Day 2 – Local market structure

International

Published on Friday 7 April 2017 Back to articles

A regular characteristic of Emerging Market (EM) countries, is that they do not have a diversified economy, but instead depend on a particular sector. In terms of the Middle East and Africa, it is quite clear that the Oil & Gas sector is probably the most significant. There are many risks that sit alongside this sector dependence. For one, the government plays a dominant role in all parts of the economy, making it hard to separate, or even distinguish, the private from public companies; in turn this means that Oil & Gas incomes are often accounted for in the government’s annual budget, thus making any price fluctuation a direct influence on the local economy; and finally domestic energy consumption is subsidized via low petrol, gas, and electricity prices as compensation for the use of natural resources which means a further hit on the state’s own public finances.

This piece was written by Kees Lakerveld co-founder of our partners 2FX Treasury, and is taken from our 5 day series on:

‘Transaction banking in the Middle East and Africa’

What to expect next week:

Day 3 (Monday)          –   Liquidity
Day 4 (Tuesday)          –   Exchange rate setting
Day 5 (Wednesday)    –   Investor protection policies

Previous:

Day 1     –   Transaction Banking in the Middle East and Africa

Who are 2FX Treasury?

Specialists in international banking and payments, co-founders Kees Lakerveld and René Schilder are able to advise businesses on how to optimise payments and trade finance to/from Emerging Markets. They work in partnership with Menas Associates to provide a one-stop solution for clients facing political and financial risks in countries such as Nigeria, Iran and Egypt.

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