This article was first published in the February 2015 international edition of Accounting and Business magazine.

Afghanistan, with its population of 30 million, has barely 1,000 certified accountants, not even 200 of whom are Afghans, according to the American University of Afghanistan (AUAF). Nor does the country have any national accounting regulations. 

Over 30 years of conflict has left the Afghan economy in shambles. With foreign troops set to withdraw by the end of 2016, developing the accountancy sector and domestic regulations is a priority for underpinning sustainable growth.

‘There is a massive gap in skilled, qualified accountants. Several years ago, there were just two ACCA-accredited accountants, and now there are 12,’ says Feroz Rafiq, the first to be accredited in the country and CFO at Afghanistan Holding Group (AHG), which provides professional business services. 

‘There is a bit of a brain drain, but there’s not really an accounting pool for people to drain from,’ he adds. ‘In fact, accountants can make more money here than in Pakistan or Dubai because of the shortage to cater to the country’s 17 banks, five major telecommunication companies, and hundreds of non-governmental organisations (NGOs).’

While small accountancy firms exist, international and Pakistani firms do the bulk of international-standard accounting in the country. Hedayatullah Yahya, CEO of Afghan United Bank, says: ‘Accredited accountants are either at foreign companies, banks or NGOs. Basically, the government and business don’t use qualified accountants but rely on those with an MBA, which is very different from an accounting qualification.’

The high-profile Kabul Bank scandal in 2011 did nothing to enhance the reputation of accountants. Both PwC and Deloitte faced criticism following a US$900m fraud. 

‘The scandal left a sour taste, as very few people now trust the banking system,’ says Sanzar Kakar, chairman of AHG. ‘A further negative was that there were a number of knee-jerk reactions, with, for example, more regulations for opening bank accounts and getting financing, which is almost non-existent, as to get a loan requires, among other things, 300 per cent collateral.’ 

Slow progress

Despite the scandal and a World Bank-funded project at the finance ministry in 2012 to develop an accounting law and set up an accountancy body to govern the sector, no significant progress has been made to date. 

Abdul Hakim Waziri FCCA, an accounting lecturer at the AUAF, says: ‘The lack of a standardised approach towards accounting is hindering the sector as different organisations follow different standards of accounting, which often leads to confusion and misinterpretation of accounts. 

‘There is a need to change this as quickly as possible because in the coming years, there will be greater demand for people specialising in accountancy and financial management.’

Accountants are hopeful that once the newly elected president, Ashraf Ghani, has managed to form a government, this drawback will be overcome. But even when the political stalemate has been overcome, there will be a great deal on the national plate for any incoming government. 

Kakar says: ‘The issue for investors is security – fiscal security – and corruption in the government. Accounting is not anywhere near being a top issue to tackle.’

Abdurrahman Al-Hashimi, a consultant with a Dubai logistics firm who was the second Afghan to achieve ACCA affiliation certification in 2009, suggests that any new law should take into consideration the accounting standards used in major trade partner countries. 

Al-Hashimi says: ‘We need GAAP for Afghanistan and ultimately to develop our own standards, including by working with accounting bodies in the region, particularly those in Pakistan, India and the United Arab Emirates.’

That said, Afghan institutions such as the AUAF, Mashal Institute of Higher Education and Bakhtar University are running specialised courses offering qualifications from ACCA and others to bolster the number of Afghani accountants. Some 280 students are enrolled on the AUAF’s ACCA programme, and a further 2,500 in ACCA courses. The AUAF is expanding outside of the capital Kabul – an important move as just 22.6 per cent of Afghanis live in urban areas. 

Following a survey last year that indicated clear demand for accountants in the private sector, the AUAF has opened branches in Kandahar and Herat, and plans to open in Mazar-i-Sharif, Balkh and Jalalabad, too. ‘We expect to train 5,000 accountants over the next four to five years,’ says Ahmad Reshad Popal, executive director of the AUAF’s Professional Development Institute.

This will not be easy, partly because classes are taught in English rather than in local languages such as Dari and Pashto, so students first have to learn English to a proficient level.

What’s more, few companies offer internships, making it hard to acquire accounting experience, something compounded by the poor economy. Yahya says: ‘Companies are not taking on many interns due to there being costs attached and most projects were in construction, but these have slowed down, so demand for accountants and interns has decreased.’

Optimism

But as NATO troops withdraw and the economy moves from being donor-based to private, Afghan accountants believe that there are grounds for optimism, especially if an accounting law is put in place. 

‘No matter how bad business is in Afghanistan, the experience of emerging markets globally shows that accounting firms always emerge to do much better,’ says Al-Hashimi. ‘The shift from donor-funded projects to the private sector means there is potential for the sector, especially as there will be huge demand from the mining and agricultural sectors.’