The Deauville Partnership’s Two-Year Twinge
Two years after holding a summit in France outlining $20 billion in support for Arab world economic transition, industrial and Gulf countries released a World Bank-led report defining a regional and global trade and investment strategy to harness public and private sector flows. It came as Qatar suspended additional aid to Egypt with IMF negotiations too on the back burner pending fresh elections, Tunisia was again downgraded amid preparation of its own Fund program, and Jordan joined the exotic bond issuance queue after Morocco to tap high-yield appetite with looser conditions than bilateral and multilateral assistance. The publication urged greater signature of free trade pacts with North America, the EU, and Asia as well as within MENA to promote agriculture, manufacturing, services and energy. Business climate reforms such as simpler regulation and anti-corruption rules should be priorities and the absence of export finance is glaring especially for smaller firms, although Islamic-based products are evolving. In the main four target economies big companies could access facilities for as low as 30 basis points before the recent post-crisis squeeze from bank consolidation and stricter Basel standards and credit deterioration to junk status. Donors have expanded liquidity and risk insurance lines in response, but the pool must compete with other regions and structural and technical obstacles remain in the absence of collateral, bankruptcy and dispute resolution procedures. Factoring is another underused tool and the study recommends following the online platform established by Mexico’s development lender for member suppliers submitting invoices. With long-term finance lacking as domestic bond markets are shallow governments and outside agencies can offer guarantees, and the offshore centers of Bahrain, Dubai and Doha could facilitate cross-border remittance-backed transactions. In Islamic techniques murabha installment sales and salam advance payment for future goods may be well-suited for routine commercial needs alongside the burgeoning no-interest sukuk debt space, where shariah interpretations from the Middle East and Asia continue to clash.
Deauville-related destinations do not feature in the regular emerging market EMTA surveys, which showed a 2012 15 percent volume decline to $5.5 trillion as local and Latin segments stayed most popular. In Q4 domestic turnover was $815 billion for two-thirds of the total with Brazil and Mexico leading followed by Russia which inaugurated direct clearing and settlement channels. The remaining 35 percent external activity was split evenly between sovereign and corporate, with Argentina and Ukraine registering rare major appearances in the first category. Argentina’s continuing court battle with distressed funds and Ukraine’s opportunistic re-opening of a previous placement despite scant prospect of IMF standby renewal spurred trading. Poland and Turkey were also overall favorites, as CDS dealing shrank 25 percent the past year with Europe’s imposition of shorting restrictions according to the long conducted tabulation of over fifty banks and investment outfits.
Two years after holding a summit in France outlining $20 billion in support for Arab world economic transition, industrial and Gulf countries released a World Bank-led report defining a regional and global trade and investment strategy to harness public and private sector flows. It came as Qatar suspended additional aid to Egypt with IMF negotiations too on the back burner pending fresh elections, Tunisia was again downgraded amid preparation of its own Fund program, and Jordan joined the exotic bond issuance queue after Morocco to tap high-yield appetite with looser conditions than bilateral and multilateral assistance. The publication urged greater signature of free trade pacts with North America, the EU, and Asia as well as within MENA to promote agriculture, manufacturing, services and energy. Business climate reforms such as simpler regulation and anti-corruption rules should be priorities and the absence of export finance is glaring especially for smaller firms, although Islamic-based products are evolving. In the main four target economies big companies could access facilities for as low as 30 basis points before the recent post-crisis squeeze from bank consolidation and stricter Basel standards and credit deterioration to junk status. Donors have expanded liquidity and risk insurance lines in response, but the pool must compete with other regions and structural and technical obstacles remain in the absence of collateral, bankruptcy and dispute resolution procedures. Factoring is another underused tool and the study recommends following the online platform established by Mexico’s development lender for member suppliers submitting invoices. With long-term finance lacking as domestic bond markets are shallow governments and outside agencies can offer guarantees, and the offshore centers of Bahrain, Dubai and Doha could facilitate cross-border remittance-backed transactions. In Islamic techniques murabha installment sales and salam advance payment for future goods may be well-suited for routine commercial needs alongside the burgeoning no-interest sukuk debt space, where shariah interpretations from the Middle East and Asia continue to clash.
Deauville-related destinations do not feature in the regular emerging market EMTA surveys, which showed a 2012 15 percent volume decline to $5.5 trillion as local and Latin segments stayed most popular. In Q4 domestic turnover was $815 billion for two-thirds of the total with Brazil and Mexico leading followed by Russia which inaugurated direct clearing and settlement channels. The remaining 35 percent external activity was split evenly between sovereign and corporate, with Argentina and Ukraine registering rare major appearances in the first category. Argentina’s continuing court battle with distressed funds and Ukraine’s opportunistic re-opening of a previous placement despite scant prospect of IMF standby renewal spurred trading. Poland and Turkey were also overall favorites, as CDS dealing shrank 25 percent the past year with Europe’s imposition of shorting restrictions according to the long conducted tabulation of over fifty banks and investment outfits.
