Optimism over Rafale fighter jet sale to UAE

ABU DHABI // A top official of Dassault Aviation, the French maker of the Rafale and Mirage fighter jets, has expressed optimism about the prospects of selling the Rafale to the UAE, and denied that the talks are taking longer than expected.

Eric Trappier, the executive vice president of Dassault, also spoke of the broad contours of the company's relationship with the UAE, saying it included upgrading the country's existing Mirage fleet and developing joint ventures with Emirati companies to help promote the local defence industry.

The UAE first indicated in 2008 that it was interested in the Rafale as a possible replacement for the Mirage, but little progress has been reported on the deal so far.

Reports have also emerged that the UAE had sought technical information on the F/A-18 Super Hornet, a direct competitor to the Rafale. However the US company Boeing, which makes the F/A-18, has denied receiving any such request.

Nearly half the UAE's fighter fleet is made up of the French Mirage 2000 and the more advanced Mirage 2000-9, or Dash 9. There are 60 Mirages in service and almost 80 F-16s.

The Mirage 2000-9 was a significant collaboration between the UAE and Dassault, said Mr Trappier. "Our first duty is to support the UAE Air Force. The programme is going well, and we are continuing to upgrade the Mirage," he said.

The UAE awarded Dassault a contract on Tuesday to upgrade the armaments and software on the country's Mirage fleet in a deal worth Dh112 million.

Before acquiring the existing Mirage fleet, the UAE operated French Mirage 3 fighters. "We hope that Rafale could be the next step," Mr Trappier said.

But he said his company would continue upgrading the UAE Mirages as the Air Force asked for more improvements.

The Mirage 2000-9 incorporates many of the requirements requested by the UAE military. But "as [in] any programme for a fighter in the world, step by step there are new requests and new requirements", he said.

While talks on the Rafale continue, the company is working with the local Emirati defence sector on developing technology, education and manufacturing bases that can support the Rafale, he said.

The UAE confirmed that the military's technical committees are studying the Rafale, but Maj Gen Obeid al Ketbi said this did not indicate the UAE was necessarily leaning towards purchasing it. He also did not say if the Rafale was facing any competition to replace the Mirage.

Gen al Ketbi is the spokesman for the International Defence Exhibition (Idex), which ends today.

Mr Trappier declined to say when the deal could be concluded, saying the decision rests with the Government.

"I am optimistic," he said. "I will not tell you that this could be signed today, tomorrow, or after tomorrow. The decision is mainly in the hands of the UAE Air Force and the Government of the UAE."

He added that "we've had this very long relationship … with the UAE. We are very optimistic because the next logical step is the Rafale.

He said his company would "try to finalise a programme with all the annexes, technical, logistics, training, offsets, the partnerships with some companies".

Other Gulf countries besides the UAE have expressed interest in the Rafale, but Saudi Arabia was not one of them, said Mr Trappier.

He said that the deal was not taking longer than expected, noting that Mirage negotiations had taken a similar amount of time.

"I think it's a big contract and they are happy with the Mirage," he said. "There is no hurry. If there is a hurry, we are also ready, but it is up to the UAE authorities … to decide when and how."

He said the UAE had asked for advancements to the standard Rafale, including improvements to software and an antenna. The French government, also a Dassault client, has also asked for some changes.

But he did not cite a price estimate for those changes, whose costs were rumoured to be among the reasons why the deal has been delayed. He said the improvements sought by the UAE or France would be paid by the country requesting them.

Mr Trappier did deny that the cost of the changes had led to a delay, saying it was simply a large programme that needed time.

He said the UAE was right to think about the Rafale's capabilities in terms of its long-term needs, and was always looking to the future.

"There are some discussions to improve the basic aircraft into what could be the Rafale of the year 2020, 2025, 2030," he said.

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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.”