Watchdog urges Gulf to be more transparent



The head of an international anti-graft watchdog has urged the Gulf to improve the accountability of governments and their entities as part of efforts to further eradicate corruption and promote transparency. Greater openness was needed concerning public income and expenditure, said Cobus de Swardt, the managing director of Transparency International, a research group based in Berlin. However, Mr de Swardt also praised the region for its ongoing efforts against corruption, which helped propel the UAE, Qatar, Oman and Bahrain up the rankings in the organisation's recent global anti-corruption index.

"In order to sustain anti-corruption efforts and transparency you need high levels of public participation - in other words, the public holding public officials to account," he said in an interview. "This region doesn't have an extremely vibrant civic society. Systems of public accountability can be improved, and greater civic participation in affairs of the state and government is one way which would stand the region in good stead."

In the long term, institutional and private investors would be attracted to markets that had a stable and predictable environment and strict rules on investment, he said. Globally, despite a recognition of the importance of raising levels of integrity, transparency and accountability in the wake of the world financial crisis, international bodies such as the Group of 20 nations had so far not turned agreement on the issue into action, Mr de Swardt said.

"As never before, the current global economic and financial crisis has highlighted the importance of integrity, transparency and accountability both in the public and private sector," he said. The UAE has moved up five places since last year to become the 30th least-corrupt country of the 180 assessed by businessmen and analysts in Transparency International's Corruption Perceptions Index. High-profile prosecutions of executives on corruption charges and improvements in financial tracking systems helped to make the UAE a better place to do business, the non-governmental organisation said in its annual global survey, published last month.

A judge in Dubai last month handed down the longest term in the emirate's corruption inquiry into Istithmar World, imprisoning a senior manager for five years after he was convicted of embezzling US$1.34 million (Dh4.9m). Dubai launched the extensive anti-corruption inquiry last year to fight fraud that was costing billions of dirhams, while Abu Dhabi in October announced an eight-year detective training course to fight against financial crime.

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Name: Infinite8

Based: Dubai

Launch year: 2017

Number of employees: 90

Sector: Online gaming industry

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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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Name: Rain Management

Year started: 2017

Based: Bahrain

Employees: 100-120

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