Accounting for development

By Uditha Jayasinghe

Professionals, especially accountants should take a more active part in engaging with the government and create a transparent environment conducive for development and even become whistleblowers to consolidate the confidence of investors in a changing future scenario noted two top government officials last night.

External Affairs Minister Prof. G.L. Peiris and Attorney General Mohan Peiris called for the people of Sri Lanka to take a stronger stance and contribute to the development drive spearheaded by the government.    

Speaking as the Chief Guest at the inauguration of the annual conference organised by the Institute of Chartered Accountants of Sri Lanka (ICASL) titled “The world sees opportunity in Sri Lanka,” External Affairs Minister G.L Peiris was buoyant of the opportunities available and insisted that it was essential for professionals to work with the government.

Recounting the many investors who are world renowned investing in Sri Lanka the Minister emphasised that there was no point in recent history when the country received so much of attention. “How do they have so much confidence in us? Two fundamental reasons, one is that we have consigned terrorism to the past and unparallel political stability. Proper question to ask is what you can do with the government to enhance the opportunities that are already in existence.”

Admitting that the government can do more and that the international investors need to be assured of the situation in Sri Lanka he praised the government’s decision to remove checkpoints. “There was no pressure from any quarter to reduce emergency rule but that was one by our own initiative. There was no intention to keep them for a moment longer than necessary.”

The Cabinet on Wednesday decided to appoint an Inter- Agency Committee to implement the recommendations made by the interim report of the Lessons Learnt and Reconciliation Commission. Quoting the President the Minister stated that the objective of easing people into reconciliation and simplifying the tax structure as well as modernising universities are all positive developments to attract investment.

Taking a fresh look at the foundations of tertiary education was recommended by him to expand business and introducing proper regulation for encouraging investors. Learning lessons from the global financial crisis he questioned as to what balance must be struck by the government to protect people but at the same time enable business. Streamlining incentives and law processors is essential to building confidence between the ground structures and investors Peiris noted adding that arbitration needs to be made more relevant to businesses.

Desirable changes would include revisions in law that deals with development concerns and cardinal strengths that Sri Lanka has should be taken advantage of. These include the macroeconomic concerns and his message was hinged on the importance of proper policies that are implemented courageously. “The way forward is engagement between you and government. Do not maintain posture of distance. These are moments of a country that do not repeat themselves and therefore there should not be any holding back. We need to work together and the government certainly wants to benefit from the ideas that are expressed by you. You certainly have the power to do so.”

ICASL has the resolve and eagerness to spearhead this drive and he called on them to forge ahead and not be found wanting to do the country proud. Declaring that the country needs professionals and he urged for a spirit of partnership to take Sri Lanka to greater heights.   

Spring board of growth      

In his turn Attorney General Mohan Peiries delivering the keynote address stated that the country was on the “spring board” of development and it has become the clarion call of the globe.

Accountancy standards have been present in Sri Lanka since 10th century during the time of Mahinda IV he recalled adding that the growth of the profession was phenomenal. Referring to the theme of the conference he observed that great steps have been taken in the stock exchange, ports, aviation and foreign reserves have coupled with a stable government without elections for the next five years has given the nation immense potential.

“We professionals must band together to lift our country to higher levels. Enhancing competitiveness through a proper legal framework is extremely important for development. Over the years the government has entered into many agreements to protect their investments and taxation protection as well as free trade agreements. These regional mechanisms promote trade and interestingly we find that there is constitutional protection for bi-lateral treaties and give them the force of law.”

He stressed that Sri Lanka has the law framework to stimulate foreign investment. National legal structures exist in abundance to build investor confidence. Objectives must be to strengthen legal provisions but it must also be about commitment to professionalism so that national development is achieved together. The AG outlined ways for the ICASL to become part of the development process with high standards, goal of furthering public interest, maintaining auditing that is compatible and consistent so that investors have confidence to invest as well as coming into contact with multinationals and local businesses.

“Truth and fairness in financial statements has a crucial part in convincing investors to implement business in this country. If the auditors give false opinions then disaster would strike. Users rely on auditors to give a reliable and impartial idea of the company. Therefore auditors are liable to shareholders and the oversight of not including information that a reasonable man would does make the auditor legally liable.”

Dwelling extensively on the jurisprudence of auditors’ responsibility and quoting numerous examples of when the auditors were sued for negligence Peiris discussed how these professionals have in return advocated transparency and full disclosure. As members of a diligent field they will be called on to be “whistleblowers” in the changing scenario of Sri Lanka.

“Accountants should be gatekeepers because they are needed to guarantee the right flow of information to the right people. It is only then that society can emulate the standards that have been set by this institution. That is the only way that we can reach the full potential of the opportunities presented by Sri Lanka.”          

Delivering the welcome address Arjuna Herath noted that the seminar has become more popular than ever before with the number topping 1000 in its 31th edition. The international forums and organisations clearly see Sri Lanka as an opportunity hub and recent indices have proven this. As one of the fastest growing economies in the world, booming tourism and prospective growth the seminar will address what it will take to reach full potential.

Keep minds open

ICASL President Sujeewa Mudalige noted that the as an institute they are most proud of their achievement. As the largest tertiary education establishment outside of the conventional universities ICASL has over 35 000 students under it. Adaptation is important to take full advantage of this situation and 80% of members work outside of conventional accounting and few have the insight that they do about the emerging economy. Nearly 50% of the top listed companies in the stock exchange have a member on its top director board. Development in the post conflict era will need fresh skills to work across culture and race barriers. “They must keep their hearts and minds open to create the future of our country.”

Countries can growth without investing much or invest much without growth. “The importance of macroeconomic stability and sustained economic growth has never been in dispute. The IMF believes that we can become a new emerging market but must remains to be done. Banks argue that there are no investors and business says that they are being too tight fisted. In this scenario the Budget is going to be key and the need is for private sector investor. They would be willing to invest if they can guarantee the right environment.”    

Mudalige maintained that State investment in private companies was positive as long as the government does not interfere with the function of the organisations that they invest in. A stable government, low inflation, 100% capital growth along with a host of positive indications and ICASL congratulated the government on their efforts.

Pointing out the downside risks he stated that the government must be clear on its fiscal policy, “We are confident that the government can reduce the fiscal deficit and can reach the projected 8%. The government’s debt is about 86% of GDP so it is not possible to have a depreciated rupee as the debt management needs to be considered. Policy framework must be consistent to give confidence to investors. The government must not retract on their promises and should not take arbitrary measures. In some instances mixed sentiments have been perceived.”

He insisted that the government should be clear about what is expected from the private sector and that it should be more customer friendly, transparent and accountable to the investors. A better public service was advocated with goals being set out for achievement. Revamping of the tax system and streamlining of State Owned Enterprises was commended by him but it was reasoned that these should fuel public private partnerships.

“The government must ensure they are fair by the partners that they enter agreements with,” he said adding that litigation should not be used to “punish” the private sector. Reforming the higher education system is also important in this context he opined and advised that the politicisation must be minimised if not completely eradicated. Mudalige called for the external degrees to be revised, labour issues and land concerns to be resolved so that the private sector should have more freedom to make investment. He urged all people to come together and put their collective minds together to find solutions to these challenges.