EU sets talks with GCC states on strategic partnerships

The EU on Friday said that it had received the mandate to launch negotiations with the Gulf Co-operation Council's six countries on concluding bilateral strategic partnership agreements.

Negotiations will start “as soon as possible,” the EU Commission, the bloc's legislative arm, said. The complementary agreement negotiations are expected to go ahead with UAE, Bahrain, Kuwait, Oman, Qatar and Saudi Arabia.

“There is huge untapped potential in the EU’s relationship with the Gulf region. As of today, we will negotiate bilateral Strategic Partnership Agreements with the six Gulf partners,” the EU's foreign affairs chief, Kaja Kallas, said on Friday.

The aim of the strategic partnership agreements “is to provide for an ambitious, modern, comprehensive and effective framework for bilateral co-operation tailored to the shared priorities and objectives of the EU and each respective GCC partner,” the press statement read.

Commissioner for trade and economic security Maros Sefcovic said that the agreements would provide a “major boost” to trade and investment relations. The negotiations framework includes a wide range of topics, including foreign and security policy, justice and law enforcement, and trade and investment.

The EU has also struck strategic partnership agreements with allies including Canada in 2016 and Japan in 2019.

European commissioner for trade and economic security Maros Sefcovic expects a 'major boost' to trade and investment relations. EPA

Strategic partnership agreements with GCC countries “will also allow for strengthening our co-operation at regional level to build peace and promote stability and prosperity in the broader Middle East,” said Commissioner for the Mediterranean, Dubravka Suica.

The talks will complement existing EU – Gulf co-operation frameworks, including continuing regional and bilateral negotiations on free trade agreements.

The EU and GCC have sought in recent years to revive talks on a free-trade agreement that stalled in 2008. In 2023, the EU was the GCC’s second largest import partner, at €93.8 billion ($102 billion), and fourth-largest export partner, at €76.3 billion.

In April, the UAE and the EU separately agreed to begin talks on a potential free trade deal.

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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.”