A businessman’s blunted optimism in Syrian stalemate


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Youssef is the father of a friend of mine. He is Syrian, and he is a very successful businessman.
He proudly told me this week that he has not missed a payroll for his 130 or so workers in two factories, one near Damascus, the other on the road to the Golan Heights, despite the ceaseless and bloody conflict that has killed more than 100,000 of his compatriots, forced millions more to flee overseas and levelled much of his beautiful and ancient country to the dust.
I have checked in with Youssef a couple of times since Bashar Al Assad, the Syrian president, began the systematic slaughter of his people in 2011.
I always marvelled at his tenacity as he described his frequent visits to his factories and land, and I was inspired by his optimism in the face of absolute devastation.
He seemed to show an almost unique ability to cut through the complexities of conflict, politics and society that have baffled generation after generation in the Middle East.
I imagine it is part of the reason he and his family have been so successful in business here for so long.
I spoke with him in March this year when a food factory owned by a big multinational burnt to the ground after a stray mortar round hit an adjoining warehouse.
I learnt a great deal from our chat. Not least that he had been instrumental in bringing that multinational to Syria and indeed in building that factory.
It seemed the story of Youssef's and his family's commercial endeavours ran parallel with the story of modern Syria.
He told me work started on building the food factory in 1992. The first Iraq war was over and Syria softened its stance towards foreign investment.
Youssef had been exiled in Lebanon for 30 years but was able to come back thanks to this shift. He thought it was time to begin rebuilding the legacy his family had founded in Syria decades earlier.
Youssef's forebears started out in Syria as farmers in the 1940s. Over the next 20 years they became one of the most prominent mercantile families in the country with dominant positions in the cotton, barley and wheat markets.
But in the early 1960s much of their land was confiscated and redistributed, and the wave of nationalisations that followed the Baath coup claimed the rest of their interests.
So for Youssef and his family to come back in the early 1990s after three decades in exile took uncommon optimism.
And then, fast forward another 20 years and Youssef is today in quasi-exile again, running his businesses remotely. Yet after two years of war with no end in sight and a factory in ruins, to still see the opportunity to reclaim your family's fortune was admirable indeed.
But that was in March.
Youssef's optimism, while still present, was noticeably blunted when I spoke to him this week. He still travels back to Damascus every month to check on his factories but his assessment of the situation has changed radically.
"Economically speaking this is a completely bleak situation now," he said with his usual frankness. "It is catastrophic."
He said the factories are struggling to get by, just covering costs as best they can. The idea of making a profit is unthinkable. "The only people making profit in Syria these days are what we call war businessmen" he told me, with palpable distaste.
He sees nothing on the horizon but bloody stalemate.
The idea of American military intervention fills him with dread. If Assad is defeated by foreign military intervention then he believes what he calls "the jihadi opposition" will come to the fore, which would be terrible for Syria and its economy. "I feel lost," he said. "I don't see any positive situation at the moment."
You might imagine Bashar Al Assad shares his feelings.
The president has three options before him. He can maintain the status quo, that is fending off an opposition that is constantly replenished with foreign fighters and aid; he can stop the war, which he cannot do as he does not exert enough control over the country; or he can escalate the war to some sort of conclusion, which he arguably attempted with last week's nerve gas attack.
But such an escalation actually forces another conclusion. The use of chemical weapons forces America and the international community to intervene in some way and can be seen as a fair gamble for someone in such an unenviable position as Mr Al Assad.
If the gamble pays off and America responds with force, he would get to shift the blame for attacking his people on to the Americans and maybe convince his allies in the region that none of this was really his fault. It would be a revisionist option, but not the first in this region.
But as long as America and the international community pursue the current diplomatic solution, Mr Al Assad will be denied this potential endgame and the depressing and bloody status quo will persist.
I hope events allow Youssef's previously indomitable optimism to return one day soon. His conclusion after our most recent chat was bleak indeed. "You remember Somalia?" he said. "That was 20 years of this. I think we have the same in Syria now."
I hope he is wrong.
jdoran@thenational.ae

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  • Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
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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.”