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Who Wants To Be a Millionaire? Try UAE The Editor looks at the implications of the rapid economic growth of the UAE for corporate treasurers operating in or responsible for the region.

Who Wants To Be a Millionaire? Try UAE

by Helen Sanders, Editor

This month has been significant for a number of reasons. February 2014 sees the Winter Olympics in Sochi, the end date (or should it be start date) of SEPA, and the very last episode of ‘Who Wants To Be a Millionaire?’ in the UK. Yes, the game show that was first broadcast in 1998, with peak viewings of 19 million viewers, 30 series, five millionaires and 83 foreign language versions has finally come to an end. So, in the spirit of nostalgia and trivia, here is today’s first question. There are no lifelines, as unless you have a very odd treasury setup, you probably have no audience, and your husband/ wife/ partner will be alarmed if you call them to answer random trivia questions.

So, for – say £1,000:

Which of the following statements is not true of the United Arab Emirates (sorry, did I forget to mention that UAE was the theme of this month’s article?):

A. Expo 2020 will take place in Dubai.

B. More than 50% of GDP is generated through oil and gas-related activities.

C. Foreign trade first developed in the second millennium BC, encouraged by the domestication of the camel.

D. There are probably a large number of parcels in a pile at Dubai Port ordered online by UK customers who unwittingly selected ‘United Arab Emirates’ rather than ‘United Kingdom’ from the ‘Country’ list when clicking too quickly.

Did you get it? C is probably questionable, coming as it does from the All-Seeing Font of All Knowledge (the internet); D has nearly happened to me many times, so it may be true. In fact, B is the one that is definitely not true: contrary to popular opinion, only 25% of GDP in UAE is generated from oil and gas revenues (source: CIA World Factbook). This reflects a highly successful policy of economic diversification, and although there are still efforts to further reduce this concentration, together with efforts in areas such as increasing local employment and developing infrastructure, UAE is strongly positioned to sustain solid economic growth. According to the World Bank’s most recent international business report, ‘Doing Business 2014’, UAE is the 23rd easiest economy in the world in which to do business (of a total of 189) the highest in the region and ahead of Japan, Netherlands, Switzerland, Belgium, France and many other established economies.

Developing financial maturity

Bearing in mind that the UAE is only 30 years old (don’t we all wish….), the speed with which its economy continues to mature is remarkable. As Sunil Veetil, Regional Head of Payments and Cash Management, HSBC Middle East and North Africa says,

“Over the past seven or eight years since I was last based in the Middle East, the market dynamics have changed considerably. UAE is now firmly established as a solid base for doing business across Middle East and Africa, which is very apparent when you look at the amount of traffic through its roads, port and airport. Not only is traffic passing through, but there is a growing focus on adding value at these transit points.”

He continues,

“Not only is the economy growing rapidly, but the international profile of UAE and the wider region continues to develop, with major events such as Expo 2020 in Dubai and the FIFA World Cup in 2022 creating positivity and encouraging tourism, trade and investment.”

The challenge for an economy that has developed so quickly is that this development cannot always be consistent across all areas. Therefore, UAE has historically lacked the regulatory and financial infrastructure to which many foreign multinationals have been accustomed. This in turn can lead to a lack of business confidence and inconsistent business models which may be less efficient. As Steve Donovan, Treasury and Trade Solutions Head for Middle East, Turkey, North Africa and Pakistan, Citi describes, however,

“Not only are we seeing very positive economic change in many parts of Middle East, such as UAE, but the regulatory and banking environment is also developing rapidly in line with international standards. For example, several central banks are investing heavily in clearing systems to improve automation. Banks too are placing substantial investment into financial infrastructure projects to support regulatory changes.” 

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