South Korean president Park Geun-hye, rear centre, delivers her statement during the formal session of the Asean-Republic of Korea Commemorative Summit in Busan, South Korea, last year. Ahn Young-joon / AP Photo
South Korean president Park Geun-hye, rear centre, delivers her statement during the formal session of the Asean-Republic of Korea Commemorative Summit in Busan, South Korea, last year. Ahn Young-joonShow more

Asean hopes to avoid problems plaguing the EU



The former US secretary of state, Henry Kissinger, once famously asked: “If I want to speak to Europe, who do I call?” In this, a crucial year for the Association of Southeast Asian Nations (Asean), the answer relevant to this regional group is clear: call Kuala Lumpur.

Malaysia is taking the chair for 12 months. At the end of the year, it hopes that the 10-country partnership will be able to declare itself the “Asean Economic Community”, the three pillars of which will be: action on political and security affairs, deeper economic integration and greater sociocultural cooperation. The slogan “Our People, Our Community, Our Vision” has been adopted and a meeting of all Asean foreign ministers has already taken place in Kota Kinabalu, in the Malaysian state of Sabah.

It must be admitted that popular excitement about the actions and statements of Asean has sometimes proved elusive. A Jakarta Post editorial put it bluntly, asking: “Who cares about Asean?”

The situation reminds me of the Boring but important feature that used to appear in The Week magazine. The Post editorial noted that this was an important year for Asean: “The 10 members of Asean are expected to totally open their doors to each other, and any kinds of barriers and obstacles will be set to a minimum. Its impact could be devastating for Indonesia if it is not fully ready for the free market, but it could be a huge opportunity if Indonesia could adjust itself to the new trading bloc.”

Quite right. But creating a genuine sense of community among nations with long histories and different languages, religions and cultures, is difficult. Many Europeans used to speak equally dismissively about the EU. But when the financial crisis hit, it became painfully clear that matters such as the free movement of goods, capital and services – words unlikely to quicken the pulse of any but the most ardent Europhile – were of importance to everyone. Whether they liked it or not, everyone was aware of the devastation the crisis wrought on Europe. Even those relatively insulated from it knew someone affected by the web of regulation that binds the EU. That web was meant to create a rising tide that would lift all boats.

But it also left individual vessels without the means to steer themselves out of troubled waters. A Greece still in possession of an independent drachma, for instance, would have had all sorts of policies at its disposal instead of having to follow the strategy dictated by Berlin.

In contrast, the Asean approach – cautious and incremental – has been wise. Malaysia’s trade minister Mustapa Mohamed has stated explicitly that “from day one, we know we’re not going to adopt the EU model”. Asean will avoid the European top-down approach, which has failed to bring its member states’ peoples with it. But it will seek to harvest the benefits that could come with a community of 625 million drawing closer together.

Other countries are most certainly aware of this potential. China is seeking to reassure the group that it will respect “Asean centrality”, in contrast with a supposed American preference for bilateral agreements. China already has large investments in which Asean countries have mutual interests. The planned high-speed rail link from Kunming in Yunnan province to Singapore will pass through Laos, Thailand and Malaysia. China wants Asean to see it not as a competitor but as a partner.

The US, meanwhile, continues to lecture Asean countries on governance. It also appears to see the association as a possible means to contain China’s ambitions, both in the region and in the surrounding seas, which are subject to multiple claims.

US secretary of state John Kerry’s words, in Foreign Policy magazine about the launch of the Sustainable Mekong Energy Initiative, are telling. The US government has just co-hosted the project’s launch meeting in Laos and Mr Kerry felt it necessary to write: “This is not a question of dictating the path of development in these countries.” Who could possibly have imagined otherwise?

Under the chairmanship of Malaysia, Asean will seek a path of mutual benefit. Confrontation is certainly not in their interests, no matter that some US hawks regard it as inevitable, or even desirable. Malaysia has historically enjoyed warm relations with China, while those with the US have never been better. The “conciliatory diplomacy” of Malaysian prime minister Najib Tun Razak, as a Center for American Progress report recently noted, has gained significant rewards. It cited a “revived US-Malaysia engagement, improved relations with Indonesia and Australia, and the resolution of a small but acrimonious territorial dispute with Singapore”.

This will be the way forward for Asean. If it means that progress is made slowly and without fireworks and grandiloquent talk, that may be all to the good. This is a better course than the one helmed by arrogant, unelected bureaucrats in Brussels. The European disconnect has angered so many that The Economist concluded that the biggest danger to the EU project is “political rejection”.

Asean will not take that risk, and its long-term foundations will be all the more secure for it.

Sholto Byrnes is a senior fellow at the Institute of Strategic and International Studies, Malaysia

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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.”