Leapfrogging into the Digital Age: Smarter Treasury in MENA
By Eleanor Hill, Editor
Looking from the outside in, the Middle East and North Africa (MENA) region still conjures up numerous business stereotypes – from entirely paper-based payment workflows to over-dependence on oil as a driver of economic growth. On the ground, however, these stereotypes are being swiftly overturned as governmental visions for a digital and sustainable future are embraced by citizens and corporates alike.
Forward-thinking MENA treasury functions are using the momentum behind government development plans, such as the United Arab Emirates’ Vision 2021 and Abu Dhabi’s Vision 2030, to build next generation treasury operations. As discussed at a recent Citi roundtable, thanks to emerging technologies, innovative partnerships, and sharing of best practices, many treasury departments in MENA are embarking on accelerated digital innovation journeys.
As MENA countries re-orientate themselves for sustainable economic growth, corporates are also shifting their business models – putting the region centre-stage in their global plans. David Aldred, TTS Sales Head for Middle East, North Africa, Pakistan and Turkey (MENAPT) Citi, explains: “While centralisation is not a new theme in the region, since the UAE has long been a regional treasury centre for many corporates across the Middle East and broader Africa region, we are noticing a shift in the dynamics. MENA is now becoming a global hub, not just a regional one. For example, many domestic corporates are expanding out from the region, using their UAE headquarters as their global growth platform.”
Aramex is a perfect example of this in action. The international express logistics freight forwarding company is headquartered in Dubai and present in circa 60 countries worldwide. Global responsibility for treasury is overseen by Arun Singh, the group’s Corporate Treasurer. “We operate a hybrid treasury structure for Aramex entities around the globe with functions managed from Dubai but mostly executed from our centralised shared service centres in India and Jordan. A few countries are yet to be brought into the centralised structure, but they follow the guidelines and policies set out by global treasury in Dubai.”
Emre Karter, Treasury & Trade Solutions Head, MENAPT, Citi, adds that: “As well as the rise of the UAE-based global treasury centres, we are also seeing the rise of mid- and back-office shared service centres across the Indian sub-continent as well as locations such as Jordan, Egypt, and Morocco. At the same time, the UAE also remains a popular location choice for regional treasury hubs among multinationals headquartered in Europe and the US.”
This is indeed the case for Nishat Neelay Deshmuk, Head of Finance, Maersk Kanoo. “Our treasury activities are centralised at our headquarters in Denmark. Local offices such as the one in Dubai, follow the global guidelines and are responsible for managing liquidity, remitting it back to headquarters, and ensuring that we have sufficient balances available locally to make payments,” she explains. “That requires efficient co-ordination, hence having the right technology in place is critical.”
A technology revolution
Indeed, technology is arguably one of the key forces driving the successful rise of regional and global treasury centres in MENA today. “The rapid adoption of technology in the region is pushing treasury to new heights,” says Aldred. “Over the last five years, we have seen a swathe of digital transformation across the region. Governments are investing significantly in the financial and digital infrastructure. On the back of this, MENA treasurers are adopting global best practices, and increasing their technology usage significantly, thereby jumping ahead of some of their peers in other regions.”
Karter agrees, explaining that the push by governments for “financial inclusion” is having a profound impact on the sophistication of treasury operations in MENA. “In countries such as Egypt, Pakistan and Turkey, financial inclusion efforts are leading to increased use of mobile and instant payments. These countries are leapfrogging more developed markets with their solutions, and this is leading to an evolution of treasury operations as they adapt to the 24/7 liquidity environment - these new flows require new technology set-ups to enable visibility and control at the push of a button,” he says.
Maersk is one global company that has taken advantage of this technology wave, having already embarked on an award-winning digitisation journey in the UAE. As Nishat Deshmukh explains: “Until three years ago, 75% of our collections in this region took place over counters at our shipping offices and involved either physical cash or cheques. There were a few larger customers that would pay via bank transfer, but they were the exception to the rule. So, we embarked on a digital transformation journey with Citi to migrate physical collections to digital ones.”