The Iraqi parliament has failed to form a working government in six months. EPA
The Iraqi parliament has failed to form a working government in six months. EPA
The Iraqi parliament has failed to form a working government in six months. EPA
The Iraqi parliament has failed to form a working government in six months. EPA

Iraq must form new government to stop instability, US says


Mina Aldroubi
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Iraqi political leaders must expedite the process of government formation to stave off instability, as the country marks six months since national elections were held, a senior US official said on Friday.

Early elections were held last October to meet the demands of anti-government protesters who in 2019 staged months of mass demonstrations. Hundreds of activists died in the fight for better representation and reform.

Iraq’s post-election period often produces deadlock, with power-sharing discussions between political blocs typically lasting five months or longer.

But this time around, those talks are not happening and sporadic meetings between parties have not come close to achieving compromise on how to share power between the country's top posts.

“Our concerns are multifaceted, the ongoing delay in government formation is first and foremost a delay in the new Iraqi government being able to provide the services and deliver on the mandate for which they were elected,” said Jennifer Gavito, US deputy assistant secretary of state for Iraq and Iran.

“This manifests itself in the lack of a budget and being able to move forward on a key priority for us in having a partner to be able to work [with] on priority areas,” Ms Gavito said.

She said it is time for Iraq’s leaders to form a government now that the public have made their voices heard.

Iraq’s elections last year struck a significant political blow to Iran-aligned parties, which lost several seats in parliament as the coalition led by Shiite nationalist cleric Moqtada Al Sadr made several gains.

"The US is eager to work with that new government on key issues and mutual concerns, including Iraq’s stability and sovereignty and empowerment for all Iraqis, anti-corruption human rights protection, energy independence and climate and health."

The delay in this formation "is impending our progress on these bilateral issues in all sectors including security, health care, economy and war", she said.

The US, Ms Gavito said, "wants to see a strong, united and resilient Iraq, we will stay with Iraq to support and be a friend to the Iraqi people".

In 2003, a US-led coalition invaded Iraq based on charges that the government of Iraqi leader at the time, Saddam Hussein, had weapons of mass destruction.

Saddam was ousted from power, but the alleged weapons were never found.

In recent years the US mission was dominated by helping to defeat ISIS militants in Iraq and Syria.

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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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Updated: April 22, 2022, 3:12 PM