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Dec 04, 2018

Opinion: Great strides ahead – IR in the Middle East

Andrew Tarbuck, chair of Meira, says IR features strongly in the region’s post-oil era

The Middle East is developing rapidly, and the field of IR in the region is no different. While international observers will be familiar with the progression of Saudi Arabia’s capital markets, underpinned by the excitement around the proposed IPO of Saudi Aramco, not enough has been written about the progressive developments in other jurisdictions in the region.

Over the past decade, various factors have driven a unique transformation of many regional capital markets. Many of the ‘post-oil’ era government plans identify the modernization of their equity capital markets as a key contributor to a prosperous future. Additionally, the promotion of the United Arab Emirates, Qatar, Kuwait and Saudi Arabia to emerging market status has begun to revolutionize the sector.

A decade ago, the majority of international investors favored developed markets, while the minority were dedicated to investments in emerging markets. But change is well under way, with large international institutional investors having discovered the huge potential that had long been hidden in the Middle East. 

In tandem with these developments, the IR profession has had to come of age. While the IR function was nearly non-existent in the region 10 years ago, certain regulators and stock exchanges in the area are now in the process of making the IRO role mandatory. The United Arab Emirates was a first mover, and Oman has announced it will follow suit before the end of 2018. 

A survey by the Middle East Investor Relations Association (Meira) and recruiting company Hanson Search reveals that IROs in the Middle East exert greater influence and achieve higher engagement at top levels of management than ever before. The growing demand for IR training and certification in the region is testament to the fact that firms have begun to embrace the need for a new approach and acknowledge the strategic aspect of IR – which all goes to show that great strides lie ahead for the function in the Middle East. Three things in particular are imminent:

1. Major changes in mind-set will be needed for issuers to maximize visibility and keep in front of current and potential investors. There is a fight for emerging markets capital and Middle East issuers need to win it; IR can be one of their weapons. Traditionally, many firms restricted their engagement efforts to neighboring countries. Capital markets in the Middle East now recognize the need to open up to the world. The implications for companies are far-reaching: IR strategies will have to be taken to a global level, accompanied by increasing transparency and accountability. 

2. There will be increasing demand for IR heads and other team members with an in-depth understanding of the regional dynamics. Ambitious practitioners are widely sought, and investing in local talent and training young professionals is the best way to ensure having the next generation of IR leaders to hand.

3. The professional services industry that specializes in catering to the IR needs of listed firms will accelerate. In the years to come, a proliferation of this industry is likely, seeing overseas branches of international market leaders in their respective fields mushroom, and local or regional boutique firms flourish. 

It remains to be seen how deftly listed companies will deal with the shifts in their operating landscape. As companies continue to mature and prosper, the investor relations community has every reason to look to the future with optimism, and encourage the great strides toward best practice.

This article was published in the winter 2018 issue of IR Magazine – the 30th anniversary issue of IR Magazine