You are on page 1of 100

Towards Responsive & Inclusive

Financial Management Institutions

Governance Global Practice
Middle East & North Africa

Issue 3
September 2014


Connecting Voices (CV) Middle East and North Africa (MENA) is a
regional initiative and partnership that promotes governance and
improved financial management practices in the public and private
sectors. The ultimate aim is to support the demands of citizens
throughout the Arab World for jobs, better governance, a voice in
public affairs, and social and economic inclusion as reflected in the
World Banks MENA Regional strategy.

CV MENA plans to seize on the windows of opportunity available in
the region. It will support capacity building in the area of financial
management, facilitate the development of a professional commu-
nity, as well as the sharing and transfer of knowledge both within
countries and within the region as a whole. CV MENA will help fos-
ter greater transparency and accountability, thereby engendering
enhanced public trust. In addition, building public and private sector
financial management capacity will also help attract and provide
comfort to much-needed foreign direct investment in the region.

CVMENA won the World Banks 2013 MENA Vice President
Team Award

The Exchange is a major annual forum that provides a channel for dialogue,
enabling countries to share experiences and promote societal-governmental
consensus building. It fosters intra-regional cooperation and stimulates
interest in improving public financial management and corporate financial
reporting in MENA. The Exchange facilitates knowledge-sharing from transi-
tional democracies and showcases successful experiences from fragile and
conflict states. The Exchange starts where financial management diagnos-
tics leaves off, that is, in supporting the creation of an enabling environment
for reforms to move from concept to reality. It helps catalyze innovative
activities to develop regional public goods and enables the World Bank to
fulfill its mission as a Solutions Bank.

A Boot Camp is a practical concept. It involves gathering a group of deci-
sion-makers and experts to address a particular issue through focused and
intensive discussion that takes into account both technical and non-
technical factors. After thoroughly examining the issue, the group develops
possible solutions and a work program to help implement them. The experi-
ence is documented in a Solutions Papera brief note describing how a
specific challenge or problem is addressed in a collaborative and pragmatic
fashion. The Boot Camps, together with the Solutions Lab and discussions in
Maarefah (knowledge in Arabic), feed into the design of the Exchange and
CV MENAs workprogram.

In partnership with the Wold Banks Global Development and Learning
Network (GDLN), CV MENA connects participants across the MENA region
(once each quarter) in finding solutions on topics related to internal and
external audit and corporate financial reporting. The Solutions Lab realizes
that an answer is not necessarily the solution: a time-tested best practice
may not be optimal in a particular situation because it may not be politically
or socially feasible at the time. The Labs help our clients fashion an attaina-
ble solutionan alternative answer to the problemby bringing in other
perspectives and different, yet relevant, experiences from other countries.
The Labs also feed into the design of The Exchange.
Maarefah responds to the need to implement, sustain, and build on the
results of The Exchange, as well as to extend these benefits to those unable
to personally attend Boot Camps and Solutions Labs. Maarefah
(knowledge in Arabic) is a Community of Practice (CoP) that serves as a
forum for ongoing dialogue and continuous peer-to-peer and expert
knowledge exchange. The CoPestablished by the Financial Management
Unit of the World Banks Middle East and North Africa Region in 2011 as a
response to popular demand for change, accountability, transparency, and
inclusivenessis designed to serve as a robust base for extending the dia-
logue and refocusing it on the needs of CV MENA.
Publisher: Governance Global Practcie, MENA, The World Bank
Managing Editor: Hisham Waly
Art Director: Denis Largeron
Artwork: Michael Gibbson (cover), Greg Johannesen (illustrations)
Contributing Photographers: Denis Largeron, Arne Hoel
Images: World Bank Images, Shutterstock

Note: The posts in the Connecting Voices magazine should not be reported as representing the views of The World Bank. The views expressed are those of
the authors and do not necessarily represent those of the The World Bank or its policy.


Public Financial
Management (PFM)

06 MENA Survey
Perception of PFM and SAIs

12 Audit & Controls
Key features

14 PFM Legislation
Basic elements

16 Extractive Industry

Corporate Financial
Reporting (CFR)

22 MENA CFR Strategy
Opportunities & Challenges

26 CPAs
Expending Opportunities

28 Integrated Reporting
Interview: Robert Eccles
Harvard Business School

Governance (TAP)

32 Promoting TAP
Role of institutions

34 Service Delivery
Working together

35 Corruption
Can Audits fight it?

37 Procurement
Capacity Building in MENA


52 Morocco
Governance Reform

54 Tunisie (in FRENCH)
Entrevue: Nabil Abdellatif
Prsident de lOrdre des Ex-
perts Comptables

56 Morocco
Public Procurement Reform

59 Libya
PFM Reform

60 Maroc (in FRENCH)
Driss Jettou, Premier Prsi-
dent de la Cour des Comptes


66 Djibouti (in FRENCH)
Entrevue: Ilyas Dawaleh,
Ministre de l'Economie et des
Finances, charge de l'industrie
et de la planification

68 Djibouti
Interview: Homa Fotouhi
Resident Representative

70 Lebanon
Interview: Fadi Fakih
Executive Board Member, CMA

72 West Bank & Gaza
Accounting Profession and

74 Egypt (EN/AR)
Interview: Hazem Hassan
Chairman of the ESAA


80 UAE
Article: Bassel Nadim
CEO of The AAA

82 KSA
Interview: Ahmad Al-
Meghames, Secretary-General

83 Kuwait
Interview: Bassam RAMADAN,
Kuwait Country Manager


86 Maarefah
Q1 and Q2 2014

87 Bootcamps
Q2 2014


92 Books
This issue selection

97 Comic Relief
This issue selection

98 From Our Windows
Team POV

99 Our Team
Whos Who


Institutions in MENA

38 MENA Overview
Institutions & Governance

45 The Exchange
Conference and beyond

46 PFM Institutions
Achieving results

48 CFR Institutions
Achieving results

Editors Note

Hisham WALY
Practice Manager
Governance Global Practice / MENA
The World Bank

The tree trunks in the picture, are, well, just
that tree trunks. But to many, the mean-
ingless angles take on a familiar appearance,
that of two human faces in profile kissing.
This is an example of a phenomenon known
as Pareidolia. The term comes from the
Greek words "para", meaning beyond, and
"eidolon", meaning image. The World Eng-
lish Online Dictionary defines Pareidolia as
the imagined perception of a pattern or
meaning where it does not actually exist.

Some of us have experienced this phenom-
enon whether by seeing religious symbols in
oddly-shaped vegetables or even rabbit-
shaped clouds in the sky. Essentially, people
draw what they believe to be significant
information from obviously insignificant
stimuli. Scientists provide numerous expla-
nations for this phenomenon ranging from
our evolutionary heritage, the brains infor-
mation processing system, or simply being a
product of peoples expectations, as report-
ed by the BBC.

A byproduct of working for the World Bank
is attending meetings a lot of meetings
whether internal (with specialists from vari-
ous sectors and backgrounds) or external
(with government officials, civil society,
media, the private sector, citizens, and do-
nors). In some of these meetings, I have
observed that some of us sometimes see a
pattern in random data because of our
yearning to find meaning in the complex
world of development reform. For example,
the passing of an access to information law
(an excellent step) is usually interpreted as a
commitment by the government for more
transparency and better governance. How-
ever, in some cases, the law is never imple-
mented or, when implemented, does not
lead to increased participation or accounta-
bility (for example, due to the weak capacity
of CSOs and legislators, or even the gov-
ernment itself putting up obstacles to pre-
vent its implementation). Another example
is the issuance of a law stipulating the adop-
tion of International Financial Reporting
Standards (IFRS) by a country only to real-
ize later that, as the capacity of stakeholders
and enforcement arrangements were not
considered, the adoption of such standards
remains theoretical.

The intent of governments in pursuing pub-
lic financial management or corporate fi-
nancial reporting reforms varies. In many
cases, governments are genuinely pursuing
reforms with commitment and ownership,
while in some cases they are reacting to
external pressure by sending what Matt
Andrews describes in his book The Limits of
Institutional Reform in Development as
signals to garner external legitimacy.
However, oftentimes these cannot be im-
plemented and seldom provide real and
sustainable solutions. In other cases, gov-
ernments are trying to rehabilitate their
image for example, after a well-publicized
corruption scandal by responding to pres-
sure from the media and public opinion or
in an attempt to deal with fiscal and eco-
nomic crises tighten controls over public
spending and put into place arrangements
for fiscal discipline and independent scruti-
ny (Archon and De Renzio, 2013).

As a development institution and donor, we
need to be clear sighted about the level of
government commitment and ownership in
order to better collaborate with internal and
external partners. In the past, this was not
always easy, given the way the World Bank
was organizationally structured whereby
professionals representing financial man-
agement, procurement, public sector, anti-
corruption, regulatory policy, social ac-
countability, taxation, and information
management were spread between many
sectors and regions that did not always co-
ordinate and exchange information and,
in some cases, even competed over budget
and tasks.

As of July 1, 2014, the World Bank Groups
new structural organization into 14 global
practices, with one Global Practice (GP)
dedicated to Governance, aims to solve this
fragmentation by bringing together all such
professionals under one roof. The aim will
be to better work together, exchange in-
formation faster, build local and global
knowledge that is adaptable to our clients
circumstances, develop integrated and in-
novative solutions to real problems, timely
report on results to our stakeholders and
better connect the dots to design realistic
not pareidolia-like interventions.

The Governance GP consists of more than
800 professionals with a presence in more
than 120 countries across the globe. This,
we hope, will help unlock our knowledge
and expertise to help achieve the World
Bank Groups two ambitious goals: reducing
the number of people living on less than
$1.25 a day to 3 percent by 2030 and pro-
moting shared prosperity by fostering the
income growth of the bottom 40 percent.

A new chapter begins.


Public Financial Management
MENA Survey 6

Perceptions of Public Finance Transparency and the
Value of Supreme Audit Institutions

Senior Financial Management Special-
ist, Governance Global Practice/MENA,
The World Bank

Coincident with the Arab Spring, calls for
more transparency, accountability, and
participation have been intensifying. This
encompasses among other things, public
access to information, natural resource
revenue transparency, and opening budgets
to public scrutiny. It is evident that a well-
functioning and independent Supreme Au-
dit Institute (SAI) can be a vital means to
public scrutiny. SAIs can audit what is done
with public monies. However, without hav-
ing these audits open to Parliaments and
to citizens the Executive cannot be held
accountable. In principle, SAIs contribute to
sound public financial management (PFM)
and good governance. This helps to ensure
less wastage and better investment of pub-
lic funds, thereby leading to economic
growth and eventually poverty reduction.
Therefore, SAIs should continue to improve
their value and make their benefits visible
for all concerned. To explore the perception
of the quality of public financial transparen-
cy and value of MENA countries SAIs, a
MNAFM sponsored survey was undertaken
on December 2013, including 47 Civil Socie-
ty Organizations (CSOs), and 27 media
organizations across 9 countries (Djibouti,
Egypt, Iraq, Jordan, Lebanon, Morocco,
Tunisia, the West Bank and Gaza, and Yem-
en). The areas explored include whether
CSOs have access to the necessary type of
information about public finance, whether
they are trained in financial management;
how they deal with the SAI of their country;
whether they read the SAI reports and how
they assess them, etc. Moreover, the sur-
vey explored these organizationsal views on
ways to strengthen their interactions and
relationships with SAIs for better coopera-
tion, as well as for public benefit. The Sur-
vey also queried the level of cooperation
between such organizations and SAIs in
holding the government accountable. Re-
garding the media, the Survey explored
whether media organizations have ever
published anything about public finance
transparency; whether their staff are quali-
fied to write on such issues; and whether
or not they were trained in financial man-
agement. The Survey also examied what
could be done to promote better report-
ing; whether CSOs know about SAIs (in
their country) and SAI roles/responsibilities;
whether they deal with SAIs, whether they
report about SAIs; and what, in their opin-
ion, could be done to strengthen their rela-
tionship with SAIs for better cooperation
and the public benefit.

The results of the Survey will help to guide
World Bank support, strengthen CSO capac-
ity, and develop mechanisms to build or
enhance the collaboration between SAIs,
CSOs, and the media.

Key conclusions from analyzing the responses:

There is difficulty in understanding complex financial matters
and limited reporting on public finance issues mainly due to
media inexperience in these matters
Interaction with SAIs is mainly to request audit reports;
likewise, there is limited awareness of the value and benefits
provided by the SAI.
Access to specific SAI audit reports and perception of their
good quality is rated average; obstacles to reading audit
reports are mainly in accessability.
There is very limited reporting on SAI audit reports.
There is a wide interest and need in building knowledge of
public financial matters and audit reports.
There is also a wide interest in coordinating with SAIs.

Key steps that could be taken are:

Support governments in having access to information laws as
already started in a number of MENA cuntries.
Facilitate knowledge building and training for CSOs and media
on public financial matters and audit reports. The 2013
Exchange in Abu-Dhabi is a good example.
Support SAIs in in coordinating with CSOs and the media. This
entails providing needed capacity building to SAIs on
Support SAIs in improving the quality of audits and audit
Raise awareness of the importance of having budget
document and audit reports made public, and support
initiatives to facilitate this.

MENA Survey 7
Public Finance Transparency
Civil Society Organizations (CSOs)

68% of CSO usually access public information: mostly government financial statements and budget documents

Most CSOs reported that enhancing capacity by attending conferences on public finances, facilitating training, having
relevant documents made public, and providing help for CSOs in preparing their budgets are key steps toward improving
focus on public finance issues.

MENA Survey 8
Public Finance Transparency

37% of media have reported on public finanance transparency news, including mostly budget implementation reports and
procurement and budget preparation news

Most media reported that enhancing capacity by attending conferences on public finances, facilitating training, recruiting
experts, and having relevant documents made public are key steps to improving the reporting on public finance issues

MENA Survey 9
Interactions with SAIs
Civil Society Organizations (CSOs)

34% of CSOs reported that they interacte with SAIs, mostly to request information or audit reports

40% of CSOs reported that they had read SAI audit repors and around 74% rated them as good.

60% of CSOs reported that they had not read a SAI audit report and 39% reported that the key reason was that reports are
not made public.

MENA Survey 10
Interactions with SAIs

37% of media reported that they interact with SAIs, mostly to request information or audit reports

54% of media reported that they had read a SAI auit report and around 85% rated it as good.

46% of media reported that they had not read a SAI audit report and 36% reported that the key reason was that the
reports were not made public.
MENA Survey 11
Interest in SAIs
Civil Society Organizations (CSOs) Media

85% of CSOs are interested in cooperating with SAIs. Most
find that workshops, and conferences are a better means
for cooperation, in addition, forming joint coordination
committees is also seen as useful.
88% of media are interested in cooperating with SAIs. Most
find workshops and conferences are a better means for
cooperation, in addition, they want to be provided with
public financial information.

Did You Know?

500 day milestone: Millennium Development Goals

August 18, 2014 marks the 500 day milestone until the target date to achieve the Millennium Devel-
opment Goals (MDGs), 8 goals established by the United Nations and governments around the world
to tackle some of the worlds biggest problems.

Internal Control & Audit 12

Key Features of Internal Financial Control and Audit

Financial Management Specialist
Governance Global Practice/MENA
The World Bank

Internal Control Systems
Organizations, be they public or private,
apply a variety of measures in their opera-
tions to ensure that their objectives are
met, that financial reporting is of required
quality, and that rules and legislation are
followed. Such measures include: expendi-
ture controls to ensure compliance with the
budget; segregation of responsabilities to
lower the risk of error and fraud; proce-
dures to ensure quality and timeliness of
accounting and financial reporting; as well
as information technology (IT) security pro-
cedures. These measures comprise inter-
nal control in accordance with the defini-
tion in the COSO1 framework. Internal con-
trol is the responsibility of the management
of the organization, and is carried out by
staff throughout the organization as part of
their everyday work. It can also be auto-
mated through IT systems. For example,
when an employee in the Ministry of Water
Resources checks whether works on irriga-
tion systems are proceeding according to
the agreed specifications and quality, it is
considered part of the internal control
framework of the ministry. A subset of in-
ternal control measures are related to the
financial management of the organiza-
tion.Management is responsible for design-
ing an internal control framework which is
appropriate for the specific organization,
although this may also include certain man-
datory measures prescribed by the legal
framework. In designing the internal control
framework, it is important to take into ac-
count the specific characteristics, opera-
tions and risks of the organization. As-
sessing risk entails considering the likeli-
hood of events occurring that may hamper
the operations of an organization and the
achievement of its objectives. In addition,
risk assessment entails examining what and
how severe the consequences of such
events would be. The internal control
measures are designed to mitigate the
identified risks. Embedded in this concept is
the notion that there is no one size fits all
solution. For example, a bank will have
different risks than a ministry that spends
significant amounts on the procurement of
goods. The type of budget system chosen
also has implications for internal control
measures (see figure). In public sector con-
texts where budgeting is characterized by a
strong focus on inputs, annual orientation
and centralization, the main focus of the
internal control system is often on assuring
compliance with rules and regulations and
annual budget appropriations. In organiza-
tions or countries where the budget is more
concerned with the expected results of the
use of the funds, it will often be relevant to
include measures aimed at increasing the
chances of goal achievement and effective-
ness. It is important to note that a higher
number of controls and checks does not
necessarily equal better control. In some
countries with poor governance, multiple
layers of controls may in fact increase cor-

1 The Committee of Sponsoring Organizations of the Treadway
Commission (COSO) is an independent private sector initiative
formed in 1985 to study the factors that can lead to fraudulent
financial reporting. COSOs Internal Control Integrated Frame-
work from 1992 has gained wide acceptance, and was updated in
2 Daniel Tommasi: The Budget Execution Process, in Allen, R.,
Hemming, R. and Potter, B. H. (2013): The International Handbook
of Public Financial Management.

In Their Own Words

"In the past year, membership in The IIA rose more than 100 percent in the Middle East. That's not only an astounding increase, it far and
away outpaced anywhere else in the world. At the same time, we found that more than 65 percent of chief audit executives surveyed by
The IIA are reporting both staffing and budget increases. What's more, internal audit staffing levels did not decrease at any Middle East
company responding to our survey, and none of the internal audit groups experienced a budget cut in the past year ... In the past four
years, in fact, there was a 278 percent increase in the number of Middle East auditors receiving the Certified Internal Auditor (CIA) or other
professional designations from The IIA. Much of the CIA growth has been the direct result of the CIA exam being translated into Arabic."

Richard Chambers, President and CEO of The Institute of Internal Auditors (IIA). March 17, 2014

Figure 1: The Budget System and Internal Control
Source: Robert Gielisse, European Commission. Adapted from Jack Diamond (2013):
Good Practice Note on Sequencing PFM Reform.


Internal audit
An important component of the internal
control framework is to monitor how the
different internal control measures are
functioning and whether they are having
the intended effect. Internal audit plays a
vital part in this monitoring process. It can
have different organizational set-ups, but
certain common principles apply.

The main objective of internal audit is to
carry out independent and objective re-
views and provide reasonable assurance
that an organizations operations are in
compliance with rules and regulations, that
financial reporting reflects the actual finan-
cial position, and increasingly, that the or-
ganization is achieving its objectives both
efficiently and effectively.
It also provides
recommendations to management on cor-
rective actions and improvement measures.

Internal audit can be distinguished from
other internal control measures in that it
mainly reviews after- the-fact, and that it is
independent, in other words that it is not
involved in the operations itself. It should
report directly to organizational manage-
ment to ensure that important issues re-
ceive top-level attentionwithout reports
first having to be approved by the people
who have been audited.

The potential scope of internal audit is
wide, but an important task is to evaluate
the internal control system. This entails a
systematic analysis of the different
measures put in place and their effective-
ness. It is less concerned with testing indi-
vidual transactions.

The Institute of Internal Auditors (IIA) has
developed internationally-recognized
standards for internal audit. They foresee
an internal audit function which evolves
from the testing of transactions to becom-
ing managements trusted advisor. This
requires strong audit teams with a variety
of skills.

Internal audit is distinct from external audit,
which in the public sector is carried out by
the supreme audit institution (SAI). Internal
audit is carried out by staff within the or-
ganization that is being audited (or in the
public sector, sometimes by the Ministry of
Finance). It reports to the management of
the same organization. By contrast, the SAI
is a separate organization with its own staff
which reports to the Parliament and the
public in addition to the audited entity.
Therefore, it fulfills an important role in
holding public officials accountable in the
use of public funds. Internal audit is also
distinct from financial inspectors in the
public sector in that it does not solely carry
out investigations into alleged mismanage-
ment or violation of rules. Rather, it uses
sampling and testing of the internal control
systems to give overall statements to man-
agement about compliance and financial

1 Jack Diamond: Internal Control and Internal
Audit, in Allen, R., Hemming, R. and Potter, B. H.
(2013): The International Handbook of Public
Financial Management.

Figure 2: Internal Control and Internal Audit
Source: Pierre Messali, World Bank, presentation delivered at The Exchange confer-
ence, Abu Dhabi, June 10-12, 2014.

Figure 3: The Change Challenge for Internal Audit
Source: Ross Fraser, presentation delivered at The Exchange conference, Abu Dhabi,
June 10-12, 2014.

Legal & Regulatory Framework 14

Scoping and Unifying
Public Financial Management Legislation:
Basic Elements to Consider

Lead Financial Management Specialist,
Governance Global Practice/MENA
The World Bank

As a number of countries in the Middle East
and North Africa (MENA) region seek to
consolidate and modernize their public
financial management (PFM) legal and
regulatory framework, some basic elements
need to be addressed. The objective is to
achieve strong, yet clear, PFM rules and the
process includes assessing:

The scope of a potential unified law;
Coherence with the countrys constitu-
Identification of conflicting or redun-
dant directives among the existing body
of laws;
A study of similar legislation in compa-
rable country contexts (with caution);
Distinguishing the potential content of
the new unified legislation from that of
decrees and regulations.

A critical consideration in the design of a
PFM Law is the imposition of limits, defini-
tion of flexibilities, and the means to set,
monitor and enforce regulations and stand-
ards. Achieving the right balance between
limits and flexibility is key to effective PFM
legislation. The mechanisms to promote
comprehensive information, transparency
and accountability help to ensure flexibility
and enforce limits. While studying the ex-
perience of other countries is desirable, the
impulse to either adopt a single model or
assemble a set of best practices, - without
due regard to the country contextual reali-
ty, - should be avoided. With this caveat,
international experience points to some
basic elements normally found in modern
PFM legislation.

Checks and balances in the budget system
Roles, responsibilities and accountabil-
ities between the executive and the
legislative branches; and
Main responsibilities of central agen-
cies, particularly the Ministry of Fi-
nance, spending ministries, and the

Budget formulation, approval and adjust-
Budget compliance with fiscal rules, if
The comprehensiveness of the budget;
The minimum content of: (i) the pre-
budget statement (including link to me-
dium-term frameworks); (ii) the budget
project and supporting documents; and
(iii) the budget law;
The timeline of formulation, presenta-
tion, discussion, and approval of the
budget, and mechanisms for continuing
operation when the budget project is
not approved before the start of the fis-
cal year;
The parameters within which the legis-
lature can modify the budget project;
Authorities over supplements and ad-
justments to the legislated budget dur-
ing execution.

Budget execution and cash management
Requirement for revenues to be consol-
idated in a common fund;
Treasury single account operation;
Requirement for funds to be spent only
by appropriation of the legislature;
Financial and compliance controls at the
commitment, verification (if applicable)
and payment stages; and
Parameters and controls for use of
complementary execution periods and
carryover of the capital expenditure

Budget classification
Basis for classifying budget expenditures for
formulation, approval, control, and report-

Accounting and financial reporting
Provisions for public sector accounting
Timeliness, content, and publication of
in-year and annual budget execution re-
ports, financial statements, and other
fiscal information; and
Legislative review of annual accounts
(budget execution reports and audited
financial statements).

Public debt
Parameters, approval and management
of debt (and guarantee) strategy and in-

Special provisions
Exceptional criteria for establishing,
approving, and regulating the transpar-
ency of extra-budgetary funds, if any;
Arrangements for budget transfers to
subnational governments (if applicable),
and related reporting; and
Arrangements for financial transactions
with state enterprises, and related re-

Transitional arrangements
Transitional clauses/schedule to allow
for phased implementation of certain

The means and authorities to regulate
the law through decrees/regulations.

Other PFM laws
While external audit should be governed by
a separate law concerning the independent
supreme audit institution, care should be
taken to ensure that PFM and audit legisla-
tion are consistent. For example, this could
be done by eliminating ambiguity between
the role of internal and external audit, and
ensuring compatibility of dates and proce-
dures for production and publication of
annual audited accounts.

In a similar fashion, the provisions of the
public procurement and PFM legislation
should be coherent.

IMF. 2010. Technical Note: Reforming Budget System
Laws. Ian Lienert and Israel Fanboim, The World Bank.
1998. Public Expenditure Management Handbook

New Paper

This is PFM

Authors: Matt Andrews, Marco Cangiano, Neil Cole, Paolo de Renzio, Philipp
Krause, and Renaud Seligmann

July 2014


The acronym PFM stands for Public Financial Management: But
what is public financial management? This short note tries to de-
mystify the concept, drawing on perspectives of specialists in the
area who work in different contexts and bring different views
(from academia, the multilateral and bilateral development agen-
cies, think tanks, government, and civil society). The note is not
meant to be prescriptive but rather offers an entry point to a fuller
discussion on the constituent elements of PFM systems, how and
why PFM reforms have emerged, and where the gaps are for fu-
ture attention.

Extractive Industry 16

New MENA Extractive Industry Public Financial
Management Study

Senior Financial Management Special-
ist, GGP/MENA, The World Bank

The MENA Extractives Public Financial
Management (PFM) Technical Practice
(TP) launched a survey aimed at taking
stock of the various ways in which re-
source revenue generation (focusing on
oil and gas resources) is currently con-
nected to overall PFM systems of coun-
tries in the Middle East and North Africa
(MENA) region. Specifically, the survey
examined connections in terms of the
legal framework, transparency, accounta-
bility, controls and oversight, integration
of resource revenues in planning and
budgeting practices, as well as Treasury
operations and asset management. The
scope encompassed issues of integrity of
information as well as more general issues
of budget management, institutional
framework, and debt and asset manage-
ment. The study is limited to the MENA
region, and focused specifically on the
those 11 countries in the region that are
net hydrocarbon exporters, namely Alge-
ria, Bahrain, Iran, Iraq, Kuwait, Libya,
Oman, Qatar, Saudi Arabia, Syria, the
United Arab Emirates (UAE), and Yemen.
Although Egypt and Morocco also have
significant extractive industries (EI), the
importance of the EI sector in these econ-
omies is too limited to classify Egypt and
Morocco as natural resource dependent.

However, these countries could be added
to the study at a later stage, if considered
important for more comprehensive cover-
age of the countries with significant re-
source production in the MENA region.
Syria is included in the list of resource-
dependent countries, but will not be cov-
ered by the study due to a complete ab-
sence of recent data. In this context, it
should also be noted that mining (primari-
ly phosphates) comprises resource reve-
nues in Morocco, whereas in the other
MENA countries, resource revenues are
based on oil and gas extraction.

Objectives of the Study
First, while the literature on governance
of extractive industries and management
of non-renewable resource revenues (RR)
abounds, it is usually focused on general
principles and good practices. However, it
fails to bridge the gap vis--vis more re-
gional and country-based knowledge that
would be actionable in a specific context.
Quite surprisingly, this is the case for the
MENA region where country knowledge
on Extractives PFM is scarce. It is either
dispersed and has to be retrieved either
from PFM sources where the specifics
of Extractives PFM are a secondary or
minor concern (for instance in Public Ex-
penditure and Financial Accountability
[PEFA] reports) or from Extractives
sources which generally pay little atten-
tion to budgetary systems. This study will
help address this important gap. The sec-
ond objective of the survey is to create a
common pool of information that the
Extractives PFM TP could later refine,
update and expand upon, thereby provid-
ing MENA GGP staff with opportunities for
learning, as well as for enriching the coun-
try-based policy dialogue on these issues.

The methodology is based on a systematic
review of the existing literature using an
analytical framework especially developed
in its initial version in a 2013 European
Union (EU)/(IBF) note
. It is focused on
links to the countrys PFM systems, and
therefore does not cover policy decisions
regarding rates of resource exploitation,
fiscal regimes, growth and development,
inequality and related issues of economic,
social, environmental and fiscal policy.
Rather, the focus is on the management
systems and practices for the public finan-
cial stocks and flows of each link in the
value chain and the public institutions
involved in or forming part of these sys-
tems and practices. The institutions and
practices typically involved are listed and
grouped in tables 2 and 3 respectively.
The systematic review has been captured
in 11 country Resource Revenue Notes,
which have been shared with relevant
country-based Governance GP staff for
validation, correction and additions. A
report will summarize findings; identify
issues and lessons, as well as potential for
more in-depth country case studies or
other possible follow-up.

Preliminary findings
The final report will be available in the
coming months. Some preliminary themes
can be outlined and are likely to be fur-
ther explored, including:
The quality of public expenditures is
particularly important for MENA re-
source-exporting countries because
spending is substantially financed by
temporary revenues from exhaustible
resources. Many budget systems in
MENA suffer from weaknesses, includ-
ing the capacity to manage planning, al-
location and effective control of budg-
etary resources. Large increases in ex-
penditures in recent years facilitated
by the resource price boom have put
additional pressures on the PFM sys-
In MENA, the availability of EI resources
can reduce pressures for accountability
and the drive for improvement in PFM
and fiscal transparency.
The Medium-Term Expenditure Frame-
work (MTEF), when adapted to the cir-
cumstances faced by MENA resource-
rich countries, can provide an institu-
tional framework for addressing medi-
um- and long-term resource allocation
issues. However, it has been notably
underused in the region.
Resource funds have been set up in
Algeria, Bahrain, Iran, Kuwait, Libya,
Oman and Qatar and their relationship
with PFM systems will be discussed.
Depending on its design, a resource
fund may help or hinder the budget sys-
tem in meeting its basic objectives.

It should be integrated within the budget
process in a coherent manner to help
maintain a unified control of fiscal policy.
It also facilitates a consistent prioritiza-
tion across government operations. In
MENA, several resource funds have led to
extra-budgetary spending, such as the
Libyan Investment Authority.
In a limited number of cases, such as Al-
geria, governments have recently made
efforts to better integrate their resource
funds with budget systems and fiscal poli-
cy frameworks, as well as to strengthen
fiscal transparency.
1. According to the IMF (2007), a country is considered rich
[rather than dependent] in hydrocarbons and/or mineral
resources if it meets either of the following criteria: (i) an
average share of hydrocarbon and/or mineral fiscal reve-
nues in total fiscal revenue of at least 25 percent; or (ii) an
average share of hydrocarbon and/or mineral export pro-
ceeds in total export proceeds of at least 25 percent.
2. The analytical framework as well as data and preliminary
analyses presented in this article can be found in Frans
Ronsholt, World Bank Study on Existing PFM Frameworks in
MENA Resource-Producing Countries: Inception Report,
May 2014
Table 1. MENA Countries and Extractive Industry Characteristics
Country Population
2011 (million)
GDP Per Capita- 2011
(PPP at 2005 USD)
Extractives Percentage Share
of Total Exports (2011)
EI as Percentage Share of Total
Government Revenue (2011)
Algeria 36.0 7,643 67% 98%
Bahrain 1.3 21,345 91% 76%
Egypt 82.5 5,547 38% 10%
Iran 74.8 10,462 50% 74%
Iraq 33.0 3,412 97% 99%
Kuwait 2.8 47,935 83% 93%
Libya 6.4 15,361 91% 86%*
Morocco 32.3 4,373 13% ..
Oman 2.8** 25,460** .. 83%*
Qatar 1.9 77,987 68% 73%
Saudi Arabia 28.1 21,430 90% 88%
Syria 21.9** 4,730** .. 34%*
UAE 4.6** 57,740** .. 73%*
Yemen 24.8 2,060 63% 89%

Notes: GCC= Gulf Cooperation Council; PPP= purchasing power parity; USD= United States dollars. Base info: RWI 2013 Country Profiles;
(*) IMF 2012 Figure 5, average for period 2001-2010. (**) The Economist: World in Figures 2012 Edition, 2009 figures.

Table 2. Institutions Typically Involved in Resource Revenue Management
National Government Other Public Institutions Citizens / Private Sector
Ministry of Extractive Sector; Ministry of
Finance; Extractive Industry Regulatory
Agency; Revenue Agency; Resource Fund;
Government auditors and Legislature
Public Corporations in Extractive
Industry sector, Central Bank and
Sub-national government
Owners of natural resources (if not the
state); Companies extracting, pro-
cessing, selling natural resources; and
Citizens as intended beneficiaries

Table 3. Management Systems and Practices Typically Involved in Resource Revenue Management
Legal Setting Reporting Compliance
Ownership of natural resources; Issue/sale/allocation of explora-
tion and extraction rights and permits; Government participation
in operations; Fiscal regimes; Utilization of resource revenues;
Institutional roles, responsibility and authority.
Coverage, Quality, Level of
detail, Frequency and
Safeguards, Quality
assurance, Appeals,
Audit, and Oversight

Box 1: Recent Initiatives to Strengthen Resource Revenue Management in Resource-rich Countries

The Extractive Industries Transparency Initiative (EITI) has developed standards for disclosure and reconciliation of what companies pay and what gov-
ernments receive, that is, a distinct but crucial stage in the value chain. A set of requirements must be fulfilled for a country to become an EITI Candidate
and to maintain that position. The standards include obligations for both the government and for the natural resource companies (NRCs) in a candidate
country, and involve an independent institution as auditor or reconciler. Currently 39 countries implement the requirements, of which 23 are considered
to be EITI compliant. An update of the EITI Standard and requirements was approved in May 2013.

The IMF in 2005 issued the first version of the Guide on Resource Revenue Transparency, which provides a comprehensive framework for assessing trans-
parency and accountability across the whole value chain. The Guide on Resource Revenue Transparency is a companion document to the Fiscal Transpar-
ency (FT) Code and Reports on the Observance of Standards and Codes (ROSC, and was re-issued in 2007 in connection with the revision of the FT Code
and ROSC in the same year. It delineates 24 good practices, arranged under the same four headings as the FT Code. As the FT Code and ROSC are currently
undergoing a revision, it would be expected that the Guide on Resource Revenue Transparency will be re-issued later in 2014.

The Revenue Watch Institute (RWI) promotes effective, transparent and accountable management of oil, gas and mineral resources for the public good.
The RWI developed the Resource Governance Index (RGI) formerly Revenue Watch Index to measure government disclosure in the management of
revenues from oil, gas and minerals extraction. It was first applied in 2009/10 in 41 countries. The second report on the RGI covers 58 countries and was
released in May 2013. The Index is based on 50 indicators under four clusters with a total of 71 main survey questions plus additional information, resulting
in 173 rated data entries per country. It is described by the RWI as largely a quantification of compliance with the good practices promoted by the IMF
Guide on Resource Revenue Transparency.


New Paper

In Their Own Words

Connecting Budgeting and Evaluation
The spending reviews conducted in the wake of the global
financial crisis have mostly been "rough and ready" processes,
and have not been informed by quality information on the
effectiveness of existing programs. This is where evaluation
comes in. Ministries of Finance increasingly understand that
good spending reviews depend on the quality of the public
expenditure analysis which underpins it, and that evaluation
has a major role to play in helping to guide the identification
of appropriate savings options. There is also a growing under-
standing that evaluation has a pivotal role to play in perfor-
mance budgeting, which is about the systematic use of per-
formance information to improve the quality of budgeting and
funding decisions. At the government-wide level, one of its
most important objectives is to improve "allocative efficiency"
that is, to help ensure that limited resources are allocated to
the areas which are going to deliver greatest benefits. The
problem is that performance budgeting is often perceived as
exclusively concerned with the use of performance indicators
in budgeting. The result is that many OECD governments have
packed budget documents with thousands of not necessarily
pertinent performance indicators. They are then disappointed
with the failure of these indicators to make much difference to
budgetary decisions. The reason for this is that indicators
alone often provide only partial information about the effec-
tiveness and efficiency of expenditure. Most outcome indica-
tors are heavily affected by so-called external factors. It is
necessary in many cases to subject indicators to significant
analysis in order to tease out the real performance story. Ex-
pressed differently, assessing program effectiveness usually
requires not only looking at the outcome indicators, but the
use of tools such as impact evaluation and program logic anal-
ysis. Performance budgeting is therefore increasingly being
more correctly viewed as the systematic use in budgeting of
performance information generally not only of indicators,
but of evaluation. Evaluation has been a "missing link" in the
attempts to realize the performance budgeting goal of truly
connecting performance and resource allocation decisions.

Tuesday, July 1, 2014, By: Dr. Marc Robinson
World Bank Group Blogs

Making Progress on Foreign Aid

Abstract: Foreign aid is one of the most important policy tools that rich countries use for helping
poor countries to improve population well-being and facilitate economic and institutional devel-
opment. The empirical evidence on its benefits is mixed and has generated much controversy. This
paper presents descriptive statistics which show that foreign aid to very poor countries accounts
for very little of total global aid; reviews the evidence that foreign aid is often determined by the
objectives of donor countries rather than the needs of recipient countries; argues that the evi-
dence on the impact of aggregate foreign aid is hindered by problems of measurement and identi-
fication, which are partly due to the heterogenous nature of aid; and discusses recent studies us-
ing natural and randomized experiments to examine narrowed definitions of aid on more dis-
aggregated outcomes.

Qian N. 2014. Making Progress on Foreign Aid. Annu. Rev. Econ. 3: Submitted. Doi:10.1146/annurev-

Annual Members Face-to-Face Meeting
November 26-28, 2014
Amman, Jordan

More info @



Revenue Administration: Administering
Revenues from Natural Resources

Natural Resources revenues, which are substantial in many countries, have major macro-fiscal rele-
vance. In 2011, these revenues accounted for over 50 percent of government revenues in petroleum-
rich countries, and approximately 20 percent in mining-producing countries and countries with both
mining and petroleum extraction industries (Figure 1). The importance ofand dependence onthe
NR sector is higher in developing countries. Indeed, the concentration of revenues in the oil sector can
reach levels of 80 percent or more in countries like Angola, the Republic of Congo, Equatorial Guinea,
and Nigeria. Moreover, future trends look optimistic in terms of reserves, with significant NR potential
estimated for certain regions, in particular sub-Saharan Africa (World Bank, 2011). This is a remarkable
opportunity to foster development and reduce poverty, but it comes with significant challenges for
many low-income countries.

International Monetary Fund
Fiscal Affairs Department
Revenue Administration: Administering Revenues from Natural ResourcesA Short Primer
Prepared by Andrea Lemgruber and Scott Shelton
April 2014


Corporate Financial Reporting
CFR Strategy 22

A Strategy for Corporate Financial
Reporting in MENA:
Addressing Opportunities and Challenges

Gabriella KUSZ
Senior Financial Management Specialist
Governance Global Practice, MENA
The World Bank

Economic growth, job creation, financial
sector development, and sound governance
all rest on a countrys Corporate Financial
Reporting (CFR) environment. CFR refers to
the broad spectrum of cross-cutting areas
which include the following:

The existence of a sound legal and regu-
latory framework to facilitate high-
quality financial reporting with due re-
gard to international standards and
good practices. It should be suitable to
different environments, such as financial
sector and capital market players, small-
and medium-size enterprises, and state-
owned enterprises;
Design and implementation of educa-
tional programs, inclusive of youth and
women professionals, to prepare them
to undertake roles in the financial re-
porting process;
Building of sufficient human capacity
within organizations to produce finan-
cial information;
Advancement of firms which provide
external accounting and auditing ser-
vices for these organizations;
Strengthening of regulators and gov-
ernment entities which oversee the
production and use of financial infor-
mation; and
Awareness among end users that rely on
this information in making economic de-
In the private sector, CFR activities are
strongly aligned with World Bank strategy.
Specifically, Bank strategy seeks to increase
transparency, foster market confidence, and
enhance the effective management of pub-
lic resources. It also aims to further country
stability, economic development and social
progress. Additionally, credible and reliable
financial information builds investor confi-
dence, furthers sound economic and finan-
cial management and increases the attrac-
tiveness of a countrys investment climate.
In doing so, it facilitates foreign direct in-
vestment (FDI) and business development.
Whereas strong CFR and improved financial
reporting contribute to financial sector sta-
bility, a lack of strong accountancy and poor
quality financial information limit effective
supervision of companies, banks, insurance
companies and other financial institutions.
Therefore, weak CFR increases the vulnera-
bility of a country to instances of fraud and
potential financial crisis.

Finally, high quality financial information is
not only vital for FDI and financial stability,
but also for the growth of small and medi-
um enterprises (SMEs). In developing and
emerging countries, these entities may
comprise more than three-quarters of a
countrys gross domestic product (GDP) and
total employment. Like their larger coun-
terparts, SME businesses require high-
quality financial information to support
business planning, facilitate access to credit,
and expand operations and employment,
thereby contributing to economic growth.

In the public sector, CFR and the develop-
ment of competent and capable accounting
professionals benefits not only private sec-
tor employers, but government as well.
Specifically, CFR can offer governments
better educated and skilled candidates
knowledgeable in key areas, such as budget
preparation, financial oversight and audit.
Well-skilled professionals are better able to
produce high-quality financial information.
Such information can then be relied upon
by the government in making decisions
related to the allocation of resources, over-
sight and evaluation of the use of public
funds and future financial decision making.

Additionally, production of high-quality
financial information by the private sector
offers government better data and greater
insight into the growth and development of
the economy, which may aid in the creation
of better policies to guide and enable eco-
nomic growth. Finally, competent and ca-
pable accountancy professionals are better
able to assist and provide support in the
correct preparation of tax return state-
ments, and may contribute directly to in-
creased tax revenue collection by the state.

CFR Strategy 23

When appropriately supported and devel-
oped, a countrys corporate financial report-
ing environment has the potential to pro-
vide high-skilled accountancy professionals
and similarly high-quality financial infor-
mation. These are two inputs necessary for
public and private sector development and
the achievement of the dual goals of the
World Bank, namely: ending extreme pov-
erty and promoting shared prosperity.
Although this is the ideal, and significant
reforms have been made throughout the
MENA region with regard to CFR environ-
ments in recent years, there are still areas
for improvement.

In assessing the degree of need for
strengthening CFR, MNAFM undertook a
SWOT (Strengths, Weaknesses, Opportuni-
ties, and Threats) assessment. Key challeng-
es identified through this exercise included
the lack of understanding /awareness of the
role of CFR in the economy, as well as the
importance of utilizing government support
to strengthen this aspect of the economy.
This is compounded by the lack of willing-
ness on the part of some governments to
support CFR development and embrace
financial sector initiatives which may benefit
the broader economy.

Additionally, throughout MENA countries,
serious deficiencies exist with regard to:
(i) the clarity and modernity of accounting
and auditing legislation and regula-
(ii) the degree of alignment of university
accounting education and Professional
Accounting Organization (PAO) certifi-
cation programs with International Ed-
ucation Standards (IES);
(iii) the capacity of PAOs to undertake core
(iv) the level of organization and operation
of systems involving investigation and
discipline of accountants and auditors;
(v) the lack of systems of quality assurance
over the audit profession.

Challenges were also seen in the poor gen-
der balance within the MENA region ac-
countancy fields, including accounting, au-
diting, and financial management. Such an
imbalance harms the diversity and ability of
national CFR environments to develop in-

Finally, an over-emphasis on professional
accountants and auditors ( 1 - 5 percent of
the profession) without due regard for vo-
cational and technical training in the area of
accountancy which may be more relevant
to the whole of regional CFR environ-
ments presents a challenge to developing
a full and multi-faceted profession.

In recognition of the powerful role that CFR
can play in the development of the MENA
region and in light of the need for the
strengthening of CFR environments, the
World Banks MENA Regional Financial
Management Unit (MNAFM) embraces a
vision of strong CFR institutions in the public
and private sectors of our client countries.
Such institutions can promote financial
transparency and economic development.
SWOT Analysis



Serious interest in alignment with international standards and
good practices in MENA region.
Positive history of World Bank engagement in the MENA re-
Strong regional unification of Gulf countries.
Common languages: Arabic among Gulf / Levant countries, and
French among the Maghreb countries / Djibouti.

Lack of awareness of CFR role in economy, in some countries.
Some government willingness to strongly support CFR reform.
Deficiencies in the CFR environment structure and function.
Politics of CFR reform and professional accountancy organiza-
tion (PAO) development.
Low gender balance in accountancy profession /CFR environ-
Over-emphasis on Professionals; not enough emphasis on
developing strong tier of accounting Technicians.



Political transition could lead to financial transparency.
Strengthened political expression could lead to strengthened
private sector development.
Re-branding of CFR for region.
CFR as a tool for further private sector development / em-
ployment generation for the region.
Strong link between public financial management and CFR.
International interest and engagement in the region.
Expansion of interest in Islamic finance.
Potential for using Reimbursable Advisory Services (RAS) to
provide targeted technical assistance as requested.
Further development of regional organizations.

Fiscal pressure faced by some MENA countries may hinder
advancement and funding of the CFR agenda.
Sustainability of some reforms undertaken given changing
political environments.
Limitations in ability to travel / engage with counterparts due
to limited access / security.
General decreases in funding.

Source: World Bank, Middle East and North Africa Financial Management Unit, 2014.

CFR Strategy 24

To achieve this vision, the MNAFM Unit has developed a Vision and Work Plan. Five key strategic goals have been identified which will
guide the units activities in promoting CFR reform and development. They include the following:


Raise awareness of CFR, specifically its role in ad-
vancing transparency and accountability and its
impact on economic and social development.
Presently the MENA region maintains a low level of understanding
of the importance of CFR, and of the role of government and pri-
vate sector in furthering this area. Additional efforts are needed to
increase comprehension of the role of CFR, its function in promot-
ing transparency and accountability, and its link to strengthening
job creation, economic development, shared prosperity and politi-
cal, and social stability. This includes looking internally within the
Bank and ensuring that MNAFM CFR Staff are knowledgeable about
the subject, and that they are actively speaking with Country Direc-
tors and other World Bank leaders to raise awareness.

Strengthen the legal and regulatory framework
and government institutions supporting CFR de-
Weak and/or misaligned legal and regulatory frameworks threaten
not only the development of the financial sector and accountancy
environment, but also the further development of the private sec-
tor and overall economy. Therefore, strengthening this area in-
cluding the implementation of legislation and regulations, and the
institutions which seek to support it will provide a sound founda-
tion for further development efforts.

Strengthen national and regional professional ac-
countancy organizational development and ca-
Strengthening the capacity of PAOs will enhance their ability to
undertake core functions in the areas of education, investigation,
discipline and quality assurance all areas of serious deficiency for
the region. Additionally, they will be able to better:
(i) promote the adoption and implementation of international
standards and good practices;
(ii) address and prepare professionals for emerging issues in the
profession such as integrated reporting and Islamic Finance; and
(iii) facilitate the positioning of professional accountants as advisors
to their SME sectors.

Strengthen accountancy education and contrib-
ute to building the capacity of university and ed-
ucational institutions in this area.
Strengthening educational programs (including programs of life-
long learning) and the institutions which provide access to learning
and knowledge on the subject of accountancy is an important step
in creating a competent and capable accountancy workforce.

Improve diversity of participation in corporate
financial reporting.
In recognition of the challenges facing the region in the areas of
women and youth unemployment, efforts will be undertaken to
ensure that CFR technical assistance and support is provided in a
manner which addresses such groups.

CFR Strategy 25

The following chart and focus areas illustrate how the CFR agenda may be furthered throughout the region during the 2015 fiscal year.
Forthcoming efforts will be designed to align with the World Bank strategy to end poverty and promote shared prosperity. Related activi-
ties will be supported not only by MNAFM staff, but as needed, by individuals and consulting firms, volunteers and public-private partners
to ensure proper implementation.

CPAs 26

CPAs: Expanding Opportunities
in the Global Marketplace

Yasmine EL-RAMLY
CPA/CITP, American Institute of Certi-
fied Public Accountants (AICPA)

Certified Public Accountants (CPAs) around
the world are increasingly being called upon
to provide a variety of services in the global
marketplace. Its really no surprise. No mat-
ter what size the organization, more and
more businesses are looking outside of their
own country and across borders to expand
their prospects. To better assess this thriv-
ing practice area, the American Institute of
CPAs Private Companies Practice Section
(PCPS) polled member accounting firms
regarding their international services, as
well as the degree to which they are work-
ing in a cross-border manner. The results
depict an increasingly globalized world and
significant opportunities for accounting
professionals throughout the Middle East
and North Africa (MENA) region and the

Insight from the American Case
Taking the American case as an example, 64
percent of U.S. small companies sold mer-
chandise or services to a customer outside
of the United States in 2013, up from 52
percent in 2010 (according to the National
Small Business Association (NSBA) 2013
Small Business Exporting Survey (available at Even more compel-
ling, 63 percent of non-exporting companies
said that they would be interested in selling
to a foreign client in the future, if their con-
cerns about exporting could be addressed.
The trend toward greater globalization is
likely to continue, as more than 70 percent
of the worlds purchasing power is located
outside of the United States, according to
U.S. Department of Commerce data. In the
US, CPA firms, regardless of their size, are
finding international services to be a grow-
ing business, as results of the PCPS survey
show. The survey was designed to gauge
practitioner interest in expanding to new
markets and acquiring an international cli-
entele. Firms also expressed their top inter-
national challenges and needs.Half of sole
practitioners and 71 percent of small firms
polled forecast international growth. By
comparison, among the largest firms re-
sponding to the survey, 97 percent expected
these services to grow.
Despite a notable interest in international
matters, 19 percent of survey respondents
were not currently offering international
services. Of that group, a little more than
one-third (35 percent) had no plans to offer
international services during the next five

Top Countries for Future Service Growth
Of the largest firms, 69 percent were look-
ing to China, followed by 58 percent to Can-
ada and 53 percent to Mexico. Among sole
practitioners, India (30 percent) came in
second after Canada (40 percent), followed
by Mexico (20 percent), and China, Brazil,
and Australia (each at 10 percent). When
the PCPS survey asked practitioners in which
other countries they expected to see
growth, their answers covered a number of
locations in Africa, Asia, Europe, and South
America. Among PCPS members who were
not offering international services but
planned to do so within the next five years,
the largest overall average percentage (37
percent) thought they would be most likely
to serve subsidiaries of international com-
panies located in the United States. Another
27 percent overall expected to work with
U.S. citizens working outside of the country,
and 25 percent anticipated working with
multinationals based in the US.

In Demand
What emerges from the survey data is that
CPA firms of all sizes are tapping into the
many opportunities offered in the interna-
tional market, - and that their services are in
demand around the world.

Exhibit 1
Top Five Challenges in Providing International Services
An American Institute of CPAs Private Companies Practice Section (PCPS) asked CPAs about the greatest hurdles to offering international
services. Their answers can be found in Table 1, and are disaggregated by firm size.

Table 1: Challenges in Providing International Services

Sole practitioners 2-to-10 CPAs 11-to-75 CPAs 75+ CPAs
Developing the expertise needed
Complying with international regulations Marketing services
Marketing/forging alliances Marketing services Marketing services Investing in people
Exploiting information tech-
nology (IT) developments
Forging alliances Forging alliances Compliance with international
Investing in people Exploiting IT developments Investing in people Forging alliances

Source: American Institute of CPAs Private Companies Practice Section (PCPS).

Exhibit 2
Top Countries for Future Service Growth
Where did U.S. CPAs expect to see the most demand for their
services? The top replies are as follows:

Table 2: Expected Demand for CPA Services: Top Countries

Country Percentage
Canada 54.3
China 44.5
Mexico 33.5
India 26.2
Brazil 24.4
Australia 15.9

Source: American Institute of CPAs Private Companies Practice
Section (PCPS).

Implications for Public Accountancy Organizations in the MENA
Region and Beyond
The US case offers some interesting perspectives for Profession-
al Accountancy Organizations (PAOs) operating in the MENA
region and beyond. Understanding the degree to which firms of
all sizes are engaging internationally in the provision of cross-
border services provides a strong input into the development of
services and support which a PAO can provide to its members.
Additionally, such input can provide useful information to the
development of Continuous Professional Development (CPD)
offerings, which may be more tailored to the upcoming needs of
PAO members. Such offerings may therefore better prepare
them to provide high-quality services in other countries. Finally,
such perspective on the degree of international engagement of
member firms provides helpful direction to the PAOs own in-
ternational engagement and relations.

Yasmine El-Ramly, CPA/CITP, is a senior technical manager with
the AICPA Firm Services & Global Alliances team. She supports
practitioners in CPA firms, creates resources that address their
top concerns through the Private Companies Practice Section
(PCPS), and builds a more inclusive environment with the help of
the AICPA Womens Initiatives Executive Committee.

CGAP Photo-Contest

For more information, including the contest rules, please visit:

Integrated Reporting 28


Professor Robert G. ECCLES
Harvard Business School

Interview conducted by Rama KRISHNAN
VENKATESWARAN, Lead Financial Manage-
ment Specialist, Governance Global Prac-
tice, MENA, The World Bank

Connecting Voices (CV MENA): The con-
cept of Integrated Reporting (<IR>) is in-
creasingly gaining attention in the corpo-
rate world. Why do you think that compa-
nies need to prepare integrated reports
rather than common size financial state-
Robert Eccles (RE): The fundamental reason
is that companies and their shareholders
are increasingly recognizing the role of all
six capitals in The International <IR>
Framework (<IR> Framework) developed
by the International Integrated Reporting
Council (IIRC) play in creating value. Tradi-
tional financial statements do a good job of
presenting how a company has used finan-
cial and manufactured capital since both are
captured on the income statement and
balance sheet. The intangible assets of hu-
man, intellectual, and social and relation-
ship capital are not. Nor is the true cost of
natural resources and the negative external-
ities companies create on these intangible
assets and natural capital reflected. The
Carbon Disclosure Project (CDP) has played
a leadership role in natural capital, first with
a focus on greenhouse gas emissions and
more recently on water and forests. Failure
to account for all forms of capital will inhibit
a companys ability to create value over the
long term and will put its social license to
operate at risk.

CV MENA: The <IR> Framework emphasiz-
es the importance of integrated thinking.
Just what is this and how is it related to
integrated reporting?
RE: Integrated thinking is about ensuring
that everyone in the organization takes
account of the organizations use of and
impacts on all six capitals in the short, me-
dium, and long term. Integrated thinking
means that managers look beyond the silos
of their responsibilities to understand how
their decisions affect and are affected by
the decisions of others in their organization.
Integrated reporting drives integrated think-
ing. In fact, the most immediate benefits of
integrated reporting are internal ones
better decisions by managers and greater
engagement by employees who want to
know how a company is producing its finan-
cial results.

CV MENA: The concept of sustainability
reporting has been around for some time
now. How is <IR> different from Sustaina-
ble Reporting?
RE: Sustainability reporting, under the lead-
ership of the Global Reporting Initiative
(GRI), came about through the recognition
that civil society, typically through the voice
of non-governmental organizations (NGOs)
representing various stakeholder interests,
deserves the right to information on a com-
panys performance on issues that matter to
them. <IR> is focused on providers of fi-
nancial capital and any others who want a
holistic view of a companys performance.
Integrated reporting should not and will not
lessen the importance of sustainability re-
porting. While the interests of investors and
stakeholders overlap, they are not identical.
Stakeholders can also be the early warning
system that identifies issues that arent
important to shareholders, but that might
be in the future.

CV MENA: As a layman, I understand that
the concept of <IR> goes much beyond the
realm of accounting and reporting and
should be seen as a core governance tool.
Can you please explain why <IR> is im-
portant from a governance perspective?

RE: The <IR> Framework emphasizes the
importance of looking at how a company is
creating value over the short, medium, and
long term. Too many companies today are
focused on the short term at the sacrifice of
the medium and long term. Time frames
determine which stakeholdersare important
to a company. Today, especially in the An-
glo-Saxon world, there is this false belief
that boards have a fiduciary obligation to
put shareholder interests first. This is simply
not true as a point of law. Boards represent
the interests of the corporation which has
its own identity. In representing their fidu-
ciary interest to the corporation, the board
decides which stakeholdersor audienc-
esmatter and over what time frames.
They should do so by issuing an annual
Statement of Significant Audiences and
Materiality (Statement). This Statement,
which is the boards view on the role of the
corporation in society, provides high-level
guidance for what should be in the compa-
nys integrated report. In turn, the integrat-
ed report is a key process and mechanism
for ensuring the implementation of the

CV MENA: What is the concept of materi-
ality in the context of <IR>? Why is this
concept important and what is the latest
thinking on it?
RE: I have already referred to materiality in
the context of the Statement. Materiality is
at the heart of reporting. Its origins are in
financial reporting and have been extended
to sustainability and integrated reporting.
Definitions and guidance on materiality
have all been high-level and general, which
is appropriate. Materiality is an entity-
specific notion. It cannot be determined by
algorithms. It depends on what audiences
the board deems are significant, the sec-
tor(s) in which the company competes, and
its particular strategy. The Sustainability
Accounting Standards Board (SASB) pro-
vides sector-specific guidance on materiality
which companies can adopt to their particu-
lar circumstances.

CV MENA: What is the role of the Sustain-
ability Accounting Standards Board? How
does it relate to the existing accounting-
standard setters globally?
RE: The SASBs mission is to ensure that so-
called nonfinancial (e.g., environmental,
social, and governance [ESG}) information is
reported to the same degree of comparabil-
ity and quality as financial information.

The SASB recognizes that the material ESG
factors vary by industry and is therefore
taking a sector approach10 sectors subdi-
vided into 80-some industries. The SASB has
made rigorous and disciplined progress to
determine the small number of ESG issues
that are relevant to investors for each in-
dustry and what the appropriate metric is
for reporting on them. Right now, the SASB
is focused on disclosures covered by the US
Securities and Exchange Commissioin (SEC)
Regulation S-K which applies to all firms
with a U.S. stock exchange listing. Domestic
corporations are required to file, among
other things, the Form 10-K; foreign regis-
trants file the form 20-F. The SASB is now in
the process of determining how its stand-
ards can be adopted by other countries with
the intent of making them as comparable as
possible, while at the same time still recog-
nizing local differences

CV MENA: Is the concept of <IR> relevant
to the public sector? If so, how?
RE: It most certainly can be. In fact, the IIRC
is organizing a public sector working group
to explore this specific topic. Public sector
organizations, including the hybrid public
sector/private sector listed state-owned
enterprises (SOEs) also use the six capitals in
performing their roles and they should ac-
count for this. The big difference is one of
audience. Unless the governmental organi-
zation is a listed SOE, shareholders are not a
relevant audience. Instead, the audience is
the broader public and the specific ele-
ments the public sector organization aims to

CV MENA: What do you see as the role of
international organizations such as the
World Bank in developing <IR>? Which
international organizations are currently
involved in the development and dissemi-
nation of <IR>?
RE: The World Bank has a critical role to
play in helping to spread the adoption of
integrated reporting. For starters, the Bank
can produce its own integrated reporting
and I know that it is working on doing so.
This will give it the moral high ground to
encourage the adoption of integrated re-
porting by its clients which are public sector
organizations and SOEs. Another interna-
tional organization interested in supporting
the development of integrated reporting is
the International Accounting Standards
Board (IASB). The European Union is also
following the development of integrated
reporting with interest.

CV MENA: Your book, One Report, intro-
duced the world to the concept of <IR> in a
systematic way. I understand that you are
in the process of publishing your second
book on the subject. Can you please tell us
the key areas of focus in your upcoming
RE: My next book, The Integrated Reporting
Movement: Meaning, Momentum, Motives,
and Materiality, examines what has hap-
pened since my first book was published
and makes recommendations on what
should be done now. While the first book
was largely a conceptual one due to the
early stages of the integrated reporting
movement four years ago, the current one
is based on a substantial amount of empiri-
cal analysis including the evaluation of the
quality of 124 integrated reports, the corpo-
rate reporting websites of the largest 500
companies in the world by revenues, and 91
materiality matrices. This book also intro-
duces two ideas. One, already mentioned is
the Statement of Significant Audiences and
Materiality. The other, which builds on the
idea of a materiality matrix, (first intro-
duced about 10 years ago at the same time
as integrated reporting, although as an in-
dependent idea at that time) is the Sus-
tainable Value Matrix. It is a management
tool for implementing the principles estab-
lished in the Statement which guides report-
ing, engagement, resource allocation, and
innovation. Finally, the book has a chapter
devoted to information technology (IT)
which discusses the important role IT can
play in furthering the development of inte-
grated reporting and integrated thinking.

CV MENA: How should companies go
about transitioning from traditional finan-
cial reporting to Integrated Reporting?
RE: This is very much a function of a compa-
nys particular circumstances. Those com-
panies which are already producing sustain-
ability report have developed at least some
of the internal control and measurement
systems for the requisite nonfinancial in-
formation that should go into an integrated
report. Those which havent will obviously
need to develop them. I dont know of any
situation in which integrated reporting
didnt have the strong support of the Chief
Executive Officer (CEO). In fact, Chief Finan-
cial Officiers (CFOs) are often nervous about
it. A process needs to be defined for how to
produce an integrated report since it in-
volves the coordination across a large num-
ber of functions to gather and understand
the relationships regarding metrics of all six
capitals. The company should also not as-
sume that producing an integrated report is
an end in itself and that the users of the
report, including analysts and investors, will
understand its contents. It should be pre-
pared to engage in a process to explain to
all relevant audiences why the company has
made this decision, and provide guidance
on how to analyze and understand the con-
tents of the report.

CV MENA: What do you see the potential
of <IR> as a governance tool for organiza-
tions such as NGOs, the Government?
RE: Good question and it reveals a certain
irony. NGOs and the government are con-
stantly pressing companies (and increasingly
investors) for greater transparency. At the
same time, many are not exactly paragons
of transparency themselves, and they are
under increasing pressure from civil society
to provide more information about the re-
sources they are using and the outcomes
they are achieving. <IR> will help them do
so. It will also foster integrated thinking that
will produce the same benefits it does for
companies. Governments, NGOs, and inves-
tors that want integrated reports from
companies will be in a stronger position to
make this case if they are practicing it them-

CV MENA: Any further thoughts?
RE: Yes, and thanks for asking. Speaking
personally, I have been studying and trying
to change corporate reporting for over two
decades. Reporting is one of those prosaic,
yet politically-charged issues that can have
an enormous impact on society. We
wouldnt have the capital markets we have
today without accounting standards and
required financial reporting. We wont have
the capital markets and society we want for
tomorrow without integrated reporting. It
has to happen on a global basis, and soon.
My primary professional goal is to making
whatever personal contribution I can to the
integrated reporting movement and help
make it happen.

The Exchange
Integrated Reporting in the Public Sector
See Back Cover for More Details


TAP 32

Promoting Transparency, Accountability
and Participation (TAP):
The role of check and balance institutions

Francesca Recanatini
Senior Economist, Governance Global
Practice, MENA, The World Bank

Worldwide there is increasing recognition
that citizen involvement is critical for en-
hancing democratic governance, improving
service delivery, and fostering empower-
ment. This citizen involvement can be fos-
tered and ensured by promoting transpar-
ency and participation. The World Bank has
been focusing on the role that transparen-
cy, accountability and participation (TAP)
can play in the achievement of develop-
ment goals. This renewed focus on trans-
parency, accountability and participation
has led World Bank practitioners to expand
the scope of their work beyond the tradi-
tional public sector institutions so as to
include check and balance institutions (see
Figure 1). It has also pushed practitioners to
understand better which policies can
strengthen the links between citizens and
their government representatives, and
promote more accountable government

In practice, the concepts of transparency,
accountability and participation have been
operationalized in many different forms,
from formal check and balance institutions
(auditor general offices, AC authorities,
etc.) to public sector measures (income and
asset disclosure legislation, immunity pro-
tection legislation, etc.) to demand-side
tools (freedom of information legislation,
scorecards, participatory policy systems,
etc.). Over the past decade the World Bank
has launched a series of initiatives to im-
prove our collective knowledge in this
broad area. The World Bank has collected
data and information on the effectiveness
of AC authorities that has led to the crea-
tion of a portal and several publications
( In addition, the
World Bank has focused on gathering and
analyzing data and information on financial
disclosure systems around the world
e/lawlibrary). This data has allowed Bank
practitioners to analyze experiences with
the implementation and enforcement of
financial disclosure systems globally and to
identify initial lessons learnt. This newly
acquired knowledge has been disseminated
widely through regional Conferences (Latin
America, East Asia and Eastern Europe) and
two publications aimed at assisting policy-
makers and practitioners to address the
challenges of establishing or strengthening
these systems. Finally, the World Bank has
focused on additional Public Accountability
Mechanisms to enhance the transparency
of public administration and the accounta-
bility of public officials. This line of work
allowed gather data on (i) Immunity Protec-
tions, (ii) Conflicts of Interest Restrictions,
and (iii) Freedom of Information.

To-date, PAM has released in-law (legal
framework) data on Immunity Protections
(2013), Conflict of Interest Restrictions
(2012), and Freedom of Information (2010).
The information and data gathered, hosted
in the PAM portal (, has been dissemi-
nated via e-learning activities and in-depth
workshops. Given however the growing
importance of the integration of accounta-
bility, transparency, and participation in
policy making and in the strengthening of
institutions, especially in fragile and post-
conflict contexts, the Global Governance
Practice team developed and delivered a
workshop to share in an integrated way the
current knowledge on TAP, bringing to-
gether knowledge from different teams and
areas regions. The objective of the
workshop was to provide policy makers,
government officials and donor
representatives with a deeper
understanding of how transparency,
accountability and participation can be
integrated for a more effective functioning
of government institutions. The event was
delivered in Caserta, Italy, last April, using
the training facilities of the MENA-OECD
Centre. More than twenty participants from
seven MENA countries (Libya, Egypt,
Yemen, Tunisia, Iraq, Jordan, West Bank
and Gaza, and Morocco) participated. The
team was able to bring together senior
officials from a diverse set of government
agencies (anti-corruption agencies,
supreme audit institutions, ombudsman
offices, etc.).

To promote greater transparency and accountability, various
countries have introduced requirements for public officials to file
asset disclosures. In parallel, efforts to curb money laundering
have resulted in greater scrutiny of financial relationships with
politically exposed persons (PEPs). This work analyzes how
information on asset disclosure could be used to support the
identification of PEPs and provides a series of recommendations
that can help support this use.

2 The Volume titled Public Office, Private Interests. Accountabil-
ity through Income and Asset Disclosure examines the objec-
tives, design features, and implementation approaches that can
contribute to the effectiveness of a financial disclosure (FD)
system, and enhance its impact as a prevention and enforcement
tool. The Volume draws on detailed case studies that are pub-
lished in a companion volume: Income and Asset Disclosure:
Case Study Illustrations. The volume can be viewed using this

Governance Framework
Actors, Capacities and Accountability
Political Actors & Institutions
Political Parties
Competition, transparency
Executive-Central Govt
Service Delivery & Regulatory
Subnational Govt &
Civil Society
& Private
Civil Society
Cross-cutting Control Agencies
(Finance, HR)

During the event, the participants
benefitted from both the World Bank
teams expertise and from the first-hand
knowledge of colleagues from Croatia,
Georgia, Italy and Romania. In particular,
participants discussed a framework that
could be used for the operationalization of
transparency, accountability and participa-
tion within a country. The presentations
and the material shared with the partici-
pants aimed at promoting knowledge-
sharing on selected check and balance insti-
tutions, such as financial disclosure for pub-
lic officials, supreme audit institutions, anti-
corruption agencies and ombudsmen, as
well as fostering regional and country-level
dialogue on these mechanisms and their
impact on governance outcomes. The event
offered also the opportunity to disseminate
global research findings, share key relevant
international experiences, increase aware-
ness on the different aspects related to the
design and implementation
of any of these mecha-
nisms, and reflect on the
ways forward for the coun-
tries involved. The event
was well received, thanks
also to the very high level
of professionalism of the
team on the ground from
the MENA-OECD Centre
and the SNA that
supported the
implementation of the
event. Participants
engaged in many ways
over the three days,
contributing actively to
each session and to the
overall discussion, and
sharing their experiences
and the challenges they
face in their own country.
The agenda, the
presentations and the list
of participants can be
found here:

The event also served as a platform to
launch the creation of a regional network of
government experts interested and in-
volved in the design and implementation of
these institutional reforms, which can help
sustain the technical and policy dialogue
beyond the event.

Service Delivery 34

You say budget sub-entity, I say hospital:
Why we should work together for our clients sake

Lead Economist, Governance Global
Practice, The World Bank

You know the problems: Pregnant women
unable to receive basic antenatal care
promised by government policy. Children
not learning basic skills in schools despite
significant public investment in educa-
tion. Essential medicines, text books and
teaching materials missing from hospitals,
clinics and classrooms, even though they
were all purchased and paid for from the
government budget. When specialists in
the health and education sectors detect
these problems, the solutions they offer
tend toward sector-wide reforms. The
design of the reforms would draw on sec-
tor policy analysis and on the assessment
of service delivery arrangements and ca-
pacity. Increasingly, since the 2004 World
Development Report, sector reforms would
also seek to make teachers, health profes-
sionals and other service providers ac-
countable to citizens and communities.
Rarely, however, would sector specialists
trace service delivery problems in their
sectors to upstream governance issues
involving public finance management, pro-
curement or civil service / performance
management at the center of govern-
ment. The realms of the Financial Man-
agement Information System (FMIS) and
the Medium-Term Expenditure Framework
(MTEF) or public employment and public
sector performance management appear
too distant to have any relationship with
the poor performance of schools and hos-
pitals. Yet, the connections between ser-
vice delivery and upstream governance
do exist and unless addressed can lead to
the failure of education or health sector
reforms. The implementation of health
sector reform in China, for instance, has
hinged on the ability of the central gov-
ernment to make subnational government
officials accountable for equitable resource
allocation and service delivery perfor-
mance within their jurisdictions. This has
required an adjustment in the country-
wide public sector performance manage-
ment system. In addition, upstream inter-
ventions have been needed to enforce
equity in budget allocations across locali-
ties, and the prioritization of basic service
delivery in government budgets at the
provincial level. The upcoming Independ-
ent Evaluation Group report on health
financing identifies a number of such ex-
amples, as well as cases where sector re-
forms cannot be sustained without being
anchored at the upstream center of gov-
ernment through, for instance, public fi-
nance law or civil service regulations. Iden-
tifying and addressing such connections,
however, brings challenges. One of the
most surprising is the difficulty experts
have in communicating across disci-
plines. As an example, at a recent innova-
tive public expenditure review in the Mid-
dle East and North Africa region, it took
several rounds of discussion before the
health financing experts figured out what
their colleagues in public finance manage-
ment (PFM) were actually talking about. It
turns out that within that particular coun-
trys budgetary system, a public financial
management (PFM) expert would use the
term budget sub-entity when talking
about a hospital or school. Budget enti-
ties would include public universi-
ties. Once this misinterpretation was fig-
ured out, it took even longer for the ex-
perts to agree on the implications of the
proposed introduction of performance-
based hospital payment mechanisms and
the desired increase in hospital autonomy
for the overall government budget classifi-
cation and budget allocation mechanisms,
as well as for the functionality of the exist-
ing FMIS. There are however clear benefits
to overcoming these challenges. There
was more to the discussion among health
financing and PFM experts, as it also in-
volved stakeholders across ministries and
service providers.

These stakeholders learned to understand
each other along with the experts. Moreo-
ver, the joint engagement helped to ex-
pand the common ground and establish a
common vocabulary among multiple
stakeholders for the needed reforms. More
opportunities for joint learning, knowledge
sharing and engagement across disciplines
are clearly needed. In a recent training
session organized by the World Bank joint-
ly with the Harvard University Kennedy
School, governance experts explored prob-
lem-driven approaches to PFM. The focus
was on recognizing the benefit of involving
country clients in designing PFM reforms
so as to address service delivery problems.
Instead of offering country clients ready-
made tools such as the MTEF and FMIS,
participants learned to recognize problems
from the perspective of country clients (for
instance, poor performance of schools),
and deconstruct problems to identify the
separate elements related to upstream
governance (such as budget allocations not
reaching schools, and lack of performance
information and performance audit). In
the future, such training could include not
only governance experts but also experts
on education, health and other sectors.
Cross-cutting Communities of Practice
(CoP) can facilitate this sort of engagement
across disciplines. The recently established
CoP PFM for Service Delivery, for instance,
could serve as a platform to showcase and
learn from examples where engagement
across disciplines has led to the success-
ful delivery of integrated solutions to
clients. The CoP could also create oppor-
tunities to connect specialists across disci-
plines in assisting the World Bank Groups
country clients. I would welcome your
suggestions for cases or issues that should
be further explored. Moreover, to promote
connections across the emerging Global
Practices (GPs), and increase the potential
for integrated solutions, the Incentives
Task Force for Collaboration, Knowledge
and Results is proposing a series of rec-
ommendations to encourage GP manage-
ment. Further, specialists are being en-
couraged to recognize the complexity of
development problems and the cross-
cutting nature of many true solutions.
Making the different GPs all book their
shared activities in their own portfolios,
allowing specialists from the different GPs
to co-lead a task, or encouraging the Coun-
try Management Units (CMUs) and all rele-
vant practice managers to work together
to identify the possible benefit of multi-GP
approaches in country work programs,
would make cross-GP collaboration and
knowledge sharing much more likely. As
we move forward, perhaps each of us,
proud of our own discipline, can open our
eyes wider to see what those in different
fields have to contribute to solving prob-
lems in our own domain. We will need to
accept with humility and patience that we
may not understand each other at first, but
that over time we will learn from each
other and be able to integrate our individ-
ual expertise-driven perspectives into true
solutions that will work for our clients.


Can Audit Fight Corruption?

Senior Financial Management Special-
ist, Governance Global Practice/MENA,
The World Bank

Corruption in Words

Corruption can severely undermine the
development effectiveness and impact of
projects. Over the last decade, the donor
community has increasingly dedicated more
attention to addressing corruption at the
national, sectoral, and project levels. The
World Banks 2012 updated Strategy and
Implementation Plan for Strengthening
Governance and Tackling Corruption called
for managing more effectively, rather than
avoiding, the risks inherent in working in a
development context, including the risk of
corruption. The impact of corruption on
development projects varies from imple-
mentation delays, selecting unqualified
contractors, inflating of costs, and failure to
complete works to utterly deterring in-
vestment, preventing development, and
adding unproductive debt.

Audit as a Tool

Audit, in varying forms, is believed to play a
significant role in detecting and preventing
corruption. The term audit is widely used as
a synonym for evaluation, appraisal, as-
sessment, examination, study or review.
Some audits such as financial, perfor-
mance, compliance, and internal audits
have specific definitions attributed by in-
ternational bodies (the International Organ-
ization of Supreme Audit Institutions [IN-
TOSAI]; the International Federation of
Accountants [IFAC]; and the Institute of
Internal Auditors [IIA]). These audits follow
a set of globally-agreed procedures, where-
as other audits, such as technical and social
audits, follow less standardized procedures
which vary according to circumstances.
Other, more specialized audits, such as
environmental audits and forensic audits,
serve specific purposes.

Corruption versus Fraud

The words corruption and fraud are
often used interchangeably. In principle,
corruption is defined as the abuse of public
office for private gain. However, corrup-
tion takes place in the form of bribery, kick-
backs, commissions or other benefits with-
out leaving any trace in the official records.
Fraud consists of originating benefits by
bypassing some controls or bending some
rules, with some traceable evidence re-
maining in the records. Therefore, audit
should be planned, designed, and executed
to address the risk of "corruption. It should
be done differently from dealing with the
risk of fraud.

Auditors Dilemma
Corruption is a highly complex phenome-
non where the parties involved leave very
little indisputable evidence, and most of the
corruption takes place discretely and in an
informal manner. Auditors find themselves
in a dilemma vis--vis the citizenry who are
expecting them to play an effective role in
reducing, if not eliminating, corruption.
Auditors cannot physically see all transac-
tions and all situations. An example is a
bribe where no one can ever detect it until
the person is caught in the act. The audi-
tors are not in the business of catching
people in the act. Thus, they cannot do
much in such cases. Similarly, auditors
would not deal with political, social, or cul-
tural corruption. However, there could be
situations where the rules and regulations
are quite infallible at governmental institu-
tions, yet corruption continues to grow
because of poor implementation or collu-

Corruption in Regular Audits
As part of regular audit (financial, compli-
ance, and internal audits) planning and
execution, auditors should try to determine
the possibilities of corruption through a
review of laws, regulations, rules and pro-
cedures. This can also be complemented by
interviews with key personnel in order to
identify any opportunities for corruption. In
situations where there may be holes in
rules, regulations, procedures and opera-
tional standards, these can create opportu-
nities for corruption or at least the protec-
tion of corruption. In such instances, the
auditors could then recommend corrective
measures. Some experts call for auditors to
maintain an inventory of corruption oppor-
tunities for each of the organizations being
audited. This inventory of corruption op-
portunities could be in the form of a list of
such possibilities. This would give the audi-
tor a framework and context for further
focus during field work.

Corruption in Specialized Audits
It is generally believed that performance
auditing can help detect corruption. Per-
formance auditing would highlight areas of
dis-economy, inefficiency, and failure to
achieve results and impact. The argument is
that projects or programs that are planned
and implemented properly with due regard
for economy and efficiency are likely to
achieve results. Any deviation such as sig-
nificantly higher costs than anticipated or a
longer period of implementation or drifting
far from achieving results might flag corrup-
tion. It is arguable that the existence of dis-
economy, inefficiency, or ineffectiveness is
not necessarily conclusive proof of corrup-
tion. There are other factors that should be
taken into consideration, such as uninten-
tional human negligence to assess risks and
costs, and a difficult and complex operating
environment. Therefore, performance au-
diting can provide some clues to corruption,
if it exists, using specific corruption indica-
tors related to lack of economy, efficiency,
and effectiveness. In this context, it should
be noted that forensic auditing is merely
used to detect fraud.

Audits and Corruption Investigations
As compared to auditing, investigation is a
different area of oversight. Auditors can
play a vital role in assisting the agencies
responsible for investigation against alleged
cases of corruption. For instance, internal
auditors can play a vital role in investiga-
tions, as they usually have more diversified
and detailed knowledge of operations than
the investigators. Internal auditors can
assist investigators in interpreting various
rules, explaining practices and sharing re-
ports. They can also help pinpoint areas of
excessive cost and weaker controls which
can, in turn, help the investigators in de-
tecting corruption.

The Role of Supreme Audit Institutions
(SAIs) in Fighting Corruption
Fighting corruption requires collective ef-
forts and serious reforms in public financial
management, public administration, the
judiciary, public information, and citizen
participation. The individual auditor or even
an internal audit department of a ministry
cannot propose actions beyond their re-
spective ministry. There are actions which
have to be taken by the government or
which may require the political will of the
state. For such actions, only an institution
like a SAI can take the initiative. Without a
strong and well established SAI in a leader-
ship role, individual auditors or even lower-
level audit departments cannot make much
of a difference in the fight against corrup-
tion. Furthermore, strong and well-
established SAIs are in a position to utilize
different audit types to fight corruption.
Despite general agreement that the SAI
should play an effective role in promoting
transparency, accountability, and participa-
tion, most MENA SAIs (and those in the
developing world more broadly) still lack
adequate independence and resources to
play this leadership role in combatting cor-

Dye, Kenneth M. and Rick Stapenhurst. 1998. Pillars of Integrity:
The Supreme Audit Institutions in Curbing Corruption. Washing-
ton, DC: EDI/World Bank.
INTOSAI. 2004a. Compliance Audit Guidelines- ISSAI 4000 4200.
. 2004b. Financial Audit Guidelines.
. 2004c. Performance Audit Guidelines- ISSAI 3000.
Khan, Muhammad Akram. 2006. The Role of Audit in Fighting
World Bank. 2014. Guidance Note for Project Teams and Clients
on the use of Different Types of Audits in Bank-financed Projects,
Washington, DC: World Bank

In The News

In its fight against corruption China will conduct a nationwide audit of government land sales and
related deals that may shed light on rent-seeking and corruption. The National Audit Office will
conduct "rigorous" checks on funds from land sales, as well land requisition, reserve and supply
that occurred from 2008 to 2013. The audit will be launched under the cabinet's oversight.

The Economic Observer newspaper via Reuters
Procurement 37

Building knowledge through innovation
and partnerships:
Regional Capacity Building in the Arab World

Yolanda TAYLER
Practice Manager, GGODR,
The World Bank

Many governments spend time and re-
sources deciding what to deliver, without
tackling how. Improving the how of deliv-
ery is a challenge that could have a dra-
matic impact on eliminating poverty. This is
a key priority for the World Bank, demand-
ing both commitment and innovation. It is
also a top priority for the Middle East and
North Africa (MENA) regions Network of
Public Procurement Experts, which is work-
ing to strengthen capacity building on the

Across the region, billions of US dollars of
public money are spent each year on con-
tracting private companies to provide the
public with goods and services. Govern-
ments and public agencies in the region
spend up to 70% of their budgets on public
procurement, ranging from major projects
like highways and airports, to purchasing a
wide variety goods and services
everything from furniture to food and text-
books. This type of spending represents
15% to 30% of Gross Domestic Product in
MENA economies. How these investments
are delivered to the public has a huge effect
on how well a government meets promises
to its citizens.

Many governments have begun reforming
the laws and regulations governing their
procurement systems in recent years, in-
tent upon ensuring efficient and effective
public spending. In reality though, even the
best legal and regulatory framework can
under-deliver without a trained workforce
to put laws and regulations into practice.

To increase returns on public investment,
MENA governments have agreed on the
need to develop and equip the public sector
employees responsible for public procure-
ment. It is in this context that the Net-
worka group composed of the heads of
public procurement in countries in the
MENA regionlaunched an ambitious,
new, multi-regional approach at a recent
meeting hosted by the Arab Administrative
Development Organization (ARADO) in
Sharjah, United Arab Emirates.

Two sources of funding have been secured
to support the initiative. The first is a
US$750,000 grant from the Micro, Small,
and Medium Enterprise (MSME) Facility of
the Arab World Initiative to teach people
working in Small and Medium Enterprises
about public procurement processes; and
the second source of funding is a $350,000
Institutional Development Fund (IDF) grant
from the World Bank, awarded to ARADO
to expand the number of topics addressed
through this model of procurement train-

ARADO is the training arm of the Arab
League, and the Network of Experts is tap-
ping into it to facilitate a regional training
program that builds on existing resources in
the various countries, addresses common
challenges, and capitalizes on existing

When it comes to the effectiveness of pub-
lic procurement, it is striking how similar
many of the challenges that MENA coun-
tries face are, and how little has been done
in the past to take advantage of cross-
border training programs. Capacity building
programs often have problems in common.
These include a lack of sufficient funding,
the lack of an assessment of existing skills
and competenciesand gapsand the
frequent exodus of highly-qualified staff to
other government positions or to private
companies offering higher pay.

Many countries have taken a highly frag-
mented approach to capacity building, and
have not yet been able to build a body of
knowledge within the country. Other
shared challenges include the lack of quali-
fied trainers and specialized training insti-
tutes, the quality and coverage of the train-
ing programs, and the limited knowledge or
dissemination of modern procurement
tools like e-procurement.

The Network of Experts regional capacity
building program seeks to address some of
these shared challenges, following the
model of the Sharjah event on SMEs. Train-
ers from nine MENA countries attended it
Morocco, Tunisia, Iraq, Jordan, Lebanon,
Djibouti, Egypt, Yemen, and the Palestinian

A regional capacity building strategy for
public procurement will be developed for
training materials in Arabic and French for
the training of trainers programs, and for
building partnerships with training institu-
tions. Subsequent country-level training
sessions will leverage each countrys exist-
ing institutions, infrastructure and exper-
tise, while putting World Bank President Jim
Yong Kims science of delivery methodology
to good use to make sure that everyone
knows how to implement the training pro-
grams. In the longer term, there could be a
regional certification program for procure-
ment professionals.

Some countries have already made ground-
breaking advances in terms of the coordina-
tion between their public procurement
departments. Collaboration allows stake-
holders to learn from the successes of oth-
ers in the region. At the regional level,
countries could coordinate to create econ-
omies of scale, taking advantage first of the
resources and knowledge that already exist
on the ground.

Cover Story

Financial Management

Cover Story 39

Hisham WALY
Practice Manager, Governance Global Practice
MENA, The World Bank

As the French Revolution was taking place in the late eighteenth
century, countless writings appeared by some of the most notable
writers of the time, such as Edmund Burke, British statesman and
philosopher, and Thomas Paine, American political activist and
philosopher. They debated the revolution with opinions encom-
passing everything from class and gender issues to ways to reform
state institutions.

Thomas Paine (left); Edmund Burke (right)

Recently these writings have been revisited in two books, with the
first being: The Great Debate: Edmund Burke, Thomas Paine, and
the Birth of Right and Left by Yuval Levin. In his book, Levin reflect-
ing on the Burke versus Paine debate asks Are great public prob-
lems best addressed through institutions designed to apply the
explicit technical knowledge of experts or by those designed to
channel the implicit social knowledge of the community? The sec-
ond book by Arun Maira, Redesigning the Aeroplane While Flying:
Reforming Institutions, highlights the fact that both Burke and
Paine agreed that institutions must be reformed for societys bet-
terment, however they disagreed about the method. Burke rec-
ommended a gradual process of evolution modelled on the way
nature makes changes. Paine preferred a revolutionary approach,
which displaces the old order entirely to make space for new insti-

This debate still resonates today. For example, although public
financial management reforms are often linked to other major re-
forms such as civil service reforms, this does not mean that it is
necessarily a good idea to simultaneously launch and implement
multiple large-scale reforms with regard to budgetary institutions.
Such a big bang (revolutionary) approach requires conditions that
are difficult to find in most developing countries, conditions includ-
ing: political opportunities, sound leadership, government stability,
human skills capacity, information, and organization. It is technical-
ly challenging, entails intensive coordination with multiple stake-
holders, and does not allow for absorptive capacity to grow as the
reform initiative expands. In a few exceptional cases Canada,
Korea, New Zealand and Poland a politically-driven, all-
encompassing reform process designed to take advantage of nar-
row windows of opportunity has worked well. However, over-
whelmingly, the incremental approach is most in line with the pro-
cess of institutional change, as well as with the short tenure of
many Ministers of Finance.

In their book, Why Nations Fail: The Origins of Power, Prosperity
and Poverty, James Robinson and Daron Acemolu describe good
economic governance as The extent to which the institutions and
processes of government provide decision makers an incentive to
be responsive to citizens, is also important for economic growth
and equity. They argue that the main explanation for different
economic outcomes among countries lies with different institu-
tions. According to the authors, economic and political institutions
are collective choices; therefore, the distribution of political power
is a fundamental determinant of their evolution. They classify insti-
tutions into: (i) inclusive institutions, which lead to the creation of
inclusive markets that support growth and equality of opportunity;
and (ii) extractive institutions that stifle entrepreneurship and crea-
tivity, and thus lead to low growth and high inequality. Indeed,
there are other critical determining factors such as geography, cul-
ture, the political environment, etc. However, these factors do not
negate the fact that institutions play a crucial role in affecting eco-
nomic development.

In MENA, the Arab Spring ushered in a historic period of social,
political, and economic transformation. However, four years later
transition countries remain mired in political and economic crises.
In response to this challenging transition, the World Bank Group
has developed a framework for engagement (strategy). One of its
main pillars is strengthening governance to help create responsive
states that are held accountable to their citizens for their actions.

These four strategic priorities are complemented with a focus on
the cross-cutting themes of Gender, Regional Integration and fos-
tering a competitive Private Sector. Work on these pillars and
themes will contribute to the World Bank Groups twin goals of
ending extreme poverty and boosting shared prosperity.

Why Institutions Matter

Institutions are the humanly devised constraints that structure political, economic and social interaction. They
consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal
rules (constitutions, laws, property rights). Throughout history, institutions have been devised by human beings
to create order and reduce uncertainty in exchange. Together with the standard constraints of economics they
define the choice set and therefore determine transaction and production costs and hence the profitability and
feasibility of engaging in economic activity. They evolve incrementally, connecting the past with the present and
the future; history in consequence is largely a story of institutional evolution in which the historical performance
of economies can only be understood as a part of a sequential story. Institutions provide the incentive structure
of an economy; as that structure evolves, it shapes the direction of economic change towards growth, stagna-
tion, or decline.
Author: Douglass C. North
Source: The Journal of Economic Perspectives, Vol. 5, No. 1, (Winter, 1991)
Cover Story 41

The Arab Spring proved that poverty and shared prosperity remain
critical challenges. Indeed, 53 percent of MENAs population living
on less than $4/day and unemployment (particularly of youth and
women) is the highest in the world. These challenges relate to a
sense of vulnerability, exclusion, and lack of voice and opportunity
on the part of the citizenry. In particular, there is a high concentra-
tion of political and economic power by the governing elites and
those close to them or a lack of inclusive institutions, as Ace-
molu and Robinson posit.

Note: PPP= purchasing power parity.

Compared to a number of other regions of the world, MENAs gov-
ernance indicators tend to have lower scores, particularly in areas
such as transparency, government effectiveness, civil liberties, me-
dia freedom, participation and social accountability. As a conse-
quence, overall governmental accountability, trust in government
institutions, and public sector service delivery are all negatively
affected. Complicating matters, the volatile environment and insta-
bility present in many MENA countries compounds these difficul-
ties, bringing with them one crisis after the other. In some instanc-
es, this has acted as a trigger for embarking on reforms, while in
other cases it has made the design and implementation of pro-
grams much more challenging.

AC= Anti-Corruption; LAC= Latin America and the Caribbean; NGO= non-
governmental organization; SAR= South Asia.

Corruption and cronyism are perceived to be widespread in many
MENA countries, and have distorted the economies in the form of a
weak private sector and poor governance. The Corruption Percep-
tions Index calculated by the Transparency International shows that
the MENA region scored lower than the world median in 2013, with
84 percent of MENA countries ranked below 50 (highly corrupted).
Among them, Egypt, Iran, Jordan, Lebanon, Libya, Tunisia, and
Yemen were widely perceived as very corrupt, with an average
score of 29 ranging from Libya with a score of 15 to Jordan with a
score of 45 (Score ranges between 0 as being highly corrupted, and
100 as being very clean). Iran and Egypt ranked 144th and 114th
respectively among 177 countries under study for the 2013 index

Corruption Ratings in the MENA Region

(1) Source: MENA Quarterly Economic Brief (2014)

Leadership, Communication and Research!

While policy makers may at times need both toughness
and political cunning when advancing contentious reforms,
OECD experience suggests that successful leadership is
often about winning consent rather than securing compli-
ance. This makes effective communication, underpinned by
solid research, all the more important.

Making Reform Happen
Lessons from OECD Countries (2010)

When Institutions Flourish

Good institutions tend to flourish under two broad circumstances: an economic environment
that is not conducive to rent-seeking, andrelated to thatthe presence of appropriate checks
and balances on those wielding political power. Consistent with this, the econometric analysis
finds that the transition to good institutions is more likely to occur in countries that are more
open, have a greater degree of political accountability, have a higher level of education in the
population, and are in the same region as countries with relatively good institutions.

Subir Lall, Nikola Spatafora, and Martin Sommer
Building Institutions
Cover Story 43

In addition, many of the countries in MENA are grappling with a
variety of challenges, including: weak public financial management
systems that are not conducive to fiscal discipline (expenditure and
revenue controls); allocation of resources consistent with policy
priorities (strategic allocation of resources); prudent management
of the governments financial resources (economy, efficiency, and
effectiveness); and transparency and scrutiny of public funds.

Although not unique to MENA countries, most suffer from signifi-
cant gaps between laws and procedures (de jure) and actual prac-
tice and implementation (de facto). Another issue is the low execu-
tion rate of investment budgets due to ineffective public invest-
ment management systems. On the corporate financial reporting
(CFR) front, there are serious deficiencies in structure and function
of the CFR framework, as well as a lack of awareness among na-
tional policy makers of its importance. In the region, only 62 per-
cent of the professional accountancy organizations maintain Inter-
national Federation of Accountants (IFAC) membership, and merely
20 percent of countries maintain independent audit regulators.

PEFA Scores: From C to C+ Average

Source: PEFA Reports
Note: EAP= East Asia and Pacific; ECA= Europe and Central Asia; LCR= Latin America and Caribbean;
MENA= Middle East and North Africa; PEFA= Public Expenditure and Financial Accountability.

PFM CPIA: Post Arab-Spring Deterioration

Source: World Bank
Note: CPIA= Country Policy and Institutional Assessment.
These challenges provided a unique entry point to work on state
institutions and the strengthening of good governance principles of
transparency, accountability, and citizen participation. What has
been achieved in the first three years since the revolutions is an
irreversible move towards greater voice and inclusion, as evidenced
in the passing of the new Access to Information legislation in Tuni-
sia (2011), Morocco (2012) and Yemen (2012). Also, weve wit-
nessed a number of constitutional changes toward a more open
and plural society in Egypt, Jordan, Morocco, Tunisia and Yemen.

In keeping with regional developments, the World Banks MENA
Governance Strategy continues to prioritize core government func-
tions and introduces the principles of transparency and accounta-
bility in public resource management, including tax reform and
service delivery in core sectors such as health, education and ener-
gy. The Bank also provides support to oversight bodies such as su-
preme audit institutions and anti-corruption agencies. In this con-
text, the World Bank supports Libya and Yemen in broader state-
building initiatives through institutional and capacity development
programs. Optimizing the performance of state-owned enterprises
through improved corporate governance is also a priority. Regard-
ing the agenda of corporate financial reporting, the Bank provides
technical assistance to governmental legal and regulatory frame-
works for financial reporting. Likewise, it also supports a capacity
building initiative for professional accountancy organizations and
financial regulators.

In support of this agenda and as documented in the regions Gov-
ernance strategy, the World Banks Governance Global Practice will
support MENA countries in the adoption of appropriate fiscal, pub-
lic financial management and regulatory policies to deliver public
goods and services. It will also help build regional, national and
subnational public institutions and delivery systems that are open
and responsive to citizen needs. Finally it will support adherence to
the rule of law, access to justice and security, and well-functioning
social accountability mechanisms. In this manner, it will also pro-
vide assurance that World Bank funds in borrowing countries are
used for their intended purposes, delivering value for money in its
outcomes and enhancing development effectiveness.

Relating to the governance agenda, we organized our annual con-
ference The Exchange: Building Financial Management Institutions
in MENA in Abu-Dhabi from June 10-12, 2014 with more than 250
participants from around the region and the globe. The Exchange
provided a channel for dialogue and enabled countries to share
financial management experiences and lessons from both the pub-
lic and private sector perspectives. In the coming pages, Manuel
Vargas, Lead Financial Management Specialist, takes us on a tour of
the PFM aspects of the Exchange, while Gabriella Kusz, Senior Fi-
nancial Management Specialist, covers the CFR side. In addition,
we labelled a number of articles throughout the magazine with
"GGP in Action" (Governance Global Practice in Action) to high-
light some of the work we are doing in MENA to build institutions
and enhance governance.

Governance & Democracy

As a starting point, I am going to define governance as a government's ability to
make and enforce rules, and to deliver services, regardless of whether that govern-
ment is democratic or not. I am more interested in what Michael Mann labels "in-
frastructural" rather than "despotic" power. The reason I am excluding democratic
accountability from the definition of governance is that we will later want to be able
to theorize the relationship between governance and democracy. The current or-
thodoxy in the development community is that democracy and good governance
are mutually supportive. I would argue that this is more of a theory than an empiri-
cally demonstrated fact, and that we cannot empirically demonstrate the connec-
tion if we define one to include the other.

What is Governance?
Francis Fukuyama
Center of Global Development, Working Paper 314, 1/2013
Cover Story 45

Strengthening Financial Management
Institutions in MENA

June 10-11, 2014 Abu Dhabi, UAE

The Exchange was held over a two day period beginning on June 10-11, 2014. It con-
sisted of both plenary style sessions as well as concurrent breakout sessions. After the
completion of the conference, we spent a day for specific thematic courses and coun-
try discussion meetings between the Financial Management Unit (MNAFM) and the
relevant country stakeholders. Noting the important role that financial management
institutions play in the public and private sectors and the challenges they face, this
years Exchange brought together high-level policy makers and stakeholders to discuss
and debate a wide range of topics including:
- Public Financial Management: PFM reform; strengthening local service delivery;
transparency in sectors (e.g., extractive industries, security), transparency in gov-
ernment accounting and reporting; supreme audit institutions and parliamentary
over-sight; and internal controls and internal audit

- Corporate Financial Reporting: CFR reform; adoption and implementation of
International Financial Reporting Stand-ards (IFRS); Audit Quality Assurance Sys-
tems Design and Development; Islamic banking and finance; the role of profes-
sional accountants as business advisors supporting MSME Development; and In-
tegrated Reporting.
Exchange 2014 was attended by more than 250 representatives of public and private
financial management institutions, academia, legislative and oversight institutions,
donors, experts, and world bank staff. They came from different parts of the world,
including 13 countries in MENA and GCC. 77% of the participants were males; while
23% females. Among the attendees, around 50 speakers had presented in 20 sessions
and 3 specialized courses.

Results Indcators
Participants who provided pos-
itive ratings on the quality,
usefulness, and relevance

Participants reporting high
quality of event content

Participants awareness of
sharing values & cooperation
among all entities has in-
creased as a result of this

Participants reporting that they
are motivated to implement
practices and solutions dis-
cussed during the event.

Participants reporting interest
in membership in Maarefa

Strengthening PFM Institutions 46

Achieving and Sustaining Results
Lead Financial Management Specialist,
Governance Global Practice, MENA
The World Bank

The role of financial management institu-
tions is vital to well-functioning public and
private sectors in the Middle East and North
Africa (MENA) region. Likewise, effective
financial management institutions are essen-
tial to achieving poverty reduction and
shared prosperity. During the Public Finan-
cial Management (PFM) sessions of The Ex-
change 2014, speakers and participants re-
flected on the special challenges and oppor-
tunities of PFM institutional development
with a particular focus not only on how to
achieve results, but on how to sustain them
in the long run. Why the focus on PFM? At a
global level, PFM helps countries in attain-
ing: (i) sound fiscal risk management; (ii)
allocation of public resources in line with
government policy priorities through the
budget; (iii) increased efficiency in the use of
public funds; and (iv) transparency and ac-
countability in the use of such funds. Based
on World Bank experience and attendant
demand from our MENA clients, The Ex-
change facilitated discussions on contempo-
rary cross-cutting PFM reform considera-
tions, as well as specific PFM topics.

Public Financial Management Reform - A
number of current issues and lessons from
PFM reform experience were discussed.
Some of the common principles include the
importance of properly defining the problem
to be addressed, strengthening fundamen-
tals first, and taking into consideration the
political economy and other non-technical
factors of reform. The pace of reform, priori-
tization and sequencing are also very im-
portant. Analytical results show that, in gen-
eral, more attention is needed to: down-
stream versus upstream reform; de facto
versus de jure results; and decentralized
versus centralized systems. Capability is as
important as capacity central financial
agencies (CFAs) must be well organized and
managed. Building tomorrows workforce
remains a challenge for MENA countries in
general, and for its financial management
institutions in particular; hence, capacity
development is a priority in sustaining
MENA's public sector financial management
reforms. The notion of PFM best practice,
that is, reforms aimed at increasing legitima-
cy but not necessarily improved function-
ality is being phased out. Instead, the fo-
cus is increasingly placed on the need for
learning and adaptation, and examining
what is reasonable and practical given a
countrys legal, administrative and govern-
ance arrangements. An important input to
the design of PFM reforms is performance
measurement. In this respect, the Public
Expenditure and Financial Accountability
(PEFA) framework for PFM performance
measurement was discussed, emphasizing
the big effort underway to update the
framework in line with evolving PFM prac-
tices in general, and with a view to closing
some gaps in particular. However, the revi-
sion is not intended to change the PEFA
framework purpose or undermine its com-
parability over time.

Internal Audit Development. Internal audit
has the potential to make significant contri-
butions to public sector effectiveness and
progress. Internal audit can provide a strate-
gically-aligned assurance service, and can
help with risk identification and mitigation.
In addition, it can be a proactive catalyst for
positive change, providing trusted advice on
risk, control and governance issues. The
changing role of the Moroccan Control Gen-
eral des Finances is a case in point. Partici-
pants were also introduced to the European
Commissions Public Internal Financial Con-
trol (PIFC) framework and its layers of de-
fense, including a functionally-independent
internal audit function anchored in a central
harmonization unit (CHU). The lessons
learned from the establishment and opera-
tion of an actual Internal Audit CHU in the
Turkish government were cited as an illustra-
tive example.

Strengthening Local Government Service
Delivery The Role of the Central Govern-
ment evising and strengthening appropriate
PFM and accountability systems at the local
governmental level goes hand-in-hand with
bringing service delivery closer to the citi-
zenry. In this context, the question of finding
the right balance between functional and
expenditure assignment of responsibilities to
local governments, as well as means of ac-
cess to finance, were analyzed at length.
Relevant experiences from India and South
Africa, as well as the emerging agenda in
Tunisia, were discussed.

Transparency in Sectors. As recent events
attest, the people of the MENA region are
becoming acutely aware of the importance
of transparency in public sector administra-
tion. The experience of using e-government
for enhanced service delivery and transpar-
ency was discussed. Moreover, participants
were introduced to developments related to
public finance transparency in specialized
but generally opaque areas such as value-
for-money in security budgets, and PFM
considerations in resource-rich environ-
ments. Addressing these sensitive fields
from a PFM perspective requires strategies
and tactics to create political space and a
professional approach.

Transparency in Government Budget Re-
porting and Accounting. The move toward
effective and transparent budgeting and
accounting systems will lead to better re-
source management and less waste in MENA
countries. This session provided an overview
of both the costs and returns of adopting the
International Public Sector Accounting
Standards (IPSAS), along with the contribu-
tion that government financial management
information systems (GFMIS) can make to
the publication of budget data in an accu-
rate, easily accessible, and meaningful man-
ner. The new Global Initiative for Fiscal
Transparency (GIFT), a multi-stakeholder
action network, seeks to advance and insti-
tutionalize global norms, along with signifi-
cant, continuous improvements in fiscal
transparency, participation, and accountabil-
ity. Ultimately, the quality of financial data
needs to be grounded in strong internal
controls, particularly with regard to the
commitment control system.

Accountability and Oversight Framework -
The Role of Supreme Audit Institutions and
Parliaments. This session explored the ex-
ternal oversight framework and shed light on
what is required for a Supreme Audit Institu-
tion (SAI) to increase its effectiveness in
ensuring the proper use of public resources.
Discussions revolved around the efforts of
the International Organization of Supreme
Audit Institutions (INTOSAI) in promoting the
implementation of international standards
(ISSAIs), as well as the perspective from the
SAIs (e.g., Iraq and the United Arab Emirates)
in implementing them. International coop-
eration leads to enhanced awareness and
understanding of detailed ISSAI require-
ments, including practical implications of
implementation, the need for wide stake-
holder buy-in and ownership, feedback
mechanisms, and informal and formal net-
works and cooperation. As importantly, the
participants stressed the outcomes that can
derive from effective collaboration between
SAIs and Parliaments, enabling the latter to
exercise fiscal oversight over the budget in
line with a good system of checks and bal-
Cover Story 47

The Exchange in Pictures - PFM

Stengthening CFR Institutions 48

Perspectives on Corporate Financial Reporting

Gabriella KUSZ
Senior Financial Management Specialist
Governance Global Practice, MENA
The World Bank

The Exchanges Corporate Financial Report-
ing (CFR) stream of event sessions was held
alongside the Public Financial Management
sessions from June 10-11, 2014 in Abu Dha-
bi, UAE. Sessions were designed to focus on
the importance of CFR institutions and the
strengthening of structures, systems and
operations for those institutions integral to
the production of high-quality financial
information for the private sector. At-
tendees representing Ministries of Finance,
Professional Accountancy Organizations
(PAOs), audit firms, regulators, non-
governmental organizations, international
organizations, capital market authorities,
universities and many others converged in
the UAE for this important event.

Event Highlights
Corporate Financial Reporting
Reform. Panelists from the NBA Neth-
erlands (the Dutch PAO), the Saudi Or-
ganization of Certified Public Account-
ants (CPAs), and the Conseil Suprieur de
lOrdre des Experts-Comptables and the
Compagnie Nationale des Commissaires
aux Comptes (French PAOs) shared their
experience in driving CFR reform within
their own countries, as well as abroad.
Discussions focused on the challenges
facing CFR development and the manner
in which panelists and their organizations
worked to overcome such challenges and
achieve success. Additional discussions
were held regarding the MENA Financial
Management (MNAFM) strategy to pro-
mote CFR development and reform
throughout the region.
Charting the Path toward the
Adoption and Implementation of
International Financial Reporting
Standards (IFRS) in general, and
IFRS for small and medium en-
terprises (SMEs) in particular.
Participants from the World Bank, the
Yemeni Association of CPAs, the Egyptian
Society of Accountants and Auditors, the
National Council of Accountancy of Mo-
rocco, and the Ordre des Experts
Comptables du Maroc (Moroccan PAO)
presented their national experiences in
developing plans for adoption and im-
plementation of IFRS, and IFRS for SMEs.
Discussions centered on what was
learned from this process, providing in-
sight and guidance to all attendees about
their own respective national efforts.
Islamic Finance - An Opportunity
for Large and SME Businesses.
Attendees had an opportunity to hear
from experts from the Gulf Cooperation
Council Accounting and Auditing Organi-
zation (GCCAAO), Deloitte, the Islamic Fi-
nance Knowledge Center (IFKC), and the
World Bank. They shared their perspec-
tives regarding the rise of Islamic Fi-
nance, its development within the GCC,
MENA and Southeast Asia and oppor-
tunities for governments, accountancy
professionals and MSME businesses
around the world.
Audit Regulation and Quality
Assurance Furthering the Qual-
ity of Services Among Large and
Small and Medium Practice
(SMP) Firms. This session brought to-
gether panelists from the regulatory sec-
tor, international organizations and the
profession to showcase the issues, chal-
lenges and experiences related to audit
regulation and quality assurance for
listed companies and SMEs alike. Panel-
ists from the International Forum of In-
dependent Audit Regulators, the Interna-
tional Federation of Accountants PAO
Development Committee, the Egyptian
Financial Services Authority, and the Pal-
estinian Association of CPAs presented
their perspectives on the rationale and
purpose of systems of audit oversight
and quality assurance. They also provid-
ed examples and organizational experi-
ence in the design and development of
such systems.
Integrated Reporting: An Intro-
duction to the Concept and Prac-
tice. The session provided a foundation-
al introduction to the concept of inte-
grated reporting. Today, corporate re-
porting is moving beyond the confines of
traditional financial reporting to include
aspects relating to the environmental,
social and governance of business opera-
tions as part of their reporting to stake-
holders. Representatives from the Har-
vard Business School, the Global Report-
ing Initiative, the American Institute of
Certified Public Accountants Business
Reporting, Assurance & Advisory Services
and XBRL Unit, and ARAMEX Corporation
(based in Dubai, UAE) offered an over-
view of the subject of integrated report-
ing. They tapped into their own re-
search, knowledge and experience to of-
fer guidance to accounting practitioners
and private sector enterprises interested
in implementing this form of reporting
within their own entities.
The Role of Professional Ac-
countants as Business Advisors
Supporting MSME Development.
Several views were presented regarding
the positioning of professional account-
ants as advisors to businesses, as well as
in facilitating the development of micro-,
small- and medium-sized enterprises
(MSMEs). MSME strengthening and de-
velopment offers a strong opportunity
for job creation, economic development
and prosperity for the peoples of MENA.
As such, representatives from the World
Bank, the International Federation of Ac-
countants Small and Medium Practices
(SMP) Committee, and the American In-
stitute of Certified Public Accountants
Private Companies Practice Section
(PCPS) presented their views on the im-
portant interrelationship between SMPs
and MSMEs. Specifically, they discussed
the work of international organizations
and established PAOs, and provided in-
sight into what is presently being done
within the region to promote the devel-
opment of SMP business advisors as
well as to position SMP development as a
policy imperative for governments, PAOs
and the private sector.

Cover Story 49

The Exchange in Pictures - CFR

In Their Own Words 50

Why Governance Matters

World Bank Group President
Jim Yong Kim
Daylight Dialogue: The Good Govern-
ance Challenge
Manila, Tuesday, July 15, 2014
As Prepared for Delivery An Excerpt

Like the Philippines, the World Bank
Group explicitly recognizes that gov-
ernance is critical for fighting poverty.
Good governance means delivering
public services effectively and effi-
ciently. It means protecting citizens
from violence and ensuring the rule of
law. It means choosing wise policies
and investments; maintaining public
assets; and ensuring that civil servants
are skilled, motivated and have the
tools to work effectively. It means
directly confronting corruption, so
that citizens have faith in their leaders
and systems.

Today, good governance also requires
fostering a transparent regulatory
environment that will allow the pri-
vate sector to create good jobs. In
sum, good governance makes it possi-
ble for us to execute and deliver
around our most cherished social
goals: those that define how we want
to live together, as nations and as a
global community. President Aquino,
your 2010 Philippine Development
Plan set forth two such goals: to attain
inclusive growth, which you defined
as the reduction of poverty; and to
create jobs. In 2013 the World Bank
Group also set two goals: to end ex-
treme poverty worldwide by 2030;
and to boost shared prosperity for the
poorest 40 percent of the population
in developing nations. The conver-
gence between the Philippines goals
and those set out by the World Banks
Board of Governors is striking, and no
accident. Countries like the Philip-
pines and institutions like the World
Bank are allies in the great struggle of
our generation: a global fight to end
poverty and build inclusive prosperity
while safeguarding the Earth for those
who will come after us.

At its heart, this is a fight for wiser,
more capable governance. It is now
well established with-in the academic
literature on institutions and growth
that there is a strong and positive cor-
relation between the principles of
good governance and a countrys GDP
per capita.

As you, President Aquino, have so
eloquently noted, good governance
is good economics. The precise caus-
al relationships are less well under-
stood, but some recent studies have
begun to confirm what many of us
have long suspected that effective
institutions (or their absence) have an
important impact on economic

There is plenty of evidence that cor-
ruption can deter private investment.
And studies at the sectoral level have
documented the perverse effect that
corruption and weak administration
can exert on education and health
outcomes, or on the quality and selec-
tion of infrastructure projects.

Some recent studies from the United
States underscore that high levels of
corruption are associated with in-
creased inequality, as well. We still
have much to learn about the role of
institutions in fostering development
and reducing poverty. Knowledge
about which reforms are most likely
to succeed under specific circum-
stances remains fragmented, and the
underlying conceptual and methodo-
logical challenges are significant.

The World Bank Group is committed
to supporting rigorous empirical ef-
forts to address these critical ques-
tions. We also believe the post-2015
Development Agenda should encour-
age countries to tackle governance
challenges head-on, measure results,
and share their data to build a strong-
er global knowledge base from which
all will benefit.


Morocco 52

Moroccos Governance Reform Program:
Strengthening Public Sector Performance and
Encouraging Citizen Engagement

Senior Public Sector Management Spe-
cialist, GGP, MENA, The World Bank

The government of Morocco launched a
two-pronged governance reform program
focused on the modernization of public
financial management and open govern-
ance to improve the allocative and opera-
tional efficiency of scarce public resources
and give its citizens a greater voice in the
development process. The Governance
Global Practice (GGP) Program in Morocco

(Governance in Arabic) supports
these efforts. It aims at maximizing the
window of opportunity for transformational
reforms offered by the Arab Spring and the
subsequent Constitution adopted in 2011.
The World Bank-supported First Transpar-
ency and Accountability Development Poli-
cy Loan series and technical assistance pro-
gram support the concretization of govern-
ance principles and rights introduced in the
Constitution in response to citizen demand.
It focuses on an integrated package of re-
forms to: (i) strengthen accountability and
performance in the management of public
resources and the delivery of public ser-
vices, such as performance budgeting and
procurement; and (ii) foster open govern-
ance and a more participatory democracy
through new policies on citizen access to
information, and public petitions and par-
ticipation, which are also in line with the
Banks strategic priorities.

Introducing performance -informed budg-
eting is seen as a lever to improve fiscal
transparency and accountability, and to
foster public sector performance. Public
expenditures are high in Morocco, around
32 percent of gross domestic product (GDP)
in 2013, including 5.6 percent GDP of public
investment. Yet, questions remain on ways
to increase the return on investment, en-
hance effectiveness of public services
, and
increase transparency and accountability.
Responding to these challenges, the gov-
ernment has engaged a broad public finan-
cial management reform aimed at improv-
ing transparency (both on the resources
used and on the performance achieved).
The reforms also aim to increase manageri-
al responsibility and accountability for re-
sults along the service delivery chain. This
agenda is based on three structural and
mutually reinforcing reforms:
introducing programmatic and per-
formance-informed budgeting;
improving public procurement and
value for money, including through
public-private partnerships (PPPs); and
modernizing public financial controls
toward more ex-post and risk-based
These reforms are made possible by a first
generation of public financial management
(PFM) reforms, which have strengthened
the basics. The reforms include the intro-
duction of an integrated financial manage-
ment system and an e-procurement sys-
tem, a consolidation of ex-ante financial
controls and a capacity assessment of all
authorizing officers, as well as a compre-
hensive accounting reform.

The GGP program supports the design and
implementation of these second genera-
tion public financial management reforms
through policy advice on the legal and regu-
latory framework (organic budget law, pro-
curement decree, PPP law, and financial
controls), and institutional strengthening,
as well as substantial capacity building.

Results to date. A new organic budget law
introducing a programmatic and perfor-
mance oriented budget process has been
submitted to the Parliament. Eight minis-
are being supported in restructuring
their budgets and in preparing their per-
formance plans to be submitted to Parlia-
ment with their 2015 budget proposals. The
new public procurement decree is effective
as of January 1, 2014, and its implementa-
tion is being supported by the Bank through
a comprehensive training of trainers pro-
gram. A PPP law has been prepared and is
pending approval by Parliament. In the
meantime, the implementing regulations
are being developed in partnership with the
Islamic Development Bank.

Figure 1: Moroccos Integrated GGP Program
Enhance Accountability and Performance
in the Management of
Public Resources through:
Foster Open Governance
Supported by a Multidisciplinary Bank team

Performance budgeting
Procurement reform
Public-Private Partnership Framework
State-Owned Enterprise Governance
Local finance

Fiscal Transparency
Access to information (article 27)
Public consultations (article 14)
Public petitions (article 15)
E-Government services

An integrated Governance Global Practice
Team (former PREM-PS, PROC, FM and WBI)

Private Sector Development/ International
Finance Corporation (IFC)
Social Development -SDV
(social accountability)
Information and Communications Sector
Unit (TWICT)
Source: World Bank.

More than 14 authorizing officers qualified
for increased responsibility and lighter ex-
ante financial controls, following a risk-
based approach.

A new focus on open and citizen-centered
governance. The value of public engage-
ment is its capacity to
strengthen social cohe-
sion, improve govern-
ment-citizen interactions
and the quality of devel-
opment policies. When
successful, participation
can have a transformative
impact by providing citi-
zens with a platform for
engagement in the de-
velopment process, and
an ability to hold gov-
ernment to account.

The 2011 Constitution
introduced new rights on
public engagement, in-
cluding the right of citi-
zens to petition public
bodies, present legisla-
tive motions to Parliament, and obtain
access to public sector information all of
which are currently being concretized
through a legal framework. To date, the
Bank has supported the design and consul-
tation process on a law regarding access to
information, an organic law on public peti-
tions and legislative motions, as well as a
draft policy on public consultations and an
e-consultation platform. These laws now
need to be adopted and complemented by
clear and simple procedures for their effec-
tive implementation.

Citizen demands for participation remain
strong as evidenced in a recent (April
2014) World Bank Nano-Survey,
citizen perceptions regarding access to
information and public engagement in Mo-
rocco. This Internet-based survey captured
15,000 responses, of which 71 percent de-
manded greater access to public sector
information, with 26 percent even willing to
pay for it. Likewise, the majority of re-
spondents (58 percent) wanted to be more
engaged, even as much as once a week, for
the 47 percent of those who replied posi-
tively. The survey sheds light on expecta-
tions regarding new rights introduced by
the constitution. It illustrates the disparities
in public awareness, as well as challenges to
accessing information and to engaging ef-

The internet is the preferred mode of in-
teraction with the government for many
citizens, including for public services. The
program is also supporting the govern-
ments e-government initiatives, such as
Watiqa, through which more than 2,500
citizens could order their birth certificate
online and receive it by registered mail. This
would help to reduce transportation costs
and the risk of corruption. This inter-
ministerial collaborative platform can host
many more online services to improve
transparency and effectiveness in the deliv-
ery of public services.

The GGPs governance program in Moroc-
co follows an integrated and holistic ap-
proach in order to maximize both internal
and external synergies. It is integrated both
in terms of the team and instruments used.
This multi-disciplinary program is leveraging
expertise from across the Bank and beyond
to support Morocco's structural governance
and service delivery reforms. The program
is based on a multi-donor Development
Policy Loan (DPL) series, with a first USD
200 million loan adopted by the World Bank
Board on October 29, 2013. It has been
prepared jointly with the European Union
(EU) and the African Development Bank
(AfDB), leveraging a further US$ 250 mil-
lion. The DPL is complemented by a USD 4
million technical assistance grant financed
by the Deauville Partnerships Transition
Fund, the MENA Multi-Donor Trust Fund, as
well as 2 Institutional Development Fund
(IDF) grants to support the procurement
reform. It is holistic in the sense that it sup-
ports governance reforms across the public
sector (central and local governments, as
well as state-owned enterprises and agen-
cies), and along the service delivery chain. It
therefore offers important opportunities to
strengthen the link
between upstream
cross-cutting govern-
ance reforms and sec-
tor-specific service
delivery challenges
down-stream. This is
the thrust of the Banks
Governance and Public
Sector Management
Strategy as well as the
new Country Partner-
ship Strategy (2014-
2017) which support
governance for im-
proved service delivery
and shared prosperity.

GGP opportunities
ahead. Such a com-
prehensive governance
program could only come to fruition thanks
to an integrated GGP team in the country
office and a close collaboration with the
Macro and Fiscal Management and the
Trade and Competitiveness Global Practic-
es, which are part of the DPL team. The
official launch of the GGP on July 1
, 2014
offers the opportunity to consolidate and
formalize this informal country office GGP
team and its integrated services to the cli-
ent and other sectors/ GPs. The growing
pipeline of Program for Results is generat-
ing a strong demand for integrated govern-
ance and fiduciary assessments. Demand
has also increased for implementation sup-
port from other GPs in order to achieve the
new instruments institutional strengthen-
ing objectives and more sustainable results.
Addressing this growing demand will re-
quire a deeper, country-level integration for
an optimal allocation of scarce human and
financial resources.

1 As evidenced in the landmark report on public sector govern-
ance by the Conseil Economic, Social et Environmental.
2 Ministries supported as of June 2014 include the: Departments
of Economy and Finance, Agriculture, Education, Water and
Forestry, Transport and Equipment, Justice, Foreign Affairs, and
Vocational Training. . 3 The Nano-Survey is not representative of
the entire population in Morocco. It is a random sample of
internet users, targeting the web traffic of users who enter faulty
URLs. The benefit of such an approach is that it ensures an
entirely random sample of online participants. Nonetheless, the
survey is limited only to online users, and does not represent a
comprehensive sample group.

Tunisia 54


President de lOrdre des Experts
Comptables de Tunisie (OECT)

LOrdre des Experts Comptables de Tunisie
(OECT) est un organisme professionnel cr
en 1983 dot de la personnalit civile
groupant les professionnels habilits ex-
ercer la profession dexpert-comptable.

Au 31 dcembre 2013, lordre compte 1120
experts comptables dont 12% femmes.

LOrdre a pour mission:
Assurer le fonctionnement normal de
la profession dexpert-comptable,
Faire respecter les rgles et obligations
de la profession
Dfendre lhonneur et lindpendance
de la profession

CVEMA: Le rle de lOECT dans la Tunisie
de post rvolution ?
NA: LOECT est un vecteur d'orientation
vers la bonne gestion et gouvernance, sur-
tout, aprs le 14 Janvier le jour ou lancien
prsident a quitt le pays, puisquil com-
mence avoir une certaine libert permet-
tant toucher tout ce qui est sujet la
lutte contre la corruption, les malversa-
tions, blanchiment dargent etc. LOECT est
aussi un bailleur de confiance, aussi bien
pour le volet fiscal, obligation lgale, obliga-
tion de dclaration et de contribution dans
le budget de lEtat et les actions communes.
La profession dexpert-comptable donne
une bonne note l'conomie tunisienne
puisquelle contribue dans la fiabilisation
des donnes et des tats financiers, ainsi a
facilite les transactions entre ces rles in-
ternes c'est dire les intervenants locaux et
surtout avec les changes internationaux.

CVEMA: Les russites de lOECT :
NA: Les russites sont multiples, elles vont
de ladoption dun nouveau system
comptable inspire des normes interna-
tionales et jusqu la formation des profes-
sionnels selon des standards interna-
tionaux. Pour l OECT, notre priorit cest
dtre prsent comme un partenaire
srieux, apolitique, neutre, et objectif. On a
russi appliquer une bonne culture
comptable. Cela remonte 1996, par
ladoption dun nouveau systme compta-
ble qui sinspire de ce qui se fait au niveau
des normes e pratiques internationales. Du
ct de la formation acadmique, nous
avons russi former nos tudiants dans
les Normes Internationales dinformation
financire (IFRS) et selon des standards
internationaux. LOECT a ainsi contribu aux
membres de la profession amliorer le
niveau dexpertise dont ils ont besoin pour
sacquitter de leurs responsabilits profes-
sionnelles. On a pu faire comprendre les
entreprises Tunisiennes lutilit et
limportance du contrle indpendant ex-
terne. Peu peu, on contribue a changer
limage purement comptable de lauditeur
qui est devenu plutt un contrleur prven-
tif, conseiller, un partenaire, ou mme un
acteur incontournable dans la cration dun
bon climat des affaires. Nous avons russi
difier une instance dassurance qualit et
de discipline totalement indpendante qui
veille assurer un service de qualit des
experts comptables.

CVEMA: Les dfis de lOECT :
NA: Parmi les dfis les plus importants cest
tendre vers plus de spcialisation dans le
domaine dexpertise. Il serait bien judicieux
davoir des comptables bien classifis pas
domaine dexpertise et ce qui reprsente
un dfi essentiellement scientifique. Il est
aussi important de souligner la ncessit de
promouvoir la formation continue de nos
membres afin dassurer un niveau lev en
matire technique et en matire de don-
tologie et tique. Maintenant lordre se
focalise renforcer les cabinets et les aider
avoir des structures plus importantes,
multidisciplinaires, ayant la possibilit
justement dassurer les deux premiers rles
dans la qute dexcellence et de la for-
mation ce qui est en effet un autre dfi
auquel lOECT fait face. Il sagit daider aux
cabines dvelopper des prestations plus
forte valeur ajoute. On aimerait bien don-
ner au climat des affaires une certaine ori-
entation vers la bonne gouvernance, vers la
transparence, vers les vecteurs et les val-
eurs actuellement fortement recommands
par les institutions internationales. Tout a
dans le cadre de laisser libre la bonne initia-
tive, le dveloppement du commerce et du
lenvironnement des affaires en gnral.
Lautre dfi qui attend lOECT est de venir
en laide ltat dans la mise en uvre de
la dcentralisation. En effet, la nouvelle
Constitution Tunisienne a institu le princi-
pe de dcentralisation sans prvoir un
mcanisme concret entre le niveau central
et les nouvelles instances dcentralises.
Donc on essaye ce niveau dapporter
quelques rponses. Ainsi, pour lexercice
2015/ 2016 parmi nos priorits cest de
contribuer justement assister les pouvoirs
mettre en place un systme fluide et co-

CVEMA: Quelles solutions vous prconisez
pour les difficults auxquels la profession
comptable fait face ?
NA: Une des solutions est de russir avoir
une meilleure coordination entre les diff-
rentes autorits de rgulation et contrle
telle que la Banque Centrale, lautorit des
microfinances, le march financier, le CGA
pour lassurance, etc. Nous avons essay
daller vers un conseil national de contrle,
daudit afin de coordonner tous les efforts,
mais a prend du temps. Par contre nous
avons un comit de partenariat et de liaison
avec la Banque Centrale et mme avec le
Conseil du Marche Financier (CMF), qui
nous permet de donner notre avis et con-
seil. Nous essayons de coordonner nos ef-
forts et jusque-l cest efficace. Toutefois,
bien que la coordination existe, elle nest
pas encore bien formalise. La profession
comptable devrait jouer un rle plus actif et
jouer le rle du lien entre le gouvernement,
la socit civile et le secteur priv et devrait
y aller vers la vulgarisation de la culture
comptable fiscale et du contrle dans cette
nouvelle Tunisie qui se veut transparente
In The News 55

Strengthening Local Governments in Tunisia as a
First Step toward Decentralization

Tunisia is one of the most highly urban-
ized countries in the Middle East and
North Africa. Roughly 70% of the coun-
trys 11 million citizens live in towns and
cities. Tunisias urban sector is the most
vibrant part of the national economy and
accounts for more than 85 % of Gross
Domestic Product. Yet under the highly
centralized decision making of the previ-
ous regime, municipalities played a rela-
tively minor role in local development.
Their share of total public spending has
only amounted to 4%. By law, municipalities have had limited func-
tional responsibilities. In the aftermath of the 2011 Revolution,
Tunisias interim political authorities have had to seriously rethink
the role of the state and the high level of centralization, and
reevaluate the importance of municipalities in urban development.
The new constitution, adopted earlier this year, has clear commit-
ments to decentralization. The document outlines a vision of fully
devolved and empowered local governments with autonomy for
executing their mandates of providing local services according to
transparent principles of participation by, and accountability to,
their citizens. The Interim Government has also signaled its intent
to place municipalities at the heart of the urban development pro-
cess by making them more active players in the planning, imple-
mentation and delivery of municipal infrastructure and services.
There is now widespread recognition that elected municipal coun-
cils and mayors must be more than passive spectators in urban
development and must become more transparent and accountable
to local citizens. Finally, key central government departments (such
as Caisse des Prets et de Soutien aux Collectivites Locales (CPSCL)
and Direction Generale des Collectivites Publiques Locales (DGCPL))
recognize the need to reform and reorganize the way in which sup-
port is provided to local governments.

The government has launched a five-year municipal investment
plan to strengthen local governments and address the needs of
disadvantaged areas. A central focus of this US$770 million plan is
to reform the management of, and responsibility for, the public
funds destined for municipalities. In line with the national priority
of redistributing decision-making from
the central government to local gov-
ernments, the aim is to put municipali-
ties in charge of their budgets, and give
local citizens a say in how the funds are

The World Bank has launched the Urban
Development and Local Governance
Program in support of the efforts of the
Interim Government. For decentraliza-
tion to work, local governments need to
be empowered, capable and accountable, said Jaafar Sadok Friaa,
World Bank Lead Urban Specialist and the leader of team that de-
veloped the program and will oversee its implementation. Our
focus will be on building up the financial and managerial capacities
of municipalities, so that they are ready to assume full responsibil-
ity over their resources, and establishing mechanisms for citizens to
fulfill their vital role in decision making and oversight to improve
the performance of local governments, he added.

The program is designed to benefit all of Tunisias 264 municipali-
ties and their 7 million inhabitants by:

improving the system by which funds are transferred from the
central government and launching demand-driven institutional and
capacity development activities, to strengthen the delivery of mu-
nicipal infrastructure and services and bring them in line with citi-
zens priorities;
implementing initiatives to build knowledge and capacity of mu-
nicipal council members and municipal staff on participatory gov-
ernance initiatives which will underpin broader efforts to improve
municipal performance and build new social contracts between
citizens and local government;
increasing the participation of local communities including, im-
portantly, women and youth, in planning development activities
managed by the municipality at the local level to ensure all groups
needs are addressed, further fostering citizens engagement and
contributing to long term sustainability.

Special consideration has also been given to the 500,000 Tunisians
living in disadvantaged areas, especially in regions with fewer eco-
nomic opportunities and a slower rate of development than the
rest of the country. The program has identified 229 disadvantaged
neighborhoods that will benefit from:
improved local service delivery by providing municipalities with
the resources to finance the upgrading of informal and disadvan-
taged neighborhoods;
direct involvement of the population in setting investment priori-
ties, with, for example, new public lighting and sidewalks in re-
sponse to demands articulated by women in disadvantaged neigh-
temporary employment opportunities generated by the activities
funded by the project, which will be targeted specifically at the
neighborhoods large number of unemployed young people.

Morocco 56

Public Procurement Reform

Prepared by: Rachel Lipson, Salim Beno-
uniche, Abdoulaye Keita, and Khadija Faridi
from the Governance Global Practice.
MENA, The World Bank

Over the last decade, Morocco has made
important strides in responding to citizen
demands for more transparency, accounta-
bility, and shared prosperity. This has also
extended into the public sector and its var-
ied functions. In Morocco public contracts
account for some 17 percent of GDP and
are responsible for critical activities in the
economy, including delivery of key public
services.[2] Given its important role, the
government of Morocco prioritized public
procurement for comprehensive reforms.
Starting with the 2003 Country Procure-
ment Assessment Report (CPAR), Morocco
embarked on a productive dialogue with
the World Bank to improve its procurement
system and optimize the performance of its
public investments. This has involved a
multi-faceted set of reforms:

Legal Reforms: There is a new Constitu-
tion with a mandate on anti-corruption
and on ensuring good governance in the
public sector. A new public procurement
decree, incorporating international best
practice has been enacted and a second
decree was slotted for March 2014.
Reforming the Institutional Framework:
The creation of a central public procure-
ment policymaking body, uniting authori-
ty from diffuse procurement bodies.
Capacity Building: Establishing a national
procurement training strategy under the
Secretary General of the Government
(SGG) and the General Treasury of the
Kingdom of Morocco (TGR).
Modernization of Tools: A new national
e-Procurement system to simplify proce-
dures and enhance access to procure-
ment information.

(image: 125 Moroccan Procurement Train-
ees received training from November 2013
to January 2014, supported by a World
Bank IDF grant.)

Country Context
Procurement reforms in Morocco can only
be fully understood in the context of politi-
cal and social reforms over the past decade.
While Morocco has a history of productive
dialogue with the World Bank on public
procurement, the events of 2011 brought
good governance, anti-corruption, and PFM
reforms to the forefront. With the wave of
change sweeping the MENA region, Moroc-
co was increasingly aware and keen to re-
spond to demands for more transparency
and accountability, including in public
spending. A good illustration of this trend
was the strong push for expanding ac-
countability on taxpayer funds.

Moroccos July 2011 constitution included
some 18 articles on transparency, ethics,
integrity, accountability, and, as a first,
clauses on fighting corruption. Morocco
also became the first Arab country to intro-
duce a constitutional provision guarantee-
ing a right to information. In this context,
the government initiated steps to enhance
transparency and accountability in the pro-
curement process, including the solicitation
of public comments on related laws or
regulations. With more information about
public contracts available, including
amounts and selected bidders, the goal was
to expand the oversight role of beneficiar-
ies and civil society, and to strengthen ac-

Legal Reforms
Even before the Arab Spring and the new
constitution, the government was engaged
in legal changes to bring its public procure-
ment framework to international stand-
ards. In 2008, with World Bank support, a
new CPAR was carried out to update the
2005 edition. A Use of Country System
(UCS) assessment [3] followed, and identi-
fied key gaps in the national procurement
system, including:

The lack of a credible, independent, and
operational complaints handling system.
The exclusion of certain types of con-
tracts [4] from the main regulations gov-
erning public procurement.
The inapplicability of public procurement
decrees over decentralized entities.
The lack of a national framework and
capacity building strategy for public and
private stakeholders.

In response, two major decrees on public
procurement were drafted and published
for consultation in 2013. The first decree
became effective on January 1, 2014, and
the second decree was expected to be en-
acted in March 2014. Among other new
elements, they provide the legal basis for
the unification of the regulatory frame-
work, now also applying to administrative
State-Owned Enterprises (SOEs) and all
levels of local government. They also intro-
duced electronic procurement, opened
architect contracts to competition, and
mandated that 20 percent of public con-
tracts be allocated to SMEs.

Institutional Reforms
Procurement in Morocco is a complex task
given the governments institutional setup.
Historically, TGR has been the World Banks
traditional counterpart on procurement
reform. However, the second decree will
create a new policy, complaints handling,
and training body called the Commission
Nationale de la Commande Publique
(CNCP). It is hosted in the Secretary General
of Government (SGG) for more independ-
ence from line ministries and large public


With this new mandate, the SGG, a key
institution in the government, takes on an
expanded role in procurement policy, re-
form, and oversight. As noted, past assess-
ments have identified the system of com-
plaints handling as a key reform area. Alt-
hough 17 percent of GDP is spent through
public procurement, no more than 25 offi-
cial complaints are filed each year. When a
company had a grievance about a contract
and suspected wrongdoing, the only option
for redress was to file a complaint directly
with the procuring entity that had awarded
the contract. Many bidders feared retalia-
tion, retribution, or damage to their ability
to compete for future tenders. Thus, a key
objective behind the reform of the pro-
curement regulatory body was to create a
new independent and objective body with
the authority to handle grievances. Starting
in 2011, the SGG started to gather the re-
sources and skills to implement this ex-
panded oversight function, including via a
World Bank-financed US$400,000 Institu-
tional Development Fund (IDF) grant. As an
autonomous body, the CNCP will have its
own budget, dedicated staff, and appropri-
ate authority. Enhancing CNCP capacity,
including in policy making, is an iterative
process. There is more to be done to enable
it to fully carry out its new responsibilities,
and strengthening stakeholder capacity will
be critical.

Capacity Building
The Moroccan government recognized it
needed a targeted and comprehensive ef-
fort to strengthen procurement skills within
the civil service and stakeholders in the
judiciary, administrative, and private sec-
tors. Toward this end, a national public
procurement capacity building strategy was
finalized in December 2012, with imple-
mentation beginning in 2013. In the short-
term, it endorses the training of trainers
focusing on government officials responsi-
ble for procurement. With the support of
the World Banks IDF grant, 125 trainers
were trained in Morocco from November
2013 to January 2014. In the medium-term,
the strategy highlighted the need for a
regulatory authority to be responsible for
overseeing the design and delivery of the
training programs at all levels (the CNCP).
With the new trainers, the government
expects some 6,000 practitioners in gov-
ernment ministries, external services, local
governments, controls and other institu-
tions will be trained. These will include
face-to-face courses, e-learning, mentor-
ing/coaching, and sessions in cooperation
with international institutions. Capacity
building efforts were also supported by the
Deauville Partnership, a multi-partner initi-
ative launched by the G8 to support Arab
countries engaged in democratic transi-
tions. This additional $250,000 will help to
fund more training of procurement trainers
and local governments via the Ministry of
the Interior. They will also support efforts
of the National Agency for the Promotion of
SMEs (ANPME), with TGR collaboration, to
train SMEs on public procurement opportu-
nities, especially via the new e-system.

Modernization of Tools
Morocco has been a leader in the MENA
region in modern e-Procurement systems
designed to increase the efficiency of public
expenditures. Moroccos home-grown sys-
tem, now many years in the making, is
viewed by its champions as one of the key
components of the countrys commitment
to promote transparency and fight corrup-
tion. It also represents a significant tool to
simplify the process of tendering, lowering
barriers to entry and encouraging competi-
tion. With the support of two other IDF
grants, the government has developed a
procurement web portal with a compre-
hensive information and dissemination
system for public buyers and the private
sector. The benefits of Moroccos e-
Procurement advances are tangible and far-
reaching: tenders can now be published
online in less than two minutes, a compre-
hensive database of government suppliers
and contractors is available on site, and
important procurement information is
available in real time. And with upcoming
features like bulk electronic purchasing,
reverse auction and expansion of e-
tendering to be piloted in the coming
months, Moroccan e-Procurement is poised
to take off. The system will be able to great-
ly improve its efficiency by dramatically
reducing the time required to complete the
bidding process, helping to conserve valua-
ble government resources. As a user-
friendly tool, the e-portal reduces costs not
just for the government, but also for firms
wishing to enter the public market. Rather
than having to resubmit the same docu-
ments, the system can store a firms admin-
istrative authorizations and other required
information. E-Procurement is also ex-
pected to help small businesses by leveling
the playing field and closing the information
access gap between large and small
firms. By bringing more private sector
players into the system and increasing
competition, e-Procurement in Morocco is
expected to lower prices by approximately
8 percent, according to government esti-

Success Factors
Morocco has been a trailblazer in MENA on
procurement. It has consistently shown that
it is one of the more advanced and deter-
mined countries in improving its regula-
tions. However, Morocco has benefited
from a number of factors that have made
reform more palatable than elsewhere. The
government has demonstrated high-level
support for and commitment to the pro-
curement reforms. The Ministers of Econ-
omy and Finance, General Affairs and Gov-
ernance (MAGG), the SGG, and the TGR
Director General have all been strong re-
form proponents and have helped push
many legal changes. Without making pro-
curement a priority, these efforts could
have stalled for years when faced with con-
flicting interests. Morocco also has the ad-
vantage of strong institutions that have the
authority and the resources to lead re-
forms. For example, the TGRs centralized
model and strong network of practition-
ers/controllers has enabled the effective
dissemination of new information and
training about laws within their department
and beyond. The Inspector-General of Fi-
nance (IGF) auditing body is another high-
capacity institution that can help in imple-
mentation. Given the quality, coverage, and
frequency of the agencys audits, [6] the
World Bank is working with them to launch
a FY15 pilot program to coordinate on the
Post- Procurement Review of Bank-financed
projects. Finally, the government has been
aided in all of these efforts by its close col-
laboration with the World Bank. From the
inclusion of procurement in the dialogue
over Bank-financed Development Policy
Loans (DPLs), to constant technical consul-
tation on various reform aspects (legal,
institutional, implementation, enforce-
ment), to the provision of resources to sup-
port capacity building efforts (including four
IDF grants), the World Bank and Morocco
have partnered diligently to improve public
procurement in the country.

Morocco still faces challenges in improving
its public procurement system. For in-
stance, significant payment delays are
common for contractors, in particular hurt-
ing SMEs, and inhibiting their ability to en-
ter or remain in the public market. The
decree could be amended to cover most
(not just administrative) SOEs.[7] Practices
in the field can be improved to better align
with international standards. In addition,
the complaints handling system needs con-
tinued improvements, and the extension of
the new regulations to local governments
will require sustained capacity building

In all of these areas, Morocco has en-
douvered to ensure that the pace of the
implementation of the reforms matches the
breadth of their impact. In the background,
corruption still remains a harmful factor in
the field. The key challenge for the future
will be transferring the intentions behind
the new laws and initiatives into actual
change in practices and behaviors on the

Here as well, the World Bank is working
side-by-side with the government of Mo-
rocco to create a realistic strategy for pro-
gress. As part of a new and innovative re-
gional study Enabling Implementation of
Public Procurement Reforms, funded by
the Banks Governance and Anti-Corruption
(GAC) Fund, the government is developing a
reform implementation strategy to address
the specific factors affecting the progress of
the reforms, and identifying entry points,
type, and sequence of subsequent interven-
tions. By moving beyond the traditional
technical analysis of public procurement
reforms, and assessing the broader envi-
ronment for change and implementation,
the government of Morocco stands poised
to take the next steps to improve its system
and enhance results for its citizens.

[1] The authors work in the Procurement unit of the World Banks
Middle East and North Africa Region (MNAPC). This Quick Note
was prepared under the general direction of, and cleared by,
Yolanda Tayler, Manager, MNAPC.[2] This includes 70 percent of
all of the work performed by Moroccan construction firms, and 80
percent of the work performed by Moroccan engineering firms.
[3] The UCS assessment is now known as the Methodology for
Assessing Procurement Systems (MAPS) self-assessment.
[4] Specifically, (i) contracts entered by public and state-owned
corporations/enterprises, (ii) service provisions by architects
(excluding those from a competitive process) and (iii) concessions.
[5] Source: TGR.
[6] The World Banks assessments and analysis of the IGFs audits
found that they cover all provinces, and for every year.
[7] There may be some commercial exceptions like the National
Airlines Company, for example, which may have to stick to the
private sector practices of their competitors.

In The News

Consultation Draft for Updating the PEFA Indicators

August 7, 2014

The Public Expenditure and Financial Accountability (PEFA)
Program, launched in 2001, has created a credible and
comprehensive framework for assessing PFM functionality,
which has been applied in a large number of countries since
2005countries with different income levels, different
administrative heritages, and in different geographical re-
gions. The PEFA Framework continues to be relevant and
applicable in a wide range of contexts; however, after 9
years with only limited changes, it is time to update it. The
PEFA Partners have no intention of changing the purpose of
the Framework; rather, the update is intended to reflect
the various developments in the PFM landscape over the
past decade, strengthen several areas of acknowledged
weakness, and extend coverage to new areas such as fiscal
strategy, use of performance information, public invest-
ment, and public asset management. Thus the update aims
to enhance the relevance of the PEFA indicators while pre-
serving their comparability over time, to the extent possi-
ble. The Partners expect that a PFM systems assessment
undertaken on the basis of the updated PEFA Framework
will provide an improved basis for monitoring PFM perfor-
mance and for discussing and designing reform priorities
for the futureand thus enhance its usefulness for gov-
ernments and other users.
Over the life of the Framework, PFM experts have offered
numerous suggestions to modify various indicators. The
Partners now seek to exploit this expertise by requesting
feedback on the draft update from any interested party:
government PFM specialists and reform managers,
PFM/PEFA practitioners, regional networks and technical
assistance providers, entities that are developing and main-
taining assessment tools, PFM standards setters, think
tanks, and academia. The PEFA Partners are pleased to pre-
sent the draft updated PEFA indicator set for public consul-
tation, along with a note that uses a question-and-answer
format to describe the background of and process for the
update. To provide feedbacka crucial element in finaliz-
ing this important workplease complete the short ques-
tionnaire (available at and/or provide more
general comments and suggestions, by October 31, 2014.
The Partners are grateful for your participation. Following
the consultation period, the draft Framework will be modi-
fied as necessary to reflect the comments and to ensure
that it remains applicable across a wide range of country
contexts and administrative heritages. The updated PEFA
Framework is expected to be released in 2015.

(Source: The PEFA website (edited))

Libya 59

Public Financial Management in Libya:
A Gradual Approach to Reform and Relationship-building

Michael Schaeffer, Senior Public Sector
Specialist and Wesal Ashur, Public Sector
Specialist, Governance Global Practice /
MENA, The World Bank

Libya recently submitted its national
budget for 2014, with a total envelope of
LYD 56 billion (US$47 billion) to the Central
Bank of Libya (CBL). There are 30 articles
that currently frame the budget law (Law
No 13, 2014). The CBL submitted the law to
its legal department for opinion. With the
FY2014 deficit approaching approximately
80 percent of gross domestic product
(GDP), the CBL would like to assess how a
deficit of such significant levels could legally
be financed before giving its approval for
the budget to be implemented. This could
mean a delay by an additional two weeks
(until July 31, 2014). Quite simply, this
means that the government of Libya has
been effectively operating for the majority
of FY2014 without a legally appropriated
budget and policy document.

Fragile, conflict-affected countries such as
Libya are a true test in the exercise of pa-
tience. The World Bank public financial and
governance programs, with the assistance
of the Department for International Devel-
opment (DFID) (UK), worked rapidly over
the past year to introduce a revised budget
coding structure and a modest double-entry
financial management information system
at the Ministry of Finance (MoF). However,
the uncertainty brought on by a frail na-
tional government structure, weak adminis-
trative authority, and an under-skilled and
unmotivated civil service has limited the
potential of achieving viable public sector
accountability reforms in Libya in the near-

The notion that Libya is a fragile, conflict-
affected state in chaos is far too simplistic.
The United States, itself, was more a fragile
hope than a reality in 1790. During the
decade that followed the U.S. revolution,
the ideals of the Declaration of Independ-
ence were combined with the content of
the Constitution to create the practical
workings of a government structure. How-
ever, even the workings of a practical ad-
ministrative structure took many years to
evolve. This appears to be the case in Libya

At present, the reform of the public finan-
cial management legal framework cannot
be an essential starting point for public
financial management (PFM) rebuilding.
International experience with fragile, con-
flict-affected states indicates that legal
reforms specifically the adoption of new
organic budget legislation generally occur
three-to-four years after the initial political
changes have taken place. Further, they
take a minimum of two years to introduce.
Existing Libyan laws and interim decrees
often suffice as a temporary basis for cur-
rent PFM rebuilding. In the case of fairly
fluid fragile, conflict-affected states such as
Libya, the existing legal infrastructure com-
bined with interim decrees creates a sense
of public financial paralysis.

Basic public financial management reforms
can be very challenging in the current Lib-
yan context. Weaknesses in procurement
and auditing are often at the heart of why it
is so difficult to overcome fiduciary con-
cerns. Strengthening public procurement is
a basic reform in the sense that it is focused
on compliance rather than performance.
However, because of rent-seeking behavior
vis-a-vis public investments, current Libyan
procurement reform efforts remain largely

The impact of current public financial
management reform efforts to promote
state building has also been limited. Con-
textual factors such as limited domestic
revenue and a difficult security environ-
ment mean that PFM reforms alone cannot
be expected to be the cornerstone of a fully
functioning, accountable public administra-
tion. With the basic introduction of a mod-
est financial management system and
budget accountancy structure, PFM reforms
have made important initial contributions
toward improving the fiduciary environ-
ment through a strong focus on budget
execution. However, substantial challenges

This article was written on July 8, 2014

Maroc 60


Mr. Driss JETTOU
Premier Prsident de la Cour des
Comptes, Royaume du Maroc

Entrevue conduit par Laila Moudden, Fi-
nancial Management Analyst

CVMENA: Pouvez-vous rapidement dcrire
votre parcours ?
DJ: Je tiens tout dabord remercier
lquipe de la Banque Mondiale de lintrt
quelle accorde notre institution. En fait,
linitiative prise par la BM de rserver une
publication aux thmatiques de gou-
vernance financire dans la rgion MENA,
est une initiative louable dans la mesure o
elle permet de faire tat des diverses exp-
riences internationales dans ce domaine et
de souligner les progrs significatifs en
matire de rforme des finances publiques
mens par certains pays, contribuant en
cela faire connatre les meilleures pra-
tiques de gouvernance des finances
publiques. Concernant mon parcours je
tiens souligner que jai suivi des tudes
secondaires scientifiques avant de rejoindre
la facult des sciences de Rabat d'o jai eu
mon diplme des tudes suprieures en
sciences physiques et chimie en 1966.
Aprs quoi, jai suivi des tudes de gestion
d'entreprise Cordwainers College (Lon-
dres) do jai obtenu un diplme de man-
agement et de gestion d'entreprise en
1968. Durant la priode 1968 1993, jai
ctoy les problmatiques lies
lentreprise marocaine et son envi-
ronnement que ce soit en ma qualit de
prsident-administrateur ou grant de
plusieurs socits ou prsident de la
Fdration marocaine des industries du cuir
(FEDIC) ou membre du bureau de la
Confdration gnrale des entreprises du
Maroc (CGEM) et vice-prsident de l'associ-
ation marocaine des exportateurs (ASMEX).
Mais cest sans doute mon exprience gou-
vernementale qui ma permis
dapprhender de faon profonde les prob-
lmatiques lies la gestion publique et ce
dans un contexte de transition conomique
et socital que le Maroc a connue partir
de la dcennie 90. Cest ainsi que jai exerc
les fonctions du ministre du Commerce et
de l'Industrie de 1993 jusquau mars 1998
dans les gouvernements successifs prsids
par Mr Mohammed Karim Lamrani et Feu
Abdellatif Filali. Le 13 aot 1997, jai t
nomm ministre des Finances, du Com-
merce, de l'Industrie et de l'Artisanat, mis-
sion que jai exerce jusqu'au 14 mars 1998
avant doccuper le poste de ministre de
l'Intrieur de 2001 2002. De septembre
2002 octobre 2007, jai t nomm par Sa
Majest le Roi Mohammed VI Premier Min-
istre du Gouvernement, cette priode a
concid avec le lancement, sous lgide de
Sa Majest le Roi, de grands chantiers de
rformes qui ont couvert lensemble du
champ conomique et social en vue de
rpondre aux dfis socio-conomiques,
engager une dynamique de progrs pour un
dveloppement durable permettant de
faire accder le pays au statut dune con-
omie mergente. Au cours de cette priode
jai t honor de nombreuses dcorations.
En 2008, jai t dcor du grand cordon du
Wissam Al Arch par SM le Roi Mohammed
VI. Enfin et, comme vous le savez, le 9 aout
2012 jai t nomm par sa Majest le Roi
Mohammed VI Premier Prsident de la
Cour des Comptes et ce dans le sillage des
grandes rformes institutionnelles que le
Maroc a connues avec lavnement de la
nouvelle constitution de 2011.

CVMENA: Pouvez-vous nous prsenter la
Cour des comptes marocaine, son posi-
tionnement institutionnel, son rle ?
DJ: En vertu de la Constitution, la Cour des
comptes (CC) se prsente comme tant
linstitution suprieure de contrle des
finances publiques du Royaume indpen-
dante du Parlement et du Gouvernement.
En effet linstar des pays avancs, la con-
stitution marocaine, ds 1996, a rig la CC
au rang dune institution constitutionnelle,
ce statut a t renforc par la nouvelle
constitution de 2011. De mme, le l-
gislateur a entour la CC de toutes les gar-
anties dindpendance qui lui permettent
lexercice de ses missions avec responsabil-
it, transparence et probit. Dabord le
statut de la CC comme tant institution
constitutionnelle est de nature mettre la
Cour labri de toute pression ou partialit.
Elle tient aussi son indpendance du statut
de ses membres qui sont des magistrats
inamovibles avec des garanties statutaires
sur lesquelles veille un conseil lu celui de
la magistrature des juridictions financires.
Ensuite, et en sus des missions que la CC est
tenue dexercer de plein droit en matire
de contrle des finances publiques, elle
jouit dune libert de programmation de ses
oprations de contrle. A ce titre, elle fixe
ses priorits dans laccomplissement de ses
missions et choisit ses thmes de contrle
en fonction de critres de slection objec-
tifs. Elle jouit galement dune certaine
autonomie financire notamment en
matire dexcution de son budget. La CC
contribue lamlioration de la gestion
publique. A cet effet, elle fait parvenir aux
deux chambres du parlement, aux gestion-
naires et aux entits contrles, des infor-
mations utiles et fiables, rsultant dun
examen contradictoire et formules sous la
forme de constatations, dobservations et
de recommandations. Ainsi, la Cour cherche
attirer lattention des dcideurs publics
sur des situations de mauvaise gestion,
dirrgularits, et dincohrence avec les
objectifs fixs ainsi que les cas
dacquisitions et de prestations effectues
des cots draisonnables. Au plan de la
dmarche, la CC exerce des contrles carac-
triss par leur tendue, leur exhaustivit
et leur vision intgre. Dabord, le champ
de contrle des juridictions financires est
tendu et inclut tous les acteurs publics :
tat, tablissements et entreprises publics,
collectivits territoriales et associations
bnficiant des fonds publics ainsi que les
partis politiques. Ensuite, ces contrles
portent sur lensemble des intervenants
dans la chaine de la dpense comme de la
recette publique savoir les ordonnateurs,
les comptables et les contrleurs. Enfin, ces
contrles sagissant dune mme entit
contrle couvrent la vrification et le
jugement des comptes, la discipline
budgtaire et financire et le contrle de la
gestion. En terme dapproche, ces contrles
tout en veillant sur le respect de la rgular-
it et de la conformit, privilgient
lapprciation des rsultats atteints en
terme defficacit, dconomie, defficience,
denvironnement et dthique.

En outre, la CC exerce dautres missions
telles que le contrle et le suivi des dclara-
tions obligatoires de patrimoine, laudit des
comptes des partis politiques et la vrifica-
tion de la rgularit

des dpenses des op-

rations lectorales. Par ailleurs, les missions
dvolues la CC, en vertu de la constitu-
tion, ne se limitent pas aux attributions de
contrle. Elles revtent galement un ca-
ractre de consultation et dassistance. A ce
titre, la Cour assiste le Parlement et rpond
aux questions et consultations lies aux
fonctions de lgislation, de contrle et
dvaluation dans le domaine des finances
publiques. De mme, elle apporte son assis-
tance aux instances judiciaires et au gou-
vernement dans les domaines qui relvent
de ses comptences en vertu de la loi.

CVMENA: Est-ce que vous pensez que la
nouvelle constitution a apport des nou-
veauts par rapport ce dispositif ?
DJ: Incontestablement, la Constitution de
2011 a confr une place de choix aux prin-
cipes et valeurs de la bonne gouvernance,
ainsi quaux institutions qui en ont la
charge. Ainsi, le titre XII a nonc les princi-
pes gnraux de la bonne gouvernance qui
doivent guider lensemble des acteurs pub-
lics. La Cour des Comptes en sa qualit
dinstitution suprieure de contrle des
finances publiques doit veiller leur re-
spect. Paralllement, un titre spcifique
(titre X) a t rserv la CC des comptes
et a apport les innovations suivantes :
largissement de ltendue des comp-
tences de la Cour des Comptes ;
Possibilit dapporter lassistance, en sus
des pouvoirs lgislatif et excutif, au
pouvoir judiciaire ;
La constitutionnalisation du contrle et
du suivi des dclarations du patrimoine,
de laudit des comptes des partis poli-
tiques et la vrification de la rgularit
des dpenses des oprations lectorales ;
Publication de lensemble de ses travaux
y compris les rapports particuliers et les
dcisions juridictionnelles ;
Prsentation Sa Majest le Roi dun
rapport annuel sur lensemble de ses ac-
tivits, quelle transmet galement au
Chef du Gouvernement et aux Prsidents
des deux Chambres du Parlement ;
Prsentation dun expos des activits de
la Cour par le Premier prsident devant
le Parlement, suivi dun dbat.
Ainsi, la Cour a vocation contrler et con-
seiller le Gouvernement, assister le Par-
lement et apporter son appui lautorit

CVMENA: Depuis que vous tes prsident
de la Cour des comptes, quels ont t vos
principaux dfis, les principales difficults
mais aussi vos russites ?
DJ: De mon point de vue, le plus grand dfi
que doit relever la Cour est den faire une
institution de contrle de rfrence,
garante de la bonne gouvernance, produi-
sant des travaux de qualit, haute valeur
ajoute en termes de pertinence de ses
interventions et de ses recommandations.
De mme la Cour doit rester constamment
ouverte sur son environnement interne et
externe, en harmonie avec les meilleures
pratiques internationales daudit public. En
effet, la nouvelle constitution a dsign la
Cour comme le garant de la protection des
principes et valeurs de la bonne gou-
vernance et de la transparence dans la ges-
tion des deniers publics. De ce fait, la Cour
est invite, plus que par le pass, en raison
des attentes des citoyens en matire de
moralisation de la vie publique, exercer
un rle accru, travers les diffrentes at-
tributions qui lui sont dvolues, dans la
mise en uvre de la bonne gouvernance
via le respect des principes de transpar-
ence, de responsabilit et de reddition des
comptes. De mme, la Cour, sur la base de
ses interventions thmatiques quelles a
inities et portant sur des sujets de nature
transversale, entend participer davantage
aux rformes des politiques publiques par
la prconisation de mesures permettant
den amliorer lefficacit. Compte tenu du
processus cumulatif dcoulant des travaux
de la Cour et de la nature ses recommanda-
tions, on peut considrer que la Cour des
Comptes a fait progresser la protection des
principes et valeurs de la bonne gou-
vernance et de la transparence dans la ges-
tion des deniers publics. A ce titre, il est
important de souligner que la Cour
consacre dans son plan de charge des mis-
sions ddies au suivi des recommanda-
tions ce qui a permis denregistrer des
progrs dans leur mise en uvre par les
entits concernes. Ceci tant, comme
toute autre institution de contrle, la CC
rencontre certaines difficults pour mener
bonne fin ses missions. A titre dexemple
on peut citer les difficults ayant trait :
au nombre trs important des entits
contrler, la diversit de leur nature,
ltendue et la complexit des domaines
de leur intervention do la difficult
dexercer un contrle exhaustif et rguli-
er ;
la qualit de linformation produite par
les entits soumises au contrle et leur
ractivit par rapport aux attentes et aux
demandes de la Cour ;
la maitrise des dlais de la ralisation
des missions daudit surtout dans les sit-
uations durgence dcoulant de la mise
en uvre des actions publiques ou de la
prservation des deniers publics;
la difficult de la Cour, comte tenu de
ltendue de ses missions, drainer les
meilleurs profils et comptences ainsi
que de mettre niveau lensemble de
nos ressources humaines.
La CC, consciente de ces difficults, a enga-
g un plan daction en vue dy apporter les
solutions appropries.

CVMENA: La nouvelle loi organique du
budget va introduire des nouveauts im-
portantes dans la gestion des finances
publiques au Maroc. Quel sera limpact de
ces changements sur les missions et le
travail de la Cour des comptes ?
DJ: Effectivement la rforme de la loi orga-
nique relative aux lois de finances va con-
duire lEtat faire voluer son cadre
budgtaire et comptable. Cette rforme
vise essentiellement renforcer la re-
sponsabilisation, la performance et la
transparence de laction publique et de
donner, au Parlement et aux citoyens, une
information claire, complte et sincre sur
lexcution budgtaire et sur le patrimoine
de l Etat. En faisant le choix de rformer sa
constitution financire , le Maroc
sinscrit dans un mouvement universel de
modernisation du cadre des finances
publiques initi par les pays anglo-saxons
(Etats-Unis, Australie, Nouvelle-Zlande,
Royaume Uni) et qui a t rejoint par
dautres pays, comme la France et dautres
pays europens. Cest galement un choix
qui sest impos avec la nouvelle constitu-
tion et les principes de gouvernance quelle
a dicts. Dans cette perspective, la Cour
des comptes est appele jouer un rle
primordial dans la certification des comptes
de lEtat ainsi que dans lapprciation et
lvaluation de la performance des organ-
ismes publics. En effet, le projet de la loi
organique relative la loi des finances
(LOLF) adopt par Parlement le
08/07/2014, confie la Cour des Comptes
la mission de certification des comptes de
lEtat. Cette certification est destine
donner lassurance que les comptes sont
conformes aux rgles comptables qui sont
consignes dans le recueil des normes
comptables de ltat et permet de donner
une assurance raisonnable sur la qualit des
comptes et, par voie de consquence, sur la
situation financire de ltat, sur son patri-
moine et sur les risques auxquels il est ex-


En outre la LOLF consacre la d-
marche de la gestion publique
axe sur les rsultats et la per-
formance, ce qui implique un
intrt accru lvaluation des
politiques publiques. En effet,
partir des nouveaux instruments
que sont les indicateurs de per-
formance, il sera possible
dvaluer limpact des autorisa-
tions budgtaires et de
lintervention des diffrents or-
ganismes publics. La dmarche
permettra galement de mettre
en exergue les nouveaux principes
constitutionnels en matire de la
bonne gouvernance savoir la
responsabilisation et la rdition
des comptes.

CVMENA: La Cour est-elle en
mesure dauditer les comptes des
projets financs par les bailleurs
? Souhaite-t-elle le faire da-
vantage ?
DJ: A ce sujet, je vous signale que
la Cour des comptes assure dj
la certification des comptes des
projets financs sous forme de
dons par certains organismes des
Nations Unies domicilis au Ma-
roc. Sur le principe, la Cour des
Comptes en tant quorganisme
public daudit externe et indpendant est
en mesure dauditer et dmettre une opin-
ion sur les comptes des projets financs
dans le cadre de la coopration bilatrale
ou multilatrale. Du reste, conformment
la lgislation financire marocaine qui exige
une fongibilit des ressources alloues au
budget de lEtat couvrant les programmes
et les projets retenus au budget annuel, la
Cour est amene auditer les projets et les
actions publiques quils soient couverts par
des ressources domestiques ou extrieures.
Ainsi, la Cour est en mesure dassurer
laudit des projets financs dans le cadre de
la coopration internationale. Toutefois, il
convient dexaminer dans le dtail, les mo-
dalits pratiques de ce genre de missions
permettant la Cour dassumer la fois ses
attributions lgales et la couverture de son
programme annuel de travail.

CVMENA: Comment la Cour est-elle or-
ganise pour contrler les collectivits
locales ?
DJ: En vertu de larticle 149 de la Constitu-
tion, le contrle des collectivits locales et
de leurs groupements relve des Cours
Rgionales des Comptes (CRC). Il faut rap-
peler que la charge qui incombe aux CRC
est trs tendue puisquelle porte sur 1737
collectivits territoriales rparties en r-
gions, prfectures, provinces, communes,
groupements des communes, rgies auto-
nomes et concessionnaires. Ainsi, neuf CRC
ont t cres. Cette cration sinscrit dans
le cadre du processus de renforcement de
la politique de dcentralisation et de d-
concentration mene par notre pays; elle
traduit aussi la volont des pouvoirs publics
dinstaurer un contrle dcentralis portant
sur la gestion des finances publiques lo-
cales. Sagissant des missions des CRC, elles
sont le prolongement de celles de la Cour
au niveau national. En effet le Code des
Juridictions Financires prvoit la transposi-
tion au niveau local des comptences de
Cour des Comptes en matire de Jugement
des comptes, de Gestion de fait, de disci-
pline budgtaire et financire, de contrle
de la gestion et de contrle et suivi des
dclarations du patrimoine. Les CRC sont
chargs en outre de missions de contrle
des actes budgtaires et sont appeles
mettre des avis sur les conditions
dexcution des budgets des collectivits
locales. Par ailleurs, le Royaume du Maroc a
initi un chantier important de rformes
avec le projet de rgionalisation avance.
Dans cette perspective, les CRC seront
amenes accompagner cette grande r-
forme qui aura forcment des implications
sur ltendue de leurs missions
tant sur le plan quantitatif que sur
le plan qualitatif.

CVMENA: Quelles sont vos priori-
ts en matire de renforcement
des capacits ?
DJ: Parmi les priorits de la CC en
matire de renforcement des ca-
pacits, il y a tout dabord le ren-
forcement du savoir-faire, de la
comptence et du professionnal-
isme de nos ressources humaines.
Etant donn que le personnel est
la premire ressource dune ISC, la
Cour considre la formation et le
perfectionnement de ses
ressources humaines comme un
objectif stratgique la fois pour
les missions courantes et les
nouvelles missions (certification
des comptes de lEtat, valuation
de la performance, des pro-
grammes et des projets publics).
Ainsi, la Cour doit sappuyer sur
une organisation qui rpond aux
exigences de lexpertise afin
quelle puisse livrer des rsultats
(rapports) probants, crdibles,
fruits dun travail mthodique,
collgial et conforme aux normes
professionnelles. Lutilisation in-
tensive des technologies de
linformation et de communication reste
aussi prioritaire en matire de renforce-
ment de nos capacits notamment avec le
lancement du projet de dmatrialisation
des processus dinformation. Comme vous
le savez linformation est une ressource
vitale devant tre organise afin dassurer
que son utilisation rponde aux besoins et
aux objectifs de la Cour qui devra commu-
niquer et mettre en commun linformation
au niveau interne afin de faciliter les op-
rations daudit. Ainsi, la mise en place dun
systme dinformation et de communica-
tion appropri permet de faciliter le travail
de la Cour par limplmentation des appli-
cations informatiques adquates.
Lutilisation des TIC est de nature renforc-
er et dvelopper les capacits des magis-
trats pour raliser les missions daudit avec
plus de professionnalisme et de perfor-
mance. La Cour projette galement la mise
en place de plateformes de partage de base
de donnes avec ses principaux partenaires
en vue dune optimisation des interventions
de la Cour en termes de dlais de ralisa-
tions des travaux et de la qualit des infor-
mations obtenues. A ce titre, les ressources
humaines des juridictions financires doi-
vent tre renforces sur les comptences
ncessaires pour en faire le meilleur usage.


CVMENA: Comment la Cour marocaine
sinsre-t-elle dans les dispositifs interna-
tionaux de gouvernance de la profession
dauditeur externe du secteur public
(normes, INTOSAI, organisations rgion-
ales et relations bilatrales) ?
DJ: La Cour entretient des contacts rguli-
ers avec les autres acteurs trangers inter-
venant dans le domaine de laudit public
externe. A cet effet, elle adapte son organi-
sation et ses mthodes de travail aux
normes daudit internationales et aux prin-
cipes quelle applique pour valuer le fonc-
tionnement des services soumis son con-
trle. Elle privilgie les meilleures pratiques
lchelle internationale. Dans ce cadre,
lactivit de la Cour en matire de coop-
ration internationale connait une grande
diversification soit avec les ISC des pays
amis soit avec les organisations interna-
tionales et rgionales auxquelles la Cour
adhre. Au niveau multilatral, la CC joue
un rle actif au niveau de lINTOSAI, elle a
prsid la commission stratgique de ren-
forcement des capacits des Institutions
Suprieures de Contrle de 2005 2013. Au
titre de la mme priode, la Cour tait
galement membre du conseil
dadministration de lInitiative de D-
veloppement de lINTOSAI (IDI) et membre
du comit excutif de lARABOSAI. Elle, fait
galement partie de lAFROSAI et de
lAISCCUF. Il est signaler que la Cour des
Comptes marocaine intervient avec la Cour
des Comptes franaise dans les missions de
contrle effectues dans le cadre du man-
dat de commissariat aux comptes com-
mandit par certaines organisations des
Nations Unies. Par ailleurs, dans le cadre de
la coopration bilatrale, la Cour reoit
rgulirement des dlgations dISC de
pays amis (pays arabes et dAfrique sub-
sahariens) et organise des stages de for-
mation et de visites de travail au profit des
magistrats et auditeurs de ces institutions.

CVMENA: Quel est l'impact de la prsenta-
tion le 21 mai 2014 du rapport annuel de la
cour des comptes au Parlement en respect
de l'article 148 de la Constitution ?
DJ: Rappelons tout dabord que cest la
premire fois dans les annales de la vie
politique marocaine que le Premier Prsi-
dent de la Cour des comptes expose devant
les deux Chambres runies du Parlement le
bilan des activits des juridictions fi-
nancires et ce, conformment aux dispo-
sitions de larticle 148 de la constitution du
Royaume. Cette prsentation initie une
phase constructive des relations entre la
Cour des comptes et le Parlement. De
mme cette initiative est de nature insuf-
fler une nouvelle dynamique la coordina-
tion entre ces deux institutions, dans le
cadre de lassistance constitutionnelle du
Parlement. En fait, l'importance du rapport
annuel de la Cour des comptes rside dans
le fait quil constitue une rfrence im-
portante dans le cadre de la collecte des
donnes et lidentification des dysfonction-
nements et par voie de consquence il
permet de renforcer la mission de contrle
de laction gouvernementale par la Parle-
ment. Ce dernier se retrouve, avec la
nouvelle constitution, largement renforc
dans ses prrogatives de lgislation, de
contrle de laction de lexcutif,
dvaluation des politiques publiques et
danimation du dbat public. A travers
lexpos que jai eu lhonneur de prsent-
er, laccent a t mis sur les faits saillants
des activits des juridictions financires en
2012. Jai voqu galement les principales
conclusions et recommandations contenues
dans deux rapports thmatiques labors
rcemment par la Cour, dont lun est relatif
la problmatique de la retraite et lautre
lvaluation du systme de compensation.
Le rapport concernant la thmatique de la
retraite a t labor par la Cour sur sa
propre initiative, alors que le rapport au
sujet du systme de compensation a t
labor suite la demande expresse de la
Chambre des Reprsentants. Consciente
des enjeux majeurs de ces deux chantiers
de rforme et du retard enregistrs par les
gouvernements successifs pour les concr-
tiser, la Cour a apport un clairage par-
ticulier en recommandant des pistes de
rformes faisables, opportunes et urgentes
si lon veut viter laggravation des risques
dcoulant du maintien du statu quo.
Lintrt de cette dmarche est de soumet-
tre les recommandations et conclusions
dcoulant des rapports de la Cour un
large dbat public entre lensemble des
acteurs politiques. Globalement les dputs
des diffrents groupes parlementaires ont
mis en exergue la porte de la prsentation
des rapports de la Cour des comptes devant
linstitution lgislative. Sur le rapport par-
ticulier portant sur lvaluation du systme
de la compensation, le Bureau de la Cham-
bre des reprsentants a publi un commu-
niqu de presse qui souligne que ce travail
"marque le dbut dune nouvelle tape
dans le renforcement de la mission de con-
trle de laction gouvernementale". De
mme cette prsentation a t relaye par
lensemble des organes des mdias et de la
presse et a suscit un large dbat public.

CVMENA: Quelle est la reprsentativit
fminine la cour des comptes?
DJ: Comme vous le savez Maroc a ralis
des avances notables, en matire de pro-
motion des conditions de la femme. Ces
avances, ont t consacres par la
nouvelle constitution de 2011, qui a rig la
parit entre les deux sexes en principe con-
stitutionnel, tout en prvoyant
linstitutionnalisation de la protection de la
parit par la cration dune Haute Autorit
de la parit. Le Maroc sest engag dans le
processus dinstitutionnalisation de lgalit
entre les sexes dans le secteur de
ladministration publique depuis longtemps
et il est invit soutenir ce processus eu
gard aux nouvelle dispositions constitu-
tionnelles. Sagissant des Juridictions Fi-
nancires, l'effectif global des Juridictions
Financires est de 548 personnes. Le taux
de reprsentativit fminine (magistrats et
fonctionnaires) est globalement autour de
30 % dont les magistrats femmes ne
reprsente quun ratio de 19 %. Il convien-
dra lavenir de lamliorer.



Djibouti 66


Ilyas Moussa DAWALEH
Ministre de l'Economie et des Finances,
charge de l'industrie et de la planifica-
tion, Djibouti

Entrevue conduit par Rock Jabbour, Finan-
cial Management Analyst, Governance
Global Practcie, MENA, The World Bank.

CVMENA: Quelles sont les reformes princi-
pales rcentes qui ont t institue a Dji-
ID: Ces dernires notre pays a mis en uvre
une srie de rformes plusieurs niveaux.
Au plan institutionnel, les reformes majeurs
sont entre autres le renforcement du cadre
macroconomique avec la reforme fiscale
qui a connu lintroduction de la TVA.
Labaissement du seuil dassujettissement
la TVA pour les entreprises un chiffre
daffaires de 50 millions de FDJ contre 80
millions de FDJ initialement a cr
davantage de trsorerie disponible pour le
gouvernement. Par ailleurs, la politique de
limitation des dpenses courantes initie a
commenc donner des rsultats probants.
Cela a permis daccroitre la part des inves-
tissements publics financs partir des
recettes intrieures. Le secteur financier
nest pas en reste avec ladoption de
plusieurs lois dont celle contre le
Blanchiment, la Confiscation et la Coop-
ration Internationale en matire de
produits du crime. La loi relative aux statuts
de la Banque Centrale de Djibouti; la loi
relative l'ouverture, l'activit et au con-
trle des tablissements de crdit ; la loi
portant rglementation des activits de
Micro finance sur le territoire national. la
bancarisation des salaris de
ladministration qui a permis une relance de
la consommation et de linvestissement des
mnages. Il y a galement eu lactualisation
de la Loi sur la rglementation du march
des assurances et ladoption des lois sur la
finance islamique (banque et assurance).
Dans le domaine de la rforme de
ladministration, deux changements
majeurs ont t introduits dont la premiere
sur a cration d'une base de donnes
unique et intgre pour la gestion des
agents de l'Etat. Ce fichier unique va rgler
tout le problme de la disparit de l'infor-
mation et comportera toutes les donnes
relatives chaque agent de l'Etat. Mais
aussi, lintroduction du systme
dassurance maladie universelle, vote en
2013, va permettre toute la population de
bnficier dune couverture maladie. Dans
le cadre de la politique damlioration du
climat des affaires et du cadre des inves-
tissements, la mise en place dun haut con-
seil national du dialogue public-priv en
2014 vise faciliter la concertation et
accueillir les contributions de chacun avant
toute prise de dcision visant introduire des
rformes. Au niveau de lenvironnement
des affaires, dimportants efforts ont t
faits et cela a permis damliorer sub-
stantiellement la position de Djibouti dans
le classement Doing Business de la Banque
mondiale. Notre pays a gagn 12 places
dans le classement gnral et 61 places
dans le critre de la cration d'entreprise
dans l'dition 2014 du Doing Business pub-
li par la mme institution. Toutefois, des
efforts restent encore faire pour lever
quelques contraintes lies l'enregis-
trement d'un titre de proprit, l'applica-
tion des contrats, l'obtention d'un crdit, la
cration d'entreprise et la protection des
investisseurs. Ces catgories ont enregistr
de faibles performances pour lesquelles le
meilleur classement n'excde pas le 148e
rang. Dautres reformes sectoriels ont
galement eu lieu ces dernires annes.

CVMENA: De quoi il s'agit la vision 2035
de Djibouti?
ID: La Vision Djibouti 2035 est une pro-
grammation de la politique conomique et
sociale de Djibouti sur un horizon de 25 ans.
Cette nouvelle orientation qui concerne
tous les secteurs du dveloppement
dpasse lorganisation de lconomie base
sur les courtes vues. Elle repose sur une
dmarche de planification prospective de
long terme et sur le ciblage des secteurs
cls porteurs de croissance, pour
dentrainer le pays dans une spirale ver-
tueuse de dveloppement et de faire de
Djibouti un pays mergent lhorizon 2035.
Djibouti 2035 se veut une rponse la con-
struction des bases pour un dveloppement
harmonieux, pilot et matriser. Cest une
dmarche de planification volontariste qui
vise mieux anticiper les mutations qui
sont de plus en plus rapides et rsoudre
les problmes structurels de dveloppe-
ment autour des objectifs de long terme. Il
dessine le futur que voulons savoir : Faire
de Djibouti, le Phare de la Mer Rouge et
un Hub commercial et logistique de
lAfrique . En effet, notre pays a besoin
davoir les ressorts dune planification du
dveloppement mieux matris, moins
soumis aux chocs exognes internes et
externes. Une croissance plus acclre et
durable, accompagne par une administra-
tion publique aux capacits renforces et
productives, est ncessaire pour rsoudre
les problmes sociaux et engendrer une
transformation structurelle de lconomie,
pour la rendre plus diversifie et plus
comptitive, avec, encore une fois, un rle
accru du secteur priv. La concrtisation
des objectifs de la vision se fera au travers
de documents de stratgies et de plans
dactions oprationnels, cadres concep-
tuels de politiques nationales, sectorielles
et rgionales de dveloppement. La Stra-
tgie de Croissance Acclre et de Promo-
tion de lEmploi (SCAPE) sera le socle de
mise en uvre.

CVMENA: Comment ces reformes
s'alignent Avec la vision 2035 de Djibouti?
ID: La Vision entend consolider les acquis
obtenus avec la mise en uvre de la Loi
dorientation conomique 2001-2010, le
DRSP 2004-2006 et lInitiative Nationale
pour le Dveloppement Social (INDS) 2008-
2012. Il sagit vritablement de passer
lchelle dans la conduite des politiques de
dveloppement. Les rformes vont dans le
sens des objectifs de la Vision 2035 car la
Vision prconise un dveloppement har-
monis et inclusive terme qui passe par la
modernisation de ladministration Djibou-
tienne laquelle rpond aux exigences
nouvelles de lconomie et latteinte des
objectifs de la Vision. Mais galement
linstauration de la confiance entre les
secteurs public-priv dans la gestion du
pays et lamlioration du climat des af-
faires. Djibouti a russi tirer parti de sa
stabilit politique et de sa position gostra-
tgique dans la Corne de lAfrique qui se
situe sur les principales routes de naviga-
tion maritime.

En consquence, ces dernires annes, le
pays a enregistr une croissance de son
activit conomique et a amlior ses per-
spectives, la faveur dimportants flux
dinvestissements directs trangers dans le
dveloppement des infrastructures portu-
aires, routires et aroportuaires. Cest
lambition affich par Djibouti 2035 de
transformer structurellement notre pays et
son conomie pour en faire un ple
conomique et commercial majeur en Af-
rique. Un pays qui connait un dveloppe-
ment conomique et social durable, o
lconomie est diversifie, la croissance est
acclre et se situe un niveau lev sur
le long terme, avec une pauvret rduite et
des indicateurs sociaux amliors. Djibouti
offre aussi une plateforme pour la scurisa-
tion du commerce mondiale (transports
martines de personnes et de marchandis-

CVMENA: Quels sont les dfis
conomiques principaux que Djibouti faire
face actuellement?
ID: Le contexte conomique aujourdhui
montre que notre pays fait dimportes
avances sur le plan conomique avec un
niveau de croissance de 5% en moyenne
annuelle sur les cinq dernires annes. Mais
en mme, lorsque nous regardons les indi-
cateurs de pauvret et le niveau de
chmage qui sont des niveaux levs
(42% et 48,5% respectivement), cela traduit
une certaine fragilit du fait de la forte
concentration des sources de croissance
autour des services, et surtout du port.
Nous sommes convaincus que la mise en
place effective de cette stratgie de diversi-
fication conomique, soutenue par une
amlioration, en parallle, de l'envi-
ronnement des affaires, constituera un
tournant dcisif pour l'conomie djibou-
tienne en favorisant le dveloppement de
national et limpulsion dun secteur priv
national fort, la diversification des sources
de croissance du pays et la rduction du
chmage. Le modle de lUAE, tout comme
celui de bien dautres pays (Maurice, Singa-
pour, etc.) constitue des rfrences dont
nous inspirerons dans la conduite de cette
politique nationale volontariste de d-
veloppement pour un vritable change-
ment de cap. Notre premier dfi est celui
de la diversification conomique, surtout de
la transformation de notre position gostra-
tgique en avance comptitif. Ltude sur le
Nouveau Modle de croissance, nous a
permis de connatre les leviers sur lesquels
nous pouvons nous appuyer pour engager
la transformation. Par ailleurs, les princi-
paux dfis sont les suivantes :
Le renforcement de la gouvernance et
des capacits de ladministration
La construction dune conomie pro-
ductive, comptitive et diversifie
Le renforcement actif de Djibouti dans
lintgration rgionale et la coop-
ration internationale
La disponibilit de lnergie et de leau
La rduction des cots de facteurs :
tlcommunications, eau et nergie.
Le cot de lnergie qui reprsente le
poste budgtaire le plus important des
entreprises djiboutiennes impacte n-
gativement sur leur sant financire et
leur comptitivit

CVMENA: Quels sont les besoins immdi-
ats du pays?
ID: Sur le plan social, les besoins immdiats
se traduisent par lamlioration de la dis-
ponibilit de leau et la lutte contre la soif
en milieu rural, la lutte contre la pauvret
et la scurit alimentaire de la population
pauvre et vulnrable. Au plan conomique,
il faut mettre en place des infrastructures
conomiques de qualit qui prpare la
transformation de notre pays, former des
ressources humaines qualifies et produc-
tives. Face un contexte mondial qui se ca-
ractrise de plus en plus par une chert des
financements pour notre pays, nous devons
tre efficaces dans lexcution de nos d-
penses dinvestissement. L'amlioration de
la comptitivit de l'conomie locale reste
un objectif majeur de notre programme
conomique dans l'optique de favoriser le
dveloppement du secteur priv et les in-
vestissements trangers.

CVMENA: Quel est Le rle que vous de-
mandez aux bailleurs de fonds d'exercer
avec le gouvernement Djiboutien afin de
contribuer la vision 2035 et ainsi aux
reformes envisages?
ID: Cette question pose toute la probl-
matique de leffectivit de la mise en uvre
des engagements dAccra et de Paris sur
lefficacit de laide. Cest un engagement
des bailleurs de fonds tout accompagner
le gouvernement, bien entendu dans un
esprit dalignement sur les priorits nation-
ales de dveloppement. Pour avancer sur
ce point, il a t adopt un cadre institu-
tionnel de haut niveau sur lamlioration du
dialogue avec justement avec les bailleurs.
Lidale pour nous cest de cheminer pro-
gressivement vers la mise en place de
lappui budgtaire ou programme. Notre
pays est dans de bonnes dispositions pour
cela, et nous attendons le mme tat
desprit de la part de nos partenaires au

Djibouti 68


Homa-Zahra FOTOUHI
Resident Representative to Djibouti,
The World Bank

Interview conducted by Rima Koteiche, Sr.
Financial Management Specialist, Govern-
ance Global Practcie, MENA, The World

CVMENA: In your role as the World Bank
representative to Djibouti, how did you
develop the MENA regions strategy to
support the country?
HF: Djibouti lies at an important three-way
junction between the West, the East and
Africa. It is a member of the Arab League
and the African Union. It has as much cul-
tural commonality with its Arab neighbors
as with its African neighbors. Like most
MENA countries, Djibouti has a large youth
population. Youth everywhere have the
same needs: a need for education, health,
and jobs. The MENA regional framework
aims to achieve reduced poverty and
shared prosperity through governance,
inclusion, jobs, and sustainable growth. Our
efforts in Djibouti are very much focused on
these objectives. The World Bank Group
Country Partnership Strategy, approved by
the Board of Executive Directors in March
2014, rests on two pillars: reducing vulner-
ability and strengthening the business envi-

CVMENA: What do you think are the key
opportunities and challenges in Djibouti?
HF: The opportunities for Djibouti include
its young population and geostrategic loca-
tion. Forty percent of the population is
under the age of 15, and could contribute
to the countrys development if provided
with the right skills and job opportunities.
Djiboutis geostrategic location can be ex-
ploited through greater regional integration
and development of key industries, as well
as the countrys infrastructure. The World
Bank conducted a study in 2012 that identi-
fied 5 under-developed sectors that could
contribute to Djiboutis economic develop-
ment, including: transport and logistics,
telecommunications, tourism, fisheries, and
light industry. We are currently working
with the government to organize a high-
level Development Exchange Roundtable at
the end of June. The focus would be on
creating a peer learning opportunity by
bringing in other developing countries
Cape Verde, Dubai, UAE, Mauritius, Rwanda
and Singaporethat have similar character-
istics to Djibouti and that were able to suc-
cessfully develop these same sectors. This
south-south exchange will help the Djibouti
public and private sectors alike learn from
the success of others. At the same time,
the challenges facing Djibouti are many,
including: a lack of natural resources, vul-
nerability to drought and difficult climatic
conditions, high poverty and unemploy-
ment rates, and low implementation capac-
ity. The World Bank is supporting the gov-
ernment in developing a natural disaster
preparedness and response mechanism.
The main employer in Djibouti has been the
public sector, and it has continued to grow
continuously. However, it is now time for
the private sector to be strengthened and
to become the main engine of economic
growth. As identified in the 2014 World
Bank Doing Business Report, the key chal-
lenge remains in the reforms needed to
create a favorable business environment. In
this context, we have prepared the first
joint International Development Associa-
tion (IDA)-International Finance Corpora-
tion (IFC) project for Djibouti, namely, the
governance for private sector development
project. It supports governance and invest-
ment climate reforms to attract foreign
direct investment and create job opportuni-
ties for the young population. This should
also have a direct effect on reducing the
poverty levels.

CVMENA: How do you see the role of the
World Bank as it has evolved over the last
few years in Djibouti?
HF: The role of the World Bank has changed
significantly in the last couple of years. The
decision to open a World Bank office in
Djibouti two years ago has brought many
advantages. First, it has brought us closer to
our client including the government, the
private sector, and civil society. This allows
for a deeper and more systematic dialogue,
and helps us to respond more quickly to
changing circumstances on the ground. It
has also helped us to strengthen our col-
laboration with other development part-
ners active in Djibouti, thereby contributing
to better donor coordination in many sec-
tors, such as health, education, social pro-
tection, energy, urban poverty reduction,
and agriculture. Finally, it has helped us to
improve the quality of the World Banks
portfolio, particularly since we introduced a
bi-annual fiduciary workshop in collabora-
tion with our financial management, pro-
curement and disbursement colleagues. A
more rapid implementation of our projects
translates into quicker and greater results
for the poor and vulnerable population of


CVMENA: How is the World Bank Country
Partnership Strategy (CPS) for 2014-17
contributing to the Djibouti Vision 2035
HF: The CPS is anchored in the govern-
ments Djibouti Vision 2035, a long-term
development plan that focuses on econom-
ic integration, governance, and human de-
velopment. The overarching objective of
the CPS is to support the governments
Djibouti Vision 2035, working to reduce
extreme poverty and build the foundations
for shared growth by harnessing the coun-
trys human and economic potential. The
CPS rests on two pillars: (i) reducing vulner-
ability; and (ii) strengthening the business
environment. The CPS will support Djibouti
in taking steps to address vulnerabilities
such as: high poverty and unemployment;
deficits in human development indicators
and social service delivery; limited access to
basic infrastructure; and high natural disas-
ter risk. The CPS will also support Djibouti
in strengthening the business-enabling
environment through better-quality and
more affordable energy and telecommuni-
cations services, as well as improvements
to the investment climate and governance
framework. In addition, the CPS focuses on
institutional strengthening and gender as
cross-cutting themes. Throughout the CPS,
interventions will encompass efforts to
strengthen institutions, build capacity, and
improve sector regulations across both
strategic pillars. We are also responding to
gender needs directly or indirectly in vari-
ous sectors and through most activities.

CVMENA: Which World Bank activity or
main effort do you strongly believe has or
will have a great impact on Djiboutis de-
HF: We have many activities with a poten-
tial transformational impact including: the
exploration of the countrys geothermal
resources; the opening up of the telecom-
munications sector; and the strengthening
of the business environment. I believe our
work in strengthening safety nets has had a
great positive impact. For example, the
ongoing social safety nets project has pro-
vided 225,000 person days of employment,
and supported positive behavior change in
pregnant and lactating mothers. The pro-
ject led to the formulation of the first social
safety net strategy in the country, and is
now developing into a national program
focusing on the prevention of malnutrition.
I cannot think of a more critical activity than
ensuring that the babies and children of
today grow into the healthy, productive
young people of tomorrow.

CVMENA: In your role as representative for
the country of Djibouti, how would you
develop the MENA overall regional strate-
gy in an "African" country?
HF: Djibouti sits at an important three-way
junction between the West, the East and
Africa. It is a member of the Arab League
and of the African Union. It has as much
cultural commonality with its Arab neigh-
bors as with its African neighbors. Like most
MENA countries, Djibouti has a large young
population. Youth everywhere have the
same needs: a need for education, health,
and jobs. The MENA regional framework
aims for reduced poverty and shared pros-
perity through governance, inclusion, jobs,
and sustainable growth. Our efforts in Dji-
bouti are very much focused on these ob-
jectives. The World Bank Group Country
Partnership Strategy, approved by the
Board in March 2014, rests on two pillars:
reducing vulnerability and strengthening
the business environment.

In Their Own Words

Countries continue to default on their debt, yet arent pushed
by governments, credit rating agencies, or financial commenta-
tors to significantly improve public sector financial reporting.
These same countries require private sector companies in their
jurisdictions to publish audited, accrual-based, financial state-
ments when raising funds in capital markets. What justifies the
double standard whereby a government compels private com-
panies to be transparent and accountable, when it avoids using
accrual accounting itselfdespite having bonds traded on the
capital markets?

Fayezul Choudhury, Chief Executive Officer of IFAC.
August 12, 2014

Lebanon 70


Executive Board Member,
Capital Markets Authority, Lebanon

Interview conducted by Rima Koteiche, Sr.
Financial Management Specialist, Govern-
ance Global Practice, MENA, The World

CVMENA: Could you please provide us
with a brief summary of the Capital Mar-
kets Authority (CMA) mandate, a newly
established regulatory body to oversee
Lebanon's capital markets?
FF: The CMA is an independent, autono-
mous regulatory body established by the
Capital Markets Law No. 161, on 17 August
2011. The CMA has two main objectives
that underline its strategic mission and
vision: (i) promoting and developing the
Lebanese Capital Markets; and (ii) protect-
ing investors from fraudulent activities
through issuing regulations that are in line
with international best financial market
practices, and proper control and audit of
all institutions that deal with financial in-
struments. The governing structure of the
CMA, as established by the law, permits the
CMA to issue its own regulations and su-
pervise the financial markets in a way to
reduce systemic risk. More importantly, the
CMA is one of the few regulators in the
world that have an autonomous Sanctions
Committee and Capital Markets Court. The
sanction committee looks into financial
market violations and has the power to
impose administrative sanctions and penal-
ties which give market participants more
confidence in the market, while at the same
time allowing those affected to appeal its
decision before the Capital Markets Court.
These features allow the CMA to successful-
ly fulfill its mandate.

CVMENA: The investment community in
Lebanon has been waiting for quite a long
time for the creation of the CMA. What
were the main difficulties that led to this
FF: As you well know, Lebanon has been in
political turmoil since early 2005, following
the assassination of the late Prime Minister
Hariri. This tenuous political situation and
at times difficult security environment have
had their impact on the functioning of all
government institutions as well as on par-
liament. So, the order of priorities of par-
liament and its legislative agenda kept shift-
ing, reflecting political and security factors.
In such an environment, financial markets
regulation and even other rather important
economic issues took a back seat. With the
phasing out of the political deadlock, an
opportunity presented itself and the law
was adopted in August 2011, almost ten
years after the onset of various rounds of
discussions involving a number of stake-

CVMENA: What are the main challenges
and opportunities facing the CMA as a
newly established regulatory body?
FF: The long term view at the CMA is to
once again set Lebanon as a major player in
the regional financial industry. The Leba-
nese capital markets are considered small
scale and less active compared to the dom-
inant banking sector. It is only normal that
in such an environment, market dynamics
shifted the capital market functions toward
the more regulated banking sector with its
already existing infrastructure, legislation
and regulation. One of the biggest chal-
lenges that the CMA faces is how to broad-
en and deepen the capital markets and
instill faith in the securities industry in Leb-
anon. I can see several areas of challenge in
developing the capital markets. First, there
is a need to change an entrenched culture
which is focused on short-term financing
secured by banks. This will take some time,
but with a proper and sequenced action
plan this could be done. I should say in this
regard that developing the securities mar-
ket will in no way adversely affect the work
of commercial banks. In fact, I would argue
that well- developed capital markets would
complement and support the activities of
banks and vice versa. We have already
started talking to banks and the financial
community at large, and I could say without
hesitation that we are on the same page in
looking forward to deepening our coopera-
tion in the future. Second, there is a need
to educate investors on the advantages of
investing in the long-term securities mar-
ket, and we have already started working
on developing an investor education pro-
gram that would promote financial literacy
among all citizens. Third, the CMA is also
increasingly working on raising the level of
expertise and knowledge of the importance
of capital markets to the business commu-
nity in Lebanon. Businesses need to under-
stand the power of long-term capital fi-
nancing to enhance long-term growth and
improve performance and profitability.
Fourth, we would need to work on capital
markets infrastructure, including mainly the
Beirut Stock Exchange (BSE). Among its
many articles, Law 161/2011 clearly calls for
privatizing the BSE. As the CMA, we consid-
er that turning the BSE into a privately held
S.A.SL company would make it more effi-
cient in attracting local and regional com-
panies to list on the BSE. We will be work-
ing closely with the Ministry of Finance and
other government entities to move forward
with this privatization. Fifth, we would need
to work with the government on different
legislation that would create the right in-
centives for both businesses and investors,
that is, encouraging citizens to invest in
capital markets and businesses to go public
and enlist on the BSE. Also, in this domain,
we will engage with all concerned govern-
ment entities on creating a business friend-
ly environment that would encourage re-
gional and international businesses to come
to Lebanon. This would be a medium- to
long-term objective.

CVMENA: Lebanon ranked 111th of 189
economies for its challenges in establishing
and doing business according to the World
Banks "Ease of Doing Business Index" for
2014. As a regulatory entity, how can the
CMA contribute to overcoming the related
FF: Improving the index of doing business in
Lebanon is a multifaceted project that re-
quires hard work from different govern-
ment entities. Of the various indicators that
affect a countrys standing in the Ease of
Doing Business Index, the CMA has been
active on the ones that are within its man-
date from the standpoint of a market regu-
lator, that is, protecting investors and en-
forcing contracts.

In this regard, the CMA has been proactive
and shall prove to be of help to the busi-
ness environment in Lebanon. Protecting
investors in financial instruments is an inte-
gral part of the CMAs daily activity. The
CMA is continuously revising the regulatory
framework and suggesting new regulations
which will further protect the market, de-
velop it and render it more transparent to
the investor. Furthermore, the CMA has
been granted by law the ability to enforce
regulations and correct misconduct in the
market through an independent Sanction
Committee within the CMA, and an auton-
omous Capital Markets Court. In its capaci-
ty to consult the government on issues
pertaining to the development of capital
markets and investment in the financial
sector in Lebanon, the CMA is also consult-
ing with several ministries to put into place
the proper legislation that would have a
positive impact on capital market activities
and the overall business environment.

CVMENA: What are the recent key institu-
tional developmental milestones that the
CMA has undertaken towards effectively
implementing its mandate?
FF: I have already covered some of the ac-
tivities that the CMA has been engaged in
so far, and which can all be considered as
milestones in the development of the capi-
tal markets. If I were to single out some
important activities, I would point out the
several decisions and audits that the CMA
has performed in a relatively short time. So
far, the CMA has made more than 16 deci-
sions that cover different aspects of its
work. I also would like to mention that we
are working closely with the Central Bank
(BDL) and the Banking Control Commission
on delineating responsibilities in the wake
of the establishment of the CMA, as some
activities have naturally shifted to the CMA.
Our work with the World Bank in the con-
text of the Financial Sector Reform and
Strengthening Initiative (FIRST) initiatives
focused on developing new regulations and
revising existing ones to ensure that the
CMAs regulations are up to international
standards and in conformity with the Inter-
national Organization of Securities Commis-
sions (IOSCO) Principles and best business
practices. This project is expected to be
completed by mid-2015. Its worth noting
that in Q4 of this year, the CMA will engage
relevant stakeholders in a consultation
process that will ensure the effective im-
plementation of the new regulations intro-
duced as part of the World Bank-CMA co-
operation. These are expected to introduce
more transparency in the regulatory

CVMENA: The enactment law 161/ 2011
has defined the independence of CMA and
the scope of responsibility of its regulatory
function Do you think that the law is com-
prehensive in that perspective? Are there
any gaps that remain to be tackled?
FF: The Capital Markets Law provides a
good framework and clear definition of
responsibilities of the CMA and protects it
from any interference, political or other-
wise. The law created an autonomous regu-
latory authority with a wide mandate which
ranges from supervision of market players,
licensing and registration of individuals and
institutions, which would serve the twin
objectives of protecting investors and de-
veloping the capital markets. Moreover,
and as I mentioned earlier, one of the most
important aspects of the CMA is the power
to sanction non-compliant individuals and
institutions through an independent Sanc-
tion Committee and a Capital Markets
Court. At the present time, we believe that
the law provides the necessary tools to
carry out our mandate successfully. How-
ever, as we proceed, we could revisit the
law and introduce any amendments, as

CVMENA: Several well advanced and de-
veloped CMAs exist in the region that can
be an inspirational learning model for CMA
Lebanon. Has any kind of twining ar-
rangement been envisaged for this pur-
FF: Since its inception, the Lebanese CMA
has been in contact with several regulators
in the region and particularly with the Saudi
CMA, which is considered well advanced by
international comparison. Several visits
took place and CMA staff met with the Sau-
di CMA officials to discuss areas of coopera-
tion and how to benefit from the advances
already made by the Saudi CMA. Also, some
CMA staff attended training sessions in
Saudi Arabia. While cooperation is very
close with the Saudi CMA, we have not
signed any official twining arrangement,
although this already informally exists. I
take this opportunity to express our grati-
tude and sincere appreciation to our Saudi
counterparts for their substantial help and
their unwavering willingness to provide
assistance in the future. We believe that
such unconditional and highly facilitated
support was vital to the successful launch of
the Lebanese CMA. As a CMA, we are part
of the Union of Arab Securities Authority
(UASA) and we exchange regular infor-
mation and participate in the activities they
organize. We also participated in some
activities organized by the COMCEC (Stand-
ing Committee for Economic and Commer-
cial Cooperation of the Organization of
Islamic Cooperation), and have been in
contact with other regional regulators, in-
cluding the Securities and Commodities
Authority of the UAE. Beyond the region,
the CMA has signed a Memorandum of
Understanding with the French regulator
AMF in May 2014 that focuses on promot-
ing bilateral relationships on issues related
to investor protection, insider trading and
technical assistance.

CVMENA: Finally, how can cooperation
between the World Bank and the CMA of
Lebanon be strengthened in the future?
FF: I believe that the initial cooperation
under the FIRST Initiative proved to be
very successful, and we look forward to
further cooperation between the CMA and
the Bank. In our view, there are many areas
in which we could cooperate as we move
forward. Perhaps the World Bank could be
of assistance in areas related to the devel-
opment of the capital markets more gener-
ally, or in areas such as capacity building to
ensure that the regulatory program is
commensurate with expanded markets.
Also, the Bank could help in developing our
human capital through targeted training
programs to keep the CMA staff abreast of
the latest developments in the capital mar-
kets area, including sponsoring some ex-
change programs with other regulators and
organizing some field visits to experience
firsthand how other regulators operate.

West Bank & Gaza 72

Study on the Adequacy of the Accounting Profession in
Meeting the Needs of the Palestinian Micro, Small and
Medium Enterprise (MSME) Market

Financial Management Specialist,
MENA Financial Management Unit,
The World Bank

The accounting profession is well respected
in the West Bank and Gaza. Students
choose to major in accounting given the
general perception that there is a job mar-
ket for them after graduation. There are
approximately 2,000 accounting graduates
per year (According to the Ministry of
Higher Education, 2,122 students graduat-
ed in accounting in the 2013-2014 academ-
ic year). According to the latest labor force
survey conducted by the Palestinian Central
Bureau of Statistics (PCBS) in 2012, there
are 1,200 auditors and 11,300 accountants
in the country. Accountants work in a varie-
ty of industries as general accountants and
bookkeepers, and others receive higher
certification and pursue careers as auditors.
After doing preliminary research on the
accounting profession, certain knowledge
gaps became evident. While the number of
auditors and accountants has been quanti-
fied, the type of accountants (education
level, skills, and so on) remains unknown.
Further, it is not known what the MSME
market requires, and whether there are
potential areas that are not being met by
the accountants currently practicing in the

The World Banks Engagement

MNAFM hired a consultancy firm, Solutions
for Development Consulting Company, to
conduct a study during the second quarter
of 2014. The goal was to analyze the main
financial management needs of MSMEs
against the adequacy, quantity and quality
of accountancy professionals available to
meet those needs. Special emphasis was
placed on the adequacy of Small and Medi-
um Practices (SMPs) and accountancy pro-
fessionals and technicians (for example,
bookkeepers) to meet the needs of the
MSME sector. The purpose was to identify
crucial financial management gaps in
MSMEs and in the accountancy profes-
sions education, skills and offerings. In this
way, future World Bank programs and ac-
tivities can then direct and target these

MSME Financial Management Needs

A large-scale survey was conducted among
MSMEs to define their financial manage-
ment needs. It was determined that a sam-
ple size of 600 MSMEs was needed to sta-
tistically represent the 123,558 MSMEs in
the country. The classification of MSMEs
varies widely in the country. The definition
used by the survey was from the Ministry
of National Economy: two or more of the
following criteria must be applicable. These
MSMEs were disaggregated into geograph-
ical regions as well as type of locality (for
example, city, village or refugee camp), in
order to get the broadest range of respons-

Figure 1: Gap in Accounting Profession

Table 1: MSMEs Classification Criteria

Classification/Criterion Micro Small Medium Large
Number of employees 1-4 5-9 10-19 >19
Annual turnover (US$) Up to 20,000 20,001-200,000 200,001- 500,000 >500,000
Registered capital (US$) Up to 5,000 5,001-50,000 50,001-100,000 >100,000
Source: Palestinian Ministry of National Economy.

Table 2: Sample Distribution

Number of
Operating Es-
% Sample
City Village Refugee Camp
West Bank 82,111 66 399 320 49 30
Gaza Strip 41,447 34 201 161 25 15
Total 123,558 100 600 481 73 46






















The surveys were completed in the field
conducting one-on-one interviews. MSMEs
were asked a variety of questions regarding
whether they utilize accounting services.
Specific questions were also posed regard-
ing bookkeeping, tax, audit and advisory
services. There was a small group of MSMEs
that did not use any accounting services; in
this case, they were asked questions regard-
ing their reasons, their perception of ac-
counting and other factors that may have
led them to not utilize accounting services.
Questions were also posed regarding poten-
tial areas of need.

Bookkeeping: Regarding bookkeeping ser-
vices, the vast majority of MSMEs do have
some accounting records (94 percent). Of
the 6 percent that do not perform any
bookkeeping, 44 percent are not registered
enterprises. When asked who performed
the bookkeeping of the 94 percent of enter-
prises that do have some form of bookkeep-
ing, the replies can be categorized as in Fig-
ure 2. As Figure 2 illustrates, there is a large
untapped potential for SMPs to provide
bookkeeping services for MSMEs. Almost 70
percent of MSME bookkeeping is personally
prepared by the owner. Accounting stand-
ards are another area of weakness in the
preparation of financial reports. Most
MSMEs do not utilize any standards in the
preparation of financial reports (91 per-
cent). Most reports are used for internal
purposes only (65 percent), whereas only 19
percent use bookkeeping to access finance.

Taxation Services: Tax report preparation is
different from bookkeeping in that most tax
reports are prepared either by an account-
ant within the MSME or by an external of-
fice (63 percent), whereas only 33 percent
are prepared personally by the owner. Al-
most 44 percent of MSMEs stated that they
do get tax inspector visits. However, 87
percent stated that the tax inspectors do
not normally change the amount due.

Audit Services: Only 7 percent of MSMEs
have auditing services. Having auditors is
highly correlated with the size of the enter-
prise, with 47 percent of medium-sized en-
terprises having auditors, 16 percent of
small-sized enterprises and 4 percent of
micro-sized enterprises. Of those that had
auditing services, when asked why they
have auditing services, 86 percent of them
noted it was for internal purposes and that
is was not legally mandated.

Advisory Services: The study found that
advisory services are only requested by 4
percent of MSMEs. Again, it was correlated
with the size of the enterprise, with larger
firms more likely to request advisory ser-
vices. The most requested services are mar-
ket or feasibility studies, which donors or
the banks have required from enterprises
for the purpose of accessing finance. A ma-
jority of MSMEs stated that they did not see
value in advisory services.

Quantity and Quality of Accountants in the Current Market

Quantity of Professional Accountants: As noted, the number of
accounting graduates has increased in recent years as accounting is
seen as a well-respected profession with high employment poten-
tial. In the last 10 years, the number of accounting graduates has
increased about 62 percent in a year-on-year comparison. Also no-
tably, accounting diplomas (two-year degrees), have increased sig-
nificantly in the last 10 years. While the numbers remain small, the
increase from 2003 to 2013 is about 60 percent year-on-year.

Quality of Professional Accountants: A smaller survey was conduct-
ed among professional accountants and auditors, and found that
over 95 percent of respondents stated that they have a higher de-
gree (Bachelors, Masters or PhD). Among the auditors surveyed, 40
percent stated that they have additional certifications. The average
number of continuous professional education among those sur-
veyed was 46 per cent. When asked about the main issues of con-
cern to the accounting profession, those surveyed noted a lack of
practical training, a lack of standards, a lack of regulation and con-
trol, low income as a profession, and no awareness by MSMEs re-
garding the importance of financial information. Most of those sur-
veyed indicated that there is an oversupply of accountants in the
West Bank and Gaza. However, they also noted that there is an
undersupply of specialized accountants, such as managerial ac-
countants, fraud auditors, cost accountants, Islamic finance ac-
countants, and others.

Conclusions and Recommendations: There is sufficient quantity of
accounting professionals to meet MSME needs. However, there is a
demand for specialized accounting professionals which is not cur-
rently being met by the accounting profession. There is interest
among MSMEs in accounting services, a market that SMPs can po-
tentially serve. Areas of possible future work include the support
and strengthening of SMPs, including raising awareness of opportu-
nities by SMPs and ensuring that they offer the appropriate services
for MSMEs. There also needs to be a strengthening of national legis-
lation around accounting standards, with efforts to ensure that en-
terprises adhere to them.
Figure 2: Preparation of Accounting Records

Source: Solutions for Development Consulting Co. 2014 Survey.

Figure 3: Number of Accounting Graduates in the West Bank and
Gaza (2003-2013)

Source: Ministry of Higher Education

Figure 4: Growth in Accounting Diplomas (2003-2012)

Source: Ministry of Higher Education.
Personally prepared by the
The accountant in the
Administrative assistant
External auditor
External accounting office
.0 20.0 40.0 60.0 80.0
2002 2004 2006 2008 2010 2012 2014
349 346
2002 2004 2006 2008 2010 2012 2014
Egypt 74


Chairman of the Egyptian Society of
Accountants and Auditors (ESAA)

Interview conducted by Mohamed Yehia,
Senior Financial Management Specialist,
GGP/MENA, World Bank

CVMENA: What are the ESAA mission and
HH: The Egyptian Society of Accountants
and Auditors (ESAA) was established by a
Royal Decree issued on April 24, 1946, and
the ESAA was re-proclaimed on January 5,
1977. ESAA was originally founded by a
number of Egyptian accountants, many of
whom had obtained their professional qual-
ifications in England. Hence, ESAA rules and
examinations were designed according to
the British system. The ESAA aims to en-
hance the academic and practical
knowledge of accountants and auditors,
and maintain international professional
recognition of the accounting and auditing
profession in Egypt.

CVMENA: How does one become an ESAA
HH: The applicant would need to pass the
intermediate and final examinations of
membership. He/she is required to have
training for three years (after graduation) at
an auditing office of an ESAA member.
However, to expand the membership base
and absorb large numbers of accountants,
ESAA eased the condition of prior training
at its member offices, allowing for such
training to be done at non-member offices
as well, provided they meet the standards
set forth by the ESAA Board of Directors,
thereby ensuring training quality and ac-
quired experience. Holders of international
certificates such as the US Certified Pub-
lic Accountant (CPA) / the Association of
Chartered Certified Accountants (ACCA)
designation / ICAEW Chartered Accountant
(CA) are exempted from taking the in-
termediate examination. However, they
would need to pass final examinations in
financial accounting, law, and Egyptian
taxes. Holders of PhDs in accounting shall
also be exempted from the intermediate
examination, but they would need to pass
the final examination. ESAA curricula and
examinations are reviewed and developed
regularly in line with the standards of inter-
national professional associations. The ex-
aminations cover many topics. The inter-
mediate examination includes financial
accounting, auditing and assurance ser-
vices, tax accounting, costs and administra-
tive accounting, law and corporate govern-
ance. The final examination covers ad-
vanced financial accounting, advanced au-
diting and assurance services, advanced tax
accounting, and finance and accounting
information systems.

CVMENA: How have the ESAA membership
and organizational structure developed in
order to cope with professional advance-
ment and member needs?
HH: There has been a steady annual in-
crease in ESAA membership. There are now
about 2000 members, compared to 1912
members at the end of last year. In the past
5 years, 482 new members joined ESAA,
including 148 new members in 2013. ESAA
is run by a Board of Directors composed of
15 members and elected by the General
Assembly. Two-thirds of the Board, at least,
should be elected from members of the
General Assembly who possess professional
experience of no less than 15 years. In its
first meeting after the General Assembly
meeting, the Board elects its chairman,
deputy chairman, treasurer and secretary
general, each of whom should have at least
15 years of professional experience. ESAA
technical work is undertaken by a number
of committees formed by the Board and
chaired by a board member. They are: the
membership committee, the examination
committee, the standards committee, the
curriculum development committee, the
training and continuing education commit-
tee, the cultural committee, and the com-
plaints committee. The Board is assisted by
an administrative/financial/ executive body
composed of a general manager and a
number of administrative employees. This
body is responsible for: member affairs
(subscription, certificates, information, and
other services); administrative organization
of examinations and supervision; adminis-
trative organization of training courses,
seminars and workshops; and follow-up of
continuing professional education.

CVMENA: What is the ESAA role in pro-
moting the application of international
standards for accounting and auditing, and
the code of ethics?
HH: The ESAA Standards Committee played
a major role in preparing the Egyptian Ac-
counting Standards, which were issued in
2006 in line with International Financial
Reporting Standards (IFRS) applicable at the
time. In 2013, the committee also updated
the Egyptian Accounting Standards in order
to comply with the latest IFRS. These up-
dated standards were referred to the High-
er Standards Committee at the Egyptian
Financial Supervisory Authority (EFSA) for
review and approval. The committee com-
prised many ESAA members, including the
ESAA Chairman, and the Chief of ESAA
Standards Committee. Hopefully, the up-
dated standards shall be issued before the
end of 2014 to be put into force early in
2015. Also in line with international stand-
ards, the ESAA Standards Committee pre-
pared standards for auditing, limited re-
view, and other assurance services. These
standards were issued in 2008 by the Minis-
ter of Investment after a review by the
Capital Market Authority (CMA) which
was later merged in the EFSA. The Commit-
tee also prepared a code of ethics, similar
to the international code. The CMA Author-
ity issued that code of ethics to be applica-
ble to the registered CMA auditors. ESAA
issued the same code of ethics to be appli-
cable to ESAA members. It is worth noting
that the Central Auditing Organization
(CAO) has approved the accounting stand-
ards which were prepared by ESAA. These
standards shall apply to the preparation of
financial statements of companies of the
public and public business sectors, and all
economic units. The CAO approved the
Egyptian standards for auditing, limited
review and other assurance services. The
CAO also approved the code of ethics,
which shall be applicable as well to CAO
staff. The CAO Chairman issued guidelines
for the application of the code of ethics.
Regarding training, the ESAA organizes
training sessions for its members and oth-
ers to explain the standards and their appli-
cations. The ESAA also organizes semi-
annual training sessions in cooperation with
the ACCA for those interested in obtaining
the ACCA International Financial Reporting
Standards (IFRS) Diploma.

CVMENA: To what extent is ESAA reaching
out to and coordinating with accounting
departments and professors at Egyptian
HH: There is currently no regulated mecha-
nism or integrated coordination between
ESAA and the Egyptian universities. However,
there is some knowledge and experience
exchange that takes place as some ESAA
members work as part-time lecturers at a
number of private universities. Moreover,
there are some ESAA and Board of Director
members who are also accounting professors
at Egyptian universities. However, there is a
need for an integrated mechanism to har-
monize ESAA curricula and examinations
with university accounting and auditing cur-

CVMENA: What is the ESAA role in ensuring
quality control and good professional eth-
HH: The ESAA role with regard to the control
of quality and good professional ethics is
limited to what is stipulated in the ESAA
statute, where the complaints committee
can investigate shortcomings of any ESAA
members, as well as professional ethics is-
sues. The committee can impose sanctions
including freezing ESAA membership. Con-
cerning all accountants registered with the
Egyptian Financial Supervisory Authority
(EFSA), including ESAA members, there is a
unit formed by the EFSA statute for the qual-
ity control of the work of those accountants.
The complaints and investigations committee
for practitioners at the Egyptian Syndicate of
Commercial Professions can also investigate
complaints against accountants registered
with the Syndicate on grounds of work short-
comings or poor work ethics. The committee
can impose appropriate sanctions, which
may include removing the name of the
member from the list of practicing account-
ants at the Ministry of Finance.

CVMENA: What are the levels and nature of
competition among companies working in
the field of accounts control? What oppor-
tunities are available for small- and medi-
um-sized offices?
HH: Generally, large offices conduct auditing
for most banks, insurance companies,
branches of international companies in
Egypt, and companies registered with the
Egyptian Stock Exchange. Competition is
most intense between companies in these
sectors. The small- and medium-sized offices
offer auditing services for a wide range of
small- and medium-sized companies, as well
as individual companies and establishments.
However, in the light of the importance of
the small- and medium-sized companies, it is
likely that large accounting offices may offer
services to these companies and compete
with smaller offices in this area. On the other
hand, based on the legal requirement by
some regulators for auditors rotation within
a specified time, it is expected that medium-
sized accounting offices may start competing
with large offices in auditing the accounts of
large Egyptian companies.

CVMENA: How can ESAA contribute to sup-
porting economic growth in Egypt?
HH: ESAA can contribute to supporting the
Egyptian economy through upgrading and
advancing accounting and auditing practices.
For example, the implementation of account-
ing and auditing work according to high in-
ternational standards gives credibility to the
financial statements, thus increasing investor
trust and attracting foreign capital. Due dili-
gence review in auditing and providing tech-
nical advice in the governance area shall also
lead to the strengthening of infrastructure
for investment. ESAA training sessions
covering accounting, auditing, governance,
and taxes contribute to upgrading work in
these areas and help strengthen the eco-
nomic performance of companies and corpo-
rations. ESAAs success in providing increas-
ing numbers of qualified graduate account-
ants contributes directly to the availability of
technical expertise and cadres needed to fill
important financial positions in general. In
addition, ESAA is represented at many con-
trol and supervisory agencies such as the
High Standards Committee, the Control
Council for the Quality Performance of Audi-
tors, the Listing Committee at the Egyptian
Exchange, the Accountant Registration
Committee at the Ministry of Finance, and
the Committee for the Unified Accounting
System at the Central Auditing Organization.

CVMENA: In your opinion, what are the
most important ESAA achievements in re-
cent years?
HH: First: ESAA membership increased over
recent years. ESAA maintained the high pro-
fessional level of its members through up-
grading the level of examinations, and train-
ing and continuing professional education.
These efforts led to wider recognition of the
professional competence of ESAA members
by the business community, various govern-
ment agencies, as well as the prosperous
work of the offices of ESAA members in the
Egyptian market. Second: The availability of
accounting and auditing standards, as well as
the professional code of ethics, was largely
due to ESAA efforts which facilitated the
preparation of financial statements in line
with international standards. Third: ESAA
established prestigious new headquarters in
the 6 October City (fully financed by ESAA
members), with 3000 square meters, includ-
ing auditoriums, facilities, and equipment
for holding training sessions for about 400
trainees at the same time, and conducting
examinations at the ESAA headquarters.
Each examination session serves about 300
candidates. Fourth: ESAA is the sole repre-
sentative of Egypt at the International Feder-
ation of Accountants (IFAC) and the Federa-
tion of Mediterranean Accountants (FCM)
which chose ESAA Chairman, Mr. Hazem
Hassan, as the first FCM chairman. Fifth:
ESAA signed a protocol with the ACCA (the
British Association of Chartered Certified
Accountants) to represent it in Egypt. The
ESAA also established an office for the ACCA
and designated a special relations officer.
Both ESAA and ACCA participate in the quali-
fication of Egyptian accountants through the
granting of the IFRS Diploma upon passing
the required examination. The examinations
are prepared and evaluated in England.

CVMENA: What are ESAAs current priori-
HH: The establishment of a separate ESAA
training center to serve larger numbers of
members and non-members in all areas re-
lated to the work of accountants and audi-
tors. Developing and upgrading the ESAA
organizational structure in light of the ex-
panded activities and moving to the new
headquarters. Effective participation in mod-
ernizing the Egyptian standards in line with
the latest international standards.

CVMENA: What is your personal vision, and
what are your aspirations for the future of
the profession in Egypt?
HH: I hope that the accounting profession in
Egypt will flourish to the extent that all ESAA
members and non-members enjoy high and
comparable professional levels. This will only
come true by replacing the current law for
practicing the profession issued in 1951. It
has undergone no change since then. A new
law should be issued reflecting the profes-
sional developments of the accounting and
auditing profession over the past 60 years.
The new law should limit permitting profes-
sional practice to those who have passed
examinations and tests, in a manner similar
to the ESAA examination arrangements. The
qualified accountant should also comply with
the Continuing Professional Education (CPE)




7 -




8 -







9 -




) (


300 .

( )

IFRS Diploma


10 -




11 -




Egypt 77

2015 .




ACCA IFRS Diploma .

5 -



6 -


/ / /
/ /


3 -

/ CA





4 -



Chairman of the Egyptian Society of
Accountants and Auditors (ESAA)

1 -

24 1946 5
1977 .


. "


2 -

31 / 12 / 2013 1912
2000 .

482 148
2013 .
) 15 (



In The News 78

Egyptians Help Shape the World Bank Groups
Strategy in Egypt for the Coming Years

In a room overlooking the Nile in the
Upper Egyptian governorate of Aswan,
a group of Egyptians gathered to dis-
cuss their development priorities and
strategies to address them. Eventual-
ly, these discussions culminated in
them choosing to prioritize education,
health, poverty, infrastructure, and the
development of economic sectors.

Samir Kamel from the Future Associa-
tion for Development, Consumer Pro-
tection and the Environment, said he
wished everyone in Aswan could have
watched this meeting live to see an
international institution such as the
World Bank Group coming to Upper
Egypt to listen to our key issues.

These discussions comprised the first
phase of consultations held by the
World Bank Group ahead of drawing-
up its new Country Partnership
Framework strategy for 20152019.
The joint strategy involves three World
Bank Group institutions, namely the
World Bank, the International Finance
Corporation (IFC), and the Multilateral
Investment Guarantee Agency (MIGA).

The consultations, which started with
government representatives in early
March, were followed by three meet-
ings held throughout the month of
June with Egyptians from civil society
and youth organizations, rural devel-
opment societies, academia and the
private sector, in Cairo, Alexandria,
and Aswan.

This is the first time direct consulta-
tions with a broad range of Egyptians
from outside official institutions have
been held. A website has also been
created with a survey aimed at collect-
ing feedback.

The Country Partnership Framework
is the road map that spells out how the
World Bank Group will support Egypt
over the coming years, said Hartwig
Schafer, Country Director for Egypt,
Yemen, and Djibouti. We are collect-
ing ideas, opinions, views and sugges-
tions. Contributions from those who
know the country best will help us
shape the strategy.

In Cairo, the audience was diverse,
with more than 100 participants. Edu-
cation, social welfare, energy, agricul-
ture and health ranked high on their
agenda. In Alexandriawhere most
participants were youngthe list was
the same, though they added private
sector development. Participants in
Aswan were of more or less the same
opinion, adding infrastructure and
fisheries, minerals and tourism.

Examples of the contributions included
Ahmed Okasha of the Mubadra Center
in Alexandria, who emphasized:
Egypt faces challenges to elementary
education, the need for the develop-
ment of teachers and the curricula,
and changing the culture of the com-
munity. Mohammed Hani Al-Sebaai,
a founder of Al-Hassan Foundation for
Spinal Cord Injuries, chose the health
service. Disability issues should also
be the center of our attention.

Aswan was chosen intentionally by the
World Bank Group to mark the first
round of consultations as Upper Egypt
is underdeveloped.

"The consultations form a key part of
determining the World Bank Groups
priorities in Egypt over the next five
years, said Nada Shousha, IFC Country
Manager for Egypt, Libya and Yemen.
It was refreshing to hear from differ-
ent groupsranging from academia
and civil society to the government
and private sectoron what we
should be focusing on to help Egypt in
its transition."

A second round of consultations is
scheduled to be held ahead of the
launch of the new Country Partnership
Framework next year.


The Gulf
United Arab Emirates 80

Value of SMPs in Enhancing the Financial Inclusion of
Small and Medium Enterprises
The UAE as a Case Study

Bassel NADIM
CEO, UAE Association of Accountants and
Auditors (AAA). He is also an advisor to the
Board of Tanmia Capital Limited, a London
based consulting firm.

Economic authorities in the United Arab
Emirates (UAE) have focused attention and
planning on the development of Small and
Medium Enterprises (SMEs) with a view
towards improving employment and boost-
ing economic activity throughout the coun-
try. In seeking to support and promote
SMEs, their counterparts in the accountancy
profession - Small and Medium Audit Practi-
tioners (SMPs) play a critical role in support-
ing SME financial reporting, enabling SMEs
access to finance and improving financial
inclusion within economy.

SMEs Significant Role in the UAE Economy
The contribution of SMEs to the UAE Gross
Domestic Product (GDP) is roughly 60%,
which is well-above the global benchmark of
SME economic contribution (45%). As can be
seen in the graph to the right, Emirati SME
contribution to national employment also
rates much higher than regional and global
averages with Emirati SMEs contributing
roughly 84% to national employment. With-
in the UAE, a significant portion of SME ac-
tivity is centralized in the countrys business
capital of Dubai (45%) with almost 75% of
SME businesses being active in trade and
retail services
. The new UAE Federal Law
2/2014 is highly expected to enhance the
position and contribution of the SME sector
to economic prosperity given the structural
alignments envisioned through this law.
According to the law, the Ministry of Econ-
omy will establish and chair a national SME
Council. This council holds as its future
mandate to collaborate with public and
private shareholders in the development of
a national SME program. This program shall
perform activities in relation to capacity
building, conducting needed research and
coordination of local SME development
programs and schemes nationwide.

SMEs Financial Inclusion
The ability to access financial services is
defined as financial inclusion
. Obtaining
financing facilities is of particular im-
portance for all businesses - SMEs are not an
exception. The aforementioned Federal Law
has addressed that issue through two initia-
tives: market access and banking access. On
the market access side, this legislation sets
minimum levels designated for small busi-
ness contractor. Specifically the federal gov-
ernment and those corporations in which
the federal government owns more than
25% of their total capital, are obliged to
direct 10% and 5% respectively of their
budget towards procurement from SME
companies. On the banking access side, the
Federal Law has improved this aspect by
requesting Emirates Development Bank
(EDB) to allocate 10% of its financing expo-
sure toward SME financing. However, other
banks and financing companies (e.g., com-
mercial banks) are still free to construct
their lending portfolios as they deem fit. The
ultimate objective of this initiative is to ele-
vate SMEs financial inclusion in the country.
Loans to SMEs in UAE were recorded at the
level of US$ 4 billion by 2013 which consti-
tutes only 4.5% of the entire lending. Recent
reports from the World Bank
suggest that
the required funding needed for SMEs in
UAE is roughly US$ 25 billion. This is almost
6 times the amount of the existing SME
lending portfolio - a proposition that cur-
rently signifies a low financial inclusion ratio
for the SME sector.

SMPs as a Catalyst for Financial Inclusion
In most cases, SMEs look for financial advice
and professional support from SMPs as
trusted advisors who can offer accommoda-
tive professional fees and who operate with-
in a more SME-tailored framework when
compared to larger audit and strategy firms.
To be most effective in their role in advising
SMEs and facilitating their access to finance,
SMPs must develop a set of services and
products to address the challenges faced in
SME access to finance. Examination of the
reasons for rejecting SMEs lending applica-
tions may provide some strategic direction.
The matrix below identifies some of the key
reasons for lending application rejection and
suggest products and services that an SMP
may offer. In addition to tailoring and en-
hancing SMP provision of specific business
lines as highlighted above; general strength-
ening of SMP firms, the professional ac-
counting organizations (PAOs) which sup-
port and oversee them and the legal and
regulatory framework in which they operate
can all be seen as integral pre-requisites in
furthering SME financial inclusion. The bet-
ter equipped and more recognized the SMP,
the greater the strength of its reports and
the more positive response from lenders.

It is a common occurrence that banks
shortlist larger audit firms as approved audi-
tors and business advisors. With exception
of a few select SMPs, the majority of these
firms are not shortlisted by banks despite
the fact that they are licensed as chartered
accountants. This may be due in part to the
lack of proper internal review systems and
international systems of quality control
established within some SMPs.

UAE Accounting and Auditing Association
(AAA) Supporting and Strengthening Local
Emirati SMPs
Recent data from the Ministry of Economy
states that there are 105 chartered account-
ing firms in the UAE. Considering global and
regional rankings, SMPs comprise the vast
majority of these firms in operation within
the UAE. Although there are strong num-
bers of SMP firms, the aforementioned chal-
lenges hinder SMPs competitiveness in the
market and may limit SMEs choices, and
possibly result in SME growth stagnation. In
recognition of these challenges facing SMPs
and SMEs, the AAA has designed and draft-
ed a high-level SME model which appropri-
ately captures the inter-relationship be-
tween SMEs and SMPs in the UAE. This
model demonstrates the position of SMPs at
the heart of SME business advisory needs
and access to finance. Additionally, in June
2014, alongside the World Bank Exchange
2014 Conference, the AAA in partnership
with the International Federation of Ac-
countants (IFAC) and World Bank conducted
a capacity building workshop aimed at
transferring knowledge and good practices
in the SMP sector so as to better enable
local Emirati audit firms to reach their po-
tential in providing high quality services to
their SME clients. Finally, in recognition of
the need for a system of Audit Quality As-
surance to promote internal systems of
quality control and high quality services
amongst all audit firms; the AAA has held
dialogue with the World Bank and IFAC re-
garding the nature of such systems, their
components and their objectives.

1. Dubai SME, The State of Small and Medium Enterprises (SMEs)
in Dubai, 2013. Small and Medium-Sized Enterprises in the EU,
2011/12 (Ecorys)
2 The Global Findex Database
3 The Status of Bank Lending to SMEs in the Middle East and
North Africa Region: Results of a Joint Survey of the Union of Arab
Bank and the World Bank 2011

Strategic Directions for SMPs offers

Reasons for rejecting a financing application from an SME What services an SMP can provide
Clarity of the project details and its cash flow projections* Co-developing proper business case
More than usual risk in the operation of the applicant* Co-developing a business plan, with focus on achievements,
stress scenarios and risk development framework.
The submitted file is incomplete* Filling guidance and administrating
Poor technical competence in addressing the lenders questions* Financial advice
Providing financial management on outsourcing bases
Loan- collateralization ratio is not well established* Assets and business valuation.
Structuring a financing scheme to meet the collaterals status.
Confidence in the applicant business profile* Operational excellence programs
Quality assurance systems
Accounting and auditing
Technical competence in fulfilling the regulatory requirements** Investing in knowledge of certain industries and regulatory
framework. Showcase thought leaderships

* D&B Business Insight Series SME Lending in UAE, 2008.
**SMP Development in UAE and the work of the Accountants & Auditors Association (AAA) Bassel Nadim
*** Conflict of interest rules shall be observed

Connecting Voices - THE BLOG - October 2014
Kingdom of Saudi Arabia 82


Secretary-General of the Saudi Organi-
zation for Certified Public Accountants

Interview conducted by Riham Hussein, Fi-
nancial Management Specialist, Governance
Global Practice, MENA, The World Bank.

The Saudi Organization for Certified Public
Accountants (SOCPA), founded in 1992,
works under Royal Decree to promote the
accounting and auditing profession and all
matters that might lead to the development
of the profession and improve its status.
SOCPA has 5,000 members and has been a
leader and active member of the Interna-
tional Federation of Accountants (IFAC). We
recently interviewed Dr. Ahmad Al-
Meghames, Secretary-General of SOCPA, to
discuss current developments in the ac-
counting profession in Saudi Arabia and
what role SOCPA is playing. Dr. Al-
Meghames completed his Doctorate of
Business Administration (DBA) in 1997 from
Mississippi State University, majoring in
accounting. He taught for a few years at the
university level before joining SOCPA as
Deputy Secretary-General in 2003. Since
2006, he has taken charge of SOCPA as its

CV MENA: What would you say is the
greatest challenge for young accountants
starting their careers in Saudi Arabia?
AA: The major challenge is to find a curricu-
lum that incorporates the international
standards (accounting and auditing) into the
Arabic language, and to find an Arabic lan-
guage faculty expert in both the Interna-
tional Financial Reporting Standards (IFRS)
and the International Standards on Auditing

CV MENA: What are the challenges facing
Micro, Small and Medium Enterprises
(MSMEs) in Saudi Arabia in the area of
accounting, and what role is SOCPA playing
in meeting these challenges?
AA: Training and development in the Arabic
language is the biggest challenge. SOCPA is
currently working actively in the following
SOCPA has entered into agreements
with leading publishers and other
agencies to translate into Arabic some
quality books and training materials
on IFRS and ISAs.
SOCPAs nominee has been appointed
to the SME Implementation Group of
the International Accounting Stand-
ards Board.
Memoranda of Understanding
(MOUs) have been forged with lead-
ing world professional accountancy
bodies, such as the Institute for Char-
tered Accountants of England and
Wales, the Institute of Chartered Ac-
countants of Pakistan, the Institute of
Chartered Accountants of India, and
theAssociation of Chartered Certified
In addition, the development and capacity
building of SMPs will be a focus area for
SOCPA in the next few years.

CV MENA: What is the rate of compliance
by companies with the International Finan-
cial Reporting Standards?
AA: Currently, banks and insurance compa-
nies are required to apply IFRS. In addition,
SOCPA standards apply to all other compa-
nies, listed and unlisted. SOCPA has ap-
proved an IFRS convergence plan by which
listed entities other than banks and insur-
ance companies would be required to re-
port under IFRS as adopted in Saudi Arabia.
The IFRS transition plan is part of a project
called SOCPA Project for Transition to In-
ternational Accounting and Auditing Stand-
ards. SOCPA started the project in 2012,
and expects to complete it around 2017.
SOCPAs stated goal for the project is to
make a transition toward IFRS after requir-
ing some additional disclosures explaining
the nature of transactions for Shariah-
conscious users. SOCPA is also translating all
of the IFRS into Arabic as part of this project
under an agreement with IFRS Foundation.

CV MENA: Can you tell us about your new
partnership with The Institute of Chartered
Accountants in England and Wales
(ICAEW)? What opportunities do you think
this will create for your members? Do you
have any plans for future partnerships with
other international organizations?
AA: Recognizing the importance of mutual
cooperation in the development of the pro-
fession of accounting and auditing, SOCPA
signed an MOU with the ICAEW for the ad-
vancement of the accounting and auditing
profession. The Memorandum aims to es-
tablish closer cooperation in various profes-
sional areas, including the conducting of
technical research, holding joint profession-
al activities, and providing joint advice to
other professional bodies. This agreement
will allow for mutual work between the
parties to consolidate the Saudi accounting
sector and ensure its sustainability through
the advancement of accounting knowledge,
professional and intellectual development,
as well as to increase the number of mem-
bers of both parties. Furthermore, im-
portant initiatives may be developed. Expe-
riences and expertise may be exchanged for
the benefit of the accounting sector and its
members in the Kingdom, and across the
region in the future. After signing this MOU,
SOCPA has also signed an MOU with The
Institute of Chartered Accountants of India
(ICAI). However, the most successful MOU
experience has been with The Institute of
Chartered Accountants of Pakistan (ICAP),
where both the bodies have supported each
other in a variety of areas. A major initiative
under the MOU with ICAP is a joint confer-
ence scheduled for March 2015.


CV MENA: An area of weakness in other
countries is usually the Quality Assurance
(QA) program. Can you tell us about
SOCPA's QA program, and if it has been
effective in ensuring a high degree of quali-
ty among auditors?
AA: SOCPAs QA program is one of the most
comprehensive programs among the Gulf
Cooperation Council (GCC) countries (The
GCC countries include Bahrain, Kuwait,
Oman, Qatar, Saudi Arabia, and the United
Arab Emirates). It is modeled on the Ameri-
can Institute of Certified Public Accountants
(AICPA) program, and almost in line with
the requirements of the International
Standard on Quality Control (ISQC) 1. In this
context, SOCPA is currently reviewing its
program and is trying to upgrade it with the
help of accountancy bodies, such as ICAEW,
ICAP, and so on.

CV MENA: Can you share any news on the
upcoming shift to International Public Sec-
tor Accounting Standards (IPSAS) which is
expected in Saudi Arabia?
AA: In September 2013, the Council of Min-
isters in Saudi Arabia agreed to apply the
Guidance of Governmental Accounting
Standards, Objectives, and Concepts, pre-
pared mainly on the basis of the interna-
tional public sector accounting standards
issued by The International Public Sector
Accounting Standards Board (IPSASB). This
application shall be implemented according
to a number of procedures including the
formation of a special committee within the
General Auditing Bureau consisting of spe-
cialists from the General Auditing Bureau,
Ministry of Finance, the Institute of Public
Administration, the Saudi Organization for
Certified Public Accountants, and other
bodies that the Committee considers ap-

CV MENA: Since assuming the Director-
General position, which activities and
achievements are you most proud of?
AA: There are a number of achievements
and activities to highlight:
1. Becoming the IFAC Professional Ac-
countancy Organization (PAO) Devel-
opment Committee Deputy Chair.
2. Having the Board of Trustees of the
IFRS foundation choose our nominee.
3. Becoming a trusted arm for the Saudi
government in areas related to consul-
tation in accounting and auditing.
4. Achieving financial independence for
5. Approval of a SOCPA Project for Transi-
tion to International Accounting and
Auditing Standards.
6. Approval of an Accounting Standards
Project for non-profit organizations.
7. Electronic filing of financial statements
under eXtensible Business Reporting
Language (XBRL).
8. Using web-based applications to pro-
vide our services.

Additional projects under development can
be found on SOCPAs website at:



Kuwait Country Manager
MENA, The World Bank

Interview conducted by Moad Alrubaidi,
Senior financial Management Specialist,
Governance GP, MENA, The World Bank

Bassam Ramadan, a Lebanese national,
joined the Bank in 1989 as a Young Profes-
sional. He started as an economist with the
MENA regional Human Development Net-
work (HDN), and then as a Senior Econo-
mist and Lead Operations Officer. He also
worked in Africa from 2004 to 2008 as a
Sector Leader for Human Development
before he became Sector Manager for
Social Protection and Labor in the HDN
anchor in 2008. Since 2011, he has been
based in Kuwait as the World Bank Country
Manager for Kuwait.

CV MENA: How do you see the develop-
ment of the Country Program in Kuwait?

BR: First, let me congratulate the MENA
Financial Management team for taking on
this important initiative to share
knowledge and experience. The World
Bank has had a strong relationship with
Kuwait for decades. Kuwait is a contrib-
uting member to the World Bank and a key
development partner. The Country Pro-
gram in Kuwait has continued to grow over
the years, which led to the opening of the
World Bank Office in 2009. The Kuwait
Reimbursable Advisory Services (RAS) Pro-
gram is built around the following three
main pillars which are aligned with the
priority areas of the Five-Year Plan of the
government of Kuwait.

(1) Improving public sector performance.
Activities include supporting the Ministry
of Finance in: modernizing the tax admin-
istration system; enhancing public financial
management; streamlining outdated pro-
curement and project cycle regulations and
practices; and strengthening the policy,
institutional, information and regulatory
frameworks for better public land man-

(2) Enhancing economic diversification
through private sector development. Activi-
ties include: supporting the recently estab-
lished Small and Medium Enterprise Fund;
supporting Kuwaits Direct Investment
Promotion Authority; helping the newly
established Competition Protection Au-
thority, and revamping the countrys insol-
vency laws.

(3) Enhancing human development. Key
activities include a large program in the
education sector, as well as health, labor
markets, and social safety nets.

Overall, the program in Kuwait is very ac-
tive and has grown several fold over the
past five years and I expect that it will
continue to grow. The program ranges
from building institutions (for example,
advising the recently established anti-
corruption authority, building a new tax
administration), to providing advice on
reforming the education system and
streamlining the business environment.
The Bank Program is providing cutting-
edge knowledge and policy advice, includ-
ing the how to of implementing best
practices in various sectors. In this context,
the Bank is seen as an honest broker and a
credible partner.

CV MENA: What do you think are the key
challenges and opportunities in Kuwait?

BR: Kuwait is one of the early pioneers in
the Gulf in many areas. Kuwait has one of
the oldest universities in the region, an
elected Parliament and active civil society,
and one of the largest Sovereign Wealth
Funds in the world. However, their econ-
omy like the rest of the Gulf Cooperation
Council (GCC), is overly dependent on oil,
and would benefit from further economic
diversification and streamlining of the gov-
ernment bureaucracy, which would also
help the private sector to develop and
grow further. In addition, the quality of the
education system needs improvement. The
public sector is the main employer of Ku-
waiti nationals (90 percent of the labor
force) who are offered generous benefit
packages that further crowd out the pri-
vate sector. The Bank RAS program in Ku-
wait is addressing many of these issues and
is helping the government take the neces-
sary policy reforms to correct these distor-
tions. While the Program has been growing
in size, the challenge now is to grow the
program while maintaining quality and
responsiveness. The governments ability
to make decisions in a timely manner is
key, and that is why it is critical to
strengthen the center of government and
improve the decision-making mechanism
that should accompany the implementa-
tion of the various reforms. On the Bank
side, the challenges are: how to maintain
the balance between responding to in-
creased client demand for our services and
selectivity; what the right mix of Bank staff
and Consultants is for any given task; and
how we can ensure that our interventions
buy the best value for money for our cli-
ents and maximize impact on the ground.
These are all real issues in any RAS pro-
gram, and require careful evaluation be-
fore embarking on new tasks. They also
require a continuous revision in the way
we do business in these countries to keep
up with their rapid pace of change.

CV MENA: What distinguishes the World
Banks work in Kuwait?

BR: The Bank in Kuwait is seen as a credible
and independent advisor and not as a con-
sultant fulfilling specific terms of reference
(TOR) and there is a big difference. We
provide our clients with global best prac-
tices, with the objective of offering the
best integrated solutions to their develop-
ment challenges. By doing so, we may
sometimes provide advice that does not
necessarily agree with certain vested inter-
est groups, but it is our professional and
moral obligation to provide it so that gov-
ernment can have the right options when
making policy decisions. We also offer
better quality advisory services at a cheap-
er cost than many of the well-known global
consulting firms. In addition, the client
respects the internal quality assurance
mechanisms the Bank goes through in the
preparation and implementation phases of
the program. The RAS program is a growing
area in most middle-income countries
(MICs) across the Bank. In my opinion,
more and more countries will request as-
sistance through the Banks various RAS
programs as their economies evolve and
they become less dependent on our finan-
cial support. This in turn implies that
greater attention by the World Bank
should be given to this growing business
line to ensure that we remain relevant and


CV MENA Events

Events 86



Mechanisms against Fraud
and Corruption: A Case
Study on Morocco
April 17, 2014, Online

One of the main reasons behind the lack of
effectiveness and efficiency in anti-
corruption programs and measures initiated
by several governments, mainly of develop-
ing countries, is the lack of a comprehensive
and targeted anti-corruption strategy.

Moroccos Central Authority for Corruption
Prevention (ICPC) recommended the design
and the effective implementation of a na-
tional anti-corruption strategy in Morocco.
Subsequently, the ICPC performed a prelim-
inary assessment of corruption and pro-
posed several measures to prevent and fight

The Moroccan government recently
launched the nationwide study for the de-
sign of a national anti-corruption strategy. In
this interactive event, Mr. Ahmed Yassine
Foukara shared the reasons behind the fail-
ure of previous anti-corruption initiatives in
Morocco as well as the reasons for the suc-
cess of the current strategy.

He discussed the different approaches and
tools Morocco is using to prevent and fight
corruption, as well as the importance of
finding the right remedies for different
countries and regions.


Integrated Reporting:
An Introduction
May 20, 2014, Online

Integrated Reporting (called <IR> for
short) is a tool that enables the corporation
to report on its financial as well as on the
environmental, social, and governance as-
pects of its business. It is a powerful in-
strument to enhance governance, transpar-
ency, and accountability in the corporate
and public sectors. Professor Robert Eccles
who popularized the concept of Integrated
Reoporting through his award-winning
book, One Report, described the evolution
of the concept of Integrated Reporting and
its current stage as well as the public policy
implications of <IR> especially in terms of
environment sustainability.


Value Added Tax: Rele-
vance, Administration, Con-
trols and Good Practices
May 27, 2014, Online

In this event, Dr. Sebastian James explained
the major differences between the Value-
Added Tax (VAT) and the General Sales Tax
(GST), and discussed how these two taxes
are best implemented, administrated, UN-
CLEAR rephrase charged and accounted
for the decrease incidents of evasion or
avoidance, UNCLEAR He described which
services or goods are exempted, and de-
tailed how VAT revenues may be best dis-
tributed between national and sub-national
governments. As part of his presentation, Dr
James provided examples of good practices
in VAT implementation and administration
as a reference for tax policy makers in the
MENA region who are embarking on its


Governance and Anti-
Corruption (GAC) in Bank
Financed Operations: Les-
sons, Experience, Pain, and
the Way Forward
July 24, 2014, Online

In this interactive event, Ms. Maria Vannari
shared her wide experience in dealing with
GAC issues in Bank investment operations.
She presented practical cases and discussed
the way to interact with the various stake-
holders when addressing GAC issues at the
project level. She also explored the Banks
effort to render the projects more GAC
responsive. Additionally, she discussed the
different approaches to prevent, identify
and fight corruption at the project level. She
also noted the importance of finding the
right remedies while taking into considera-
tion the specificities and context of each
Events 87



A Round Table on the Chal-
lenges and Opportunities
of Parliamentary Financial
Oversight in Lebanon
Beirut, Lebanon, March 20, 2014

As part of its Connecting Voices of the Mid-
dle East and North Africa (CV MENA) initia-
tive, and within the mandate of its Su-
preme Audit Institutions and Legislative
Scrutiny Technical Practice (SAI-LS TP), the
World Banks MENA Financial Management
Unit organized a round table on the Chal-
lenges and Opportunities of Parliamentary
Financial Oversight in Lebanon.

The key note speaker was Member of Par-
liament, Mr. Ibrahim Kanaan, the Chair of
the Parliamentary Finance and Budget
Committee. He was joined in the discus-
sions by Mr. Alain Bifani, Director General
in the Ministry of Finance, and Mr. Elie
Maalouf, Judge at the Court of Accounts.
The Round Table was chaired by Mr. Ferid
Belhaj, World Bank Country Director for
Lebanon, and attended by a number of
participants from the World Bank, the Min-
istry of Finance, the Court of Accounts,
Parliament, and other agencies.

In the context of the World Bank's Country
Partnership Strategy for Lebanon, partici-
pants recognized the importance of effec-
tive oversight of the use of public re-
sources for service delivery and accounta-
bility. The mandate and achievements of
the Lebanese Parliamentary Finance and
Budget Committee and the enabling roles
of both the Ministry of Finance and Court
of Accounts were explored. International
good practices on parliamentary engage-
ment in the budget process and the use of
Supreme Audit Institution (SAIs) reports
were shared. To promote knowledge-
sharing and capacity enhancement through
regional and global networks, the partici-
pants discussed what the World Bank Insti-
tute, the Arab Institute for Parliamentarian
Legislative Studies and Training, and the
Arab Parliamentarians against Corruption
can offer.

Key messages

Cooperation and collaboration among
the Parliamentary Finance and Budget
Committee, Court of Accounts and the
Ministry of Finance is continuing as it
relates to instrumental matters, such
as account accuracy and timeliness,
budget comprehensiveness, and audit

With 54 sessions within three and a
half months, the parliamentary com-
mittee has been active, seriously
studying and being vocal about chal-
lenging issues related to the budget.

The Court of Accounts is aware of its
capacity development needs and the
impact of the challenging political
economy. Indeed, it seeks to play a
constructive role in suggesting
measures to address these challenges.

All participants agreed on the rele-
vance of the World Bank's agenda in
supporting governance to the three
main functions of parliament: repre-
sentation, oversight, and legislative


Consultation for Parlia-
mentary Stakeholders in
Center for Mediterranean Integration,
Marseilles, France, April 7-9, 2014.

As part of its work on Public Financial
Management (PFM), the World Bank (the
World Bank Institute and the Middle East
and North Africa [MENA] Financial Man-
agement Unit) organized The Middle East
and North Africa Consultation for Parlia-
mentary Stakeholders in collaboration
with McGill University, Laval University, the
Westminster Foundation for Democracy
and the United Nations Development Pro-

The objective of the consultations was to
develop a better understanding of how
parliaments in the region scrutinize the
public budget one of the key tasks of
legislatures. Gaining a better understand-
ing of the prevailing practice in the region
will help the World Bank design a strategy
for strengthening the capacity of parlia-
ments to perform these critical PFM func-
tions. Importantly, the event provided a
forum for knowledge exchange between
attending country delegations.
Participants included Members of Parlia-
ment and parliamentary staff from the
finance/oversight committees in Algeria,
Iraq-Kurdistan Regional Government (KRG),
Jordan, Morocco and Tunisia, as well as
officials from the Supreme Audit Institu-
tions (SAIs) of Iraq, Iraq-KRG, Morocco and

Discussions revolved around legal man-
dates for parliamentary scrutiny, organiza-
tion of parliamentary committee work,
resourcing of parliamentary committees
and parliamentary research capacity. The
event also explored the powers and func-
tions of SAIs in the region and their rela-
tionship with parliaments.
Given the limited systematized knowledge
about parliamentary budgetary oversight
in countries with a French administrative
heritage, the McGill and Laval Universities
of Canada are currently carrying out a re-
search project with support from
lAssociation des secrtaires gnraux des
parlements francophones (The Association
of Secretary-Generals of Francophone Par-
liaments- ASGPF). The event provided an
opportunity for the researchers to obtain
first-hand information from the partici-
pants about the regional situation.

Discussion Highlights
The role of parliament in the prepara-
tion and oversight of the budget var-
ies greatly between countries, but
generally the participating countries
have a limited role for parliament in
the preparation phase. There was a
call for stronger involvement in the
early stages of the budget cycle.
In several countries, oversight com-
mittees have held inquiries into al-
leged misuse of public funds, some-
times with a high degree of transpar-
ency. For example, the results of an
investigation in Algeria were posted
online, and in Morocco parliamentary
hearings have been broadcast on TV.
Reports of the plenary have also been
published in the official gazette.
The prevailing distinction between the
Francophone and Westminster par-
liamentary models is being chal-
lenged. Indeed, there are opportuni-
ties for learning between them. For
example, Morocco has recently estab-
lished a committee similar to a Public
Accounts Committee, which is not
common in Francophone systems. The
relationship between the SAI and par-
liament has traditionally been weaker
in Francophone systems than in
Westminster systems, but the exam-
ple of Morocco shows that this can


Introducing the Public Ex-
penditure and Financial
Accountability (PEFA)
The Exchange, Abu Dhabi, United Arab
Emirates, 12 June, 2014

On June 12, 2014, Mr. Phil Sinnett, Head of
the Public Expenditure and Financial Ac-
countability (PEFA) Secretariat, presented
an overview and update for a technical
session of The Exchange conference. The
session attracted the participation of
around 100 attendees interested in public
financial management in the MENA region,
including senior officials from ministries of
finance, supreme audit institutions and

The format of the session included a formal
presentation by Mr. Sinnett providing an
overview of the program and how it was
developed. He explained that it aims to
strengthen the ability of both the recipient
and the donor to assess the condition of a
countrys public expenditure, procurement
and financial accountability systems. Like-
wise, it also helps to develop a practical
sequence of reform and capacity-building
actions in a manner that encourages coun-
try ownership. The PEFA Framework helps
to: (i) reduce the transaction costs to
countries; (ii) enhance donor harmoniza-
tion; and (iii) allow for the monitoring of
progress of country public financial man-
agement (PFM) performance over time. As
such, it can lead to improved impact of

Key points

The Framework provides a high-level over-
view of all aspects of a countrys PFM sys-
tem performance (including revenues,
expenditures, financial assets/liabilities and
procurement). It also examines whether
there are tools in place to deliver the three
main budgetary outcomes, namely: aggre-
gate fiscal discipline, strategic resource
allocation, and the efficient use of re-
sources for service delivery.

PEFA consists of a set of 31 indicators along
with a concise report providing a narrative
about the indicators, and drawing a sum-
mary conclusion from the analysis. The
indicators are calibrated on a 4-point Car-
dinal Scale (A, B, C, D), reflecting interna-
tional good practice. Most indicators have
between two and four dimensions, and
each should be rated separately. Dimen-
sions for an indicator are aggregated using
one of two methods (M1: weakest link or
M2: average).

Drawing on the established PFM interna-
tional standards and codes and other
commonly recognized good practices, PEFA
supports country-led reform for which
analytical work, reform design, implemen-
tation and monitoring reflect country prior-
ities and are integrated into government
institutional structures. It builds on donor
and international financial institution har-
monization and alignment around the
country strategy, with a focus on monitor-
ing results. In addition, it offers a shared
information pool about PFM systems and
their performance, which is commonly
accepted by and shared among the stake-
holders at the country level thus avoid-
ing potentially duplicative and inconsistent
analytical work.

Through repeat assessments in a country,
PEFA is capable of demonstrating perfor-
mance changes over time. The Framework
was launched in June 2005 and updated in
January 2011. It covers the entire financial
management cycle focusing on the central
government. However, the application of
the Framework at the sub-national gov-
ernment level, for which guidelines were
developed in 2008, has since become

Mr. Sinnett highlighted that the Frame-
work is currently being revised to incorpo-
rate some editorial clarifications, and will
be updated to include accepted good prac-
tice in light of the recent evolution in PFM.
Further, it will improve on certain areas of
weakness. He stressed that there is no
intention to change the purpose of the
Framework or undermine its comparability
over time. However, continuing relevance
is of paramount importance.

The Framework is expected to remove
donor indicators and introduce new indica-
tors for credible fiscal strategy, public in-
vestment management and asset man-
agement. Finally, Mr. Sinnett went through
the indicators to be revised, explaining
their current problems and the proposals
to improve them. The new version of the
Framework is expected to be finalized early
in 2015. The presentation was followed by
case studies, whereby participants rated a
number of indicators.

Interactive discussions were held during
the session and participants were given the
opportunity to comment and ask ques-
tions. One of the questions raised was if
PEFA can be used to compare PFM perfor-
mance in different countries. Mr. Sinnett
stressed that the PEFA Framework was
developed to measure progress over time
in one country not for country compari-
sons. Rather, it is a development tool that
guides a countrys PFM reform priorities.

Another question was if PEFA reports are
publicly available. Mr. Sinnett confirmed
that, subject to government approval, a
countrys report is made publicly available
on the PEFA website. Most finalized re-
ports are currently available and can be
accessed via the assessment portal.


Training on the Supreme
Audit Institutions Perfor-
mance Measurement
Framework (SAI PMF)
The Exchange, Abu Dhabi, United Arab
Emirates, 12 June, 2014

Effective Supreme Audit Institutions (SAIs)
provide an important contribution to the
accountability for the use of public funds.
In order to successfully fulfill this role, SAIs
need to be independent from the execu-
tive, have a certain organizational capacity,
and a strong audit methodology. Continu-
ous improvement is required for SAIs to
remain relevant and support improved
public sector management.

To facilitate the process of continued im-
provement, the International Organization
of Supreme Audit Institutions (INTOSAI)
has developed a new tool to enable SAIs to
better measure, manage, monitor and
report on their performance the SAI
Performance Measurement Framework
(SAI PMF). The tool facilitates an evidence-
based assessment of SAI performance as
compared to high-level requirements con-
tained in the International Standards of
Supreme Audit Institutions (ISSAIs). Use of
the tool is currently being rolled out global-
ly, and the INTOSAI Development Initiative,
as coordinator of INTOSAIs SAI PMF Task
Team, has developed training materials to
facilitate widespread learning on the use of
this tool.

As part of The Exchange conference orga-
nized by the World Bank in Abu Dhabi on
June 10-12, 2014, a workshop on the SAI
PMF tool was held. The workshop was led
by two certified SAI PMF facilitators, Has-
sine Boussandel from the Court of Ac-
counts of Tunisia and Mohammed Abdul-
gaffar from the National Audit Office of
Bahrain. The event was attended by 50 SAI
staff and representatives of other public
sector institutions from the Middle East
and North Africa region, including Lebanon,
Morocco, Oman, Tunisia, and the West
Bank and Gaza.

The topics of the SAI PMF workshop:

Understanding SAI PMF
What is SAI PMF?
Developing SAI PMF
Structure of the SAI PMF; the 7 do-
mains of performance
Scoring SAI PMF
Performance indicators and scoring
Conducting SAI PMF
The SAI PMF assessment process;
planning and key considerations
SAI PMF Reporting: Sierra Leone Case
The SAI PMF Performance Report


Strengthening Small and
Medium Audit Practition-
ers (SMPs) to Be Support-
ers of MSME Development
Abu Dhabi, United Arab Emirates,
12 June, 2014

The workshop was designed to offer Ex-
change Conference participants and those
from the local Emirati Small and Medium
Practitioners (SMPs) community an oppor-
tunity to discuss in a more intimate setting
the importance of strengthening SMPs. In
so doing, their ability to provide more tai-
lored audit and business advisory services
to better meet the needs of their Micro-,
Small- and Medium- Enterprise (MSME)
clients can be enhanced.

This event was structured to build upon
the previous World Bank CV MENA Solu-
tions Lab event entitled International
Standards on Auditing (ISA) for SMPs held
in December 2013, which provided an in-
troduction to the subject of proper applica-
tion of ISA amongst SMP practices.

Co-Sponsored by the World Bank,
MNAFMs CV MENA Initiative, the World
Banks MSME Facility, the International
Federation of Accountants (IFAC) and the
Association of Accountants and Auditors
(AAA) of the United Arab Emirates (UAE),
the "Strengthening Small and Medium
Audit Practitioners to Be Supporters of
MSME Development" event continued the
momentum and interest by offering partic-
ipants innovative insight into how best to
support SMPs in their provision of high-
quality services to MSMEs.

Event sessions focused on the following

Development of SMPs in the UAE and
the work of the American Accounting
Association (AAA) in supporting SMP
strengthening and expansion of ser-
vices to MSME clients. This session
provided an overview of the nature of
SMP development in the UAE, and the
work of the AAA in supporting the de-
velopment of this important sector of
their financial services industry.

Appropriate application of Interna-
tional Standards on Auditing (ISA), ef-
ficiency advice for practitioners, and
current guides and resources for their
proper application. This session pro-
vided an overview of global highlights
of the IFAC Small and Medium Prac-
tices (SMP) Quick Poll research which
was conducted in December 2013.
Additionally, presenters provided the
audience with an update on the input
of the SMP Committee into standard
setting, as well as the structure of the
International Standards of Auditing
(ISA). Further, an in depth review of
ISA 220, 201, 200, 315, 230 and Inter-
national Standard of Quality Control 1
was also presented.

Provision of information technology
support to SMPs and how to support
and select appropriate audit soft-
ware. Presenters focused on the ex-
perience of the Belgian Institute of
Accountants and their design and de-
velopment of services to support the
SMPs among their membership. Addi-
tionally, this session provided insight
into the Belgian Institutes develop-
ment of Pack PE-KE Audit Software. It
also offered advice and guidance on
the selection of audit software to
support SMPs.

Development and research in manag-
ing SMP practices. This session pro-
vided insight into the results of the
IFAC SMP Quick Roll MENA regional
research, as well as information and
the results of research conducted by
IFAC and other organizations on the
subject of practice management and

Expanding SMP services beyond audit
and toward supporting integrated
reporting and other business adviso-
ry services crucial to MSME devel-
opment. This session provided coun-
try examples of new service offerings,
and explored the concept of shaping
professional accountants as Trusted
Business Advisors. Related topics dis-
cussed included: marketing, staff, in-
formation technology, clients and ser-
vices structuring. Finally, discussions
were also held regarding the implica-
tions for integrated reporting to serve
SMP clients in MENA and throughout
the world.

Participants expressed 82 percent satisfac-
tion with the overall workshop event, not-
ing particular value from the content, skills
application in practice, and the support
that this workshop provided to their im-
plementation of international standards
and good practices.

Session presenters included: Mr. Bassel
Nadim, Chief Executive Officer of the AAA
of the UAE; Ms. Gail McEvoy, IFAC Board
Member and previous Technical Advisor to
the IFAC Small and Medium Practices
(SMP) Committee; Ms. Inge Saeys, Member
of the IFAC SMP Committee and active
audit partner in PLC Van Cauter-Saeys &
Co., a member of JPA International; Mr.
Hechmi Abdelwahed, previous Member of
the IFAC SMP Committee from 2004, and
current Member of the Conseil National de
la Comptabilit (Tunis), President of the
Fondation de lAudit Financier (FAF), and
Treasurer of the APIQ (Association pour
lInnovation et la Qualit); and Mr. Wassim
Khrouf Technical Advisor for the IFAC SMP
Committee and Board Member of the Tu-
nisian Certified Public Accountants body,
Ordre des Experts Comptables de Tunisie
(OECT- Institute of Chartered Accountants
of Tunisia).


Municipal PEFA
Tunisia, Tunis, July 1, 2014

The Tunisia FM Team, with support from
the PEFA Secretariat, organized a Munici-
pal PEFA Boot Camp.

The objective was to raise awareness
about the tool and its application in a sub-
national and municipal context. Jean-
Michel Champomier from the PEFA Secre-
tariat (making a short stop-over on his way
back from France to Washington) delivered
most of the content, which included three
short case studies. The 17 participants
were from the municipality of Sfax, which
is planning to conduct a PEFA this year lead
by AFD (Agence Francaise de Developpe-
ment), with PPIAF funding, from the Minis-
try of Finance (Budget, Accounting, Local
Government Unit), from the CFAD (Training
Center for Local governments) and from
the Parliament (adviser at the Budget and
Finance Committee) as well as from donors
including AFD, EU, GIZ, and SECO.

The tool is already well known in Tunisia
because of the 2010 central government
PEFA. However, it has never been used in
the Maghreb even if interest for use at this
level is rising in Morocco (Agadir, Marra-
kech) and in Tunisia. The Financial Man-
agement unit plans to roll-out the tool in
additional municipalities with funds re-
ceived from the Country Management

Did You Know? 90

A recent review of 25 years of Financial Management Information System (FMIS) World Bank funded
projects identified the top ten reasons why they were not fully successful.

Source: Financial Management Information Systems, 25 Years Experience on what Works and What Doesnt. Authors: Cem Dener, Joanna
Watkins, William Dorotinsky. 2011.







The Exchange CV MENA: Participant
Rank Failure Factors in Completed FMIS Projects
1 Inadequate capacity to sustain
2 Institutional resistance
3 Weak project planning/preparation
4 Complex project design/Number of procurements
5 Organizational structure not suited to integration
6 Inadequate ICT infrastructure
7 Lack of leadership commitment
8 Project team not skilled
9 Inappropriate technology
10 Ineffective project coordination

Cross-Cutting Topics
Books 92

MENA Books

Inside Inequality in the Arab Republic of
Egypt: Facts and Perceptions across Peo-
ple, Time, and Space by Paolo Verme,
Branko Milanovic, Sherine Al-Shawarby,
Sahar El Tawila, The World Bank.

This book joins
four papers pre-
pared in the
framework of the
Egypt inequality
study financed by
the World Bank.
The first paper
prepared by
Sherine Al-
Shawarby reviews
the studies on inequality in Egypt since the
1950s with the double objective of illus-
trating the importance attributed to ine-
quality through time and of presenting and
compare the main published statistics on
inequality. To our knowledge, this is the
first time that such a comprehensive re-
view is carried. The second paper prepared
by Branko Milanovic turns to the global
and spatial dimensions of inequality. The
objective here is to put Egypt inequality in
the global context and better understand
the origin and size of spatial inequalities
within Egypt using different forms of
measurement across regions and urban
and rural areas. The Egyptian society re-
mains deeply divided across space and in
terms of welfare and this study unveils
some of the hidden features of this ine-
quality. The third paper prepared by Paolo
Verme studies facts and perceptions of
inequality during the period 2000-2009,
the period that preceded the Egyptian
revolution. The objective of this part is to
provide some initial elements that could
explain the apparent mismatch between
inequality measured with household sur-
veys and inequality aversion measured by
values surveys. No such study has been
carried out before in the Middle-East and
North-Africa (MENA) region and this
seemed a particular important and timely
topic to address in the light of the unfold-
ing developments in the Arab region. The
fourth paper prepared by Sahar El Tawila,
May Gadallah and Enas Ali A. El-Majeed
assesses the state of poverty and inequali-
ty among the poorest villages of Egypt. The
paper attempts to explain the level of ine-
quality in an effort to disentangle those
factors that derive from household abilities
from those factors that derive from local
opportunities. This is the first time that
such study is conducted in Egypt. The book
should be of interest to any observer of the
political and economic evolution of the
Arab region in the past few years and to
poverty and inequality specialists that wish
to have a deeper understanding of the
distribution of incomes in Egypt and other
countries in the MENA region.

The Second Arab
Awakening and
the Battle for
Pluralism by
Marwan Muash-
er. Yale Universi-
ty Press.

This important
book is not
about immediate
events or poli-
cies or responses to the Arab Spring. In-
stead, it takes a long, judicious view of
political change in the Arab world, begin-
ning with the first Awakening in the nine-
teenth century and extending into future
decades whenif the dream is realizeda
new Arab world defined by pluralism and
tolerance will emerge. Marwan Muasher,
former foreign minister of Jordan, asserts
that all sidesthe United States, Europe,
Israel, and Arab governments alikewere
deeply misguided in their thinking about
Arab politics and society when the turmoil
of the Arab Spring erupted. He explains the
causes of the unrest, tracing them back to
the first Arab Awakening, and warns of the
forces today that threaten the success of
the Second Arab Awakening, ignited in
December 2010. Hope rests with the new
generation and its commitment to toler-
ance, diversity, the peaceful rotation of
power, and inclusive economic growth,
Muasher maintains. He calls on the West
to rethink political Islam and the Arab-
Israeli conflict, and he discusses steps all
parties can take to encourage positive
state-building in the freshly unsettled Arab

Reconstructing Iraqs Budgetary Institu-
tions: Coalition State Building after Sad-
dam by James D. Savage. Cambridge Uni-
versity Press.

The invasion of
Iraq led to a
costly nine-year
and reconstruc-
tion effort. Re-
Iraq's budgetary
proved to be a
vital element of
the state-
building project,
as allocating Iraq's growing oil revenues to
pay salaries and pensions, build infrastruc-
ture, and provide essential public services
played a key role in the Coalition's counter-
insurgency strategy. Consistent with the
literature on state building, failed states,
peacekeeping, and foreign assistance, this
book argues that budgeting is a core state
activity necessary for the operation of a
functional government. Employing a histor-
ical institutionalist approach, this book first
explores the Ottoman, British, and
Ba'athist origins of Iraq's budgetary institu-
tions. The book next examines American
pre-war planning, the Coalition Provisional
Authority's rule making and budgeting
following the invasion of Iraq in 2003, and
the mixed success of the Coalition's capaci-
ty-building programs initiated throughout
the occupation. The budgetary process
introduced by the Coalition offered a
source of institutional stability in the midst
of insurgency, sectarian division, economic
uncertainty, and occupation. This book
sheds light on the problem of "outsiders"
building states, contributes to a more
comprehensive evaluation of the Coalition
in Iraq, addresses the question of why Ira-
qis took ownership of some Coalition-
generated institutions, and helps explain
the nature of institutional change.


The New Arabs: How the
Millennial Generation is
Changing the Middle East
by Juan Cole.

The Awakening of Muslim
Democracy: Religion, Mo-
dernity, and the State by
Jocelyne Cesari. Cambridge
University Press.

Taking to the Streets: The
Transformation of Arab
Activism edited by Lina
Khatib and Ellen Lust.
Johns Hopkins University

Diaries of an Unfinished
Revolution: Voices from
Tunis to Damascus edited
by Layla Al-Zubaidi and
Matthew Cassel. Penguin.

A History of Modern Tunisia
edition by Kenneth Per-
kins. Cambridge University

The New Middle East:
Protest and Revolution in
the Arab World by Fawaz
A. Gerges. Cambridge
University Press.


Bringing Down the Banking System: Lessons from Iceland by
Gudrun Johnsen. Palgrave Macmillan.

The combined collapse of Iceland's
three largest banks in 2008 is the
third largest bankruptcy in history and
the largest banking system collapse
suffered by any country in modern
economic history, relative to GDP.
How could tiny Iceland build a bank-
ing system in less than a decade that
proportionally exceeded Switzer-
land's? Why did the bankers decide to
grow the system so fast? How did
businesses tunnel money out of the
banking system? And why didn't any-
body stop them? Bringing Down the Banking System answers
these questions. Gudrun Johnsen, Senior Researcher with Ice-
land's Special Investigation Commission, tells the riveting story of
the rise and fall of the Icelandic banking system, describes the
commission's findings on the damaging effects of holding compa-
ny cross-ownership, and explains what we can learn from it all.

Islamic Finance and Economic Development: Risk Management,
Regulation and Corporate Governance by Amr Mohamed El Tiby
and Wafik M. Grais. Wiley.

Islamic finance, like conventional finance is a
business of financial intermediation. Its dis-
tinctive features relate to the requirement
that it abides by Shari'a rules that promote
fairness of contracts and prevention of ex-
ploitation, sharing of risks and rewards,
prohibition of interests, and tangible eco-
nomic purpose. In Islamic Finance and Eco-
nomic Development: Risk, Regulation, and
Corporate Governance, authors expound
how these distinctive features bear on the opportunities and chal-
lenges facing the Islamic finance industrys development, risk
management, regulation and corporate governance. Covers the
history and basics of Islamic finance, and provides insight into
current conditions and future landscape. Explores regulatory
framework and presents an approach to developing a systemic
Shari'a governance framework to govern operations in the Islamic
finance industry.

Accounting: A Very Short
Introduction by Christo-
pher Nebes. Oxford Uni-
versity Press.

The Economist Guide to
Financial Management:
Principles and Practice, 2

edition by John Tennent.

The Essentials of Risk
Management, 2
by Michel Crouhy, Dan
Galai and Robert Mark.

Fail-Safe Management:
Five Rules to Avoid Pro-
ject Failure, Au-
thors/Editors: Jody Zall
Kusek, Marelize Goergens
Prestidge and Billy C.
Laws and Regulations in
Global Financial Markets by
Ray Girasa. Palgrave Macmil-

Handbook of Accounting
and Development edited
by Trevor Hopper, M.
Tsamenyi, S. Uddin and
Danture Wickramasinghe.
Edward Elgar.


The Politics of Accounting
Regulation: Organizing
Transnational Standard
Setting in Financial Re-
porting by Sebastian Bot-
zem. Edward Elgar.

Global Leaders in Islamic
Finance: Industry Mile-
stones and Reflections by
Emmy Abdul Alim. Wiley.

Economic Development
and Islamic Finance edit-
ed by Zamir Iqbal and
Abbas Mirakhor. World


Redesigning the Aeroplane While Flying:
Reforming Institutions by Arun Maira

The development
of institutions that
conform to both
democratic princi-
ples as well as
ideas is one of
human history's
unfinished tasks.
Perhaps it has
become modern India's destiny to help
finish the task. Institutions and institutional
processes provide stability, are a means to
progress and thus fulfil the needs of socie-
ty. This functionality, however, has been
lost in recent times and citizens around the
world are losing confidence in institutions
of government and democracy, free mar-
kets and capitalism. Reforming institutions
has thus become the most urgent task for
leaders across the world. Not an easy task:
it is as risky as redesigning an aero plane
while flying in it; it shakes up the founda-
tions of stability. This insightful book,
penned by a member of India's Planning
Commission, looks at how India, the
world's largest democracy, which em-
braced capitalism twenty years ago, has
become the principal laboratory for institu-
tional reform. It provides new ways to
think about institutions and the process of
reforming them and explains how we
should go about reformation as a nation.
The principles given in this book apply to
institutions of government and business in
all countries. Timely and incisive, Redesign-
ing the Aeroplane While Flying addresses
the most essential need of the hour. Arun
Maira is a thought leader and author of
several books on leadership, institutional
transformation and the future of India. He
was a member of India's Planning Commis-
sion from 2009 to 2014. Prior to that, he
was with the Tata Group in India and
abroad for twenty-five years, consulted in
the USA for ten years with Arthur D. Little
Inc. and was the chairman of the Boston
Consulting Group, India.

Municipal Finances: A Handbook for Local
Governments edited by Catherine D. Far-
vacque-Vitkovic and Mihaly Kopanyi.

This handbook
aims to help local
government practi-
tioners, particularly
staff of medium
and large cities,
improve strategic
management of
municipal finances.
The demands for
pragmatic knowledge are fueled in part by
decentralization and fiscal pressures, as
transfer of responsibilities from central to
local governments are not often accompa-
nied with an adequate transfer of re-
sources. Practitioners seek ideas and tools
to control expenditures, strengthen reve-
nues, as well as to tap large external funds,
achieve creditworthiness, and adopt good
borrowing practices. Advocating sound
municipal management based on improved
governance and enhanced accountability,
this handbook provides a comprehensive
picture of municipal finances with a broad
scope. The eight chapters cover such topics
as fiscal decentralization and intergovern-
mental finances; management of metropo-
lises; instruments of good financial man-
agement; management of revenues, ex-
penditures, assets, and external resources;
and performance measurement. Focusing
on the perspectives of local officers, this
handbook combines theory, pragmatic
how-to advice, best practices from global
experiences, and possible solutions.

Financial Management Information Sys-
tems and Open Budget Data: Do Govern-
ments Report on Where the Money Goes?
By: Authors/Editors: Cem Dener and Saw
Young (Sandy) Min

Financial Man-
agement Infor-
mation Systems
and Open Budget
Data: Do govern-
ments report on
where the money
goes?' is a World
Bank Study, initi-
ated in 2012 after
an extended
stocktaking exer-
cise, to explore
the effects of Financial Management In-
formation Systems (FMIS) on publishing
reliable open budget data, as well as the
potential improvements in budget trans-
parency. A rich data set was created by
visiting the government public finance web
sites in 198 economies, and collecting evi-
dence on the use of 176 FMIS in publishing
open budget data. This study is not intend-
ed to develop another index or ranking on
budget transparency. The scope is limited
to the budget data disclosed by the gov-
ernments on the web for the details of
budget revenues and expenditures, as well
as the results achieved. This is a tour
around the world in search of reliable open
budget data, in order to share some of the
good practices and possible answers to a
key question: 'Where does the money go?'.
The primary audience for this study in-
cludes World Bank teams, government
officials, oversight agencies, civil society
groups, and other specialists involved in
FMIS and Opend Budget Data projects. The
study shows that, as of today, only a small
group of governments provide opportuni-
ties to the citizens, civil society groups or
oversight agencies for access to reliable,
accurate, and meaningful open budget
data from underlying FMIS solutions.

However, there is an increase in demand
from citizens and civil society for improved
and complete open budget data about all
financial activities, and many governments
around the world are trying to respond to
this democratic pressure. Several cases
demonstrate that the innovative solutions
to improve budget transparency can be
developed rapidly with a modest invest-
ment even in difficult settings, if there is a
political will and commitment. In order to
further help governments within their en-
deavor and to encourage those who are
showing little or no visibility of public fi-
nance information on the web, the report
concludes with several achievable recom-
mendations and guidelines on publishing
open budget data benefiting from existing
FMIS solutions.

Closing the Feedback Loop : Can Technolo-
gy Bridge the Accountability Gap? By
Bjrn-Sren Gigler and Savita Bailur, Editors

Enhanced transparency, accountability, and
government or donor responsiveness to
people needs are imperative to achieve
better and more sustainable development
results on the ground. The rapid spread of
new technologies is transforming the daily
lives of millions of
poor people around
the world and has
the potential to be
a real game changer
for development.
Improved account-
ability and respon-
siveness are critical
for reaching the
goals of eliminating
extreme poverty and promoting shared
prosperity with a focus on improving the
well-being of the most vulnerable and mar-
ginalized groups in society. Within the
broader political economy context, many
questions remain unanswered about the
role that new technologies can play to act
as an accelerator for closing the accounta-
bility gap. Within this context, this report
brings together new evidence from leading
academics and practitioners on the effects
of technology-enabled citizen engagement.
The report aims to address the following
four main questions: how do new technol-
ogies empower communities through par-
ticipation, transparency, and accountabil-
ity?; are technologies an accelerator for
closing the accountability gap - the space
between supply (governments, service
providers) and demand (citizens, communi-
ties,civil society organizations) that must be
bridged for open and collaborative govern-
ance?; under what conditions does this
occur?; and what are the experiences and
lessons learned from existing grassroots
innovators and donor-supported citizen
engagement and crowdsourcing programs,
and how can these programs be replicated
or scaled up?. The report presents a theo-
retical framework about the linkages be-
tween new technologies, participation,
empowerment, and the improvement of
poor people's human well-being based on
Amartya Sen's capability approach. The
book provides rich case studies about the
different factors that influence whether or
not information and communication tech-
nology (ICT)-enabled citizen engagement
programs can improve the delivery and
quality of public services to poor communi-
ties. The report analyzes in depth both the
factors and process of using new technolo-
gies to enhance the delivery of primary
health services to pregnant women in Kar-
nataka, India, and of several community
mapping and crowdsourcing programs in
Guinea, Haiti, Kenya, Libya, Sudan, and
other countries.

Global Governance That
Works by Richard Jolly.

Governance and Finance of
Metropolitan Areas in Federal
Systems edited by Enid Slack
and Rupak Chattopadhyay.
Oxford University Press.

Retooling Global Develop-
ment and Governance edited
by Rob Vos and Manuel F.
Montes. United Na-

Divided Nations: Why Global
Governance Is Failing, and
What We Can Do about It by
Ian Goldin. Oxford University

Fiscal Monitor April 2014: Pub-
lic Expenditure Reform: Making
Difficult Choices. International
Monetary Fund.

Innovative State: How New
Technologies Can Transform
Government by Aneesh
Chopra. Atlantic Monthly

Transparent Government:
What It Means and How You
Can Make It Happen by
Donald Gordon. Prometheus

The Industrial Policy Revolution
I: The Role of Government
Beyond Ideology edited by
Joseph E. Stiglitz and Justin Yifu
Lin. Palgrave Macmillan.

Comparative Public Budget-
ing: Global Perspectives on
Taxing and Spending by
George M. Guess and Lance
T. Leloup. SUNY Press.

Complexity and the Art of
Public Policy: Solving Socie-
tys Problems from the Bot-
tom Up by David Colander
and Roland Kupers. Princeton
University Press.

The Persistence of Innovation
in Government by Sanford
Borins. Brookings Institution

Good Government: The
Relevance of Political Sci-
ence edited by Soren
Holmberg and Bo Rothstein.
Edward Elgar.

Why Government Fails So
Often And How It Can Do
Better by Peter H. Schuck.
Princeton University Press.

Failed States and Fragile Socie-
ties: A New World Disorder?
edited by Ingo Trauschweizer
and Steven M. Miner. Ohio
University Press.

Administering Fiscal Re-
gimes for Extractive Indus-
tries: A Handbook by Jack


Subsidy Reform in MENA

However, subsidies are often ineffective and biased against the poor. Generalized price subsidiesthe most
common form in MENA countriesare neither well targeted nor cost-effective as a social protection tool. Though
they may reach the poor to some extent, they benefit mostly the better off, who consume more of the subsidized
goods, particularly energy products: in 2008, in Egypt, the poorest 40 percent of the population received only 3
percent of gasoline subsidies (Figure 2). Moreover, subsidiesespecially those on energy products impose wel-
fare costs by distorting relative prices in the economy, which fosters overconsumption and resource misallocation.
This, in turn, reduces exportable resources and thus limits wealth accumulation for energy-exporting countries,
and weakens the current account of energy-importing countries. In addition, overconsumption leads to adverse
impacts on traffic congestion, health, and the environment, and to inefficient specialization of domestic produc-
tion, often in less labor and high energy-intensive industries. Finally, subsidies hurt growth. Although they can be
used to provide short-term support to the productive sector, in the long run subsidies have a dampening effect on
growth potential, through price distortions, under-investment in labor-intensive and energy-efficient sectors,
crowding out of productive spending on human and physical capital, and higher inequality linked to inefficient
support of the poor.

International Monetary Fund
Author/Editor: Subsidy Reform in the Middle East and North Africa: Recent Progress and Challenges Ahead
Carlo A. Sdralevich ; Randa Sab ; Younes Zouhar ; Giorgia Albertin
Date: July 09, 2014

Comic Relief 97

From Our Windows 98

We asked some of our Governance Global Practice staff in MENA for photos of what they see every day outside their of-
fice windows. Below is a short trip across the world we live in through the windows we look out from.

Did You Know?

The FM team of the Governance GP
in MENA comes from:
Bolivia, Burkina-Faso, Canada, Costa
Rica, Egypt, France, India, Jordan,
Lebanon, Morocco, Norway, Poland,
Tunisia, United States,
West Bank and Gaza, and Yemen

The team speaks:
Arabic, Croatian, English, French,
Hindi, Malayalam, Norwegian, Polish,
Portuguese, Russian, Serbian,
and Spanish.

The Governance GP / MENA 99

The Financial Management team of the Governance Global Practice (GGP) in MENA focuses on two strategic objectives:
Helping developing partner countries build their FM capacity, and
Providing reasonable assurance that financing provided by the Bank is being used for the intended purposes with economy and efficiency.

Project Country Region
The FM Unit provides assessment, design, and
implementation support services to ensure
that, for Bank-financed operations, partner
countries have in place appropriate FM ar-
rangements.These include support for the
achievement of project development objec-
tives, compliance with Bank FM requirements,
and the development of sustainable FM ca-
pacity. It actively seeks to use country FM
systems where they are assessed as adequate.

Provides information on the overall fiduciary
environment and risks, and promotes and
supports building FM capacity as appropriate
for each countrys development priorities
and institutional environment. It provides
FM diagnostics, policy and technical advice,
advisory services, and technical and project
assistance to partner countries. It also facili-
tates FM learning, knowledge exchanges,
and access to relevant global expertise.
Establish arrangements for portfolio and budget monitoring
of operational services, ensuring value-for-money and con-
sistent quality across the board. It also promotes region-
wide initiatives to create and disseminate knowledge. The
Connecting Voices of MENA initiative provides a platform
for learning and dialogue among relevant regional stake-
holders to promote sound public financial management and
corporate financial reporting.

Unit Management Team

Hisham WALY (Manager) Manuel VARGAS (Lead FMS)
Practice Management: (1) Public Financial Manage-
ment, (2) State-owned Enterprises, and (3) FM sys-
tems and processes - Operational Services: Poverty
Reduction and Economic Management, Human Devel-
opment, Financial and Private Sector Development

Practice Management: (1) Decentralization and Local Govern-
ment, (2) Social Accountability, Citizen Engagement; (3) Corpo-
rate Financial Reporting, including integrated reporting <IR>,
and (4) Fragility and Conflict - Operational Services: Sustainable
Countries Technical Practices (TP)




Mohamed YEHIA (Sr. FMS)
West Bank & Gaza

Public Financial
Management (PFM)
Corporate Financial
Reporting (CFR)
Financial Controls
Internal Audit
Hosam DIAA
Extractive Industries
Mohamed YEHIA
SAIs & Legislative

Accounting & Auditing
Gabriella KUSZ
Islamic Finance
Gabriella KUSZ
Gabriella KUSZ
Hosam DIAA
Banking & Insurance
Gabriella KUSZ
Hosam DIAA
Integrated Reporting
Gabriella KUSZ
Micro, Small, and
Medium Entreprises
Gabriella KUSZ
Fragility & Post Conflict
Mohamed YEHIA
GAC in Projects
Social Accountability & Citizen
Trust Funds
Knowledge Tools
Disbursement & Risk
Management Systems