Dispatch (Asia version)
| by Peta Tomlinson, Majella Gomes, Sonia Kolesnikov-Jessop 20 Nov 2007 Topic: News |
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Hong Kong accountants are enjoying increasing status and recognition for their contribution to the workplace. Across all areas of both the public and private sectors, employers are giving credit to their accountants for their professional expertise and the value they add to the organisation. In particular, Hong Kong accounting professionals are impressing bosses with their ability to move forward with new regulations. This contrasts sharply with the US and UK, where only a third of accounting staff are deemed to have a better grasp of today's new regulatory environment than they did five years ago. According to recruitment agency Robert Half International, which surveyed employers, the vast majority of Hong Kong accountants are regarded as more important assets than they were five years ago. The agency's Hong Kong director, Andrew Brushfield, says the stature and responsibilities of accounting professionals have been elevated, as has the level of trust placed in them. 'More than ever, they are counted on to be accurate and objective in financial reporting and auditing, tax advice and compliance, business and personal financial advice, and an expanding array of other services,' said Brushfield. 'This is true right across the field - in public accounting, within a public or private company, for government agencies, nonprofit organisations, and in academia as well.' Tighter corporate governance is also placing accounting departments in a greater position of responsibility than ever before. Brushfield says that many public companies are going beyond minimum regulatory requirements to make sure their business practices and culture are beyond reproach. 'We expect that having a reputation for effective governance will continue to grow in importance for companies in the post-reform era.' The survey also found that while experience always counts, Hong Kong SMEs value a candidate's educational qualifications twice as much as their experience. Brushfield says Hong Kong accountants are better qualified than their counterparts in many other countries, and are highly commercially focused. 'They're getting into aspects of the business that previously accountants wouldn't be involved in, and this is earning recognition from bosses.' Brushfield said the increased importance of their corporate role presents Hong Kong accounting and finance professionals with tremendous opportunities to use their skills and experience. Moreover, as compliance requirements become integrated across organisations, companies are prompted to seek professionals to support additional business needs. Robert Half International is a leading recruitment agency for positions in the finance, banking and accounting fields. The firm has more than 350 offices worldwide. Malaysia's national oil company, Petroliam Nasional Berhad (Petronas), has inked a deal with top Australian energy firm Woodside Petroleum Ltd to buy over Woodside's assets in Mauritania for US$418m. Oilfield development Chinguetti, worth about A$1bn, is at the core of the deal, which includes other offshore producing, development and exploration interests. Petronas already holds an exploration block in Mauritania, in addition to operations in Chad, Sudan and South Africa. Chinguetti has been a less than stellar performer. It came online in February 2006 and peaked at about 75,000 barrels per day (BPD). However, production declined to just 20,000 BPD in less than 10 months. For Woodside, therefore, the deal appears to be one of cutting losses and extricating itself gracefully from a no-longer-lucrative proposition. Its African foray - assets include exploration acreage in Libya and Kenya, and a natural gas venture in Algeria - has cost it more than A$100m in exploration alone. Petronas, on the other hand, appears to be on an upstream buying spree. In addition to its African holdings, it has a stake worth US$1.1bn in Rosneft, a company present in all major oil and gas producing regions in Russia, including eastern and western Siberia, the Far East, the Northern Caucasus, Timano-Pechora, the Volga-Urals, the Black Sea and the Sea of Azov. Its average daily crude oil production is approximately 1.7 million barrels. Besides Rosneft and Woodside, Petronas also recently signed an agreement with Shell for a stake in a project in the Timor Sea. Petronas contributes a significant amount to the Malaysian GDP, and makes almost as much as ConocoPhillips, the third-largest oil company in the US. Apart from the members of the Organisation for Economic Co-operation and Development (OECD), Singapore has become the most active cross-border mergers and acquisitions (M&A) player, well ahead of China and India, an OECD study, International Investment Perspective 2007, has showed. Cross-border M&A activity is a significant subset of foreign direct investments (FDIs), and in OECD countries it accounts for more than half of total direct investment. Citing figures compiled by Thomson OneBanker, the study shows Singapore to be the biggest non-OECD investor in M&A activity in the OECD region. The small city state was followed by Brazil, the UAE and South Africa. China and India did not even make it to the top 10 list. Including transactions valued at more than US$100m, Singapore has done M&A deals totalling only US$36bn in the OECD from 1990 to May this year, or 14.5% of the total M&A activity in the OECD accounted for by non-OECD investors during this period. Singapore was also the largest non-OECD country involved in M&A deals outside the OECD, ploughing in US$35.8bn over the period or 25.3% of the total in the region involving non-OECD countries. It was followed by China, Malaysia and South Africa. The report pointed out that while countries like China and India have been in the spotlight for their M&A deals, often portrayed as 'trying to take over' prized assets in the OECD area, the reality is that other countries come well ahead of them. It added that the media attention given to the rise of the new M&A giants from emerging economies had been somewhat disproportionate with respect to the dimension of actual flows from these sources. To give but one example from the report, fewer Americans work for companies from Mexico (the emerging economy which accounts for the largest number of jobs in the US) than for a single Dutch company, Phillips. According to the study, the mining and processing of raw materials sector saw the biggest amount of cross-border M&A activity in the OECD last year, followed by the telecommunication, financial and the media and entertainment sectors. Since the 1990s, at least 43% of the M&A outflows from emerging economies, including Singapore, have targeted enterprises in the services sector worldwide. Another 19% concerned access to raw materials, or companies that process them. Malaysia's new single-tier corporate tax system, announced on 7 September 2007, in conjunction with the National Budget 2008, is already making an impact. Under the former two-tier imputation system (TTS), profits earned by companies were taxed twice: first at company level, and then at shareholder level in the form of individual taxes on dividends earned. The new single-tier corporate tax system (STS), however, will only see company profits being taxed once - at company level. Shareholders of the company receiving dividends will no longer be taxed on those dividends. The new policy is already creating ripples, with analysts readjusting their valuations of individual counters. At least one main board-listed company, PLUS Expressways Berhad, has had an upward revaluation, and more may follow. Analysts say that many companies listed on Bursa Malaysia, the Malaysian Stock Exchange, which may have had large accumulated tax-exempt profits will now be able to declare them without having to pay the price of declaring those dividends. The new single-tier system provides a six-year transition period up to 31 December 2013, and is likely to be adopted by companies, particularly when their tax credit account has been exhausted. Under the TTS, many companies have been paying dividends from a tax credit reserve, the Section 108 tax credit account. While companies may be heaving sighs of relief, other groups may be less than enthusiastic about the shift to the single-tier tax system - individuals paying personal taxes, for instance. Shareholders who pay less than corporate-rate tax will no longer be entitled to refunds from dividend tax credits, while those who are taxed higher than the corporate rate of 26% will not have to pay the additional tax. Generally, the implementation of the single-tier tax system is perceived as beneficial to business, but analysts concede that it will affect shareholders who are already living on fixed incomes, such as pensioners, who will not be able to avail themselves of tax credit dividend refunds. Australian treasurers should be thinking above the bottom line to now consider the waistline, recent studies have suggested. Research by Access Economics puts the economic cost of Australia's growing obesity problem at a hefty A$21bn a year, including A$1.7bn in lost productivity. With more workers spending more time in the office, companies have good reason to make wellness central to their corporate strategy - and according to PwC, the economic case for ill health prevention is 'overwhelming'. A study by PwC's Health Research Institute, in conjunction with the World Economic Forum, found companies who implement workplace wellness programmes can expect a three-to-one return on their investment. PwC says that in addition to mitigating health risks for an ageing workforce, wellness programmes will help companies keep employees happy and attract new talent. Professor Ian Caterson, head of the Institute of Obesity, Nutrition and Exercise at the University of Sydney, suggests companies consider financial incentives as a means of motivating productivity. He says tax breaks are already available for companies that put in gyms and encourage their workers to use them, and promote small practical incentives such as providing healthy fruit in the workplace. In a corporate setting, Caterson says lifestyle intervention programmes involving the whole company would probably work best. Susan Heron, CEO for Victoria and Tasmania of the Australian Institute of Management, says staff wellness is becoming a priority for Australian companies which have been 'caught up in the generational change'. 'Older employees have health issues, while younger people are more aware - both ends are squeezing in,' she explained. 'There's also growing recognition of the value of human capital. Smart employers realise their workplace must have a competitive advantage and they need to do something to retain staff.' Companies must also ascertain what is realistic and deliverable, and while large corporates might have a budget to invest in staff wellness, it is harder for smaller firms. 'I think there will be more spending in these areas going forward, but companies must first evaluate their priorities,' Heron said. While China's financial markets continue to surge, merger and acquisition (M&A) activity in the mainland appears to be in rapid decline. According to research from Grant Thornton International, deals are dwindling in both number and volume. For the first six months of 2007, foreign businesses were involved in 105 M&As worth US$1.9bn. This indicates there will be a major reduction from the whole of 2006, when 279 deals worth over US$11.5bn were made. The US remains China's biggest foreign investor, doing 27 deals this half, followed by Hong Kong with 26. But who, or what, has applied the brakes? Stephen Chipman, CEO of the Grant Thornton China Management Company, says several factors have contributed. First is the introduction in late 2006 of China's new M&A regulations targeting foreign investors. This created additional restrictions and approvals for certain types of transactions in certain industries that could 'impact on national security', he said. Another factor could be the question of cost. Chipman notes that valuations of targets in mainland China for foreign investors have been running quite high, and this may be deterring deals. Newly prospering India has also been suspected of stealing China's thunder. Ian Smart, head of international M&A at Grant Thornton corporate finance, said: 'The reduction in M&A activity in mainland China is interesting and is perhaps the result of the increased M&A activity in India. Indian businesses over the past 12 months have benefited from the more welcoming business regulations.' China's share market, however, continues its bull run. According to data provider Thomson Financial, mainland Chinese IPOs have raised a record US$40.5bn so far this year, surpassing the US$21.1bn for all of 2006. In May, the value of shares traded on mainland bourses was, for the first time, greater than the rest of Asia combined. In August, the Chinese stock market was declared bigger in terms of market value than Japan's (taking into account Chinese companies listed in Hong Kong). Analysts say this underlines the dramatic surge in the mainland's financial markets over the past 18 months. China's equity markets even remained strong throughout the recent worldwide decline. Why? No one has a good answer, wrote Harold Furchtgott Roth in the New York Sun, though the headline did offer one scenario: 'China stock market defies gravity'. The Monetary Authority of Singapore (MAS) has proposed changes to the Securities and Futures Act and the Financial Advisers Act that aim to enhance regulatory oversight of capital markets services (CMS) and financial advisers' (FA) licences. Among the changes, the MAS proposes to let the holders of licences for capital markets services and financial advisers have perpetual licences so that they do not need to renew their permits every three years. It also wants to amend the law requiring foreign regulators to obtain its permission to inspect CMS and FA licence holders, though such inspections would be subject to safeguards, including the requirement to protect confidentiality of information. Currently a foreign regulator must seek the consent of the licence holder before carrying out the inspection, but does not require MAS consent. MAS is also proposing to extend the power to issue a prohibition order to banks, insurance and finance companies which are at present exempt from licensing. Currently, MAS is empowered only to issue such orders against CMS licence holders. Other changes propose to amend the definitions of 'securities' and 'futures contract' to allow MAS to prescribe new products as securities as well as exclude other products which may not be considered as financial instruments. in brief...
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