The UAE's celebration of its 40th anniversary marked not only domestic success, but also a new trend in its foreign relations. Located in the tumultuous Arab Gulf, the UAE has prospered among domestic, regional and international challenges. It has managed to raise its international profile to become among the most active members of the international community at many levels, particularly as an aid donor.
During its history the UAE has produced a constructive foreign policy that is based on dialogue, diplomacy and development. It led a relatively small state to become visible not only among Arab states, but also in the larger international community.
This policy of engagement was evident from the start. Sheikh Zayed, the father of the country, preferred dialogue with Tehran, despite Iran being perceived as the most serious security threat to the UAE. The UAE consistently chose to deal with the issue of the three occupied islands in the Gulf, the Tunbs and Abu Musa, through international courts and the United Nations, without confrontation.
In recent years Sheikh Abdullah bin Zayed, the Foreign Minister, has also been active. Due to his efforts in gathering international support, the UAE won the bid to house the International Renewable Energy Agency (Irena). The UAE has established stronger ties with most countries in the region and gathered support for its rights to the occupied islands, as well as more general support for Arab causes throughout the region.
Diplomacy is especially important for small states. The UAE has complemented its outreach with foreign aid, a dominant aspect in its foreign affairs. Development and humanitarian aid has added to the country's international prestige. In fact, the UAE is ranked 14th globally in terms of aid disbursed in proportion to gross national income. That assistance, which is rooted in the country's Arab and Islamic traditions, has become a central tenet of its foreign policy.
This year, the UAE has become involved in two significant events in the Arab world. First, it was the second Arab country after Qatar to engage with Nato to support operations in Libya. Second, it participated in the Peninsula Shield operation in Bahrain. It is worth asking what is the significance of these two events for the UAE in terms of its foreign relations and domestic realities. In particular, why did Qatar and the UAE become the only two Arab countries to contribute to the Nato operation in Libya?
Despite speculation that Nato used Qatar and the UAE as an Arab umbrella to cover its operations in Libya, many believed international cooperation was urgently needed to stop Libya from being dragged further into a civil war. At the beginning of the uprising, the UAE supported Qatar's bid to secure an Arab League resolution calling for international protection for Libyan protesters.
Mohammed Al Akari, an adviser to Libya's National Transitional Council, told me the NTC would not have called for international support if there had been another option. Simply put, the absence of Arab defence cooperation or an armed force under the umbrella of the Arab League meant that Nato was the only solution for multilateral action. The UAE understood this.
The question arises, then, why didn't other regional states like Oman, Kuwait and Bahrain take similar action? Part of the answer is that in May 2011, the UAE became the first Arab country to send an ambassador to Nato. Although the UAE already belonged to Nato's Istanbul Cooperation Initiative, the decision to send an ambassador showed the UAE's international commitment.
In part, this was an insurance policy against the security threat posed by Iran. The UAE's leaders understand that the country's position is strengthened by engagement with international security initiatives.
The perceived regional threat of Iran also helps to explain the intervention in Bahrain. The UAE took part in the deployment of the GCC's Peninsula Shield Force to maintain order in Bahrain. Although these forces acted within the framework of a defence agreement among the GCC states, many Bahraini observers perceived them as occupying forces.
But in truth, most of these forces have had little contact with protesters. The UAE personnel in Bahrain were used to guard sensitive government buildings and strategic sites. The Shield force was defined as an effort to preserve GCC unity and stability.
The GCC as a bloc within the region has become a security umbrella for the smaller states. The UAE's President, Sheikh Khalifa bin Zayed, has sought to follow in the steps of his predecessor to maintain a regional organisation to serve the mutual economic, security and political interests.
Nonetheless, the GCC should re-evaluate its security role going forward to better define the role of the Peninsula Shield Force.
The main mission of the force is to serve as the first line of defence against any external aggressor. There is not, however, any provision for the deployment of a multilateral GCC force to deal with security threats from within these states by their own people.
The UAE's involvement at the regional and international levels signifies a growing prominence in the international community. The country prefers involvement rather than isolation, but has proceeded down this road by taking cautious steps, as it will no doubt continue to do.
Khalid Almezaini is a research fellow at the University of Cambridge and author of The UAE and Foreign Policy: Foreign Aid, Identities and Interests
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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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