Editor’s foreword

Perhaps more than any other region in the world, the Middle East suffers from a slightly unfair risk perception. The wide disparities between the various countries are often overlooked, and geopolitical developments in a handful of Middle Eastern countries often cast a very large shadow over the whole of the region. Of course, it all depends on where you’re coming from; there are different perceptions of Middle Eastern risk in different parts of the world. Sitting in, say, the US, perhaps the whole of the Middle East looks like one big risk. An exporter or financier based in the Middle East itself might be concerned about a couple of countries but is comfortable with most of them. And financial institutions that have a constant focus on the Middle East, like ABC International Bank or Europäisch-Iranische Handelsbank, know the real picture and, thankfully, scare less easily.

For those comfortable with the risk level, there are some interesting new markets opening – or re-opening, as it were. Two are coming in from the cold after years of sanctions or pariah status. Many trade financiers are watching Libya now that Muammar Quadafi seems eager to re-join the international community and placate the Americans. Once US sanctions are lifted, this market will no doubt start to open, trade will pick up and trade-finance opportunities will emerge. And, of course, Iraq is the subject of endless speculation, as the Trade Bank of Iraq gets on its feet and a proper system for financing the country’s potentially huge volume of imports and exports, especially oil, is being put in place. While this new Iraqi market is the poster child for all that is risky about the Middle East, it likewise typifies the sizeable potential and enticing opportunity of some of the region’s exciting new markets.

Sudan is another market to keep an eye on this year, now that peace and stability seem to be in reach after years of bloodshed. Trade flows are also picking up in Lebanon, for example.

There are two trains of thought on Iran. The economy is doing well, Iranian companies are spending heavily and capital-equipment imports are increasing. As a result, some institutions are expecting quite a lot of trade-finance business out of there this year, perhaps even more than last. However, some forfaiters are reporting declining – in fact, all but disappearing – LC volumes. If this is true, all the more reason then to take a closer look at some of the region’s new, albeit complicated markets, and at other products such as factoring.

Courtney Fingar is editor of Trade & Forfaiting Review.

Features

Hedge funds to the rescue Free
Commodity producers’ credit limits are feeling the strain of high prices and high freight rates. Small and medium-sized businesses in developing countries are finding it particularly tough to get capital, and banks alone cannot meet the demand. Enter CommodityFinance.com, which is trying to provide some of the missing credit by targeting physical inventories that cannot be sold on a futures exchange. Erika Morphy reports.

Commodity derivatives: In an asset class of their own Free

Helter smelter Free
It’s high times for metals producers at the moment, with prices soaring, the capital markets mad for mining equities and tenors starting to look like those of oil deals. Meanwhile, junior companies doing exploration in Africa, China and Russia, among other places, are keeping financiers busy. Erika Morphy reports on the latest global developments in oil, metals and mining finance.

Unchartered territory Free
Factoring is catching on in the Middle East, albeit slower than in other regions, and forfaiting looks to have a better year than last, with some tantalising new markets coming back into the international fold. Should Iran and Turkey disappoint, forfaiters might look to newcomers like Iraq, Libya and Sudan to make up the slack. Courtney Fingar reports.

Opportunity amid challenges Free
Iraq, one of the world’s most interesting new trade-finance markets, offers untold opportunities and challenges for cross-border trade, and an effective structure for doing business in the country is rapidly being developed. Bruce Proctor, senior vice president and global trade-services head at JPMorgan, discusses the Trade Bank of Iraq’s role and explains how companies can take advantage of its services.

Offering a helping hand Free
A combination of natural disasters and macroeconomic volatility in Turkey during the period from 1999 to 2002 created an unfavourable and uncertain environment for exporting companies. The World Bank stepped in to offer an export financial-intermediation loan in 1999, and having had some success with the programme, is following it up with a new and improved version. Gordon Feller reports.

Continental shift Free
A recent invoice-finance revolution in European civil-code jurisdictions, led by a new breed of securitisation technologies, has opened up a promising market for financing medium-sized corporates through factoring and invoice discounting. Phillip Kerle, CEO of invoice-finance specialist JMH Demica, predicts that in two or three years this market will even rival that of the UK.

Changing with the times Free
As corporate preferences shift from the use of documentary credits or LCs to simpler settlement mechanisms, the primacy of banks in facilitating trade fulfillment is declining. The response from banks has been varied. Dhulipala Ramesh and Jayakumar Venkatraman, both senior domain consultants with Infosys Technologies in Bangalore, discuss some of the drivers of this changing environment and suggest how banks can adapt their trade-services businesses using a “Prism” approach.

Regulars

Market view: Paul Emery Free
A recent decision by the English Court of Appeal, upholding the original decision of the High Court, has clarified the position when choosing English law as the governing law in Islamic financing transactions.

Company profile: Arabian sights Free
While many other banks tend to shy away from Middle Eastern risk at the first sign of geopolitical trouble, ABC International Bank keeps its sights firmly on the Arab world. Jeff Fallon, Charlotte Wärmé Wiltshire and Philip Patterson sat down with Courtney Fingar to explain the bank’s unshakable commitment to the region.

Personal profile: The Russian connection Free
Driven by challenge and spurred by a seemingly insatiable desire to travel, Marcus Hopkins speaks to Kathleen Williams about his career in commercial banking, his experience with acquisitions and investments in emerging markets, and the future of Moscow Narodny Bank as well as the Russian market.

Emerging-market debt pricing Free

Country-risk appetite Free
The analysis from Standard Bank London: