Treasury Today Country Profiles in association with Citi

Best Practice Handbook

Corporate Treasury in the Middle East Best Practice Handbook Buy print copy button

Corporate Treasury in the Middle East

Contents

Listings

Section 1: The region
Section 2: Cash management
Section 3: Trade and supply chain
Section 4: Technology
Section 5: Banking providers
Section 6: Country overviews
Section 7: The Islamic financial system
Section 8: Useful contacts

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Introduction

The Middle East is a complex and increasingly innovative region. Although some countries exhibit similarities and a level of co-ordination, particularly those that make up the Gulf Co-operation Council (GCC), it would be a mistake to treat the region as one country. Each one has specific characteristics and challenges associated with different economic and regulatory environments.

In this Handbook, we focus on the six countries in the GCC trade bloc: Kuwait, Bahrain, Qatar, United Arab Emirates (UAE), Oman and Saudi Arabia, as well as Jordan, Morocco, Yemen and Egypt whose membership of the GCC is planned, but not yet confirmed.

The region as a whole weathered the 2007/8 financial crisis well. However, its economic and political stability was threatened by popular uprisings, starting in Tunisia in December 2010 and spreading to Egypt, Libya and Yemen. Demonstrations also took place in Algeria, Bahrain, Jordan, Kuwait, Morocco and Sudan. By the end of what was collectively known as the ‘Arab Spring’, four rulers were ousted from power, while other leaders were forced to concede political and social reforms in order to quell the protests.

These upheavals have brought with them challenges for companies operating in the region. Supply chain disruptions due to the turmoil have ‘forced the hand’ of many corporates in the region, encouraging them to look at solutions such as supply chain financing. Treasurers, in particular those working in the markets where uprisings took place, are still having to deal with nervousness, tightened credit and an increased cost of borrowing.

According to Treasury Today’s Middle East Benchmarking Study 2012, the top three regional treasury priorities are:

  • Securing long-term funding.

  • Cash pooling.

  • Maintaining strong bank relationships.

The Middle East treasury world still requires innovation, and governments and banks are stepping up to the plate to deliver what is needed. Direct debits and IBANs are being introduced in many markets and central banks are building up their capacity as to the volumes they can process. Mobile payment (m-payment) services have become increasingly viable in the Egyptian market, for example, due to a soaring mobile penetration rate, which exceeded 90% at the beginning of 2012.

Domestic corporates are looking to expand their business beyond regional borders, and some of the regional banks are following them, expanding their footprint and product offering at the same time. Many multinational companies, on the other hand, are setting up regional treasury centres in order to take advantage of the Middle East’s strategic geographical position between the Asian subcontinent and Africa.

The rise of the Asia-MENA trade corridor is the big story. China has now overtaken the US as the biggest global trading partner with the Middle East, with India in third place. The UAE, in particular, accounts for over £20 billion of the re-export market – the third largest after Singapore and Hong Kong.

These new developments – and the promise of much more in the pipeline – make the Middle East an interesting region to do business in.