The annual GTR Mena event returned (virtually) on February 15-17, to reflect on an eventful year for global trade and developments in the Middle East and North Africa.
The event saw players from across the trade ecosystem join to discuss a wide range of topics, from building back trade resilience post-pandemic to the growing focus on ESG in the industry, the rise and rise of digitisation, and the opportunities and challenges brought about by the shifting political landscape.
In this post-conference wrap-up, we bring together some of the main takeaways and key insights.
Surviving and thriving in the face of myriad challenges
In stark contrast to 2020’s GTR Mena gathering, at which talk revolved around the build-up to Dubai’s Expo 2020 and the potential of the numerous ‘Vision’ programmes put together by the region’s governments to further advance Mena’s role as a leading trade hub, conversations at the 2021 conference were dominated by the fallout from the events of the past 12 months.
Aside from the Covid-19 pandemic, the oil-dependent economies of the GCC experienced the additional shock of the slump in oil prices, while a decline in overall global demand weighed on the region’s exporters. This, as panellists at the roundtable on the first day of the event noted, was a year in which even the best-made scenario plans had to be rethought – but the overall sentiment was that corporates had stepped up to the plate.
“The companies here have demonstrated huge resilience and agility in navigating their way through to make sure they were able to survive, which has been critical for everybody over the last 12 months,” said Matthew Hurn, chair of the Middle East Advisory Panel at the Association of Corporate Treasurers (ACT).
While the focus for many firms operating in the region has been on staying afloat during trying times, Graham Griffiths, associate director at Control Risks, cautioned against overlooking the wider picture. “Geopolitical developments and risks didn’t stop just because the pandemic happened,” he said, adding: “The transition to working from home gave rise to cyber vulnerabilities, and that was exacerbated in a region like ours where a lot of that cyber risk is driven by geopolitical events and nation-state activities.”
For financiers, too, the current backdrop is a challenging one. In a panel titled Adopting new approaches to risk in the financing of trade, Fiji Varghese, regional head of trade finance, Middle East at Crédit Agricole CIB, said: “One of the pinch points for trade finance in the market is in contracting, and banks are very cautious on that sector in that region. We are also now starting to see the 2020 balance sheets coming in and we see some deterioration which is destabilising the working capital and cashflow requirements of counterparties. Our biggest focus now is on credit risk. In the region there is a flight to quality, and with that comes concentration risk on the larger entities.”
The Biden effect
Coming just weeks after the inauguration of the new US administration, the conference hosted several conversations about the implications of a newly multilateral US foreign policy approach on Middle East trade and national security issues.
“There is still a lack of transparency in the region when it comes to trade transactions which will implicate the US’ view of the sanctions and other rules that should be in play. The Biden admin has talked about the Joint Comprehensive Plan of Action (JCPOA) and what it will do to get back into that deal but only after Iran demonstrates its willingness to fall back in compliance. So those who were hoping for a quick change will be disappointed,” said John Smith, partner at Morrison and Foerster LLP.
UAE-Israel relations: the dawn of a new era?
Trade between Israel and the UAE has long been off-limits. But a historic agreement to normalise relations means hopes are now blossoming that a lucrative new trade corridor in the Middle East is being established.
“I truly believe that the signing of the Abraham Accords is a game changer. It has the potential to really change the trade map of Israel,” said Idan Shapira, head of participation and international syndication at Israel’s Bank Leumi.
Speaking from Dubai, Sanjeev Dutta, executive director of commodities and services at the Dubai Multi Commodities Centre (DMCC) said: “The region is very excited to be signing this accord and for the DMCC in particular it’s a huge opportunity for both inward and outward trade.”
Estimates suggest trade between the two nations could eventually reach as much as US$4bn a year, creating around 15,000 jobs in a range of sectors. Patricia Tiller, managing partner at Hunton Andrews Kurth LLP, believes that the ramp-up in bilateral trade is already under way.
“We’re seeing a lot happening in the energy sector at the moment,” she said. “There are several opportunities for direct trade to Israel as well as access to the Mediterranean via the EAPC pipeline which runs from south to north across Israel. Gaining access to this pipeline is a significant change in oil exports for the UAE.”
The supply chain to save the world
As the Herculean task of vaccinating the global population against Covid gets underway, questions remain as to how governments, manufacturers and healthcare providers will overcome complex logistical obstacles across the entire global supply chain. A session that brought together Eric Ten Kate, vice-president of Life Sciences at Agility GIL and Mitch Wilson, CEO of Global Response Aid, highlighted the progress of the Mena region in putting in place the necessary infrastructure.
For example, Dubai has recently launched the Vaccine Logistics Alliance, which brings together Emirates Airlines, DP World’s global network of ports and logistic operations, Dubai Airports and Dubai’s International Humanitarian City, while Abu Dhabi has also set up a global logistics centre. Meanwhile, air corridors are being set up to connect major vaccine manufacturers in India with markets around the world, via the UAE.
Greening the Middle East
As countries around the world now look toward a more sustainable future post-pandemic, panellists discussed the extent to which the Mena region, which has historically been known for its dependence on fossil fuels, will leverage the disruption brought by Covid-19 to embed sustainable practices into every level of the economy.
“The ESG topic is an emerging topic,” said Sereen Ahmed, head of trade and working capital, Middle East at Barclays.
“We do see a lot of discussions around ESG but there is lot of work for all of us to do going forward,” added Okan Dalaney, head of structured trade finance at ADM. “There are specific tasks for the banks to come up with new products, because the financial incentive is not yet there.”
However, Roheet Shah, co-founder of Carbon Chain, highlighted that the region’s comprehensive integration into the global economy and into global supply chains means that there is little time to waste. “Even if you’re based in the Middle East, you can still be impacted by regulations, for example, popping up in the EU, Asia or the US,” he said. “This is becoming a massive moment where the focus of investment is moving into green technology to effect actual change.”