Middle East Winners: Steady Progress

Treasury and cash management in the Middle East region is complex and unique—reflecting the different economies and companies that operate here. The region is home to some of the most advanced corporate treasuries in the world—and a host of smaller treasury operations that are becoming increasingly sophisticated. Regional banks have worked hard to provide services that meet the needs of these diverse client bases, to ensure that companies have the tools they need to excel as their focus turns outward from home markets.

The region saw limited economic improvement in some countries, rather than broad-based progress in 2016, according to Focus Economics. It also saw geopolitical stability improve in some markets, such as Iran and Iraq, while others, namely Syria, continued to deteriorate.

But those countries dominated by the oil and petrochemical sectors continued to suffer as a result of low-for-long oil prices. One of the key impacts has been less liquidity, as governments struggle to cover budgets and pull liquidity from the region’s banks to do so. A related effect is higher costs and reduced funding access for corporations.

This means that companies have had to become more efficient in their cash and working-capital management, leading them to look for better tools and services. This is especially true for small and midsize enterprises and family-run businesses. Many companies had grown accustomed to easy access to funding and liquidity in the heady days when oil was priced at $100 or more a barrel.

But given the sophisticated operations of the region’s largest companies, many are looking to treasury solutions that can increase enterprisewide visibility across the working-capital cycle.

Economic and regulatory reforms to increase business friendliness have been a key plank in the agenda of some of the region’s largest economies in recent years. Companies can make use of regional solutions, such as cross-border cash pooling, to increase efficiency of liquidity and cash management.

In addition, digitization of payments is a key area of development for corporations—although it is hampered by the fact that many markets continue to be driven by cash and checks, and by payments infrastructures that vary greatly from market to market.

The year 2017 started out on a positive note for the oil-exporting economies of the region, as oil prices began to rise following the oil-output cap effected by OPEC. But souring that for many countries was the immigration ban, currently under review by the judicial branch in the United States, that was enacted by President Trump’s administration in late January. 

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