Daily Star

  • Subject : Abu-Ghazaleh says global financial crisis is far from over
  • Date : 23-Dec-2009
  • Text :

    BEIRUT: Arab Society of Certified Accountants (ASCA) Chairman Talal Abu-Ghazaleh painted on Tuesday a bleak picture of the mid- and long-term impact of the global financial crisis, saying that it won’t end unless the global financial system is entirely changed. “There is a rumor that the world will end in 2012 and some people are genuinely concerned that the world may end in 2012. As for me, I am not worried at all, because I know the world already ended in 2008 and an incipient world is rising from that terminus,” he said.

    “Analysts have on many occasions declared that the crisis will only last for a month or two but I have always believed and I am saying it one more time: The crisis will be with us throughout the next decade” he said.

    Abu-Ghazaleh said that the crisis did not end but it was only put on hold through the stimulus packages injected by the developed governments.

    “These packages pose dangers because they moved the burden from the private sector to the governments,” he added. “In the meantime, unemployment, bankruptcies, governmental deficits, slow growth, high spending, economic weakness, governmental debt explosion, debt service growth, deflation, and possible stagflation all of which are a recipe for ‘how great powers fall’.”

    His remarks came during the opening of the Arab financial and accounting forum which took place at the Movenpick Hotel in Beirut. Entitled “The G20 resolutions: Their financial, economic and accounting implications,” the forum was organized by ASCA and Talal Abu-Ghazaleh and Co. International (TAGI), in cooperation with Banque Du Liban, Union of Arab Banks, the Lebanese Association of Certified Public Accountants (LACPA), and World Union of Arab Bankers (WUAB).

    It was organized in response to the G-20 summit resolutions to achieve substantial change in the international accounting and auditing standards so that they more accurately reflect the economic events, and consequently provide protection to the state economies from financial crises.

    Abu-Ghazaleh expressed his surprise at some analysts’ comments about recovery from the crisis while the unemployment rate is continuously increasing.

    “I hope that these allegations don’t mask the reality of the crisis or change distorts its concept,” he said.

    The unemployment rate in the Middle East region is rising to between 9 and 11 percent this year, the director general of the International Labor Organization (ILO), Juan Somavia said two months ago during the Arab employment forum, describing the figure as being “only the tip of the iceberg.”

    “A jobless recovery will not be sustainable; not socially, not economically, not politically,” said Somavia, adding that the central objective is a rapid recovery in employment, together with a basic social protecting floor that goes hand in hand with economic recovery.

    Somavia’s views were echoed by those of Abu-Ghazaleh, who said that his greatest fear is that financial, fiscal and economic crises may subsequently develop into de-stabilizing social and humanitarian crises.

    On the other hand, Abu-Ghazaleh showed some optimism by saying that the crisis is an opportunity that should not be wasted. “I believe that we have ahead of us an opportunity which should not be missed and we need to turn these challenges into advantages,” he added.

    Abu-Ghalazeh placed a great importance on Pittsburgh summit that took place on September 24-25, 2009, when leaders called on international accounting bodies to redouble their efforts to achieve a single set of high quality global accounting standards within the context of their independent standard setting process.

    “They also designated the G-20 as the premier forum for our international economic cooperation. They also have asked the accounting profession to report back at the next meeting with recommendations on how to maximize the effectiveness of cooperation,” he added.

    He continued by saying that G-20 have always blamed the accounting society for not adopting better standards.
    However, he added, that changing the international standards is a complicated process which takes at least three years since it goes through what is called a due process.

    “If we wait that long, we will not be able to avoid the negative impact of the crisis,” Abu-Ghazaleh said.

    Therefore, he added, ASCA and Talal Abu-Ghazaleh Organization (TAGorg) added an 11th program to 10 iniatially announced including the governance testing program, stress testing origram, valuation testing program and others.

    For his part, Antoine Gholam, president of the Lebanese Association for Certified Public Accountants (LACPA), criticized the current situation of accounting standards in the Arab world which he described as being unorganized and they lack coordination.

    “I was participating yesterday in Cairo in a meeting for the board of directors of one of the formal Arab associations involved in accounting and auditing tasks, and they unfortunately spent a great amount of time discussing whether to locate the association headquarters in Cairo or Baghdad,” he added.

    Among the speakers was Alain Bifani, general director of the Finance Ministry, who was representing Rayya Haffar, the minister of finance.

    He underlined the importance of cooperation between the public and the private sector in order to achieve financial stability. Bifani also emphasized the importance of reviewing the accounting system in Lebanon in addition to the financial regulations as a first step to upgrading the accounting standards.