Rapidly accelerating growth and increased intra-trading across South America, Africa, Asia and the Middle East (SAAAME) is leading to a radical shake-up in the competitive environment for financial services businesses, both within the SAAAME region and beyond, according to “Project Blue: Capitalising on the rise and interconnectivity of the emerging markets” published by PwC.
SAAAME regions are emerging as an increasingly interconnected trading zone, which effectively, in physical terms at least, bypasses the West. Within this growth, the Middle East is ideally placed to take advantage of both domestic and intra-SAAAME trade.
Graham Hayward, Partner and Leader of financial services at PwC Middle East. said , “The real story is not just the speed of growth within SAAAME, but how interconnected the trade flows between these markets have become. As intra-SAAAME trade proliferates with the growing importance of the Middle East, an even greater proportion of global commerce is set to bypass the West altogether. Financial institutions need to find ways to tap into this emerging-to-emerging market commerce to sustain competitive relevance.”
The report highlights that the interconnectivity of intra-SAAAME trade and investment flows and how Middle East is positioned within this trade cycle. Within SAAAME, there are pockets of particularly high trade growth, notably between Asia and Latin America and between Africa and the Middle East.
The economic power and potential of the Middle East is being bolstered by the accelerating diversification of domestic economies, global investments by regional sovereign wealth funds and the region’s growing presence as a global trading hub. The increasing interconnectivity of intra-SAAAME trade and investment flows is as significant as the growth and projected size of the Middle Eastern and other emerging markets. Trade between the Middle East and other SAAAME regions is growing much faster than with Europe or North America. Trade with Asia reached $624 billion in 2011, compared to $106 billion with North America and $181 billion with the European Union.
*CAGR: Compound Annual Growth Rate
Akhilesh Khera, Director at PwC and part of the Project Blue added : “We’re currently at a watershed. Trade between the Middle East and other SAAAME regions is growing much faster than with Europe or North America. China is already vying with the US as the biggest market for Middle Eastern oil. Huge infrastructure investment is flowing in the wake of this shift from West to East. Being able to follow customers into new growth markets, and take advantage of the most valuable trade flows and investment opportunities will be key differentiators for financial services businesses in the Middle East.”
The report highlights that clients will be looking for acquisition support, trade services and finance in local currencies to help them build up their businesses in Asia, Africa and Latin America. If financial services organisations can’t offer the right support and presence on the ground, clients will switch to institutions that can.
Graham Hayward, Partner and Leader of financial services at PwC Middle East, concluded:“In an increasingly globalised financial services sector, the impact of the rise and interconnectivity of the emerging markets will be felt across the globe. The models for growth that prevailed before the financial crisis are going to have to change. Growth will need to be relooked at from various dimensions and following the customers on both ends of the trade flow will be the key. Success is likely to depend on being able to anticipate and respond quickly to changes in customer expectations, behaviour and use of alliances, technology while managing an ever evolving regulatory and risk profile that are shaping SAAAME and wider global markets. “
Notes to Editor:
PwC firms help organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com.
Established in the Middle East for 40 years, PwC has firms in Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, the Palestinian territories, Qatar, Saudi Arabia and the United Arab Emirates, with around 2,500 people. (www.pwc.com/middle-east)
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.
©2012 PricewaterhouseCoopers. All rights reserved