Giving young people in the Middle East hope is as crucial as investing in technology and the economy, a UAE minister said on the opening day of a World Economic Forum event in Dubai.
Mohammed Al Gergawi, Minister of Cabinet Affairs, said a lack of hope among the region's young at a time of economic crisis and conflict was a major challenge.
“Technology is important. Economy is important, but building society is very important – creating hope is very important,” he told WEF founder Klaus Schwab in a conversation on stage as the two-day Global Future Councils meeting began.
We are really obsessed with the future because we know the past in this region - and history of this region - always will create conflict
Mohammed Al Gergawi,
Minister of Cabinet Affairs
“Sometimes part of the problem in the Middle East is young people – they don't have hope. So whatever we do, we have a philosophy [that is] … how can we build hope for young people?
"We are really obsessed with the future because we know the past in this region – and history of this region – always will create conflict.
“How do we design a better future for us? Is it doable? It is doable. We have decided that we want to move to the future, and we want to move to the future quite quickly.”
Mr Schwab said the way ahead must be shaped. “If you want to believe in the future, if you want to have hope for the future, we have to design this future.”
World upturned
The event, a precursor to the flagship Davos conference in January, will hear how governments must learn to cope with change in the global order at a time when the US, Russia, China are at odds and as the UN faces open hostility.
Climate action, economic growth and emerging technologies are top of the agenda as more than 500 decision makers and experts meet at the Madinat Jumeirah complex.
Mr Al Gergawi said governments and institutions were grappling with a changing world order, conflicts and the effects of rapid migration.
“We thought that as the world becomes more interconnected, prosperity would flourish and conflicts would diminish,” he said.
“We used to think that economic integration would reduce wars and military confrontations, and that economic gains would outweigh ideological and political disputes.
“Open borders for capital trade and human migration have given rise to social tensions, amplifying populist sentiments and societal divisions., This also led to conflict and wars that we are witnessing today.
“Alliances and power dynamics are no longer steadfast, even in international institutions we once thought were unshakeable but now face unprecedented challenges. The lines between friends from foes, we cannot always differentiate – and these lines have been blurred. We are in a time beyond political predictions.”
AI guard rails
The challenges and opportunities that artificial intelligence poses is a major theme. Omar Al Olama, UAE's Minister of State for Artificial Intelligence, Digital Economy and Remote Work Applications, said governments and institutions risked being left behind if they fail to write laws and build guard rails for AI.
“Most of the deliberations that take place, whether it's international organisations or within governments themselves, are extremely long, take many years, whereas the problem is here and now,” he told a press conference.
“We've seen that with social media. So today, we're taking about the issues that social media is causing … and some of the guidelines that we are needing. But I'd say social media was a problem in 2008, 2007. And today we're talking about potential solutions. And we have seen the impact in politics … in mental health … in the crises we're seeing.
“So, we renew our call for proactive decisions to be taken by governments, faster, more agile processes. We do not have time to afford to wait for this to get out of hand.”
UAE's march towards 2031
On Tuesday, the UAE government and the World Economic Forum launched We The UAE 2031 Strategic Intelligence Councils. This will involve about 120 stakeholders who will assemble every year to assess how global trends can be used to support the UAE's ambitions in the next seven years to become a greater global economic hub.
“The UAE government’s partnership with WEF builds on a journey of co-operation that represents a model for collaboration between governments and international organisations,” said Huda Al Hashimi, Deputy Minister of Cabinet Affairs for Strategy Affairs.
Stephan Mergenthaler, head of strategic intelligence at the World Economic Forum, said a challenge many governments face today is being "wired for the previous age".
The UAE's plan looks to get well ahead of the biggest trends and capitalise on them, he said, and tap into this pool of experts to make the best decisions about the future.
The Global Future Councils consists of 30 councils made up of experts across business, government, academia and civil society, from more than 80 countries, who are nominated for two-year terms.
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Killing of Qassem Suleimani
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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.”
