Lebanon is looking to business chiefs among the UAE diaspora to boost deposits at home as it seeks to increase lending and stave off further economic shocks from Syria's unravelling crisis.
The Lebanese central bank governor, Riad Salameh, met Lebanese businessmen in Abu Dhabi yesterday, a day after the prime minister, Najib Miqati, resigned amid political deadlock with Hezbollah, the Shiite militant and political movement.
In January, the banking regulator injected US$1.5 billion (Dh5.5bn) into Lebanon's banking system to help finance housing and other sectors that are "key to social stability" and growth, Mr Salemeh said.
Last month the country's central bank found buyers for $2.2bn of $3bn in bonds offered for sale.
It also exchanged deposit certificates due this year and next for ones with maturities of seven to 10 years.
"Lebanon is living a crisis," Mr Salameh said yesterday. "From the start of the year, the regulator took into account that 2013 was going to include many crises. On the one hand, we have had problems related to the parliamentary elections, and on the other we have experienced the fallout from Syria's turmoil and the resulting slowdown on investment and activity in Lebanon."
Tensions in Lebanon have risen since the popular uprising seeking to unseat the Syrian president, Bashar Al Assad, reignited dormant yet highly eruptive divisions in Lebanese politics.
Clashes broke out yesterday in Tripoli, home to a Sunni Muslim majority, which is largely supportive of Syria's Sunni-led uprising.
Mr Miqati, who is a Sunni, on Saturday resigned from his post as prime minister after Hezbollah refused to ratify a decision to extend the term of a senior security official and to approve the creation of a body to oversee the June parliamentary elections.
"Now it is important for dialogue to begin and for a salvation government to be established during this difficult period," Mr Miqati said on Saturday from his official Twitter account after submitting his resignation to the president. "I thank God that I Ieft office the same way I came in, with integrity."
The political fallout has sharpened the economic challenges facing Lebanon, after some Arabian Gulf states last year warned their citizens against travelling to the country. The decision by the UAE, Qatar and Saudi Arabia cut much-needed tourism revenues for Lebanon.
Profits plunged at Lebanon's banks as they wrote down bad loans to their customers in Syria after uprisings and international sanctions took their toll on the country's economy.
Mr Salameh appealed to the Lebanese businessmen yesterday to help shore up remittances, the country's main source of foreign exchange.
Lebanon receives $8bn annually in remittances, according to data from the World Bank. Some 40 to 50 per cent of this comes from the Gulf, Mr Salameh said. The IMF expects Lebanon to register growth of 2 per cent for last year and 2.5 per cent for this.
halsayegh@thenational.ae
if you go
The flights
Etihad, Emirates and Singapore Airlines fly direct from the UAE to Singapore from Dh2,265 return including taxes. The flight takes about 7 hours.
The hotel
Rooms at the M Social Singapore cost from SG $179 (Dh488) per night including taxes.
The tour
Makan Makan Walking group tours costs from SG $90 (Dh245) per person for about three hours. Tailor-made tours can be arranged. For details go to www.woknstroll.com.sg
Pearls on a Branch: Oral Tales
Najlaa Khoury, Archipelago Books
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.”
