MIDDLE

EAST SUPPLEMENT
A supplement to The Treasurer | J A N U A R Y 2 0 0 9

A new dawn beckons

Sweeping change promised in liquidity management

Gulf streams of wealth

A global capital facilitator

Leadership in the information age

A strategic framework for market success

Root and branch

Smooth cash service for luxury hotel
 A treasury focus for the region
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JANUARY 2009 MIDDLE EAST SUPPLEMENT 1

 middle east supplement
LIQUIDITY
A new dawn
beckons the bold
CONTROLLING CASH AND OPTIMISING ITS VALUE ARE CRITICAL FOR CORPORATIONS TO MAKE THE
MOST OF THEIR MONEY OPERATIONS. NEW TECHNOLOGY AND METHODS OFFER SWEEPING
CHANGES IN LIQUIDITY MANAGEMENT FOR THOSE BANKS BOLD ENOUGH TO GRASP THE NETTLE,
SAYS MARIO TOMBAZZI OF HSBC.
L
iquidity management is vital to the financial well
being of an organisation. It is also one of the most
demanding disciplines, not just in terms of managing
and optimising cash pools in multiple currencies and
locations, but also predicting available liquidity accurately
and matching those predictions against possible
contingencies over multiple timeframes.
Advances in the techniques used for liquidity management
in recent years have been relatively gradual. Now we appear
to be on the brink of something on an altogether larger scale;
liquidity management is on the cusp of a completely new
generation of technology, methods and – ultimately –
performance.
STATUS QUO OBJECTIVES While the feasibility and
effectiveness of liquidity management have significantly
improved over time, its general objectives have remained
broadly unchanged. The primary objective for many
2 MIDDLE EAST SUPPLEMENT JANUARY 2009
Executive summary
The obstacles which an efficient liquidity management
programme must vault include the restrictions imposed by
market regulation, multiple banking solutions, and the
volatility of cash positions. Banks need to offer a truly
integrated, international liquidity proposition, which in turn
is built on an exacting set of criteria. A new generation of
technology and systems promises to enable this
improvement, and secure a dramatic leap in the quality of
liquidity management.
corporations is to maximise the use of internal sources of funds,
irrespective (where possible) of geography or business structure.
This objective takes two forms. First, the need to avoid the cost
of cash shortfalls that could be covered instead by surplus
funds at other group companies. Second, the opportunity cost
of idle balances that deliver sub-optimal returns.
An associated objective is the desire to reduce the “access
risk” of relying on markets or third parties for liquidity; events
since the third quarter of 2007 have been a fairly obvious
example of the importance of market/counterparty liquidity
risk in its purest form, both from a sourcing (financing) and
deployment (investment) standpoint. A further risk to be
eradicated relates to the visibility and safekeeping of assets.
In an increasingly regulated world the costs and penalties
associated with compliance failure are far too severe to be
neglected.
Finally, there is the desire to reduce the management
overhead relating to the underlying end-to-end process. In
an entity as leanly staffed as the modern corporate treasury,
manual tasks are clearly undesirable, as is the need to be
continually (re)evaluating the same execution options and
their pricing. In an ideal world, the degree of human
intervention required for cash pool administration should be
minimal, with parameterised system logic and resilient
automated processes taking the strain instead.
SERIES OF OBSTACLES Unfortunately, the treasury
professional attempting to achieve these objectives is

confronted by a series of obstacles of ascending complexity.
One of the first is the intricacy of the legal ownership
structures involved in the liquidity management solution
configuration. Another is the unpredictability and volatility of
cash positions. Business seasonality, geographic distribution,
industry type, disbursement and collection practices all
influence the accuracy of cashflow forecasting. Liquidity
structures serve as a safety net for such uncertainty. The
organisation’s management model – for example centralised
or decentralised – combined with the degree of autonomy of
local business units can also prove a substantial hurdle. In
the Middle East, organisations tend towards centralised
models, however, the full value of their individual business
units’ working capital positions is not maximised at all times.
Also, where decentralised models exist, overcoming these
hurdles might require considerable management effort.
Sooner or later, any discussion of liquidity management
turns to the core issue of market regulation, which comes in
the form of various restrictions on capital movements and
currency conversion.
These apply across both developing and emerging markets
and reduce the efficacy of liquidity management structures.
They include specific conditions applied to interest
compensation available on local and/or foreign currency
holdings, prohibitions or clearance requirements on the
conversion of holdings between these currencies and
limitations on the activities permissible by non-resident
entities or on inter-company lending. A further burden comes
in the form of administrative and reporting requirements
relating to these restrictions.
The Middle East is no exception to this, although many
markets have simplified tax systems to a degree,
corporations recognise that regulations and tax are dynamic
factors that any liquidity management strategy must adapt
to accommodate. Compared to other obstacles, regulation
and taxation are particularly problematic: while careful
planning can overcome problems relating to organisational
structure and volatility of flows, regulation and tax obviously
cannot be directly determined by corporations. In most
cases, tax planning and business transformation
considerations – such as in the adoption of a re-invoicing
centre or a commissionaire model – are a key influence (if
not a determinant) on the design of the liquidity solution.
This incurs a substantial initial investment in the analysis,
due diligence and project/change management required, as
well as a periodic maintenance cost necessary to keep
abreast of regulatory, fiscal or corporate organisational
changes.
CONTINUOUS PROCESS CHAIN These various obstacles
have meant that many corporations find themselves operating
with suboptimal liquidity management practices and
structures. One further and highly critical factor in the success
(or otherwise) of the results achieved has been the inability of
many cash management providers to offer a fully integrated,
pan-regional cash and liquidity management service.
Traditionally, very few top tier international cash
management institutions have been able to support the full
middle east supplement
LIQUIDITY
NOW WE APPEAR TO BE ON THE
BRINK OF SOMETHING ON AN
ALTOGETHER LARGER SCALE;
LIQUIDITY MANAGEMENT IS ON
THE CUSP OF A COMPLETELY
NEW GENERATION OF
TECHNOLOGY, METHODS AND –
ULTIMATELY – PERFORMANCE.
spectrum of payment and collection instruments (from
paper to electronic, from notes and coins to cards) across
any region, including the Middle East. Furthermore, even
fewer have been able to complement this with the
comprehensive portfolio of liquidity management tools
required to structure the optimal solution.
The need for corporates to have a cash management
provider capable of covering all these bases cannot be
overemphasised. The maintenance of a continuous “clearing
to concentration” process chain is essential to the success of
a liquidity management structure. Once this process chain is
fragmented by the participation of independent third-party
providers or out-of-network intermediaries, inefficiencies
creep in and value is lost. Different file formats, early cut off
times, inconsistent processing platforms and non-standard
working practices are just a few of the elements that can
quickly cause this deterioration. To overcome the obstacles
outlined above, a best-in-class liquidity management
structure has to be a sophisticated but operationally simple
piece of engineering. The addition of an external component
or agent may not break it entirely, but will undoubtedly
reduce its effectiveness.
JOINING THE DOTS Deregulation can only happen at a
pace that is synchronised with the financial and economic
development of the country concerned; essentially an
outcome with a long and uncertain timeline. More
immediately relevant is the paucity of international cash-
management banks that have the reach and depth of
services to offer a truly integrated cash and liquidity
management proposition on a regional, if not global, basis.
Any bank aspiring to claim such end-to-end facility has to
be able to meet a formidable list of criteria.
One of the most fundamental of these is direct clearing
membership across all countries, clearing channels/zones and
instruments involved. As soon as any critical element of the
clearing process has to be outsourced, the risk of errors
and/or frictional inefficiencies arises, unless the agent can
deliver additional value over and above the direct process
ownership.
The corollary to this is the need for an extensive regional
network capable of catering for full local banking services,
with the consistency and quality of delivery that is expected
from an international institution. Apart from the efficiencies
JANUARY 2009 MIDDLE EAST SUPPLEMENT 3
 middle east supplement
LIQUIDITY
this offers in terms of transaction processing control through
direct clearing participation, it goes very much hand in hand
with the development of local expertise. This is critical to the
process as a whole in various ways; in addition to delivering a
deep understanding of local business practice and clearing
mechanisms, it also improves the quality of regulatory
intelligence. This can prove invaluable in terms of providing
early notice of any possible changes (and perhaps even
influencing those changes) that could affect the liquidity
structure, allowing any adjustments to be made in a timely
manner.
However, such local capability is easily dissipated if it is not
supported by a robust regional and global liquidity
management platform and infrastructure. These are essential if
local capabilities are to be leveraged to the maximum macro
advantage for the client. Put simply, efficient consolidation of
cash at a local level is quickly devalued if upstream systems
introduce inefficiencies and delays in mobilising the liquidity
across entities and locations. This has obvious implications for
information management too; a bank may offer the most
sophisticated reporting tools with a superlative graphical
interface, but if platforms are incapable of extracting the value
trapped in slow moving or suboptimally employed pools of
liquidity, these tools are powerless.
To the treasury manager trying to forecast and plan in
multiple timeframes, it is not just the existence of cash that
is important; it is also the certain knowledge of available
cash and of how it will flow through a liquidity structure.
What is obviously critical to the overall efficiency of the
structure is the consistent quality of delivery, but also of
methodology: simply put, this translates to process
standardisation and automation. Corporations are
increasingly mindful of their own direct costs when assessing
liquidity solutions, particularly in relation to the cost of
managing exceptions and errors, and more generally in
relation to inconsistent methods and procedures. At the very
top of a liquidity chain lie management tools and investment
and funding instruments.
Historically, some banks have regarded these as almost an
afterthought, or something to be dealt with by the client; an
4 MIDDLE EAST SUPPLEMENT JANUARY 2009
attitude very much at odds with client objectives. As treasury
departments have evolved into more business-focused and
cost-conscious organisations, their desire to minimise
manual intervention has increased. Management tools that
deliver maximum information plus the integrated facility to
act on that information are now a common requirement. At
the same time, treasurers want their staff to undertake more
value-added tasks, rather than administering working capital
funding or investment policy. Once they have established the
policy guidelines and the acceptable instruments and key
performance indicators, they would ideally like
parameterised business logic to take care of the policy
execution and enforcement.
NEW APPROACH NEEDED Needless to say, delivering all of
the above requires a substantial investment in both product
functionality and application integration. The number of
banks prepared or with the capacity to make such an
investment is limited. Nevertheless, only those banks that do
so will be able to lay the essential foundations for
transforming their liquidity service offerings and taking them
to the next level.
However, corporations wishing to benefit from this
transformation will require a different approach to the bank
selection process. In the past, liquidity and transaction banks
were typically chosen on an entirely discrete basis. This was
understandable, as there was typically minimal overlap in
many regions between banks that could offer the best
regional liquidity management and those that could offer the
best domestic transactional banking. A fairly common
outcome was that local banks were selected for transactional
banking because of their stronger on-the-ground capabilities,
with an overlay regional bank responsible for the liquidity
consolidation. The result was a fragmented banking
relationship and a sub-optimal liquidity management
process. This is a long way from best practice, given the
substantial investment made by some banks in
implementing a more holistic transaction/liquidity approach.
Such an approach deserves a similarly holistic decision-
making process on the part of buyers.

NEW POSSIBILITIES The primary focus of liquidity management to
date has been on process automation within the concentration
structures typical to the particular region and country where they are
located (eg physical/notional, single/multi-entity, domestic/cross-
border). This is now progressing to the next level with market leaders in
international cash management services investing in dedicated global
liquidity management platforms to enhance their service. Such platforms
will offer expanded product functionality and new service features that
will revolutionise the way clients manage their portfolio of working
capital balances and access integrated funding and investment options.
In a perfect world, this functionality should be available in any
market falling within the provider’s footprint, and such a footprint
should be as extensive as possible. Not all functionality may be
immediately applicable due to local regulation, but regulation is not
static and tends to evolve in parallel with a country’s economy.
Having the technical infrastructure already in place offers immediate
service consistency across all markets, while allowing for rapid future
deployment when regulatory conditions permit.
The investment by leading banks in new liquidity-related
functionality also has the potential to break down barriers between
perception and reality. A case in point is multi-currency pooling,
which has traditionally been regarded as too complex for clients to
understand and too unwieldy for providers to implement and
administer. In a brave new world, where both liquidity and
transactional banking can be closely integrated in one provider, this
is no longer true; multi-currency pooling becomes immediately
accessible to a far broader range
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middle east supplement
xx XX
LIQUIDITY
Another benefit of bank investment in liquidity management
functionality is configurability; liquidity structures will no longer be
constrained by their providers’ domestic limitations. Instead, clients
will have access to optimal multi-regional liquidity structures and
cashflow management tools that fit their specific business model
and requirements. From a client perspective, this consistency and
flexibility of configuration has a tangible effect on the bottom line.
Their liquidity positions in any market (subject to regulatory
constraints) can for the first time make a positive contribution to
their overall regional or global position.
CONCLUSION At the core of these changes to the world of liquidity
management lie two things – the control of cash and its optimised
value. Maximising the potential of both is the crucial foundation that
a select few providers are striving to achieve. Once that is in place,
new management tools and extensive integrated workflows will be
limited only by imagination. Eventually, end-to-end automation and
standardisation become a given, with enhanced analytics simplifying
decision-making and business-rule driven processes extracting the full
value from working capital on a real time basis. Welcome to the new
liquidity horizon.
Mario Tombazzi, senior vice president, Product Management
The Hongkong and Shanghai Banking
Corporation Limited, Hong Kong
mariotombazzi@hsbc.com.uk
www.hsbc.ae
JANUARY 2009 MIDDLE EAST SUPPLEMENT 5
 middle east supplement
FINANCIAL SERVICES
Another time,
another place
THE MIDDLE EAST IS KNOWN FOR ITS AMBITIOUS BUILDING PROGRAMME, BUT ITS
BURGEONING FINANCIAL SERVICES SECTOR IS LIKELY TO BE ITS MOST POWERFUL
DEVELOPMENT. MICHELLE PERRY INVESTIGATES.
T
he Middle East has for millennia been the gateway
for traders from the east and west offering
entrepreneurs of the day the perfect location
geographically to sell and buy their wares.
As savvy as ever, the region’s rulers have been strategically
positioning the emirates over the past five to six years in a
bid to diversify away from its reliance on oil and gas – in
which incidentally they are still rich – to create a financial
centre important enough to rival the world’s best centres.
And the jewel in the crown is, for now, Dubai, slowly edging
over Bahrain as the region’s most important financial centre.
Most people are familiar with the extent of construction – a
barometer frequently used by insolvency experts to gauge a
region’s affluence – in the UAE, and particularly Dubai. They
know the area is exceptionally wealthy, but what is less well
known is the development in the financial services arena.
DRIVING FORCE One of the triggers for growth in financial
services has been the development and sophistication of
Islamic finance (IF) products, which allow Muslims to invest
6 MIDDLE EAST SUPPLEMENT JANUARY 2009
Executive summary
Financial services, driven by the development of Islamic
finance, are growing strongly in the Middle East. With a
rapid pace of change – “Dubai time” – and an increasingly
sophisticated market to attract business, the region is
appealing to those hoping to avoid the worst of the global
recession. And while some adjustment to local customs is
advised, this is a truly international environment.
without earning interest – in accordance with Sharia law. All
products must be signed off by Islamic scholars to ensure
compliance with the Sharia law.
Someone who has experienced that tremendous growth is
Raphael Ricaud, head of Islamic finance at Rothschild. Ricaud
arrived in Riyadh at the end of 2001, when IF “was close to
zero”.
“I have seen the development in the sector, particularly in
this field, grow quickly,” says Ricaud, who has also worked in
HSBC’s Islamic division in Dubai.
Since global banks such as HSBC, a pioneer in developing
Sharia-compliant products, brought it into the mainstream,
many products are just as competitive as other commercial,
non-IF products.
What has also helped develop Islamic finance in the region
is endorsement and encouragement by the emirates’ rulers.
In Qatar, for example, the emirate created its own pure
Islamic megabank two years ago, explains Ricaud.
In other states IF has developed from the grassroots in the
form of small national investment banks that are Sharia-
compliant. In the past, the older national banks in Saudi
Arabia and Kuwait offered some IF products, but nothing to
the extent we now see.
Today, most of the older national banks in the region have
IF divisions or subsidiaries but there are now also myriad pure
Islamic finance banks, as well as the IF divisions of the global
investment banks. It is increasingly a mainstream component
of the global banking system, with products having moved

beyond lending, insurance and investment funds to include
Sukuk, hedge funds, currency swaps, and more.
The value of Islamic project finance deals being closed is
projected to grow to $3bn by 2012, representing up to 30%
of all major structured deals finalised in the region, according
to the Middle East’s business intelligence service, Middle East
Economic Digest.
International Islamic Financial Market (IIFM), an industry
association, calculates that corporate Sukuk issuance leapt
from $0.4bn in 2000 to $24.5bn in 2006.
GROWING COMPLEXITY IN TREASURY Although still
lacking the West’s sophistication, treasury services in the
Middle East are becoming more advanced. As more expertise
is brought into the region and local skills develop, the
treasury function is growing in complexity.
“The products are simpler and the use of derivatives lower.
The volume of the local stock markets are much less
developed,” explains Ricaud.
But he adds: “What I have seen is the development of
Islamic treasury products that weren’t there three years ago.
It’s possible to structure a Sharia-compliant interest rate
swap and currency swap now.”
Still, treasury services have a long way to go before they
meet levels in the West. “If you need global treasury services
then you would be working with JP Morgan or HSBC rather
than local banks,” says Michael Killian, executive vice
president and treasurer at Dubai Aerospace Enterprise.
He adds, however: “They are coming up the curve quickly
because they can skip a lot of the middle stuff and jump
straight to the most sophisticated services.”
The main challenge facing IF from the treasury perspective
is how to develop treasury products in a more sophisticated
manner, Ricaud says. “It is growing slowly, but I believe the
trend will continue.”
FAST PACE OF CHANGE The pace of change is what
impresses many foreigners in the region. Tushar Patel,
assistant group treasurer at global port operator DP World,
was asked to go to Dubai two years ago to help set up a
treasury function following DP’s takeover of P&O. It was an
opportunity he grasped with both hands and he has not
looked back.
“It’s very dynamic. DP is one of the most recognised
companies there. It’s right at the forefront in driving things in
treasury.
“We did the largest acquisition facility at the time. The
largest bond issue for 30 years and IPO all at the same time,”
Patel explains. “A lot of Middle Eastern companies look to DP
and follow what we do.”
Patel cites the company’s governance structures and risk
management processes as systems that are also adopted by
national companies looking to improve transparency.
What inspires him most about the region is the national
companies’ energy. “Western companies are often more
conservative, while Middle Eastern companies are more
dynamic. P&O was always one of those to wait and see what
other companies would do. DP prefers to be the first,” he adds.
middle east supplement
FINANCIAL SERVICES
THE PACE WITH WHICH PEOPLE
MOVE IS VERY QUICK. DUBAI-
TIME, THEY CALL IT, WHEN YOU
DO THINGS RIGHT AWAY
Killian, who has been based in Dubai for the past two
years, agrees. “One of the things we find is that the pace
with which people move is very quick. Dubai-time, they call
it, when you do things right away,” he says.
In terms of international corporates setting up in the
Middle East the region is young in knowledge and application
of governance and risk management processes. But Killian
says companies learn quickly and are “coming up the curve
very fast”.
In fact, he says, there is much more shareholder
interaction with companies and that is acting as an incentive
to improve transparency and openness. Backed by the
government, which holds a stake in many national
companies, transparency levels are improving significantly,
say treasurers working in the region.
Often, however, in a fast-paced business environment it
takes a while for things to catch up. Buildings go up daily – in
fact it’s said that 27% of the world’s cranes are currently in
Dubai – but as Killian has observed, the infrastructure often
lags behind, whether roads or governance procedures.
The Middle East is managing to attract highly skilled
treasurers to the region with great career opportunities and
that ensures standards are kept high. Importing skills is also
helping in terms of developing the local skills set.
RELATIONSHIPS ARE IMPORTANT It is very different doing
business in the Middle East to elsewhere in the world, say
those working in the region. There is little separation
between business and pleasure time. This blurring of the lines
between work and play can confuse many Westerners, more
used to abiding by the rules of a division in activities. But
they are not all disconcerted by these mores and if you want
to forge a successful career in the region it is advisable to get
used to combining work and pleasure.
“What I really appreciate in this part of the world is that
business is part of social life. The Arabs are very emotional
people and so the concept of trust is more developed here.
It’s critical to build personal relationships before you can do
business,” says Ricaud.
It is a close knit community with around 15 players in
Islamic banking. While the level of sophistication in banking
relationships is not quite on a par with the West, bankers
tend to stay in the region, if not in the same job, for a long
time, so nurturing relations is vital.
Investors work in the same way as in the West in process
launching, structuring and distributing bonds. The
distribution cut is the conventional platform. “In that sense
there’s not much different between the West and the Middle
East,” says Ricaud.
JANUARY 2009 MIDDLE EAST SUPPLEMENT 7
 middle east supplement
FINANCIAL SERVICES
COSMOPOLITAN AND TRADITIONAL CONVENTIONS
There have always been strong links between Britain and the
Middle East but Westerners increasingly gravitate towards
the region now, not least for its tax-free benefits. You can
forge a comfortable and sociable lifestyle in the region as
long as you always remain aware that it is a Muslim country
and there are conventions to adhere to.
The working week runs from Sunday to Thursday as Friday
is an important holy day. And it’s considered rude or forward
for men to shake Muslim women’s hands when they meet –
either in business or social situations.
THE ARABS ARE VERY
EMOTIONAL PEOPLE AND SO
THE CONCEPT OF TRUST IS
MORE DEVELOPED HERE. IT’S
CRITICAL TO BUILD PERSONAL
RELATIONSHIPS BEFORE YOU
CAN DO BUSINESS
8 MIDDLE EAST SUPPLEMENT JANUARY 2009
Once they are au fait with the regional mores ex-patriots
feel at home. Patel says since he moved out two years ago a
lot of people who went to university or studied treasury
management with him have been offered a job opportunity
somewhere in the region.
Dubai is a particular favourite with Westerners as out of
the seven emirates it appears the most Westernised. Dubai
was built on a Western model, with many of the country’s
chief advisers having lived in London or elsewhere in Europe.
It’s still part of the Arab world with strict customs and that
must be respected.
“Westerners sometimes forget that Dubai is part of the
Muslim world. It’s normal as it’s very cosmopolitan here with all
the skyscrapers and shops and you have a large Indian/
Bangladeshi community too. If it weren’t for the call to prayer
you would forget you were in the Middle East,” says Ricaud.
With a huge ex-patriot community the region is becoming
more and more international. Killian says: “This has been a
fabulous experience. It’s truly international here and a cross-
cultural experience is great.”
CHANGING TIMES The oil-rich Middle East is cosseted thanks
to its wealth and booming economy from the current global
financial crisis. However it is not completely isolated from it.
“The atmosphere has changed. It’s harder to raise debt in
the Middle East now but 2007 was an amazing year.
Everyone is waiting until next year to do anything,” says
Patel nostalgically.
Although the market is expected to be much tougher in
2009 than in 2007, it is unlikely the Middle East will be hit as
hard as industrialised nations.
On the upside however, “The market capitalisation of each
company is little but this has a positive side in the context of
what is happening now. Even if prices here are affected by
the crisis the region will withstand the global crisis much
better than the West,” Patel adds.
While some are less sanguine, we could nevertheless see
the Middle East taking advantage of cheap assets. It is pretty
much the only place on the planet at the moment with any
wealth to spend.
“The interesting thing about the Middle East is that it’s
sitting on oil wells and has a large wealth of capital and with
assets cheap we will see Middle Eastern companies look to
snap up some bargains,” predicts Patel.
Even British prime minister Gordon Brown visited the
Middle East in the autumn with his begging bowl. He went to
ask the Gulf states to increase trade between Britain and the
oil rich states, as well as to “persuade the Gulf states, who’ve
made an awful lot of money in the past few months... to
redistribute some of that to help other states”.
He also suggested the states had a duty to use some of
their massive oil wealth to help ease the impact of the credit
crunch on the world economy.
By the time the global recession eases it is likely more
Western companies will be under the banner of the Middle
East, with its burgeoning financial centre much more powerful
than it is now. Watch this space.
Michelle Perry is a freelance journalist
editor@treasurers.org
www.treasurers.org
 middle east supplement
CASH MANAGEMENT
Root and branch
approach
CASHFLOWS AT ATLANTIS, THE PALM WATERPARK ON DUBAI’S EXCLUSIVE PALM JUMEIRAH
WERE ALWAYS GOING TO BE SUBSTANTIAL, SO THEY NEEDED A BANK THAT COULD COVER
EVERY ASPECT OF CASH MANAGEMENT.
A
tlantis, The Palm is a 1,539 room, ocean-themed
destination resort at the centre of the crescent of
the man-made Palm Jumeirah in Dubai. This US$1.5
billion joint venture project was developed with
Dubai-government owned Istithmar. Opened in September
2008, the resort occupies a 46ha site, with 17ha of water
park amusement, marine and entertainment attractions.
With the scale and magnitude of such a project, Atlantis
was faced with the challenge of having to manage sizeable
transaction volumes of payments and collections – in the
most efficient and cost-effective manner. In parallel with the
10 MIDDLE EAST SUPPLEMENT JANUARY 2009
Executive summary
Since opening in September 2008, Atlantis, The Palm has
attracted a huge number of visitors from all over the world,
creating challenges and complexities in payments,
collections and account management requirements. Abu
Dhabi Commercial Bank’s cash management team talks
about how they were able to service Atlantis’s transaction
banking requirements with creative yet practical solutions,
and how Atlantis is reaping the benefits from its smooth
and efficient functioning.
project’s development, Atlantis engaged ADCB for its
transaction banking services, particularly on collections and
disbursements requirements. Cash handling was a primary
concern because of Atlantis’s sheer size – translating into
substantial daily cash collections from various parties. Daily
denomination exchange was likewise required for “loose
change” transactions in Atlantis’s collection points within the
resort, ensuring top quality hotel service to its clientele.
Atlantis’s main concern was to have all its cash collections
for immediate credit to the account in a timely manner and
reduce as far as possible the risks of holding physical cash in
its counters. On the disbursements side, Atlantis wanted an
end-to-end solution to handle multiple payment types –
cheques, domestic and international fund transfers and
payroll; with single batch authorisation to expedite
disbursements to suppliers, customers and employees.
CASH MANAGEMENT IS AN EXACT SCIENCE This is where
the benefits of ADCB’s experience and approach came in. The
bank prides itself on approaching cash management as an
exact science. Client-need assessments are conducted to
take account of a company’s unique cash history, present
operations and future plans. Through detailed consultation,
ADCB’s client-focused specialists compile a holistic picture of
all aspects of a business’s cash requirements, devising
appropriate products and services. The on-the-ground

implementation team ensures successful product delivery
with full after-sales support.
On account management, ADCB provides simplified
administration, efficient monitoring and control of cashflows,
reduction in back-office workload and enhanced account
structures for streamlined reconciliation. Liquidity
management focuses on increasing funds availability and
providing ease and flexibility in managing outstanding deposit
balances with ADCB. This includes installing effective cashflow
management, maximising returns in surplus or idle cash, and
reducing borrowings, cost of borrowing and overdraft charges.
Payments solutions focus on daily transaction banking
requirements, offering streamlining of processes, cost-
reduction, risk-minimisation, comprehensive services for
domestic and cross-border payments, and structures for
prompt and accurate payments.
Collections services enhance control to provide best use of
valuable company resources and offer cost-effective funds
collection, reduced clearing cycle, improved settlement of
outstanding receivables and greater credit control.
For channel management the bank provides information
delivery and transaction initiation through multiple channels:
fax, email and internet that achieve a seamless and flexible
interface between client and bank.
Atlantis was faced with the challenge of having to manage
sizeable transaction volumes of payments and collections –
in the most efficient and cost-effective manner.
A COMPLETE PACKAGE Using these skills, ADCB presented a
full range of cash management solutions to cover all of
Atlantis’s present and future requirements. An account
structure was established to identify all cash and cheque
receipts from payment transactions. Atlantis was given online
access to its accounts anytime, real-time through ADCB’s state-
of-the-art ADCB@ctive corporate internet banking system.
The bank’s end-to-end collections services Cash@Request
and Courier@Velocity handle Atlantis’s entire collections
requirements. Cash receipts are collected daily at pre-
arranged pick-up times from Atlantis’s various collection
points within the complex. Customer instructions and other
confidential documents are handled to and from Atlantis
using ADCB’s courier services on a regular basis. ADCB
provides all reportorial requirements to Atlantis for all
collections processed during the period.
On the disbursements side, Atlantis is making use of ADCB’s
WE NEEDED A BANK TO MANAGE
ALL OUR DAY-TO-DAY
TRANSACTION REQUIREMENTS.
WE WERE IMPRESSED BY ADCB’S
RANGE OF SOLUTIONS, EVEN
BEFORE WE FORMALLY OPENED
ATLANTIS
middle east supplement
CASH MANAGEMENT
ATLANTIS WAS FACED WITH THE
CHALLENGE OF HAVING TO
MANAGE SIZEABLE TRANSACTION
VOLUMES OF PAYMENTS AND
COLLECTIONS – IN THE MOST
EFFICIENT AND COST-EFFECTIVE
MANNER
customised cheques service for high volume payments to
suppliers. Salary transfers in favour of Atlantis employees are
transmitted through a secure electronic channel for
subsequent crediting to payroll accounts in ADCB and other
banks across the UAE. Through ADCB’s Retail Banking Group,
the bank supplied automated teller machines (ATMs) within
the Atlantis complex for use by guests and employees.
Implementation of ADCB’s bulk payments solution is
under way, to convert most of Atlantis’s cheque payments to
electronic fund transfers – both domestic and international,
allowing Atlantis to do single batch approvals for multiple
transactions of different payment types. With this service,
reconciliation will be simplified and accelerated through a
payment acknowledgement file provided at the end of each
batch payment run, to be uploaded into Atlantis’s accounts
payable system.
BRINGING THE BANK INTO THE FOLD “We needed a bank
to manage all our day-to-day transaction requirements:
covering all our payments, collections and account
management,” says Tim Wise, senior vice president – finance.
“We were impressed by ADCB’s range of solutions, even
before we formally opened Atlantis. Choosing a bank for its
cash management services lies beyond the usual criteria of
the bank’s size, branch network and sophisticated product
offering. The difference lies in its quick response, after-sales
service support and continuous improvement of products
and systems. It knows and understands our business and
procedures, our problems and needs and offers customised
solutions. It’s like bringing ADCB to our company, Atlantis.”
ADCB is constantly developing cash management capabilities
to provide the finest and most reliable range of products and
meet the growing demands of clients. These services are backed
by the bank’s sound asset structure, its investment in cutting-
edge technology, and team of highly experienced and motivated
corporate banking personnel, in-depth local knowledge and
ADCB’s extensive region-wide branch network.
Glenn Cuevo, head of cash management
Raffy Vicencio, senior product manager
Cash Management Division
Abu Dhabi Commercial Bank
glenn.c@adcb.com
raffy.v@adcb.com
www.adcb.com
JANUARY 2009 MIDDLE EAST SUPPLEMENT 11
 middle east supplement
CAPITAL MARKETS
Gulf streams
of wealth
THE GULF IS NOW ACCEPTED AS A MAJOR FINANCIAL CENTRE, BUT HOW IS IT MOVING FROM
SIMPLY HAVING LOTS OF MONEY TO BECOMING A GLOBAL CAPITAL FACILITATOR?
GRAHAM BUCK FINDS OUT.
I
f further evidence were needed of the increasing power
and influence of the Middle East, it was provided by
Gordon Brown’s trip to Saudi Arabia last autumn to
persuade its rulers to pump additional funds into the
International Monetary Fund.
The personal visit to the region’s leaders by the British
prime minister, who was accompanied by 27 Western
business leaders representing the banking, energy and
construction sectors, came in the wake of Barclays
announcement that it had secured £3.5bn of investment
from Abu Dhabi’s ruling family and a further £2.3bn from
Qatar.
Middle Eastern wealth has also manifested itself in other,
more exotic, scenarios – one of the more recent being the
acquisition of Premier League team Manchester City by the
Abu Dhabi United Group for Development and Investment.
“Who would have ever thought that some of the
12 MIDDLE EAST SUPPLEMENT JANUARY 2009
Executive summary
With a projected investment of $1.5 trillion in the Gulf over
the next few years, overseas interest has never been higher.
The younger generation, keen to exploit that potential, is
looking to encourage the free and transparent flow of
money through sophisticated financial instruments,
upholding rule of law and relaxed laws on foreign
investment. But it must also overcome potential problems
of high inflation, repatriation of wealth and potential unrest.
intricacies of a Sovereign Wealth Fund acquisition would be
discussed at length on Sky Sports News?” comments Andrew
Nicholls, a senior partner at Penrose Financial, the financial
services and capital markets PR consultancy.
With Western banks increasingly looking to the region for
growth opportunities as slowing growth in the US and
Europe is succeeded by recession, Penrose believes the
Middle East holds tremendous promise for companies able to
offer genuine business opportunities to the region. As the
firm notes, a staggering $1.5 trillion is projected for
investment across the Gulf over the next few years.
However, in responding to the region’s opportunities,
Western banks have heeded the crucial role of Islamic
finance, so are expanding their range of Sharia-compliant
products and employing Islamic scholars to advise them. It is
not yet clear whether this will be enough to win them
business in the future, or if Arab clients will prefer to
continue banking with local institutions.
Penrose’s recently published report, The Road of Opportunity:
Evolving Capital Markets in the Middle East, examines the
region’s financial landscape in detail and assesses its viability
as a bona fide and sustainable financial centre.
There has been a plethora of material written about the
Gulf and issues such as its ruling elite, its sovereign wealth
funds (SWFs) and Sharia investment – hence the need for a
guide that eliminates less relevant information and focuses
on the opinions of Middle East experts and the main themes
and trends likely to be important over the coming years.
The report begins by noting that the Gulf’s elevation to a

THE RULERS OF THE MIDDLE
EAST – MANY YOUNG AND
WESTERN-EDUCATED – ARE
MOVING FROM BEING WEALTH
ACCUMULATORS TO CAPITAL
FACILITATORS
major global financial centre is commonly accepted by
companies around the globe, while Western banks and their
“caravans of support services” have opened shop in the region.
But as its authors note, European and American
commentators “swing between applauding and condemning
the region’s rising economic power.” Growth has been
accompanied by concerns over issues such as political
stability and terrorism. And as the Sheikhs, their political elite
and the all-powerful SWFs grow increasingly rich; questions
have arisen over how sustainable the region will prove to be
as a financial hub.
“Much has been written about the region’s viability as the
next financial centre – with comments varying wildly
between eulogies about its potential to pointed criticism of
the lack of standardisation, rule of law and market
sophistication,” says Nicholls. “The reality, as always, is
somewhere between the two.
“While nobody doubts the sheer wealth of their
economies, we all know that it takes much more than
accumulated riches to create a financial centre. However, the
rulers of the Middle East – many young and Western-
educated – are moving from being wealth accumulators to
capital facilitators.”
This means they realise that a financial centre is based on
the free and transparent flow of money in and out, the report
suggests. So there is an increasing readiness to embrace
foreign ownership, relax restrictive laws on outsiders, uphold
the rule of law, enhance transparency and introduce regulatory
controls and sophisticated capital market instruments.
While it is probably too early to judge whether this goal of
lasting financial centres can be achieved, the region’s massive
infrastructure projects already act as vehicles for increased
liquidity. Dubai is said to account for at least 25% of the
world’s active cranes and has, with Abu Dhabi, ploughed
billions into highways, major new cities, schools and hospitals.
While these enormous projects continue, there will be demand
for debt and structured finance to fund them. Project finance is
well suited to Islamic financial instruments, which, as the
report notes, need to be backed by physical assets.
The structuring of the deals is becoming more complex
and, despite the vast local wealth, developers are seeking to
both spread risk and raise their public profile by involving
foreign partners. There is growing evidence to suggest that
the Gulf “has the potential to be much more than a fleeting
fascination for emerging market bankers”.
The report’s authors believe the huge investment in
middle east supplement
CAPITAL MARKETS
What are the likely future developments in the region?
The report concludes by singling out discernible trends:
GROWTH OF EQUITY AND DEBT MARKETS While Western
economies suffer in the credit crunch, Middle Eastern markets will
grow more significant as companies seek to raise funds from the
region’s vast pools of liquidity.
CAREER OF CHOICE FOR FOREIGNERS Bankers and traders in
the West increasingly see the region as a first choice in career
advancement. It has gained credibility and is regarded by those in
the investment community as a place to work and gain experience.
SPENDING There is a new awareness that the accumulated
wealth of the Middle East should be spent. New areas are under
review, with the investment plans of SWFs closely watched.
EMERGING PLANS Investors and the media are realising that
the region has a plan and that the infrastructure projects are the
lynchpin.
REGULATORY CHANGES The relaxation of foreign ownership
rules will be watched, with Saudi Arabia of particular interest. Will
it seek to extend its financial reach and its banks attempt to
become the region’s leading financial institutions?
THE NEW GENERATION Younger, Western-educated Arabs who
are setting up in business will influence the region’s development
as a financial centre. Businesses are likely to continue
restructuring and cross-border merger and acquisition deals are
likely in addition to regional and local ones.
infrastructure represents rather more than mere ambition.
Instead it is providing “the necessary physical framework
around which the appropriate legal and regulatory system
can be placed to create an efficient and sustainable financial
hub” – or, in the words of one of the region’s major
infrastructure firms, Abu Dhabi’s ALDAR Properties, they are
“building a nation”.
Some countries in the region are also looking further afield
and using existing relationships to participate in
infrastructure projects in North America, China and
elsewhere in Asia. An example was the $1.4bn deal signed in
2006 by Bahrain-based Islamic investment bank Gulf Finance
House to fund two tourism projects in Morocco.
ATTRACTIVE LEVELS OF WEALTH The investment and
business opportunities for financial service providers in the
Gulf vary from one country to another, with the region’s
wealth largely concentrated in the form of government funds
and high net worth individuals.
Over the last decade, media attention has largely focused
on Dubai and Abu Dhabi. Both countries have actively
encouraged foreign participation, in a bid to diversify and
lessen the reliance of their economies on oil.
The process has been accompanied by more social and
economic freedoms than in neighbouring countries, helping
JANUARY 2009 MIDDLE EAST SUPPLEMENT 13
 middle east supplement
CAPITAL MARKETS
to establish them as rewarding business venues for the
foreign investor. By contrast, Saudi Arabia has proved to be
possibly the most restrictive Gulf nation but is now slowly
becoming more accommodating to foreign business. Riyadh
is the most populous city with four million inhabitants and is
regarded as the ideal centre for private banking and the
biggest concentration of wealthy citizens.
The size of the region’s available wealth is undoubtedly its
biggest attraction. The steady increase up to last July’s peak
in the price of oil brought “incredible revenues” to the Gulf
states, with each dollar rise in the price of crude bringing
further billions to producing countries.
According to Penrose, of an estimated $3 trillion held by
the Sovereign Wealth Funds, $2 trillion is located in the Gulf
and the figure is set to reach $8 trillion-$10 trillion over the
next decade. SWFs such as the Abu Dhabi Investment
Authority increasingly seek advice on how to invest and fund
new ventures both at home and abroad.
Around $1.5 trillion is slated for investment across the Gulf
THOSE EXPRESSING SCEPTICISM
OVER WHETHER THE GULF CAN
ESTABLISH ITSELF IN THE LONG
TERM AS A CREDIBLE FINANCIAL
CENTRE UNDERESTIMATE THE
SOPHISTICATION OF A NEW
GENERATION OF ARAB
POLITICAL AND BUSINESS
LEADERS
14 MIDDLE EAST SUPPLEMENT JANUARY 2009
region over the next few years and billions of it will trickle
down to outside investors, offering enormous business
opportunities for Western companies.
Add to this around 400,000 high net worth individuals in
the region who, according to a Capgemini and Merrill Lynch
report, have a combined wealth of $1,700 trillion and offer
an attractive market for institutions specialising in private
wealth and asset management.
As these vast coffers of wealth are “closely entwined with the
personal wealth of individual people and families”, there are
also ample opportunities for corporate and project financing.
The report notes that this wealth lies in the hands of the
ruling elite and powerful indigenous merchant families.
However, as the younger generations gain control, they are
seeking to diversify their portfolios and this offers
opportunities for those able to advise or manage the move
towards new ventures, divestitures and initial public offerings.
SOPHISTICATED YOUNGER GENERATION Those
expressing scepticism over whether the Gulf can establish
itself in the long term as a credible financial centre
underestimate the sophistication of a new generation of Arab
political and business leaders, suggests the report.
Many are Western-educated and are determined “to forge
a new economic future by taking the best of the West and
adapting it to their own countries and business sectors”. They
are fully aware of the need to overcome obstacles such as a
lack of transparency in business dealings, high inflation levels
and the need for the rule of law in certain areas.
This desire to modernise opens up business opportunities to
firms offering financial, legal and communications advisory
services, while Western banks have the chance to advise on
and manage new investment and business strategies
undertaken by the region’s traditional businesses that want to
restructure so they can better compete in global markets.

There is evidence in the growing number of initial public
offerings, with the total in 2007 up 50% from 2006.
Barriers caused by uncertainty and perceived corruption are
easing regulation steadily towards world-class standards,
helped by professional advisers. However, one potential
drawback noted by Penrose is that Gulf countries remain
kingdoms, and lack the same checks and balances as
democracies, meaning that any contract signed between
businesses could be overturned without any legal
consequences.
Press freedoms are also more limited than in the West,
although there is growing acceptance that the media needs
to be involved in the region’s financial development, while
SWFs and family-owned businesses recognise the need to
engage with the West and improve ways of communicating
their future investment strategies. The Abu Dhabi
Investment Authority recently went as far as head-hunting a
leading PR manager.
Demand for and trade in equities and Sukuk Islamic bonds
is growing, while a relaxation on foreign ownership rules will
help the Gulf establish itself as a financial hub. However, to
ensure long-term success, it needs much greater critical
mass. This would mean increasing its capital liquidity by
introducing sophisticated financial instruments such as
derivatives to facilitate the flow of funds. Large institutional
investors such as hedge funds must also have a presence if
its equity and debt markets are to develop to the same level
as those in the West and Asia.
The absence of the two cornerstones of global capital
markets, derivatives and debt, plus the issue of Sharia
compliance, are largely responsible for the lack of capital
market sophistication.
The region will need to develop these financial instruments
and their markets in order to compete effectively, the report
suggests. A tentative start has been made, with Western
bankers calling for regulators to help develop the industry
and the offshore Dubai International Financial Centre (DIFC)
recently launching some regional derivative products.
Hedge funds are also curtailed by stringent rules against
shorting stocks, although Saudi Arabia’s Ajeej Capital and
Dubai’s Evolvence Capital have begun cultivating the
beginnings of a local hedge fund industry with Western
partners.
Of course, opportunities for Western banks and exchange
operators to facilitate change by introducing new products
and tools have become even more attractive due to the
economic crisis in the world’s other capital markets.
As a result, more bankers and traders are abandoning US
and European markets in favour of the Middle East, although
as Penrose points out, Islamic finance’s lack of
standardisation will slow the introduction of financial
instruments and the growth of investment funds.
Other obstacles highlighted by the report are high levels of
inflation – the emirates are likely to hit a rate of 13%-15%
this year – and the local currencies’ pegging with the dollar,
which makes it difficult for foreign businesses and individuals
to repatriate capital. High inflation raises the prospect of a
crash in the property market, which would damage the area’s
investment reputation as property has proved one of the key
high-returning assets for both local and overseas investors.
“The hype of the Dubai property market could very well be
middle east supplement
CAPITAL MARKETS
ISLAMIC FINANCE IS ONE OF THE
GREAT BOOM INDUSTRIES OF
THE REGION. BUT IT IS A CLUB
RUN BY THE ARABS ACCORDING
TO THEIR OWN RULES AND
WESTERNERS WILL STRUGGLE TO
BREAK INTO IT – DESPITE THE
EFFORTS OF SOME BANKS
a bubble waiting to burst if greater control is not put in
place,” the report’s authors comment.
Possibly less recognised is the impact of inflation,
combined with poor working conditions and long hours, on
the region’s vast lower-paid migrant workforce. There is
simmering unrest that could ignite something more serious.
The Gulf Co-operation Council (GCC) needs to address
these problems by controlling mass speculation in the
property sector and accelerating progress towards a single
GCC currency pegged to a basket of currencies.
FOREIGN INVESTMENT OPPORTUNITIES The region’s lack
of transparency limits the opportunities for foreigners to
invest directly in the Gulf. While the property and corporate
sectors have begun to open up, there remains a host of
ownership restrictions and doing business is made harder by
the need to appoint local agents as mandatory partners and
secure suitable financial licences.
Around 90% of businesses in the region are entirely or
partly owned by the ruling “merchant” families, with much
cross ownership of assets between families and rulers and no
clear distinctions between banks and SWFs creating conflicts
of interest.
But making the effort to overcome these obstacles is
worthwhile. As Penrose notes, the Gulf region’s enormous
pools of liquidity are only partly tapped by conventional
financial structures. Sharia-compliant banking services and
products will open up large new sources of revenue. Assets
invested according to Islamic guidelines have grown at
around 20% annually worldwide and should reach the $2
trillion level by 2010, says Ernst & Young.
But as one analyst notes: “Islamic finance is one of the
great boom industries of the region. But it is a club run by
the Arabs according to their own rules and Westerners will
struggle to break into it – despite the efforts of some banks.”
And while the number of Islamic finance institutions is
rising – with plans for the DIFC to establish a Sharia Centre,
an Islamic hedge funds platform, an Islamic finance portal, a
commodity murabah exchange and the creation of a judicial
academy and research centre – the report questions whether
demand will be sufficient to support all the potential new
entrants.
Graham Buck is a Reporter on the Treasurer
editor@treasurers.org
www.treasurers.org
JANUARY 2009 MIDDLE EAST SUPPLEMENT 15
 middle east supplement
BUSINESS OPERATIONS
Leadership in the
information age
ALL INSTITUTIONS WANT TO BE MARKET LEADERS. INTERNET-BASED SOURCES SUCH AS
WIKIPEDIA HAVE EXPOSED A WHOLE NEW SET OF CONCEPTS TO FURTHER THAT AMBITION,
AS HARSHIT H JAIN FOUND OUT.
Executive summary
In today’s financial environment, beating the competition is
tougher than ever. Good service is the key to customer loyalty,
but a strategy to build that is necessary. Online information
sources helped the author build a seven point strategic
framework to achieve market leadership for his bank.
F
inancial institutions, though an integral and essential
component of the service industry, have not been
known to be particularly service-oriented. In a sense,
they have a lot to learn about customer service from
airlines and hotels. Add to that the intensity of competition
and the emergence of the intelligent and savvy “butterfly”
customer and it becomes clear that banks which want to
flourish and be market leaders need to adopt a holistic
strategy. This article describes how the author has attempted
over the last couple of years to apply these concepts to
practice in his business area at his bank.
16 MIDDLE EAST SUPPLEMENT JANUARY 2009
In their interesting book “Market leadership strategies for
service companies”, Craig Terrill and Arthur Middlebrooks
provide a good strategic framework that has formed the
basis for this article. “Wikinomics – How mass collaboration
changes everything” by Don Tapscott and Anthony D
Williams is also an eye opener on some of the concepts that
have suddenly become available to organisations in the wake
of the popularity of Wikipedia. It is interesting to look at the
application of these concepts to achieving and sustaining
market leadership in the financial services industry.
APPLICATION OF THE CONCEPTS IN FINANCIAL
SERVICES The strategic framework which I found beneficial
has seven building blocks:
■ Service business definition Most banks are sorely
tempted to be “all things to all people” so as to be a market
leader. But today’s marketplace is looking for niche segment
leaders who can delight – not just satisfy – customers in their
service-product market space.
■ Target market innovation Market segmentation is key –
particularly when it comes to banks –because being
innovative in “precision targeting” of customers can make all
the difference. In my own experience, customers in the area
of “liabilities management” (ie those who don’t require credit
facilities) is an under-served market segment, often
overlooked by most corporate banks, but which can provide
good annual revenue streams.
■ Brand positioning innovation Today’s customers are
extremely brand conscious, have the problem of being
exposed to over-communication via myriad media channels
and display low or no loyalty. A consistent, clear and easy
message outlining the bank’s mission, vision, values and
brand promise helps create and sustain the right imagery
about the bank in the minds of the customers, potential
customers and, very importantly, the employees within.
“Oppositioning” in an attempt to provide a different position
in the minds of the target market is a concept worth
exploring. One should not underestimate the power of the
brand, particularly in these trying times.

■ Service offering innovation Most banks claim to be
customer-centric, providing products and services to meet
their requirements. However their emphasis, brand
promotion, staff rewards and recognition parameters,
organisation charts, and the like, give their game away. Banks
need to consciously court customer problems and
complaints (rather than have an impersonal voice
mail/automated system taking note of the same) and then
get into rapid prototyping or structuring of product solutions
to mitigate those problems. “Think of us whenever you have
a problem” is not a bad dictum to follow on this front. This is
also the area where a Wikipedia mindset really helps – how
about engaging those “difficult customers” (often termed
internally as “painful”) as collaborators in the design of
bank’s products, services and processes. You suddenly
unleash the power of today’s savvy customer to your bank’s
internal product development team, which may be
overstretched and/or under resourced and/or may like
“operating out of an ivory tower” because that’s what has
made them successful historically.
■ Process experience innovation Getting the voice of the
customer into the bank, though seen as important, has only
slowly started to break into the fortresses that most banks
have been (as viewed by most customers). To be a market
leader, you need to have the customers decide the “value
addition” in the bank’s processes rather than its archaic and
inward-focused policies and manuals driving the same.
Constant job rotation within the bank (relationship managers
moving to credit and vice versa; operations moving to
customer-facing service roles and vice versa) are easy but
much-needed measures that senior management must
encourage to have everyone in the organisation remain
focused on customers at all times, and become more
empathetic to their cause and perspective.
■ People innovation Financial services is a people business
and yet banks undertake a whole lot of cost-saving measures
PRACTICAL ADVICE
Banks are in the service industry – let us learn not just from
the best banks but also from the best airlines and the best
hotels.
We need to avoid the “be all things to all people”
approach and remain focused on our core strengths and
competencies.
Being number one, with the “share of wallet” and “share
of heart” of ideal target customers, will make the bank a
market leader.
Listening to the customers on an ongoing basis and
actively seeking out the difficult, demanding customers as
active collaborators will create a sustainable competitive
edge – by coming to the market with products, services,
and processes that customers will really accept, and being
served by employees who own these fully and with all their
hearts.
“Letting go” is an important part of senior management
when it comes to redefining the franchise for the future.
middle east supplement
BUSINESS OPERATIONS
BANKS WHICH WANT TO
FLOURISH AND BE MARKET
LEADERS NEED TO ADOPT A
HOLISTIC STRATEGY
while trying simultaneously to delight customers through use
of technology. I believe banking is taking a 180 degree turn,
with “the personal touch” now coming back to provide a
strong competitive edge that banks are using to become
market leaders and regain customer loyalty. “Innovention”
(ie proactive intervention) – a term that the authors use –
can unleash the creativity and empathy of the bank’s staff to
create unique service experiences for each customer. That
indeed would be an entry barrier for other banks.
■ Sustaining market leadership If becoming a market
leader is difficult, staying there is even more of a challenge.
This is where senior management of the bank needs to get
into thinking longer-term – much beyond their own interests
to that of all shareholders and customers. Like the “flight of
the geese”, they need to ensure they can take a back seat
and let some of their able lieutenants take charge while they
go back into the market and spend time with customers,
front-line staff, service providers and all those with whom
they lost touch as they entered into the “corner office” – and
then return rejuvenated with fresh marketing, branding,
services, process and people ideas. That’s the only way they
can build a market leader that will stand the test of time.
Harshit H Jain is head of liabilities
management, corporate banking,
Emirates NBD
jainh@nbd.com
www.nbd
RECOMMENDED READINGS
■ “Market leadership strategies for service companies” by
Craig Terrill and Arthur Middlebrooks, NTC/Contemporary
Publishing Group, Inc., 2000.
■ “Wikinomics – How mass collaboration changes
everything” by Dan Tapscott and Anthony D Williams,
Portfolio, 2006.
■ “Firms of endearment – How world-class companies
profit from passion and purpose” by Raj Sisodia, David B
Wolfe and Jagdish N Sheth, Wharton School Publishing,
2007.
■ “The future of competition – Co-creating unique value
with customers” by C K Prahalad and Venkat Ramaswamy,
Harvard Business School Press, 2004.
■ “Killer customers – Tell the good from the bad – and
crush your competitors” by Larry Selden and Geoffrey
Colvin, Portfolio, 2003.
JANUARY 2009 MIDDLE EAST SUPPLEMENT 17
 middle east supplement
GLOBAL INVESTMENT
Where capital flows
HOW PREPARED ARE MIDDLE EAST COMPANIES FOR MAKING THEIR PRESENCE FELT IN THE WIDER
GLOBAL ECONOMY. PETER WILLIAMS REVIEWS ONE SURVEY WHICH SUGGESTS SOUND PROGRESS.
A
series of surveys conducted during 2008 by KPMG
International investigated the future direction of
capital flows both globally and in specific regions
around the world. The results from the survey
covering 15 countries around the world suggested that
investment was moving away from the US and into Europe,
India and China. The survey results suggest the emergence of
“a three-bloc world” comprising the Americas, Europe and
Asia Pacific. KPMG also produced a report focused on the
investment intentions among a group of large companies
based in the Middle East and North Africa. In a bid to discover
where companies expect to go in the next phase of their
expansion, 50 senior corporate investment strategists in
seven countries in the region were asked which countries
(other than their own) they plan to invest in during 2008/09
and where they are looking to invest in five years time.
18 MIDDLE EAST SUPPLEMENT JANUARY 2009
Executive summary
Traditionally the Middle East has been seen as a magnet for
inward investment. Foreign corporations have invested
substantial capital and human resources over decades in a
bid to develop the potential of the region’s energy wealth.
While capital continues to flow into the region it is no longer
a one way street. Investment and capital is now moving out
the region as Middle Eastern companies are leveraging the
resources of the region to establish themselves as key
players in the emergence of an increasingly globalised
economy.
Countries included in the study were Saudi Arabia and Kuwait
(over half the interviews took place in those two countries) as
well as UAE, Oman, Qatar, Bahrain and Egypt. The results
showed that companies were focusing on investments in
countries within the region in the immediate future. However
over the next five years it is clear that Middle Eastern
companies will be taking steps to expand into foreign
markets.
CHANGING ORDER In the next year the countries set to
receive the most investment were UAE, India, Qatar, China,
Bahrain and Saudi Arabia. In five years time the order is
expected to be India, UAE, China, US and Saudi Arabia. In
terms of change in percentage of corporates planning a
significant investment between 2008/09 and 2013/14, the
KPMG survey suggests that India makes the most significant
gain followed by the US, Yemen, Brazil and Thailand. Middle
Eastern investors are showing relatively low interest in
Europe with the exception of the UK whose share of
investment remained steady at 8%. See box on
infrastructure investment.
In the longer term KPMG paints a picture of companies
showing increasing interest in investment outside the region,
especially in India and the US. The report says: “If Middle East
investors are indeed widening the range of companies they
are willing to invest in, then this may increase the level of
competition that companies within the region could
encounter if they are looking to investment from a
neighbouring country. But this doesn’t mean that regional
support disappears.”
Indeed Gulf Co-operation Council (GCC) states are
expected to continue to pour significant shares of Middle
 middle east supplement
GLOBAL INVESTMENT

East investment into neighbouring economies. In the near
future the survey found that the most influential country
aggregated across all sectors is Saudi Arabia, driven mainly
by its very strong showing as the most influential country in
services. Second in terms of influence is the UAE, again
largely through its presence in service industries. Looking
ahead five years those two are still expected to dominate
with Qatar still seen as significant. However the near-term
position of the US and the UK is expected to wane in favour
of the emerging economies of China and India.
It is clear from the KPMG survey that the primary focus for
GCC business over this period is likely to remain within their

Infrastructure capital demand

PUSH TO DIVERSIFY ECONOMIES IN THE MIDDLE EAST CREATES
HUGE NEED FOR INFRASTRUCTURE CAPITAL

In order to meet capital demands driven by strong “In the long term, we expect the current trend towards
population and economic growth, more than $100bn of continued greater private sector participation in
public-private partnership (PPP) investments in the Middle infrastructure in the Middle East to continue. Investors
East and North Africa region will be required over the next looking to compete for the lucrative contracts are going to
five years to supplement government funding, says a report have to cultivate relationships through consultants or other
by Ernst & Young. intermediaries already well versed in Middle Eastern
According to Bridging the Gap: Private Investment in Middle business practices,” said Mike Lucki, global leader of
East Infrastructure, current and active civil engineering infrastructure, Ernst & Young.
projects in the six nations of the GCC have a total value of In the Middle East governments traditionally have
$1.3 trillion. But with construction costs rising and dramatic contracted with regional or international companies to
economic growth, design and build
infrastructure needs are rapidly infrastructure such as
outstripping the region’s public EVEN WITH THE LARGE airports, ports or roads and
resources despite record government agencies have
exports of oil in recent years. AMOUNT OF REVENUE usually operated the
For example, despite the GENERATED FROM OIL infrastructure. While that is
Middle East boasting two- still true today, governments
thirds of the world’s EXPORTS IN THE REGION, are increasingly forming PPPs
desalination plants, the World GOVERNMENTS ARE HAVING with the private sector to
Bank has predicted that the build and operate projects.
amount of water available per TO FIND ALTERNATE MEANS Such partnerships provide
person in the region will halve OF FUNDING THE EXPANSIVE private investors and
by 2050 as a result of contractors with new
population and economic INFRASTRUCTURE business opportunities in the
growth and climate change. DEVELOPMENT PLANS Middle East, and enable
This suggests that a significant governments to share the
capital investment will soon be REQUIRED TO MEET RAPIDLY risks of project development,
needed to meet demand and GROWING DEMAND draw on the knowledge and
private sources will be experience of the private
increasingly looked to for a sector and leverage public
portion of this investment. investment in infrastructure
“Even with the large amount of revenue generated from with private capital. “No doubt the global credit crisis
oil exports in the region, governments are having to find will have some effect on regional project finance pricing,
alternate means of funding the expansive infrastructure terms and time to close, but it is too early to determine
development plans required to meet rapidly growing the magnitude. There are billions of dollars of
demand,” said Abraham Akkawi, Middle East Leader of announced infrastructure projects in the pipeline which
Infrastructure, Ernst & Young. have been planned on the assumption of varying levels
Despite oil revenues increasing to an estimated $381bn of private sector participation. These projects are critical
in 2007, countries in the region have decreased their public to the economic growth of the countries in the region,
spending by 5% since 2002, according to the Institute of especially GCC countries,” said Phil Gandier, Middle East
International Finance. Leader, Transaction Advisory Services, Ernst & Young.

JANUARY 2009 MIDDLE EAST SUPPLEMENT 19

 middle east supplement
GLOBAL INVESTMENT
region. However at the same time, the mixture of foreign
partners taking an interest in the region looks set to change
in a way that reflects the wider changes that are likely to
take place in the global economy.
The KPMG survey looked at the factors that were
important for companies that were looking to invest. The
survey found some key differences between what is
important for GC companies and those in the rest of the
world. Respondents were asked to rate 12 country attributes
by the influence they have on decisions to invest in a
particular country. Globally the more important attribute
was access to new customers, followed by political stability.
In contrast for GCC companies political stability was
paramount, especially for manufacturers which presumably
are concerned over the effects of instability on their factories
or supply chains. GCC showed more agreement with other
respondents for factors such as impartial rule of law and
good infrastructure. However priorities diverged again over
the relative importance of high quality labour forces and the
tax regime.
KPMG suggests that the relaxed view of the impact of tax
on foreign investment may be due to some GCC
unfamiliarity with more complex tax regimes found in other
parts of the world.
EMERGING PICTURE According to KPMG, the picture that
emerges from this study is of a group of companies part
way through a process of establishing their presence
20 MIDDLE EAST SUPPLEMENT JANUARY 2009
MIDDLE EAST CORPORATE
INVESTORS ARE AHEAD OF THEIR
GLOBAL COUNTERPARTS. THE
CHALLENGE REMAINS FOR GCC
INVESTORS TO ESTABLISH A
LASTING MIDDLE EASTERN
PRESENCE IN THE WIDER
GLOBAL ECONOMY. AND IT
SEEMS THEY ARE WELL-PLACED
TO MEET THE CHALLENGE.
outside their region and doing so in a cautious and careful
fashion. The report states: “They are not new to the idea of
overseas investments: over half (54%) have already put
money into the countries they plan to invest in over the
next five years and 70% plan to use the profits from these
investments to build their presence in their chosen
countries.” But investors from other countries are further
down the track of building a presence cross-border and are,
according to KPMG, more comfortable taking the risks
associated with bringing in new money rather than relying
on generated profits.
One notable difference between GCC and other investors is
that GCC investors are less concerned than their global
counterparts about the influence of private equity in their
sectors. The report suggests that 60% of GCC investors are
most likely to find themselves bidding against private equity
investors or portfolio/strategic investors when making
overseas acquisitions. That compares with 36% in the global
study. Moreover 61% of GCC investors welcome private
equity investors in their sector as a good source of capital and
long-term supportive shareholders (58% globally). The
contrast in attitudes to sovereign wealth funds is even more
marked.
Nearly a quarter (24%) of global investors said they would
not welcome an investment from a sovereign wealth funds,
only 4% of GCC investors agreed. The survey suggests Middle
East corporate investors are ahead of their global
counterparts thanks to their familiarity with sovereign wealth
funds which look certain to become more important in the
years ahead. The challenge remains for GCC investors to
establish a lasting Middle Eastern presence in the wider global
economy. And it seems they are well-placed to meet the
challenge.
See www.kpmg.com/Global/IssuesAndInsights/
ArticlesAndPublications/Pages/Middle-East-capital-flows-
survey-2008.aspx
Peter Williams is editor of The Treasurer
editor@treasurers.org
www.treasurers.org