Bridges on the road to a stronger Yemen


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In the two decades since the birth of modern Yemen, its diversity has often been more of a burden than a blessing. North and South Yemen came together in 1990 but developing a programme of national reform to bridge the country's many different interests has been an ongoing challenge for the Yemeni president Ali Abdullah Saleh.

As thousands protested in Yemen yesterday, both its diversity and differences were on display. In Sana'a's Tahrir Square there were secular socialists, members of the Islamist Islah party, unemployed youth, and students from Sana'a University, all calling for reform. Pro-government demonstrators marched nearby. The protests were not limited to the capital. In Yemen's southern region, rich in oil and gas, the distribution of the country's resources has long been at the centre of debate. And while there were few protests in northern parts of the country, a battle against the Houthi movement is ongoing.

Mr Saleh announced on Wednesday that he would not seek re-election for president in 2013 but that was not enough to prevent yesterday's protests. And clearly, addressing the country's challenges involves more than one man, as some demonstrators in Sana'a were keen to observe. "We are calling for change," the leader of an umbrella organisation for Yemen's opposition groups, Mohammed Al Mutawakal, told journalists. "It's not about specific people, it's about moving toward real democracy."

It is also about development. At the centre of Yemen's difficulties are a growing population and dwindling resources. Two-thirds of the population is under the age of 25. Rural poverty has caused mass migration to the country's bigger cities, where more people compete for fewer resources.

Mr Saleh has tried to stimulate growth and distribute wealth with fuel subsidies but they have had unintended consequences. Rather than create jobs or a higher standard of living for the poor, subsidies made it easier for the wealthiest Yemenis to pump water out of the country's aquifers, as James Spencer explained in these pages last month.

None of Yemen's problems, nor their solutions, fit neatly within any of the slogans shouted at yesterday's demonstrations. Reform of the country's political infrastructure is required to bring its many different interests to the table and to diffuse its many tensions. Improvements to the country's physical infrastructure are just as important. It is the disconnect of so many Yemenis from the global economy, and their isolation from their countrymen, that has allowed groups such as al Qa'eda to operate in the country. The building of roads and bridges will prove a far more effective remedy against this problem than any bombing campaign. It is these kinds of national projects that should be at the top of the list for Yemen's donors.

No matter who is in charge of the country, only a long-term commitment to improved governance and stronger infrastructure can address Yemen's many different interests and challenges.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Living in...

This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.

Profile

Company: Justmop.com

Date started: December 2015

Founders: Kerem Kuyucu and Cagatay Ozcan

Sector: Technology and home services

Based: Jumeirah Lake Towers, Dubai

Size: 55 employees and 100,000 cleaning requests a month

Funding:  The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.