Treasury Priorities for Multinational Corporations - Middle East and Africa

Treasury Priorities for Multinational Corporations | 23 Chapter 4: Subsidiary Funding andRepatriation Organizations operating inMEAmust contendwith diverse regulatory frameworks, varying levels of capital market development, currency convertibility challenges, and often restrictive foreign exchange regimes. These factors significantly influence howmultinationals structure their subsidiaries’ balance sheets, source capital, and manage the efficient movement of funds across borders. This section provides an in-depth analysis of survey findings related to subsidiary fundingmodels, access to liquidity, key capital structure drivers, and repatriation practices, offering critical insights into the strategic financial decisions beingmade in this dynamic region. Current Preferred Subsidiary Funding Models The choice of funding model for subsidiaries in the MEA region is often a strategic decision influenced by a multitude of factors, including tax efficiency, regulatory constraints, local market conditions, and overall corporate liquidity management objectives. The survey reveals a blend of intra- company and external financing mechanisms. Organizations in MEA strategically leverage a diverse range of funding mechanisms, with intercompany loans emerging as a cornerstone. These internal financial arrangements are highly favoured for their inherent flexibility, internal control, and potential tax efficiencies. Funding model 60% 50% 40% 30% 20% 10% 0% Intercompany Loan Local Bank Financing Equity International Bank Financing 52% 40% 28% 19%