The UAE and Georgia started negotiations towards a Comprehensive Economic Partnership Agreement (Cepa) this week as the Emirates looks to double the size of its national economy and push gross domestic product beyond Dh3 trillion ($817 billion) by 2030.
The talks were held in Georgian capital Tbilisi from September 26-28 and aim to boost trade, investment and economic cooperation between the two nations in line with the UAE’s foreign trade agenda launched in September 2021, the Ministry of Economy said on Wednesday.
“The UAE continues to explore economic partnerships with markets of regional and global importance. Georgia is a dynamic, free-market economy in the heart of the emerging Caucus region, and our relationships has seen real momentum in recent years,” said Dr Thani Al Zeyoudi, the UAE Minister of State for Foreign Trade.
The economies of both countries have “clear synergies” and complement one another, Dr Al Zeyoudi said.
Non-oil bilateral trade between the two countries more than doubled in the first half of 2022 to $166 million, from the same period a year earlier. It increased 118 per cent on 2020 and 85 per cent on 2019.
Bilateral non-oil foreign trade for all of 2021 between the UAE and Georgia increased 52 per cent to $223m from the previous year. It climbed 11 per cent on pre-Covid levels from 2019.
The UAE now accounts for 63 per cent of Georgia’s trade with the Arab world.
Mutual direct investment between the two countries exceeded $1bn by the end of 2021, with UAE investments currently representing 5 per cent of all foreign direct investment into Georgia, its sixth largest source of FDI, according to the ministry.
The Cepa talks will identify opportunities across agriculture, artificial intelligence, tourism, transportation, energy and other sectors.
“We will also work to create platform for SMEs, start-ups and entrepreneurs to scale and expand internationally,” Dr Al Zeyoudi said. “We are both entering these negotiations with a clear commitment to create opportunity, build on common interests and champion the private sector in both countries.”
Jumaa Muhammad Al Kait, Assistant Undersecretary for International Trade Affairs at the Ministry of Economy, is heading the UAE negotiation team on this tour, including representatives from all concerned authorities in the country.
The Cepa negotiations will explore removing or reducing tariffs and improving market access.
This will help accelerate the flow of Georgia’s principal exports, including cars, gold and semiconductor devices.
It will also provide opportunities for the UAE’s services sector, in particular logistics, education, ICT, finance and FinTech.
There are also opportunities to co-operate on food security and agriculture, advanced technology, hospitality, tourism, real estate and small- and medium-sized enterprises, the statement said.
The UAE has already signed Cepas with India, Israel and Indonesia, and negotiations are under way for a similar pact with Turkey to further boost international trade.
In April, the UAE and Turkey began talks on a deal that is expected to double bilateral trade from $13.7bn, the Ministry of Economy said at the time.
A similar pact with South Korea is expected to be finalised by the end of 2022. It aims to enhance the economic partnership between the two countries to a minimum of $20bn in the next three to five years.
The UAE is also holding Cepa negotiations with Kenya and the Philippines.
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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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