage to speak up.’ Nusrate Ibrahim FCCA, managing director of consultancy NTI, also stressed the need for greater self-promotion: ‘We cannot be perfect in everything we do, but do we have to be perfect? We might be good at what we do but how good are we at marketing ourselves?’ Yet businesses often get fuller value from their female employees, observed EY partner Ginnie Carlier. For example, women tend to dedicate more rather than fewer hours to the company when on flexible work arrangements. A bigger issue, she suggested, was getting women more networked. PwC partner Claire Duce agreed that it was important to find a way to keep women networked that needed to take a career break. ‘Women also don’t always put themselves forward and communicate what they would like to do to the same degree as their male counterparts,’ she said. Such issues have led to initiatives such as Reach. The first not-for-profit organisation based at Dubai International Financial Centre, Reach offers a structured mentor-mentee programme for female professionals. Mentors are successful businesswomen from international companies.

▼ AROUND THE TABLE

From left: Jyothi Kasi, Sheena Ganesh, Ginnie Carlier, Claire Duce

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As the programme’s founder, Racha Alkhawaja, director at Abu Dhabi-based investment bank MENACORP, explained: ‘Reach has uncovered a range of issues within the workplace that often stem from a breakdown in communication. Our mentees often come in eager to improve their career and sometimes have very false expectations of their work-life balance. They feel they can be perfect at work, at home and as a mother, which of course nobody can be. ‘I ask them whether they set weekly targets. It doesn’t have to be anything big; it could be reaching a client you’ve been unable to speak to or improving communication with a particular colleague. This simple task often helps you identify your shortfalls and strengths, which is key to any fruitful conversation with managers about promotion or flexible working or even simply gaining credibility in your workplace.’

Widen the pool Imelda Dunlop, executive director at the Gulf business transparency advocate the Pearl Initiative, added: ‘There’s such a small pool of women at board level in the region. Because of this they’re asked to sit on so many boards. We need to widen that pool by helping women through the pipeline when, for example, they have young children.’ It has been increasingly argued that having women executives on boards equates to greater business success, with an often more measured approach towards decisionmaking and risk. There are suggestions that women place a greater emphasis on building relationships and teams, rather than the more masculine style of directing and organising. Yet, said Brenda Rademeyer, head of outstation finance for UAE carrier Etihad Airlines, gaining female executives’ maximum performance also means building the right support structure. ‘It’s important for female CFOs to feel supported,’ she said. ‘If your team succeeds you succeed, and women can really instill that. In my own team I put a strong KPI emphasis on soft as well as technical skills, something I think that women do more than their male counterparts.’ With a view to unleashing future talent, Dubai has proposed quotas for the number of women on boards. Initiatives to address gender imbalance may be in their early stages, but momentum seems to be growing. ■ Mark Atkinson, journalist based in Dubai

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MIDDLE EAST AND SOUTH ASIA | CORPORATE REPORTING

STANDARD BEARERS

Lorraine Holleway FCCA, chair of ACCA’s Global Forum for Corporate Reporting and head of financial reporting for Qatar Shell, looks at reporting developments across the region

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nternational Financial Reporting Standards now constitute the de facto global language for financial reporting, according to the IFRS Foundation, whose analysis at the end of 2013 showed that 101 jurisdictions around the world require all or most listed companies and financial institutions in their capital markets to use IFRS. Support for IFRS is reasonably strong in the Middle East and South Asia, according to the International Accounting Standards Board’s country-by-country analysis. In the United Arab Emirates (UAE), for example, companies listed on NASDAQ Dubai must prepare IFRS accounts, while companies listed on the Dubai Financial Market are permitted to – and most do – apply IFRS. Companies in Abu Dhabi also apply IFRS, and domestic listed companies in Qatar are required to. Momentum towards adoption is building up in Saudi Arabia, where banks and insurance companies already have to report under IFRS. The local standard-setter, the Saudi Organization for Certified Public Accountants (SOCPA), has approved an IFRS convergence plan that would require listed companies to report under SOCPA standards, which will be IFRSs with some modifications. SOCPA plans to complete its convergence project by around 2017.

Convergence in South Asia Elsewhere, Sri Lanka has adopted IFRS with some modifications. And Bangladesh has adopted most but not all of IFRS as Bangladesh Financial Reporting Standards. Pakistan has adopted most but not all IFRSs – a notable exception being IFRS 1, First-time Adoption of IFRS. However, the country’s IFRS requirement does not apply just to listed companies, but also to economically significant companies whose securities do not trade in a public market. IFRS adoption is proceeding more slowly in India, although convergence between Indian standards and IFRS has been debated in the Indian parliament. In the meantime, the Securities and Exchange Board of India has given listed entities the option to prepare and file consolidated financial statements in conformity with IFRS. According to the India profile of the International Accounting Standards Board (IASB), the standard-setting body responsible for overseeing IFRS, as at June 2013, 11 companies (mainly ones with foreign listings) have taken advantage of the IFRS option.

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INTEGRATED FIRST ACCA has become the first global accountancy body to introduce integrated reporting into its qualification. Students will be examined on integrated reporting for the first time when it is introduced into the ACCA Qualification from December 2014. Alan Hatfield, director of learning at ACCA, says: ‘ACCA has a history of innovation and anticipating trends. We continue to enhance our syllabus on a regular basis to ensure that ACCA members are at the forefront of good practice. This means that we can be confident that ACCA members are complete finance professionals, equipped with skills to  work in all sectors.’

Countries across the Middle East and South Asia have vibrant small and medium-sized business sectors. IFRS for SMEs would give such businesses a recognised basis for their financial reporting and international comparability, should they want it. Nations that have adopted IFRS for SMEs include Bangladesh, Iraq, Sri Lanka and the UAE. Adoption of the standard is being considered in Pakistan and in Saudi Arabia where, under SOCPA’s IFRS transition plan, non-publicly accountable entities would be required to report under a modified version of IFRS for SMEs. India is again unusual in that it has not adopted IFRS for SMEs, nor is its adoption under consideration.

Integrated and sustainability reporting One corporate reporting development getting under way across the world is integrated reporting. December 2013 saw the release of the International Integrated Reporting Framework, which aims to support the creation of value over the short, medium and long term. It seeks to support efficient and productive capital allocation, and act as a force for financial stability and sustainability. Integrated reporting addresses the broad base of resources and relationships used and affected by an organisation – identified as a range of ‘capitals’, specifically financial, manufactured, intellectual, human, social/ relationship and natural capitals.


CORPORATE REPORTING | MIDDLE EAST AND SOUTH ASIA

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▲ FIGURES OF TRUST Companies listed on the Abu Dhabi stock market have had to publish IFRS accounts since 2003

The move reflects the need of corporate reporting to move beyond purely financial issues, reflecting wider concerns from investors and other stakeholders in how natural and social capitals are reported, and how these impact the sustainable business model of companies. At least three companies in the region have taken part in the International Integrated Reporting Council’s pilot programme: Tata Steel and Kirloskar Brothers in India, and Sri Lanka’s Diesel & Motor Engineering (DIMO). By doing so they have helped to test integrated reporting concepts and develop the new framework. DIMO was also a winner of one of the latest ACCA Sri Lanka Sustainability Reporting Awards, which benchmark companies against Global Reporting Initiative (GRI) guidelines. DIMO took the top spot in the medium-sized business category, while Hatton National Bank and HNB Assurance won the large and small category awards respectively. Elsewhere, judging is currently taking place for the 2013 ACCA-WWF Pakistan Environmental Reporting Awards; the winners will be announced this June. The awards, which have been running for many years, support and promote best practice in environmental and sustainability reporting. They aim to recognise organisations that disclose information about the environment and social impacts of their activity, raise awareness of corporate transparency issues, and encourage uptake of environmental and sustainability

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REAL-TIME ATTRACTION Investors believe ‘real-time’ reporting would enhance investor returns and improve the level of confidence in corporate reporting, according to ACCA research. Companies providing information on an as-needed basis would be perceived as having better corporate governance, and so attract investment more easily. The research is part of a broader series of Understanding Investors reports by ACCA available at www.accaglobal.com/reporting

CARBON RISKS Current standards, stock market listing requirements, reporting frameworks and non-financial reporting guidelines do not alert investors to the risks of carbon assets being ‘stranded’ by the imposition of carbon budgets designed to limit climate change. Research by ACCA and the Carbon Tracker Initiative challenges the way in which fossil-fuel reserves are accounted for and reported by energy companies. The resulting Carbon Avoidance? report is available at www.accaglobal.com/accountability

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MIDDLE EAST AND SOUTH ASIA | CORPORATE REPORTING

VIEW FROM: KAMILLIA ALMARASHI ACCA

Senior associate – investment, Investment Corporation of Dubai ‘Transparency and disclosure in financial reporting is without doubt one of the most vital pillars within corporate governance for any enterprise that aspires to achieve global standards and recognition. Adequately detailed financial reporting on investments in companies allows all stakeholders, including investors and principal shareholders such as the Investment Corporation of Dubai, to know and analyse the financial and business model of an investment. ‘The emergence of Dubai as a financial hub and centre of excellence necessitates that companies operating within its jurisdiction have a uniform level of transparency and a heightened corporate governance culture at all times.’

FRANKLYN AMERASINGHE

Judge, ACCA Sri Lanka Sustainability Reporting Awards ‘Corporate reporting has progressed from covering regulatory requirements to a triple bottom-line approach. Global Reporting Initiative formats have helped to achieve focus. Sustainability awards have influenced even SMEs to report on stakeholder issues and adopt a sustainability strategy. The current competition focuses on business operations as opposed to the past practice of differentiating between businesses on their scale of operation, which helps to place emphasis on impacts, strategies for reaching targets and measured achievements.’

RICHARD MARTIN

Head of corporate reporting, ACCA ‘Corporate reporting must evolve if it is to remain relevant and meet the needs of investors. This means going beyond purely financial issues, to reflect the wider concern for how natural and social capitals are reported and how these impact on the sustainable business model of companies. ‘ACCA believes that the accountancy profession has the skills and credibility to lead in corporate reporting, integrating a range of elements from risk and internal controls to presentation of strategic outcomes and developing the business model. The real-time reporting research, [mentioned on the previous page], is part of a wider project examining the investor landscape in the wake of the global financial crisis – looking at what investors want from corporate reporting, and in what format.’

reporting by entities in Pakistan. ICI Pakistan has a strong track record in this area of reporting, having won the award for best sustainability report for the last two years. Such initiatives, and the responses they elicit from businesses, suggest there is interest in sustainability reporting among companies in a range of sectors, including engineering, financial and chemical.

Transparency levels Middle East and South Asia countries have substantial representation in anti-corruption body Transparency International through independent local organisations known as ‘chapters’ that fight corruption in their respective countries. The body’s Corruption Perception Index ranks 177 countries and territories based on how corrupt a public sector is perceived to be, drawing on a range of sources. Though some countries rank relatively poorly in the 2013 index, that is not the case for the UAE and Qatar, which both make the top 30.

Looking ahead The evidence suggests growing support for IFRS adoption by listed companies, and interest in developments such as integrated reporting. It should be noted that many businesses in the Middle East and South Asia may be state-owned or family concerns but could still be affected by global corporate reporting trends. Smaller businesses seeking external finance may face increasing pressure from banks and potential investors for better and more comparable accounts. External pressures aside, business owners and management teams can themselves benefit from the type of  enhanced reporting that can be achieved through integrated reporting and other leading-edge techniques, which increase their focus on those issues that create long-term value for their businesses. ■ FOR MORE INFORMATION:

www.accaglobal.com/reporting

ACCOUNTING AND BUSINESS


ISLAMIC FINANCE | MIDDLE EAST AND SOUTH ASIA

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GOING FORWARD

IFRS convergence with accounting standards for Islamic finance transactions in the region has made only limited progress. KPMG’s Samer Hijazi and Rukaiya Rashid explain

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herever they operate, Islamic financial institutions (IFIs) are subject to the same global financial system as their conventional counterparts. To compete for the same sources of finance, IFIs have to be comparable across borders. It is also vital for analysts to be able to benchmark and rate them against their conventional counterparts, both domestically and internationally. No surprise then that many IFIs would prefer to report in the global accounting language of choice, IFRS (International Financial Reporting Standards). However, Islamic finance is by definition distinct from conventional finance. Its nuances mean that many countries require Islamic banks to apply Islamic finance-specific accounting standards such as those from the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) rather than IFRS. The fact that institutions can report and disclose similar transactions in different ways poses problems for

those institutions themselves as well as for the development of Islamic finance in general. In December 2012, KPMG and ACCA ran a series of roundtables to gauge the views of leading Islamic finance experts and industry stakeholders on all aspects of financial reporting pertaining to Islamic finance. Participants agreed that the application of IFRS to Islamic finance would build confidence across all stakeholders and that the International Accounting Standards Board (IASB) should issue guidance to ensure consistent interpretation of IFRSs as they relate to Islamic finance. Progress on IFRS convergence in the Middle East and South Asia has been limited. The 2013 Accounting for Islamic Financial Transactions and Entities survey by the Asian-Oceanian StandardsSetters Group revealed that IFRS and AAOIFI standards coexist in several jurisdictions. For example, in Bahrain, IFIs have to comply with AAOIFI standards but apply IFRS where AAOIFI standards are silent on particular products and activities. In the UAE, IFRS is generally applied, but entities can apply for exemption and use AAOIFI standards instead. Feedback from KPMG/ACCA roundtable participants showed a reluctance in the region to switch to IFRS completely, at least until the IASB announces how it plans to address reporting requirements specific to Islamic transactions. So, while there appears to be widespread support for IFIs to apply a single suite of accounting standards, and that logically this suite should be IFRS as the most applicable globally accepted set of standards, in practice key industry stakeholders in the Middle East and South Asia are hesitant to switch to IFRS completely. This is largely due to ambiguity in the interpretation and application of IFRS in relation to certain Islamic products and transactions. As a recommendation, it would be beneficial for the IASB to work in collaboration with organisations such as AAOIFI and other Islamic finance bodies to issue IFRS application guidance when accounting for certain Islamic financial products, as well as on extra disclosures that could be made for the benefit of stakeholders seeking information on the entity’s Sharia-compliant operations. ■ Samer Hijazi FCCA is a director in KPMG’s financial services audit practice. He is also a Certified Islamic Professional Accountant (CIPA) with AAOIFI. Rukaiya Rashid is assistant manager in KPMG’s financial sector assurance practice FOR MORE INFORMATION:

Read the joint KPMG/ACCA report Global alignment at www.accaglobal.com/reporting

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MIDDLE EAST AND SOUTH ASIA | COMMENT

NEXT GENERATION The accountancy profession can provide opportunities for an aspirational future generation, says Dr Afra Sajjad, ACCA’s head of education – emerging markets

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he economic growth of countries in the Middle East and South Asia represents a great opportunity for accountants to prove their worth. If the region is to live up to its enormous potential, it will need finance professionals – and many of them. The rapidly growing sectors of financial services, shared services, banking and business advisory need well-rounded finance professionals. The ACCA Qualification has consequently become one valued by both employers and employees. Across the region, the demand for accountants is still far higher than the supply. Sri Lanka, for example, aspires to be the worldwide centre for shared services and needs 100,000 accountants; at the moment it has around 10,000. Even in those countries with a large and established profession, demand continues to grow. India, for example, has more than a million accountants but needs many more, while in the UAE there is strong demand for finance professionals to staff the growing number of multinationals’ regional offices. The good news is that there are plenty of young people keen to enter the profession – accountancy is a popular career choice. Many are drawn to ACCA because of its flexibility and potential for mobility, both geographically and between sectors and disciplines, along with its strong global reputation among employers. Young people in the region want and expect to switch jobs and travel during their career, and the ACCA Qualification is the passport they need. But we need to be sure these young people have the right skills in place, skills that go beyond technical ability. Employers want well-rounded business professionals with behavioural competencies, general business awareness and commercial acumen – skills that can mostly be gained only through experience. Young accountants can do much to ensure they are well informed about the business world but employers should also play their part. The lack of a mentoring culture is holding back the development of the finance professionals that fast-growing economies need. Whatever their age, all accountants in the region will have to come to terms with the changing needs of business, and especially with the changes created by big data, cloud computing and mobile and social platforms. ACCA’s recent Digital Darwinism report concluded: ‘The profession must anticipate the changing needs of business. It must supplement its technical expertise with a broad understanding of the application of existing and emerging technologies and the new skills that they demand.’ This is

ACCOUNTING AND BUSINESS

particularly true for countries in the Middle East and South Asia, where the impact of new technologies is expected to be significant in the next five to 10 years, but where professional accountants have so far been slow to adapt. The same report listed the skills needed for the decade ahead: knowledge of data extraction techniques, modelling and analysis. This is a world in which the accountant’s role goes far beyond financial reporting and it is something that the profession, old and new, must quickly learn to accept. The changes already under way bring great opportunities for finance professionals and we must not let them pass us by. ■ FOR MORE INFORMATION:

Read the ACCA report Digital Darwinism at www.accaglobal.com/ab27


TRAILBLAZERS

GLOBAL EVENTS DRIVE INFRASTRUCTURE BOOM IN MIDDLE EAST

OUTSOURCING

ACCOUNTANTS BOOST SECTOR IN INDIA AND SRI LANKA INTEGRATED MOVE FIRST FOR ACCOUNTANCY BODY PAKISTAN STATE-OWNED SECTOR DRIVES DEMAND DUBAI HOSTING ACCA COUNCIL MEETING


AB Middle East and South Asia special edition – February 2014