MIA, Malaysian Institute of Accountants needs to change

World Bank report says it should improve its governance structure

PETALING JAYA: After a recent assessment of the accounting and auditing environment in Malaysia, the World Bank has concluded that there ought to be changes in how the Malaysian Institute of Accountants (MIA) is governed.

The report on the observance of standards and codes, released in February, noted among other things, that the institute's governance structure and lack of resources were “posing some challenges”.

The report focused on accounting and auditing standards and practices in corporate Malaysia, as well as the institutional framework that underpins the corporate financial reporting system.

“An independent review of the governance structure of the MIA should be conducted to provide recommendations for improving its structure and operations,” said the World Bank.

“In particular, these actions should address the structure and membership of the MIA council, and the streamlining of the investigation and disciplinary process.

“These changes should also facilitate the process of approving any increases in membership fees, as it appears that a lack of resources is impacting the MIA's ability to discharge effectively all its obligations.”

The report noted that the institute's governing body, its council, had 30 members, 10 of whom are elected. The rest are appointed by the Government.

“All the members of the investigation, disciplinary, and disciplinary appeals committees are required to be members of the council, which limits the volume of cases these committees are able to process,” said the World Bank.

The institute has already taken steps to address this. In an interview with StarBiz earlier this month, MIA president Datuk Mohamed Nasir Ahmad said the institute had submitted to the Government a draft of proposed amendments to the Accountants Act 1967.

Among the changes sought was that the MIA be allowed to create multiple sub-committees to deal with investigations, with the subcommittee members possibly coming from outside the council.

However, the World Bank report did not mention any dissatisfaction over the council's composition, although this has been a longstanding complaint among some MIA members.

In a statement sent to StarBiz, the Malaysian Accounting Firms Association (previously known as the Association Of Small & Medium Accounting Firms of Kuala Lumpur and Selangor) pointed out that although the MIA was “wholly supported by members subscriptions”, 20 of the council members were appointed by the Finance Minister on the advice of the Accountant-General, as provided under the Accountants Act.

“The MIA is probably the only members-only professional body in Malaysia, and possibly in any country, with such a majority of unelected members in council,” said the association.

“If at all any amendment to the Act is to be proposed, it should start with reinstating the rights of the members to govern themselves as professionals should.”

The association issued the statement in response to the StarBiz article on April 16 on the proposed amendments to the Act.

Mohamed Nasir said the MIA was also proposing that its council be given the authority to make or amend certain rules, instead of having to wait for a general meeting to approve new rules.

The association frets that this may enable the MIA to unilaterally increase its membership subscription rates.

It said: “To put that in context, members have rejected subscription increases sought in the last two AGMs due to unhappiness with the institute.”

The World Bank report alluded to the institute's previous attempts to seek a subscription hike.

“The MIA derives almost twice as much income from its professional development programmes than it collects from annual membership fees. The annual membership fees stand at RM250, and two recent attempts to increase annual fees were voted down,” said the bank.

By ERROL OH
errol@thestar.com.my

Malaysisia changes over the last 42 years; quanity yes, quality?

The ascend to the throne of our new King, 42 years after he was last installed, is a time to reflect on our achievements.

I WAS at the installation of our new King the other day. Twice as King, he has seen Malaysia change from what it was then and now. He also mentioned in his speech that he witnessed the efforts of the Prime Minister at that time, Tun Abdul Razak, the father of our current Prime Minister.

I sat in the audience, reflecting on some of the positives that have taken place in our country and took some notes on my Blackberry.

The key thought that ran through my mind was how much things have changed over the last 42 years. Here’s how much:

·We moved from a low-income, high-poverty country to a high-middle-income economy. Our next transformation is to become a high-income, developed country with quality of life for everyone.

·Our infrastructure has increased by leaps and bounds. Roads and highways have been built and traverse all parts of the country. We are putting in a mass rapid transit system in Kuala Lumpur to take us to the next level.

·We have modern retail outlets – supermarkets, hypermarkets, shopping complexes, malls and entertainment outlets and we are helping mom-and-pop stores to modernise too.

·We are moving towards greater freedom in all spheres with the repeal of the Internal Security Act, establishing clear rights for peaceful assembly and affirming the rights of online expression and social media liberties, amongst others. The Government has also made amendments to Printing Presses and Publications Act, while the Prime Minister is also talking about changes to the Sedition Act.

·Religious freedom has actually taken strides forward. There is now explicit statement of freedom to import (instead of implicitly before) and publish the Alkitab (the Bible). Indeed, since the 10 points resolution, many Alkitab have been imported and printed locally, without any difficulties with the authorities.

·We have moved to an extensive “social welfare” system e.g free primary and secondary schools, virtually free public health system, and one of the lowest consumer prices for fuel, LPG cooking gas, sugar, electricity, flour, gas, and so on with high subsidies from the Government.

·We have moved to greater focus on rural poor. Under the transformation initiatives, for low-income groups, three million lives were positively impacted in 2010 and 2011.

·We have put up an explicit and substantive roadmap to transform Malaysia further. We will build upon the great achievements we have made between the times of the rules of our current King and work towards our vision 2020 - to make our country a developed one with its people earning high incomes.

Considerable achievement

Just to show the extent our achievements over the last 42 years, I have constructed a table of some key indicators. You can see for yourself how much things have changed, even if you accounted for the fact that a ringgit went a much longer way then.

Our income as a nation – gross national income at the prevailing prices then - increased 64 times over the last 42 years, which is fantastic considering that the population growth over the same period was just 1.6 times.

It’s not surprising therefore that per capita income went up 25 times over the period, a considerable achievement even after taking into account inflation and the drop in value of money.

‘We are putting in a mass rapid transit system in Kuala Lumpur to take us to the next level.’

 

One of the most telling effects of this is that the incidence of poverty has been brought down from nearly half of the population to less than four for every 100 people in the country. That’s tremendous.

The number of schools increased but the impact here would have been understated because while additional schools were built, existing schools would have increased their enrolment considerably.

There was a massive explosion in universities. In 1970, the universities were all public and there were only three. The latest figures indicate that private universities now outnumber government ones almost two to one with 20 public universities and 39 private ones.

A similar situation was seen for hospitals with private hospitals increasing from 46 to 239 while government hospitals rose more moderately from less than 80 to 137.

Average life expectancy, assuming equal numbers of males and female, increased by 17% to 74.1 years, reflecting vast improvement in health levels, which is reinforced by the sharp over 80% drop in the infant mortality rate to seven per 1,000 live births.

World confidence in the Malaysian economy too increased over the 42-year period and this is well-supported by foreign direct investment flows in 2011 of an excellent RM33bil which was 150 times more than that in 1970.

Who would have believed 42 years ago, that Malaysia would make such major achievements in an extremely challenging environment of uncertainty posed by the 1969 racial riots and the drastic and controversial steps that the Government took then to redress racial imbalances and eliminate poverty?

But despite the scepticism and the lack of confidence then, we succeeded and succeeded well. Yes, we could have done better, but then we can always do better and anyone could have done better. What counted was that we met our major targets.

We find similar scepticism now to our efforts to make yet another great transformation, a giant stride to become a developed nation with its citizens earning high incomes and enjoying a better quality of life than ever before.

Promising figures

We aim to do this in a bit more than eight years in a rather challenging and competitive environment. And I dare say we know how to do it. We have it pretty much mapped out in quite some detail.

The initial figures are promising, despite all the nay-saying which continues to give me the transformation blues. But yes, we will rise above the blues as we did before and make this a better nation for each and everyone of us.

The results for 2010 and 2011 are great with most of our targets not just met but exceeded, often by a lot. See the comprehensive annual report on economic and government transformation in the Performance Management and Delivery Unit (Pemandu) website for details.

Rome wasn’t built overnight, likewise Malaysia too. We are blessed as a country. Whilst we know there are shortcomings, we also need to count our blessings even as we overcome the shortcomings and other obstacles.

And we shall overcome – of that I am very sure.

Transformation Blues - By Idris Jala

UNCTAD conference starts amid Uncertainty

The 13th UNCTAD conference began last weekend with an impressive turnout of political leaders but there are tense undercurrents below the surface calm.

THE ministerial meeting of the UN Conference on Trade and Development (UNCTAD) kicked off to a good start last Saturday with an opening session marked by a modern play and dance depicting the inequalities of the modern world, and with speeches by an impressive group of political leaders, including the Emir of Qatar, the President of Tunisia who came to power in the wake of the Arab Spring, and the Prime Ministers of Turkey and Bangladesh.

Most of them stressed the need to rethink the model of economic growth that was driven by a financial system that is now seen as dysfunctional and by a pattern of development that may be economically and environmentally unsustainable.

This is echoed in the theme of the UNCTAD conference, known as UNCTAD XIII because it is the 13th in a series of high-level sessions, held once in four years, since the founding in 1964 of this most important of United Nations development organisation.

The UNCTAD XIII theme is “Development-led globalisation: Towards sustainable and inclusive development paths.”

The conference report of the UNCTAD secretary-general, Supachai Panitchpakdi, speaks of a “world turned upside down”.

Much of it criticised the way globalisation had been driven by speculative finance, which has destabilised the world economy but also damaged development in developing countries.

The report advocated the start of a new era, of a development-led globalisation in which the state has to resume its leading role in development, with a new North-South deal based on taming the financial sector, turning trade and investment towards development, managing new threats and there is more democratic governance of the world economy.

Many sessions have already been held, with ministers, business leaders and academics debating investment promotion and investment agreements, the global environment influencing development, trade and poverty.

On Sunday, the UN General Assembly President Nassir Abdulaziz Al-Nasser, opened the main plenary, re-affirming the leading role of UNCTAD on trade and development issues in the UN system.

However, below the surface calm, there is an undercurrent of a tense atmosphere because of the uncertainties surrounding the main outcome of UNCTAD XIII, a declaration of ministers that spells out the main issues of the present and the main functions of UNCTAD in future.

The latest draft of this declaration, dated April 21, shows how far the countries are from agreement on many issues, both in stating the problems the world faces and in the future role of UNCTAD on these issues.

It is evident from this draft that developed countries, especially the group known as JZ (that includes the US, Japan, Canada, Australia, New Zealand and Switzerland), are proposing to delete or severely dilute the text in many areas.

If their proposals are accepted, the future role of UNCTAD may be seriously curtailed.

This is being resisted by developing countries and their Group of 77 and China, which want to retain UNCTAD’s mandate to work on its present broad range of issues.

The most notable divisions, along North-South lines, are the following:

The G77 wants UNCTAD XIII to reaffirm the Accra Accord of 2008 adopted at the previous UNCTAD session, and to build on it. This will allow UNCTAD to continue work on all the issues it presently deals with.

However, the JZ group wants to delete “reaffirm” and keep “builds upon”, implying that there is no agreement to maintain the present mandate.

The text has only two simple paragraphs on the financial crisis, and the need to connect finance to the real economy, which JZ wants to delete. JZ and the European Union also want to delete another paragraph on the role of UNCTAD to contribute to the UN’s work in addressing the causes and effects of the economic crisis.

The paragraphs on the work of UNCTAD on debt, debt restructuring and responsible lending are also being diluted or deleted by developed countries.

The JZ group wants to delete UNCTAD’s work in servicing the GSTP, the South-South trade preference scheme of developing countries.

There is only one paragraph referring to UNCTAD’s work on intellectual property and development. The JZ and EU propose deletion of this.

Similarly JZ proposes deletion of the only reference to the important role of industrial policies.

There is also deletion or dilution of UNCTAD’s work on environment and sustainable development, such as climate change and the follow up to the Rio Plus 20 summit.

Other areas of dilution include food and agriculture, preferences to least developed countries, technology transfer, traditional knowledge and genetic resources.

At a meeting of Ministers of the G77 and China on April 20, it was agreed that the developing countries’ group will maintain its stand that the Accra Accord be reaffirmed and that there should be no dilution of the issues.

This is to be expected, because the G77 and China consider UNCTAD to be their organisation. Indeed, it was the formation of UNCTAD in 1964 that led to the birth of the G77 and China itself.

A puzzling question is why some of the developed countries are so adamant on eroding the mandate and work of UNCTAD.

It is well known that UNCTAD is not the developed countries’ favourite organisation, since its secretariat has continuously produced research that flies in the face of the orthodox policies of organisations they control, especially the World Bank and IMF.

But then the work of UNCTAD, which has often proved correct, is even more important today, when the old economic theories are crumbling and the traditional policies are being reviewed.

UNCTAD has proved it can contribute immensely to the new ideas so much needed.

What if there is no agreement on the draft Declaration?

That would be a setback not only to UNCTAD but the whole framework of international cooperation, which is also much needed in these turbulent times for the global economy.

Thus, it is hoped that all the countries at UNCTAD XIII will this week agree on a good declaration in Doha.

GLOBAL TRENDS BY MARTIN KHOR