Some resolutions to revive Lebanon



It’s a bleak and drizzly Sunday morning but the pavement outside my house in Brighton nonetheless reverberates to the pounding of keen-as mustard January joggers. “New year, new me,” may be the groan-inducing mantra that plagues the latter part of the festive season, but to be fair most of us middle-aged people increasingly do resolve to live and behave better.

Lebanon, which will be 95 this year, would be advised to do the same if it ever dreams of reaching 100 without disintegrating. The government, which as usual has other things on its mind, has got to grip the fundamental economic imperatives and wake up to the needs of a population rapidly running out of patience.

On the public sector front, the state must send a clear signal to those international companies that have shown interest in bidding for the exploration and drilling rights for its estimated 1.9 billion barrels of oil and 122 trillion cubic feet of natural gas.

This is not only to resurrect what appears at the moment to be a rapidly fading golden opportunity, but to also restore the credibility of the state in the eyes of the Lebanese people for whom such a windfall, if it were managed correctly, could be the first building block in the creation of a genuine welfare state.

The government also must steady its nerve and work even more closely with the private sector, especially the banking, tourism, retail and hospitality industries. The banks must increase their lending to allow businesses to grow and create employment as well as approve more personal loans in a bid to stimulate consumption and alleviate income shortfalls.

Retail, tourism and hospitality have weathered a mighty storm in the past two years, but they must work to woo a different kind of visitor. They can no longer rely on the patronage of Gulf Arabs or depend on the diaspora. Those Lebanese who left during the war and who initially came back year-after-year are getting older and their children certainly don’t have the emotional attachment their parents had. The Gulf Arabs who used Lebanon as a safe haven after 9/11 have either moved to more glamorous playgrounds or have been put off by the sectarian tensions and threats of kidnapping. Allowing charter flights into Beirut would be a start. Just saying.

The biggest elephant in the room is the lack of commercial activity in the Beirut Central District, also known as the downtown. The supposed heart of the city, rebuilt by Rafik Hariri in the 90s, is now a ghost town, a state of affairs that has not stopped Solidere, the real estate firm charged with developing the area, charging rents that would make a London tenant weep.

Between 2005 and 2008 the area became heavily politicised and the commercial stardust that heralded its unveiling six years earlier began to dissipate. The Syrian civil war, political chaos and subsequent economic decline has seen it completely evaporate. The only reason businesses are still there is because they are tied into long-term rents and they are dying a little bit every day.

Solidere must concede that its master plan for urban rejuvenation has hit a brick wall. It must review its rents and come up with a strategy to lure businesses and people back to the area. Ordinary Lebanese feel no connection with the area. This needs to be addressed. There are some things that are more important than a bottom line.

My last wish is that the Lebanese state and the international community step up to the plate and make a genuine attempt to resolve the country’s refugee and security situation. There are nearly 2 million Syrians in Lebanon and the longer their status remains uncertain, social and sectarian tensions will exacerbate. Not only will infrastructure be even further pushed to the breaking point, but many thousands of Lebanese are being squeezed out of an already precarious job market by cheap Syrian labour. Meanwhile, those refugees who do not find work will more than likely be pushed into the arms of the extremists already massing in the Bekaa and Tripoli.

That should be our wish list. To ignore these priorities could lead to the eventual unravelling of the country. This year is the 40th anniversary of the civil war, a conflict that had its roots in sectarianism but which was unleashed in no small part because of the widening gulf between the haves and the have not’s. Sound familiar?

Michael Karam is a freelance writer who lives between Beirut and Brighton

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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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