Wellington CBD and harbour from Mount Victoria. David Wall / Lonely Planet
Wellington CBD and harbour from Mount Victoria. David Wall / Lonely Planet

Business

Oil and milk economies draw closer together

Abu Dhabi Model Economies: New Zealand may seem like an unlikely choice for benchmarking within the Abu Dhabi Economic Vision 2030. But high-ranking officials say there are a number of similarities between the economies.

Neil Parmar

August 15, 2011

A desire to be different has brought two nations 14,000 kilometres apart closer together as the gaze of Abu Dhabi's Economic Vision 2030 falls on New Zealand.

Vision 2030: More on Abu Dhabi Model Economies

Three days may do for Dubai – but not in New Zealand International travelers spend an average of more than three weeks when they visit New Zealand. But the country is now boosting efforts to increase how much those tourists spend. Read article

Abu Dhabi advised to build trust by adopting NZ's office of ombudsman In Abu Dhabi's efforts to be ranked among the world's top governments, officials have visited New Zealand for insights in key areas.. read article

Working hard off the rugby field, too New Zealand was selected as a model economy within Abu Dhabi's Economic Vision 2030, in part, for its success in developing a relatively large export base. read article

New Zealand shows starting a business can be pain free When Abu Dhabi looked for a model economy to inspire its growth of small and medium-sized business it chose New Zealand. Here is why. read article

"We were seen as very, very different economies," says Olga Speranskaya, the operations manager for investment at New Zealand Trade and Enterprise, a national economic development agency. But both economies have a common interest at heart. "In the end," says Ms Speranskaya, "Abu Dhabi is a country of oil and money. We're a country of milk and money. Diversification is key."

That common push to diversify has woven the two economies closer together. The UAE is now one of New Zealand's largest trading partners in the Middle East, with the value of exports from the island country having topped NZ$416 million (Dh1.27 billion) last year. Etihad Airways and Emirates Airline have become major sources of tourists bound for New Zealand.

Last year, a high-level delegation from the Abu Dhabi Accountability Authority met New Zealand's prime minister, John Key, to discuss the effects of the global financial downturn on their respective economies. And, in June, New Zealand's first embassy in the Emirates was opened in Abu Dhabi.

"Both New Zealand and UAE are countries of similar size with a strong interest in good governance and sustainable growth," says Malcolm Millar, New Zealand's ambassador to the Emirates.

For officials in Abu Dhabi, there has also been a keen interest in how New Zealand has become top-ranked in the world when it comes to making it easy for an entrepreneur to start a new venture. The country has created the right infrastructure overall "to encourage and promote awareness of innovation … especially on the small and medium-sized sector", says Mohamed Omar Abdullah, the Undersecretary for the Abu Dhabi Department of Economic Development.

"That was by itself a very good contribution of the strategy of New Zealand," says Mr Abdullah. "New Zealand has moved from the traditional economy to the knowledge-based economy. We, as Abu Dhabi, look at it from that direction."

Key features of new policy

Pupils to learn coding and other vocational skills from Grade 6

Exams to test critical thinking and application of knowledge

A new National Assessment Centre, PARAKH (Performance, Assessment, Review and Analysis for Holistic Development) will form the standard for schools

Schools to implement online system to encouraging transparency and accountability

While you're here

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.”

Results

2.15pm: Handicap Dh80,000 1,950m

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2.45pm: Handicap Dh90,000 1,800m

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3.15pm: Handicap Dh115,000 1,000m

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3.45pm: Jebel Ali Mile Group 3 Dh575,000 1,600m

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4.15pm: Handicap Dh105,000 1,400m

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4.45pm: Shadwell Farm Conditions Dh125,000 1,200m

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5.15pm: Handicap Dh85,000 1,200m

Winner: Daltrey, Sandro Paiva, Ali Rashid Al Raihi.