Trade Trends in
Europe, the
Middle East and Africa
Paul G. Geerts
Head of EMEA Trade Finance Advisory, RBS
Despite the huge economic and cultural diversity that is a feature of the EMEA
region, many of the headline challenges facing treasurers amount to business
as usual: accessing and preservation of liquidity, keeping costs down, and a
continuing focus on risk management.
According to the World Trade
Organization,^1 Europe has the world’s
highest rate of intra-regional trade, making
it highly vulnerable to the region’s stagnant
growth. In contrast, the Middle East’s
largest trading partner is Asia, enabling it to
grow alongside the developing economies
that are buying its energy and other
exports. Africa, despite its relative poverty,
is also benefiting from its rich energy and
other natural resources and increasing
trade with Asia.
In Europe, the euro crisis continues to
shake business confidence and has
reduced the ability of banks to provide
liquidity. In the Middle East and North
Africa, while the Arab Spring has curbed
banks’ risk appetite regarding the affected
countries, the oil-rich Gulf Cooperation
Council countries have been left relatively
unscathed. Indeed some countries are
benefiting, as their safe-haven status has
attracted capital inflows. This has helped
to repair post-credit crisis foreign currency
liquidity shortages; but all lending tends to
focus on lower-risk assets.
In terms of impact on trade finance, the
Middle East continues to be an important
hub for the application of commodity
finance. Although traditional trade products
1 http://www.wto.org/english/res_e/statis_e/its2011_e/its2011_e.
pdf.
have historically been favoured in the
region, a more open attitude towards
newer forms of financing such as supply
chain finance (SCF) and credit insurance is
developing – a shift that is being driven by
an increased focus on reducing borrowing
costs.
Europe’s mature markets, however, are
already at the forefront of trade finance
innovation and are looking at achieving
increased efficiencies through methods
such as payment standardisation,
centralised treasury operations and the
integration of cash and trade platforms.
However, the use of bank products to
improve efficiencies in working capital
processes and the finance function therein,
or to leverage working capital, remains
fairly modest.Navigating the regulatory framework
Five years on, the consequences of the
global financial crisis are still very much
apparent, not only in terms of trade flows
and an increased uptake in traditional trade
products, but also in the oncoming ‘sea
change’ as regulators implement measures
designed to prevent any recurrence of
such a crisis.The greatest and most wide-reaching
challenge is that posed by Basel II and
III, because of not only its general impact
on the ability of banks to lend, but also