Towards Responsive & Inclusive

Financial Management Institutions

Governance Global Practice

Middle East & North Africa

Issue 3 September 2014

www.cvmena.org

CV MENA 2

Connecting Voices (CV) Middle East and North Africa (MENA) is a regional initiative and partnership that promotes governance and improved financial management practices in the public and private sectors. The ultimate aim is to support the demands of citizens throughout the Arab World for jobs, better governance, a voice in public affairs, and social and economic inclusion as reflected in the World Bank’s MENA Regional strategy. CV MENA plans to seize on the windows of opportunity available in the region. It will support capacity building in the area of financial management, facilitate the development of a professional commu-nity, as well as the sharing and transfer of knowledge both within countries and within the region as a whole. CV MENA will help fos-ter greater transparency and accountability, thereby engendering enhanced public trust. In addition, building public and private sector financial management capacity will also help attract and provide comfort to much-needed foreign direct investment in the region.

CVMENA won the World Bank’s 2013 MENA Vice President Team Award

The Exchange is a major annual forum that provides a channel for dialogue, enabling countries to share experiences and promote societal-governmental consensus building. It fosters intra-regional cooperation and stimulates interest in improving public financial management and corporate financial reporting in MENA. The Exchange facilitates knowledge-sharing from transi-tional democracies and showcases successful experiences from fragile and conflict states. The Exchange starts where financial management diagnos-tics leaves off, that is, in supporting the creation of an enabling environment for reforms to move from concept to reality. It helps catalyze innovative activities to develop regional public goods and enables the World Bank to fulfill its mission as a “Solutions Bank.”

A Boot Camp is a practical concept. It involves gathering a group of deci-sion-makers and experts to address a particular issue through focused and intensive discussion that takes into account both technical and non-technical factors. After thoroughly examining the issue, the group develops possible solutions and a work program to help implement them. The experi-ence is documented in a Solutions Paper—a brief note describing how a specific challenge or problem is addressed in a collaborative and pragmatic fashion. The Boot Camps, together with the Solutions Lab and discussions in Maarefah (“knowledge” in Arabic), feed into the design of the Exchange and CV MENA’s workprogram.

In partnership with the Wold Bank’s Global Development and Learning Network (GDLN), CV MENA connects participants across the MENA region (once each quarter) in finding solutions on topics related to internal and external audit and corporate financial reporting. The Solutions Lab realizes that an answer is not necessarily the solution: a time-tested “best practice” may not be optimal in a particular situation because it may not be politically or socially feasible at the time. The Labs help our clients fashion an attaina-ble solution—an alternative answer to the problem—by bringing in other perspectives and different, yet relevant, experiences from other countries. The Labs also feed into the design of The Exchange.

Maarefah responds to the need to implement, sustain, and build on the results of The Exchange, as well as to extend these benefits to those unable to personally attend Boot Camps and Solutions Labs. Maarefah (“knowledge” in Arabic) is a Community of Practice (CoP) that serves as a forum for ongoing dialogue and continuous peer-to-peer and expert knowledge exchange. The CoP—established by the Financial Management Unit of the World Bank’s Middle East and North Africa Region in 2011 as a response to popular demand for change, accountability, transparency, and inclusiveness—is designed to serve as a robust base for extending the dia-logue and refocusing it on the needs of CV MENA.

www.cvmena.org cvmena@worldbank.org

Publisher: Governance Global Practcie, MENA, The World Bank Managing Editor: Hisham Waly Art Director: Denis Largeron Artwork: Michael Gibbson (cover), Greg Johannesen (illustrations) Contributing Photographers: Denis Largeron, Arne Hoel Images: World Bank Images, Shutterstock

Note: The posts in the Connecting Voices magazine should not be reported as representing the views of The World Bank. The views expressed are those of the authors and do not necessarily represent those of the The World Bank or its policy.

Contents 3

THEMES

Public Financial Management (PFM) 06 MENA Survey Perception of PFM and SAIs

12 Audit & Controls Key features

14 PFM Legislation Basic elements 16 Extractive Industry MENA PFM Study Corporate Financial Reporting (CFR) 22 MENA CFR Strategy Opportunities & Challenges

26 CPAs Expending Opportunities 28 Integrated Reporting Interview: Robert Eccles Harvard Business School

Governance (TAP) 32 Promoting TAP Role of institutions 34 Service Delivery Working together

35 Corruption Can Audits fight it? 37 Procurement Capacity Building in MENA

COUNTRIES

Maghreb 52 Morocco Governance Reform 54 Tunisie (in FRENCH) Entrevue: Nabil Abdellatif Président de l’Ordre des Ex-perts Comptables

56 Morocco Public Procurement Reform 59 Libya PFM Reform 60 Maroc (in FRENCH) Driss Jettou, Premier Prési-dent de la Cour des Comptes

Mashreq 66 Djibouti (in FRENCH) Entrevue: Ilyas Dawaleh, Ministre de l'Economie et des Finances, charge de l'industrie et de la planification

68 Djibouti Interview: Homa Fotouhi Resident Representative

70 Lebanon Interview: Fadi Fakih Executive Board Member, CMA 72 West Bank & Gaza Accounting Profession and MSMEs

74 Egypt (EN/AR) Interview: Hazem Hassan Chairman of the ESAA

Gulf 80 UAE Article: Bassel Nadim CEO of The AAA 82 KSA Interview: Ahmad Al-Meghames, Secretary-General of SOCPA

83 Kuwait Interview: Bassam RAMADAN, Kuwait Country Manager

GENERAL

Events 86 Maarefah Q1 and Q2 2014

87 Bootcamps Q2 2014

Cross-Cutting 92 Books This issue selection

97 Comic Relief This issue selection 98 From Our Windows Team POV 99 Our Team Who’s Who

COVER STORY

Strengthening Financial

Management Institutions in MENA

38 MENA Overview Institutions & Governance

45 The Exchange

Conference and beyond

46 PFM Institutions Achieving results

48 CFR Institutions

Achieving results

4

Editor’s Note

Hisham WALY Practice Manager

Governance Global Practice / MENA The World Bank

The tree trunks in the picture, are, well, just that — tree trunks. But to many, the mean-ingless angles take on a familiar appearance, that of two human faces in profile kissing. This is an example of a phenomenon known as Pareidolia. The term comes from the Greek words "para", meaning beyond, and "eidolon", meaning image. The World Eng-lish Online Dictionary defines Pareidolia as “the imagined perception of a pattern or meaning where it does not actually exist.” Some of us have experienced this phenom-enon whether by seeing religious symbols in oddly-shaped vegetables or even rabbit-shaped clouds in the sky. Essentially, people draw what they believe to be significant information from obviously insignificant stimuli. Scientists provide numerous expla-nations for this phenomenon ranging from our evolutionary heritage, the brain’s infor-mation processing system, or simply being a product of people’s expectations, as report-ed by the BBC. A byproduct of working for the World Bank is attending meetings —a lot of meetings— whether internal (with specialists from vari-ous sectors and backgrounds) or external (with government officials, civil society, media, the private sector, citizens, and do-nors). In some of these meetings, I have observed that some of us sometimes see a pattern in random data because of our yearning to find meaning in the complex world of development reform. For example, the passing of an access to information law (an excellent step) is usually interpreted as a commitment by the government for more transparency and better governance. How-ever, in some cases, the law is never imple-mented or, when implemented, does not lead to increased participation or accounta-bility (for example, due to the weak capacity of CSOs and legislators, or even the gov-ernment itself putting up obstacles to pre-vent its implementation). Another example is the issuance of a law stipulating the adop-

tion of International Financial Reporting Standards (IFRS) by a country— only to real-ize later that, as the capacity of stakeholders and enforcement arrangements were not considered, the adoption of such standards remains theoretical.

The intent of governments in pursuing pub-lic financial management or corporate fi-nancial reporting reforms varies. In many cases, governments are genuinely pursuing reforms with commitment and ownership, while in some cases they are reacting to external pressure by sending what Matt Andrews describes in his book The Limits of Institutional Reform in Development as “signals” to garner external legitimacy. However, oftentimes these cannot be im-plemented and seldom provide real and sustainable solutions. In other cases, gov-ernments are trying to rehabilitate their image— for example, after a well-publicized corruption scandal— by responding to pres-sure from the media and public opinion or in an attempt to deal with fiscal and eco-nomic crises tighten controls over public spending and put into place arrangements

for fiscal discipline and independent scruti-ny (Archon and De Renzio, 2013). As a development institution and donor, we need to be clear sighted about the level of government commitment and ownership in order to better collaborate with internal and external partners. In the past, this was not always easy, given the way the World Bank was organizationally structured whereby professionals representing financial man-agement, procurement, public sector, anti-corruption, regulatory policy, social ac-countability, taxation, and information management were spread between many sectors and regions that did not always co-ordinate and exchange information— and, in some cases, even competed over budget and tasks. As of July 1, 2014, the World Bank Group’s new structural organization into 14 global practices, with one Global Practice (GP) dedicated to Governance, aims to solve this fragmentation by bringing together all such professionals under one roof. The aim will be to better work together, exchange in-formation faster, build local and global knowledge that is adaptable to our clients’ circumstances, develop integrated and in-novative solutions to real problems, timely report on results to our stakeholders and better connect the dots to design realistic— not pareidolia-like— interventions. The Governance GP consists of more than 800 professionals with a presence in more than 120 countries across the globe. This, we hope, will help unlock our knowledge and expertise to help achieve the World Bank Group’s two ambitious goals: reducing the number of people living on less than $1.25 a day to 3 percent by 2030 and pro-moting shared prosperity by fostering the income growth of the bottom 40 percent.

A new chapter begins.

5

Public Financial Management

MENA Survey 6

Perceptions of Public Finance Transparency and the Value of Supreme Audit Institutions

Mona EL CHAMI Senior Financial Management Special-ist, Governance Global Practice/MENA, The World Bank Coincident with the Arab Spring, calls for more transparency, accountability, and participation have been intensifying. This encompasses among other things, public access to information, natural resource revenue transparency, and opening budgets to public scrutiny. It is evident that a well-functioning and independent Supreme Au-dit Institute (SAI) can be a vital means to public scrutiny. SAIs can audit what is done with public monies. However, without hav-ing these audits open to Parliaments— and to citizens— the Executive cannot be held accountable. In principle, SAIs contribute to sound public financial management (PFM) and good governance. This helps to ensure

less wastage and better investment of pub-lic funds, thereby leading to economic growth and eventually poverty reduction. Therefore, SAIs should continue to improve their value and make their benefits visible for all concerned. To explore the perception of the quality of public financial transparen-cy and value of MENA countries’ SAIs, a MNAFM sponsored survey was undertaken on December 2013, including 47 Civil Socie-ty Organizations (CSOs), and 27 media organizations across 9 countries (Djibouti, Egypt, Iraq, Jordan, Lebanon, Morocco, Tunisia, the West Bank and Gaza, and Yem-en). The areas explored include whether CSOs have access to the necessary type of information about public finance, whether they are trained in financial management; how they deal with the SAI of their country; whether they read the SAI reports and how they assess them, etc. Moreover, the sur-vey explored these organizationsal views on ways to strengthen their interactions and relationships with SAIs for better coopera-tion, as well as for public benefit. The Sur-

vey also queried the level of cooperation between such organizations and SAIs in holding the government accountable. Re-garding the media, the Survey explored whether media organizations have ever published anything about public finance transparency; whether their staff are quali-fied to write on such issues; and whether or not they were trained in financial man-agement. The Survey also examied what could be done to promote better report-ing; whether CSOs know about SAIs (in their country) and SAI roles/responsibilities; whether they deal with SAIs, whether they report about SAIs; and what, in their opin-ion, could be done to strengthen their rela-tionship with SAIs for better cooperation and the public benefit. The results of the Survey will help to guide World Bank support, strengthen CSO capac-ity, and develop mechanisms to build or enhance the collaboration between SAIs, CSOs, and the media.

Key conclusions from analyzing the responses:

• There is difficulty in understanding complex financial matters

and limited reporting on public finance issues mainly due to media inexperience in these matters

• Interaction with SAIs is mainly to request audit reports; likewise, there is limited awareness of the value and benefits provided by the SAI.

• Access to specific SAI audit reports and perception of their good quality is rated average; obstacles to reading audit reports are mainly in accessability.

• There is very limited reporting on SAI audit reports. • There is a wide interest and need in building knowledge of

public financial matters and audit reports. • There is also a wide interest in coordinating with SAIs.

Key steps that could be taken are: • Support governments in having access to information laws as

already started in a number of MENA cuntries. • Facilitate knowledge building and training for CSOs and media

on public financial matters and audit reports. The 2013 Exchange in Abu-Dhabi is a good example.

• Support SAIs in in coordinating with CSOs and the media. This entails providing needed capacity building to SAIs on communication.

• Support SAIs in improving the quality of audits and audit reports.

• Raise awareness of the importance of having budget document and audit reports made public, and support initiatives to facilitate this.

MENA Survey 7 Public Finance Transparency

Civil Society Organizations (CSOs)

68% of CSO usually access public information: mostly government financial statements and budget documents

Most CSOs reported that enhancing capacity by attending conferences on public finances, facilitating training, having relevant documents made public, and providing help for CSOs in preparing their budgets are key steps toward improving

focus on public finance issues.

MENA Survey 8 Public Finance Transparency

Media

37% of media have reported on public finanance transparency news, including mostly budget implementation reports and procurement and budget preparation news

Most media reported that enhancing capacity by attending conferences on public finances, facilitating training, recruiting experts, and having relevant documents made public are key steps to improving the reporting on public finance issues

MENA Survey 9 Interactions with SAIs

Civil Society Organizations (CSOs)

34% of CSOs reported that they interacte with SAIs, mostly to request information or audit reports

40% of CSOs reported that they had read SAI audit repors and around 74% rated them as good.

60% of CSOs reported that they had not read a SAI audit report and 39% reported that the key reason was that reports are not made public.

MENA Survey 10 Interactions with SAIs

Media

37% of media reported that they interact with SAIs, mostly to request information or audit reports

54% of media reported that they had read a SAI auit report and around 85% rated it as good.

46% of media reported that they had not read a SAI audit report and 36% reported that the key reason was that the reports were not made public.

MENA Survey 11 Interest in SAIs

Civil Society Organizations (CSOs) Media

85% of CSOs are interested in cooperating with SAIs. Most find that workshops, and conferences are a better means for cooperation, in addition, forming joint coordination

committees is also seen as useful.

88% of media are interested in cooperating with SAIs. Most find workshops and conferences are a better means for cooperation, in addition, they want to be provided with

public financial information.

Did You Know?

500 day milestone: Millennium Development Goals

August 18, 2014 marks the 500 day milestone until the target date to achieve the Millennium Devel-opment Goals (MDGs), 8 goals established by the United Nations and governments around the world to tackle some of the world’s biggest problems.

Internal Control & Audit 12

Key Features of Internal Financial Control and Audit

Yngvild ARNESEN Financial Management Specialist Governance Global Practice/MENA The World Bank Internal Control Systems Organizations, be they public or private, apply a variety of measures in their opera-tions to ensure that their objectives are met, that financial reporting is of required quality, and that rules and legislation are followed. Such measures include: expendi-ture controls to ensure compliance with the budget; segregation of responsabilities to lower the risk of error and fraud; proce-dures to ensure quality and timeliness of accounting and financial reporting; as well as information technology (IT) security pro-cedures. These measures comprise “inter-nal control” in accordance with the defini-tion in the COSO1 framework. Internal con-trol is the responsibility of the management of the organization, and is carried out by staff throughout the organization as part of their everyday work. It can also be auto-mated through IT systems. For example, when an employee in the Ministry of Water Resources checks whether works on irriga-tion systems are proceeding according to the agreed specifications and quality, it is considered part of the internal control framework of the ministry. A subset of in-ternal control measures are related to the financial management of the organiza-tion.Management is responsible for design-

ing an internal control framework which is appropriate for the specific organization, although this may also include certain man-datory measures prescribed by the legal framework. In designing the internal control framework, it is important to take into ac-count the specific characteristics, opera-tions and risks of the organization. As-sessing risk entails considering the likeli-hood of events occurring that may hamper the operations of an organization and the achievement of its objectives. In addition, risk assessment entails examining what and how severe the consequences of such events would be. The internal control measures are designed to mitigate the identified risks. Embedded in this concept is the notion that there is no “one size fits all” solution. For example, a bank will have different risks than a ministry that spends significant amounts on the procurement of goods. The type of budget system chosen also has implications for internal control measures (see figure). In public sector con-texts where budgeting is characterized by a

strong focus on inputs, annual orientation and centralization, the main focus of the internal control system is often on assuring compliance with rules and regulations and annual budget appropriations. In organiza-tions or countries where the budget is more concerned with the expected results of the use of the funds, it will often be relevant to include measures aimed at increasing the chances of goal achievement and effective-ness. It is important to note that a higher number of controls and checks does not necessarily equal better control. In some countries with poor governance, multiple layers of controls may in fact increase cor-ruption.2 1 The Committee of Sponsoring Organizations of the Treadway Commission (COSO) is an independent private sector initiative formed in 1985 to study the factors that can lead to fraudulent financial reporting. COSO’s Internal Control – Integrated Frame-work from 1992 has gained wide acceptance, and was updated in 2013. 2 Daniel Tommasi: “The Budget Execution Process”, in Allen, R., Hemming, R. and Potter, B. H. (2013): The International Handbook of Public Financial Management.

In Their Own Words

"In the past year, membership in The IIA rose more than 100 percent in the Middle East. That's not only an astounding increase, it far and away outpaced anywhere else in the world. At the same time, we found that more than 65 percent of chief audit executives surveyed by The IIA are reporting both staffing and budget increases. What's more, internal audit staffing levels did not decrease at any Middle East company responding to our survey, and none of the internal audit groups experienced a budget cut in the past year ... In the past four years, in fact, there was a 278 percent increase in the number of Middle East auditors receiving the Certified Internal Auditor (CIA) or other professional designations from The IIA. Much of the CIA growth has been the direct result of the CIA exam being translated into Arabic."

Richard Chambers, President and CEO of The Institute of Internal Auditors (IIA). March 17, 2014

Figure 1: The Budget System and Internal Control Source: Robert Gielisse, European Commission. Adapted from Jack Diamond (2013):

Good Practice Note on Sequencing PFM Reform.

13 Internal audit An important component of the internal control framework is to monitor how the different internal control measures are functioning and whether they are having the intended effect. Internal audit plays a vital part in this monitoring process. It can have different organizational set-ups, but certain common principles apply. The main objective of internal audit is to carry out independent and objective re-views and provide reasonable assurance that an organization’s operations are in compliance with rules and regulations, that financial reporting reflects the actual finan-cial position, and increasingly, that the or-ganization is achieving its objectives both efficiently and effectively.1 It also provides recommendations to management on cor-rective actions and improvement measures. Internal audit can be distinguished from other internal control measures in that it mainly reviews after- the-fact, and that it is independent, — in other words that it is not involved in the operations itself. It should report directly to organizational manage-ment to ensure that important issues re-ceive top-level attention—without reports first having to be approved by the people who have been audited. The potential scope of internal audit is wide, but an important task is to evaluate the internal control system. This entails a systematic analysis of the different measures put in place and their effective-ness. It is less concerned with testing indi-vidual transactions. The Institute of Internal Auditors (IIA) has developed internationally-recognized standards for internal audit. They foresee an internal audit function which evolves from the testing of transactions to becom-ing management’s trusted advisor. This requires strong audit teams with a variety of skills. Internal audit is distinct from external audit, which in the public sector is carried out by the supreme audit institution (SAI). Internal audit is carried out by staff within the or-ganization that is being audited (or in the public sector, sometimes by the Ministry of Finance). It reports to the management of the same organization. By contrast, the SAI is a separate organization with its own staff which reports to the Parliament and the

public in addition to the audited entity. Therefore, it fulfills an important role in holding public officials accountable in the use of public funds. Internal audit is also distinct from financial inspectors in the public sector in that it does not solely carry out investigations into alleged mismanage-ment or violation of rules. Rather, it uses sampling and testing of the internal control

systems to give overall statements to man-agement about compliance and financial reporting. 1 Jack Diamond: “Internal Control and Internal Audit”, in Allen, R., Hemming, R. and Potter, B. H. (2013): The International Handbook of Public Financial Management.

Figure 2: Internal Control and Internal Audit Source: Pierre Messali, World Bank, presentation delivered at The Exchange confer-

ence, Abu Dhabi, June 10-12, 2014.

Figure 3: The Change Challenge for Internal Audit Source: Ross Fraser, presentation delivered at The Exchange conference, Abu Dhabi,

June 10-12, 2014.

Legal & Regulatory Framework 14

Scoping and Unifying Public Financial Management Legislation:

Basic Elements to Consider

Manuel VARGAS Lead Financial Management Specialist, Governance Global Practice/MENA The World Bank As a number of countries in the Middle East and North Africa (MENA) region seek to consolidate and modernize their public financial management (PFM) legal and regulatory framework, some basic elements need to be addressed. The objective is to achieve strong, yet clear, PFM rules and the process includes assessing: • The scope of a potential unified law; • Coherence with the country’s constitu-

tion; • Identification of conflicting or redun-

dant directives among the existing body of laws;

• A study of similar legislation in compa-rable country contexts (with caution); and

• Distinguishing the potential content of the new unified legislation from that of decrees and regulations.

A critical consideration in the design of a PFM Law is the imposition of limits, defini-tion of flexibilities, and the means to set, monitor and enforce regulations and stand-ards. Achieving the right balance between limits and flexibility is key to effective PFM legislation. The mechanisms to promote comprehensive information, transparency and accountability help to ensure flexibility and enforce limits. While studying the ex-perience of other countries is desirable, the impulse to either adopt a single model or assemble a set of “best practices”, - without due regard to the country contextual reali-

ty, - should be avoided. With this caveat, international experience points to some basic elements normally found in modern PFM legislation. Checks and balances in the budget system • Roles, responsibilities and accountabil-

ities between the executive and the legislative branches; and

• Main responsibilities of central agen-cies, particularly the Ministry of Fi-nance, spending ministries, and the cabinet.

Budget formulation, approval and adjust-ments • Budget compliance with fiscal rules, if

any; • The comprehensiveness of the budget; • The minimum content of: (i) the pre-

budget statement (including link to me-dium-term frameworks); (ii) the budget project and supporting documents; and (iii) the budget law;

• The timeline of formulation, presenta-tion, discussion, and approval of the budget, and mechanisms for continuing operation when the budget project is

not approved before the start of the fis-cal year;

• The parameters within which the legis-lature can modify the budget project; and

• Authorities over supplements and ad-justments to the legislated budget dur-ing execution.

Budget execution and cash management • Requirement for revenues to be consol-

idated in a common fund; • Treasury single account operation; • Requirement for funds to be spent only

by appropriation of the legislature; • Financial and compliance controls at the

commitment, verification (if applicable) and payment stages; and

• Parameters and controls for use of complementary execution periods and carryover of the capital expenditure budget.

Budget classification Basis for classifying budget expenditures for formulation, approval, control, and report-ing.

15

Accounting and financial reporting • Provisions for public sector accounting

standard-setting; • Timeliness, content, and publication of

in-year and annual budget execution re-ports, financial statements, and other fiscal information; and

• Legislative review of annual accounts (budget execution reports and audited financial statements).

Public debt • Parameters, approval and management

of debt (and guarantee) strategy and in-struments.

Special provisions

• Exceptional criteria for establishing, approving, and regulating the transpar-ency of extra-budgetary funds, if any;

• Arrangements for budget transfers to subnational governments (if applicable), and related reporting; and

• Arrangements for financial transactions with state enterprises, and related re-porting.

Transitional arrangements • Transitional clauses/schedule to allow

for phased implementation of certain provisions.

Regulations • The means and authorities to regulate

the law through decrees/regulations.

Other PFM laws While external audit should be governed by a separate law concerning the independent supreme audit institution, care should be taken to ensure that PFM and audit legisla-tion are consistent. For example, this could be done by eliminating ambiguity between the role of internal and external audit, and ensuring compatibility of dates and proce-dures for production and publication of annual audited accounts. In a similar fashion, the provisions of the public procurement and PFM legislation should be coherent. Bibliography IMF. 2010. Technical Note: Reforming Budget System Laws. Ian Lienert and Israel Fanboim, The World Bank. 1998. Public Expenditure Management Handbook

New Paper

This is PFM

Authors: Matt Andrews, Marco Cangiano, Neil Cole, Paolo de Renzio, Philipp Krause, and Renaud Seligmann July 2014 Abstract: The acronym PFM stands for Public Financial Management: But what is public financial management? This short note tries to de-mystify the concept, drawing on perspectives of specialists in the area who work in different contexts and bring different views (from academia, the multilateral and bilateral development agen-cies, think tanks, government, and civil society). The note is not meant to be prescriptive but rather offers an entry point to a fuller discussion on the constituent elements of PFM systems, how and why PFM reforms have emerged, and where the gaps are for fu-ture attention.

Extractive Industry 16

New MENA Extractive Industry Public Financial Management Study

Franck BESSETTE Senior Financial Management Special-ist, GGP/MENA, The World Bank The MENA Extractives Public Financial Management (PFM) Technical Practice (TP) launched a survey aimed at taking stock of the various ways in which re-source revenue generation (focusing on oil and gas resources) is currently con-nected to overall PFM systems of coun-tries in the Middle East and North Africa (MENA) region. Specifically, the survey examined connections in terms of the legal framework, transparency, accounta-bility, controls and oversight, integration of resource revenues in planning and budgeting practices, as well as Treasury operations and asset management. The scope encompassed issues of integrity of information as well as more general issues of budget management, institutional framework, and debt and asset manage-ment. The study is limited to the MENA region, and focused specifically on the those 11 countries in the region that are net hydrocarbon exporters, namely Alge-ria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates (UAE), and Yemen. Although Egypt and Morocco also have significant extractive industries (EI), the importance of the EI sector in these econ-omies is too limited to classify Egypt and Morocco as natural resource dependent.1 However, these countries could be added to the study at a later stage, if considered important for more comprehensive cover-age of the countries with significant re-source production in the MENA region.

Syria is included in the list of resource-dependent countries, but will not be cov-ered by the study due to a complete ab-sence of recent data. In this context, it should also be noted that mining (primari-ly phosphates) comprises resource reve-nues in Morocco, whereas in the other MENA countries, resource revenues are based on oil and gas extraction. Objectives of the Study First, while the literature on governance of extractive industries and management of non-renewable resource revenues (RR) abounds, it is usually focused on general principles and good practices. However, it fails to bridge the gap vis-à-vis more re-gional and country-based knowledge that would be actionable in a specific context. Quite surprisingly, this is the case for the MENA region where country knowledge on Extractives PFM is scarce. It is either dispersed and has to be retrieved either from PFM sources— where the specifics of Extractives PFM are a secondary or minor concern (for instance in Public Ex-penditure and Financial Accountability [PEFA] reports) — or from Extractives sources which generally pay little atten-tion to budgetary systems. This study will help address this important gap. The sec-ond objective of the survey is to create a common pool of information that the Extractives PFM TP could later refine, update and expand upon, thereby provid-ing MENA GGP staff with opportunities for learning, as well as for enriching the coun-try-based policy dialogue on these issues. Methodology The methodology is based on a systematic review of the existing literature using an analytical framework especially developed in its initial version in a 2013 European Union (EU)/(IBF) note2. It is focused on links to the country’s PFM systems, and therefore does not cover policy decisions regarding rates of resource exploitation, fiscal regimes, growth and development, inequality and related issues of economic, social, environmental and fiscal policy. Rather, the focus is on the management systems and practices for the public finan-cial stocks and flows of each link in the value chain and the public institutions involved in or forming part of these sys-

tems and practices. The institutions and practices typically involved are listed and grouped in tables 2 and 3 respectively. The systematic review has been captured in 11 country Resource Revenue Notes, which have been shared with relevant country-based Governance GP staff for validation, correction and additions. A report will summarize findings; identify issues and lessons, as well as potential for more in-depth country case studies or other possible follow-up. Preliminary findings The final report will be available in the coming months. Some preliminary themes can be outlined and are likely to be fur-ther explored, including: • The quality of public expenditures is

particularly important for MENA re-source-exporting countries because spending is substantially financed by temporary revenues from exhaustible resources. Many budget systems in MENA suffer from weaknesses, includ-ing the capacity to manage planning, al-location and effective control of budg-etary resources. Large increases in ex-penditures in recent years— facilitated by the resource price boom— have put additional pressures on the PFM sys-tems.

• In MENA, the availability of EI resources can reduce pressures for accountability and the drive for improvement in PFM and fiscal transparency.

• The Medium-Term Expenditure Frame-work (MTEF), when adapted to the cir-cumstances faced by MENA resource-rich countries, can provide an institu-tional framework for addressing medi-um- and long-term resource allocation issues. However, it has been notably underused in the region.

• Resource funds have been set up in Algeria, Bahrain, Iran, Kuwait, Libya, Oman and Qatar and their relationship with PFM systems will be discussed. Depending on its design, a resource fund may help or hinder the budget sys-tem in meeting its basic objectives.

17 • It should be integrated within the budget

process in a coherent manner to help maintain a unified control of fiscal policy. It also facilitates a consistent prioritiza-tion across government operations. In MENA, several resource funds have led to extra-budgetary spending, such as the Libyan Investment Authority.

• In a limited number of cases, such as Al-geria, governments have recently made efforts to better integrate their resource funds with budget systems and fiscal poli-cy frameworks, as well as to strengthen fiscal transparency.

1. According to the IMF (2007), a country is considered rich [rather than ‘dependent’] in hydrocarbons and/or mineral resources if it meets either of the following criteria: (i) an average share of hydrocarbon and/or mineral fiscal reve-nues in total fiscal revenue of at least 25 percent; or (ii) an average share of hydrocarbon and/or mineral export pro-ceeds in total export proceeds of at least 25 percent. 2. The analytical framework as well as data and preliminary analyses presented in this article can be found in Frans Ronsholt, World Bank Study on Existing PFM Frameworks in MENA Resource-Producing Countries: Inception Report, May 2014

Table 1. MENA Countries and Extractive Industry Characteristics Country Population

2011 (million) GDP Per Capita- 2011

(PPP at 2005 USD) Extractives Percentage Share

of Total Exports (2011) EI as Percentage Share of Total Government Revenue (2011)

Algeria 36.0 7,643 67% 98% Bahrain 1.3 21,345 91% 76% Egypt 82.5 5,547 38% 10% Iran 74.8 10,462 50% 74% Iraq 33.0 3,412 97% 99% Kuwait 2.8 47,935 83% 93% Libya 6.4 15,361 91% 86%* Morocco 32.3 4,373 13% .. Oman 2.8** 25,460** .. 83%* Qatar 1.9 77,987 68% 73% Saudi Arabia 28.1 21,430 90% 88% Syria 21.9** 4,730** .. 34%* UAE 4.6** 57,740** .. 73%* Yemen 24.8 2,060 63% 89%

Notes: GCC= Gulf Cooperation Council; PPP= purchasing power parity; USD= United States dollars. Base info: RWI 2013 Country Profiles; (*) IMF 2012 Figure 5, average for period 2001-2010. (**) The Economist: World in Figures 2012 Edition, 2009 figures.

Table 2. Institutions Typically Involved in Resource Revenue Management National Government Other Public Institutions Citizens / Private Sector

Ministry of Extractive Sector; Ministry of Finance; Extractive Industry Regulatory Agency; Revenue Agency; Resource Fund; Government auditors and Legislature

Public Corporations in Extractive Industry sector, Central Bank and Sub-national government

Owners of natural resources (if not the state); Companies extracting, pro-cessing, selling natural resources; and Citizens as intended beneficiaries

Table 3. Management Systems and Practices Typically Involved in Resource Revenue Management

Legal Setting Reporting Compliance Ownership of natural resources; Issue/sale/allocation of explora-tion and extraction rights and permits; Government participation in operations; Fiscal regimes; Utilization of resource revenues; Institutional roles, responsibility and authority.

Coverage, Quality, Level of detail, Frequency and Distribution/publication

Safeguards, Quality assurance, Appeals, Audit, and Oversight

Box 1: Recent Initiatives to Strengthen Resource Revenue Management in Resource-rich Countries

The Extractive Industries Transparency Initiative (EITI) has developed standards for disclosure and reconciliation of what companies pay and what gov-ernments receive, that is, a distinct but crucial stage in the value chain. A set of requirements must be fulfilled for a country to become an EITI Candidate and to maintain that position. The standards include obligations for both the government and for the natural resource companies (NRCs) in a candidate country, and involve an independent institution as auditor or ‘reconciler’. Currently 39 countries implement the requirements, of which 23 are considered to be ‘EITI compliant’. An update of the EITI Standard and requirements was approved in May 2013. The IMF in 2005 issued the first version of the Guide on Resource Revenue Transparency, which provides a comprehensive framework for assessing trans-parency and accountability across the whole value chain. The Guide on Resource Revenue Transparency is a companion document to the Fiscal Transpar-ency (FT) Code and Reports on the Observance of Standards and Codes (ROSC, and was re-issued in 2007 in connection with the revision of the FT Code and ROSC in the same year. It delineates 24 good practices, arranged under the same four headings as the FT Code. As the FT Code and ROSC are currently undergoing a revision, it would be expected that the Guide on Resource Revenue Transparency will be re-issued later in 2014. The Revenue Watch Institute (RWI) promotes effective, transparent and accountable management of oil, gas and mineral resources for the public good. The RWI developed the Resource Governance Index (RGI) — formerly Revenue Watch Index — to measure government disclosure in the management of revenues from oil, gas and minerals extraction. It was first applied in 2009/10 in 41 countries. The second report on the RGI covers 58 countries and was released in May 2013. The Index is based on 50 indicators under four clusters with a total of 71 main survey questions plus additional information, resulting in 173 rated data entries per country. It is described by the RWI as largely a quantification of compliance with the good practices promoted by the IMF Guide on Resource Revenue Transparency.

18

New Paper

In Their Own Words

Connecting Budgeting and Evaluation The spending reviews conducted in the wake of the global financial crisis have mostly been "rough and ready" processes, and have not been informed by quality information on the effectiveness of existing programs. This is where evaluation comes in. Ministries of Finance increasingly understand that good spending reviews depend on the quality of the public expenditure analysis which underpins it, and that evaluation has a major role to play in helping to guide the identification of appropriate savings options. There is also a growing under-standing that evaluation has a pivotal role to play in perfor-mance budgeting, which is about the systematic use of per-formance information to improve the quality of budgeting and funding decisions. At the government-wide level, one of its most important objectives is to improve "allocative efficiency" – that is, to help ensure that limited resources are allocated to the areas which are going to deliver greatest benefits. The problem is that performance budgeting is often perceived as exclusively concerned with the use of performance indicators in budgeting. The result is that many OECD governments have packed budget documents with thousands of not necessarily

pertinent performance indicators. They are then disappointed with the failure of these indicators to make much difference to budgetary decisions. The reason for this is that indicators alone often provide only partial information about the effec-tiveness and efficiency of expenditure. Most outcome indica-tors are heavily affected by so-called external factors. It is necessary in many cases to subject indicators to significant analysis in order to tease out the real performance story. Ex-pressed differently, assessing program effectiveness usually requires not only looking at the outcome indicators, but the use of tools such as impact evaluation and program logic anal-ysis. Performance budgeting is therefore increasingly being more correctly viewed as the systematic use in budgeting of performance information generally – not only of indicators, but of evaluation. Evaluation has been a "missing link" in the attempts to realize the performance budgeting goal of truly connecting performance and resource allocation decisions. Tuesday, July 1, 2014, By: Dr. Marc Robinson World Bank Group – Blogs

Making Progress on Foreign Aid

Abstract: Foreign aid is one of the most important policy tools that rich countries use for helping poor countries to improve population well-being and facilitate economic and institutional devel-opment. The empirical evidence on its benefits is mixed and has generated much controversy. This paper presents descriptive statistics which show that foreign aid to very poor countries accounts for very little of total global aid; reviews the evidence that foreign aid is often determined by the objectives of donor countries rather than the needs of recipient countries; argues that the evi-dence on the impact of aggregate foreign aid is hindered by problems of measurement and identi-fication, which are partly due to the heterogenous nature of aid; and discusses recent studies us-ing natural and randomized experiments to examine narrowed definitions of aid on more dis-aggregated outcomes. Qian N. 2014. Making Progress on Foreign Aid. Annu. Rev. Econ. 3: Submitted. Doi:10.1146/annurev-

economics-080614-115553

Annual Members’ Face-to-Face Meeting

November 26-28, 2014 Amman, Jordan

More info @ www.maarefah.net

MAAREFA

Excerpt

Revenue Administration: Administering Revenues from Natural Resources

Natural Resources revenues, which are substantial in many countries, have major macro-fiscal rele-vance. In 2011, these revenues accounted for over 50 percent of government revenues in petroleum- rich countries, and approximately 20 percent in mining-producing countries and countries with both mining and petroleum extraction industries (Figure 1). The importance of—and dependence on—the NR sector is higher in developing countries. Indeed, the concentration of revenues in the oil sector can reach levels of 80 percent or more in countries like Angola, the Republic of Congo, Equatorial Guinea, and Nigeria. Moreover, future trends look optimistic in terms of reserves, with significant NR potential estimated for certain regions, in particular sub-Saharan Africa (World Bank, 2011). This is a remarkable opportunity to foster development and reduce poverty, but it comes with significant challenges for many low-income countries.

International Monetary Fund Fiscal Affairs Department Revenue Administration: Administering Revenues from Natural Resources—A Short Primer Prepared by Andrea Lemgruber and Scott Shelton April 2014

21

Corporate Financial Reporting

CFR Strategy 22

A Strategy for Corporate Financial Reporting in MENA:

Addressing Opportunities and Challenges

Gabriella KUSZ Senior Financial Management Specialist Governance Global Practice, MENA The World Bank Economic growth, job creation, financial sector development, and sound governance all rest on a country’s Corporate Financial Reporting (CFR) environment. CFR refers to the broad spectrum of cross-cutting areas which include the following: • The existence of a sound legal and regu-

latory framework to facilitate high-quality financial reporting with due re-gard to international standards and good practices. It should be suitable to different environments, such as financial sector and capital market players, small- and medium-size enterprises, and state-owned enterprises;

• Design and implementation of educa-tional programs, inclusive of youth and women professionals, to prepare them to undertake roles in the financial re-porting process;

• Building of sufficient human capacity within organizations to produce finan-cial information;

• Advancement of firms which provide external accounting and auditing ser-vices for these organizations;

• Strengthening of regulators and gov-ernment entities which oversee the production and use of financial infor-mation; and

• Awareness among end users that rely on this information in making economic de-cisions.

In the private sector, CFR activities are strongly aligned with World Bank strategy. Specifically, Bank strategy seeks to increase transparency, foster market confidence, and enhance the effective management of pub-lic resources. It also aims to further country stability, economic development and social progress. Additionally, credible and reliable financial information builds investor confi-dence, furthers sound economic and finan-cial management and increases the attrac-tiveness of a country’s investment climate. In doing so, it facilitates foreign direct in-vestment (FDI) and business development. Whereas strong CFR and improved financial reporting contribute to financial sector sta-bility, a lack of strong accountancy and poor quality financial information limit effective supervision of companies, banks, insurance companies and other financial institutions. Therefore, weak CFR increases the vulnera-bility of a country to instances of fraud and potential financial crisis. Finally, high quality financial information is not only vital for FDI and financial stability, but also for the growth of small and medi-um enterprises (SMEs). In developing and emerging countries, these entities may comprise more than three-quarters of a country’s gross domestic product (GDP) and total employment. Like their larger coun-

terparts, SME businesses require high-quality financial information to support business planning, facilitate access to credit, and expand operations and employment, thereby contributing to economic growth. In the public sector, CFR and the develop-ment of competent and capable accounting professionals benefits not only private sec-tor employers, but government as well. Specifically, CFR can offer governments better educated and skilled candidates knowledgeable in key areas, such as budget preparation, financial oversight and audit. Well-skilled professionals are better able to produce high-quality financial information. Such information can then be relied upon by the government in making decisions related to the allocation of resources, over-sight and evaluation of the use of public funds and future financial decision making. Additionally, production of high-quality financial information by the private sector offers government better data and greater insight into the growth and development of the economy, which may aid in the creation of better policies to guide and enable eco-nomic growth. Finally, competent and ca-pable accountancy professionals are better able to assist and provide support in the correct preparation of tax return state-ments, and may contribute directly to in-creased tax revenue collection by the state.

CFR Strategy 23 When appropriately supported and devel-oped, a country’s corporate financial report-ing environment has the potential to pro-vide high-skilled accountancy professionals and similarly high-quality financial infor-mation. These are two inputs necessary for public and private sector development and the achievement of the dual goals of the World Bank, namely: ending extreme pov-erty and promoting “shared prosperity”. Although this is the ideal, and significant reforms have been made throughout the MENA region with regard to CFR environ-ments in recent years, there are still areas for improvement. In assessing the degree of need for strengthening CFR, MNAFM undertook a SWOT (Strengths, Weaknesses, Opportuni-ties, and Threats) assessment. Key challeng-es identified through this exercise included the lack of understanding /awareness of the role of CFR in the economy, as well as the importance of utilizing government support to strengthen this aspect of the economy. This is compounded by the lack of willing-

ness on the part of some governments to support CFR development and embrace financial sector initiatives which may benefit the broader economy. Additionally, throughout MENA countries, serious deficiencies exist with regard to: (i) the clarity and modernity of accounting

and auditing legislation and regula-tions;

(ii) the degree of alignment of university accounting education and Professional Accounting Organization (PAO) certifi-cation programs with International Ed-ucation Standards (IES);

(iii) the capacity of PAOs to undertake core functions;

(iv) the level of organization and operation of systems involving investigation and discipline of accountants and auditors; and

(v) the lack of systems of quality assurance over the audit profession.

Challenges were also seen in the poor gen-der balance within the MENA region ac-

countancy fields, including accounting, au-diting, and financial management. Such an imbalance harms the diversity and ability of national CFR environments to develop in-clusively. Finally, an over-emphasis on professional accountants and auditors ( 1 - 5 percent of the profession) without due regard for vo-cational and technical training in the area of accountancy— which may be more relevant to the whole of regional CFR environ-ments— presents a challenge to developing a full and multi-faceted profession. In recognition of the powerful role that CFR can play in the development of the MENA region and in light of the need for the strengthening of CFR environments, the World Bank’s MENA Regional Financial Management Unit (MNAFM) embraces a vision of strong CFR institutions in the public and private sectors of our client countries. Such institutions can promote financial transparency and economic development.

SWOT Analysis

Strengths

Weaknesses

• Serious interest in alignment with international standards and

good practices in MENA region. • Positive history of World Bank engagement in the MENA re-

gion. • Strong regional unification of Gulf countries. • Common languages: Arabic among Gulf / Levant countries, and

French among the Maghreb countries / Djibouti.

• Lack of awareness of CFR role in economy, in some countries. • Some government willingness to strongly support CFR reform. • Deficiencies in the CFR environment structure and function. • Politics of CFR reform and professional accountancy organiza-

tion (PAO) development. • Low gender balance in accountancy profession /CFR environ-

ments. • Over-emphasis on ‘Professionals;’ not enough emphasis on

developing strong tier of accounting ‘Technicians.’

Opportunities

Threats

• Political transition could lead to financial transparency. • Strengthened political expression could lead to strengthened

private sector development. • Re-branding of CFR for region. • CFR as a tool for further private sector development / em-

ployment generation for the region. • Strong link between public financial management and CFR. • International interest and engagement in the region. • Expansion of interest in Islamic finance. • Potential for using Reimbursable Advisory Services (RAS) to

provide targeted technical assistance as requested. • Further development of regional organizations.

• Fiscal pressure faced by some MENA countries may hinder

advancement and funding of the CFR agenda. • Sustainability of some reforms undertaken given changing

political environments. • Limitations in ability to travel / engage with counterparts due

to limited access / security. • General decreases in funding.

Source: World Bank, Middle East and North Africa Financial Management Unit, 2014.

CFR Strategy 24 To achieve this vision, the MNAFM Unit has developed a Vision and Work Plan. Five key strategic goals have been identified which will guide the unit’s activities in promoting CFR reform and development. They include the following:

STRATEGIC GOALS

#1 Raise awareness of CFR, specifically its role in ad-

vancing transparency and accountability and its impact on economic and social development.

Presently the MENA region maintains a low level of understanding of the importance of CFR, and of the role of government and pri-vate sector in furthering this area. Additional efforts are needed to increase comprehension of the role of CFR, its function in promot-ing transparency and accountability, and its link to strengthening job creation, economic development, shared prosperity and politi-cal, and social stability. This includes looking internally within the Bank and ensuring that MNAFM CFR Staff are knowledgeable about the subject, and that they are actively speaking with Country Direc-tors and other World Bank leaders to raise awareness.

#2

Strengthen the legal and regulatory framework and government institutions supporting CFR de-

velopment.

Weak and/or misaligned legal and regulatory frameworks threaten not only the development of the financial sector and accountancy environment, but also the further development of the private sec-tor and overall economy. Therefore, strengthening this area— in-cluding the implementation of legislation and regulations, and the institutions which seek to support it— will provide a sound founda-tion for further development efforts.

#3

Strengthen national and regional professional ac-countancy organizational development and ca-

pacity.

Strengthening the capacity of PAOs will enhance their ability to undertake core functions in the areas of education, investigation, discipline and quality assurance — all areas of serious deficiency for the region. Additionally, they will be able to better: (i) promote the adoption and implementation of international standards and good practices; (ii) address and prepare professionals for emerging issues in the profession such as integrated reporting and Islamic Finance; and (iii) facilitate the positioning of professional accountants as advisors to their SME sectors.

#4 Strengthen accountancy education and contrib-

ute to building the capacity of university and ed-ucational institutions in this area.

Strengthening educational programs (including programs of life-long learning) and the institutions which provide access to learning and knowledge on the subject of accountancy is an important step in creating a competent and capable accountancy workforce.

#5 Improve diversity of participation in corporate

financial reporting.

In recognition of the challenges facing the region in the areas of women and youth unemployment, efforts will be undertaken to ensure that CFR technical assistance and support is provided in a manner which addresses such groups.

CFR Strategy 25 The following chart and focus areas illustrate how the CFR agenda may be furthered throughout the region during the 2015 fiscal year. Forthcoming efforts will be designed to align with the World Bank strategy to end poverty and promote shared prosperity. Related activi-ties will be supported not only by MNAFM staff, but as needed, by individuals and consulting firms, volunteers and public-private partners to ensure proper implementation.

CPAs 26

CPAs: Expanding Opportunities in the Global Marketplace

Yasmine EL-RAMLY CPA/CITP, American Institute of Certi-fied Public Accountants (AICPA)

Certified Public Accountants (CPAs) around the world are increasingly being called upon to provide a variety of services in the global marketplace. It’s really no surprise. No mat-ter what size the organization, more and more businesses are looking outside of their own country and across borders to expand their prospects. To better assess this thriv-ing practice area, the American Institute of CPAs Private Companies Practice Section (PCPS) polled member accounting firms regarding their international services, as well as the degree to which they are work-

ing in a cross-border manner. The results depict an increasingly globalized world and significant opportunities for accounting professionals throughout the Middle East and North Africa (MENA) region and the world. Insight from the American Case Taking the American case as an example, 64 percent of U.S. small companies sold mer-chandise or services to a customer outside of the United States in 2013, up from 52 percent in 2010 (according to the National Small Business Association (NSBA) 2013 Small Business Exporting Survey (available at tinyurl.com/owul3m8). Even more compel-ling, 63 percent of non-exporting companies said that they would be interested in selling to a foreign client in the future, if their con-cerns about exporting could be addressed. The trend toward greater globalization is likely to continue, as more than 70 percent of the world’s purchasing power is located outside of the United States, according to U.S. Department of Commerce data. In the US, CPA firms, regardless of their size, are finding international services to be a grow-ing business, as results of the PCPS survey show. The survey was designed to gauge practitioner interest in expanding to new markets and acquiring an international cli-entele. Firms also expressed their top inter-national challenges and needs.Half of sole practitioners and 71 percent of small firms polled forecast international growth. By comparison, among the largest firms re-sponding to the survey, 97 percent expected these services to grow.

Despite a notable interest in international matters, 19 percent of survey respondents were not currently offering international services. Of that group, a little more than one-third (35 percent) had no plans to offer international services during the next five years. Top Countries for Future Service Growth Of the largest firms, 69 percent were look-ing to China, followed by 58 percent to Can-ada and 53 percent to Mexico. Among sole practitioners, India (30 percent) came in second after Canada (40 percent), followed by Mexico (20 percent), and China, Brazil, and Australia (each at 10 percent). When the PCPS survey asked practitioners in which other countries they expected to see growth, their answers covered a number of locations in Africa, Asia, Europe, and South America. Among PCPS members who were not offering international services but planned to do so within the next five years, the largest overall average percentage (37 percent) thought they would be most likely to serve subsidiaries of international com-panies located in the United States. Another 27 percent overall expected to work with U.S. citizens working outside of the country, and 25 percent anticipated working with multinationals based in the US. In Demand What emerges from the survey data is that CPA firms of all sizes are tapping into the many opportunities offered in the interna-tional market, - and that their services are in demand around the world.

Exhibit 1 Top Five Challenges in Providing International Services An American Institute of CPAs Private Companies Practice Section (PCPS) asked CPAs about the greatest hurdles to offering international services. Their answers can be found in Table 1, and are disaggregated by firm size. Table 1: Challenges in Providing International Services

Sole practitioners 2-to-10 CPAs 11-to-75 CPAs 75+ CPAs

Developing the expertise needed

Complying with international regulations Marketing services

Marketing/forging alliances Marketing services Marketing services Investing in people

Exploiting information tech-nology (IT) developments

Forging alliances Forging alliances Compliance with international regulations

Investing in people Exploiting IT developments Investing in people Forging alliances

Source: American Institute of CPAs Private Companies Practice Section (PCPS).

27 Exhibit 2 Top Countries for Future Service Growth Where did U.S. CPAs expect to see the most demand for their services? The top replies are as follows: Table 2: Expected Demand for CPA Services: Top Countries

Country Percentage Canada 54.3 China 44.5

Mexico 33.5 India 26.2 Brazil 24.4

Australia 15.9

Source: American Institute of CPAs Private Companies Practice Section (PCPS). Implications for Public Accountancy Organizations in the MENA Region and Beyond

The US case offers some interesting perspectives for Profession-al Accountancy Organizations (PAOs) operating in the MENA region and beyond. Understanding the degree to which firms of all sizes are engaging internationally in the provision of cross-border services provides a strong input into the development of services and support which a PAO can provide to its members. Additionally, such input can provide useful information to the development of Continuous Professional Development (CPD) offerings, which may be more tailored to the upcoming needs of PAO members. Such offerings may therefore better prepare them to provide high-quality services in other countries. Finally, such perspective on the degree of international engagement of member firms provides helpful direction to the PAO’s own in-ternational engagement and relations. Yasmine El-Ramly, CPA/CITP, is a senior technical manager with the AICPA Firm Services & Global Alliances team. She supports practitioners in CPA firms, creates resources that address their top concerns through the Private Companies Practice Section (PCPS), and builds a more inclusive environment with the help of the AICPA Women’s Initiatives Executive Committee.

CGAP Photo-Contest

For more information, including the contest rules, please visit: https://photocontest.cgap.org/cgap

Integrated Reporting 28

Interview

Professor Robert G. ECCLES Harvard Business School

Interview conducted by Rama KRISHNAN VENKATESWARAN, Lead Financial Manage-ment Specialist, Governance Global Prac-tice, MENA, The World Bank Connecting Voices (CV MENA): The con-cept of Integrated Reporting (<IR>) is in-creasingly gaining attention in the corpo-rate world. Why do you think that compa-nies need to prepare integrated reports rather than common size financial state-ments? Robert Eccles (RE): The fundamental reason is that companies and their shareholders are increasingly recognizing the role of all six capitals in “The International <IR> Framework” (<IR> Framework) developed by the International Integrated Reporting Council (IIRC) play in creating value. Tradi-tional financial statements do a good job of presenting how a company has used finan-cial and manufactured capital since both are captured on the income statement and balance sheet. The intangible assets of hu-man, intellectual, and social and relation-ship capital are not. Nor is the true cost of natural resources and the negative external-ities companies create on these intangible assets and natural capital reflected. The

Carbon Disclosure Project (CDP) has played a leadership role in natural capital, first with a focus on greenhouse gas emissions and more recently on water and forests. Failure to account for all forms of capital will inhibit a company’s ability to create value over the long term and will put its social license to operate at risk. CV MENA: The <IR> Framework emphasiz-es the importance of “integrated thinking.” Just what is this and how is it related to integrated reporting? RE: Integrated thinking is about ensuring that everyone in the organization takes account of the organization’s use of and impacts on all six capitals in the short, me-dium, and long term. Integrated thinking means that managers look beyond the silos of their responsibilities to understand how their decisions affect and are affected by the decisions of others in their organization. Integrated reporting drives integrated think-ing. In fact, the most immediate benefits of integrated reporting are internal ones—better decisions by managers and greater engagement by employees who want to know how a company is producing its finan-cial results. CV MENA: The concept of “sustainability reporting” has been around for some time now. How is <IR> different from Sustaina-ble Reporting? RE: Sustainability reporting, under the lead-ership of the Global Reporting Initiative (GRI), came about through the recognition that civil society, typically through the voice of non-governmental organizations (NGOs) representing various stakeholder interests, deserves the right to information on a com-pany’s performance on issues that matter to them. <IR> is focused on “providers of fi-nancial capital” and any others who want a holistic view of a company’s performance. Integrated reporting should not and will not lessen the importance of sustainability re-porting. While the interests of investors and stakeholders overlap, they are not identical. Stakeholders can also be the early warning system that identifies issues that aren’t important to shareholders, but that might be in the future. CV MENA: As a layman, I understand that the concept of <IR> goes much beyond the realm of accounting and reporting and should be seen as a core governance tool. Can you please explain why <IR> is im-portant from a governance perspective?

RE: The <IR> Framework emphasizes the importance of looking at how a company is creating value over the short, medium, and long term. Too many companies today are focused on the short term at the sacrifice of the medium and long term. Time frames determine which stakeholdersare important to a company. Today, especially in the An-glo-Saxon world, there is this false belief that boards have a fiduciary obligation to put shareholder interests first. This is simply not true as a point of law. Boards represent the interests of the corporation which has its own identity. In representing their fidu-ciary interest to the corporation, the board decides which stakeholders—or audienc-es—matter and over what time frames. They should do so by issuing an annual “Statement of Significant Audiences and Materiality (Statement).” This Statement, which is the board’s view on the role of the corporation in society, provides high-level guidance for what should be in the compa-ny’s integrated report. In turn, the integrat-ed report is a key process and mechanism for ensuring the implementation of the Statement. CV MENA: What is the concept of “materi-ality” in the context of <IR>? Why is this concept important and what is the latest thinking on it? RE: I have already referred to materiality in the context of the Statement. Materiality is at the heart of reporting. Its origins are in financial reporting and have been extended to sustainability and integrated reporting. Definitions and guidance on materiality have all been high-level and general, which is appropriate. Materiality is an entity-specific notion. It cannot be determined by algorithms. It depends on what audiences the board deems are significant, the sec-tor(s) in which the company competes, and its particular strategy. The Sustainability Accounting Standards Board (SASB) pro-vides sector-specific guidance on materiality which companies can adopt to their particu-lar circumstances. CV MENA: What is the role of the Sustain-ability Accounting Standards Board? How does it relate to the existing accounting-standard setters globally? RE: The SASB’s mission is to ensure that so-called nonfinancial (e.g., environmental, social, and governance [ESG}) information is reported to the same degree of comparabil-ity and quality as financial information.

29 The SASB recognizes that the material ESG factors vary by industry and is therefore taking a sector approach—10 sectors subdi-vided into 80-some industries. The SASB has made rigorous and disciplined progress to determine the small number of ESG issues that are relevant to investors for each in-dustry and what the appropriate metric is for reporting on them. Right now, the SASB is focused on disclosures covered by the US Securities and Exchange Commissioin (SEC) Regulation S-K which applies to all firms with a U.S. stock exchange listing. Domestic corporations are required to file, among other things, the Form 10-K; foreign regis-trants file the form 20-F. The SASB is now in the process of determining how its stand-ards can be adopted by other countries with the intent of making them as comparable as possible, while at the same time still recog-nizing local differences CV MENA: Is the concept of <IR> relevant to the public sector? If so, how? RE: It most certainly can be. In fact, the IIRC is organizing a public sector working group to explore this specific topic. Public sector organizations, including the hybrid public sector/private sector listed state-owned enterprises (SOEs) also use the six capitals in performing their roles and they should ac-count for this. The big difference is one of audience. Unless the governmental organi-zation is a listed SOE, shareholders are not a relevant audience. Instead, the audience is the broader public and the specific ele-ments the public sector organization aims to serve. CV MENA: What do you see as the role of international organizations such as the World Bank in developing <IR>? Which international organizations are currently involved in the development and dissemi-nation of <IR>? RE: The World Bank has a critical role to play in helping to spread the adoption of integrated reporting. For starters, the Bank can produce its own integrated reporting and I know that it is working on doing so. This will give it the “moral high ground” to encourage the adoption of integrated re-porting by its clients which are public sector organizations and SOEs. Another interna-tional organization interested in supporting the development of integrated reporting is the International Accounting Standards

Board (IASB). The European Union is also following the development of integrated reporting with interest. CV MENA: Your book, One Report, intro-duced the world to the concept of <IR> in a systematic way. I understand that you are in the process of publishing your second book on the subject. Can you please tell us the key areas of focus in your upcoming book? RE: My next book, The Integrated Reporting Movement: Meaning, Momentum, Motives, and Materiality, examines what has hap-pened since my first book was published and makes recommendations on what should be done now. While the first book was largely a conceptual one due to the early stages of the integrated reporting movement four years ago, the current one is based on a substantial amount of empiri-cal analysis— including the evaluation of the quality of 124 integrated reports, the corpo-rate reporting websites of the largest 500 companies in the world by revenues, and 91 materiality matrices. This book also intro-duces two ideas. One, already mentioned is the “Statement of Significant Audiences and Materiality.” The other, which builds on the idea of a “materiality matrix,” (first intro-duced about 10 years ago at the same time as integrated reporting, although as an in-dependent idea at that time) is the “Sus-tainable Value Matrix.” It is a management tool for implementing the principles estab-lished in the Statement which guides report-ing, engagement, resource allocation, and innovation. Finally, the book has a chapter devoted to information technology (IT) which discusses the important role IT can play in furthering the development of inte-grated reporting and integrated thinking. CV MENA: How should companies go about transitioning from traditional finan-cial reporting to Integrated Reporting? RE: This is very much a function of a compa-ny’s particular circumstances. Those com-panies which are already producing sustain-ability report have developed at least some of the internal control and measurement systems for the requisite nonfinancial in-formation that should go into an integrated report. Those which haven’t will obviously need to develop them. I don’t know of any situation in which integrated reporting didn’t have the strong support of the Chief

Executive Officer (CEO). In fact, Chief Finan-cial Officiers (CFOs) are often nervous about it. A process needs to be defined for how to produce an integrated report since it in-volves the coordination across a large num-ber of functions to gather and understand the relationships regarding metrics of all six capitals. The company should also not as-sume that producing an integrated report is an end in itself and that the users of the report, including analysts and investors, will understand its contents. It should be pre-pared to engage in a process to explain to all relevant audiences why the company has made this decision, and provide guidance on how to analyze and understand the con-tents of the report. CV MENA: What do you see the potential of <IR> as a governance tool for organiza-tions such as NGOs, the Government? RE: Good question and it reveals a certain irony. NGOs and the government are con-stantly pressing companies (and increasingly investors) for greater transparency. At the same time, many are not exactly paragons of transparency themselves, and they are under increasing pressure from civil society to provide more information about the re-sources they are using and the outcomes they are achieving. <IR> will help them do so. It will also foster integrated thinking that will produce the same benefits it does for companies. Governments, NGOs, and inves-tors that want integrated reports from companies will be in a stronger position to make this case if they are practicing it them-selves. CV MENA: Any further thoughts? RE: Yes, and thanks for asking. Speaking personally, I have been studying and trying to change corporate reporting for over two decades. Reporting is one of those prosaic, yet politically-charged issues that can have an enormous impact on society. We wouldn’t have the capital markets we have today without accounting standards and required financial reporting. We won’t have the capital markets and society we want for tomorrow without integrated reporting. It has to happen on a global basis, and soon. My primary professional goal is to making whatever personal contribution I can to the integrated reporting movement and help make it happen.

The Exchange Integrated Reporting in the Public Sector

See Back Cover for More Details

31

Transparency, Accountability, and Participation

TAP 32

Promoting Transparency, Accountability and Participation (TAP):

The role of check and balance institutions

Francesca Recanatini Senior Economist, Governance Global Practice, MENA, The World Bank

Worldwide there is increasing recognition that citizen involvement is critical for en-hancing democratic governance, improving service delivery, and fostering empower-ment. This citizen involvement can be fos-tered and ensured by promoting transpar-ency and participation. The World Bank has been focusing on the role that transparen-cy, accountability and participation (TAP) can play in the achievement of develop-ment goals. This renewed focus on trans-parency, accountability and participation has led World Bank practitioners to expand the scope of their work beyond the tradi-tional public sector institutions so as to

include check and balance institutions (see Figure 1). It has also pushed practitioners to understand better which policies can strengthen the links between citizens and their government representatives, and promote more accountable government structures. In practice, the concepts of transparency, accountability and participation have been operationalized in many different forms, from formal check and balance institutions (auditor general offices, AC authorities, etc.) to public sector measures (income and asset disclosure legislation, immunity pro-tection legislation, etc.) to “demand-side” tools (freedom of information legislation, scorecards, participatory policy systems, etc.). Over the past decade the World Bank has launched a series of initiatives to im-prove our collective knowledge in this broad area. The World Bank has collected data and information on the effectiveness of AC authorities that has led to the crea-tion of a portal and several publications (www.acauthorities.org). In addition, the World Bank has focused on gathering and analyzing data and information on financial disclosure systems around the world www.worldbank.org/fpd/financialdisclosure/lawlibrary). This data has allowed Bank practitioners to analyze experiences with the implementation and enforcement of financial disclosure systems globally and to identify initial lessons learnt. This newly acquired knowledge has been disseminated widely through regional Conferences (Latin America, East Asia and Eastern Europe) and two publications aimed at assisting policy-makers and practitioners to address the challenges of establishing or strengthening these systems. Finally, the World Bank has focused on additional Public Accountability Mechanisms to enhance the transparency of public administration and the accounta-bility of public officials. This line of work allowed gather data on (i) Immunity Protec-tions, (ii) Conflicts of Interest Restrictions, and (iii) Freedom of Information. To-date, PAM has released in-law (legal framework) data on Immunity Protections (2013), Conflict of Interest Restrictions

(2012), and Freedom of Information (2010). The information and data gathered, hosted in the PAM portal (www.agidata.org/pam http://www.pamdata.org/), has been dissemi-nated via e-learning activities and in-depth workshops. Given however the growing importance of the integration of accounta-bility, transparency, and participation in policy making and in the strengthening of institutions, especially in fragile and post-conflict contexts, the Global Governance Practice team developed and delivered a workshop to share in an integrated way the current knowledge on TAP, bringing to-gether knowledge from different teams and areas regions. The objective of the workshop was to provide policy makers, government officials and donor representatives with a deeper understanding of how transparency, accountability and participation can be integrated for a more effective functioning of government institutions. The event was delivered in Caserta, Italy, last April, using the training facilities of the MENA-OECD Centre. More than twenty participants from seven MENA countries (Libya, Egypt, Yemen, Tunisia, Iraq, Jordan, West Bank and Gaza, and Morocco) participated. The team was able to bring together senior officials from a diverse set of government agencies (anti-corruption agencies, supreme audit institutions, ombudsman offices, etc.). 1 To promote greater transparency and accountability, various countries have introduced requirements for public officials to file asset disclosures. In parallel, efforts to curb money laundering have resulted in greater scrutiny of financial relationships with politically exposed persons (PEPs). This work analyzes how information on asset disclosure could be used to support the identification of PEPs and provides a series of recommendations that can help support this use. http://fpdweb.worldbank.org/units/fpdvp/ffsdr/ffsfi/Pages/Using-Asset-Disclosure-for-Identifying-Politically-Exposed-Persons-.aspx 2 The Volume titled “Public Office, Private Interests. Accountabil-ity through Income and Asset Disclosure” examines the objec-tives, design features, and implementation approaches that can contribute to the effectiveness of a financial disclosure (FD) system, and enhance its impact as a prevention and enforcement tool. The Volume draws on detailed case studies that are pub-lished in a companion volume: “Income and Asset Disclosure: Case Study Illustrations”. The volume can be viewed using this link: http://www1.worldbank.org/finance/star_site/publications/Public-Private-interest.html

Governance FrameworkActors, Capacities and Accountability

Outcomes: Services,

Regulations, Corruption

Political Actors & Institutions• Political Parties

• Competition, transparency

Executive-Central Govt

Service Delivery & Regulatory Agencies

Subnational Govt & Communities

Formal Oversight

Institutions• Parliament• Judiciary• Oversight institutions

Civil Society & Private

Sector•Civil Society

Watchdogs•Media

•Business Associations

Cross-cutting Control Agencies (Finance, HR)

Citizens/Firm

s

Citizens/Firms

Citi

zens

/Fir

ms

Citizens/Firms

33

During the event, the participants benefitted from both the World Bank team’s expertise and from the first-hand knowledge of colleagues from Croatia, Georgia, Italy and Romania. In particular, participants discussed a framework that could be used for the operationalization of transparency, accountability and participa-tion within a country. The presentations and the material shared with the partici-pants aimed at promoting knowledge-

sharing on selected check and balance insti-tutions, such as financial disclosure for pub-lic officials, supreme audit institutions, anti-corruption agencies and ombudsmen, as well as fostering regional and country-level dialogue on these mechanisms and their impact on governance outcomes. The event offered also the opportunity to disseminate global research findings, share key relevant international experiences, increase aware-ness on the different aspects related to the

design and implementation of any of these mecha-nisms, and reflect on the ways forward for the coun-tries involved. The event was well received, thanks also to the very high level of professionalism of the team on the ground from the MENA-OECD Centre and the SNA that supported the implementation of the event. Participants engaged in many ways over the three days, contributing actively to each session and to the overall discussion, and sharing their experiences and the challenges they face in their own country. The agenda, the presentations and the list of participants can be found here: http://worldbank.org/anticorruption/tap

The event also served as a platform to launch the creation of a regional network of government experts interested and in-volved in the design and implementation of these institutional reforms, which can help sustain the technical and policy dialogue beyond the event.

Service Delivery 34

You say budget sub-entity, I say hospital: Why we should work together for our client’s sake

Hana BRIXI Lead Economist, Governance Global Practice, The World Bank You know the problems: Pregnant women unable to receive basic antenatal care promised by government policy. Children not learning basic skills in schools despite significant public investment in educa-tion. Essential medicines, text books and teaching materials missing from hospitals, clinics and classrooms, even though they were all purchased and paid for from the government budget. When specialists in the health and education sectors detect these problems, the solutions they offer tend toward sector-wide reforms. The design of the reforms would draw on sec-tor policy analysis and on the assessment of service delivery arrangements and ca-pacity. Increasingly, since the 2004 World Development Report, sector reforms would also seek to make teachers, health profes-sionals and other service providers ac-countable to citizens and communities. Rarely, however, would sector specialists trace service delivery problems in their sectors to “upstream governance” issues involving public finance management, pro-curement or civil service / performance management “at the center of govern-ment”. The realms of the Financial Man-agement Information System (FMIS) and the Medium-Term Expenditure Framework (MTEF)— or public employment and public sector performance management— appear too distant to have any relationship with the poor performance of schools and hos-pitals. Yet, the connections between ser-vice delivery and “upstream governance” do exist and unless addressed can lead to

the failure of education or health sector reforms. The implementation of health sector reform in China, for instance, has hinged on the ability of the central gov-ernment to make subnational government officials accountable for equitable resource allocation and service delivery perfor-mance within their jurisdictions. This has required an adjustment in the country-wide public sector performance manage-ment system. In addition, upstream inter-ventions have been needed to enforce equity in budget allocations across locali-ties, and the prioritization of basic service delivery in government budgets at the provincial level. The upcoming Independ-ent Evaluation Group report on health financing identifies a number of such ex-amples, as well as cases where sector re-forms cannot be sustained without being anchored at the upstream center of gov-ernment through, for instance, public fi-nance law or civil service regulations. Iden-tifying and addressing such connections, however, brings challenges. One of the most surprising is the difficulty experts have in communicating across disci-plines. As an example, at a recent innova-

tive public expenditure review in the Mid-dle East and North Africa region, it took several rounds of discussion before the health financing experts figured out what their colleagues in public finance manage-ment (PFM) were actually talking about. It turns out that within that particular coun-try’s budgetary system, a public financial management (PFM) expert would use the term “budget sub-entity” when talking about a hospital or school. “Budget enti-ties” would include public universi-ties. Once this misinterpretation was fig-ured out, it took even longer for the ex-perts to agree on the implications of the proposed introduction of performance-based hospital payment mechanisms and the desired increase in hospital autonomy for the overall government budget classifi-cation and budget allocation mechanisms, as well as for the functionality of the exist-ing FMIS. There are however clear benefits to overcoming these challenges. There was more to the discussion among health financing and PFM experts, as it also in-volved stakeholders across ministries and service providers.

35 These stakeholders learned to understand each other along with the experts. Moreo-ver, the joint engagement helped to ex-pand the common ground and establish a common vocabulary among multiple stakeholders for the needed reforms. More opportunities for joint learning, knowledge sharing and engagement across disciplines are clearly needed. In a recent training session organized by the World Bank joint-ly with the Harvard University Kennedy School, governance experts explored prob-lem-driven approaches to PFM. The focus was on recognizing the benefit of involving country clients in designing PFM reforms so as to address service delivery problems. Instead of offering country clients ready-made tools such as the MTEF and FMIS, participants learned to recognize problems from the perspective of country clients (for instance, poor performance of schools), and deconstruct problems to identify the separate elements related to upstream governance (such as budget allocations not reaching schools, and lack of performance

information and performance audit). In the future, such training could include not only governance experts but also experts on education, health and other sectors. Cross-cutting Communities of Practice (CoP) can facilitate this sort of engagement across disciplines. The recently established CoP PFM for Service Delivery, for instance, could serve as a platform to showcase and learn from examples where engagement across disciplines has led to the success-ful delivery of integrated solutions to clients. The CoP could also create oppor-tunities to connect specialists across disci-plines in assisting the World Bank Group’s country clients. I would welcome your suggestions for cases or issues that should be further explored. Moreover, to promote connections across the emerging Global Practices (GPs), and increase the potential for integrated solutions, the Incentives Task Force for Collaboration, Knowledge and Results is proposing a series of rec-ommendations to encourage GP manage-ment. Further, specialists are being en-

couraged to recognize the complexity of development problems and the cross-cutting nature of many true solutions. Making the different GPs all “book” their shared activities in their own portfolios, allowing specialists from the different GPs to co-lead a task, or encouraging the Coun-try Management Units (CMUs) and all rele-vant practice managers to work together to identify the possible benefit of multi-GP approaches in country work programs, would make cross-GP collaboration and knowledge sharing much more likely. As we move forward, perhaps each of us, proud of our own discipline, can open our eyes wider to see what those in different fields have to contribute to solving prob-lems in our own domain. We will need to accept with humility and patience that we may not understand each other at first, but that over time we will learn from each other and be able to integrate our individ-ual expertise-driven perspectives into true solutions that will work for our clients.

Corruption

Can Audit Fight Corruption?

Jad MAZAHREH Senior Financial Management Special-ist, Governance Global Practice/MENA, The World Bank Corruption in Words Corruption can severely undermine the development effectiveness and impact of projects. Over the last decade, the donor community has increasingly dedicated more

attention to addressing corruption at the national, sectoral, and project levels. The World Bank’s 2012 updated Strategy and Implementation Plan for Strengthening Governance and Tackling Corruption called for managing more effectively, rather than avoiding, the risks inherent in working in a development context, including the risk of corruption. The impact of corruption on development projects varies from imple-mentation delays, selecting unqualified contractors, inflating of costs, and failure to complete works— to utterly deterring in-vestment, preventing development, and adding unproductive debt. Audit as a Tool Audit, in varying forms, is believed to play a significant role in detecting and preventing corruption. The term audit is widely used as a synonym for evaluation, appraisal, as-sessment, examination, study or review. Some audits— such as financial, perfor-mance, compliance, and internal audits— have specific definitions attributed by in-ternational bodies (the International Organ-ization of Supreme Audit Institutions [IN-TOSAI]; the International Federation of Accountants [IFAC]; and the Institute of

Internal Auditors [IIA]). These audits follow a set of globally-agreed procedures, where-as other audits, such as technical and social audits, follow less standardized procedures which vary according to circumstances. Other, more specialized audits, such as environmental audits and forensic audits, serve specific purposes. Corruption versus Fraud The words ‘corruption’ and ‘fraud’ are often used interchangeably. In principle, corruption is defined as “the abuse of public office for private gain”. However, corrup-tion takes place in the form of bribery, kick-backs, commissions or other benefits with-out leaving any trace in the official records. ‘Fraud’ consists of originating benefits by bypassing some controls or bending some rules, with some traceable evidence re-maining in the records. Therefore, audit should be planned, designed, and executed to address the risk of "corruption.” It should be done differently from dealing with the risk of “fraud”.

36 Auditors’ Dilemma Corruption is a highly complex phenome-non where the parties involved leave very little indisputable evidence, and most of the corruption takes place discretely and in an informal manner. Auditors find themselves in a dilemma vis-à-vis the citizenry who are expecting them to play an effective role in reducing, if not eliminating, corruption. Auditors cannot physically see all transac-tions and all situations. An example is a bribe where no one can ever detect it until the person is caught ‘in the act.’ The audi-tors are not in the business of catching people ‘in the act.’ Thus, they cannot do much in such cases. Similarly, auditors would not deal with political, social, or cul-tural corruption. However, there could be situations where the rules and regulations are quite infallible at governmental institu-tions, yet corruption continues to grow because of poor implementation or collu-sion. Corruption in Regular Audits As part of regular audit (financial, compli-ance, and internal audits) planning and execution, auditors should try to determine the possibilities of corruption through a review of laws, regulations, rules and pro-cedures. This can also be complemented by interviews with key personnel in order to identify any opportunities for corruption. In situations where there may be holes in rules, regulations, procedures and opera-tional standards, these can create opportu-nities for corruption or at least the protec-tion of corruption. In such instances, the auditors could then recommend corrective measures. Some experts call for auditors to maintain an inventory of corruption oppor-tunities for each of the organizations being audited. This inventory of corruption op-portunities could be in the form of a list of such possibilities. This would give the audi-tor a framework and context for further focus during field work. Corruption in Specialized Audits It is generally believed that performance auditing can help detect corruption. Per-formance auditing would highlight areas of

dis-economy, inefficiency, and failure to achieve results and impact. The argument is that projects or programs that are planned and implemented properly with due regard for economy and efficiency are likely to achieve results. Any deviation such as sig-nificantly higher costs than anticipated or a longer period of implementation or drifting far from achieving results might flag corrup-tion. It is arguable that the existence of dis-economy, inefficiency, or ineffectiveness is not necessarily conclusive proof of corrup-tion. There are other factors that should be taken into consideration, such as uninten-tional human negligence to assess risks and costs, and a difficult and complex operating environment. Therefore, performance au-diting can provide some clues to corruption, if it exists, using specific corruption indica-tors related to lack of economy, efficiency, and effectiveness. In this context, it should be noted that forensic auditing is merely used to detect fraud. Audits and Corruption Investigations As compared to auditing, investigation is a different area of oversight. Auditors can

play a vital role in assisting the agencies responsible for investigation against alleged cases of corruption. For instance, internal auditors can play a vital role in investiga-tions, as they usually have more diversified and detailed knowledge of operations than the investigators. Internal auditors can assist investigators in interpreting various rules, explaining practices and sharing re-ports. They can also help pinpoint areas of excessive cost and weaker controls which can, in turn, help the investigators in de-tecting corruption. The Role of Supreme Audit Institutions (SAIs) in Fighting Corruption Fighting corruption requires collective ef-forts and serious reforms in public financial management, public administration, the judiciary, public information, and citizen participation. The individual auditor or even an internal audit department of a ministry cannot propose actions beyond their re-spective ministry. There are actions which have to be taken by the government or which may require the political will of the state. For such actions, only an institution like a SAI can take the initiative. Without a strong and well established SAI in a leader-ship role, individual auditors or even lower-level audit departments cannot make much of a difference in the fight against corrup-tion. Furthermore, strong and well-established SAIs are in a position to utilize different audit types to fight corruption. Despite general agreement that the SAI should play an effective role in promoting transparency, accountability, and participa-tion, most MENA SAIs (and those in the developing world more broadly) still lack adequate independence and resources to play this leadership role in combatting cor-ruption. References Dye, Kenneth M. and Rick Stapenhurst. 1998. Pillars of Integrity: The Supreme Audit Institutions in Curbing Corruption. Washing-ton, DC: EDI/World Bank. INTOSAI. 2004a. Compliance Audit Guidelines- ISSAI 4000 – 4200. ———. 2004b. Financial Audit Guidelines. ———. 2004c. Performance Audit Guidelines- ISSAI 3000. Khan, Muhammad Akram. 2006. The Role of Audit in Fighting Corruption. World Bank. 2014. Guidance Note for Project Teams and Clients on the use of Different Types of Audits in Bank-financed Projects, Washington, DC: World Bank

In The News

In its fight against corruption China will conduct a nationwide audit of government land sales and related deals that may shed light on rent-seeking and corruption. The National Audit Office will conduct "rigorous" checks on funds from land sales, as well land requisition, reserve and supply that occurred from 2008 to 2013. The audit will be launched under the cabinet's oversight.

The Economic Observer newspaper via Reuters

Procurement 37

Building knowledge through innovation and partnerships:

Regional Capacity Building in the Arab World

Yolanda TAYLER Practice Manager, GGODR, The World Bank Many governments spend time and re-sources deciding what to deliver, without tackling how. Improving the “how” of deliv-ery is a challenge that could have a dra-matic impact on eliminating poverty. This is a key priority for the World Bank, demand-ing both commitment and innovation. It is also a top priority for the Middle East and North Africa (MENA) region’s Network of Public Procurement Experts, which is work-ing to strengthen capacity building on the ground. Across the region, billions of US dollars of public money are spent each year on con-tracting private companies to provide the public with goods and services. Govern-ments and public agencies in the region spend up to 70% of their budgets on public procurement, ranging from major projects like highways and airports, to purchasing a wide variety goods and services—everything from furniture to food and text-books. This type of spending represents 15% to 30% of Gross Domestic Product in MENA economies. How these investments are delivered to the public has a huge effect on how well a government meets promises to its citizens.

Many governments have begun reforming the laws and regulations governing their procurement systems in recent years, in-tent upon ensuring efficient and effective public spending. In reality though, even the best legal and regulatory framework can under-deliver without a trained workforce to put laws and regulations into practice. To increase returns on public investment, MENA governments have agreed on the need to develop and equip the public sector employees responsible for public procure-ment. It is in this context that the Net-work—a group composed of the heads of public procurement in countries in the MENA region—launched an ambitious, new, multi-regional approach at a recent meeting hosted by the Arab Administrative Development Organization (ARADO) in Sharjah, United Arab Emirates. Two sources of funding have been secured to support the initiative. The first is a US$750,000 grant from the Micro, Small, and Medium Enterprise (MSME) Facility of the Arab World Initiative to teach people working in Small and Medium Enterprises about public procurement processes; and the second source of funding is a $350,000 Institutional Development Fund (IDF) grant from the World Bank, awarded to ARADO to expand the number of topics addressed through this model of procurement train-ing. ARADO is the training arm of the Arab League, and the Network of Experts is tap-ping into it to facilitate a regional training program that builds on existing resources in the various countries, addresses common challenges, and capitalizes on existing strengths. When it comes to the effectiveness of pub-lic procurement, it is striking how similar many of the challenges that MENA coun-tries face are, and how little has been done in the past to take advantage of cross-border training programs. Capacity building programs often have problems in common. These include a lack of sufficient funding,

the lack of an assessment of existing skills and competencies—and gaps—and the frequent exodus of highly-qualified staff to other government positions or to private companies offering higher pay. Many countries have taken a highly frag-mented approach to capacity building, and have not yet been able to build a body of knowledge within the country. Other shared challenges include the lack of quali-fied trainers and specialized training insti-tutes, the quality and coverage of the train-ing programs, and the limited knowledge or dissemination of modern procurement tools like e-procurement. The Network of Experts’ regional capacity building program seeks to address some of these shared challenges, following the model of the Sharjah event on SMEs. Train-ers from nine MENA countries attended it—Morocco, Tunisia, Iraq, Jordan, Lebanon, Djibouti, Egypt, Yemen, and the Palestinian Territories. A regional capacity building strategy for public procurement will be developed for training materials in Arabic and French for the ‘training of trainers’ programs, and for building partnerships with training institu-tions. Subsequent country-level training sessions will leverage each country’s exist-ing institutions, infrastructure and exper-tise, while putting World Bank President Jim Yong Kim’s science of delivery methodology to good use to make sure that everyone knows how to implement the training pro-grams. In the longer term, there could be a regional certification program for procure-ment professionals. Some countries have already made ground-breaking advances in terms of the coordina-tion between their public procurement departments. Collaboration allows stake-holders to learn from the successes of oth-ers in the region. At the regional level, countries could coordinate to create econ-omies of scale, taking advantage first of the resources and knowledge that already exist on the ground.

Cover Story

Strengthening Financial Management

Institutions In MENA

Cover Story 39

Hisham WALY Practice Manager, Governance Global Practice MENA, The World Bank As the French Revolution was taking place in the late eighteenth century, countless writings appeared by some of the most notable writers of the time, such as Edmund Burke, British statesman and philosopher, and Thomas Paine, American political activist and philosopher. They debated the revolution with opinions encom-passing everything from class and gender issues to ways to reform state institutions.

Thomas Paine (left); Edmund Burke (right)

Recently these writings have been revisited in two books, with the first being: The Great Debate: Edmund Burke, Thomas Paine, and the Birth of Right and Left by Yuval Levin. In his book, Levin reflect-ing on the Burke versus Paine debate asks “Are great public prob-lems best addressed through institutions designed to apply the explicit technical knowledge of experts or by those designed to channel the implicit social knowledge of the community?” The sec-ond book by Arun Maira, Redesigning the Aeroplane While Flying: Reforming Institutions, highlights the fact that both Burke and Paine agreed that institutions must be reformed for society’s bet-terment, however they disagreed about the method. Burke rec-ommended a gradual process of evolution modelled on the way nature makes changes. Paine preferred a revolutionary approach, which displaces the old order entirely to make space for new insti-tutions. This debate still resonates today. For example, although public financial management reforms are often linked to other major re-forms such as civil service reforms, this does not mean that it is necessarily a good idea to simultaneously launch and implement multiple large-scale reforms with regard to budgetary institutions. Such a “big bang” (revolutionary) approach requires conditions that are difficult to find in most developing countries, conditions includ-ing: political opportunities, sound leadership, government stability, human skills capacity, information, and organization. It is technical-ly challenging, entails intensive coordination with multiple stake-holders, and does not allow for absorptive capacity to grow as the reform initiative expands. In a few exceptional cases— Canada, Korea, New Zealand and Poland— a politically-driven, all-encompassing reform process designed to take advantage of nar-row windows of opportunity has worked well. However, over-whelmingly, the incremental approach is most in line with the pro-

cess of institutional change, as well as with the short tenure of many Ministers of Finance. In their book, Why Nations Fail: The Origins of Power, Prosperity and Poverty, James Robinson and Daron Acemoğlu describe good economic governance as “The extent to which the institutions and processes of government provide decision makers an incentive to be responsive to citizens, is also important for economic growth and equity.” They argue that the main explanation for different economic outcomes among countries lies with different institu-tions. According to the authors, economic and political institutions are collective choices; therefore, the distribution of political power is a fundamental determinant of their evolution. They classify insti-tutions into: (i) inclusive institutions, which lead to the creation of inclusive markets that support growth and equality of opportunity; and (ii) extractive institutions that stifle entrepreneurship and crea-tivity, and thus lead to low growth and high inequality. Indeed, there are other critical determining factors such as geography, cul-ture, the political environment, etc. However, these factors do not negate the fact that institutions play a crucial role in affecting eco-nomic development.

In MENA, the Arab Spring ushered in a historic period of social, political, and economic transformation. However, four years later transition countries remain mired in political and economic crises. In response to this challenging transition, the World Bank Group has developed a framework for engagement (strategy). One of its main pillars is strengthening governance to help create responsive states that are held accountable to their citizens for their actions. These four strategic priorities are complemented with a focus on the cross-cutting themes of Gender, Regional Integration and fos-tering a competitive Private Sector. Work on these pillars and themes will contribute to the World Bank Group’s twin goals of ending extreme poverty and boosting shared prosperity.

Why Institutions Matter Institutions are the humanly devised constraints that structure political, economic and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights). Throughout history, institutions have been devised by human beings to create order and reduce uncertainty in exchange. Together with the standard constraints of economics they define the choice set and therefore determine transaction and production costs and hence the profitability and feasibility of engaging in economic activity. They evolve incrementally, connecting the past with the present and the future; history in consequence is largely a story of institutional evolution in which the historical performance of economies can only be understood as a part of a sequential story. Institutions provide the incentive structure of an economy; as that structure evolves, it shapes the direction of economic change towards growth, stagna-tion, or decline.

Author: Douglass C. North Source: The Journal of Economic Perspectives, Vol. 5, No. 1, (Winter, 1991)

Cover Story 41

The Arab Spring proved that poverty and shared prosperity remain critical challenges. Indeed, 53 percent of MENA’s population living on less than $4/day and unemployment (particularly of youth and women) is the highest in the world. These challenges relate to a sense of vulnerability, exclusion, and lack of voice and opportunity on the part of the citizenry. In particular, there is a high concentra-tion of political and economic power by the governing elites and those close to them— or a lack of inclusive institutions, as Ace-moğlu and Robinson posit.

Note: PPP= purchasing power parity. Compared to a number of other regions of the world, MENA’s gov-ernance indicators tend to have lower scores, particularly in areas such as transparency, government effectiveness, civil liberties, me-dia freedom, participation and social accountability. As a conse-quence, overall governmental accountability, trust in government institutions, and public sector service delivery are all negatively affected. Complicating matters, the volatile environment and insta-bility present in many MENA countries compounds these difficul-ties, bringing with them one crisis after the other. In some instanc-es, this has acted as a trigger for embarking on reforms, while in other cases it has made the design and implementation of pro-grams much more challenging.

AC= Anti-Corruption; LAC= Latin America and the Caribbean; NGO= non-governmental organization; SAR= South Asia.

Corruption and cronyism are perceived to be widespread in many MENA countries, and have distorted the economies in the form of a weak private sector and poor governance. The Corruption Percep-tions Index calculated by the Transparency International shows that the MENA region scored lower than the world median in 2013, with 84 percent of MENA countries ranked below 50 (highly corrupted). Among them, Egypt, Iran, Jordan, Lebanon, Libya, Tunisia, and Yemen were widely perceived as very corrupt, with an average score of 29— ranging from Libya with a score of 15 to Jordan with a score of 45 (Score ranges between 0 as being highly corrupted, and 100 as being very clean). Iran and Egypt ranked 144th and 114th respectively among 177 countries under study for the 2013 index (1). Corruption Ratings in the MENA Region

(1) Source: MENA Quarterly Economic Brief (2014)

Leadership, Communication and Research!

“While policy makers may at times need both toughness and political cunning when advancing contentious reforms, OECD experience suggests that successful leadership is often about winning consent rather than securing compli-ance. This makes effective communication, underpinned by solid research, all the more important.”

Making Reform Happen

Lessons from OECD Countries (2010)

When Institutions Flourish Good institutions tend to flourish under two broad circumstances: an economic environment that is not conducive to rent-seeking, and—related to that—the presence of appropriate checks and balances on those wielding political power. Consistent with this, the econometric analysis finds that the transition to good institutions is more likely to occur in countries that are more open, have a greater degree of political accountability, have a higher level of education in the population, and are in the same region as countries with relatively good institutions.

Subir Lall, Nikola Spatafora, and Martin Sommer Building Institutions

Cover Story 43 In addition, many of the countries in MENA are grappling with a variety of challenges, including: weak public financial management systems that are not conducive to fiscal discipline (expenditure and revenue controls); allocation of resources consistent with policy priorities (strategic allocation of resources); prudent management of the government’s financial resources (economy, efficiency, and effectiveness); and transparency and scrutiny of public funds. Although not unique to MENA countries, most suffer from signifi-cant gaps between laws and procedures (de jure) and actual prac-tice and implementation (de facto). Another issue is the low execu-tion rate of investment budgets due to ineffective public invest-ment management systems. On the corporate financial reporting (CFR) front, there are serious deficiencies in structure and function of the CFR framework, as well as a lack of awareness among na-tional policy makers of its importance. In the region, only 62 per-cent of the professional accountancy organizations maintain Inter-national Federation of Accountants (IFAC) membership, and merely 20 percent of countries maintain independent audit regulators. PEFA Scores: From C to C+ Average

Source: PEFA Reports Note: EAP= East Asia and Pacific; ECA= Europe and Central Asia; LCR= Latin America and Caribbean; MENA= Middle East and North Africa; PEFA= Public Expenditure and Financial Accountability.

PFM CPIA: Post Arab-Spring Deterioration

Source: World Bank Note: CPIA= Country Policy and Institutional Assessment.

These challenges provided a unique entry point to work on state institutions and the strengthening of good governance principles of transparency, accountability, and citizen participation. What has been achieved in the first three years since the revolutions is an irreversible move towards greater voice and inclusion, as evidenced in the passing of the new Access to Information legislation in Tuni-sia (2011), Morocco (2012) and Yemen (2012). Also, we’ve wit-nessed a number of constitutional changes toward a more open and plural society in Egypt, Jordan, Morocco, Tunisia and Yemen. In keeping with regional developments, the World Bank’s MENA Governance Strategy continues to prioritize core government func-tions and introduces the principles of transparency and accounta-bility in public resource management, including tax reform and service delivery in core sectors such as health, education and ener-gy. The Bank also provides support to oversight bodies such as su-preme audit institutions and anti-corruption agencies. In this con-text, the World Bank supports Libya and Yemen in broader state-building initiatives through institutional and capacity development programs. Optimizing the performance of state-owned enterprises through improved corporate governance is also a priority. Regard-ing the agenda of corporate financial reporting, the Bank provides technical assistance to governmental legal and regulatory frame-works for financial reporting. Likewise, it also supports a capacity building initiative for professional accountancy organizations and financial regulators. In support of this agenda and as documented in the region’s Gov-ernance strategy, the World Bank’s Governance Global Practice will support MENA countries in the adoption of appropriate fiscal, pub-lic financial management and regulatory policies to deliver public goods and services. It will also help build regional, national and subnational public institutions and delivery systems that are open and responsive to citizen needs. Finally it will support adherence to the rule of law, access to justice and security, and well-functioning social accountability mechanisms. In this manner, it will also pro-vide assurance that World Bank funds in borrowing countries are used for their intended purposes, delivering value for money in its outcomes and enhancing development effectiveness. Relating to the governance agenda, we organized our annual con-ference “The Exchange: Building Financial Management Institutions in MENA” in Abu-Dhabi from June 10-12, 2014 with more than 250 participants from around the region and the globe. The Exchange provided a channel for dialogue and enabled countries to share financial management experiences and lessons from both the pub-lic and private sector perspectives. In the coming pages, Manuel Vargas, Lead Financial Management Specialist, takes us on a tour of the PFM aspects of the Exchange, while Gabriella Kusz, Senior Fi-nancial Management Specialist, covers the CFR side. In addition, we labelled a number of articles throughout the magazine with "GGP in Action" (Governance Global Practice in Action) to high-light some of the work we are doing in MENA to build institutions and enhance governance.

Governance & Democracy

As a starting point, I am going to define governance as a government's ability to make and enforce rules, and to deliver services, regardless of whether that govern-ment is democratic or not. I am more interested in what Michael Mann labels "in-frastructural" rather than "despotic" power. The reason I am excluding democratic accountability from the definition of governance is that we will later want to be able to theorize the relationship between governance and democracy. The current or-thodoxy in the development community is that democracy and good governance are mutually supportive. I would argue that this is more of a theory than an empiri-cally demonstrated fact, and that we cannot empirically demonstrate the connec-tion if we define one to include the other.

What is Governance?

Francis Fukuyama Center of Global Development, Working Paper 314, 1/2013

Cover Story 45

Strengthening Financial Management Institutions in MENA

June 10-11, 2014 – Abu Dhabi, UAE

The Exchange was held over a two day period beginning on June 10-11, 2014. It con-sisted of both plenary style sessions as well as concurrent breakout sessions. After the completion of the conference, we spent a day for specific thematic courses and coun-try discussion meetings between the Financial Management Unit (MNAFM) and the relevant country stakeholders. Noting the important role that financial management institutions play in the public and private sectors and the challenges they face, this year’s Exchange brought together high-level policy makers and stakeholders to discuss and debate a wide range of topics including:

- Public Financial Management: PFM reform; strengthening local service delivery; transparency in sectors (e.g., extractive industries, security), transparency in gov-ernment accounting and reporting; supreme audit institutions and parliamentary over-sight; and internal controls and internal audit

- Corporate Financial Reporting: CFR reform; adoption and implementation of International Financial Reporting Stand-ards (IFRS); Audit Quality Assurance Sys-tems Design and Development; Islamic banking and finance; the role of profes-sional accountants as business advisors – supporting MSME Development; and In-tegrated Reporting.

Exchange 2014 was attended by more than 250 representatives of public and private financial management institutions, academia, legislative and oversight institutions, donors, experts, and world bank staff. They came from different parts of the world, including 13 countries in MENA and GCC. 77% of the participants were males; while 23% females. Among the attendees, around 50 speakers had presented in 20 sessions and 3 specialized courses.

Results Indcators

83%

Participants who provided pos-itive ratings on the quality, usefulness, and relevance

78% Participants reporting high quality of event content

81%

Participants’ awareness of sharing values & cooperation among all entities has in-creased as a result of this event.

68%

Participants reporting that they are motivated to implement practices and solutions dis-cussed during the event.

80% Participants reporting interest in membership in Maarefa

Strengthening PFM Institutions 46

Achieving and Sustaining Results

Manuel VARGAS Lead Financial Management Specialist, Governance Global Practice, MENA The World Bank The role of financial management institu-tions is vital to well-functioning public and private sectors in the Middle East and North Africa (MENA) region. Likewise, effective financial management institutions are essen-tial to achieving poverty reduction and shared prosperity. During the Public Finan-cial Management (PFM) sessions of The Ex-change 2014, speakers and participants re-flected on the special challenges and oppor-tunities of PFM institutional development with a particular focus not only on how to achieve results, but on how to sustain them in the long run. Why the focus on PFM? At a global level, PFM helps countries in attain-ing: (i) sound fiscal risk management; (ii) allocation of public resources in line with government policy priorities through the budget; (iii) increased efficiency in the use of public funds; and (iv) transparency and ac-countability in the use of such funds. Based on World Bank experience and attendant demand from our MENA clients, The Ex-change facilitated discussions on contempo-rary cross-cutting PFM reform considera-tions, as well as specific PFM topics. Public Financial Management Reform - A number of current issues and lessons from PFM reform experience were discussed. Some of the common principles include the importance of properly defining the problem to be addressed, strengthening fundamen-tals first, and taking into consideration the political economy and other non-technical factors of reform. The pace of reform, priori-tization and sequencing are also very im-portant. Analytical results show that, in gen-eral, more attention is needed to: down-stream versus upstream reform; de facto versus de jure results; and decentralized versus centralized systems. Capability is as important as capacity — central financial agencies (CFAs) must be well organized and managed. Building tomorrow’s workforce remains a challenge for MENA countries in general, and for its financial management institutions in particular; hence, capacity development is a priority in sustaining MENA's public sector financial management reforms. The notion of “PFM best practice”, that is, reforms aimed at increasing legitima-cy— but not necessarily improved function-ality— is being phased out. Instead, the fo-cus is increasingly placed on the need for

learning and adaptation, and examining what is reasonable and practical given a country’s legal, administrative and govern-ance arrangements. An important input to the design of PFM reforms is performance measurement. In this respect, the Public Expenditure and Financial Accountability (PEFA) framework for PFM performance measurement was discussed, emphasizing the big effort underway to update the framework in line with evolving PFM prac-tices in general, and with a view to closing some gaps in particular. However, the revi-sion is not intended to change the PEFA framework purpose or undermine its com-parability over time. Internal Audit Development. Internal audit has the potential to make significant contri-butions to public sector effectiveness and progress. Internal audit can provide a strate-gically-aligned assurance service, and can help with risk identification and mitigation. In addition, it can be a proactive catalyst for positive change, providing trusted advice on risk, control and governance issues. The changing role of the Moroccan Control Gen-eral des Finances is a case in point. Partici-pants were also introduced to the European Commission’s Public Internal Financial Con-trol (PIFC) framework and its layers of de-fense, including a functionally-independent internal audit function anchored in a central harmonization unit (CHU). The lessons learned from the establishment and opera-tion of an actual Internal Audit CHU in the Turkish government were cited as an illustra-tive example. Strengthening Local Government Service Delivery – The Role of the Central Govern-ment evising and strengthening appropriate PFM and accountability systems at the local governmental level goes hand-in-hand with bringing service delivery closer to the citi-zenry. In this context, the question of finding the right balance between functional and expenditure assignment of responsibilities to local governments, as well as means of ac-cess to finance, were analyzed at length. Relevant experiences from India and South Africa, as well as the emerging agenda in Tunisia, were discussed. Transparency in Sectors. As recent events attest, the people of the MENA region are becoming acutely aware of the importance of transparency in public sector administra-tion. The experience of using e-government for enhanced service delivery and transpar-ency was discussed. Moreover, participants were introduced to developments related to

public finance transparency in specialized— but generally opaque areas— such as value-for-money in security budgets, and PFM considerations in resource-rich environ-ments. Addressing these sensitive fields from a PFM perspective requires strategies and tactics to create political space and a professional approach. Transparency in Government Budget Re-porting and Accounting. The move toward effective and transparent budgeting and accounting systems will lead to better re-source management and less waste in MENA countries. This session provided an overview of both the costs and returns of adopting the International Public Sector Accounting Standards (IPSAS), along with the contribu-tion that government financial management information systems (GFMIS) can make to the publication of budget data in an accu-rate, easily accessible, and meaningful man-ner. The new Global Initiative for Fiscal Transparency (GIFT), a multi-stakeholder action network, seeks to advance and insti-tutionalize global norms, along with signifi-cant, continuous improvements in fiscal transparency, participation, and accountabil-ity. Ultimately, the quality of financial data needs to be grounded in strong internal controls, particularly with regard to the commitment control system. Accountability and Oversight Framework - The Role of Supreme Audit Institutions and Parliaments. This session explored the ex-ternal oversight framework and shed light on what is required for a Supreme Audit Institu-tion (SAI) to increase its effectiveness in ensuring the proper use of public resources. Discussions revolved around the efforts of the International Organization of Supreme Audit Institutions (INTOSAI) in promoting the implementation of international standards (ISSAIs), as well as the perspective from the SAIs (e.g., Iraq and the United Arab Emirates) in implementing them. International coop-eration leads to enhanced awareness and understanding of detailed ISSAI require-ments, including practical implications of implementation, the need for wide stake-holder buy-in and ownership, feedback mechanisms, and informal and formal net-works and cooperation. As importantly, the participants stressed the outcomes that can derive from effective collaboration between SAIs and Parliaments, enabling the latter to exercise fiscal oversight over the budget in line with a good system of checks and bal-ances.

Cover Story 47

The Exchange in Pictures - PFM

Stengthening CFR Institutions 48

Perspectives on Corporate Financial Reporting

Gabriella KUSZ Senior Financial Management Specialist Governance Global Practice, MENA The World Bank The Exchange’s Corporate Financial Report-ing (CFR) stream of event sessions was held alongside the Public Financial Management sessions from June 10-11, 2014 in Abu Dha-bi, UAE. Sessions were designed to focus on the importance of CFR institutions and the strengthening of structures, systems and operations for those institutions integral to the production of high-quality financial information for the private sector. At-tendees representing Ministries of Finance, Professional Accountancy Organizations (PAOs), audit firms, regulators, non-governmental organizations, international organizations, capital market authorities, universities and many others converged in the UAE for this important event.

Event Highlights

• Corporate Financial Reporting Reform. Panelists from the NBA Neth-erlands (the Dutch PAO), the Saudi Or-ganization of Certified Public Account-ants (CPAs), and the Conseil Supérieur de l’Ordre des Experts-Comptables and the Compagnie Nationale des Commissaires aux Comptes (French PAOs) shared their experience in driving CFR reform within their own countries, as well as abroad. Discussions focused on the challenges facing CFR development and the manner in which panelists and their organizations worked to overcome such challenges and achieve success. Additional discussions were held regarding the MENA Financial Management (MNAFM) strategy to pro-mote CFR development and reform throughout the region.

• Charting the Path toward the Adoption and Implementation of International Financial Reporting Standards (IFRS) in general, and IFRS for small and medium en-terprises (SMEs) in particular. Participants from the World Bank, the

Yemeni Association of CPAs, the Egyptian Society of Accountants and Auditors, the National Council of Accountancy of Mo-rocco, and the Ordre des Experts Comptables du Maroc (Moroccan PAO) presented their national experiences in developing plans for adoption and im-plementation of IFRS, and IFRS for SMEs. Discussions centered on what was learned from this process, providing in-sight and guidance to all attendees about their own respective national efforts.

• Islamic Finance - An Opportunity for Large and SME Businesses. Attendees had an opportunity to hear from experts from the Gulf Cooperation Council Accounting and Auditing Organi-zation (GCCAAO), Deloitte, the Islamic Fi-nance Knowledge Center (IFKC), and the World Bank. They shared their perspec-tives regarding the rise of Islamic Fi-nance, its development within the GCC, MENA and Southeast Asia— and oppor-tunities for governments, accountancy professionals and MSME businesses around the world.

• Audit Regulation and Quality Assurance – Furthering the Qual-ity of Services Among Large and Small and Medium Practice (SMP) Firms. This session brought to-gether panelists from the regulatory sec-tor, international organizations and the profession to showcase the issues, chal-lenges and experiences related to audit regulation and quality assurance for listed companies and SMEs alike. Panel-ists from the International Forum of In-dependent Audit Regulators, the Interna-tional Federation of Accountants PAO Development Committee, the Egyptian Financial Services Authority, and the Pal-estinian Association of CPAs presented their perspectives on the rationale and purpose of systems of audit oversight and quality assurance. They also provid-ed examples and organizational experi-ence in the design and development of such systems.

• Integrated Reporting: An Intro-duction to the Concept and Prac-

tice. The session provided a foundation-al introduction to the concept of inte-grated reporting. Today, corporate re-porting is moving beyond the confines of traditional financial reporting to include aspects relating to the environmental, social and governance of business opera-tions as part of their reporting to stake-holders. Representatives from the Har-vard Business School, the Global Report-ing Initiative, the American Institute of Certified Public Accountants Business Reporting, Assurance & Advisory Services and XBRL Unit, and ARAMEX Corporation (based in Dubai, UAE) offered an over-view of the subject of integrated report-ing. They tapped into their own re-search, knowledge and experience to of-fer guidance to accounting practitioners and private sector enterprises interested in implementing this form of reporting within their own entities.

• The Role of Professional Ac-countants as Business Advisors Supporting MSME Development. Several views were presented regarding the positioning of professional account-ants as advisors to businesses, as well as in facilitating the development of micro-, small- and medium-sized enterprises (MSMEs). MSME strengthening and de-velopment offers a strong opportunity for job creation, economic development and prosperity for the peoples of MENA. As such, representatives from the World Bank, the International Federation of Ac-countants Small and Medium Practices (SMP) Committee, and the American In-stitute of Certified Public Accountants Private Companies Practice Section (PCPS) presented their views on the im-portant interrelationship between SMPs and MSMEs. Specifically, they discussed the work of international organizations and established PAOs, and provided in-sight into what is presently being done within the region to promote the devel-opment of SMP business advisors— as well as to position SMP development as a policy imperative for governments, PAOs and the private sector.

Cover Story 49

The Exchange in Pictures - CFR

In Their Own Words 50

Why Governance Matters

World Bank Group President Jim Yong Kim

Daylight Dialogue: The Good Govern-ance Challenge Manila, Tuesday, July 15, 2014 As Prepared for Delivery – An Excerpt “Like the Philippines, the World Bank Group explicitly recognizes that gov-ernance is critical for fighting poverty. Good governance means delivering public services effectively and effi-ciently. It means protecting citizens from violence and ensuring the rule of law. It means choosing wise policies and investments; maintaining public assets; and ensuring that civil servants are skilled, motivated and have the tools to work effectively. It means directly confronting corruption, so that citizens have faith in their leaders and systems. Today, good governance also requires fostering a transparent regulatory environment that will allow the pri-vate sector to create good jobs. In sum, good governance makes it possi-ble for us to execute and deliver around our most cherished social goals: those that define how we want to live together, as nations and as a global community. President Aquino, your 2010 Philippine Development Plan set forth two such goals: to attain inclusive growth, which you defined as the reduction of poverty; and to create jobs. In 2013 the World Bank Group also set two goals: to end ex-treme poverty worldwide by 2030; and to boost shared prosperity for the poorest 40 percent of the population in developing nations. The conver-gence between the Philippines’ goals and those set out by the World Bank’s Board of Governors is striking, and no accident. Countries like the Philip-pines and institutions like the World Bank are allies in the great struggle of our generation: a global fight to end poverty and build inclusive prosperity while safeguarding the Earth for those who will come after us.

At its heart, this is a fight for wiser, more capable governance. It is now well established with-in the academic literature on institutions and growth that there is a strong and positive cor-relation between the principles of good governance and a country’s GDP per capita. As you, President Aquino, have so eloquently noted, “good governance is good economics.” The precise caus-al relationships are less well under-stood, but some recent studies have begun to confirm what many of us have long suspected— that effective institutions (or their absence) have an important impact on economic growth. There is plenty of evidence that cor-ruption can deter private investment. And studies at the sectoral level have documented the perverse effect that corruption and weak administration can exert on education and health outcomes, or on the quality and selec-tion of infrastructure projects. Some recent studies from the United States underscore that high levels of corruption are associated with in-creased inequality, as well. We still have much to learn about the role of institutions in fostering development and reducing poverty. Knowledge about which reforms are most likely to succeed under specific circum-stances remains fragmented, and the underlying conceptual and methodo-logical challenges are significant. The World Bank Group is committed to supporting rigorous empirical ef-forts to address these critical ques-tions. We also believe the post-2015 Development Agenda should encour-age countries to tackle governance challenges head-on, measure results, and share their data to build a strong-er global knowledge base from which all will benefit.”

51

Maghreb

Morocco 52

Morocco’s Governance Reform Program: Strengthening Public Sector Performance and

Encouraging Citizen Engagement

Fabian SEIDERER Senior Public Sector Management Spe-cialist, GGP, MENA, The World Bank The government of Morocco launched a two-pronged governance reform program focused on the modernization of public financial management and open govern-ance to improve the allocative and opera-tional efficiency of scarce public resources and give its citizens a greater voice in the development process. The Governance Global Practice (GGP) Program in Morocco Hakama (Governance in Arabic) supports these efforts. It aims at maximizing the window of opportunity for transformational reforms offered by the Arab Spring and the subsequent Constitution adopted in 2011. The World Bank-supported First Transpar-ency and Accountability Development Poli-cy Loan series and technical assistance pro-gram support the concretization of govern-ance principles and rights introduced in the Constitution in response to citizen demand.

It focuses on an integrated package of re-forms to: (i) strengthen accountability and performance in the management of public resources and the delivery of public ser-vices, such as performance budgeting and procurement; and (ii) foster open govern-ance and a more participatory democracy through new policies on citizen access to information, and public petitions and par-ticipation, which are also in line with the Bank’s strategic priorities. Introducing performance -informed budg-eting is seen as a lever to improve fiscal transparency and accountability, and to foster public sector performance. Public expenditures are high in Morocco, around 32 percent of gross domestic product (GDP) in 2013, including 5.6 percent GDP of public investment. Yet, questions remain on ways to increase the return on investment, en-hance effectiveness of public services1, and increase transparency and accountability. Responding to these challenges, the gov-ernment has engaged a broad public finan-cial management reform aimed at improv-ing transparency (both on the resources used and on the performance achieved). The reforms also aim to increase manageri-al responsibility and accountability for re-sults along the service delivery chain. This agenda is based on three structural and mutually reinforcing reforms: • introducing programmatic and per-

formance-informed budgeting; • improving public procurement and

value for money, including through public-private partnerships (PPPs); and

• modernizing public financial controls toward more ex-post and risk-based

controls. These reforms are made possible by a first generation of public financial management (PFM) reforms, which have strengthened the basics. The reforms include the intro-duction of an integrated financial manage-ment system and an e-procurement sys-tem, a consolidation of ex-ante financial controls and a capacity assessment of all authorizing officers, as well as a compre-hensive accounting reform. The GGP program supports the design and implementation of these second genera-tion public financial management reforms through policy advice on the legal and regu-latory framework (organic budget law, pro-curement decree, PPP law, and financial controls), and institutional strengthening, as well as substantial capacity building. Results to date. A new organic budget law introducing a programmatic and perfor-mance oriented budget process has been submitted to the Parliament. Eight minis-tries2 are being supported in restructuring their budgets and in preparing their per-formance plans to be submitted to Parlia-ment with their 2015 budget proposals. The new public procurement decree is effective as of January 1, 2014, and its implementa-tion is being supported by the Bank through a comprehensive training of trainers pro-gram. A PPP law has been prepared and is pending approval by Parliament. In the meantime, the implementing regulations are being developed in partnership with the Islamic Development Bank.

Figure 1: Morocco’s Integrated GGP Program

Enhance Accountability and Performance in the Management of

Public Resources through:

Foster Open Governance through:

Supported by a Multidisciplinary Bank team with:

Performance budgeting

Procurement reform Public-Private Partnership Framework State-Owned Enterprise Governance

Local finance

Fiscal Transparency

Access to information (article 27) Public consultations (article 14)

Public petitions (article 15) E-Government services

An integrated Governance Global Practice

Team (former PREM-PS, PROC, FM and WBI)

Private Sector Development/ International Finance Corporation (IFC) Social Development -SDV

(social accountability) Information and Communications Sector

Unit (TWICT) Source: World Bank.

GGP in ACTION

53 More than 14 authorizing officers qualified for increased responsibility and lighter ex-ante financial controls, following a risk-based approach. A new focus on open and citizen-centered governance. The value of public engage-ment is its capacity to strengthen social cohe-sion, improve govern-ment-citizen interactions and the quality of devel-opment policies. When successful, participation can have a transformative impact by providing citi-zens with a platform for engagement in the de-velopment process, and an ability to hold gov-ernment to account. The 2011 Constitution introduced new rights on public engagement, in-cluding the right of citi-zens to petition public bodies, present legisla-tive motions to Parliament, and obtain access to public sector information— all of which are currently being concretized through a legal framework. To date, the Bank has supported the design and consul-tation process on a law regarding access to information, an organic law on public peti-tions and legislative motions, as well as a draft policy on public consultations and an e-consultation platform. These laws now need to be adopted and complemented by clear and simple procedures for their effec-tive implementation. Citizen demands for participation remain strong as evidenced in a recent (April 2014) World Bank Nano-Survey, 3 assessing citizen perceptions regarding access to information and public engagement in Mo-rocco. This Internet-based survey captured 15,000 responses, of which 71 percent de-manded greater access to public sector information, with 26 percent even willing to pay for it. Likewise, the majority of re-spondents (58 percent) wanted to be more engaged, even as much as once a week, for the 47 percent of those who replied posi-tively. The survey sheds light on expecta-tions regarding new rights introduced by the constitution. It illustrates the disparities in public awareness, as well as challenges to

accessing information and to engaging ef-fectively. The internet is the preferred mode of in-teraction with the government for many citizens, including for public services. The program is also supporting the govern-

ment’s e-government initiatives, such as Watiqa, through which more than 2,500 citizens could order their birth certificate online and receive it by registered mail. This would help to reduce transportation costs and the risk of corruption. This inter-ministerial collaborative platform can host many more online services to improve transparency and effectiveness in the deliv-ery of public services. The GGP’s governance program in Moroc-co follows an integrated and holistic ap-proach in order to maximize both internal and external synergies. It is integrated both in terms of the team and instruments used. This multi-disciplinary program is leveraging expertise from across the Bank and beyond to support Morocco's structural governance and service delivery reforms. The program is based on a multi-donor Development Policy Loan (DPL) series, with a first USD 200 million loan adopted by the World Bank Board on October 29, 2013. It has been prepared jointly with the European Union (EU) and the African Development Bank (AfDB), leveraging a further US$ 250 mil-lion. The DPL is complemented by a USD 4 million technical assistance grant financed by the Deauville Partnership’s Transition Fund, the MENA Multi-Donor Trust Fund, as well as 2 Institutional Development Fund

(IDF) grants to support the procurement reform. It is holistic in the sense that it sup-ports governance reforms across the public sector (central and local governments, as well as state-owned enterprises and agen-cies), and along the service delivery chain. It therefore offers important opportunities to

strengthen the link between upstream cross-cutting govern-ance reforms and sec-tor-specific service delivery challenges down-stream. This is the thrust of the Bank’s Governance and Public Sector Management Strategy as well as the new Country Partner-ship Strategy (2014-2017) which support governance for im-proved service delivery and shared prosperity. GGP opportunities ahead. Such a com-prehensive governance

program could only come to fruition thanks to an integrated GGP team in the country office and a close collaboration with the Macro and Fiscal Management and the Trade and Competitiveness Global Practic-es, which are part of the DPL team. The official launch of the GGP on July 1st, 2014 offers the opportunity to consolidate and formalize this informal country office GGP team and its integrated services to the cli-ent and other sectors/ GPs. The growing pipeline of Program for Results is generat-ing a strong demand for integrated govern-ance and fiduciary assessments. Demand has also increased for implementation sup-port from other GPs in order to achieve the new instrument’s institutional strengthen-ing objectives and more sustainable results. Addressing this growing demand will re-quire a deeper, country-level integration for an optimal allocation of scarce human and financial resources. 1 As evidenced in the landmark report on public sector govern-ance by the Conseil Economic, Social et Environmental. 2 Ministries supported as of June 2014 include the: Departments of Economy and Finance, Agriculture, Education, Water and Forestry, Transport and Equipment, Justice, Foreign Affairs, and Vocational Training. . 3 The Nano-Survey is not representative of the entire population in Morocco. It is a random sample of internet users, targeting the web traffic of users who enter faulty URLs. The benefit of such an approach is that it ensures an entirely random sample of online participants. Nonetheless, the survey is limited only to online users, and does not represent a comprehensive sample group.

GGP in ACTION

Tunisia 54

Entrevue

Nabil ABDELLATIF President de l’Ordre des Experts Comptables de Tunisie (OECT) L’Ordre des Experts Comptables de Tunisie (OECT) est un organisme professionnel créé en 1983 doté de la personnalité civile groupant les professionnels habilités à ex-ercer la profession d’expert-comptable. Au 31 décembre 2013, l’ordre compte 1120 experts comptables dont 12% femmes. L’Ordre a pour mission: • Assurer le fonctionnement normal de

la profession d’expert-comptable, • Faire respecter les règles et obligations

de la profession • Défendre l’honneur et l’indépendance

de la profession

CVEMA: Le rôle de l’OECT dans la Tunisie de post révolution ? NA: L’OECT est un vecteur d'orientation vers la bonne gestion et gouvernance, sur-tout, après le 14 Janvier le jour ou l’ancien président a quitté le pays, puisqu’il com-mence à avoir une certaine liberté permet-tant à toucher à tout ce qui est sujet à la lutte contre la corruption, les malversa-

tions, blanchiment d’argent etc. L’OECT est aussi un bailleur de confiance, aussi bien pour le volet fiscal, obligation légale, obliga-tion de déclaration et de contribution dans le budget de l’Etat et les actions communes. La profession d’expert-comptable donne une bonne note à l'économie tunisienne puisqu’elle contribue dans la fiabilisation des données et des états financiers, ainsi ça facilite les transactions entre ces rôles in-ternes c'est à dire les intervenants locaux et surtout avec les échanges internationaux. CVEMA: Les réussites de l’OECT : NA: Les réussites sont multiples, elles vont de l’adoption d’un nouveau system comptable inspirée des normes interna-tionales et jusqu’à la formation des profes-sionnels selon des standards interna-tionaux. Pour l OECT, notre priorité c’est d’être présent comme un partenaire sérieux, apolitique, neutre, et objectif. On a réussi à appliquer une bonne culture comptable. Cela remonte à 1996, par l’adoption d’un nouveau système compta-ble qui s’inspire de ce qui se fait au niveau des normes e pratiques internationales. Du côté de la formation académique, nous avons réussi à former nos étudiants dans les Normes Internationales d’information financière (IFRS) et selon des standards internationaux. L’OECT a ainsi contribué aux membres de la profession à améliorer le niveau d’expertise dont ils ont besoin pour s’acquitter de leurs responsabilités profes-sionnelles. On a pu faire comprendre les entreprises Tunisiennes l’utilité et l’importance du contrôle indépendant ex-terne. Peu à peu, on contribue a changer l’image purement comptable de l’auditeur qui est devenu plutôt un contrôleur préven-tif, conseiller, un partenaire, ou même un acteur incontournable dans la création d’un bon climat des affaires. Nous avons réussi à édifier une instance d’assurance qualité et de discipline totalement indépendante qui veille à assurer un service de qualité des experts comptables. CVEMA: Les défis de l’OECT : NA: Parmi les défis les plus importants c’est tendre vers plus de spécialisation dans le domaine d’expertise. Il serait bien judicieux d’avoir des comptables bien classifiés pas domaine d’expertise et ce qui représente un défi essentiellement scientifique. Il est aussi important de souligner la nécessité de promouvoir la formation continue de nos membres afin d’assurer un niveau élevé en matière technique et en matière de déon-

tologie et étique. Maintenant l’ordre se focalise à renforcer les cabinets et les aider à avoir des structures plus importantes, multidisciplinaires, ayant la possibilité justement d’assurer les deux premiers rôles dans la quête d’excellence et de la for-mation ce qui est en effet un autre défi auquel l’OECT fait face. Il s’agit d’aider aux cabines à développer des prestations à plus forte valeur ajoutée. On aimerait bien don-ner au climat des affaires une certaine ori-entation vers la bonne gouvernance, vers la transparence, vers les vecteurs et les val-eurs actuellement fortement recommandés par les institutions internationales. Tout ça dans le cadre de laisser libre la bonne initia-tive, le développement du commerce et du l’environnement des affaires en général. L’autre défi qui attend l’OECT est de venir en l’aide à l’état dans la mise en œuvre de la décentralisation. En effet, la nouvelle Constitution Tunisienne a institué le princi-pe de décentralisation sans prévoir un mécanisme concret entre le niveau central et les nouvelles instances décentralisées. Donc on essaye à ce niveau d’apporter quelques réponses. Ainsi, pour l’exercice 2015/ 2016 parmi nos priorités c’est de contribuer justement à assister les pouvoirs à mettre en place un système fluide et co-herent. CVEMA: Quelles solutions vous préconisez pour les difficultés auxquels la profession comptable fait face ? NA: Une des solutions est de réussir à avoir une meilleure coordination entre les diffé-rentes autorités de régulation et contrôle telle que la Banque Centrale, l’autorité des microfinances, le marché financier, le CGA pour l’assurance, etc. Nous avons essayé d’aller vers un conseil national de contrôle, d’audit afin de coordonner tous les efforts, mais ça prend du temps. Par contre nous avons un comité de partenariat et de liaison avec la Banque Centrale et même avec le Conseil du Marche Financier (CMF), qui nous permet de donner notre avis et con-seil. Nous essayons de coordonner nos ef-forts et jusque-là c’est efficace. Toutefois, bien que la coordination existe, elle n’est pas encore bien formalisée. La profession comptable devrait jouer un rôle plus actif et jouer le rôle du lien entre le gouvernement, la société civile et le secteur privé et devrait y aller vers la vulgarisation de la culture comptable fiscale et du contrôle dans cette nouvelle Tunisie qui se veut transparente

In The News 55

Strengthening Local Governments in Tunisia as a First Step toward Decentralization

Tunisia is one of the most highly urban-ized countries in the Middle East and North Africa. Roughly 70% of the coun-try’s 11 million citizens live in towns and cities. Tunisia’s urban sector is the most vibrant part of the national economy and accounts for more than 85 % of Gross Domestic Product. Yet under the highly centralized decision making of the previ-ous regime, municipalities played a rela-tively minor role in local development. Their share of total public spending has only amounted to 4%. By law, municipalities have had limited func-tional responsibilities. In the aftermath of the “2011 Revolution”, Tunisia’s interim political authorities have had to seriously rethink the role of the state and the high level of centralization, and reevaluate the importance of municipalities in urban development. The new constitution, adopted earlier this year, has clear commit-ments to decentralization. The document outlines a vision of fully devolved and empowered local governments with autonomy for executing their mandates of providing local services according to transparent principles of participation by, and accountability to, their citizens. The Interim Government has also signaled its intent to place municipalities at the heart of the urban development pro-cess – by making them more active players in the planning, imple-mentation and delivery of municipal infrastructure and services. There is now widespread recognition that elected municipal coun-cils and mayors must be more than “passive spectators” in urban development and must become more transparent and accountable to local citizens. Finally, key central government departments (such as Caisse des Prets et de Soutien aux Collectivites Locales (CPSCL) and Direction Generale des Collectivites Publiques Locales (DGCPL)) recognize the need to reform and reorganize the way in which sup-port is provided to local governments.

The government has launched a five-year municipal investment plan to strengthen local governments and address the needs of disadvantaged areas. A central focus of this US$770 million plan is to reform the management of, and responsibility for, the public funds destined for municipalities. In line with the national priority

of redistributing decision-making from the central government to local gov-ernments, the aim is to put municipali-ties in charge of their budgets, and give local citizens a say in how the funds are spent. The World Bank has launched the Urban Development and Local Governance Program in support of the efforts of the Interim Government. “For decentraliza-tion to work, local governments need to

be empowered, capable and accountable,” said Jaafar Sadok Friaa, World Bank Lead Urban Specialist and the leader of team that de-veloped the program and will oversee its implementation. “Our focus will be on building up the financial and managerial capacities of municipalities, so that they are ready to assume full responsibil-ity over their resources, and establishing mechanisms for citizens to fulfill their vital role in decision making and oversight to improve the performance of local governments,” he added. The program is designed to benefit all of Tunisia’s 264 municipali-ties and their 7 million inhabitants by: •improving the system by which funds are transferred from the central government and launching demand-driven institutional and capacity development activities, to strengthen the delivery of mu-nicipal infrastructure and services and bring them in line with citi-zens’ priorities; •implementing initiatives to build knowledge and capacity of mu-nicipal council members and municipal staff on participatory gov-ernance initiatives which will underpin broader efforts to improve municipal performance and build new social contracts between citizens and local government; •increasing the participation of local communities including, im-portantly, women and youth, in planning development activities managed by the municipality at the local level to ensure all groups’ needs are addressed, further fostering citizens’ engagement and contributing to long term sustainability. Special consideration has also been given to the 500,000 Tunisians living in disadvantaged areas, especially in regions with fewer eco-nomic opportunities and a slower rate of development than the rest of the country. The program has identified 229 disadvantaged neighborhoods that will benefit from: •improved local service delivery by providing municipalities with the resources to finance the upgrading of informal and disadvan-taged neighborhoods; •direct involvement of the population in setting investment priori-ties, with, for example, new public lighting and sidewalks in re-sponse to demands articulated by women in disadvantaged neigh-borhoods; •temporary employment opportunities generated by the activities funded by the project, which will be targeted specifically at the neighborhoods’’ large number of unemployed young people.

GGP in ACTION

Morocco 56

Public Procurement Reform Prepared by: Rachel Lipson, Salim Beno-uniche, Abdoulaye Keita, and Khadija Faridi from the Governance Global Practice. MENA, The World Bank Over the last decade, Morocco has made important strides in responding to citizen demands for more transparency, accounta-bility, and shared prosperity. This has also extended into the public sector and its var-ied functions. In Morocco public contracts account for some 17 percent of GDP and are responsible for critical activities in the economy, including delivery of key public services.[2] Given its important role, the government of Morocco prioritized public procurement for comprehensive reforms. Starting with the 2003 Country Procure-ment Assessment Report (CPAR), Morocco embarked on a productive dialogue with the World Bank to improve its procurement system and optimize the performance of its public investments. This has involved a multi-faceted set of reforms: • Legal Reforms: There is a new Constitu-

tion with a mandate on anti-corruption and on ensuring good governance in the public sector. A new public procurement decree, incorporating international best practice has been enacted and a second decree was slotted for March 2014.

• Reforming the Institutional Framework: The creation of a central public procure-ment policymaking body, uniting authori-ty from diffuse procurement bodies.

• Capacity Building: Establishing a national procurement training strategy under the Secretary General of the Government (SGG) and the General Treasury of the Kingdom of Morocco (TGR).

• Modernization of Tools: A new national e-Procurement system to simplify proce-dures and enhance access to procure-ment information.

(image: 125 Moroccan Procurement Train-ees received training from November 2013 to January 2014, supported by a World Bank IDF grant.) Country Context Procurement reforms in Morocco can only be fully understood in the context of politi-cal and social reforms over the past decade. While Morocco has a history of productive dialogue with the World Bank on public procurement, the events of 2011 brought good governance, anti-corruption, and PFM reforms to the forefront. With the wave of

change sweeping the MENA region, Moroc-co was increasingly aware and keen to re-spond to demands for more transparency and accountability, including in public spending. A good illustration of this trend was the strong push for expanding ac-countability on taxpayer funds. Morocco’s July 2011 constitution included some 18 articles on transparency, ethics, integrity, accountability, and, as a first, clauses on fighting corruption. Morocco also became the first Arab country to intro-duce a constitutional provision guarantee-ing a right to information. In this context, the government initiated steps to enhance transparency and accountability in the pro-curement process, including the solicitation of public comments on related laws or regulations. With more information about public contracts available, including amounts and selected bidders, the goal was to expand the oversight role of beneficiar-ies and civil society, and to strengthen ac-countability. Legal Reforms Even before the Arab Spring and the new constitution, the government was engaged in legal changes to bring its public procure-ment framework to international stand-ards. In 2008, with World Bank support, a new CPAR was carried out to update the 2005 edition. A Use of Country System (UCS) assessment [3] followed, and identi-fied key gaps in the national procurement system, including: • The lack of a credible, independent, and

operational complaints handling system.

• The exclusion of certain types of con-tracts [4] from the main regulations gov-erning public procurement.

• The inapplicability of public procurement decrees over decentralized entities.

• The lack of a national framework and capacity building strategy for public and private stakeholders.

In response, two major decrees on public procurement were drafted and published for consultation in 2013. The first decree became effective on January 1, 2014, and the second decree was expected to be en-acted in March 2014. Among other new elements, they provide the legal basis for the unification of the regulatory frame-work, now also applying to administrative State-Owned Enterprises (SOEs) and all levels of local government. They also intro-duced electronic procurement, opened architect contracts to competition, and mandated that 20 percent of public con-tracts be allocated to SMEs. Institutional Reforms Procurement in Morocco is a complex task given the government’s institutional setup. Historically, TGR has been the World Bank’s traditional counterpart on procurement reform. However, the second decree will create a new policy, complaints handling, and training body called the “Commission Nationale de la Commande Publique” (CNCP). It is hosted in the Secretary General of Government (SGG) for more independ-ence from line ministries and large public buyers.

GGP in ACTION

57 With this new mandate, the SGG, a key institution in the government, takes on an expanded role in procurement policy, re-form, and oversight. As noted, past assess-ments have identified the system of com-plaints handling as a key reform area. Alt-hough 17 percent of GDP is spent through public procurement, no more than 25 offi-cial complaints are filed each year. When a company had a grievance about a contract and suspected wrongdoing, the only option for redress was to file a complaint directly with the procuring entity that had awarded the contract. Many bidders feared retalia-tion, retribution, or damage to their ability to compete for future tenders. Thus, a key objective behind the reform of the pro-curement regulatory body was to create a new independent and objective body with the authority to handle grievances. Starting in 2011, the SGG started to gather the re-sources and skills to implement this ex-panded oversight function, including via a World Bank-financed US$400,000 Institu-tional Development Fund (IDF) grant. As an autonomous body, the CNCP will have its own budget, dedicated staff, and appropri-ate authority. Enhancing CNCP capacity, including in policy making, is an iterative process. There is more to be done to enable it to fully carry out its new responsibilities, and strengthening stakeholder capacity will be critical. Capacity Building The Moroccan government recognized it needed a targeted and comprehensive ef-fort to strengthen procurement skills within the civil service and stakeholders in the judiciary, administrative, and private sec-tors. Toward this end, a national public procurement capacity building strategy was finalized in December 2012, with imple-mentation beginning in 2013. In the short-term, it endorses the training of trainers focusing on government officials responsi-ble for procurement. With the support of the World Bank’s IDF grant, 125 trainers were trained in Morocco from November 2013 to January 2014. In the medium-term, the strategy highlighted the need for a regulatory authority to be responsible for overseeing the design and delivery of the training programs at all levels (the CNCP). With the new trainers, the government expects some 6,000 practitioners in gov-ernment ministries, external services, local governments, controls and other institu-tions will be trained. These will include face-to-face courses, e-learning, mentor-ing/coaching, and sessions in cooperation with international institutions. Capacity building efforts were also supported by the Deauville Partnership, a multi-partner initi-

ative launched by the G8 to support Arab countries engaged in democratic transi-tions. This additional $250,000 will help to fund more training of procurement trainers and local governments via the Ministry of the Interior. They will also support efforts of the National Agency for the Promotion of SMEs (ANPME), with TGR collaboration, to train SMEs on public procurement opportu-nities, especially via the new e-system.

Modernization of Tools Morocco has been a leader in the MENA region in modern e-Procurement systems designed to increase the efficiency of public expenditures. Morocco’s home-grown sys-tem, now many years in the making, is viewed by its champions as one of the key components of the country’s commitment to promote transparency and fight corrup-tion. It also represents a significant tool to simplify the process of tendering, lowering barriers to entry and encouraging competi-tion. With the support of two other IDF grants, the government has developed a procurement web portal with a compre-hensive information and dissemination system for public buyers and the private sector. The benefits of Morocco’s e-Procurement advances are tangible and far-reaching: tenders can now be published online in less than two minutes, a compre-hensive database of government suppliers and contractors is available on site, and important procurement information is available in real time. And with upcoming features like bulk electronic purchasing, reverse auction and expansion of e-tendering to be piloted in the coming months, Moroccan e-Procurement is poised to take off. The system will be able to great-ly improve its efficiency by dramatically reducing the time required to complete the bidding process, helping to conserve valua-ble government resources. As a user-friendly tool, the e-portal reduces costs not just for the government, but also for firms

wishing to enter the public market. Rather than having to resubmit the same docu-ments, the system can store a firm’s admin-istrative authorizations and other required information. E-Procurement is also ex-pected to help small businesses by leveling the playing field and closing the information access gap between large and small firms. By bringing more private sector players into the system and increasing competition, e-Procurement in Morocco is expected to lower prices by approximately 8 percent, according to government esti-mates.[5] Success Factors Morocco has been a trailblazer in MENA on procurement. It has consistently shown that it is one of the more advanced and deter-mined countries in improving its regula-tions. However, Morocco has benefited from a number of factors that have made reform more palatable than elsewhere. The government has demonstrated high-level support for and commitment to the pro-curement reforms. The Ministers of Econ-omy and Finance, General Affairs and Gov-ernance (MAGG), the SGG, and the TGR Director General have all been strong re-form proponents and have helped push many legal changes. Without making pro-curement a priority, these efforts could have stalled for years when faced with con-flicting interests. Morocco also has the ad-vantage of strong institutions that have the authority and the resources to lead re-forms. For example, the TGR’s centralized model and strong network of practition-ers/controllers has enabled the effective dissemination of new information and training about laws within their department and beyond. The Inspector-General of Fi-nance (IGF) auditing body is another high-capacity institution that can help in imple-mentation. Given the quality, coverage, and frequency of the agency’s audits, [6] the World Bank is working with them to launch a FY15 pilot program to coordinate on the Post- Procurement Review of Bank-financed projects. Finally, the government has been aided in all of these efforts by its close col-laboration with the World Bank. From the inclusion of procurement in the dialogue over Bank-financed Development Policy Loans (DPLs), to constant technical consul-tation on various reform aspects (legal, institutional, implementation, enforce-ment), to the provision of resources to sup-port capacity building efforts (including four IDF grants), the World Bank and Morocco have partnered diligently to improve public procurement in the country.

GGP in ACTION

58 Conclusion Morocco still faces challenges in improving its public procurement system. For in-stance, significant payment delays are common for contractors, in particular hurt-ing SMEs, and inhibiting their ability to en-ter or remain in the public market. The decree could be amended to cover most (not just administrative) SOEs.[7] Practices in the field can be improved to better align with international standards. In addition, the complaints handling system needs con-tinued improvements, and the extension of the new regulations to local governments will require sustained capacity building efforts. In all of these areas, Morocco has en-douvered to ensure that the pace of the implementation of the reforms matches the breadth of their impact. In the background,

corruption still remains a harmful factor in the field. The key challenge for the future will be transferring the intentions behind the new laws and initiatives into actual change in practices and behaviors on the ground. Here as well, the World Bank is working side-by-side with the government of Mo-rocco to create a realistic strategy for pro-gress. As part of a new and innovative re-gional study “Enabling Implementation of Public Procurement Reforms,” funded by the Bank’s Governance and Anti-Corruption (GAC) Fund, the government is developing a reform implementation strategy to address the specific factors affecting the progress of the reforms, and identifying entry points, type, and sequence of subsequent interven-tions. By moving beyond the traditional technical analysis of public procurement

reforms, and assessing the broader envi-ronment for change and implementation, the government of Morocco stands poised to take the next steps to improve its system and enhance results for its citizens. ________________________________ [1] The authors work in the Procurement unit of the World Bank’s Middle East and North Africa Region (MNAPC). This Quick Note was prepared under the general direction of, and cleared by, Yolanda Tayler, Manager, MNAPC.[2] This includes 70 percent of all of the work performed by Moroccan construction firms, and 80 percent of the work performed by Moroccan engineering firms. Source: http://www.oecd.org/countries/morocco/44172038.pdf [3] The UCS assessment is now known as the Methodology for Assessing Procurement Systems (MAPS) self-assessment. [4] Specifically, (i) contracts entered by public and state-owned corporations/enterprises, (ii) service provisions by architects (excluding those from a competitive process) and (iii) concessions. [5] Source: TGR. [6] The World Bank’s assessments and analysis of the IGF’s audits found that they cover all provinces, and for every year. [7] There may be some commercial exceptions like the National Airlines Company, for example, which may have to stick to the private sector practices of their competitors.

In The News

Consultation Draft for Updating the PEFA Indicators August 7, 2014 The Public Expenditure and Financial Accountability (PEFA) Program, launched in 2001, has created a credible and comprehensive framework for assessing PFM functionality, which has been applied in a large number of countries since 2005—countries with different income levels, different administrative heritages, and in different geographical re-gions. The PEFA Framework continues to be relevant and applicable in a wide range of contexts; however, after 9 years with only limited changes, it is time to update it. The PEFA Partners have no intention of changing the purpose of the Framework; rather, the update is intended to reflect the various developments in the PFM landscape over the past decade, strengthen several areas of acknowledged weakness, and extend coverage to new areas such as fiscal strategy, use of performance information, public invest-ment, and public asset management. Thus the update aims to enhance the relevance of the PEFA indicators while pre-serving their comparability over time, to the extent possi-ble. The Partners expect that a PFM systems assessment undertaken on the basis of the updated PEFA Framework will provide an improved basis for monitoring PFM perfor-mance and for discussing and designing reform priorities for the future—and thus enhance its usefulness for gov-ernments and other users.

Over the life of the Framework, PFM experts have offered numerous suggestions to modify various indicators. The Partners now seek to exploit this expertise by requesting feedback on the draft update from any interested party: government PFM specialists and reform managers, PFM/PEFA practitioners, regional networks and technical assistance providers, entities that are developing and main-taining assessment tools, PFM standards setters, think tanks, and academia. The PEFA Partners are pleased to pre-sent the draft updated PEFA indicator set for public consul-tation, along with a note that uses a question-and-answer format to describe the background of and process for the update. To provide feedback—a crucial element in finaliz-ing this important work—please complete the short ques-tionnaire (available at www.pefa.org) and/or provide more general comments and suggestions, by October 31, 2014. The Partners are grateful for your participation. Following the consultation period, the draft Framework will be modi-fied as necessary to reflect the comments and to ensure that it remains applicable across a wide range of country contexts and administrative heritages. The updated PEFA Framework is expected to be released in 2015.

(Source: The PEFA website (edited))

GGP in ACTION

Libya 59

Public Financial Management in Libya: A Gradual Approach to Reform and Relationship-building

Michael Schaeffer, Senior Public Sector Specialist and Wesal Ashur, Public Sector Specialist, Governance Global Practice / MENA, The World Bank Libya recently submitted its national budget for 2014, with a total envelope of LYD 56 billion (US$47 billion) to the Central Bank of Libya (CBL). There are 30 articles that currently frame the budget law (Law No 13, 2014). The CBL submitted the law to its legal department for opinion. With the FY2014 deficit approaching approximately 80 percent of gross domestic product (GDP), the CBL would like to assess how a deficit of such significant levels could legally be financed before giving its approval for the budget to be implemented. This could mean a delay by an additional two weeks (until July 31, 2014). Quite simply, this means that the government of Libya has been effectively operating for the majority of FY2014 without a legally appropriated budget and policy document. Fragile, conflict-affected countries such as Libya are a true test in the exercise of pa-tience. The World Bank public financial and governance programs, with the assistance of the Department for International Devel-opment (DFID) (UK), worked rapidly over the past year to introduce a revised budget coding structure and a modest double-entry financial management information system at the Ministry of Finance (MoF). However, the uncertainty brought on by a frail na-

tional government structure, weak adminis-trative authority, and an under-skilled and unmotivated civil service has limited the potential of achieving viable public sector accountability reforms in Libya in the near-term. The notion that Libya is a fragile, conflict-affected state in chaos is far too simplistic. The United States, itself, was more a fragile hope than a reality in 1790. During the decade that followed the U.S. revolution, the ideals of the Declaration of Independ-ence were combined with the content of the Constitution to create the practical workings of a government structure. How-ever, even the workings of a practical ad-ministrative structure took many years to evolve. This appears to be the case in Libya today.

At present, the reform of the public finan-cial management legal framework cannot be an essential starting point for public financial management (PFM) rebuilding. International experience with fragile, con-flict-affected states indicates that legal reforms— specifically the adoption of new organic budget legislation— generally occur three-to-four years after the initial political changes have taken place. Further, they take a minimum of two years to introduce. Existing Libyan laws and interim decrees often suffice as a temporary basis for cur-rent PFM rebuilding. In the case of fairly fluid fragile, conflict-affected states such as

Libya, the existing legal infrastructure com-bined with interim decrees creates a sense of public financial paralysis. Basic public financial management reforms can be very challenging in the current Lib-yan context. Weaknesses in procurement and auditing are often at the heart of why it is so difficult to overcome fiduciary con-cerns. Strengthening public procurement is a basic reform in the sense that it is focused on compliance rather than performance. However, because of rent-seeking behavior vis-a-vis public investments, current Libyan procurement reform efforts remain largely ineffective. The impact of current public financial management reform efforts to promote state building has also been limited. Con-textual factors such as limited domestic revenue and a difficult security environ-ment mean that PFM reforms alone cannot be expected to be the cornerstone of a fully functioning, accountable public administra-tion. With the basic introduction of a mod-est financial management system and budget accountancy structure, PFM reforms have made important initial contributions toward improving the fiduciary environ-ment through a strong focus on budget execution. However, substantial challenges remain.

This article was written on July 8, 2014

GGP in ACTION

Maroc 60

Entrevue

Mr. Driss JETTOU Premier Président de la Cour des Comptes, Royaume du Maroc

Entrevue conduit par Laila Moudden, Fi-nancial Management Analyst

CVMENA: Pouvez-vous rapidement décrire votre parcours ? DJ: Je tiens tout d’abord à remercier l’équipe de la Banque Mondiale de l’intérêt qu’elle accorde à notre institution. En fait, l’initiative prise par la BM de réserver une publication aux thématiques de gou-vernance financière dans la région MENA, est une initiative louable dans la mesure où elle permet de faire état des diverses expé-riences internationales dans ce domaine et de souligner les progrès significatifs en matière de réforme des finances publiques menés par certains pays, contribuant en cela à faire connaître les meilleures pra-tiques de gouvernance des finances publiques. Concernant mon parcours je tiens à souligner que j’ai suivi des études secondaires scientifiques avant de rejoindre la faculté des sciences de Rabat d'où j’ai eu mon diplôme des études supérieures en sciences physiques et chimie en 1966. Après quoi, j’ai suivi des études de gestion d'entreprise à Cordwainers College (Lon-dres) d’où j’ai obtenu un diplôme de man-agement et de gestion d'entreprise en 1968. Durant la période 1968 à 1993, j’ai côtoyé les problématiques liées à l’entreprise marocaine et son envi-

ronnement que ce soit en ma qualité de président-administrateur ou gérant de plusieurs sociétés ou président de la Fédération marocaine des industries du cuir (FEDIC) ou membre du bureau de la Confédération générale des entreprises du Maroc (CGEM) et vice-président de l'associ-ation marocaine des exportateurs (ASMEX). Mais c’est sans doute mon expérience gou-vernementale qui m’a permis d’appréhender de façon profonde les prob-lématiques liées à la gestion publique et ce dans un contexte de transition économique et sociétal que le Maroc a connue à partir de la décennie 90. C’est ainsi que j’ai exercé les fonctions du ministre du Commerce et de l'Industrie de 1993 jusqu’au mars 1998 dans les gouvernements successifs présidés par Mr Mohammed Karim Lamrani et Feu Abdellatif Filali. Le 13 août 1997, j’ai été nommé ministre des Finances, du Com-merce, de l'Industrie et de l'Artisanat, mis-sion que j’ai exercée jusqu'au 14 mars 1998 avant d’occuper le poste de ministre de l'Intérieur de 2001 à 2002. De septembre 2002 à octobre 2007, j’ai été nommé par Sa Majesté le Roi Mohammed VI Premier Min-istre du Gouvernement, cette période a coïncidé avec le lancement, sous l’égide de Sa Majesté le Roi, de grands chantiers de réformes qui ont couvert l’ensemble du champ économique et social en vue de répondre aux défis socio-économiques, engager une dynamique de progrès pour un développement durable permettant de faire accéder le pays au statut d’une écon-omie émergente. Au cours de cette période j’ai été honoré de nombreuses décorations. En 2008, j’ai été décoré du grand cordon du Wissam Al Arch par SM le Roi Mohammed VI. Enfin et, comme vous le savez, le 9 aout 2012 j’ai été nommé par sa Majesté le Roi Mohammed VI Premier Président de la Cour des Comptes et ce dans le sillage des grandes réformes institutionnelles que le Maroc a connues avec l’avènement de la nouvelle constitution de 2011. CVMENA: Pouvez-vous nous présenter la Cour des comptes marocaine, son posi-tionnement institutionnel, son rôle ? DJ: En vertu de la Constitution, la Cour des comptes (CC) se présente comme étant l’institution supérieure de contrôle des finances publiques du Royaume indépen-dante du Parlement et du Gouvernement. En effet à l’instar des pays avancés, la con-stitution marocaine, dés 1996, a érigé la CC au rang d’une institution constitutionnelle, ce statut a été renforcé par la nouvelle constitution de 2011. De même, le lé-gislateur a entouré la CC de toutes les gar-

anties d’indépendance qui lui permettent l’exercice de ses missions avec responsabil-ité, transparence et probité. D’abord le statut de la CC comme étant institution constitutionnelle est de nature à mettre la Cour à l’abri de toute pression ou partialité. Elle tient aussi son indépendance du statut de ses membres qui sont des magistrats inamovibles avec des garanties statutaires sur lesquelles veille un conseil élu celui de la magistrature des juridictions financières. Ensuite, et en sus des missions que la CC est tenue d’exercer de plein droit en matière de contrôle des finances publiques, elle jouit d’une liberté de programmation de ses opérations de contrôle. A ce titre, elle fixe ses priorités dans l’accomplissement de ses missions et choisit ses thèmes de contrôle en fonction de critères de sélection objec-tifs. Elle jouit également d’une certaine autonomie financière notamment en matière d’exécution de son budget. La CC contribue à l’amélioration de la gestion publique. A cet effet, elle fait parvenir aux deux chambres du parlement, aux gestion-naires et aux entités contrôlées, des infor-mations utiles et fiables, résultant d’un examen contradictoire et formulées sous la forme de constatations, d’observations et de recommandations. Ainsi, la Cour cherche à attirer l’attention des décideurs publics sur des situations de mauvaise gestion, d’irrégularités, et d’incohérence avec les objectifs fixés ainsi que les cas d’acquisitions et de prestations effectuées à des coûts déraisonnables. Au plan de la démarche, la CC exerce des contrôles carac-térisés par leur étendue, leur exhaustivité et leur vision intégrée. D’abord, le champ de contrôle des juridictions financières est étendu et inclut tous les acteurs publics : État, établissements et entreprises publics, collectivités territoriales et associations bénéficiant des fonds publics ainsi que les partis politiques. Ensuite, ces contrôles portent sur l’ensemble des intervenants dans la chaine de la dépense comme de la recette publique à savoir les ordonnateurs, les comptables et les contrôleurs. Enfin, ces contrôles s’agissant d’une même entité contrôlée couvrent la vérification et le jugement des comptes, la discipline budgétaire et financière et le contrôle de la gestion. En terme d’approche, ces contrôles tout en veillant sur le respect de la régular-ité et de la conformité, privilégient l’appréciation des résultats atteints en terme d’efficacité, d’économie, d’efficience, d’environnement et d’éthique.

61 En outre, la CC exerce d’autres missions telles que le contrôle et le suivi des déclara-tions obligatoires de patrimoine, l’audit des comptes des partis politiques et la vérifica-tion de la régularité́ des dépenses des opé-rations électorales. Par ailleurs, les missions dévolues à la CC, en vertu de la constitu-tion, ne se limitent pas aux attributions de contrôle. Elles revêtent également un ca-ractère de consultation et d’assistance. A ce titre, la Cour assiste le Parlement et répond aux questions et consultations liées aux fonctions de législation, de contrôle et d’évaluation dans le domaine des finances publiques. De même, elle apporte son assis-tance aux instances judiciaires et au gou-vernement dans les domaines qui relèvent de ses compétences en vertu de la loi. CVMENA: Est-ce que vous pensez que la nouvelle constitution a apporté des nou-veautés par rapport à ce dispositif ? DJ: Incontestablement, la Constitution de 2011 a conféré une place de choix aux prin-cipes et valeurs de la bonne gouvernance, ainsi qu’aux institutions qui en ont la charge. Ainsi, le titre XII a énoncé les princi-pes généraux de la bonne gouvernance qui doivent guider l’ensemble des acteurs pub-lics. La Cour des Comptes en sa qualité d’institution supérieure de contrôle des finances publiques doit veiller à leur re-spect. Parallèlement, un titre spécifique (titre X) a été réservé à la CC des comptes et a apporté les innovations suivantes : • Élargissement de l’étendue des compé-

tences de la Cour des Comptes ; • Possibilité d’apporter l’assistance, en sus

des pouvoirs législatif et exécutif, au pouvoir judiciaire ;

• La constitutionnalisation du contrôle et du suivi des déclarations du patrimoine, de l’audit des comptes des partis poli-tiques et la vérification de la régularité des dépenses des opérations électorales ;

• Publication de l’ensemble de ses travaux y compris les rapports particuliers et les décisions juridictionnelles ;

• Présentation à Sa Majesté le Roi d’un rapport annuel sur l’ensemble de ses ac-tivités, qu’elle transmet également au Chef du Gouvernement et aux Présidents des deux Chambres du Parlement ;

• Présentation d’un exposé des activités de la Cour par le Premier président devant le Parlement, suivi d’un débat.

Ainsi, la Cour a vocation à contrôler et con-seiller le Gouvernement, à assister le Par-lement et à apporter son appui à l’autorité judiciaire. CVMENA: Depuis que vous êtes président

de la Cour des comptes, quels ont été vos principaux défis, les principales difficultés mais aussi vos réussites ? DJ: De mon point de vue, le plus grand défi que doit relever la Cour est d’en faire une institution de contrôle de référence, garante de la bonne gouvernance, produi-sant des travaux de qualité, à haute valeur ajoutée en termes de pertinence de ses interventions et de ses recommandations. De même la Cour doit rester constamment ouverte sur son environnement interne et externe, en harmonie avec les meilleures pratiques internationales d’audit public. En effet, la nouvelle constitution a désigné la Cour comme le garant de la protection des principes et valeurs de la bonne gou-vernance et de la transparence dans la ges-tion des deniers publics. De ce fait, la Cour est invitée, plus que par le passé, en raison des attentes des citoyens en matière de moralisation de la vie publique, à exercer un rôle accru, à travers les différentes at-tributions qui lui sont dévolues, dans la mise en œuvre de la bonne gouvernance via le respect des principes de transpar-ence, de responsabilité et de reddition des comptes. De même, la Cour, sur la base de ses interventions thématiques qu’elles a initiées et portant sur des sujets de nature transversale, entend participer davantage aux réformes des politiques publiques par la préconisation de mesures permettant d’en améliorer l’efficacité. Compte tenu du processus cumulatif découlant des travaux de la Cour et de la nature ses recommanda-tions, on peut considérer que la Cour des Comptes a fait progresser la protection des principes et valeurs de la bonne gou-vernance et de la transparence dans la ges-tion des deniers publics. A ce titre, il est important de souligner que la Cour consacre dans son plan de charge des mis-sions dédiées au suivi des recommanda-tions ce qui a permis d’enregistrer des progrès dans leur mise en œuvre par les entités concernées. Ceci étant, comme toute autre institution de contrôle, la CC rencontre certaines difficultés pour mener à bonne fin ses missions. A titre d’exemple on peut citer les difficultés ayant trait : • au nombre très important des entités à

contrôler, à la diversité de leur nature, à l’étendue et la complexité des domaines de leur intervention d’où la difficulté d’exercer un contrôle exhaustif et réguli-er ;

• à la qualité de l’information produite par les entités soumises au contrôle et leur réactivité par rapport aux attentes et aux demandes de la Cour ;

• à la maitrise des délais de la réalisation des missions d’audit surtout dans les sit-uations d’urgence découlant de la mise en œuvre des actions publiques ou de la préservation des deniers publics;

• à la difficulté de la Cour, comte tenu de l’étendue de ses missions, à drainer les meilleurs profils et compétences ainsi que de mettre à niveau l’ensemble de nos ressources humaines.

La CC, consciente de ces difficultés, a enga-gé un plan d’action en vue d’y apporter les solutions appropriées. CVMENA: La nouvelle loi organique du budget va introduire des nouveautés im-portantes dans la gestion des finances publiques au Maroc. Quel sera l’impact de ces changements sur les missions et le travail de la Cour des comptes ? DJ: Effectivement la réforme de la loi orga-nique relative aux lois de finances va con-duire l’Etat à faire évoluer son cadre budgétaire et comptable. Cette réforme vise essentiellement à renforcer la re-sponsabilisation, la performance et la transparence de l’action publique et de donner, au Parlement et aux citoyens, une information claire, complète et sincère sur l’exécution budgétaire et sur le patrimoine de l ’Etat. En faisant le choix de réformer sa « constitution financière », le Maroc s’inscrit dans un mouvement universel de modernisation du cadre des finances publiques initié par les pays anglo-saxons (Etats-Unis, Australie, Nouvelle-Zélande, Royaume Uni…) et qui a été rejoint par d’autres pays, comme la France et d’autres pays européens. C’est également un choix qui s’est imposé avec la nouvelle constitu-tion et les principes de gouvernance qu’elle a édictés. Dans cette perspective, la Cour des comptes est appelée à jouer un rôle primordial dans la certification des comptes de l’Etat ainsi que dans l’appréciation et l’évaluation de la performance des organ-ismes publics. En effet, le projet de la loi organique relative à la loi des finances (LOLF) adopté par Parlement le 08/07/2014, confie à la Cour des Comptes la mission de certification des comptes de l’Etat. Cette certification est destinée à donner l’assurance que les comptes sont conformes aux règles comptables qui sont consignées dans le recueil des normes comptables de l’État et permet de donner une assurance raisonnable sur la qualité des comptes et, par voie de conséquence, sur la situation financière de l’État, sur son patri-moine et sur les risques auxquels il est ex-posé.

62 En outre la LOLF consacre la dé-marche de la gestion publique axée sur les résultats et la per-formance, ce qui implique un intérêt accru à l’évaluation des politiques publiques. En effet, à partir des nouveaux instruments que sont les indicateurs de per-formance, il sera possible d’évaluer l’impact des autorisa-tions budgétaires et de l’intervention des différents or-ganismes publics. La démarche permettra également de mettre en exergue les nouveaux principes constitutionnels en matière de la bonne gouvernance à savoir la responsabilisation et la réédition des comptes. CVMENA: La Cour est-elle en mesure d’auditer les comptes des projets financés par les bailleurs ? Souhaite-t-elle le faire da-vantage ? DJ: A ce sujet, je vous signale que la Cour des comptes assure déjà la certification des comptes des projets financés sous forme de dons par certains organismes des Nations Unies domiciliés au Ma-roc. Sur le principe, la Cour des Comptes en tant qu’organisme public d’audit externe et indépendant est en mesure d’auditer et d’émettre une opin-ion sur les comptes des projets financés dans le cadre de la coopération bilatérale ou multilatérale. Du reste, conformément à la législation financière marocaine qui exige une fongibilité des ressources allouées au budget de l’Etat couvrant les programmes et les projets retenus au budget annuel, la Cour est amenée à auditer les projets et les actions publiques qu’ils soient couverts par des ressources domestiques ou extérieures. Ainsi, la Cour est en mesure d’assurer l’audit des projets financés dans le cadre de la coopération internationale. Toutefois, il convient d’examiner dans le détail, les mo-dalités pratiques de ce genre de missions permettant à la Cour d’assumer à la fois ses attributions légales et la couverture de son programme annuel de travail. CVMENA: Comment la Cour est-elle or-ganisée pour contrôler les collectivités locales ? DJ: En vertu de l’article 149 de la Constitu-tion, le contrôle des collectivités locales et de leurs groupements relève des Cours Régionales des Comptes (CRC). Il faut rap-peler que la charge qui incombe aux CRC est très étendue puisqu’elle porte sur 1737 collectivités territoriales réparties en ré-

gions, préfectures, provinces, communes, groupements des communes, régies auto-nomes et concessionnaires. Ainsi, neuf CRC ont été créées. Cette création s’inscrit dans le cadre du processus de renforcement de la politique de décentralisation et de dé-concentration menée par notre pays; elle traduit aussi la volonté des pouvoirs publics d’instaurer un contrôle décentralisé portant sur la gestion des finances publiques lo-cales. S’agissant des missions des CRC, elles sont le prolongement de celles de la Cour au niveau national. En effet le Code des Juridictions Financières prévoit la transposi-tion au niveau local des compétences de Cour des Comptes en matière de Jugement des comptes, de Gestion de fait, de disci-pline budgétaire et financière, de contrôle de la gestion et de contrôle et suivi des déclarations du patrimoine. Les CRC sont chargés en outre de missions de contrôle des actes budgétaires et sont appelées à émettre des avis sur les conditions d’exécution des budgets des collectivités locales. Par ailleurs, le Royaume du Maroc a initié un chantier important de réformes avec le projet de régionalisation avancée. Dans cette perspective, les CRC seront amenées à accompagner cette grande ré-forme qui aura forcément des implications

sur l’étendue de leurs missions tant sur le plan quantitatif que sur le plan qualitatif. CVMENA: Quelles sont vos priori-tés en matière de renforcement des capacités ? DJ: Parmi les priorités de la CC en matière de renforcement des ca-pacités, il y a tout d’abord le ren-forcement du savoir-faire, de la compétence et du professionnal-isme de nos ressources humaines. Etant donné que le personnel est la première ressource d’une ISC, la Cour considère la formation et le perfectionnement de ses ressources humaines comme un objectif stratégique à la fois pour les missions courantes et les nouvelles missions (certification des comptes de l’Etat, évaluation de la performance, des pro-grammes et des projets publics). Ainsi, la Cour doit s’appuyer sur une organisation qui répond aux exigences de l’expertise afin qu’elle puisse livrer des résultats (rapports) probants, crédibles, fruits d’un travail méthodique, collégial et conforme aux normes professionnelles. L’utilisation in-tensive des technologies de

l’information et de communication reste aussi prioritaire en matière de renforce-ment de nos capacités notamment avec le lancement du projet de dématérialisation des processus d’information. Comme vous le savez l’information est une ressource vitale devant être organisée afin d’assurer que son utilisation réponde aux besoins et aux objectifs de la Cour qui devra commu-niquer et mettre en commun l’information au niveau interne afin de faciliter les opé-rations d’audit. Ainsi, la mise en place d’un système d’information et de communica-tion approprié permet de faciliter le travail de la Cour par l’implémentation des appli-cations informatiques adéquates. L’utilisation des TIC est de nature à renforc-er et à développer les capacités des magis-trats pour réaliser les missions d’audit avec plus de professionnalisme et de perfor-mance. La Cour projette également la mise en place de plateformes de partage de base de données avec ses principaux partenaires en vue d’une optimisation des interventions de la Cour en termes de délais de réalisa-tions des travaux et de la qualité des infor-mations obtenues. A ce titre, les ressources humaines des juridictions financières doi-vent être renforcées sur les compétences nécessaires pour en faire le meilleur usage.

63 CVMENA: Comment la Cour marocaine s’insère-t-elle dans les dispositifs interna-tionaux de gouvernance de la profession d’auditeur externe du secteur public (normes, INTOSAI, organisations région-ales et relations bilatérales) ? DJ: La Cour entretient des contacts réguli-ers avec les autres acteurs étrangers inter-venant dans le domaine de l’audit public externe. A cet effet, elle adapte son organi-sation et ses méthodes de travail aux normes d’audit internationales et aux prin-cipes qu’elle applique pour évaluer le fonc-tionnement des services soumis à son con-trôle. Elle privilégie les meilleures pratiques à l’échelle internationale. Dans ce cadre, l’activité de la Cour en matière de coopé-ration internationale connait une grande diversification soit avec les ISC des pays amis soit avec les organisations interna-tionales et régionales auxquelles la Cour adhère. Au niveau multilatéral, la CC joue un rôle actif au niveau de l’INTOSAI, elle a présidé la commission stratégique de ren-forcement des capacités des Institutions Supérieures de Contrôle de 2005 à 2013. Au titre de la même période, la Cour était également membre du conseil d’administration de l’Initiative de Dé-veloppement de l’INTOSAI (IDI) et membre du comité exécutif de l’ARABOSAI. Elle, fait également partie de l’AFROSAI et de l’AISCCUF. Il est à signaler que la Cour des Comptes marocaine intervient avec la Cour des Comptes française dans les missions de contrôle effectuées dans le cadre du man-dat de commissariat aux comptes com-mandité par certaines organisations des Nations Unies. Par ailleurs, dans le cadre de la coopération bilatérale, la Cour reçoit régulièrement des délégations d’ISC de pays amis (pays arabes et d’Afrique sub-sahariens) et organise des stages de for-mation et de visites de travail au profit des magistrats et auditeurs de ces institutions. CVMENA: Quel est l'impact de la présenta-tion le 21 mai 2014 du rapport annuel de la cour des comptes au Parlement en respect de l'article 148 de la Constitution ? DJ: Rappelons tout d’abord que c’est la première fois dans les annales de la vie politique marocaine que le Premier Prési-dent de la Cour des comptes expose devant les deux Chambres réunies du Parlement le bilan des activités des juridictions fi-nancières et ce, conformément aux dispo-sitions de l’article 148 de la constitution du Royaume. Cette présentation initie une phase constructive des relations entre la Cour des comptes et le Parlement. De même cette initiative est de nature à insuf-fler une nouvelle dynamique à la coordina-tion entre ces deux institutions, dans le

cadre de l’assistance constitutionnelle du Parlement. En fait, l'importance du rapport annuel de la Cour des comptes réside dans le fait qu’il constitue une référence im-portante dans le cadre de la collecte des données et l’identification des dysfonction-nements et par voie de conséquence il permet de renforcer la mission de contrôle de l’action gouvernementale par la Parle-ment. Ce dernier se retrouve, avec la nouvelle constitution, largement renforcé dans ses prérogatives de législation, de contrôle de l’action de l’exécutif, d’évaluation des politiques publiques et d’animation du débat public. A travers l’exposé que j’ai eu l’honneur de présent-er, l’accent a été mis sur les faits saillants des activités des juridictions financières en 2012. J’ai évoqué également les principales conclusions et recommandations contenues dans deux rapports thématiques élaborés récemment par la Cour, dont l’un est relatif à la problématique de la retraite et l’autre à l’évaluation du système de compensation. Le rapport concernant la thématique de la retraite a été élaboré par la Cour sur sa propre initiative, alors que le rapport au sujet du système de compensation a été élaboré suite à la demande expresse de la Chambre des Représentants. Consciente des enjeux majeurs de ces deux chantiers de réforme et du retard enregistrés par les gouvernements successifs pour les concré-tiser, la Cour a apporté un éclairage par-ticulier en recommandant des pistes de réformes faisables, opportunes et urgentes si l’on veut éviter l’aggravation des risques découlant du maintien du statu quo. L’intérêt de cette démarche est de soumet-tre les recommandations et conclusions découlant des rapports de la Cour à un large débat public entre l’ensemble des

acteurs politiques. Globalement les députés des différents groupes parlementaires ont mis en exergue la portée de la présentation des rapports de la Cour des comptes devant l’institution législative. Sur le rapport par-ticulier portant sur l’évaluation du système de la compensation, le Bureau de la Cham-bre des représentants a publié un commu-niqué de presse qui souligne que ce travail "marque le début d’une nouvelle étape dans le renforcement de la mission de con-trôle de l’action gouvernementale". De même cette présentation a été relayée par l’ensemble des organes des médias et de la presse et a suscité un large débat public. CVMENA: Quelle est la représentativité féminine à la cour des comptes? DJ: Comme vous le savez Maroc a réalisé des avancées notables, en matière de pro-motion des conditions de la femme. Ces avancées, ont été consacrées par la nouvelle constitution de 2011, qui a érigé la parité entre les deux sexes en principe con-stitutionnel, tout en prévoyant l’institutionnalisation de la protection de la parité par la création d’une Haute Autorité de la parité. Le Maroc s’est engagé dans le processus d’institutionnalisation de l’égalité entre les sexes dans le secteur de l’administration publique depuis longtemps et il est invité à soutenir ce processus eu égard aux nouvelle dispositions constitu-tionnelles. S’agissant des Juridictions Fi-nancières, l'effectif global des Juridictions Financières est de 548 personnes. Le taux de représentativité féminine (magistrats et fonctionnaires) est globalement autour de 30 % dont les magistrats femmes ne représente qu’un ratio de 19 %. Il convien-dra à l’avenir de l’améliorer.

www.cvmena.org

65

Mashreq

Djibouti 66

Entrevue

Ilyas Moussa DAWALEH Ministre de l'Economie et des Finances, charge de l'industrie et de la planifica-tion, Djibouti

Entrevue conduit par Rock Jabbour, Finan-cial Management Analyst, Governance Global Practcie, MENA, The World Bank.

CVMENA: Quelles sont les reformes princi-pales récentes qui ont été institue a Dji-bouti? ID: Ces dernières notre pays a mis en œuvre une série de réformes à plusieurs niveaux. Au plan institutionnel, les reformes majeurs sont entre autres le renforcement du cadre macroéconomique avec la reforme fiscale qui a connu l’introduction de la TVA. L’abaissement du seuil d’assujettissement à la TVA pour les entreprises à un chiffre d’affaires de 50 millions de FDJ contre 80 millions de FDJ initialement a créé d’avantage de trésorerie disponible pour le gouvernement. Par ailleurs, la politique de limitation des dépenses courantes initiée a commencé à donner des résultats probants. Cela a permis d’accroitre la part des inves-tissements publics financés à partir des recettes intérieures. Le secteur financier n’est pas en reste avec l’adoption de plusieurs lois dont celle contre le Blanchiment, la Confiscation et la Coopé-ration Internationale en matière de produits du crime. La loi relative aux statuts de la Banque Centrale de Djibouti; la loi relative à l'ouverture, à l'activité et au con-

trôle des établissements de crédit ; la loi portant réglementation des activités de Micro finance sur le territoire national. la bancarisation des salariés de l’administration qui a permis une relance de la consommation et de l’investissement des ménages. Il y a également eu l’actualisation de la Loi sur la réglementation du marché des assurances et l’adoption des lois sur la finance islamique (banque et assurance). Dans le domaine de la réforme de l’administration, deux changements majeurs ont été introduits dont la premiere sur a création d'une base de données unique et intégrée pour la gestion des agents de l'Etat. Ce fichier unique va régler tout le problème de la disparité de l'infor-mation et comportera toutes les données relatives à chaque agent de l'Etat. Mais aussi, l’introduction du système d’assurance maladie universelle, votée en 2013, va permettre à toute la population de bénéficier d’une couverture maladie. Dans le cadre de la politique d’amélioration du climat des affaires et du cadre des inves-tissements, la mise en place d’un haut con-seil national du dialogue public-privé en 2014 vise à faciliter la concertation et à accueillir les contributions de chacun avant toute prise de décision visant introduire des réformes. Au niveau de l’environnement des affaires, d’importants efforts ont été faits et cela a permis d’améliorer sub-stantiellement la position de Djibouti dans le classement Doing Business de la Banque mondiale. Notre pays a gagné 12 places dans le classement général et 61 places dans le critère de la création d'entreprise dans l'édition 2014 du Doing Business pub-lié par la même institution. Toutefois, des efforts restent encore à faire pour lever quelques contraintes liées à l'enregis-trement d'un titre de propriété, l'applica-tion des contrats, l'obtention d'un crédit, la création d'entreprise et la protection des investisseurs. Ces catégories ont enregistré de faibles performances pour lesquelles le meilleur classement n'excède pas le 148e rang. D’autres reformes sectoriels ont également eu lieu ces dernières années. CVMENA: De quoi il s'agit la vision 2035 de Djibouti?

ID: La Vision Djibouti 2035 est une pro-grammation de la politique économique et sociale de Djibouti sur un horizon de 25 ans. Cette nouvelle orientation qui concerne tous les secteurs du développement dépasse l’organisation de l’économie basée sur les courtes vues. Elle repose sur une démarche de planification prospective de long terme et sur le ciblage des secteurs clés porteurs de croissance, pour

d’entrainer le pays dans une spirale ver-tueuse de développement et de faire de Djibouti un pays émergent à l’horizon 2035. Djibouti 2035 se veut une réponse à la con-struction des bases pour un développement harmonieux, piloté et maîtriser. C’est une démarche de planification volontariste qui vise à mieux anticiper les mutations qui sont de plus en plus rapides et à résoudre les problèmes structurels de développe-ment autour des objectifs de long terme. Il dessine le futur que voulons à savoir : Faire de « Djibouti, le Phare de la Mer Rouge et un Hub commercial et logistique de l’Afrique ». En effet, notre pays a besoin d’avoir les ressorts d’une planification du développement mieux maîtrisé, moins soumis aux chocs exogènes internes et externes. Une croissance plus accélérée et durable, accompagnée par une administra-tion publique aux capacités renforcées et productives, est nécessaire pour résoudre les problèmes sociaux et engendrer une transformation structurelle de l’économie, pour la rendre plus diversifiée et plus compétitive, avec, encore une fois, un rôle accru du secteur privé. La concrétisation des objectifs de la vision se fera au travers de documents de stratégies et de plans d’actions opérationnels, cadres concep-tuels de politiques nationales, sectorielles et régionales de développement. La Stra-tégie de Croissance Accélérée et de Promo-tion de l’Emploi (SCAPE) sera le socle de mise en œuvre. CVMENA: Comment ces reformes s'alignent Avec la vision 2035 de Djibouti? ID: La Vision entend consolider les acquis obtenus avec la mise en œuvre de la Loi d’orientation économique 2001-2010, le DRSP 2004-2006 et l’Initiative Nationale pour le Développement Social (INDS) 2008-2012. Il s’agit véritablement de passer à l’échelle dans la conduite des politiques de développement. Les réformes vont dans le sens des objectifs de la Vision 2035 car la Vision préconise un développement har-monisé et inclusive à terme qui passe par la modernisation de l’administration Djibou-tienne laquelle répond aux exigences nouvelles de l’économie et à l’atteinte des objectifs de la Vision. Mais également l’instauration de la confiance entre les secteurs public-privé dans la gestion du pays et l’amélioration du climat des af-faires. Djibouti a réussi à tirer parti de sa stabilité politique et de sa position géostra-tégique dans la Corne de l’Afrique qui se situe sur les principales routes de naviga-tion maritime.

67 En conséquence, ces dernières années, le pays a enregistré une croissance de son activité économique et a amélioré ses per-spectives, à la faveur d’importants flux d’investissements directs étrangers dans le développement des infrastructures portu-aires, routières et aéroportuaires. C’est l’ambition affiché par Djibouti 2035 de transformer structurellement notre pays et son économie pour en faire un pôle économique et commercial majeur en Af-rique. Un pays qui connait un développe-ment économique et social durable, où l’économie est diversifiée, la croissance est accélérée et se situe à un niveau élevé sur le long terme, avec une pauvreté réduite et des indicateurs sociaux améliorés. Djibouti offre aussi une plateforme pour la sécurisa-tion du commerce mondiale (transports martines de personnes et de marchandis-es). CVMENA: Quels sont les défis économiques principaux que Djibouti faire face actuellement? ID: Le contexte économique aujourd’hui montre que notre pays fait d’importes avancées sur le plan économique avec un niveau de croissance de 5% en moyenne annuelle sur les cinq dernières années. Mais en même, lorsque nous regardons les indi-cateurs de pauvreté et le niveau de chômage qui sont à des niveaux élevés (42% et 48,5% respectivement), cela traduit une certaine fragilité du fait de la forte concentration des sources de croissance autour des services, et surtout du port. Nous sommes convaincus que la mise en place effective de cette stratégie de diversi-fication économique, soutenue par une amélioration, en parallèle, de l'envi-ronnement des affaires, constituera un tournant décisif pour l'économie djibou-

tienne en favorisant le développement de national et l’impulsion d’un secteur privé national fort, la diversification des sources de croissance du pays et la réduction du chômage. Le modèle de l’UAE, tout comme celui de bien d’autres pays (Maurice, Singa-pour, etc.) constitue des références dont nous inspirerons dans la conduite de cette politique nationale volontariste de dé-veloppement pour un véritable change-ment de cap. Notre premier défi est celui de la diversification économique, surtout de la transformation de notre position géostra-tégique en avance compétitif. L’étude sur le Nouveau Modèle de croissance, nous a permis de connaître les leviers sur lesquels nous pouvons nous appuyer pour engager la transformation. Par ailleurs, les princi-paux défis sont les suivantes : • Le renforcement de la gouvernance et

des capacités de l’administration • La construction d’une économie pro-

ductive, compétitive et diversifiée • Le renforcement actif de Djibouti dans

l’intégration régionale et la coopé-ration internationale

• La disponibilité de l’énergie et de l’eau • La réduction des coûts de facteurs :

télécommunications, eau et énergie. Le coût de l’énergie qui représente le poste budgétaire le plus important des entreprises djiboutiennes impacte né-gativement sur leur santé financière et leur compétitivité

CVMENA: Quels sont les besoins immédi-ats du pays? ID: Sur le plan social, les besoins immédiats se traduisent par l’amélioration de la dis-ponibilité de l’eau et la lutte contre la soif

en milieu rural, la lutte contre la pauvreté et la sécurité alimentaire de la population pauvre et vulnérable. Au plan économique, il faut mettre en place des infrastructures économiques de qualité qui prépare la transformation de notre pays, former des ressources humaines qualifiées et produc-tives. Face un contexte mondial qui se ca-ractérise de plus en plus par une cherté des financements pour notre pays, nous devons être efficaces dans l’exécution de nos dé-penses d’investissement. L'amélioration de la compétitivité de l'économie locale reste un objectif majeur de notre programme économique dans l'optique de favoriser le développement du secteur privé et les in-vestissements étrangers. CVMENA: Quel est Le rôle que vous de-mandez aux bailleurs de fonds d'exercer avec le gouvernement Djiboutien afin de contribuer à la vision 2035 et ainsi aux reformes envisagées? ID: Cette question pose toute la problé-matique de l’effectivité de la mise en œuvre des engagements d’Accra et de Paris sur l’efficacité de l’aide. C’est un engagement des bailleurs de fonds à tout accompagner le gouvernement, bien entendu dans un esprit d’alignement sur les priorités nation-ales de développement. Pour avancer sur ce point, il a été adopté un cadre institu-tionnel de haut niveau sur l’amélioration du dialogue avec justement avec les bailleurs. L’idéale pour nous c’est de cheminer pro-gressivement vers la mise en place de l’appui budgétaire ou programme. Notre pays est dans de bonnes dispositions pour cela, et nous attendons le même état d’esprit de la part de nos partenaires au développement.

Djibouti 68

Interview

Homa-Zahra FOTOUHI Resident Representative to Djibouti, The World Bank Interview conducted by Rima Koteiche, Sr. Financial Management Specialist, Govern-ance Global Practcie, MENA, The World Bank. CVMENA: In your role as the World Bank representative to Djibouti, how did you develop the MENA region’s strategy to support the country? HF: Djibouti lies at an important three-way junction between the West, the East and Africa. It is a member of the Arab League and the African Union. It has as much cul-tural commonality with its Arab neighbors as with its African neighbors. Like most MENA countries, Djibouti has a large youth population. Youth everywhere have the same needs: a need for education, health, and jobs. The MENA regional framework aims to achieve reduced poverty and shared prosperity through governance, inclusion, jobs, and sustainable growth. Our efforts in Djibouti are very much focused on these objectives. The World Bank Group Country Partnership Strategy, approved by the Board of Executive Directors in March 2014, rests on two pillars: reducing vulner-ability and strengthening the business envi-ronment. CVMENA: What do you think are the key opportunities and challenges in Djibouti? HF: The opportunities for Djibouti include its young population and geostrategic loca-tion. Forty percent of the population is under the age of 15, and could contribute to the country’s development— if provided with the right skills and job opportunities. Djibouti’s geostrategic location can be ex-ploited through greater regional integration and development of key industries, as well

as the country’s infrastructure. The World Bank conducted a study in 2012 that identi-fied 5 under-developed sectors that could contribute to Djibouti’s economic develop-ment, including: transport and logistics, telecommunications, tourism, fisheries, and light industry. We are currently working with the government to organize a high-level Development Exchange Roundtable at the end of June. The focus would be on creating a peer learning opportunity by bringing in other developing countries— Cape Verde, Dubai, UAE, Mauritius, Rwanda and Singapore—that have similar character-istics to Djibouti and that were able to suc-cessfully develop these same sectors. This south-south exchange will help the Djibouti public and private sectors alike learn from the success of others. At the same time, the challenges facing Djibouti are many, including: a lack of natural resources, vul-nerability to drought and difficult climatic conditions, high poverty and unemploy-ment rates, and low implementation capac-ity. The World Bank is supporting the gov-ernment in developing a natural disaster preparedness and response mechanism. The main employer in Djibouti has been the public sector, and it has continued to grow continuously. However, it is now time for the private sector to be strengthened and to become the main engine of economic growth. As identified in the 2014 World Bank Doing Business Report, the key chal-lenge remains in the reforms needed to create a favorable business environment. In this context, we have prepared the first joint International Development Associa-tion (IDA)-International Finance Corpora-

tion (IFC) project for Djibouti, namely, the governance for private sector development project. It supports governance and invest-ment climate reforms to attract foreign direct investment and create job opportuni-ties for the young population. This should also have a direct effect on reducing the poverty levels. CVMENA: How do you see the role of the World Bank as it has evolved over the last few years in Djibouti? HF: The role of the World Bank has changed significantly in the last couple of years. The decision to open a World Bank office in Djibouti two years ago has brought many advantages. First, it has brought us closer to our client including the government, the private sector, and civil society. This allows for a deeper and more systematic dialogue, and helps us to respond more quickly to changing circumstances on the ground. It has also helped us to strengthen our col-laboration with other development part-ners active in Djibouti, thereby contributing to better donor coordination in many sec-tors, such as health, education, social pro-tection, energy, urban poverty reduction, and agriculture. Finally, it has helped us to improve the quality of the World Bank’s portfolio, particularly since we introduced a bi-annual fiduciary workshop in collabora-tion with our financial management, pro-curement and disbursement colleagues. A more rapid implementation of our projects translates into quicker and greater results for the poor and vulnerable population of Djibouti.

69 CVMENA: How is the World Bank Country Partnership Strategy (CPS) for 2014-17 contributing to the Djibouti Vision 2035 Plan? HF: The CPS is anchored in the govern-ment’s Djibouti Vision 2035, a long-term development plan that focuses on econom-ic integration, governance, and human de-velopment. The overarching objective of the CPS is to support the government’s Djibouti Vision 2035, working to reduce extreme poverty and build the foundations for shared growth by harnessing the coun-try’s human and economic potential. The CPS rests on two pillars: (i) reducing vulner-ability; and (ii) strengthening the business environment. The CPS will support Djibouti in taking steps to address vulnerabilities such as: high poverty and unemployment; deficits in human development indicators and social service delivery; limited access to basic infrastructure; and high natural disas-ter risk. The CPS will also support Djibouti in strengthening the business-enabling environment through better-quality and more affordable energy and telecommuni-cations services, as well as improvements to the investment climate and governance framework. In addition, the CPS focuses on

institutional strengthening and gender as cross-cutting themes. Throughout the CPS, interventions will encompass efforts to strengthen institutions, build capacity, and improve sector regulations across both strategic pillars. We are also responding to gender needs directly or indirectly in vari-ous sectors and through most activities. CVMENA: Which World Bank activity or main effort do you strongly believe has or will have a great impact on Djibouti’s de-velopment? HF: We have many activities with a poten-tial transformational impact including: the exploration of the country’s geothermal resources; the opening up of the telecom-munications sector; and the strengthening of the business environment. I believe our work in strengthening safety nets has had a great positive impact. For example, the ongoing social safety nets project has pro-vided 225,000 person days of employment, and supported positive behavior change in pregnant and lactating mothers. The pro-ject led to the formulation of the first social safety net strategy in the country, and is now developing into a national program focusing on the prevention of malnutrition.

I cannot think of a more critical activity than ensuring that the babies and children of today grow into the healthy, productive young people of tomorrow. CVMENA: In your role as representative for the country of Djibouti, how would you develop the MENA overall regional strate-gy in an "African" country? HF: Djibouti sits at an important three-way junction between the West, the East and Africa. It is a member of the Arab League and of the African Union. It has as much cultural commonality with its Arab neigh-bors as with its African neighbors. Like most MENA countries, Djibouti has a large young population. Youth everywhere have the same needs: a need for education, health, and jobs. The MENA regional framework aims for reduced poverty and shared pros-perity through governance, inclusion, jobs, and sustainable growth. Our efforts in Dji-bouti are very much focused on these ob-jectives. The World Bank Group Country Partnership Strategy, approved by the Board in March 2014, rests on two pillars: reducing vulnerability and strengthening the business environment.

In Their Own Words

“Countries continue to default on their debt, yet aren’t pushed by governments, credit rating agencies, or financial commenta-tors to significantly improve public sector financial reporting. These same countries require private sector companies in their jurisdictions to publish audited, accrual-based, financial state-ments when raising funds in capital markets. What justifies the double standard whereby a government compels private com-panies to be transparent and accountable, when it avoids using accrual accounting itself—despite having bonds traded on the capital markets?”

Fayezul Choudhury, Chief Executive Officer of IFAC. August 12, 2014

Lebanon 70

Interview

Fadi FAKIH Executive Board Member, Capital Markets Authority, Lebanon

Interview conducted by Rima Koteiche, Sr. Financial Management Specialist, Govern-ance Global Practice, MENA, The World Bank. CVMENA: Could you please provide us with a brief summary of the Capital Mar-kets Authority (CMA) mandate, a newly established regulatory body to oversee Lebanon's capital markets? FF: The CMA is an independent, autono-mous regulatory body established by the Capital Markets Law No. 161, on 17 August 2011. The CMA has two main objectives that underline its strategic mission and vision: (i) promoting and developing the Lebanese Capital Markets; and (ii) protect-ing investors from fraudulent activities through issuing regulations that are in line with international best financial market practices, and proper control and audit of all institutions that deal with financial in-struments. The governing structure of the CMA, as established by the law, permits the CMA to issue its own regulations and su-pervise the financial markets in a way to reduce systemic risk. More importantly, the CMA is one of the few regulators in the world that have an autonomous Sanctions Committee and Capital Markets Court. The sanction committee looks into financial market violations and has the power to impose administrative sanctions and penal-ties which give market participants more

confidence in the market, while at the same time allowing those affected to appeal its decision before the Capital Markets Court. These features allow the CMA to successful-ly fulfill its mandate. CVMENA: The investment community in Lebanon has been waiting for quite a long time for the creation of the CMA. What were the main difficulties that led to this delay? FF: As you well know, Lebanon has been in political turmoil since early 2005, following the assassination of the late Prime Minister Hariri. This tenuous political situation and at times difficult security environment have had their impact on the functioning of all government institutions as well as on par-liament. So, the order of priorities of par-liament and its legislative agenda kept shift-ing, reflecting political and security factors. In such an environment, financial markets regulation and even other rather important economic issues took a back seat. With the phasing out of the political deadlock, an opportunity presented itself and the law was adopted in August 2011, almost ten years after the onset of various rounds of discussions involving a number of stake-holders. CVMENA: What are the main challenges and opportunities facing the CMA as a newly established regulatory body? FF: The long term view at the CMA is to once again set Lebanon as a major player in the regional financial industry. The Leba-nese capital markets are considered small scale and less active compared to the dom-inant banking sector. It is only normal that in such an environment, market dynamics shifted the capital market functions toward the more regulated banking sector with its already existing infrastructure, legislation and regulation. One of the biggest chal-lenges that the CMA faces is how to broad-en and deepen the capital markets and instill faith in the securities industry in Leb-anon. I can see several areas of challenge in developing the capital markets. First, there is a need to change an entrenched culture which is focused on short-term financing secured by banks. This will take some time, but with a proper and sequenced action plan this could be done. I should say in this regard that developing the securities mar-ket will in no way adversely affect the work of commercial banks. In fact, I would argue that well- developed capital markets would complement and support the activities of banks and vice versa. We have already started talking to banks and the financial

community at large, and I could say without hesitation that we are on the same page in looking forward to deepening our coopera-tion in the future. Second, there is a need to educate investors on the advantages of investing in the long-term securities mar-ket, and we have already started working on developing an investor education pro-gram that would promote financial literacy among all citizens. Third, the CMA is also increasingly working on raising the level of expertise and knowledge of the importance of capital markets to the business commu-nity in Lebanon. Businesses need to under-stand the power of long-term capital fi-nancing to enhance long-term growth and improve performance and profitability. Fourth, we would need to work on capital markets infrastructure, including mainly the Beirut Stock Exchange (BSE). Among its many articles, Law 161/2011 clearly calls for privatizing the BSE. As the CMA, we consid-er that turning the BSE into a privately held S.A.SL company would make it more effi-cient in attracting local and regional com-panies to list on the BSE. We will be work-ing closely with the Ministry of Finance and other government entities to move forward with this privatization. Fifth, we would need to work with the government on different legislation that would create the right in-centives for both businesses and investors, that is, encouraging citizens to invest in capital markets and businesses to go public and enlist on the BSE. Also, in this domain, we will engage with all concerned govern-ment entities on creating a business friend-ly environment that would encourage re-gional and international businesses to come to Lebanon. This would be a medium- to long-term objective. CVMENA: Lebanon ranked 111th of 189 economies for its challenges in establishing and doing business according to the World Bank’s "Ease of Doing Business Index" for 2014. As a regulatory entity, how can the CMA contribute to overcoming the related challenges? FF: Improving the index of doing business in Lebanon is a multifaceted project that re-quires hard work from different govern-ment entities. Of the various indicators that affect a country’s standing in the “Ease of Doing Business Index”, the CMA has been active on the ones that are within its man-date from the standpoint of a market regu-lator, that is, protecting investors and en-forcing contracts.

71 In this regard, the CMA has been proactive and shall prove to be of help to the busi-ness environment in Lebanon. Protecting investors in financial instruments is an inte-gral part of the CMA’s daily activity. The CMA is continuously revising the regulatory framework and suggesting new regulations which will further protect the market, de-velop it and render it more transparent to the investor. Furthermore, the CMA has been granted by law the ability to enforce regulations and correct misconduct in the market through an independent Sanction Committee within the CMA, and an auton-omous Capital Markets Court. In its capaci-ty to consult the government on issues pertaining to the development of capital markets and investment in the financial sector in Lebanon, the CMA is also consult-ing with several ministries to put into place the proper legislation that would have a positive impact on capital market activities and the overall business environment. CVMENA: What are the recent key institu-tional developmental milestones that the CMA has undertaken towards effectively implementing its mandate? FF: I have already covered some of the ac-tivities that the CMA has been engaged in so far, and which can all be considered as milestones in the development of the capi-tal markets. If I were to single out some important activities, I would point out the several decisions and audits that the CMA has performed in a relatively short time. So far, the CMA has made more than 16 deci-sions that cover different aspects of its work. I also would like to mention that we are working closely with the Central Bank (BDL) and the Banking Control Commission on delineating responsibilities in the wake of the establishment of the CMA, as some activities have naturally shifted to the CMA. Our work with the World Bank in the con-text of the Financial Sector Reform and Strengthening Initiative (FIRST) initiatives focused on developing new regulations and revising existing ones to ensure that the CMA’s regulations are up to international standards and in conformity with the Inter-national Organization of Securities Commis-sions (IOSCO) Principles and best business practices. This project is expected to be completed by mid-2015. It’s worth noting that in Q4 of this year, the CMA will engage relevant stakeholders in a consultation process that will ensure the effective im-plementation of the new regulations intro-duced as part of the World Bank-CMA co-operation. These are expected to introduce more transparency in the regulatory framework.

CVMENA: The enactment law 161/ 2011 has defined the independence of CMA and the scope of responsibility of its regulatory function Do you think that the law is com-prehensive in that perspective? Are there any gaps that remain to be tackled? FF: The Capital Markets Law provides a good framework and clear definition of responsibilities of the CMA and protects it from any interference, political or other-wise. The law created an autonomous regu-latory authority with a wide mandate which ranges from supervision of market players, licensing and registration of individuals and institutions, which would serve the twin objectives of protecting investors and de-veloping the capital markets. Moreover, and as I mentioned earlier, one of the most important aspects of the CMA is the power to sanction non-compliant individuals and institutions through an independent Sanc-tion Committee and a Capital Markets Court. At the present time, we believe that the law provides the necessary tools to carry out our mandate successfully. How-ever, as we proceed, we could revisit the law and introduce any amendments, as needed. CVMENA: Several well advanced and de-veloped CMAs exist in the region that can be an inspirational learning model for CMA Lebanon. Has any kind of twining ar-rangement been envisaged for this pur-pose? FF: Since its inception, the Lebanese CMA has been in contact with several regulators in the region and particularly with the Saudi

CMA, which is considered well advanced by international comparison. Several visits took place and CMA staff met with the Sau-di CMA officials to discuss areas of coopera-tion and how to benefit from the advances already made by the Saudi CMA. Also, some CMA staff attended training sessions in Saudi Arabia. While cooperation is very close with the Saudi CMA, we have not signed any official twining arrangement, although this already informally exists. I take this opportunity to express our grati-tude and sincere appreciation to our Saudi counterparts for their substantial help and their unwavering willingness to provide assistance in the future. We believe that such unconditional and highly facilitated support was vital to the successful launch of the Lebanese CMA. As a CMA, we are part of the Union of Arab Securities Authority (UASA) and we exchange regular infor-mation and participate in the activities they organize. We also participated in some activities organized by the COMCEC (Stand-ing Committee for Economic and Commer-cial Cooperation of the Organization of Islamic Cooperation), and have been in contact with other regional regulators, in-cluding the Securities and Commodities Authority of the UAE. Beyond the region, the CMA has signed a Memorandum of Understanding with the French regulator AMF in May 2014 that focuses on promot-ing bilateral relationships on issues related to investor protection, insider trading and technical assistance. CVMENA: Finally, how can cooperation between the World Bank and the CMA of Lebanon be strengthened in the future? FF: I believe that the initial cooperation under the “FIRST” Initiative proved to be very successful, and we look forward to further cooperation between the CMA and the Bank. In our view, there are many areas in which we could cooperate as we move forward. Perhaps the World Bank could be of assistance in areas related to the devel-opment of the capital markets more gener-ally, or in areas such as capacity building to ensure that the regulatory program is commensurate with expanded markets. Also, the Bank could help in developing our human capital through targeted training programs to keep the CMA staff abreast of the latest developments in the capital mar-kets area, including sponsoring some ex-change programs with other regulators and organizing some field visits to experience firsthand how other regulators operate.

West Bank & Gaza 72

Study on the Adequacy of the Accounting Profession in Meeting the Needs of the Palestinian Micro, Small and

Medium Enterprise (MSME) Market

Riham HUSSEIN Financial Management Specialist, MENA Financial Management Unit, The World Bank The accounting profession is well respected in the West Bank and Gaza. Students choose to major in accounting given the general perception that there is a job mar-ket for them after graduation. There are approximately 2,000 accounting graduates per year (According to the Ministry of Higher Education, 2,122 students graduat-ed in accounting in the 2013-2014 academ-ic year). According to the latest labor force survey conducted by the Palestinian Central Bureau of Statistics (PCBS) in 2012, there are 1,200 auditors and 11,300 accountants in the country. Accountants work in a varie-ty of industries as general accountants and

bookkeepers, and others receive higher certification and pursue careers as auditors. After doing preliminary research on the accounting profession, certain knowledge gaps became evident. While the number of auditors and accountants has been quanti-fied, the type of accountants (education level, skills, and so on) remains unknown. Further, it is not known what the MSME market requires, and whether there are potential areas that are not being met by the accountants currently practicing in the market. The World Bank’s Engagement MNAFM hired a consultancy firm, Solutions for Development Consulting Company, to conduct a study during the second quarter of 2014. The goal was to analyze the main financial management needs of MSMEs against the adequacy, quantity and quality of accountancy professionals available to meet those needs. Special emphasis was placed on the adequacy of Small and Medi-um Practices (SMPs) and accountancy pro-fessionals and technicians (for example, bookkeepers) to meet the needs of the MSME sector. The purpose was to identify crucial financial management gaps in MSMEs and in the accountancy profes-sion’s education, skills and offerings. In this way, future World Bank programs and ac-tivities can then direct and target these areas.

MSME Financial Management Needs A large-scale survey was conducted among MSMEs to define their financial manage-ment needs. It was determined that a sam-ple size of 600 MSMEs was needed to sta-tistically represent the 123,558 MSMEs in the country. The classification of MSMEs varies widely in the country. The definition used by the survey was from the Ministry of National Economy: two or more of the following criteria must be applicable. These MSMEs were disaggregated into geograph-ical regions as well as type of locality (for example, city, village or refugee camp), in order to get the broadest range of respons-es. Figure 1: Gap in Accounting Profession

Table 1: MSMEs Classification Criteria

Classification/Criterion Micro Small Medium Large Number of employees 1-4 5-9 10-19 >19 Annual turnover (US$) Up to 20,000 20,001-200,000 200,001- 500,000 >500,000 Registered capital (US$) Up to 5,000 5,001-50,000 50,001-100,000 >100,000

Source: Palestinian Ministry of National Economy. Table 2: Sample Distribution

Governorate Number of Operating Es-tablish-ments

% Sample Locality

City Village Refugee Camp West Bank 82,111 66 399 320 49 30 Gaza Strip 41,447 34 201 161 25 15 Total 123,558 100 600 481 73 46

Fina

ncia

l Man

agem

ent

Nee

ds o

f MSM

Es

Qua

ntity

and

Qua

lity

of

acco

untin

g pr

ofes

siona

ls av

aila

ble

to m

eet t

hose

ne

eds

Gap

in A

ccou

ntin

g Pr

ofes

sion

GGP in ACTION

73 The surveys were completed in the field conducting one-on-one interviews. MSMEs were asked a variety of questions regarding whether they utilize accounting services. Specific questions were also posed regard-ing bookkeeping, tax, audit and advisory services. There was a small group of MSMEs that did not use any accounting services; in this case, they were asked questions regard-ing their reasons, their perception of ac-counting and other factors that may have led them to not utilize accounting services. Questions were also posed regarding poten-tial areas of need. Bookkeeping: Regarding bookkeeping ser-vices, the vast majority of MSMEs do have some accounting records (94 percent). Of the 6 percent that do not perform any bookkeeping, 44 percent are not registered enterprises. When asked who performed the bookkeeping of the 94 percent of enter-prises that do have some form of bookkeep-ing, the replies can be categorized as in Fig-

ure 2. As Figure 2 illustrates, there is a large untapped potential for SMPs to provide bookkeeping services for MSMEs. Almost 70 percent of MSME bookkeeping is personally prepared by the owner. Accounting stand-ards are another area of weakness in the preparation of financial reports. Most MSMEs do not utilize any standards in the preparation of financial reports (91 per-cent). Most reports are used for internal purposes only (65 percent), whereas only 19 percent use bookkeeping to access finance. Taxation Services: Tax report preparation is different from bookkeeping in that most tax reports are prepared either by an account-ant within the MSME or by an external of-fice (63 percent), whereas only 33 percent are prepared personally by the owner. Al-most 44 percent of MSMEs stated that they do get tax inspector visits. However, 87 percent stated that the tax inspectors do not normally change the amount due.

Audit Services: Only 7 percent of MSMEs have auditing services. Having auditors is highly correlated with the size of the enter-prise, with 47 percent of medium-sized en-terprises having auditors, 16 percent of small-sized enterprises and 4 percent of micro-sized enterprises. Of those that had auditing services, when asked why they have auditing services, 86 percent of them noted it was for internal purposes and that is was not legally mandated. Advisory Services: The study found that advisory services are only requested by 4 percent of MSMEs. Again, it was correlated with the size of the enterprise, with larger firms more likely to request advisory ser-vices. The most requested services are mar-ket or feasibility studies, which donors or the banks have required from enterprises for the purpose of accessing finance. A ma-jority of MSMEs stated that they did not see value in advisory services.

Quantity and Quality of Accountants in the Current Market Quantity of Professional Accountants: As noted, the number of accounting graduates has increased in recent years as accounting is seen as a well-respected profession with high employment poten-tial. In the last 10 years, the number of accounting graduates has increased about 62 percent in a year-on-year comparison. Also no-tably, accounting diplomas (two-year degrees), have increased sig-nificantly in the last 10 years. While the numbers remain small, the increase from 2003 to 2013 is about 60 percent year-on-year. Quality of Professional Accountants: A smaller survey was conduct-ed among professional accountants and auditors, and found that over 95 percent of respondents stated that they have a higher de-gree (Bachelors, Masters or PhD). Among the auditors surveyed, 40 percent stated that they have additional certifications. The average number of continuous professional education among those sur-veyed was 46 per cent. When asked about the main issues of con-cern to the accounting profession, those surveyed noted a lack of practical training, a lack of standards, a lack of regulation and con-trol, low income as a profession, and no awareness by MSMEs re-garding the importance of financial information. Most of those sur-veyed indicated that there is an oversupply of accountants in the West Bank and Gaza. However, they also noted that there is an undersupply of specialized accountants, such as managerial ac-countants, fraud auditors, cost accountants, Islamic finance ac-countants, and others. Conclusions and Recommendations: There is sufficient quantity of accounting professionals to meet MSME needs. However, there is a demand for specialized accounting professionals which is not cur-rently being met by the accounting profession. There is interest among MSMEs in accounting services, a market that SMPs can po-tentially serve. Areas of possible future work include the support and strengthening of SMPs, including raising awareness of opportu-nities by SMPs and ensuring that they offer the appropriate services for MSMEs. There also needs to be a strengthening of national legis-lation around accounting standards, with efforts to ensure that en-terprises adhere to them.

Figure 2: Preparation of Accounting Records

Source: Solutions for Development Consulting Co. 2014 Survey. Figure 3: Number of Accounting Graduates in the West Bank and Gaza (2003-2013)

Source: Ministry of Higher Education Figure 4: Growth in Accounting Diplomas (2003-2012)

Source: Ministry of Higher Education.

69.1

11.0

1.7

1.3

16.5

Personally prepared by the…

The accountant in the…

Administrative assistant

External auditor

External accounting office

.0 20.0 40.0 60.0 80.0

792

1,356

704

1,507 1,598

1,282 1,403 1,562 1,624

1,880 2,122

-

500

1,000

1,500

2,000

2,500

2002 2004 2006 2008 2010 2012 2014

148 160 149

268

411 492

435 489

349 346

0

100

200

300

400

500

600

2002 2004 2006 2008 2010 2012 2014

GGP in ACTION

Egypt 74

Interview

Hazem HASSAN Chairman of the Egyptian Society of Accountants and Auditors (ESAA)

Interview conducted by Mohamed Yehia, Senior Financial Management Specialist, GGP/MENA, World Bank CVMENA: What are the ESAA mission and goals? HH: The Egyptian Society of Accountants and Auditors (ESAA) was established by a Royal Decree issued on April 24, 1946, and the ESAA was re-proclaimed on January 5, 1977. ESAA was originally founded by a number of Egyptian accountants, many of whom had obtained their professional qual-ifications in England. Hence, ESAA rules and examinations were designed according to the British system. The ESAA aims to en-hance the academic and practical knowledge of accountants and auditors, and maintain international professional recognition of the accounting and auditing profession in Egypt. CVMENA: How does one become an ESAA member? HH: The applicant would need to pass the intermediate and final examinations of membership. He/she is required to have training for three years (after graduation) at an auditing office of an ESAA member. However, to expand the membership base and absorb large numbers of accountants, ESAA eased the condition of prior training at its member offices, allowing for such training to be done at non-member offices as well, provided they meet the standards

set forth by the ESAA Board of Directors, thereby ensuring training quality and ac-quired experience. Holders of international certificates — such as the US Certified Pub-lic Accountant (CPA) / the Association of Chartered Certified Accountants (ACCA) designation / ICAEW Chartered Accountant (CA) — are exempted from taking the in-termediate examination. However, they would need to pass final examinations in financial accounting, law, and Egyptian taxes. Holders of PhDs in accounting shall also be exempted from the intermediate examination, but they would need to pass the final examination. ESAA curricula and examinations are reviewed and developed regularly in line with the standards of inter-national professional associations. The ex-aminations cover many topics. The inter-mediate examination includes financial accounting, auditing and assurance ser-vices, tax accounting, costs and administra-tive accounting, law and corporate govern-ance. The final examination covers ad-vanced financial accounting, advanced au-diting and assurance services, advanced tax accounting, and finance and accounting information systems. CVMENA: How have the ESAA membership and organizational structure developed in order to cope with professional advance-ment and member needs? HH: There has been a steady annual in-crease in ESAA membership. There are now about 2000 members, compared to 1912 members at the end of last year. In the past 5 years, 482 new members joined ESAA, including 148 new members in 2013. ESAA is run by a Board of Directors composed of 15 members and elected by the General Assembly. Two-thirds of the Board, at least, should be elected from members of the General Assembly who possess professional experience of no less than 15 years. In its first meeting after the General Assembly meeting, the Board elects its chairman, deputy chairman, treasurer and secretary general, each of whom should have at least 15 years of professional experience. ESAA technical work is undertaken by a number of committees formed by the Board and chaired by a board member. They are: the membership committee, the examination committee, the standards committee, the curriculum development committee, the training and continuing education commit-tee, the cultural committee, and the com-plaints committee. The Board is assisted by an administrative/financial/ executive body composed of a general manager and a number of administrative employees. This body is responsible for: member affairs

(subscription, certificates, information, and other services); administrative organization of examinations and supervision; adminis-trative organization of training courses, seminars and workshops; and follow-up of continuing professional education. CVMENA: What is the ESAA role in pro-moting the application of international standards for accounting and auditing, and the code of ethics? HH: The ESAA Standards Committee played a major role in preparing the Egyptian Ac-counting Standards, which were issued in 2006 in line with International Financial Reporting Standards (IFRS) applicable at the time. In 2013, the committee also updated the Egyptian Accounting Standards in order to comply with the latest IFRS. These up-dated standards were referred to the High-er Standards Committee at the Egyptian Financial Supervisory Authority (EFSA) for review and approval. The committee com-prised many ESAA members, including the ESAA Chairman, and the Chief of ESAA Standards Committee. Hopefully, the up-dated standards shall be issued before the end of 2014 to be put into force early in 2015. Also in line with international stand-ards, the ESAA Standards Committee pre-pared standards for auditing, limited re-view, and other assurance services. These standards were issued in 2008 by the Minis-ter of Investment after a review by the Capital Market Authority (CMA) — which was later merged in the EFSA. The Commit-tee also prepared a code of ethics, similar to the international code. The CMA Author-ity issued that code of ethics to be applica-ble to the registered CMA auditors. ESAA issued the same code of ethics to be appli-cable to ESAA members. It is worth noting that the Central Auditing Organization (CAO) has approved the accounting stand-ards which were prepared by ESAA. These standards shall apply to the preparation of financial statements of companies of the public and public business sectors, and all economic units. The CAO approved the Egyptian standards for auditing, limited review and other assurance services. The CAO also approved the code of ethics, which shall be applicable as well to CAO staff. The CAO Chairman issued guidelines for the application of the code of ethics. Regarding training, the ESAA organizes training sessions for its members and oth-ers to explain the standards and their appli-cations. The ESAA also organizes semi-annual training sessions in cooperation with the ACCA for those interested in obtaining the ACCA International Financial Reporting Standards (IFRS) Diploma.

75

CVMENA: To what extent is ESAA reaching out to and coordinating with accounting departments and professors at Egyptian universities? HH: There is currently no regulated mecha-nism or integrated coordination between ESAA and the Egyptian universities. However, there is some knowledge and experience exchange that takes place as some ESAA members work as part-time lecturers at a number of private universities. Moreover, there are some ESAA and Board of Director members who are also accounting professors at Egyptian universities. However, there is a need for an integrated mechanism to har-monize ESAA curricula and examinations with university accounting and auditing cur-ricula. CVMENA: What is the ESAA role in ensuring quality control and good professional eth-ics? HH: The ESAA role with regard to the control of quality and good professional ethics is limited to what is stipulated in the ESAA statute, where the complaints committee can investigate shortcomings of any ESAA members, as well as professional ethics is-sues. The committee can impose sanctions including freezing ESAA membership. Con-cerning all accountants registered with the Egyptian Financial Supervisory Authority (EFSA), including ESAA members, there is a unit formed by the EFSA statute for the qual-ity control of the work of those accountants. The complaints and investigations committee for practitioners at the Egyptian Syndicate of Commercial Professions can also investigate complaints against accountants registered with the Syndicate on grounds of work short-comings or poor work ethics. The committee can impose appropriate sanctions, which may include removing the name of the member from the list of practicing account-ants at the Ministry of Finance. CVMENA: What are the levels and nature of competition among companies working in the field of accounts control? What oppor-tunities are available for small- and medi-um-sized offices? HH: Generally, large offices conduct auditing for most banks, insurance companies, branches of international companies in Egypt, and companies registered with the Egyptian Stock Exchange. Competition is most intense between companies in these sectors. The small- and medium-sized offices offer auditing services for a wide range of small- and medium-sized companies, as well as individual companies and establishments. However, in the light of the importance of the small- and medium-sized companies, it is likely that large accounting offices may offer

services to these companies and compete with smaller offices in this area. On the other hand, based on the legal requirement by some regulators for auditors’ rotation within a specified time, it is expected that medium-sized accounting offices may start competing with large offices in auditing the accounts of large Egyptian companies.

CVMENA: How can ESAA contribute to sup-porting economic growth in Egypt? HH: ESAA can contribute to supporting the Egyptian economy through upgrading and advancing accounting and auditing practices. For example, the implementation of account-ing and auditing work according to high in-ternational standards gives credibility to the financial statements, thus increasing investor trust and attracting foreign capital. Due dili-gence review in auditing and providing tech-nical advice in the governance area shall also lead to the strengthening of infrastructure for investment. ESAA training sessions — covering accounting, auditing, governance, and taxes — contribute to upgrading work in these areas and help strengthen the eco-nomic performance of companies and corpo-rations. ESAA’s success in providing increas-ing numbers of qualified graduate account-ants contributes directly to the availability of technical expertise and cadres needed to fill important financial positions in general. In addition, ESAA is represented at many con-trol and supervisory agencies — such as the High Standards Committee, the Control Council for the Quality Performance of Audi-tors, the Listing Committee at the Egyptian Exchange, the Accountant Registration Committee at the Ministry of Finance, and the Committee for the Unified Accounting System at the Central Auditing Organization. CVMENA: In your opinion, what are the most important ESAA achievements in re-cent years? HH: First: ESAA membership increased over recent years. ESAA maintained the high pro-fessional level of its members through up-grading the level of examinations, and train-ing and continuing professional education. These efforts led to wider recognition of the professional competence of ESAA members by the business community, various govern-ment agencies, as well as the prosperous work of the offices of ESAA members in the

Egyptian market. Second: The availability of accounting and auditing standards, as well as the professional code of ethics, was largely due to ESAA efforts which facilitated the preparation of financial statements in line with international standards. Third: ESAA established prestigious new headquarters in the 6 October City (fully financed by ESAA members), with 3000 square meters, includ-ing auditoriums, facilities, and equipment for holding training sessions for about 400 trainees at the same time, and conducting examinations at the ESAA headquarters. Each examination session serves about 300 candidates. Fourth: ESAA is the sole repre-sentative of Egypt at the International Feder-ation of Accountants (IFAC) and the Federa-tion of Mediterranean Accountants (FCM) which chose ESAA Chairman, Mr. Hazem Hassan, as the first FCM chairman. Fifth: ESAA signed a protocol with the ACCA (the British Association of Chartered Certified Accountants) to represent it in Egypt. The ESAA also established an office for the ACCA and designated a special relations officer. Both ESAA and ACCA participate in the quali-fication of Egyptian accountants through the granting of the IFRS Diploma upon passing the required examination. The examinations are prepared and evaluated in England. CVMENA: What are ESAA’s current priori-ties? HH: The establishment of a separate ESAA training center to serve larger numbers of members and non-members in all areas re-lated to the work of accountants and audi-tors. Developing and upgrading the ESAA organizational structure in light of the ex-panded activities and moving to the new headquarters. Effective participation in mod-ernizing the Egyptian standards in line with the latest international standards. CVMENA: What is your personal vision, and what are your aspirations for the future of the profession in Egypt? HH: I hope that the accounting profession in Egypt will flourish to the extent that all ESAA members and non-members enjoy high and comparable professional levels. This will only come true by replacing the current law for practicing the profession issued in 1951. It has undergone no change since then. A new law should be issued reflecting the profes-sional developments of the accounting and auditing profession over the past 60 years. The new law should limit permitting profes-sional practice to those who have passed examinations and tests, in a manner similar to the ESAA examination arrangements. The qualified accountant should also comply with the Continuing Professional Education (CPE) requirements.

76

بالنسبة لكافة المحاسبين المسجلين لدى هيئة الرقابة المالية بما فيهم أعضاء الجمعية هناك وحدة مشكلة بموجب قانون الهيئة، تختص بالرقابة على جودة أعمال كافة المحاسبين المسجلين لدى الهيئة بما

كذلك يحق المسجلين لديها من أعضاء الجمعية. فيهمللجنة الشكاوى والتحقيق بشعبة مزاولي المهنة بنقابة التجاريين التحقيق في أي شكوى ضد أي محاسب مسجل لديها في التقصير في أداء عمله أو سوء التصرف المهني وفرض العقوبات المناسبة التي قد تصل إلي طلب شطب العضو من سجالت

لدى وزارة المالية.للمهنة اسبين المزاولين المح

ما هو مستوى وطبيعة المنافسة -7المنافسة بين الشركات العاملة فى مجال مراقبة الحسابات وبخاصة فرص المكاتب

الصغيرة والمتوسطة؟بصفة عامة تقوم المكاتب الكبرى بمراجعة معظم البنوك وشركات التأمين وفروع الشركات العالمية في مصر ، وكذا العديد من الشركات المصرية المسجلة بالبورصة ، وتتركز المنافسة بينهم في هذه القطاعات. بينما تقوم المكاتب المتوسطة والصغيرة

متوسطة بمراجعة العديد من الشركات المصرية الحجم والصغيرة وشركات األفراد والمنشآت الفردية. على الرغم من ذلك فإنه من غير المستبعد في ضوء زيادة أهمية الشركات الصغيرة والمتوسطة بدء إهتمام المكاتب الكبرى في تقديم خدماتها لتلك الشركات ومنافسة المكاتب األصغر حجماً في هذا

من المتوقع في ضوء المجال. على الجانب األخراالشتراط اإلجبارى لتغيير مراقب الحسابات كل فترة زمنية محددة أن تبدأ المكاتب المتوسطة الحجم في محاولة منافسة المكاتب الكبرى في مجال مراجعة

الشركات المصرية الكبرى.

ما مدى قدرة الجمعية على المساهمة فى -8 تدعيم النمو االقتصادى بمصر ؟

ة أنشطة تسهم من خاللها مهنة المحاسبة هناك عدوالمراجعة فى تدعيم االقتصاد. على سبيل المثال،

المراجعة بمستوى عالو المحاسبة ذ أعمالفإن تنفيوفقاً للمعاير الدولية يعطى مصداقية من المهنية

زيادة ثقة فيللقوائم المالية وهو ما يساهم كما ق.المستثمرين وجذب رؤوس األموال إلى األسوا

أن القيام بأعمال الفحص النافى للجهالة أيضاً يساعد ةمواالستشارات الفنية فى مجال الحوك

االستثمار.تقوية البنية التحتية فى مجال على التيالدورات التدريبية على الجانب اآلخر فإن المراجعةوالمحاسبة تتقدمها الجمعية في مجاال

تلك فيارتقاء العمل فيالضرائب تساهم و الحوكمةو األداء االقتصادىالمجاالت وانعكاس ذلك على

تخريج أعداد فينجاح الجمعية كما أن الشركات.يسهم بشكل مباشر متزايدة من المحاسبين المؤهلين

فى توفير الخبرات الفنية والكفاءات الالزمة لشغل شكل عام.المجاالت المالية ب في الهامةمناصب ال

العديد من تمثيل الجمعية لدىتقدم يضاف إلى مااللجنة العليا الجهات الفنية والرقابية الهامة مثل

أعمالمجلس الرقابة على جودة أداء ، للمعاييرلجنة قيد ، لجنة القيد بالبورصة، الحسابات مراقبي

لجنة النظام و المحاسبين لدى وزارة المالية .اتللمحاسب المركزيلموحد لدى الجهاز ا المحاسبي

أهم إنجازات من وجهة نظركم، ما هى -9

خالل السنوات األخيرة؟الجمعية ما حققته الجمعية خالل السنوات األخيرة أوالً:

من زيادة في عدد أعضائها ، والمحافظة على من خالل إرتفاع المستوى المهنى العالى ألعضائها

مستوى اإلمتحانات والتدريب والتعليم المهنى بكفاءة أعضاءأدى الى إعتراف اكبر مما المستمر

من قبل جمعية المحاسبين والمراجعين المصرية مجتمع األعمال والهيئات الحكومية المختلفة فضالً

سوق الأعضاء الجمعية في تزايد أعمال مكاتبعن .المصرية

يعود الفضل بشكل كبير في وجود معايير ثانياً:السلوك مصرية سواء للمحاسبة أو المراجعة أو

المهنى الى مجهودات جمعية المحاسبين والمراجعين المصرية وهو ما أتاح إعداد قوائم وبيانات مالية

تمكنت تتماشى مع المتطلبات العالمية.ثالثاُ:أكتوبر 6الجمعية من إنشاء مقر مناسب لها بمدينة

) على تم تمويله بالكامل من قبل أعضاء الجمعية(وبه من القاعات مساحة ثالثة آالف متر

والمستلزمات واألجهزة والمعدات التى تسمح بعقد الدورات التدريبية ألعداد تصل الى نحو

متدرب في نفس الوقت كما تسمح بعقد 400اإلمتحانات مقر الجمعية علماً بان عدد الممتحنين

كل دورة.ممتحن في 300يبلغ حوالى ة الجمعية هى الممثل الوحيد لجمهوري رابعاً:

IFACمصر العربية في اإلتحاد الدولى للمحاسبين وكذلك في إتحاد محاسبى دول حوض البحر األبيض

والذى إختار رئيس جمعية FCMالمتوسط المحاسبين والمراجعين المصرية(حازم حسن) كأول

رئيس لإلتحاد. عيةقامت الجمعية بعمل بروتوكول مع جم :خامساً

لتمثيلها في مصر ACCAالمحاسبين البريطانية ِ حيث خصصت الجمعية مكتب وموظف خاص بالعالقات مع الجمعية البريطانية كما تشترك الجمعيتين في تأهيل المحاسبين المصريين عن طريق منحهم دبلومه في المعايير الدولية للتقارير

بعد اجتيازهم اإلمتحان IFRS Diplomaالمالية ي الخاص بذلك والذى يتم وضعه وتصحيحه ف

لترا.جإن

ما هى أولويات الجمعية فى الفترة -10 الحالية؟

تابع نفصلإنشاء مركز تدريب للجمعية ككيان مكبر أللجمعية، يتمكن من تقديم خدمات التدريب لعدد

ئهامن المحاسبين من أعضاء الجمعية وغير أعضاوفي كافة المجاالت التي لها عالقة بعمل المحاسبين

والمراجعين.تطوير الهيكل التنظيمي للجمعية واالرتقاء به في ضوء التوسع في أنشطتها ، واالنتقال إلي المقر

الجديد. المشاركة الفعالة في تحديث المعايير المصرية لتتفق

خر ما صدر دوليا في هذا الشأن.آمع

ما هى رؤيتك الشخصية وتمنياتك -11 لمستقبل المهنة فى مصر؟

ة المحاسبة في مصر بشكل عام أن تنهض مهنأتمنى بحيث يكون جميع المحاسبين المزاولين للمهنة من

مستوى ىأعضاء الجمعية ومن غير أعضائها ذومهني عال ومتقارب. ولن يتأتى ذلك إال باستبدال

1951قانون مزاولة المهنة الحالي والذي صدر عام مع وافقولم يطرأ عليه أي تعديل، بقانون جديد يت

ت التي حدثت في مهنة المحاسبة والمراجعة التطوران عاما منذ صدور هذا يستأكثر من على مدى

أهم المستجدات المطلوبة في من ولعل القانون.القانون الجديد أن يكون التأهيل لمزاولة المهنة هو

جمعية ما تقوم به فقط من خالل امتحانات على غرار يلزم المحاسبين والمراجعين المصرية، وأيضا أن

المحاسب المؤهل بمتطلبات التعليم المستمر.

Egypt 77

حوار مع رئيس جمعية المحاسبين والمراجعين المصرية

رئيس جمعية المحاسبين والمراجعين ورئيس لجنة المعايير بالجمعية ومن المأمول أن تصدر المعايير

ذن هللا إبحيث يمكن ب 2014المحدثة قبل نهاية عام قامت كما .2015عام بدايةالعمل بها اعتبارا من

المصرية لجنة المعايير بالجمعية بإعداد المعاييرللمراجعة والفحص المحدود وخدمات التأكد األخرى

مع المعايير الدولية وتم إصدارها في عام وافقةمتمار بعد مراجعتها من بمعرفة وزير االستث 2008

قامت لجنة كذلك هيئة سوق المال في ذلك الوقت.المعايير بالجمعية بإعداد ميثاق للسلوك المهني متمشياً مع مثيله الدولي وقامت هيئة سوق المال بإصداره ليسرى على مراقبي الحسابات المسجلين بالهيئة كما قامت الجمعية بإصداره ليسرى على

أن معايير المحاسبة اإلشارة إلىوتجدر أعضائها .عتمدها الجهاز ا المصرية التي أعدتها الجمعية

عداد وعرض إالمركزي للمحاسبات لتطبق على القوائم المالية لشركات القطاع العام وقطاع األعمال العام والوحدات اإلقتصادية كما قام الجهاز باعتماد المعايير المصرية للمراجعة والفحص المحدود

مات التأكد األخرى وكذلك ميثاق السلوك وخدالمهني للتطبيق في الجهاز المركزي للمحاسبات نفسه وأصدر رئيس الجهاز القرارات الالزمة لهذا

تقوم الجمعية بعمل على صعيد التدريب، التطبيق .دورات تدريبية دورية لشرح المعايير وتطبيقاتها ألعضاء الجمعية وغيرهم، كما تنظم الجمعية

دورات تدريبية نصف سنوية ACCAباالشتراك مع . ACCA IFRS Diplomaللحصول على

إلى أى مدى تقوم الجمعية بالتواصل -5

أقسام المحاسبة واألساتذة مع والتنسيق المتخصصين بالجامعات المصرية؟

بين ة أو تنسيق متكاملمنظم آليةال يوجد حاليا نوع من الجمعية والجامعات المصرية ولكن يوجد

قيام بعض تواصل وتبادل الخبرات من خالل المحاضرين لبعض الوقت كالعمل بأعضاء الجمعية

وكذلك عن طريق الجامعات الخاصة عدد منلدى وجود بعض أعضاء بالجمعية ومجلس إداراتها من

األمر بالجامعات المختلفة. إال أن أساتذة المحاسبةمناهج تنسيق بينلل آلية متكاملة إيجاديتطلب

، ومناهج المحاسبة من جانب وامتحانات الجمعية .على الجانب اآلخر والمراجعة بالجامعات المصرية

الرقابة ما هو دور الجمعية فيما يتعلق ب -6

؟سلوك المهنيالعلى جودة األداء وحسن ينحصر دور جمعية المحاسبين والمراجعين المصرية في مجال الرقابة على جودة األداء وحسن السلوك المهني حسبما ورد بالقانون األساسي للجمعية الذي يخول للجنة الشكاوى بالجمعية التحقيق في اي شكوى بالتقصير من احد أعضاء الجمعية أو سوء السلوك المهني، وإنزال العقوبات الالزمة عليه بما في ذلك تجميد عضويته بالجمعية.

يضطلع بالمهنة لمدة ال تقل عن خمسة عشر عاماً.بالجمعية عدد من اللجان المختلفة الفنيبالعمل

منبثقة من مجلس اإلدارة ويرأس كل منها عضو

من مجلس اإلدارة. وتتكون تلك اللجان من لجنة العضوية/ لجنة االمتحانات/ لجنة المعايير/ لجنة تطوير المناهج/ لجنة التدريب والتعليم المستمر/

ويعاون مجلس وى.اللجنة الثقافية ولجنة الشكايرأسه مدير عام تنفيذي ومالي إدارياإلدارة جهاز

متفرغ يعمل معه حالياً عدد من الموظفين اإلداريين شئون األعضاء من إشتراكات ويتولى هذا الجهاز:

وشهادات ومعلومات وأية خدمات أخرى لألعضاء لإلمتحانات والرقابة عليها اإلداريالتنظيم

دورات التدريبية والندوات وورش التنظيم اإلدارى لل المستمر المهنيمتابعة التعليم العمل

ما هى كيفيىة الحصول على عضوية -3

الجمعية؟يتم الحصول على عضوية الجمعية عامة عن طريق

ويشترط ونهائياجتياز الشخص إلمتحانين متوسط أن يكون قد أمضى ثالث سنوات تمرين بعد التخرج

لمراجعة الخاصة بأعضاء بمكاتب المحاسبة واتستوفي الشروط التيالجمعية وغيرها من المكاتب

يضعها مجلس إدارة الجمعية لضمان جدية التيأما الحاصلين التمرين ونوعية الخبرة المكتسبة . CPA / ACCAعلى الشهادات المهنية الدولية مثل

/ CA في كل النهائيفالبد من اجتيازهم إلمتحانلمالية والقانون والضرائب المصرية من المحاسبة ا

، وبالنسبة للحاصلين على شهادات الدكتوراه في النهائيالمحاسبة فالبد من اجتيازهم إلمتحان

ويتم دراسة مناهج اإلمتحانات بالجمعية . بالكاملهو مطبق بأول مع ما وتطويرها بما يتماشى أوالً

وفي ضوء ذلك في الجمعيات المهنية العالمية .اإلمتحان : يليأصبحت مواد اإلمتحان كما

المراجعة ، المحاسبة المالية: ويشمل المتوسطالتكاليف ، المحاسبة الضريبية، وخدمات التأكد

.القانون وحوكمة الشركات، ووالمحاسبة اإلداريةالمحاسبة المالية النهائي: ويشمل اإلمتحان

، لمتقدمةالمراجعة وخدمات التأكد ا، المتقدمةنظم و التمويل، المحاسبة الضريبية المتقدمة

.المعلومات المحاسبية

ما هو دور الجمعية فى دعم تطبيق -4النعايير الدولية فى المحاسبة والمراجعة

وقواعد السلوك المهنى؟ قامت لجنة المعايير بالجمعية بدور رئيسي نحو إعداد معايير المحاسبة المصرية التي صدرت عام

معايير معكلي شبه شى بشكل اوالتي تتم 2006المحاسبة الدولية السارية في ذلك الوقت ، كما

بتحديث معايير المحاسبة 2013قامت خالل عام خر إصدارات المعايير آشى مع االمصرية لتتم

الدولية تمهيداً لمراجعتها واعتمادها من اللجنة مالية العليا للمعايير المشكلة لدى هيئة الرقابة ال

علماً بأن معظم أعضاء هذه اللجنة هم من أعضاء جمعية المحاسبين والمراجعين المصرية وتضم

Hazem HASSAN

Chairman of the Egyptian Society of Accountants and Auditors (ESAA)

بداية ما هى رسالة وأهداف الجمعية -1وما مدى تقدمها فى سبيل تحقيق تلك

األهداف؟تأسست جمعية المحاسبين والمراجعين لقد

المصرية بموجب المرسوم الملكى الصادر بتاريخ 5وأعيد إشهارها بتاريخ 1946إبريل سنة 24

عدد من أوائل هاقام بتأسيس .1977يناير سنة عدد كبير منهم المحاسبين في مصر في ذلك الوقت

لذا . ممن حصلوا على تأهيلهم المهنى من إنجلتراتم تصميم نظم الجمعية وامتحاناتها طبقاً للنظام فقد

" تهدف الجمعية إلى العمل على رفع و اإلنجليزى .المستوى العلمى والعملى للعاملين في حقل مهنة المحاسبة والمراجعة والسعى لالحتفاظ لمهنة المحاسبة والمراجعة في مصر بالمستوى الالئق لها

". دولياً

الجمعية والهيكل كيف تطورت عضوية -2التنظيمى الخاص بها لمواكبة التطورات

المهنية واحتياجات أعضائها؟هناك زيادة مضطردة سنوياً في أعضاء الجمعية

عضواً 1912 31/12/2013بلغ عددهم في التيبلغت الزيادة في . عضواً 2000وحالياً ما يقرب من

أعضاء الجمعية خالل الخمس سنوات الماضية عضوية جديدة خالل 148منها جديداً عضواً 482 إدارةتدار الجمعية بمعرفة مجلس . 2013عام

) عضواً تنتخبهم الجمعية العمومية 15مكون من (من بين أعضائها ويشترط أن يكون ثلثا أعضاء المجلس على األقل من بين أعضاء الجمعية المشتغلين بالمكاتب المهنية الخاصة لمدة ال تقل

وينتخب مجلس اإلدارة في . عاماً عن خمسة عشر أول إجتماع له بعد إنعقاد الجمعية العمومية هيئة

–أمين الصندوق –نائبه –المكتب ( الرئيس السكرتير العام ) وأن يكون كل منهم قد اشتغل

In The News 78

Egyptians Help Shape the World Bank Group’s Strategy in Egypt for the Coming Years

In a room overlooking the Nile in the Upper Egyptian governorate of Aswan, a group of Egyptians gathered to dis-cuss their development priorities and strategies to address them. Eventual-ly, these discussions culminated in them choosing to prioritize education, health, poverty, infrastructure, and the development of economic sectors. Samir Kamel from the Future Associa-tion for Development, Consumer Pro-tection and the Environment, said he wished everyone in Aswan “could have watched this meeting live to see an international institution such as the World Bank Group coming to Upper Egypt to listen to our key issues.” These discussions comprised the first phase of consultations held by the World Bank Group ahead of drawing-up its new Country Partnership Framework strategy for 2015–2019. The joint strategy involves three World Bank Group institutions, namely the World Bank, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). The consultations, which started with government representatives in early March, were followed by three meet-ings held throughout the month of June with Egyptians from civil society and youth organizations, rural devel-opment societies, academia and the

private sector, in Cairo, Alexandria, and Aswan. This is the first time direct consulta-tions with a broad range of Egyptians from outside official institutions have been held. A website has also been created with a survey aimed at collect-ing feedback. “The Country Partnership Framework is the road map that spells out how the World Bank Group will support Egypt over the coming years,” said Hartwig Schafer, Country Director for Egypt, Yemen, and Djibouti. “We are collect-ing ideas, opinions, views and sugges-tions. Contributions from those who know the country best will help us shape the strategy.”

In Cairo, the audience was diverse, with more than 100 participants. Edu-cation, social welfare, energy, agricul-ture and health ranked high on their agenda. In Alexandria—where most participants were young—the list was the same, though they added private sector development. Participants in Aswan were of more or less the same

opinion, adding infrastructure and fisheries, minerals and tourism. Examples of the contributions included Ahmed Okasha of the Mubadra Center in Alexandria, who emphasized: “Egypt faces challenges to elementary education, the need for the develop-ment of teachers and the curricula, and changing the culture of the com-munity.” Mohammed Hani Al-Sebaa’i, a founder of Al-Hassan Foundation for Spinal Cord Injuries, chose the health service. “Disability issues should also be the center of our attention.” Aswan was chosen intentionally by the World Bank Group to mark the first round of consultations as Upper Egypt is underdeveloped. "The consultations form a key part of determining the World Bank Group’s priorities in Egypt over the next five years,” said Nada Shousha, IFC Country Manager for Egypt, Libya and Yemen. “It was refreshing to hear from differ-ent groups—ranging from academia and civil society to the government and private sector—on what we should be focusing on to help Egypt in its transition." A second round of consultations is scheduled to be held ahead of the launch of the new Country Partnership Framework next year.

79

The Gulf

United Arab Emirates 80

Value of SMPs in Enhancing the Financial Inclusion of Small and Medium Enterprises

The UAE as a Case Study

Bassel NADIM CEO, UAE Association of Accountants and Auditors (AAA). He is also an advisor to the Board of Tanmia Capital Limited, a London based consulting firm. Economic authorities in the United Arab Emirates (UAE) have focused attention and planning on the development of Small and Medium Enterprises (SMEs) with a view towards improving employment and boost-ing economic activity throughout the coun-try. In seeking to support and promote SMEs, their counterparts in the accountancy profession - Small and Medium Audit Practi-tioners (SMPs) play a critical role in support-ing SME financial reporting, enabling SMEs access to finance and improving financial inclusion within economy. SMEs Significant Role in the UAE Economy The contribution of SMEs to the UAE Gross Domestic Product (GDP) is roughly 60%, which is well-above the global benchmark of SME economic contribution (45%). As can be seen in the graph to the right, Emirati SME contribution to national employment also rates much higher than regional and global averages with Emirati SMEs contributing roughly 84% to national employment. With-in the UAE, a significant portion of SME ac-tivity is centralized in the country’s business capital of Dubai (45%) with almost 75% of SME businesses being active in trade and retail services1. The new UAE Federal Law 2/2014 is highly expected to enhance the position and contribution of the SME sector to economic prosperity given the structural alignments envisioned through this law. According to the law, the Ministry of Econ-omy will establish and chair a national SME Council. This council holds as its future

mandate to collaborate with public and private shareholders in the development of a national SME program. This program shall perform activities in relation to capacity building, conducting needed research and coordination of local SME development programs and schemes nationwide. SMEs’ Financial Inclusion The ability to access financial services is defined as financial inclusion2. Obtaining financing facilities is of particular im-portance for all businesses - SMEs are not an exception. The aforementioned Federal Law has addressed that issue through two initia-tives: market access and banking access. On the market access side, this legislation sets minimum levels designated for small busi-ness contractor. Specifically the federal gov-ernment and those corporations in which the federal government owns more than 25% of their total capital, are obliged to direct 10% and 5% respectively of their budget towards procurement from SME companies. On the banking access side, the Federal Law has improved this aspect by requesting Emirates Development Bank (EDB) to allocate 10% of its financing expo-sure toward SME financing. However, other banks and financing companies (e.g., com-mercial banks) are still free to construct their lending portfolios as they deem fit. The ultimate objective of this initiative is to ele-vate SMEs financial inclusion in the country. Loans to SMEs in UAE were recorded at the level of US$ 4 billion by 2013 which consti-tutes only 4.5% of the entire lending. Recent

reports from the World Bank3 suggest that the required funding needed for SMEs in UAE is roughly US$ 25 billion. This is almost 6 times the amount of the existing SME lending portfolio - a proposition that cur-rently signifies a low financial inclusion ratio for the SME sector. SMPs as a Catalyst for Financial Inclusion In most cases, SMEs look for financial advice and professional support from SMPs as trusted advisors who can offer accommoda-tive professional fees and who operate with-in a more SME-tailored framework when compared to larger audit and strategy firms. To be most effective in their role in advising SMEs and facilitating their access to finance, SMPs must develop a set of services and products to address the challenges faced in SME access to finance. Examination of the reasons for rejecting SMEs lending applica-tions may provide some strategic direction. The matrix below identifies some of the key reasons for lending application rejection and suggest products and services that an SMP may offer. In addition to tailoring and en-hancing SMP provision of specific business lines as highlighted above; general strength-ening of SMP firms, the professional ac-counting organizations (PAOs) which sup-port and oversee them and the legal and regulatory framework in which they operate – can all be seen as integral pre-requisites in furthering SME financial inclusion. The bet-ter equipped and more recognized the SMP, the greater the strength of its reports and the more positive response from lenders.

81 It is a common occurrence that banks shortlist larger audit firms as approved audi-tors and business advisors. With exception of a few select SMPs, the majority of these firms are not shortlisted by banks despite the fact that they are licensed as chartered accountants. This may be due in part to the lack of proper internal review systems and international systems of quality control established within some SMPs. UAE Accounting and Auditing Association (AAA) –Supporting and Strengthening Local Emirati SMPs Recent data from the Ministry of Economy states that there are 105 chartered account-ing firms in the UAE. Considering global and regional rankings, SMPs comprise the vast majority of these firms in operation within the UAE. Although there are strong num-bers of SMP firms, the aforementioned chal-lenges hinder SMPs competitiveness in the market and may limit SMEs’ choices, and possibly result in SME growth stagnation. In recognition of these challenges facing SMPs and SMEs, the AAA has designed and draft-ed a high-level SME model which appropri-ately captures the inter-relationship be-tween SMEs and SMPs in the UAE. This model demonstrates the position of SMPs at the heart of SME business advisory needs and access to finance. Additionally, in June

2014, alongside the World Bank Exchange 2014 Conference, the AAA in partnership with the International Federation of Ac-countants (IFAC) and World Bank conducted a capacity building workshop aimed at transferring knowledge and good practices in the SMP sector so as to better enable local Emirati audit firms to reach their po-tential in providing high quality services to their SME clients. Finally, in recognition of the need for a system of Audit Quality As-surance to promote internal systems of

quality control and high quality services amongst all audit firms; the AAA has held dialogue with the World Bank and IFAC re-garding the nature of such systems, their components and their objectives. 1. Dubai SME, The State of Small and Medium Enterprises (SMEs) in Dubai, 2013. Small and Medium-Sized Enterprises in the EU, 2011/12 (Ecorys) 2 The Global Findex Database 3 The Status of Bank Lending to SMEs in the Middle East and North Africa Region: Results of a Joint Survey of the Union of Arab Bank and the World Bank 2011

Strategic Directions for SMPs offers

Reasons for rejecting a financing application from an SME What services an SMP can provide Clarity of the project details and its cash flow projections* Co-developing proper business case More than usual risk in the operation of the applicant* Co-developing a business plan, with focus on achievements,

stress scenarios and risk development framework. The submitted file is incomplete* Filling guidance and administrating Poor technical competence in addressing the lender’s questions* Financial advice

Providing financial management on outsourcing bases Loan- collateralization ratio is not well established* Assets and business valuation.

Structuring a financing scheme to meet the collaterals status. Confidence in the applicant business profile* Operational excellence programs

Quality assurance systems Accounting and auditing

Technical competence in fulfilling the regulatory requirements** Investing in knowledge of certain industries and regulatory framework. Showcase thought leaderships

* D&B Business Insight Series – SME Lending in UAE, 2008. **SMP Development in UAE and the work of the Accountants & Auditors Association (AAA) – Bassel Nadim *** Conflict of interest rules shall be observed

Connecting Voices - THE BLOG - October 2014

Kingdom of Saudi Arabia 82

Interview

Dr. Ahmad AL-MEGHAMES Secretary-General of the Saudi Organi-zation for Certified Public Accountants

Interview conducted by Riham Hussein, Fi-nancial Management Specialist, Governance Global Practice, MENA, The World Bank. The Saudi Organization for Certified Public Accountants (SOCPA), founded in 1992, works under Royal Decree to “promote the accounting and auditing profession and all matters that might lead to the development of the profession and improve its status”. SOCPA has 5,000 members and has been a leader and active member of the Interna-tional Federation of Accountants (IFAC). We recently interviewed Dr. Ahmad Al-Meghames, Secretary-General of SOCPA, to discuss current developments in the ac-counting profession in Saudi Arabia and what role SOCPA is playing. Dr. Al-Meghames completed his Doctorate of Business Administration (DBA) in 1997 from Mississippi State University, majoring in accounting. He taught for a few years at the university level before joining SOCPA as Deputy Secretary-General in 2003. Since 2006, he has taken charge of SOCPA as its Secretary-General. CV MENA: What would you say is the greatest challenge for young accountants starting their careers in Saudi Arabia? AA: The major challenge is to find a curricu-lum that incorporates the international standards (accounting and auditing) into the

Arabic language, and to find an Arabic lan-guage faculty expert in both the Interna-tional Financial Reporting Standards (IFRS) and the International Standards on Auditing (ISAs). CV MENA: What are the challenges facing Micro, Small and Medium Enterprises (MSMEs) in Saudi Arabia in the area of accounting, and what role is SOCPA playing in meeting these challenges? AA: Training and development in the Arabic language is the biggest challenge. SOCPA is currently working actively in the following areas:

• SOCPA has entered into agreements with leading publishers and other agencies to translate into Arabic some quality books and training materials on IFRS and ISAs.

• SOCPA’s nominee has been appointed to the SME Implementation Group of the International Accounting Stand-ards Board.

• Memoranda of Understanding (MOUs) have been forged with lead-ing world professional accountancy bodies, such as the Institute for Char-tered Accountants of England and Wales, the Institute of Chartered Ac-countants of Pakistan, the Institute of Chartered Accountants of India, and theAssociation of Chartered Certified Accountants.

In addition, the development and capacity building of SMPs will be a focus area for SOCPA in the next few years. CV MENA: What is the rate of compliance by companies with the International Finan-cial Reporting Standards? AA: Currently, banks and insurance compa-nies are required to apply IFRS. In addition, SOCPA standards apply to all other compa-nies, listed and unlisted. SOCPA has ap-proved an IFRS convergence plan by which listed entities other than banks and insur-ance companies would be required to re-port under IFRS as adopted in Saudi Arabia. The IFRS transition plan is part of a project called ‘SOCPA Project for Transition to In-ternational Accounting and Auditing Stand-ards’. SOCPA started the project in 2012, and expects to complete it around 2017. SOCPA’s stated goal for the project is to make a transition toward IFRS after requir-ing some additional disclosures explaining the nature of transactions for Shariah-conscious users. SOCPA is also translating all

of the IFRS into Arabic as part of this project under an agreement with IFRS Foundation. CV MENA: Can you tell us about your new partnership with The Institute of Chartered Accountants in England and Wales (ICAEW)? What opportunities do you think this will create for your members? Do you have any plans for future partnerships with other international organizations? AA: Recognizing the importance of mutual cooperation in the development of the pro-fession of accounting and auditing, SOCPA signed an MOU with the ICAEW for the ad-vancement of the accounting and auditing profession. The Memorandum aims to es-tablish closer cooperation in various profes-sional areas, including the conducting of technical research, holding joint profession-al activities, and providing joint advice to other professional bodies. This agreement will allow for mutual work between the parties to consolidate the Saudi accounting sector and ensure its sustainability through the advancement of accounting knowledge, professional and intellectual development, as well as to increase the number of mem-bers of both parties. Furthermore, im-portant initiatives may be developed. Expe-riences and expertise may be exchanged for the benefit of the accounting sector and its members in the Kingdom, and across the region in the future. After signing this MOU, SOCPA has also signed an MOU with The Institute of Chartered Accountants of India (ICAI). However, the most successful MOU experience has been with The Institute of Chartered Accountants of Pakistan (ICAP), where both the bodies have supported each other in a variety of areas. A major initiative under the MOU with ICAP is a joint confer-ence scheduled for March 2015.

83 CV MENA: An area of weakness in other countries is usually the Quality Assurance (QA) program. Can you tell us about SOCPA's QA program, and if it has been effective in ensuring a high degree of quali-ty among auditors? AA: SOCPA’s QA program is one of the most comprehensive programs among the Gulf Cooperation Council (GCC) countries (The GCC countries include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates). It is modeled on the Ameri-can Institute of Certified Public Accountants (AICPA) program, and almost in line with the requirements of the International Standard on Quality Control (ISQC) 1. In this context, SOCPA is currently reviewing its program and is trying to upgrade it with the help of accountancy bodies, such as ICAEW, ICAP, and so on. CV MENA: Can you share any news on the upcoming shift to International Public Sec-tor Accounting Standards (IPSAS) which is expected in Saudi Arabia?

AA: In September 2013, the Council of Min-isters in Saudi Arabia agreed to apply the Guidance of Governmental Accounting Standards, Objectives, and Concepts, pre-pared mainly on the basis of the interna-tional public sector accounting standards issued by The International Public Sector Accounting Standards Board (IPSASB). This application shall be implemented according to a number of procedures including the formation of a special committee within the General Auditing Bureau consisting of spe-cialists from the General Auditing Bureau, Ministry of Finance, the Institute of Public Administration, the Saudi Organization for Certified Public Accountants, and other bodies that the Committee considers ap-propriate. CV MENA: Since assuming the Director-General position, which activities and achievements are you most proud of? AA: There are a number of achievements and activities to highlight:

1. Becoming the IFAC Professional Ac-countancy Organization (PAO) Devel-opment Committee Deputy Chair.

2. Having the Board of Trustees of the IFRS foundation choose our nominee.

3. Becoming a trusted arm for the Saudi government in areas related to consul-tation in accounting and auditing.

4. Achieving financial independence for SOCPA.

5. Approval of a SOCPA Project for Transi-tion to International Accounting and Auditing Standards.

6. Approval of an Accounting Standards Project for non-profit organizations.

7. Electronic filing of financial statements under eXtensible Business Reporting Language (XBRL).

8. Using web-based applications to pro-vide our services.

Additional projects under development can be found on SOCPA’s website at: www.socpa.org.sa.

Kuwait

Interview

Bassam RAMADAN Kuwait Country Manager MENA, The World Bank Interview conducted by Moad Alrubaidi, Senior financial Management Specialist, Governance GP, MENA, The World Bank Bassam Ramadan, a Lebanese national, joined the Bank in 1989 as a Young Profes-sional. He started as an economist with the MENA regional Human Development Net-work (HDN), and then as a Senior Econo-

mist and Lead Operations Officer. He also worked in Africa from 2004 to 2008 as a Sector Leader for Human Development before he became Sector Manager for Social Protection and Labor in the HDN anchor in 2008. Since 2011, he has been based in Kuwait as the World Bank Country Manager for Kuwait. CV MENA: How do you see the develop-ment of the Country Program in Kuwait? BR: First, let me congratulate the MENA Financial Management team for taking on this important initiative to share knowledge and experience. The World Bank has had a strong relationship with Kuwait for decades. Kuwait is a contrib-uting member to the World Bank and a key development partner. The Country Pro-gram in Kuwait has continued to grow over the years, which led to the opening of the World Bank Office in 2009. The Kuwait Reimbursable Advisory Services (RAS) Pro-gram is built around the following three main pillars which are aligned with the

priority areas of the Five-Year Plan of the government of Kuwait. (1) Improving public sector performance. Activities include supporting the Ministry of Finance in: modernizing the tax admin-istration system; enhancing public financial management; streamlining outdated pro-curement and project cycle regulations and practices; and strengthening the policy, institutional, information and regulatory frameworks for better public land man-agement. (2) Enhancing economic diversification through private sector development. Activi-ties include: supporting the recently estab-lished Small and Medium Enterprise Fund; supporting Kuwait’s Direct Investment Promotion Authority; helping the newly established Competition Protection Au-thority, and revamping the country’s insol-vency laws. (3) Enhancing human development. Key activities include a large program in the education sector, as well as health, labor markets, and social safety nets.

84

Overall, the program in Kuwait is very ac-tive and has grown several fold over the past five years— and I expect that it will continue to grow. The program ranges from building institutions (for example, advising the recently established anti-corruption authority, building a new tax administration), to providing advice on reforming the education system and streamlining the business environment. The Bank Program is providing cutting-edge knowledge and policy advice, includ-ing the “how to” of implementing best practices in various sectors. In this context, the Bank is seen as an honest broker and a credible partner. CV MENA: What do you think are the key challenges and opportunities in Kuwait? BR: Kuwait is one of the early pioneers in the Gulf in many areas. Kuwait has one of the oldest universities in the region, an elected Parliament and active civil society, and one of the largest Sovereign Wealth Funds in the world. However, their econ-omy like the rest of the Gulf Cooperation Council (GCC), is overly dependent on oil, and would benefit from further economic diversification and streamlining of the gov-ernment bureaucracy, which would also help the private sector to develop and grow further. In addition, the quality of the education system needs improvement. The public sector is the main employer of Ku-

waiti nationals (90 percent of the labor force) who are offered generous benefit packages that further crowd out the pri-vate sector. The Bank RAS program in Ku-wait is addressing many of these issues and is helping the government take the neces-sary policy reforms to correct these distor-tions. While the Program has been growing in size, the challenge now is to grow the program while maintaining quality and responsiveness. The government’s ability to make decisions in a timely manner is key, and that is why it is critical to strengthen the center of government and improve the decision-making mechanism that should accompany the implementa-tion of the various reforms. On the Bank side, the challenges are: how to maintain the balance between responding to in-creased client demand for our services and selectivity; what the right mix of Bank staff and Consultants is for any given task; and how we can ensure that our interventions buy the best value for money for our cli-ents and maximize impact on the ground. These are all real issues in any RAS pro-gram, and require careful evaluation be-fore embarking on new tasks. They also require a continuous revision in the way we do business in these countries to keep up with their rapid pace of change. CV MENA: What distinguishes the World Bank’s work in Kuwait?

BR: The Bank in Kuwait is seen as a credible and independent advisor and not as a con-sultant fulfilling specific terms of reference (TOR) — and there is a big difference. We provide our clients with global best prac-tices, with the objective of offering the best integrated solutions to their develop-ment challenges. By doing so, we may sometimes provide advice that does not necessarily agree with certain vested inter-est groups, but it is our professional and moral obligation to provide it so that gov-ernment can have the right options when making policy decisions. We also offer better quality advisory services at a cheap-er cost than many of the well-known global consulting firms. In addition, the client respects the internal quality assurance mechanisms the Bank goes through in the preparation and implementation phases of the program. The RAS program is a growing area in most middle-income countries (MICs) across the Bank. In my opinion, more and more countries will request as-sistance through the Bank’s various RAS programs as their economies evolve and they become less dependent on our finan-cial support. This in turn implies that greater attention by the World Bank should be given to this growing business line to ensure that we remain relevant and competitive.

85

CV MENA Events

Events 86

MAAREFAH

MAAREFAH

Mechanisms against Fraud and Corruption: A Case Study on Morocco April 17, 2014, Online

One of the main reasons behind the lack of effectiveness and efficiency in anti-corruption programs and measures initiated by several governments, mainly of develop-ing countries, is the lack of a comprehensive and targeted anti-corruption strategy. Morocco’s Central Authority for Corruption Prevention (ICPC) recommended the design and the effective implementation of a na-tional anti-corruption strategy in Morocco. Subsequently, the ICPC performed a prelim-inary assessment of corruption and pro-posed several measures to prevent and fight corruption. The Moroccan government recently launched the nationwide study for the de-sign of a national anti-corruption strategy. In this interactive event, Mr. Ahmed Yassine Foukara shared the reasons behind the fail-ure of previous anti-corruption initiatives in Morocco as well as the reasons for the suc-cess of the current strategy. He discussed the different approaches and tools Morocco is using to prevent and fight corruption, as well as the importance of finding the right remedies for different countries and regions.

MAAREFAH

Integrated Reporting: An Introduction May 20, 2014, Online

“Integrated Reporting” (called <IR> for short) is a tool that enables the corporation to report on its financial as well as on the environmental, social, and governance as-pects of its business. It is a powerful in-strument to enhance governance, transpar-ency, and accountability in the corporate and public sectors. Professor Robert Eccles who popularized the concept of Integrated Reoporting through his award-winning book, One Report, described the evolution of the concept of Integrated Reporting and its current stage as well as the public policy implications of <IR> especially in terms of environment sustainability.

MAAREFAH

Value Added Tax: Rele-vance, Administration, Con-trols and Good Practices May 27, 2014, Online

In this event, Dr. Sebastian James explained the major differences between the Value-Added Tax (VAT) and the General Sales Tax

(GST), and discussed how these two taxes are best implemented, administrated, UN-CLEAR – rephrase charged and accounted for the decrease incidents of evasion or avoidance, UNCLEAR He described which services or goods are exempted, and de-tailed how VAT revenues may be best dis-tributed between national and sub-national governments. As part of his presentation, Dr James provided examples of good practices in VAT implementation and administration as a reference for tax policy makers in the MENA region who are embarking on its adoption.

MAAREFAH

Governance and Anti-Corruption (GAC) in Bank Financed Operations: Les-sons, Experience, Pain, and the Way Forward July 24, 2014, Online

In this interactive event, Ms. Maria Vannari shared her wide experience in dealing with GAC issues in Bank investment operations. She presented practical cases and discussed the way to interact with the various stake-holders when addressing GAC issues at the project level. She also explored the Bank’s effort to render the projects more “GAC responsive”. Additionally, she discussed the different approaches to prevent, identify and fight corruption at the project level. She also noted the importance of finding the right remedies while taking into considera-tion the specificities and context of each project.

Events 87

BOOT CAMP

BOOT CAMP

A Round Table on the Chal-lenges and Opportunities of Parliamentary Financial Oversight in Lebanon Beirut, Lebanon, March 20, 2014

As part of its Connecting Voices of the Mid-dle East and North Africa (CV MENA) initia-tive, and within the mandate of its Su-preme Audit Institutions and Legislative Scrutiny Technical Practice (SAI-LS TP), the World Bank’s MENA Financial Management Unit organized a round table on the “Chal-lenges and Opportunities of Parliamentary Financial Oversight in Lebanon.” The key note speaker was Member of Par-liament, Mr. Ibrahim Kanaan, the Chair of the Parliamentary Finance and Budget Committee. He was joined in the discus-sions by Mr. Alain Bifani, Director General in the Ministry of Finance, and Mr. Elie Maalouf, Judge at the Court of Accounts. The Round Table was chaired by Mr. Ferid Belhaj, World Bank Country Director for Lebanon, and attended by a number of participants from the World Bank, the Min-istry of Finance, the Court of Accounts, Parliament, and other agencies. In the context of the World Bank's Country Partnership Strategy for Lebanon, partici-pants recognized the importance of effec-tive oversight of the use of public re-sources for service delivery and accounta-bility. The mandate and achievements of the Lebanese Parliamentary Finance and Budget Committee and the enabling roles of both the Ministry of Finance and Court of Accounts were explored. International

good practices on parliamentary engage-ment in the budget process and the use of Supreme Audit Institution (SAIs) reports were shared. To promote knowledge-sharing and capacity enhancement through regional and global networks, the partici-pants discussed what the World Bank Insti-tute, the Arab Institute for Parliamentarian Legislative Studies and Training, and the Arab Parliamentarians against Corruption can offer. Key messages • Cooperation and collaboration among

the Parliamentary Finance and Budget Committee, Court of Accounts and the Ministry of Finance is continuing as it relates to instrumental matters, such as account accuracy and timeliness, budget comprehensiveness, and audit independence.

• With 54 sessions within three and a half months, the parliamentary com-mittee has been active, seriously studying and being vocal about chal-lenging issues related to the budget.

• The Court of Accounts is aware of its

capacity development needs and the impact of the challenging political economy. Indeed, it seeks to play a constructive role in suggesting measures to address these challenges.

• All participants agreed on the rele-

vance of the World Bank's agenda in supporting governance to the three main functions of parliament: repre-sentation, oversight, and legislative activity.

BOOT CAMP

Consultation for Parlia-mentary Stakeholders in MENA Center for Mediterranean Integration, Marseilles, France, April 7-9, 2014.

As part of its work on Public Financial Management (PFM), the World Bank (the World Bank Institute and the Middle East and North Africa [MENA] Financial Man-agement Unit) organized “The Middle East and North Africa Consultation for Parlia-mentary Stakeholders” in collaboration with McGill University, Laval University, the Westminster Foundation for Democracy and the United Nations Development Pro-gram. The objective of the consultations was to develop a better understanding of how parliaments in the region scrutinize the public budget — one of the key tasks of legislatures. Gaining a better understand-ing of the prevailing practice in the region will help the World Bank design a strategy for strengthening the capacity of parlia-ments to perform these critical PFM func-tions. Importantly, the event provided a forum for knowledge exchange between attending country delegations. Participants included Members of Parlia-ment and parliamentary staff from the finance/oversight committees in Algeria, Iraq-Kurdistan Regional Government (KRG), Jordan, Morocco and Tunisia, as well as officials from the Supreme Audit Institu-tions (SAIs) of Iraq, Iraq-KRG, Morocco and Tunisia. Discussions revolved around legal man-dates for parliamentary scrutiny, organiza-tion of parliamentary committee work, resourcing of parliamentary committees and parliamentary research capacity. The event also explored the powers and func-tions of SAIs in the region and their rela-tionship with parliaments. Given the limited systematized knowledge about parliamentary budgetary oversight in countries with a French administrative heritage, the McGill and Laval Universities of Canada are currently carrying out a re-

search project with support from l’Association des secrétaires généraux des parlements francophones (The Association of Secretary-Generals of Francophone Par-liaments- ASGPF). The event provided an opportunity for the researchers to obtain first-hand information from the partici-pants about the regional situation. Discussion Highlights • The role of parliament in the prepara-

tion and oversight of the budget var-ies greatly between countries, but generally the participating countries have a limited role for parliament in the preparation phase. There was a call for stronger involvement in the early stages of the budget cycle.

• In several countries, oversight com-mittees have held inquiries into al-leged misuse of public funds, some-times with a high degree of transpar-ency. For example, the results of an investigation in Algeria were posted online, and in Morocco parliamentary hearings have been broadcast on TV. Reports of the plenary have also been published in the official gazette.

• The prevailing distinction between the Francophone and Westminster par-liamentary models is being chal-lenged. Indeed, there are opportuni-ties for learning between them. For example, Morocco has recently estab-lished a committee similar to a Public Accounts Committee, which is not common in Francophone systems. The relationship between the SAI and par-liament has traditionally been weaker in Francophone systems than in Westminster systems, but the exam-ple of Morocco shows that this can change.

BOOT CAMP

Introducing the Public Ex-penditure and Financial Accountability (PEFA) Framework The Exchange, Abu Dhabi, United Arab Emirates, 12 June, 2014 On June 12, 2014, Mr. Phil Sinnett, Head of the Public Expenditure and Financial Ac-countability (PEFA) Secretariat, presented an overview and update for a technical session of The Exchange conference. The session attracted the participation of around 100 attendees interested in public financial management in the MENA region, including senior officials from ministries of finance, supreme audit institutions and academia.

The format of the session included a formal presentation by Mr. Sinnett providing an overview of the program and how it was developed. He explained that it aims to strengthen the ability of both the recipient and the donor to assess the condition of a country’s public expenditure, procurement and financial accountability systems. Like-wise, it also helps to develop a practical sequence of reform and capacity-building actions in a manner that encourages coun-try ownership. The PEFA Framework helps to: (i) reduce the transaction costs to countries; (ii) enhance donor harmoniza-tion; and (iii) allow for the monitoring of progress of country public financial man-agement (PFM) performance over time. As such, it can lead to improved impact of reforms. Key points The Framework provides a high-level over-view of all aspects of a country’s PFM sys-tem performance (including revenues, expenditures, financial assets/liabilities and procurement). It also examines whether there are tools in place to deliver the three main budgetary outcomes, namely: aggre-gate fiscal discipline, strategic resource allocation, and the efficient use of re-sources for service delivery. PEFA consists of a set of 31 indicators along with a concise report providing a narrative about the indicators, and drawing a sum-mary conclusion from the analysis. The indicators are calibrated on a 4-point Car-dinal Scale (A, B, C, D), reflecting interna-tional good practice. Most indicators have between two and four dimensions, and each should be rated separately. Dimen-sions for an indicator are aggregated using one of two methods (M1: weakest link or M2: average). Drawing on the established PFM interna-tional standards and codes and other commonly recognized good practices, PEFA supports country-led reform for which analytical work, reform design, implemen-tation and monitoring reflect country prior-ities and are integrated into government institutional structures. It builds on donor and international financial institution har-monization and alignment around the country strategy, with a focus on monitor-ing results. In addition, it offers a shared information pool about PFM systems and

their performance, which is commonly accepted by and shared among the stake-holders at the country level— thus avoid-ing potentially duplicative and inconsistent analytical work. Through repeat assessments in a country, PEFA is capable of demonstrating perfor-mance changes over time. The Framework was launched in June 2005 and updated in January 2011. It covers the entire financial management cycle focusing on the central government. However, the application of the Framework at the sub-national gov-ernment level, for which guidelines were developed in 2008, has since become widespread. Mr. Sinnett highlighted that the Frame-work is currently being revised to incorpo-rate some editorial clarifications, and will be updated to include accepted good prac-tice in light of the recent evolution in PFM. Further, it will improve on certain areas of weakness. He stressed that there is no intention to change the purpose of the Framework or undermine its comparability over time. However, continuing relevance is of paramount importance. The Framework is expected to remove donor indicators and introduce new indica-tors for credible fiscal strategy, public in-vestment management and asset man-agement. Finally, Mr. Sinnett went through the indicators to be revised, explaining their current problems and the proposals to improve them. The new version of the Framework is expected to be finalized early in 2015. The presentation was followed by case studies, whereby participants rated a number of indicators. Interactive discussions were held during the session and participants were given the opportunity to comment and ask ques-tions. One of the questions raised was if PEFA can be used to compare PFM perfor-mance in different countries. Mr. Sinnett stressed that the PEFA Framework was developed to measure progress over time in one country— not for country compari-sons. Rather, it is a development tool that guides a country’s PFM reform priorities. Another question was if PEFA reports are publicly available. Mr. Sinnett confirmed that, subject to government approval, a country’s report is made publicly available on the PEFA website. Most finalized re-ports are currently available and can be accessed via the assessment portal.

BOOT CAMP

Training on the Supreme Audit Institutions Perfor-

mance Measurement Framework (SAI PMF) The Exchange, Abu Dhabi, United Arab Emirates, 12 June, 2014 Effective Supreme Audit Institutions (SAIs) provide an important contribution to the accountability for the use of public funds. In order to successfully fulfill this role, SAIs need to be independent from the execu-tive, have a certain organizational capacity, and a strong audit methodology. Continu-ous improvement is required for SAIs to remain relevant and support improved public sector management.

To facilitate the process of continued im-provement, the International Organization of Supreme Audit Institutions (INTOSAI) has developed a new tool to enable SAIs to better measure, manage, monitor and report on their performance — the SAI Performance Measurement Framework (SAI PMF). The tool facilitates an evidence-based assessment of SAI performance as compared to high-level requirements con-tained in the International Standards of Supreme Audit Institutions (ISSAIs). Use of the tool is currently being rolled out global-ly, and the INTOSAI Development Initiative, as coordinator of INTOSAI’s SAI PMF Task Team, has developed training materials to facilitate widespread learning on the use of this tool. As part of The Exchange conference orga-nized by the World Bank in Abu Dhabi on June 10-12, 2014, a workshop on the SAI PMF tool was held. The workshop was led by two certified SAI PMF facilitators, Has-sine Boussandel from the Court of Ac-counts of Tunisia and Mohammed Abdul-gaffar from the National Audit Office of Bahrain. The event was attended by 50 SAI staff and representatives of other public sector institutions from the Middle East and North Africa region, including Lebanon, Morocco, Oman, Tunisia, and the West Bank and Gaza. The topics of the SAI PMF workshop: Understanding SAI PMF • What is SAI PMF? • Why SAI PMF? • Developing SAI PMF

• Structure of the SAI PMF; the 7 do-mains of performance

Scoring SAI PMF • Performance indicators and scoring Conducting SAI PMF • The SAI PMF assessment process;

planning and key considerations SAI PMF Reporting: Sierra Leone Case Study • The SAI PMF Performance Report

BOOT CAMP

Strengthening Small and Medium Audit Practition-ers (SMPs) to Be Support-ers of MSME Development Abu Dhabi, United Arab Emirates, 12 June, 2014 The workshop was designed to offer Ex-change Conference participants and those from the local Emirati Small and Medium Practitioners (SMPs) community an oppor-tunity to discuss in a more intimate setting the importance of strengthening SMPs. In so doing, their ability to provide more tai-lored audit and business advisory services to better meet the needs of their Micro-, Small- and Medium- Enterprise (MSME) clients can be enhanced.

This event was structured to build upon the previous World Bank CV MENA Solu-tions Lab event entitled “International Standards on Auditing (ISA) for SMPs” held in December 2013, which provided an in-troduction to the subject of proper applica-tion of ISA amongst SMP practices. Co-Sponsored by the World Bank, MNAFM’s CV MENA Initiative, the World Bank’s MSME Facility, the International Federation of Accountants (IFAC) and the Association of Accountants and Auditors (AAA) of the United Arab Emirates (UAE), the "Strengthening Small and Medium Audit Practitioners to Be Supporters of MSME Development" event continued the momentum and interest by offering partic-ipants innovative insight into how best to support SMPs in their provision of high-quality services to MSMEs.

Event sessions focused on the following issues: • Development of SMPs in the UAE and

the work of the American Accounting Association (AAA) in supporting SMP strengthening and expansion of ser-vices to MSME clients. This session provided an overview of the nature of SMP development in the UAE, and the work of the AAA in supporting the de-velopment of this important sector of their financial services industry.

• Appropriate application of Interna-tional Standards on Auditing (ISA), ef-ficiency advice for practitioners, and current guides and resources for their proper application. This session pro-vided an overview of global highlights of the IFAC Small and Medium Prac-tices (SMP) Quick Poll research which was conducted in December 2013. Additionally, presenters provided the audience with an update on the input of the SMP Committee into standard setting, as well as the structure of the International Standards of Auditing (ISA). Further, an in depth review of ISA 220, 201, 200, 315, 230 and Inter-national Standard of Quality Control 1 was also presented.

• Provision of information technology support to SMPs and how to support and select appropriate audit soft-ware. Presenters focused on the ex-perience of the Belgian Institute of Accountants and their design and de-velopment of services to support the SMPs among their membership. Addi-tionally, this session provided insight into the Belgian Institute’s develop-ment of Pack PE-KE Audit Software. It also offered advice and guidance on the selection of audit software to support SMPs.

• Development and research in manag-ing SMP practices. This session pro-vided insight into the results of the IFAC SMP Quick Roll MENA regional research, as well as information and the results of research conducted by IFAC and other organizations on the subject of practice management and strengthening.

• Expanding SMP services beyond audit and toward supporting integrated reporting and other business adviso-

ry services crucial to MSME devel-opment. This session provided coun-try examples of new service offerings, and explored the concept of shaping professional accountants as ‘Trusted Business Advisors’. Related topics dis-cussed included: marketing, staff, in-formation technology, clients and ser-vices structuring. Finally, discussions were also held regarding the implica-tions for integrated reporting to serve SMP clients in MENA and throughout the world.

Participants expressed 82 percent satisfac-tion with the overall workshop event, not-ing particular value from the content, skills application in practice, and the support that this workshop provided to their im-plementation of international standards and good practices.

Session presenters included: Mr. Bassel Nadim, Chief Executive Officer of the AAA of the UAE; Ms. Gail McEvoy, IFAC Board Member and previous Technical Advisor to the IFAC Small and Medium Practices (SMP) Committee; Ms. Inge Saeys, Member of the IFAC SMP Committee and active audit partner in PLC Van Cauter-Saeys & Co., a member of JPA International; Mr. Hechmi Abdelwahed, previous Member of the IFAC SMP Committee from 2004, and current Member of the Conseil National de la Comptabilité (Tunis), President of the Fondation de l’Audit Financier (FAF), and Treasurer of the APIQ (Association pour l’Innovation et la Qualité); and Mr. Wassim Khrouf Technical Advisor for the IFAC SMP Committee and Board Member of the Tu-nisian Certified Public Accountants body, Ordre des Experts Comptables de Tunisie (OECT- Institute of Chartered Accountants of Tunisia).

BOOT CAMP

Municipal PEFA Tunisia, Tunis, July 1, 2014

The Tunisia FM Team, with support from the PEFA Secretariat, organized a Munici-pal PEFA Boot Camp. The objective was to raise awareness about the tool and its application in a sub-national and municipal context. Jean-Michel Champomier from the PEFA Secre-tariat (making a short stop-over on his way back from France to Washington) delivered most of the content, which included three short case studies. The 17 participants were from the municipality of Sfax, which is planning to conduct a PEFA this year lead by AFD (Agence Francaise de Developpe-ment), with PPIAF funding, from the Minis-try of Finance (Budget, Accounting, Local Government Unit), from the CFAD (Training Center for Local governments) and from the Parliament (adviser at the Budget and Finance Committee) as well as from donors including AFD, EU, GIZ, and SECO. The tool is already well known in Tunisia because of the 2010 central government PEFA. However, it has never been used in the Maghreb even if interest for use at this level is rising in Morocco (Agadir, Marra-kech) and in Tunisia. The Financial Man-agement unit plans to roll-out the tool in additional municipalities with funds re-ceived from the Country Management Unit.

Did You Know? 90 A recent review of 25 years of Financial Management Information System (FMIS) World Bank funded projects identified the top ten reasons why they were not fully successful. Source: Financial Management Information Systems, 25 Years Experience on what Works and What Doesn’t. Authors: Cem Dener, Joanna Watkins, William Dorotinsky. 2011.

0.00

1.00

2.00

3.00

4.00

5.00

Prof

essio

nal F

ulfil

lmen

t

Obj

ectiv

e ac

hiev

emen

t

Cont

ents

/Lev

el

Activ

ity O

rgan

izatio

n

Qua

lity

Use

fuln

ess

Rele

vanc

e

Skill

s inc

reas

e

skill

s app

licab

le

Impl

emen

tatio

n

Coop

erat

ion

Ma'

rafe

h m

embe

rshi

p

The Exchange CV MENA: Participant Feedback

Rank Failure Factors in Completed FMIS Projects

1 Inadequate capacity to sustain

2 Institutional resistance

3 Weak project planning/preparation

4 Complex project design/Number of procurements

5 Organizational structure not suited to integration

6 Inadequate ICT infrastructure

7 Lack of leadership commitment

8 Project team not skilled

9 Inappropriate technology

10 Ineffective project coordination

91

Cross-Cutting Topics

Books 92 MENA Books

OVERNANCEInside Inequality in the Arab Republic of Egypt: Facts and Perceptions across Peo-ple, Time, and Space by Paolo Verme, Branko Milanovic, Sherine Al-Shawarby, Sahar El Tawila, The World Bank.

This book joins four papers pre-pared in the framework of the Egypt inequality study financed by the World Bank. The first paper prepared by Sherine Al-Shawarby reviews

the studies on inequality in Egypt since the 1950s with the double objective of illus-trating the importance attributed to ine-quality through time and of presenting and compare the main published statistics on inequality. To our knowledge, this is the first time that such a comprehensive re-view is carried. The second paper prepared by Branko Milanovic turns to the global and spatial dimensions of inequality. The objective here is to put Egypt inequality in the global context and better understand the origin and size of spatial inequalities within Egypt using different forms of measurement across regions and urban and rural areas. The Egyptian society re-mains deeply divided across space and in terms of welfare and this study unveils some of the hidden features of this ine-quality. The third paper prepared by Paolo Verme studies facts and perceptions of inequality during the period 2000-2009, the period that preceded the Egyptian revolution. The objective of this part is to provide some initial elements that could explain the apparent mismatch between inequality measured with household sur-veys and inequality aversion measured by values surveys. No such study has been carried out before in the Middle-East and North-Africa (MENA) region and this seemed a particular important and timely topic to address in the light of the unfold-ing developments in the Arab region. The fourth paper prepared by Sahar El Tawila, May Gadallah and Enas Ali A. El-Majeed

assesses the state of poverty and inequali-ty among the poorest villages of Egypt. The paper attempts to explain the level of ine-quality in an effort to disentangle those factors that derive from household abilities from those factors that derive from local opportunities. This is the first time that such study is conducted in Egypt. The book should be of interest to any observer of the political and economic evolution of the Arab region in the past few years and to poverty and inequality specialists that wish to have a deeper understanding of the distribution of incomes in Egypt and other countries in the MENA region.

The Second Arab Awakening and the Battle for Pluralism by Marwan Muash-er. Yale Universi-ty Press. This important book is not about immediate events or poli-

cies or responses to the Arab Spring. In-stead, it takes a long, judicious view of political change in the Arab world, begin-ning with the first Awakening in the nine-teenth century and extending into future decades when—if the dream is realized—a new Arab world defined by pluralism and tolerance will emerge. Marwan Muasher, former foreign minister of Jordan, asserts that all sides—the United States, Europe, Israel, and Arab governments alike—were deeply misguided in their thinking about Arab politics and society when the turmoil of the Arab Spring erupted. He explains the causes of the unrest, tracing them back to the first Arab Awakening, and warns of the forces today that threaten the success of the Second Arab Awakening, ignited in December 2010. Hope rests with the new generation and its commitment to toler-ance, diversity, the peaceful rotation of power, and inclusive economic growth, Muasher maintains. He calls on the West to rethink political Islam and the Arab-Israeli conflict, and he discusses steps all

parties can take to encourage positive state-building in the freshly unsettled Arab world. Reconstructing Iraq’s Budgetary Institu-tions: Coalition State Building after Sad-dam by James D. Savage. Cambridge Uni-versity Press.

The invasion of Iraq led to a costly nine-year

state-building and reconstruc-tion effort. Re-

constructing Iraq's budgetary

institutions proved to be a vital element of the state-building project,

as allocating Iraq's growing oil revenues to pay salaries and pensions, build infrastruc-ture, and provide essential public services played a key role in the Coalition's counter-insurgency strategy. Consistent with the literature on state building, failed states, peacekeeping, and foreign assistance, this book argues that budgeting is a core state activity necessary for the operation of a functional government. Employing a histor-ical institutionalist approach, this book first explores the Ottoman, British, and Ba'athist origins of Iraq's budgetary institu-tions. The book next examines American pre-war planning, the Coalition Provisional Authority's rule making and budgeting following the invasion of Iraq in 2003, and the mixed success of the Coalition's capaci-ty-building programs initiated throughout the occupation. The budgetary process introduced by the Coalition offered a source of institutional stability in the midst of insurgency, sectarian division, economic uncertainty, and occupation. This book sheds light on the problem of "outsiders" building states, contributes to a more comprehensive evaluation of the Coalition in Iraq, addresses the question of why Ira-qis took ownership of some Coalition-generated institutions, and helps explain the nature of institutional change.

93

The New Arabs: How the Millennial Generation is Changing the Middle East by Juan Cole.

The Awakening of Muslim Democracy: Religion, Mo-dernity, and the State by Jocelyne Cesari. Cambridge University Press.

Taking to the Streets: The Transformation of Arab Activism edited by Lina Khatib and Ellen Lust. Johns Hopkins University Press.

Diaries of an Unfinished Revolution: Voices from Tunis to Damascus edited by Layla Al-Zubaidi and Matthew Cassel. Penguin.

A History of Modern Tunisia 2nd edition by Kenneth Per-kins. Cambridge University Press.

The New Middle East: Protest and Revolution in the Arab World by Fawaz A. Gerges. Cambridge University Press.

BANKING, FINANCE & ACCOUNTING

GOVERNANCEBringing Down the Banking System: Lessons from Iceland by Gudrun Johnsen. Palgrave Macmillan.

The combined collapse of Iceland's three largest banks in 2008 is the third largest bankruptcy in history and the largest banking system collapse suffered by any country in modern economic history, relative to GDP. How could tiny Iceland build a bank-ing system in less than a decade that proportionally exceeded Switzer-land's? Why did the bankers decide to grow the system so fast? How did businesses tunnel money out of the banking system? And why didn't any-

body stop them? Bringing Down the Banking System answers these questions. Gudrun Johnsen, Senior Researcher with Ice-land's Special Investigation Commission, tells the riveting story of the rise and fall of the Icelandic banking system, describes the commission's findings on the damaging effects of holding compa-ny cross-ownership, and explains what we can learn from it all.

Islamic Finance and Economic Development: Risk Management, Regulation and Corporate Governance by Amr Mohamed El Tiby and Wafik M. Grais. Wiley.

Islamic finance, like conventional finance is a business of financial intermediation. Its dis-tinctive features relate to the requirement that it abides by Shari'a rules that promote fairness of contracts and prevention of ex-ploitation, sharing of risks and rewards, prohibition of interests, and tangible eco-nomic purpose. In Islamic Finance and Eco-nomic Development: Risk, Regulation, and Corporate Governance, authors expound

how these distinctive features bear on the opportunities and chal-lenges facing the Islamic finance industry’s development, risk management, regulation and corporate governance. Covers the history and basics of Islamic finance, and provides insight into current conditions and future landscape. Explores regulatory framework and presents an approach to developing a systemic Shari'a governance framework to govern operations in the Islamic finance industry.

Accounting: A Very Short Introduction by Christo-pher Nebes. Oxford Uni-versity Press.

The Economist Guide to Financial Management: Principles and Practice, 2nd edition by John Tennent. PublicAffairs.

The Essentials of Risk Management, 2nd edition by Michel Crouhy, Dan Galai and Robert Mark. McGraw-Hill.

Fail-Safe Management: Five Rules to Avoid Pro-ject Failure, Au-thors/Editors: Jody Zall Kusek, Marelize Goergens Prestidge and Billy C. Hamilton.

Laws and Regulations in Global Financial Markets by Ray Girasa. Palgrave Macmil-lan.

Handbook of Accounting and Development edited by Trevor Hopper, M. Tsamenyi, S. Uddin and Danture Wickramasinghe. Edward Elgar.

94

The Politics of Accounting Regulation: Organizing Transnational Standard Setting in Financial Re-porting by Sebastian Bot-zem. Edward Elgar.

Global Leaders in Islamic Finance: Industry Mile-stones and Reflections by Emmy Abdul Alim. Wiley.

Economic Development and Islamic Finance edit-ed by Zamir Iqbal and Abbas Mirakhor. World Bank.

GOVERNANCE & PUBLIC SECTOR

Redesigning the Aeroplane While Flying: Reforming Institutions by Arun Maira

The development of institutions that conform to both democratic princi-ples as well as

market-capitalist ideas is one of human history's unfinished tasks. Perhaps it has

become modern India's destiny to help finish the task. Institutions and institutional processes provide stability, are a means to progress and thus fulfil the needs of socie-ty. This functionality, however, has been lost in recent times and citizens around the world are losing confidence in institutions of government and democracy, free mar-kets and capitalism. Reforming institutions has thus become the most urgent task for leaders across the world. Not an easy task: it is as risky as redesigning an aero plane while flying in it; it shakes up the founda-tions of stability. This insightful book, penned by a member of India's Planning Commission, looks at how India, the world's largest democracy, which em-braced capitalism twenty years ago, has become the principal laboratory for institu-tional reform. It provides new ways to think about institutions and the process of reforming them and explains how we should go about reformation as a nation. The principles given in this book apply to institutions of government and business in all countries. Timely and incisive, Redesign-ing the Aeroplane While Flying addresses the most essential need of the hour. Arun Maira is a thought leader and author of several books on leadership, institutional transformation and the future of India. He was a member of India's Planning Commis-sion from 2009 to 2014. Prior to that, he was with the Tata Group in India and

abroad for twenty-five years, consulted in the USA for ten years with Arthur D. Little Inc. and was the chairman of the Boston Consulting Group, India. Municipal Finances: A Handbook for Local Governments edited by Catherine D. Far-vacque-Vitkovic and Mihaly Kopanyi.

This handbook aims to help local government practi-tioners, particularly staff of medium and large cities, improve strategic management of municipal finances. The demands for

pragmatic knowledge are fueled in part by decentralization and fiscal pressures, as transfer of responsibilities from central to local governments are not often accompa-nied with an adequate transfer of re-sources. Practitioners seek ideas and tools to control expenditures, strengthen reve-nues, as well as to tap large external funds, achieve creditworthiness, and adopt good borrowing practices. Advocating sound municipal management based on improved governance and enhanced accountability, this handbook provides a comprehensive picture of municipal finances with a broad scope. The eight chapters cover such topics as fiscal decentralization and intergovern-mental finances; management of metropo-lises; instruments of good financial man-agement; management of revenues, ex-penditures, assets, and external resources; and performance measurement. Focusing on the perspectives of local officers, this handbook combines theory, pragmatic how-to advice, best practices from global experiences, and possible solutions. Financial Management Information Sys-tems and Open Budget Data: Do Govern-

ments Report on Where the Money Goes? By: Authors/Editors: Cem Dener and Saw Young (Sandy) Min

Financial Man-agement Infor-mation Systems and Open Budget Data: Do govern-ments report on where the money goes?' is a World Bank Study, initi-ated in 2012 after an extended stocktaking exer-cise, to explore

the effects of Financial Management In-formation Systems (FMIS) on publishing reliable open budget data, as well as the potential improvements in budget trans-parency. A rich data set was created by visiting the government public finance web sites in 198 economies, and collecting evi-dence on the use of 176 FMIS in publishing open budget data. This study is not intend-ed to develop another index or ranking on budget transparency. The scope is limited to the budget data disclosed by the gov-ernments on the web for the details of budget revenues and expenditures, as well as the results achieved. This is a tour around the world in search of reliable open budget data, in order to share some of the good practices and possible answers to a key question: 'Where does the money go?'. The primary audience for this study in-cludes World Bank teams, government officials, oversight agencies, civil society groups, and other specialists involved in FMIS and Opend Budget Data projects. The study shows that, as of today, only a small group of governments provide opportuni-ties to the citizens, civil society groups or oversight agencies for access to reliable, accurate, and meaningful open budget data from underlying FMIS solutions.

95 However, there is an increase in demand from citizens and civil society for improved and complete open budget data about all financial activities, and many governments around the world are trying to respond to this democratic pressure. Several cases demonstrate that the innovative solutions to improve budget transparency can be developed rapidly with a modest invest-ment even in difficult settings, if there is a political will and commitment. In order to further help governments within their en-deavor and to encourage those who are showing little or no visibility of public fi-nance information on the web, the report concludes with several achievable recom-mendations and guidelines on publishing open budget data benefiting from existing FMIS solutions. Closing the Feedback Loop : Can Technolo-gy Bridge the Accountability Gap? By Björn-Sören Gigler and Savita Bailur, Editors Enhanced transparency, accountability, and government or donor responsiveness to people needs are imperative to achieve better and more sustainable development results on the ground. The rapid spread of new technologies is transforming the daily

lives of millions of poor people around the world and has the potential to be a real game changer for development. Improved account-ability and respon-siveness are critical for reaching the goals of eliminating

extreme poverty and promoting shared prosperity with a focus on improving the well-being of the most vulnerable and mar-ginalized groups in society. Within the broader political economy context, many questions remain unanswered about the role that new technologies can play to act as an accelerator for closing the accounta-bility gap. Within this context, this report brings together new evidence from leading academics and practitioners on the effects of technology-enabled citizen engagement. The report aims to address the following four main questions: how do new technol-ogies empower communities through par-ticipation, transparency, and accountabil-ity?; are technologies an accelerator for closing the accountability gap - the space between supply (governments, service

providers) and demand (citizens, communi-ties,civil society organizations) that must be bridged for open and collaborative govern-ance?; under what conditions does this occur?; and what are the experiences and lessons learned from existing grassroots innovators and donor-supported citizen engagement and crowdsourcing programs, and how can these programs be replicated or scaled up?. The report presents a theo-retical framework about the linkages be-tween new technologies, participation, empowerment, and the improvement of poor people's human well-being based on Amartya Sen's capability approach. The book provides rich case studies about the different factors that influence whether or not information and communication tech-nology (ICT)-enabled citizen engagement programs can improve the delivery and quality of public services to poor communi-ties. The report analyzes in depth both the factors and process of using new technolo-gies to enhance the delivery of primary health services to pregnant women in Kar-nataka, India, and of several community mapping and crowdsourcing programs in Guinea, Haiti, Kenya, Libya, Sudan, and other countries.

Global Governance That Works by Richard Jolly. Routledge.

Governance and Finance of Metropolitan Areas in Federal Systems edited by Enid Slack and Rupak Chattopadhyay. Oxford University Press.

Retooling Global Develop-ment and Governance edited by Rob Vos and Manuel F. Montes. United Na-tions/Bloomsbury.

Divided Nations: Why Global Governance Is Failing, and What We Can Do about It by Ian Goldin. Oxford University Press.

Fiscal Monitor April 2014: Pub-lic Expenditure Reform: Making Difficult Choices. International Monetary Fund.

Innovative State: How New Technologies Can Transform Government by Aneesh Chopra. Atlantic Monthly Press.

Transparent Government: What It Means and How You Can Make It Happen by Donald Gordon. Prometheus Books

The Industrial Policy Revolution I: The Role of Government Beyond Ideology edited by Joseph E. Stiglitz and Justin Yifu Lin. Palgrave Macmillan.

Comparative Public Budget-ing: Global Perspectives on Taxing and Spending by George M. Guess and Lance T. Leloup. SUNY Press.

Complexity and the Art of Public Policy: Solving Socie-ty’s Problems from the Bot-tom Up by David Colander and Roland Kupers. Princeton University Press.

The Persistence of Innovation in Government by Sanford Borins. Brookings Institution Press.

Good Government: The Relevance of Political Sci-ence edited by Soren Holmberg and Bo Rothstein. Edward Elgar.

Why Government Fails So Often And How It Can Do Better by Peter H. Schuck. Princeton University Press.

Failed States and Fragile Socie-ties: A New World Disorder? edited by Ingo Trauschweizer and Steven M. Miner. Ohio University Press.

Administering Fiscal Re-gimes for Extractive Indus-tries: A Handbook by Jack Calder

Excerpt

Subsidy Reform in MENA “However, subsidies are often ineffective and biased against the poor. Generalized price subsidies—the most common form in MENA countries—are neither well targeted nor cost-effective as a social protection tool. Though they may reach the poor to some extent, they benefit mostly the better off, who consume more of the subsidized goods, particularly energy products: in 2008, in Egypt, the poorest 40 percent of the population received only 3 percent of gasoline subsidies (Figure 2). Moreover, subsidies—especially those on energy products— impose wel-fare costs by distorting relative prices in the economy, which fosters overconsumption and resource misallocation. This, in turn, reduces exportable resources and thus limits wealth accumulation for energy-exporting countries, and weakens the current account of energy-importing countries. In addition, overconsumption leads to adverse impacts on traffic congestion, health, and the environment, and to inefficient specialization of domestic produc-tion, often in less labor and high energy-intensive industries. Finally, subsidies hurt growth. Although they can be used to provide short-term support to the productive sector, in the long run subsidies have a dampening effect on growth potential, through price distortions, under-investment in labor-intensive and energy-efficient sectors, crowding out of productive spending on human and physical capital, and higher inequality linked to inefficient support of the poor.”

International Monetary Fund Author/Editor: Subsidy Reform in the Middle East and North Africa: Recent Progress and Challenges Ahead Carlo A. Sdralevich ; Randa Sab ; Younes Zouhar ; Giorgia Albertin Date: July 09, 2014

Comic Relief 97

From Our Windows 98 We asked some of our Governance Global Practice staff in MENA for photos of what they see every day outside their of-fice windows. Below is a short trip across the world we live in through the windows we look out from.

Did You Know? The FM team of the Governance GP in MENA comes from: Bolivia, Burkina-Faso, Canada, Costa Rica, Egypt, France, India, Jordan, Lebanon, Morocco, Norway, Poland, Tunisia, United States, West Bank and Gaza, and Yemen The team speaks: Arabic, Croatian, English, French, Hindi, Malayalam, Norwegian, Polish, Portuguese, Russian, Serbian, and Spanish.

The Governance GP / MENA 99 The Financial Management team of the Governance Global Practice (GGP) in MENA focuses on two strategic objectives: • Helping developing partner countries build their FM capacity, and • Providing reasonable assurance that financing provided by the Bank is being used for the intended purposes with economy and efficiency.

Project Country Region The FM Unit provides assessment, design, and implementation support services to ensure that, for Bank-financed operations, partner countries have in place appropriate FM ar-rangements.These include support for the achievement of project development objec-tives, compliance with Bank FM requirements, and the development of sustainable FM ca-pacity. It actively seeks to use country FM systems where they are assessed as adequate.

Provides information on the overall fiduciary environment and risks, and promotes and supports building FM capacity as appropriate for each country’s development priorities and institutional environment. It provides FM diagnostics, policy and technical advice, advisory services, and technical and project assistance to partner countries. It also facili-tates FM learning, knowledge exchanges, and access to relevant global expertise.

Establish arrangements for portfolio and budget monitoring of operational services, ensuring value-for-money and con-sistent quality across the board. It also promotes region-wide initiatives to create and disseminate knowledge. The Connecting Voices of MENA initiative provides a platform for learning and dialogue among relevant regional stake-holders to promote sound public financial management and corporate financial reporting.

Unit Management Team

Hisham WALY (Manager) Manuel VARGAS (Lead FMS)

Practice Management: (1) Public Financial Manage-ment, (2) State-owned Enterprises, and (3) FM sys-tems and processes - Operational Services: Poverty Reduction and Economic Management, Human Devel-opment, Financial and Private Sector Development

Rama KRISHNAN (Lead FMS) Practice Management: (1) Decentralization and Local Govern-ment, (2) Social Accountability, Citizen Engagement; (3) Corpo-rate Financial Reporting, including integrated reporting <IR>, and (4) Fragility and Conflict - Operational Services: Sustainable Development.

Countries Technical Practices (TP)

Franck BESSETTE (Sr. FMS)

Tunisia

Algeria

Morocco Libya

Rima KOTEICHE (Sr. FMS)

Lebanon

Djibouti

Jad MAZAHREH (Sr. FMS)

Jordan

Iraq

Mohamed YEHIA (Sr. FMS)

Egypt

West Bank & Gaza

Moad ALRUBAIDI (Sr. FMS)

Yemen

GCC

Public Financial Management (PFM)

Corporate Financial Reporting (CFR)

Cross-Cutting Themes

Financial Controls Jad MAZAHREH Walid AL-NAJJAR

Internal Audit Rima KOTEICHE Yngvild ARNESEN

Government Accounting Hosam DIAA Kamel BEZZINE

Decentralization

Moad ALRUBAIDI Nadi MASHNI

Extractive Industries Franck BESSETTE Mohamed YEHIA

SAIs & Legislative Scrutiny Mona EL CHAMI Yngvild ARNESEN

Accounting & Auditing Gabriella KUSZ Riham HUSSEIN

Islamic Finance Gabriella KUSZ Nadi MASHNI

State-owned Enterprises Gabriella KUSZ Hosam DIAA

Banking & Insurance Gabriella KUSZ Hosam DIAA

Integrated Reporting Gabriella KUSZ Shirley FORONDA

Micro, Small, and Medium Entreprises Gabriella KUSZ Riham HUSSEIN

Fragility & Post Conflict Mohamed YEHIA Saleh MANARY

GAC in Projects Jad MAZAHREH Rock JABBOUR

Social Accountability & Citizen Engagement Mona EL CHAMI Wael EL SHABRAWI

Trust Funds Rima KOTEICHE Laila MOUDDEN

Knowledge Tools Denis LARGERON Ali SALAMAH

Disbursement & Risk Management Systems Shirley FORONDA Ali SALAMAH

cvmena@worldbank.org