Possibilities and pitfalls as Egypt counts its votes


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Egyptians in nine of the country's 27 governorates voted Monday and yesterday, in the first round of marathon parliamentary elections that will not be completed until early next year.

Results of this week's voting, and an accurate tally of the voter turnout, will have to wait. But already there is reason to believe that this process is itself changing the rules in Egypt.

Anecdotal accounts of a high turnout - and of a low rate of polling irregularities - signal that Egyptians, in their collective wisdom, are taking the process seriously.

Gains will emerge slowly, considering that the ruling Supreme Council of the Armed Forces (SCAF) has said it intends to retain authority for months. But Egyptians have waited a long time for free and fair elections, and as they begin to express themselves democratically, their expectations will be high. Cairenes waiting in long queues to vote greeted foreigners with handshakes and greetings: "Welcome to Egypt." Tahrir Square liberals did not want these elections, but many other Egyptians plainly did.

The new legislators will differ on countless policy matters, but the hope is they will share a certain interest in seeing real power in Egypt flow from soldiers to civilians. And this could become a self-fulfilling aspiration. If a big turnout gives lawmakers a certain authority, there will be a corresponding reduction in the authority of the SCAF. Consider the opinion of student and voter Nouran Al Antably, who supports the army in principle but says the generals have to go: "The soldiers are just Egyptians, they are not going to leave Egypt. But the Supreme Council is from the Mubarak time."

There is hope that the military will feel increasing pressure to cooperate with, rather than try to dominate, the civilians. This is, however, the most optimistic of scenarios. If legislators are narrowly partisan, they could waste this historic opportunity. In particular discord between Islamists and secularists runs deep. Or the turnout could dwindle away as the process - with its staggeringly complex voting system - drags on. Or violence and fraud could still imperil the process.

There are, in short, many dangerous possibilities. And these are early days. We need only recall the optimism of Iraq's 2005 elections, and the poor governance there since, to see that elections are not necessarily a panacea.

Whatever the day may bring for Egypt, though, there is no mistaking the brightness of this dawn. After half a century of rigged elections without surprises, Egyptians are waiting attentively, and hopefully, to learn how they will now be governed.

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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