Much has been written these past few weeks about the imbroglio now besetting Sycip Gorres and Velayo (SGV), the country’s largest and most respected accountancy firm. As passive spectators in the unfolding SGV drama, some groups have expressed deep concern over how this episode would end up, because it could write finis to a revered Philippine institution unless something is done soon to amicably settle this controversy.
If a company wants to put a badge of credibility into its auditing procedures and results, it hires SGV to do the audit. That’s how respected the firm is. In fact, over 60 percent of the Philippines’ top 100 corporations go to SGV for their auditing requirements.
The firm is acknowledged as having pioneered the “Filipinization” of the accounting profession. It worked out a merger with Henry Hunter Bayne & Co. (HHB), a firm which started its practice in the country in 1906. Then in 1953, Thomas Farnell, a senior partner of HHB, decided to return to his homeland and sell his practice to two Filipino accountants—Arsenio Reyes and Ramon Gorres. After a series of negotiations, the two companies merged to form the largest accounting firm in the Philippines. From this, SGV was born.
That was a time when nationalism meant rebuilding a country and establishing an identity that was truly Filipino. SGV snatched the accounting profession from foreign hands back then because it was the right thing to do at that time.
But with the advent of globalization came a borderless world economy in which protectionism has become an anachronism. This is the bigger picture that the protagonists in the SGV controversy should concern themselves with. SGV would not survive the new global order were it to ensnare itself in a cocoon of false nationalism in the same way that the entire Philippines would be left behind in this new millennium in terms of technological advances in many fields were it to remains a closed or inward-looking economy.
True, the Constitution states that the practice of all professions in the Philippines shall be limited to Filipino citizens, save in cases prescribed by law. But it should be recalled that the Philippines is a signatory to the World Trade Organization Agreement, of which one aspect is the General Agreement on Trade and Services or GATS.
Experts point out that the WTO Agreement was ratified by the Philippines in 1994 so it has the force of law in our country.
The “services” referred to under the GATS, as explained by Supreme Court Justice Dante Tinga to Ateneo law graduates last year, is “any service in any sector except services supplied in the exercise of governmental authority”, the latter exception being defined as “any service which is supplied neither on a commercial basis, nor in competition with one or more service suppliers.”
Based on this definition, Justice Tinga had said that the provision of professional legal services is clearly included under the GATS. If this is the case, then accountancy and audit services are also included as part of this “cross border practice” of professions.
Since the GATS is part of the WTO Agreement, a treaty which the Philippines ratified in 1994, it has the force of law in this jurisdiction. In any event, any legislation allowing foreigners to practice their profession in the Philippines will pass constitutional muster, except the professions which the Constitution specifically confines to Filipino citizens, such as the management of mass media or the advertising industry, Justice Tinga had explained.
Thus, SGV’s current relationship with US-based Ernst & Young is legal under both domestic and international laws. And the argument by critics that such a partnership would violate the constitutional proviso on Filipino ownership of domestic companies and the anti-dummy law, actually has no legal leg to stand on.
In the first place, other local auditing firms have also gone the same route as SGV had done. Isla Lipana and Co. has UK’s PricewaterhouseCoopers as its partner, while Manabat Sanagustin & Co., has KPMG. Manabat Delgado Amper & Co. is a member firm of Deloitte Touche Tohmatsu. This only shows that the rule of the game under the borderless world is to partner with world-class corporate giants—and adopt cross border practice—or fold up under the relentless pressures of fierce global competition.
Moreover, SGV has entered into this kind of widely practiced international partnerships since 1985, when it became a member firm of Arthur Andersen & Co.
As for the so-called internal restructuring agreement, which is the bone of contention within the SGV, its still work-in-progress. SGV founder Washington Sycip himself has lamented what he had described in a media interview as the “completely wrong reporting” on the issue.
The agreement, Sycip explained, would not even make Ernst & Young a co-equal of SGV. As professionals, of course, Sycip said they can take a look at the accounts that Ernst & Young is doing for SGV in the same way that the former can take a look at the accounts that SGV has.
This is the same practice done in other accounting firms that have foreign partners. Isla Lipana, Manabat and all the others have followed SGV’s lead because they know that in order to compete globally and survive in the Knowledge Age, establishing alliances with internationally recognized leaders in their particular field of trade is the only way to survive—and excel.
Not so hidden agenda
GlaxoSmithKline (GSK) has dropped the prices of most of its major medicines by 30 to 50 percent in a bid to make quality medicines affordable to more Filipinos.
Starting last March 1, GSK reduced prices on medicines for acute diseases such as pneumonia and other bacterial infections, ulcer, bronchitis, hospital acquired infection, nausea and vomiting among others. Its cervical cancer vaccine continues to be available at a more affordable price, after it was reduced by as much as 60 percent in Nov. 2008.
The reduction puts in motion the global thrust of GSK to widen access to quality medicines all over the world.
Recently, GSK global chief executive officer Andrew Witty set out an ambitious new agenda to tackle the challenges of improving global health. This includes drastically reducing its prices in the 50 least developed countries and being flexible in pricing for middle-income countries such as the Philippines to better respond to the needs of the patients.
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