“Accounting requires a continuing education on the part of its professionals. How can Philippine accountancy grow intellectually and compete globally if it does not accept this reality?”
by Ducky Paredes
After all the hue and cry over the travails of the Philippines’ largest and most respected accountancy firm, Sycip Gorres and Velayo (SGV), the company still stands as strong as ever.
If a company wants to put a badge of credibility into its auditing procedures and results, it is still a no-brainer to hire SGV as its auditors. That’s how respected the firm is. In fact, over 60% of the Philippines’ Top 100 corporations go to SGV for their auditing requirements. Of course, it does not always work out for all companies.
(Not every one is married to SGV. One of the largest companies in the country dumped SGV when it claimed that SGV was not a hundred percent for the company but was, instead, more protective of its foreign partner’s client.)
After World War II, at a time when other Filipinos were preoccupied with rebuilding the country, the young Washington Sycip started an accounting firm. The accounting field was then dominated by foreigners but Sycip’s list of clients started growing as his reputation to provide the highest quality of service spread fast among business circles.
Sycip took in as partners his boyhood friend Alfredo Velayo and Vicente Jose, a tax expert, to form Sycip Velayo, Jose and Company in 1947. Eventually, Ramon J. Gorres joined them in 1953. Thus was SyCip, Gorres, Velayo & Co. or SGV born.
That was a time when nationalism meant rebuilding a country and establishing an identity that was truly Filipino. SGV snatched the accounting profession from foreign hands back then because it was the right thing to do at that time.
But with the advent of globalization came a borderless world economy in which protectionism has become an anachronism. This is the bigger picture that the protagonists in the SGV controversy should concern themselves with. SGV would not survive the new global order were it to ensnare itself in a cocoon of false nationalism in the same way that the entire Philippines would be left behind in this new millennium in terms of technological advances in many fields were it to remains a closed or inward-looking economy.
This is true for the accounting profession, or for any profession for that matter. This industry cannot remain globally competitive if its shuts its doors to outside influence. Accounting requires a continuing education on the part of its professionals. How can Philippine accountancy grow intellectually and compete globally if it does not accept this reality?
True, Section 14, Article XII of the Constitution says: “The practice of all professions in the Philippines shall be limited to Filipino citizens, save in cases prescribed by law.” But it should be recalled that the Philippines is a signatory to the World Trade Organization Agreement, of which one aspect is the General Agreement on Trade and Services or GATS.
The WTO Agreement was ratified by the Philippines in 1994 so it has the force of law in our country.
The “services” referred to under the GATS, as explained by Supreme Court Justice Dante Tinga is “any service in any sector except services supplied in the exercise of governmental authority.”
Based on this definition, Justice Tinga’s opinion is that the provision of professional legal services is clearly included under the GATS. If this is the case, then accountancy and audit services are also included as part of this “cross border practice” of professions.
According to Tinga, legislation allowing foreigners to practice their profession in the Philippines, following Section 14, Article XII, should pass constitutional muster, except the professions which the Constitution specifically confines to Filipino citizens, such as the management of mass media or the advertising industry.
Thus, according toe the management of SGV, its current relationship with US-based Ernst & Young is legal under both domestic and international laws. Thus, SGV says, the argument that such a partnership would violate the constitutional proviso on Filipino ownership of domestic companies and the anti-dummy law, actually has no legal leg to stand on.
In the first place, other local auditing firms have also gone the same route as SGV had done. Isla Lipana and Co. has UK’s PricewaterhouseCoopers as its partner, while Manabat Sanagustin & Co., has KPMG. Manabat Delgado Amper & Co. is a member firm of Deloitte Touche Tohmatsu. This only shows that the rule of the game under the borderless world is to partner with world-class corporate giants—and adopt cross border practice—or fold up under the relentless pressures of fierce global competition.
Moreover, SGV has entered into this kind of widely practiced international partnerships since 1985, when it became a member firm of Arthur Andersen & Co. Instead of being gobbled up Andersen and disintegrating when the partnership ended in 2002, SGV became even more competitive in the globalized economy. Proof of this is that the company remained a very much viable auditing company following its partnership with Andersen and ended up with Ernst & Young.
The ASEAN provides proof that integration and cross border practice are the imperatives under the borderless world economy. The three accords signed during the just-concluded 14th Summit of the Association of Southeast Asian Nations in Thailand enables accountants and two more types of professionals—doctors and dentists—to practice their professions anywhere in the Asean region. Moreover, these Asean Mutual Recognition Arrangements (MRAs) on Accountancy Services, on Medical Practitioners and on Dental Practitioners allow these professionals to work in any of the Asean-member countries without being required to pass the board examinations of these countries.
Asean deputy secretary-general Pushpanathan Sundram announced that an earlier MRA on engineering has already taken effect, with Filipino engineers already working now in Laos and Thailand. At the 13th Asean summit two years ago in Singapore, similar MRAs covered surveying and architectural services. MRAs covering engineering and nursing had been sealed before 2007.
In fact, the goal of the 14th Asean summit is to jumpstart the conversion of the region into a single economic bloc akin to the European Union. This is a testament to integration or international partnerships as crucial to sharpening the global competitiveness of any country or corporation at a time of fast-track globalization.
Back to SGV, the internal restructuring agreement, which is the bone of contention within the SGV, is still a work in progress. SGV founder Washington Sycip himself laments what he had describes as “completely wrong reporting” on the issue.
The agreement, Sycip explained, would not even make Ernst & Young a co-equal of SGV. As professionals, of course, Sycip said they can take a look at the accounts that Ernst & Young is doing for SGV in the same way that the former can take a look at the accounts that SGV has.
This is the same practice done in other accounting firms that have foreign partners. Isla Lipana, Manabat and all the others have followed SGV’s lead because they know that in order to compete globally and survive in the Knowledge Age, establishing alliances with internationally recognized leaders in their particular field of trade is the only way to survive—and excel.
Of course, the reality is that for some firms – as the large Philippine company earlier mentioned that dumped SGV – there are accounts that are better off with accounting firms that are independent of foreign partners.
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hvp 03.11.09)
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