Five questions on a Middle East perspective

From MSCNewsWire's European Correspondent |Wednesday 6 September 2017 | Beirut-based Meguerditch Bouldoukian is an emeritus figure in banking in the Middle East and the EU. Mr Bouldoukian (pictured with Paul Volcker) now answers our five questions on New Zealand’s Middle East positioning …..

There is evidence of a belief here in a short Middle East memory. We have the defaulting on the old Development Finance obligations. Then we have the U-turn on the undertaking on live sheep exports to Saudi Arabia. Followed by compensation in the form of a covert stock-handling depot there. Then the matter of the New Zealand delegation to the UN Security Council as a further entreaty backing the anti Israel censure?

There will always be mistakes and false starts. Especially with evolving markets. You can take comfort in your wider picture. According to recent OECD reports New Zealand’s one of the robust economies on the globe since 2012 due to tourism, inward migration, construction. It has a sound fiscal position and low public debt and balanced budget. GDP $185 billion, growth rate of 3.9 %, per capita income $39,400 and internet usage 86 %. I am though rather worried by the Development Finance Corporation experience which you cite and which once again demonstrates the danger of a longer term operational involvement by a government in commercial banking. If this intervention is a sustained one, and not just implemented to cope with an emergency then a Pandora’s Box is put in place and which is bound to be opened at some stage down the line.

There is a belief that only very large scale organisations, ideally with government involvement, are the only ones that can trade with the Middle East ---and then get paid...

My advice here is for commercial interests in your country to steer very clear of Middle East states ruled by sultans, emirs, kings, and other despots of that ilk. Elsewhere you will find strong legal statutes to ensure against the kind of default you seem to be describing

All the NZ trading banks are owned in Australia. Do you see this as an advantage/disadvantage?

The major banks must encourage the outside world in coordination with the government to pump in Foreign Direct Investments. Local banks ultimately can only finance SMEs or SMIs. I am pleased that you asked this question because it has given me an opportunity to clear up a misconception, rather touching in its way, to the effect that the Australian trading banks are owned in Australia. They are in fact and to a substantial extent owned by UK and US banks, notably HSBC, J.P Morgan, and Citigroup among others. Is this an advantage? Probably. The reason is that the smaller the bank, the greater will be its reluctance to take on risk.

It is said that the Australian banks along with the Canadian banks are the world's best regulated?

Industry figures tell us that world’s best regulated banks are domiciled in order in:

• Finland
• South Africa
• Canada
• NEW ZEALAND
• Australia
• Hong Kong
• Norway
• Singapore

The significance of this is that you do not have to worry about banks operating in New Zealand soundly regulated as they are by the Reserve Bank.

Do you see any benefit in New Zealand seeking to re-establish its own joint stock/ trading bank?

You have had the problem in your recent and longer term history of your own bank in this category getting into trouble and having to be rescued by the taxpayer, the government in other words. This in turn opens our Pandora’s Box which takes the form of the state, and for a number of reasons, being viewed as being responsible for the bank and even long after the emergency that caused it to be involved in the first place.