Geneva, 5 November 2008 - Transparent financial and accounting rules are necessary to restore investor confidence around the world as the economic crisis intensifies and spreads, UNCTAD´s Secretary-General told a working group on accounting and reporting standards this afternoon.
Problems of "opacity and complexity" are at the heart of the crisis, Secretary-General Supachai Panitchpakdi said. It may be necessary to introduce amendments to relevant accounting and reporting standards, he told the meeting, and if such a process is undertaken "it must happen in a fair and transparent way" and should include participation by representatives of developing countries. "The crisis will not only be felt on Wall Street, or even High Street, but -- perhaps most painfully -- on the muddy, unpaved pathways of the developing world," he said.
Mr. Supachai spoke at a high-level panel discussion of the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR). The working group, now in its 25th year, began its session Tuesday and will conclude on Thursday.
"The current crisis originated in United States sub-prime mortgages that were packaged into mortgaged-backed securities and sold to investors around the world," Mr. Supachai said. "It was the inscrutable nature of these products that ultimately set off the current wave of financial unrest, with devastating effects." At this point, the Secretary-General said, "the crisis is spreading through international financial markets like a pandemic."
Mr. Supachai remarked that among the damage may be liquidity problems for developing country banks; stock-market panics spreading to emerging markets; a global slowdown in demand, which will hurt the exports of the world´s poorer nations, led by declines in prices for commodities; and likely reductions in aid to poor countries, as donor nations give priority to bail-out packages for their own economies. The United Nations has already revised its projections for world economic growth downward to about 2% for 2009, "and this may still be optimistic," he said.
Mr. Supachai stressed that despite the crisis "we have to work together to ensure that we get back on track to achieve the Millennium Development Goals" and continue other efforts to improve well-being and secure stable economic progress in the developing world.
He called on ISAR "to provide key inputs to the deliberations taking place in standard-setting bodies and regulatory bodies." The working group will have UNCTAD´s support if it decides to convene a further meeting in the upcoming months to discuss such issues, the Secretary-General said.
There were four panellists for the afternoon discussion of "financial stability and international standards of accounting and reporting."
Wang Jun, Vice-Minister of the Ministry of Finance of China, said the country has made great efforts over the past 30 years to develop national accounting and reporting standards and to ensure they are compatible with international standards. He went on to describe training for accountants in China and reforms made as international standards have evolved and the nation´s economy has expanded in size and complexity.
Ibrahim Ashmawy, Deputy Minister of Investment of Egypt, asked how the international financial system, with all its mechanisms and expertise, had failed to predict or prevent the current crisis. To cope with the effect of the crisis in Egypt, he said, the government was increasing expenditure on infrastructure projects by some US$3 billion to spur the economy, and was striving to increase lending to banks and to provide greater financial leverage to small- and medium-sized businesses.
Ngy Tayi, Under Secretary of State of the Ministry of Economy and Finance of Cambodia, spoke on "building capacity in accounting and auditing: the Cambodian experience." He and said steps taken by the government have included establishment of a National Accounting Council; partnerships with the Association of Chartered Certified Accountants (ACCA); and small-business training in financial reporting standards.
And Kwabena Baah-Duodu, Ambassador of Ghana to the United Nations Office at Geneva, said programmes to improve fiscal transparency, accounting, and reporting in Ghana country had been under way for a decade. The government had reviewed legislation and regulations and had passed a new and more comprehensive Public Financial Management Law in 2003, he said.