Agriculture and Accounting in the Madness Vortex in the Neoliberal IFRS-IPSAS

ACCOUNTING

IN THE “MADNESS VORTEX” OF

NEOLIBERAL IFRS-IPSAS A criticism of IAS 41

and IPSAS 27 on Agriculture

Dr. Aji Dedi Mulawarman

Department of Accounting,

Faculty of Economics and Business

Universitas Brawijaya

Presented at Baruch College CUNY, New York, 27 April, 2012

International Conference of Critical Accounting 2012

SCOPE

• This paper criticizes the plan and application of IAS 41 (business sector agriculture accounting standard) and IPSAS 27 (public sector agriculture accounting standard)

• as part of the full implementation of IFRS adoption in Indonesia in 2012.

Neoliberalism Effects to

Agriculture • The application of IFRS will bring about cooptation of

Agriculture in the prison of neoliberalism,

• Neoliberalism clearly negates:

▫ livelihood of farmers,

▫ national agricultural self-reliance,

▫ interrelation with humanitarian values, that should be filled with spirituality and nature closeness,

IFRS against Local Values • IFRS is not in accordance to the local

philosophy of farmer relations to the nature: "sedhumuk bathuk, senyari bumi, pecahing dodo, wutahing ludira, thumekaning pathi".

• This old Javanese saying means that land is most crucial for farmers. They are willing to sacrifice their lives for their land.

The MNC’s Role on Agriculture

Neoliberalism

• MNCs hold major role through the entire line from the distribution of agricultural input industries, food processing, trading up to distribution through multinational supermarket.

The Octopus of MNC

throughout Agricultural Chains

As we can see, The MNCs get their hands on

everything!!!

Accounting that support this

madness?

• As a logical consequence, accounting is emerging as a reflection of the liberalization of business activity and the nation, both can be found in IAS 41 and IPSAS 27, which are also designed in favor of neoliberal co-optation and free trade mechanism.

The IAS 41 and IPSAS 27 will crush these

people-based farmers through

corporatocracy

• Empirical evidence shows how Tukirin,

Suprapto, Utomo, Jumidi, Dawam, Kusen,

Slamet, Ali dan Nurrochman, who were

people-based farmers from Kediri, East Java,

Indonesia, were imprisoned in 2005 because

of their corn seed production that were not

certified as ‘legal’ corn seeds that were

usually produced by agricultural MNCs, one

which is Charoen Pokphand.

CORPORATOCRACY

• Corporatocracy is selfish/egoistic/greedy activities through capital which, according to Rais (2008):

▫ “...[is] contained in the government ... who is controlled by large corporation owners as authoratitative system to

control the economy and global politics, with seven elements, namely large corporations, government political forces, ... international banking, military forces, mass media, co-opted intellectuals and last but not least , is the emerging national elite mentality of inlander, comprador or servants.”

ACCOUNTING AS

A CORPORATOCRACY TOOL • Accounting is designed as a "trap of corporate hegemony"

(Mayper et al., 2005) and "tool" of economic neoliberalism (Kim 2004; Abeysekara 2005) for the perpetuation of corporate interests (Merino et al., 2005) through manufactured consent.

• Accountants and financial analysts are "professional gatekeeper" to inject MNC's interests through political lobbying and audit deregulation for profit.

Deregulation through IFRS will cause State

Hijacked Captured Corruption

• State Hijacked Captured Corruption, is a corruption by taking the country hostage by regulatory design, whether in the form of law, Government Regulation, President Regulation and other regulatory policies.

Accounting as Colonialization tool

• Through accounting harmonization, there is "Colonialism" since the 1997 financial crisis.

• The pattern of adoption without regarding the source of the Indonesian values is called as the mentality of the palace servants (abdi-dalem) by Nataatmadja (1984, xxv). Palace servant-minded men are not considered as fully humans, who do not have any knowledge, independence or life, and therefore can be, or even should be, colonized.

Hence...The TRAGEDY MAP in

Indonesian Accounting

IASC/IASB

International Accounting Standards

Committee/International Accounting

Standards Committee

IFAC

International Federation of

Accountants

IFRS - IPSAS -

IES Translation Process IAI

(Indonesian Accounting Society)

Indonesia Financial Statement

Standard

(SAK, SPAP, SPAI dan SAS)

MNC’s and US/Europe

Intervention

IMF, World Bank,

ADB, WTO, GATT, etc

Intervention

BIG FOUR

(Indonesian Accountant)

Intervention

Colonialism Cartel

Manufactured

Consent

Professional

Gatekeeper

State Hijacked

Corruption

Abdi Dalem

Subjongos

Agribusiness is for PROFIT • Agribusiness thought directs farm-based

accounting model towards agriculture accounting. Farm accounting refers to the definition of a farmer, who conduct agricultural activities as an economic activity in pursue of high business profit (Mosher 1966); also called NET FARM INCOME

Farm accounting as commercial

accounting... the pathway to the Market

• Even in the current phase of neoliberalism, agriculture accounting is a guide for the farm, as defined by Agromisa Foundation (2006) as follows:

• “...farm as a commercial enterprise operating in a market economy ... all this with the purpose of making (more) profit and a better and lasting living for the family.”

The Key Words in

IAS 41 and IPSAS 27

FAIR VALUE

and

ACCRUALIZATION

FAIR VALUE MAINLY RELIES ON MARKET PRICE

Market Price is controlled

by the MNCs

Seeds, Fertilizers,

Distribution

As a consequence:

High Cost for Farmers,

Local Agricultural Activity

is less attractive

Further Consequence:

Shifting Land Use, while

the national food defense

decreases

As a Results, Indonesia

is more dependent on

MNCs

MNCs become more

Powerful

Farmers are marginalized

Vortex of

IAS 41

Madness

ACCRUALIZATION MAINLY RELIES ON

CASH FLOWS POTENTIAL

with Efficiency and

Effectiveness through

VFM in the CFS and BS

As a consequence:

Less Public Service

Orientation to Farmers

Further Consequence:

Removal of Subsidies and

Protection in Seeds,

Fertilizers, Product, Market,

etc

As a Results, High Costs for

Farmers and State Owned

Enterprises cause inefficiency

and ineffectiveness

Adopting Private Style

Management or Privatization

of State Owned Enterprises on

Agriculture

Farmers are marginalized

Vortex of

IPSAS 27

Madness

To Pay Off Debt to IMF,

WB, ADB, etc.

Existing and Missing Values in Indonesian

Agriculture Accounting

Missing values in

Neoliberal Agriculture

Accounting

Homo Socius

Homo Religious

Existing values in

Neoliberal Agriculture

Accounting

Homo Economicus

To Escape from these Vortex, Accounting should expand

that Conventional Views of Homo Economicus...

Homo Socius Homo Religious Homo Economicus

For Private Sector, in the form of:

- Traditional Kinship Market

- Socio Religious Cohesiveness of

Society

For Public Sector, in the form of:

Social-Religious Interaction between

Farmers and Enterprise

These views must be applied to both

PRIVATE and PUBLIC sectors:

People-Based Economy as

Solution • The progress of agriculture-based technology needs to adapt to

people's livelihood of farmers and national agricultural that is filled with the unique values of tradition, culture and religiosity.

• Healthy national economy is built through the development of business systems and competitive, sustainable and decentralized people-based agribusiness. (Mubyarto and Santosa 2003).

• People-Based Economy will strengthen the protection of farmers at international level

People-Based Agriculture

Accounting • Another way to save food security, farmers and national agriculture is

through increasing urgency to initiate people-based economy agriculture.

• Accounting as one of the pillars of the national agricultural

development also needs to be moved closer to the people's

interests instead of MNCs.

• If indeed IFRS and IPSAS do not provide support to the interests of national food security, agriculture and Indonesian farmers, then there is no other way except to throw away the idea of adoption, harmonization or convergence of IFRS, especially IAS 41 and IPSAS 27

A Reflection for Indonesian

Accounting Standards • It is therefore become important to recall what

Bung Karno (Soekarno), Indonesia’s first President, claimed for the Republic of Indonesia as he shouted "Go to Hell with your Aid", on 25 March 1964, similar to a symbol of resistance to IFRS and IPSAS, as in "Go to hell with your

IFRS and IPSAS”.

• THANK YOU