South Korean Vice Unification Minister Chun Hae-sung, center right, shakes hands with the head of North Korean delegation Jon Jong Su during their meeting at Panmunjom in the Demilitarized Zone in Paju, South Korea. AP
South Korean Vice Unification Minister Chun Hae-sung, center right, shakes hands with the head of North Korean delegation Jon Jong Su during their meeting at Panmunjom in the Demilitarized Zone in PajShow more

Reasons to be sceptical about Korean opportunity



On November 29, 1987, Korean Air Flight 858 exploded in mid-air, scattering human remains and plane debris into the Andaman Sea below. Two North Korean operatives had planted a bomb on the passenger jet – from Baghdad to Seoul – before disembarking at a stop-over some hours earlier. All 115 passengers and crew died in the blast. One bomber who survived a suicide attempt later testified as to the motive: to destabilise the South Korean government and scare athletes away from the 1988 Seoul Summer Olympics.

This month, the Games have become the backdrop for renewed North-South diplomacy. Following fresh sanctions imposed in the wake of Kim Jong-un's latest missile test last November, the recent talks have yielded rare tangible results. Next month, a North Korean delegation will attend the 2018 Winter Olympics in Pyeongchang, some 80 miles south of the demilitarised zone. With athletes joined by 230 cheerleaders and 140 orchestral musicians, this is among the largest exodus from North to South in years. Notably, the countries will march under one flag and field a joint women's ice hockey team. As a result, the cross border road will open for the first time in two years.

As ever, the reasons for what Japanese foreign minister Taro Kono has dubbed a North Korean "charm offensive" can only be divined. Some see an attempt to divert attention from Kim's nuclear programme. Others, including US secretary of state Rex Tillerson, have chalked it up to recent biting sanctions. Although his mercurial president is likely to take credit, many suspect a North Korean strategy to phase out the US, with whom South Korea usually holds military exercises in February. Seen by Pyongyang as a rehearsal for war, the exercises have been postponed until March – after the Olympics.

Historical precedent is not wholly encouraging. Having marched under one flag at the 2000 and 2004 Summer Games and the 2006 Winter Games, both sides subsequently reverted back to their posturing. But for now we should celebrate, with cautious scepticism, this sporting gesture. Meanwhile, the spectre of US-South Korea military exercises looms large, likely to set the trend of the post-Olympics proceedings, when any whisper of rapprochement will really be tested.

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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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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
 
Round 3: February 7-9, Dubai Autodrome – Dubai
 
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
 
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
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COMPANY PROFILE
Name: Kumulus Water
 
Started: 2021
 
Founders: Iheb Triki and Mohamed Ali Abid
 
Based: Tunisia 
 
Sector: Water technology 
 
Number of staff: 22 
 
Investment raised: $4 million