Emerging Afghanistan: Fortune favours the bold at the Silk Route’s junction
Private investors, international donors and business organisations are keeping a vigilant eye on the reconstruction of war-torn Afghanistan, as president Barak Obama agrees to keep US troops in the country until the end of 2016, a survey by Timetric’s global magazine The Accountant has revealed.
Despite its dependence on international aid, the lack of a mature private sector, and the absence of strong regulatory and oversight authorities, Afghanistan’s economy is in the making, and hence opportunities are endless in a country where almost everything remains to be done.
But to fulfill its potential Afghanistan needs first a solid accountancy industry to lead the development of the financial sector. Afghan practitioners told The Accountant that the country’s nascent professional services industry has not been exploited yet.
The Accountant’s survey has revealed a thriving accountancy market where the traditional dominance of the Big Four is being challenged by middle market firms.
Apart from EY and KPMG, the first international firm to settle in Afghanistan, mid-tier firms Grant Thornton and Crowe Horwath International are contenders for the top four spots.
The top ten includes Deloitte, HLB International, Baker Tilly International, PKF International, Alliot International, Kreston International and BDO, whose leadership was surveyed for this report.
However Afghanistan faces daunting challenges due to its under-regulated business environment. For example the lack of legal requirements to make statutory audits compulsory for companies. Currently only audits for banks are mandatory.
In addition there is no common reporting standards as some organisations prepare their accounts according to the relevant GAAP and others follow IFRS. As a result the format of audit reports and financial statements is far from being standardised throughout the country.
A practitioner also warned: “Low balling in audit fees and corruption in the selection of firms for audit in private organisations, NGOs and even at ministry levels has become the norm.”
Following the recommendation of the World Bank, the Afghan parliament will soon pass an accountancy law, which is expected to be the cornerstone of the emerging financial sector.
As such, the also emerging accountancy industry is called to play a pivotal role in assisting the future capital market and regulators.
There are also proposals under consideration to adopt IFRS for SMEs to increase the level of transparency and entice foreign investors. If that happens there will be further opportunities for Afghan firms and finance professionals.
A practitioner said: “Finance departments of organisations would need significant resources to handle such a huge turnover of clients. Besides audit and assurance, management consultancy and advisory will also increase with the evolution of the industry.”
Surveyed practitioners pointed out that if the security situation improves, Afghanistan is expected to boost economic growth.
Another reason for the US to keep its security forces until the end of 2016 is Afghanistan’s geopolitics.
The country features a strategic situation in Central Asia, at a time when several initiatives are addressing the revival of the Silk Route, the ancient trading roads between China and the Mediterranean.
According to an Afghan practitioner: “The Chinese government is going for it more aggressively, considering opening three routes. One of them would go from Central Asia through Afghanistan and Pakistan. I think the Silk Route will add to the trade and business activity in this area, and accounting services will go up as a result.”
Reported by the Accountant
Established in 1874, The Accountant is the oldest specialist magazine focused on the accountancy sector. It provides unbiased and authoritative news and analysis from an international perspective, tailored to the needs of the global accountancy profession. Its coverage includes core issues of both financial and management accounting, corporate reporting and risk analysis derived from regulatory changes, to name a few. The Accountant is a part of Timetric’s briefing services. Find more on http://www.theaccountant-online.com/
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