Last year in September, history was made as a peace deal was brokered involving the UAE and Israel. Known as The Abraham Accords, the new treaty represents a significant geopolitical statement, which economic experts predict could result in USD 4 billion of worth of additional trade.
The new relationship includes a $3 billion investment fund to facilitate bi-lateral trade. As well as symbolizing renewed peace, prosperity, order and security, the move also brings greater stability to the region, with significant opportunities for bi-lateral trade across multiple sectors expected to follow.
This is just one of the positive changes in the normalization of ties in the Middle East. In early January 2021, the Al Ula agreement also came into play, thereby signaling the end of an almost 4-year long GCC-blockade against Qatar. Such new alliancing between the UAE and Israel and the UAE and Qatar will prove to be most beneficial from a trade opportunity perspective.
Commenting on new peace treaty, Maham Siddique, Regional Marketing Director and Vice President, UAE Commercial at Tradewind Middle East Limited said, “Israel is home to a creative, entrepreneurial, multicultural and educated workforce. Being one of the healthiest and most secure economies in the world, it enjoys a high concentration of engineers and PhDs and like the UAE, is a powerhouse of innovation.”
She added, “The UAE is traditionally considered as the gateway to the Middle East. Its unique geographic position provides a trade bridge to the Indian subcontinent, which is useful when you consider that there are over 100,000 Indian-owned and operated companies in the UAE.”
In Israel, many multi-national banks, such as Citibank, JP Morgan, HSBC, Santander and Sumitomo, already have fully operational innovation centers. Consequently, there is great potential for immediate collaboration and support in the fintech space, as well as the trade and corporate finance sectors. On 18 November, it was announced that the Abu Dhabi Global Market Financial Services Regulatory Authority (ADGM FSRA) and the Israel Securities Authority (ISA) entered into a fintech cooperation agreement, with the aim of providing a framework for information sharing, and for facilitating the movement of start-ups, knowledge and talent. In terms of cementing the opportunities for trade, fintech would seem to be leading the charge with the ADGM and Israel’s Bank Hapoalim, signing a Memorandum of Understanding (MoU) earlier this month. This MoU will see the two institutions jointly promote and develop fintech innovation, ecosystems, and market opportunities that will support the digital transformation of the financial services sector and connect the economies of the two countries.
Additionally, it’s in the interest of both markets to expand their economic reach. For Israel, this means a gateway to new regions, including the Gulf Cooperation Council (GCC), Commonwealth of Independent States (CIS) countries, Central Asia, Africa, and the Far East. Also, opening the doors to a regional powerhouse like Israel would complement the UAE’s vision towards its Dubai Industrial Strategy 2030.
The additional tag of ‘Made in the UAE’ would be a significant bonus for ease of conducting business. In fact, it was COVID-19 that pushed the UAE’s ranking to one of the best places for doing business, particularly in the sphere of commodities trade. Many companies will be able to dive into the economy based on various tax and logistical benefits, resulting in increased trade, academic, medical, and scientific collaborations, manufacturing and technology partnerships, and new opportunities in fintech.
The latest trends in trade finance show that traditional trade products, such as letters of credit, are shrinking as big buyers have articulated suppliers for themselves and built up open account solutions. This trend will continue to rise across the Middle East. Furthermore, the new agreement will also benefit buyers from both countries. Buyers who do not have vendor financing programs in place, who wish to diversify sourcing in new markets, or perhaps seek to procure larger order volumes that the supplier may be hesitant to agree on, will likely seek support from specialized trade finance companies. This can include assistance with payment term extensions, increasing days payables outstanding, as well as assisting suppliers with being able to conduct trade on open-account terms.
Commenting on the potential areas of growth, Siddique continued; “I expect to see a shift in mind-set within the UAE with e-commerce anticipated to grow significantly, and so will e-commerce opportunities between Israel and the US. In my opinion, cross-border e-commerce will form the next phase of expansion and will open up more opportunities to purchase goods from across the region, rather than just domestically.”
