Pacific Rim weathers storm
A year of volatility has seen Western economies in the doldrums while Asia's, particularly the Pacific Rim, have strengthened. Today's CPA Congress will offer insights into how business professionals need to think and act to ensure their organisations thrive in this new landscape.
Changes in Asia mean Singapore's economy is expected to grow 3-5 per cent. Things also look good for India, which grew 6.5 per cent last year, according to the CIA World Factbook. Goldman Sachs predicts India's GDP growth will be 8.5 per cent this year.
Closer to home, the mainland announced a 9.6 per cent year-on-year GDP growth in the third quarter, the slowest this year. It grew 11.9 per cent year-on-year in the first quarter and 10.3 per cent in the second. China's star continues to rise, however, as it overtook Japan as the world's second-largest economy.
Hong Kong took a hit amid the financial crisis with GDP declining 2.8 per cent last year according to the factbook. However, Goldman expects the city to rebound to 4 per cent this year.
But Theresa Chan, PricewaterhouseCoopers' (PwC) partner and CPA Australia's president for Greater China, remains buoyant, saying: 'China and Hong Kong's growth is still on track', because mergers and acquisitions and initial public offerings are still occurring.
However, she notes that because of the credit crunch, 'Western governments have been printing more money and raising taxes', so tax accountants will benefit because more will be needed to ensure compliance while resolving issues of transfer pricing and double tax agreement abuse.
Tim Lui, a senior PwC tax partner, believes events have unfolded well. 'China is a significant player on global markets and I'm confident we will continue to see China emerge as a substantial economic force - particularly in Asia,' he says. 'Getting the 'economic journey' right for China is very important. What's more important is China keeps growing in an orderly manner, and gears itself for the opportunities that will come its way. It needs to be ready.'
Similarly, Bernard Chan, president of Asia Financial Group, thinks China's rise goes beyond mere rankings and reflects huge changes in the global economy. As such, the next stage of China's story is going to be 'about a maturing economy, as well as a growing one'.
As the size of China's labour force peaks, and the population starts to age, the country may well grow old before it grows rich. Therefore, 'the focus will shift more to raising productivity and domestic consumption', he says. 'The global imbalances that everyone has worried about over the last few years will have to sort themselves out - which will require change in America, Europe and other places.'
A month after the 9/11 attacks, the Patriot Act was passed and created greater anti-money-laundering scrutiny for banks. The following year saw the watershed Sarbanes-Oxley Act (SOX) spread its tentacles globally in the aftermath of Enron's collapse, ushering in a new era of more arduous corporate governance for many American and foreign companies.
Earlier this year, the United States passed the Dodd-Frank Act to raise transparency and accountability in its financial markets - an act which some say will be a boon for Hong Kong and Singapore's derivatives markets as the US becomes more regulated, but which others claim will create a greater compliance burden for Asian banks in the US. The British Bribery Act also has extraterritorial effect and will undoubtedly affect Asian companies with a British presence, or British nationals on their payrolls.
However, Bernard Chan says there's a silver lining. 'I know that some transnational service companies based in Hong Kong have gained a significant competitive advantage ... being SOX-compliant,' he says. 'They win contracts from the US because of it. It's a good example of how the accounting function can form a vital part of a company's product.'
The net result has been greater opportunities for accountants thanks to the changing global economic landscape, Theresa Chan says. 'More global businesses and [accounting] firms are engaged in risk management.' Many Western corporations must abide by their home country's rules even when overseas. She says that by helping them implement heightened 'international controls and have stronger risk management', accountants in Asia have been able to apply that knowledge and experience to the benefit of Asian companies operating abroad or aspiring to.