Opening welcome remarks by Ingrid van Wees, ADB Vice-President for Finance and Risk Management, at the ADB Capacity Building Forum on Public Sector Accounting on 30 May 2018.
Distinguished participants, speakers and colleagues, Good Morning!
On behalf of the Asian Development Bank, I would like to extend a warm welcome to you all. We are very glad that you are able to join ADB’s Capacity Building Forum on Public Sector Accounting today. I would also like to express my sincere appreciation to our distinguished speakers, panelists and members of the International Public Sector Accounting Standard Board—IPSASB, who have graciously agreed to share their experience and expertise with us.
I understand that this year’s forum kicked off yesterday very productively. I was pleased to note that you had lively and constructive discussions on IPSAS Board’s 2019-2023 Strategy and Workplan.
Interestingly, ADB is at a similar junction as IPSASB as we are currently in the process of finalizing our Strategy 2030. As this long- term corporate strategy opens up new alleys for continuing our successful collaboration with the IPSASB, I would like to take this opportunity to share with you some relevant aspects.
Strategy 2030 recognizes the drastically changing landscape ADB is operating in. As the fastest-growing region in the world economy in recent decades, Asia and the Pacific’s share of global gross domestic product increased from 25% in 2000 to 33% in 2016.1
During this period, the number of our borrowing low-income countries declined considerably from 16 to 2 with only Afghanistan and Nepal remaining in this category. In contrast, the number of middle-income countries more than doubled to 36 from 15. Seven of ADB’s sovereign borrowers even reached high income status — five of which graduated2 from ADB borrowing and are now our partners in fostering the development of a prosperous, sustainable, and inclusive Asia and the Pacific.3
The Asia and Pacific region is expected to continue enjoying steady GDP growth over the near term.4
However, to maintain a sustainable level of growth, ADB’s developing member countries will need to invest $1.7 trillion per year to bridge infrastructure gaps, address climate change and disaster risks, and to achieve the sustainable development goals by 2030.
Large portions of which will need to come from public funds.
As the region is changing rapidly, we at ADB are looking at transforming our services and service delivery to respond effectively to the regions’ fast changing needs and capacity. While
ADB will sustain its efforts to eradicate extreme poverty, given the unfinished poverty agenda, the Bank will expand its mandate to achieve a prosperous, inclusive, resilient, and sustainable Asia and the Pacific.
One of ADB’s continued operational priorities is strengthening governance and institutional capacity which we believe is a strong basis for country development. ADB will support developing member countries improve governance and create an environment for sustainable growth by strengthening the quality and capacity of public institutions.
As a knowledge provider, ADB will focus on delivering practical value that fits local conditions, identify lessons, and replicate good practices (including technology transfer) across the region and beyond.
As a convener of partnerships, ADB will continue to promote dialogue and collaboration among diverse partners and stakeholders.
Given this strategic thrust, I believe that our partnership with the IPSASB as well as joint efforts in strengthening capacity and regional collaboration remain highly relevant.
It is widely acknowledged that the adoption of accrual-based accounting provides a more comprehensive view of governments’ financial position, enhances the credibility and transparency of financial reporting, and plays a critical role in improving decision-making in the public sector. It helps governments to be more accountable to their citizens and other stakeholders and ultimately supports value for money of public funds.
The Asia and Pacific region will need to clearly demonstrate its financial stability through transparency in fiscal data. Failure of governments to manage their finances has in the past, and could potentially again in the future, have dramatic consequences with ever increasing debt volumes. Therefore, we believe that governments can benefit from accrual basis IPSAS and that the adoption of IPSAS is a solid basis for sustainable economic development and prosperity in the region.
Good progress has been made to date. ADB’s developing member countries have recognized benefits and importance of accrual basis IPSAS. Emerging economies in Southeast Asia are making particular good progress. For instance, governments of Indonesia, Malaysia, the Philippines, and Thailand have adopted accrual basis accounting. Other countries including Kazakhstan, Sri Lanka and Viet Nam are making big strides towards compiling IPSAS-based accounts.
While the overall direction of travel towards a single set of global standards for the public sector is positive, the scale of change needed should not be underestimated. Many of ADB’s developing member countries still follow cash basis accounting practices and still need to make much more progress. For instance, major economies of South Asia such as Bangladesh and India are still applying predominantly cash basis accounting.
We recognize that adopting an accrual basis accounting framework is a long and strenuous journey. There is need for a sustained effort lasting several years to overcome challenges and accomplish the transition. The best in class like Australia and New Zealand have realized improvement in accrual basis accounting over several years.
The ultimate success of the implementation begins with raising awareness among national stakeholders, commitment from high-level government leaders, and a change in the mindsets in civil service. Next, it is critical that public finance employees in public services are equipped with the right skills and competencies to deal with the challenges before adopting and implementing IPSAS.
The investment by governments to skill up their public finance staff will need to go hand-in-hand with investments in appropriate information technology systems and training of staff in their accurate application. The development of these capacities makes for a stronger finance function within public entities, which is a necessary component of improving the quality and robustness of financial information. Last but not least, strong legal and regulatory foundations are crucial to the reform, such as developing accounting and auditing legislation.
History tells us that building capacity and capability is vital to the success of any IPSAS implementation plan. Therefore, ADB is particularly pleased that Raising Awareness of IPSAS and the Benefits of Accrual Adoption was included as one of the key themes under the next draft IPSASB Strategy.
Since 2013, ADB held four regional forums and workshops where member countries learned about current developments in IPSAS and best accounting practices through knowledge sharing among participating countries and institutions. I am honored and pleased to share that we consistently received positive feedback on our forums. Participants expressed strong support and urged ADB to continue organizing these forums as they offer excellent opportunities for exchange on lessons learned and networking across the region.
This year, my team and I are delighted that we have about 70 participants from 31 countries from the region in this forum—the largest number of participants to date. I feel privileged to welcome you to our home and to host the forum in ADB’s headquarters in the beautiful country of the Philippines.
ADB will continue to support the development of robust accounting framework in governments by providing venues to collaborate and share knowledge on best practices among them as a crucial contribution to consolidate sustainable development in the region. We look forward to working with you and the IPSAS-B in this joint effort to strengthen public sector accounting and financial management in Asia and the Pacific.
1 ADB. Draft Strategy 2030— Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. April 2018
2 Brunei Darussalam, Hong Kong,China, the Republic of Korea, Singapore, and Taipei,China.
3 ADB. Draft Review of the Graduation Policy. 13 October 2017.
4 ADB projects a GDP growth rate for developing Asia and the Pacific of 6.0% in 2018 and 5.9% in 2019. Excluding Asia’s high-income newly industrialized economies (Hong Kong,China, the Republic of Korea, Singapore, and Taipei,China) growth rates are estimated to even reach 6.5% in 2018 and 6.4% in 2019. ADB. Asian Development Outlook 2018 – Highlights. April 2018