Dysfunction of Arab states puts stress on colonial borders



The capture of Mosul by militants of the Islamic State in Iraq and the Levant has shown the increasingly nominal nature of Middle Eastern borders. Ironically, these borders, created by Britain and France after the First World War remained durable for a century.

In the past week, two prominent Arab figures expressed doubt that Syria would remain as it was, with its war into its fourth year. Lebanese politician Walid Jumblatt told the Associated Press: “We are still at the beginning of the war in Syria. In the long term, the map of the Middle East will be redrawn.”

Meanwhile, the former United Nations envoy to Syria, Lakhdar Brahimi, declared to Der Spiegel that Syria would “become another Somalia. It will not be divided, as many have predicted. It’s going to be a failed state, with warlords all over the place”.

Mr Jumblatt and Mr Brahimi have differing views of Syria’s destiny. The Lebanese Druze leader believes that, ultimately, Syria will break down into new entities, which will affect the region as a whole. Mr Brahimi disagrees, arguing that Syria will remain united, but only in name. Fragmentation is assured, he believes, also impacting negatively on the region.

Just as the borders of the Middle East were drawn by outsiders, they may continue to be preserved, or threatened, by outsiders. When Iraq invaded Kuwait in 1990, it was the United States that expelled the Iraqi army. By and large, Western states have defended the status quo in the Arab world, even urging their Kurdish allies to remain a part of an Iraqi federal state.

Only in the Israeli-Palestinian context has there been a project to create a new Palestinian state, while the establishment of South Sudan in 2011 merely formalised a longstanding rift between Khartoum and Sudan’s south.

The fear of fragmentation in the region derives from an understanding not that its states were created by Western colonial powers, but from the fact that they have become more contested by their own citizens. This has been true of Syria, Iraq, Libya and even Lebanon, which yet remained one country despite a terrible civil war.

This dysfunctional nature of the Arab state is the consequence mainly of social contracts that promise citizens only intimidation and repression, usually under the eye of a brutal ruling class, with little by way of rights or economic and human development.

Syria has been a prime example of this pattern. Other than the prospect of ending the violence, little encourages Syrians to return to the sordid state in place before 2011. At the same time, the incentive to see Syria divided into mini-states, constructed around sectarian or ethnic identities, is no stronger. Both sides in the conflict seek to defeat the other and win all of Syria.

But is that true of everyone? President Bashar Al Assad’s staunchest ally, Iran, appears to have a different agenda, at least in the medium term: to consolidate the Syrian regime’s hold over “vital Syria” – Damascus, the border with Lebanon, the Syrian coast, and communication lines in between, through the city and province of Homs. Outside those areas, Iran has neither the manpower nor the incentive to help Mr Al Assad recapture territory and hold it for an extended period.

The implications are very serious. Unable to impose its allies’ control over large swathes of Sunni-dominated areas in Syria and Iraq, a hegemonic Tehran may prefer fragmentation, allowing it to dominate digestible components of disintegrating Arab states.

Nor can Mr Al Assad challenge this, given his dependency on Iran and its Lebanese and Iraqi Shia clients for his own political survival. But whether Syria’s divided territories consolidate into lasting entities is a question that remains unresolved.

The possibility of a parting of the ways between Mr Al Assad and Iran is improbable, but possible. The Syrian president has not sought to build up an Alawite mini-state in northeast Syria, while he has done his utmost to maintain a grip on ­Damascus.

Perhaps he feels that a resort to a blatantly sectarian project would not only undermine the idea of Al Assad rule over all of Syria, it could destroy the family’s standing among Alawites. In the past half-century the story of the Alawites has been one of expansion outside their traditional areas and integration into the Syrian state. To be forced back into the mountain now could prompt them to turn against Mr Al Assad’s rule.

The Syrian state as we knew it is not likely to return in the foreseeable future, if ever. But if anything helps achieve this it’s the efforts of regional powers to accelerate the breakup of Syria – or Iraq, for that matter – in order to better exploit the aftermath.

Colonial-era borders in the Arab world have proven far more resilient than critics of colonialism will admit. But post-colonial Arab regimes, by presiding over failing states, have made the task that much easier for countries gaining from their divisions.

Michael Young is opinion editor of The Daily Star newspaper in Beirut.

On Twitter @BeirutCalling

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.”

Ziina users can donate to relief efforts in Beirut

Ziina users will be able to use the app to help relief efforts in Beirut, which has been left reeling after an August blast caused an estimated $15 billion in damage and left thousands homeless. Ziina has partnered with the United Nations High Commissioner for Refugees to raise money for the Lebanese capital, co-founder Faisal Toukan says. “As of October 1, the UNHCR has the first certified badge on Ziina and is automatically part of user's top friends' list during this campaign. Users can now donate any amount to the Beirut relief with two clicks. The money raised will go towards rebuilding houses for the families that were impacted by the explosion.”