Commanders warn of maritime security challenges for Gulf during Abu Dhabi conference



ABU DHABI // The location of the Arabian Gulf creates a number of security challenges in the maritime domain, global naval commanders warn.

These include the disruption of the flow of goods and services and piracy attacks.

As globalisation and the importance of the sea for world trade increases, countries become more dependent on external supplies.

States are being urged to protect their oceans and improve surveillance to anticipate crises and ensure national security.

“There’s no doubt that securing international maritime trade has become instrumental in ensuring the smooth function of global markets,” said Vice Admiral Evangelos Apostolakis, chief of staff of the Greek navy.

“Pirate groups which occasionally operate from lands pose an obstacle to the flow of goods and services.”

He was addressing the Gulf Naval Commanders conference in Abu Dhabi on Wednesday.

With the region turning into a hub of international commerce, the security of oil supplies has become a common concern for nations.

“The possibility of conflict cannot be ruled out,” said Rear Adm Syed Arif Hussaini, of the Pakistan navy. “This is a challenge faced by us, naval commanders. We need to estimate the current and emerging threats and work out appropriate strategies through collective wisdom, enhance cooperation and mutual trust.”

He said that over the past century, the framework of Arabian Gulf security had been based on cooperation between regional countries and dominant powers.

“We witnessed three wars but the security of oil supplies to the world was ensured as the focus of conflict remained on land,” he said. “But will the same happen in any future conflict? The world is transforming into a shape that we’ve not seen before.”

Rear Adm Hussaini said the Arabian Gulf was geostrategically and geoeconomically important, which brought about opportunities and challenges.

“The Gulf requires a cooperative mechanism to include confidence-building and conflict prevention,” he said. “We need to share ideas and develop understanding.”

Rear Adm Antoine Beaussant, commander of the French forces in the Indian Ocean, said the Arabian Gulf had become the most important route.

“Gulf countries have realised what type of advantage they could draw from their cross-route position,” he said. “They use oil as a magnifier and they are placed at the centre of world trade traffic.

“Our gaze is now turning to the seas and our economies are more dependent on external supplies.”

He said states had to protect their interests and preserve their oceans.

“This implies a need of surveillance to know the environment and anticipate a crisis,” he said. “It requires appropriate means to protect people and provide security and defence.”

Of all petro-chemicals traded in the world, 35 per cent move by sea. That figure rises to 65 per cent for Asia.

“Our economies rest on efficiency of maritime transport,” said Rear Adm Beaussant. “Not only do we trade at sea, but we also started producing at sea. Sources of oil and commodities are moving offshore and, besides offshore oil-production sites, you find diamonds which are being extracted from the seabed.”

He said the shift towards the sea would have several consequences, including a rise in oil transportation linked to a rise in oil demands, the development of seabed exploration, a rise in marine energy farms and increased pressure on the maritime environment.

“Mastering the sea has become a necessity, so has been identifying major threats,” he said. “There are chances that terrorism will rise in upcoming years due to major political and religious rifts in the region so, to tackle all this, the security structure of the Gulf has to be reinforced.”

Commodore Keith Blount, the UK maritime component commander and deputy commander of the Combined Maritime Forces, said a GCC-wide committee to deal with maritime threats would mark important progress.

“We tend to over-classify information and become fascinated by the risks of disclosing what we know rather than the benefits of doing so,” he said. “The re-emergence of piracy in the Gulf of Aden and the Red Sea will come back.

“I know there are more to come in the future and Somalia remains a long way from being sorted. But, in sharing information and working together, we will be even more prepared and ready to successfully deal with any crisis.

“Increased cooperation and inter-operability will aid regional stability and security. It’s too serious an issue for us not to take positive action to get better.”

cmalek@thenational.ae

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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