The recent events in the Middle East are a reminder of how we continue to live in times of great uncertainty and treasurers continue to monitor events and take appropriate steps to mitigate any additional risks to their organisations. However, many countries in the region are successfully transforming their business environments. But do treasurers have the necessary tools with which to take advantage of these opportunities for growth in a turbulent global economy? To get a clearer understanding of the issues that lie ahead, The Treasurer spoke to James Adams, group treasurer of Chalhoub Group and chair of the ACT Middle East Advisory Panel.
JA: The Middle East is a broad region, covering a diverse range of countries and local economies. Despite the recent challenging global backdrop, several countries in this region have been able to continue making great strides in their programme of reforms and investments, particularly the UAE and Kingdom of Saudi Arabia (KSA). For many professionals, these two countries have been the place to be with many opportunities spurred by positive change.
We have seen some countries reinvent themselves since the pandemic. Although there are still global tensions, with geopolitical and economic uncertainty, the UAE, KSA and Qatar have all benefited from tailwinds in this region. Rising oil prices have brought in greater liquidity and provided support for spending on structural diversification projects in several sectors. Inflation has also been relatively benign compared with other parts of the world, in part due to the strong US dollar, although housing costs have recently risen to reflect increased demand.
KSA, in particular, is moving ahead at a rapid pace as the government invests in huge giga-projects for its "Vision 2030", such as the Red Sea project and the ambitious new city of Neom, while also creating social change. This, in turn, has led to increased demand in sectors such as construction, tourism, hospitality and property. The situation is very promising long term if this trend continues.
However, other countries in the region that are not beneficiaries of these tailwinds have seen more challenges recently, such as Egypt and the Levant area. Treasurers have needed to use their full toolkit to manage specific issues, such as foreign exchange restrictions, currency devaluation and trapped cash.
The treasury profession has developed across the region, particularly for skills, expertise and qualifications
JA: The regional transformation has helped drive the demand for professionally qualified treasurers. It is a much more mature profession now compared with 10 years ago. There is more local talent as well.
This surge in demand for professional skills was demonstrated by last year’s announcement that Abu Dhabi Global Market Academy would be working with the ACT to deliver treasury qualifications in the UAE.
For treasurers here, there is also significant change in the tax and regulatory environment. For example, the introduction of new taxes – VAT has now been widely adopted in the region since 2018 and corporate taxes have been introduced this year in the UAE – means that treasurers are for the first time now working in areas of taxation. We are looking at economic substance, tax planning and transfer pricing, diversifying our work.
The use of technology in treasury operations has also increased rapidly in recent years but the flip side is that, inevitably, there has also been a boom in cyber threats and digital fraud. This requires companies to think more about cyber security and the wider data challenge.
The ACT Middle East Advisory Panel now has close to 20 corporate members representing some of the largest companies across the region, and is increasingly looking to broaden its activities to support local treasury professionals. I have served on the judging panel for the ACT Middle East Treasury Awards for several years, and I was particularly impressed to see the quality of local nominations outside the UAE more recently. This highlights how the treasury profession has developed across the region, particularly for skills, expertise and qualifications. I was especially proud to announce the 2023 winners at the ACT’s Middle East Treasury Summit.
Sustainability is becoming an increasingly important area of focus in the region. We have long believed that finance professionals are well equipped to drive sustainability programmes within their organisations, as they can measure and report on key metrics and have a broad range of stakeholders. I have been working with the chief sustainability officer at my group to ensure that our KPIs for sustainable finance are meaningful, and we have recently agreed a sustainable working capital facility, which is linked to science-based metrics.
The presence of COP28 in the UAE and COP27 in Egypt have also served to underline the growing importance of sustainability to the region, which has seen a number of government ‘Visions’ that set out programmes that will help the region diversify from an oil-based economy to one that is able to secure income from other sectors. Technology hubs are springing up in the region, while tourism is booming.
For me, it is always about the networking and sharing of best practice to find solutions for common challenges. I am looking forward to congratulating all the award winners.
All of this makes it an exciting time to be here.
James Adams is group treasurer of Chalhoub Group, chair of the ACT Middle East Advisory Panel and head judge for the ACT Middle East awards. He was speaking to Philip Smith, editor of The Treasurer