Corporate treasury in the Middle East is currently undergoing a change driven by innovative visions for the future and economic reform. Strategic initiatives like Saudi Vision 2030,¹ We the UAE 2031² and others not only pave the way to a wave of economic diversification, but also to an adoption of advanced technologies.

This shift, coupled with economic reforms such as the introduction of corporate income tax as well as the region’s ever-increasing connectivity between Europe, Africa and Asia, has given rise to the establishment of regional treasury centers. Simultaneously, corporate treasurers have adopted sophisticated technologies, creating a dynamic and resilient treasury landscape. In this rapidly changing environment for businesses, corporate treasury in the region is moving beyond transactional tasks and focusing on financial strategy, risk mitigation and value creation.

Treasury evolves – and so does treasury technology

Corporate treasurers in the Middle East are investing in sophisticated treasury management systems to streamline processes, enhance liquidity management and optimize financial decision making. Treasurers who leverage new systems are earning accolades for their successes.

For example, in-house banking, or structures where a specific entity takes on centralized management of treasury functions, have helped treasurers scale.³ In fact, ADNOC Group of the UAE won the Treasury Project of the Year award at the ACT Middle East Treasury Awards in 2022 underscoring in-house banking’s strength in cash management, working capital and systems implementation.⁴ The work aims to accelerate the Group’s growth, future-proofing its business and building a legacy of creating sustainable value.

In another case, ACWA Power of Saudi Arabia won the Adam Smith Awards in 2021 for implementing a three-part treasury transformation project.⁵ This included a new treasury management system that enabled increased automation and creating an in-house bank infrastructure for payments, intercompany tracking, accounting, forecasting, screening and reconciliation. These advancements and their respective industry awards underscore the importance of corporate treasury moving beyond transactional tasks and expanding their roles.

Economic diversification and industry development

There have been exceptional economic developments in the Middle East in the last several decades, and the region is now on the cusp of a new stage defined by an accelerating pace of change. The national visions in the region are not merely ambitious goals, but fundamental drivers of a significant shift in the economic landscape.

The region charts its course toward economic diversification. For example, the emergence of the automotive sector in Saudi Arabia introduces corporate treasurers to a host of new challenges, from managing the financial aspects of manufacturing and supply chain operations to handling the complexities of global partnership. Corporate treasurers must adapt to an entirely new set of treasury realities, from initial investments to ongoing operational treasury, trade and risk management.

Additionally, the metals and mining sector emerges as a key player as the region capitalizes on the surge in worldwide demand for low carbon steel. The Middle East has inherent advantages for the production and export, including low-cost energy from natural gas and the relatively easier production of green hydrogen.⁶ Saudi Arabia’s move of merging Al Rajhi Steel and Hadeed⁷ reflects this commitment, while Emirates Steel Arkan’s investments⁸ underscore the sector’s shift toward sustainability. With international players from Japan, India, Türkiye, Brazil and beyond seeking partnership, the metals and mining sector becomes a catalyst for economic expansion and diversification. In this evolving industrial frontier, corporate treasurers are now tasked with the harmonization of treasury operations, from liquidity and account management to risk mitigation on an international scale.

While these ambitious initiatives bring real changes to trade to and from the region, corporate treasury teams need to play a crucial role in aligning treasury strategies with these visionary goals. They can do so by ensuring treasury fundamentals like:

• Instilling a cash mentality
• Gaining a clear view of business liquidity
• Navigating high interest rates
• Maximizing internal liquidity to future-proof treasury

The rise of regional treasury centers

As the national visions set the pace for the economic developments in the region, from the connected sectors to the next generation of advanced digital technologies, the regional economies have not only modernized tax structures but also positioned the region as a global financial hub.

Several countries in the region have introduced or are considering corporate income tax⁹ and value-added tax (VAT)¹⁰ as part of economic reforms. These reforms reflect a commitment on the region’s part to align with international financial standards. They may have significant implications for corporate treasurers ranging from tax compliance and documentation, reporting and planning, to transfer pricing consideration, contractual agreements and cross-border transactions. As a result, corporate treasurers will likely need to adapt their processes, systems and strategies to ensure compliance and optimize the businesses’ overall financial position.

Simultaneously, with Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC) in UAE, where J.P. Morgan is expanding its presence, and King Abdullah Financial District (KAFD) in Saudi Arabia, key financial hubs have attracted international businesses looking for a strategic base in the region. The hubs’ financial infrastructure, regulatory framework and environment have empowered the rise of regional treasury centers for international businesses across diversified industries.

The rise of international businesses setting up regional treasury centers has catalyzed a change in views towards the treasury function itself in the region.¹¹ Corporate treasurers now operate as a strategic partner, steering businesses through the complexities of evolving tax structures as well as treasury, trade and risk management, while leveraging the advantages offered by these regional financial hubs for further trade, export and growth.

Treasury technology transformation

The journey from a reliance on checks and physical signatures to the adoption of cutting-edge financial technologies represents a seismic shift in treasury management in the region. From a corporate treasury perspective, digital transformation has rapidly evolved from a narrative to an action following the pandemic. Businesses have increasingly become a more engaged link in the process to challenge banks and fintechs for more digital, connected and intuitive solutions. This includes the expectation of further control, transparency and improved efficiency across operations.

In the midst of visionary initiatives and economic reforms, technological advancements are again central to transforming treasury operations across the region. As new sectors open up new ways of trade, export and growth, treasuries are no longer confined to traditional operational models, but are embracing advanced treasury functions such as regional treasury structures, real-time treasury, artificial intelligence and machine learning, payment factories and in-house banks. As a result, cybersecurity is of growing importance in treasury operations to ensure robust measures to protect sensitive financial data in the age of digital transformation.

Looking to the future

A treasury renaissance in the Middle East is not just a momentary shift—it's a part of a trajectory toward a forward-looking economy. As the economies in the region diversify and expand, corporate treasury can play a pivotal role in ensuring the resilience of businesses across various sectors, including but not limited to energy, power, renewables, metals and mining.

In the midst of change, where visionary initiatives, economic reforms and technological innovations converge, the Middle East's treasury landscape is rapidly evolving as a proactive response towards a forward-looking economy. Corporate treasurers are looking to future-proof the treasury function of tomorrow across treasury, trade and risk management.

Disclaimer

© 2024 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A. Member FDIC. Deposits held in non-U.S. branches are not FDIC insured. Non-deposit products are not FDIC insured. The statements herein are confidential and proprietary and not intended to be legally binding. Not all products and services are available in all geographical areas. Visit jpmorgan.com/paymentsdisclosure for further disclosures and disclaimers related to this content.