Business

Top military exhibition in Abu Dhabi already a full house

Gulf countries are boosting their military expenditure to protect their borders in a region that is gripped by violence.

Dania Saadi

30 November, 2014

The Middle East’s top military exhibition has already sold out of space almost three months before its doors are due to open amid rampant military spending regionwide.

The International Defence Exhibition and Conferences (Idex) will take place in Abu Dhabi from February 22-26.

Idex, which has been held every other year since its inception two decades ago, has expanded to include Navdex, a maritime defence exhibition and Umex, an unmanned systems exhibition.

Total naval defence spending in the Arabian Gulf and western Indian Ocean is expected to reach US$76.4 billion between 2010 and 2019, Idex said in a statement released on Sunday.

Idex is taking place as Middle Eastern countries’ defence spending is expected to rocket to $920 billion between 2014 and 2020, according to the consultancy IHS Jane’s Aerospace, Defence and Security.

Gulf countries are boosting their military expenditure to protect their borders in a region that is gripped by violence from Iraq to Yemen.

Growth in the defence budgets of GCC countries has been particularly high over recent years, and now accounts for about 83 per cent of overall military spending in the Middle East, according to IHS Jane’s annual defence budgets review. Spending on defence across the Mena region in 2013 grew by 12.1 per cent to $120.6bn, making it the fastest-growing region in percentage terms in the world. The report found that Saudi Arabia, Oman, Iraq and Bahrain all featured in the top five growth markets in percentage terms for 2013. Defence spending in the Mena region accounts for 7.8 per cent of worldwide expenditure, up from 5.2 per cent in 2008, according to IHS.

Qatar, the world’s biggest exporter of liquefied natural gas, said in March it signed contracts worth $23bn to purchase attack helicopters, guided missiles, tankers and other weapons from Boeing, Airbus, Lockheed Martin, Raytheon and 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.”

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March 2021: Mr Sunak extends the SDLT holiday at his March 3 budget until the end of June.

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