UAE signs deal with Philippines to boost and protect mutual investments

The UAE's Ministry of Finance has signed an agreement with the Philippines to boost mutual investments and protect them from non-commercial risks, it said in a statement on Thursday.

The partnership will bolster economic and commercial co-operation and create an investment-friendly climate to attract capital-intensive foreign investments, said Mohamed Al Hussaini, Minister of State for Financial Affairs.

“We are keen to strengthen international relations and sign agreements that enhance the investment climate and elevate the business-incubator environment,” he said.

“These agreements serve as a key international policy tool to encourage foreign direct investment and provide legal protection for both parties’ investments in accordance with international law, thereby stimulating business initiatives to achieve sustainable economic development.”

The UAE, the Arab world’s second-largest economy, has maintained strong trade momentum despite pandemic-induced headwinds and has been strengthening its relationship with vital trading partners globally.

The UAE is the Philippines’ biggest export partner in the Middle East. Total trade between the two countries grew by about 35 per cent to reach Dh3.5 billion ($953 million) in 2021 from Dh2.6bn ($705m) in 2020, official data show.

The Emirates also ranked as the 17th-biggest source of approved investments in the Philippines in 2019, cumulatively valued at Dh48m.

In February, the UAE and the Philippines also agreed to initiate talks to establish a Comprehensive and Economic Partnership Agreement to solidify trade and investment ties between the two countries.

The Protection and Promotion of Investments agreement aims to protect mutual investments from non-commercial risks such as nationalisation, expropriation (taking property from its owner for public use or benefit) and sequestration (taking legal possession of assets until a debt has been paid or other claims have been met), unless it is for the purpose of public interest and in accordance with the law, the statement said.

It provides investors compensation for their investments, provided the value is in “accordance with the market value of the investment prior to its nationalisation or expropriation — with the exception of natural resources from the provisions of the agreement”.

The agreement also provides compensation if investments are destroyed because of war, conflict, civil disobedience or demonstrations.

However, investors are not covered under the provisions of the agreement if the goal is to benefit from it without having an investment activity in the country, the statement added.

The agreement also aims to set out the dispute settlement procedures between investors and the state, the ministry said.

So far, the UAE, represented by the Ministry of Finance, has signed 107 bilateral agreements to protect and encourage investment.

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Sector: Education Technology

Size (employees/revenue): Total team size: 65. Full-time employees: 25. Revenue undisclosed

Stage: early-stage startup

Investors: Adam Tech Ventures, Endure Capital, Equitrust, the World Bank-backed Innovative Startups SMEs Fund, a London investment fund, a number of former and current executives from Uber and Netflix, among others.

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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.”

UAE signs deal with Philippines to boost and protect mutual investments

The agreement aims to bolster economic co-operation and attract capital-intensive foreign investments

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