Houthi Shiite rebels held a tribal meeting in Yemen's capital, Sanaa, which resulted in an ultimatum to president Abed Rabbo Mansour Hadi. Photo: Hani Mohammed / AP
Houthi Shiite rebels held a tribal meeting in Yemen's capital, Sanaa, which resulted in an ultimatum to president Abed Rabbo Mansour Hadi. Photo: Hani Mohammed / AP
Houthi Shiite rebels held a tribal meeting in Yemen's capital, Sanaa, which resulted in an ultimatum to president Abed Rabbo Mansour Hadi. Photo: Hani Mohammed / AP
Houthi Shiite rebels held a tribal meeting in Yemen's capital, Sanaa, which resulted in an ultimatum to president Abed Rabbo Mansour Hadi. Photo: Hani Mohammed / AP

Contemplating the prospect of two Yemens


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Yemen’s status as a unitary state has never been a simple affair, and that was the case long before the Houthi rebels’ ultimatum this week to Yemen’s president to appoint a new government. After the Iran-backed Shia rebels took over Sanaa and large tracts of the country,they felt empowered to warn that if the government did not meet their approval, they would appoint a “national salvation council” instead.

Given that the Houthis are a minority Shia group within the mostly Sunni state, this might seem like a classic case of disproportional influence. But such is the murky network of allegiances of convenience as the country navigates the aftermath of the Arab Spring that the Houthis have support from those still loyal to ousted president Ali Abdullah Saleh and other allied tribes.

Yemen’s most recent manifestation as a single state has only been since 1990, when the collapse of the Soviet Union precipitated the Russian-supported People’s Democratic Republic of Yemen, known as South Yemen, negotiating a peaceful unification with the Yemen Arab Republic, then ruled by Mr Saleh and known as North Yemen.

Even that unity was shaky, with a civil war breaking out in 1994 when secessionists from the south declared the creation of the Democratic Republic of Yemen. The secession fizzled out within months when troops from the north seized Aden.

The central premise behind Yemen’s Conference of National Dialogue, a GCC-brokered deal designed to find a peaceful way forward for the country after the end of Mr Saleh’s rule, was that the country would remain a single entity. Models based on varying degrees of federalism were designed to diminish the power of the secessionist calls being made out of the southern governates.

With the Houthis’ control of the capital and the important Red Sea port city of Hodeida, the southern provinces’ secessionist argument gains new vigour and appeal, making the prospect of Yemen breaking into two or more countries increasingly probable.

This would be bad on several levels, not least that Iran would do in Yemen, formerly within Saudi Arabia’s sphere of influence, what it did with Hizbollah in Lebanon. A divided Yemen would have less influence in the region and be poorly placed to provide the stability and prosperity its people desperately seek. If Al Qaeda and its affiliates thrive in the south, it could threaten regional security. It is not in the interests of most Yemenis and ought not be allowed to happen.

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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.”