Iraq and France sign deals to boost economic and security ties

Iraq and France have signed several deals aimed at bringing Baghdad closer to Paris economically.

Iraqi Prime Minister Mohammed Shia Al Sudani landed in Paris on Thursday for his first official visit as leader and met French President Emmanuel Macron.

The two sides “signed a treaty that seeks to strengthen bilateral relations in anti-corruption, security, renewable energy and culture”, the Elysee Palace said on Friday.

Mr Macron and Mr Al Sudani “reaffirmed their commitment to complete big network infrastructures projects based on French know-how … In that respect, they have pledged to grant Iraq the expertise of French companies”, the Elysee Palace said.

“In terms of alternative energies, they showed their commitment to the implementation of TotalEnergies's multiple-energies project … based on solar energy and investments in gas.”

Mr Al Sudani said the agreements between the two countries have set up a “road map” for improved relations.

“A short while ago, my friend Macron and I signed the Strategic Partnership Agreement, which lays down a road map for expanding the horizons of co-operation between our two countries in various fields,” he said.

“We will continue to work with friends on serious partnerships that will guarantee Iraq achieving economic reform and sustainable development, as we planned in the government programme.”

French company TotalEnergies in 2021 signed a $10 billion contract with Baghdad, but work on a number of projects has yet to begin.

These include the construction of oil and gas processing facilities with the capacity for electricity production, along with a one-gigawatt photovoltaic power plant

Mr Macron has visited Iraq twice since taking office in 2017. He said last month that Baghdad must follow a path that is not “dictated from outside”.

Mr Al Sudani's visit aims to “develop opportunities for close co-operation with France and to provide prospects for investments and trade exchange”, the Prime Minister's office said in a statement given to The National.

“The visit will witness the signing of a strategic partnership agreement between Iraq and France, which will include the economic, investment and security sectors, combating terrorism and extremism, cultural exchange and promoting peace in the two countries, the Middle East region and the world.”

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.”