Iraq’s new government could take months to form following the announcement of the general elections results, although backroom deals started before the first vote was made, experts told The National.
Preliminary results showed the political party of populist Shiite cleric Moqtada Al Sadr gaining the largest share of the vote, translating to more than 70 seats. The bloc is expected to hold major influence over Iraq’s direction and relationship with Iran and the West.
Mr Al Sadr’s party beat candidates from the Iran-backed Fatah Alliance, led by paramilitary leader Hadi Al Amiri, which has contested the results along with several other Shiite groups.
It was not immediately clear how many seats the Fatah Alliance had lost from the 48 they held after the 2018 election.
The period that follows the results is a crucial time for political parties to try to secure key ministries for their candidates.
“There will be an appeal process by the big losers and then we move to the selection of the speaker, president and prime minister as a package deal,” Michael Knights, a fellow at the Washington Institute for Near East Policy, told The National.
Mr Knights said political jockeying, as in previous rounds of elections, is expected.
“Some cabinet roles will be excluded from the party points system [including the prime minister role] and those excluded roles will be left to the prime minister to fill. Other ministries will be shared out using the points system,” he said.
Under Iraqi legislation, the party that wins the most seats is allowed to choose the country’s next prime minister, but it is unlikely any of the competing coalitions will secure a clear majority.
Without a clear majority, a lengthy process involving backroom negotiations will take place to select a consensus prime minister and agree on a new coalition government.
Negotiations over senior positions have already started, as gaining access to ministries is the key to moving forward for political parties, said Renad Mansour, a research fellow and director of the Iraq Initiative at London’s Chatham House.
“Even though there were elections, and they had some kind of measure that influences government formation, the government formation has already begun even before the first vote has been cast,” Mr Mansour told The National.
What makes the elections different this time round is not the focus on who will be the next prime minister, president or parliament speaker, but for political parties to assign their candidates to ministerial positions, he said.
What happens now?
There will be a period in which the public, candidates and political parties can contest the results, and request manual recounts, said Sajad Jiyad, an Iraqi fellow at the Century Foundation think tank.
The Independent High Electoral Commission (IHEC) has one month to certify the results, Mr Jiyad told The National.
“Once that’s done IHEC will present the results to the supreme court to certify and then within 15 days the next parliament is supposed to meet to choose its speaker,” he said.
It will take some time until the results are ratified and we see a new parliament session and new speaker, he said.
Experts predict it could take be least six months until a new government is formed.
Although Mr Al Sadr's gains were not a surprise, the margin was larger than predicted and Fatah's collapse in support shocked many, said Lahib Higel, Crisis Group’s senior analyst for Iraq.
"We will see some contestation of the election results. We have already seen that from Shiite parties. They have already had a meeting just last night to come up with a united front in terms of how they should deal with the situation,” Ms Higel told The National.
The outcome of the elections will make “this process a little longer because we are in a period that establishes what the smaller blocs actually look like,” she said.
“When we have a clear picture of how the blocs will look in parliament then the real negotiations over various ministries will begin.”
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
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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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