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The symposium, “ASEAN Capital Markets—The Importance of a Strong Financial Reporting Environment”, was organised by the Global Public Policy Committee (GPPC) and the IFAC, and supported by the Institute of Certified Public Accountants of Singapore (ICPAS), US-ASEAN Business Council (USABC), and Asian Corporate Governance Association (ACGA).
The symposium, with its theme on the importance of high-quality financial reporting in building investor confidence and promoting economic growth, was thus very timely. In addition to setting the scene on ASEAN capital markets, the panel discussions covered the three key elements required for high-quality financial reporting, namely, a strong financial reporting infrastructure, independent oversight of auditors, and corporate governance in the ASEAN region.
In the first session on "Setting the Scene: the ASEAN Community and its Capital Markets", panel members agreed that the ASEAN markets represent an attractive growth story. ASEAN’s combined GDP of $2.2 trillion in 2012 is projected to grow by five times to $10 trillion by 2030. This will be fuelled mainly by private consumption, especially by the growing middle class, and investment. In particular, an estimated US$600 billion investment is required in economic and social infrastructure over the next ten years in the region. Public sector financing is unlikely to be sufficient. This is also a task beyond the means of any one ASEAN country.
The panel members echoed what Minister of State Josephine Teo, the symposium’s Guest of Honour, said about the need to establish an integrated ASEAN capital market to realise its full potential. As one panel member puts it, ASEAN will have to work together to find ways to develop bankable projects to catalyse private-sector financing and facilitate the flow of investments. The panel members discussed at length on getting the plumbing right to attract investors into the markets.
In the second session entitled “A Strong Financial Reporting Infrastructure: Vital for a Growing Economy and Strong Capital Market”, IFAC President Warren Allen shared how IFAC envisioned the accountancy profession to be recognised as a valued leader in the development of strong and sustainable organisations, financial markets, and economies. He said “that to positively contribute to the economic development and the development of capital markets, a strong financial reporting infrastructure, which includes high-quality recognised standards in auditing and assurance, ethics, education, and public sector accounting is needed". As highlighted in the earlier panel, the value of intra-ASEAN flows for the physical trade and M&A volumes, which totalled US$430 billion over the last 10 years, was in fact greater than the combined sum total of the flows between ASEAN and North Asia, Japan, Europe and North America. To facilitate such flows, there is a need for a strong financial reporting infrastructure within ASEAN under which business practices and regulation are improved, corporate governance and accountability enhanced, and common accounting rules adopted and practised. In this aspect, the adoption of International Financial Reporting Standards or IFRS by the ASEAN countries will be an important enabler.
In the third session on “Independent Oversight of Auditors”, panel members emphasised that an essential ingredient for successful integration of ASEAN capital markets is effective audit oversight in as many ASEAN Member States as possible, if not across the whole ASEAN region. Towards this goal, the ASEAN Audit Regulatory Group or AARG plays an important role in sharing best practices in audit regulation and inspection, and encouraging and helping other ASEAN members to develop independent audit oversight.
In particular, the collaboration and coordination among audit oversight bodies in ASEAN will improve overall audit quality, enhance consistency of regulation and set common expectations of audit firms across the region as well as help form common understanding to tackle regional issues including root causes of risks to audit quality. Overall, this will contribute to the trustworthiness of financial information and market confidence and facilitate cross-border business and transactions within the region.