PM calls for Arab reforms


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Arab countries must invest in education to prevent their unemployed youth falling prey to radicalism and being left behind in today's competitive world, the Prime Minister has said. The Arab world has failed to make structural reforms in education or create sufficient work opportunities, Sheikh Mohammed bin Rashid, who is also Vice President of the UAE and Ruler of Dubai, wrote in an editorial in The Wall Street Journal yesterday entitled "Education vs Extremism".

With unemployment already at 15 per cent, the Middle East needs to create 80 million new jobs over the next five years "just to keep apace of our demographics" in a region with the fastest growing labour force in the world, the editorial said. "These increasingly restive youths are particularly vulnerable to those who would preach radicalism and hostility to the West, especially the US," the Prime Minister wrote.

Sixty five million adults in the Arab world are illiterate, two-thirds of them women, and more than 10m Arab children are not enrolled in school, a situation which the ruler described as a "monumental waste of human capacity". Unless they invest in education, Arab countries "are in danger of being left behind in a relentlessly competitive world", he said. Greater transparency in governance, a stronger rule of law, and more independent institutions of justice are necessary for Arab countries to create a better investment climate and stronger policies in education and economics, he said.

Instead of investing in these areas, Middle Eastern governments too often give priority to defence budgets, which Sheikh Mohammed described as "recklessness that has cost Arabs decades in lost development." The total expenditure on conflicts in the Middle East, the world's most militarised region, has exceeded $3 trillion (Dh11.01 trillion) over the past 60 years. Sheikh Mohammed made his comments ahead of Barack Obama's speech in Egypt, where the US president addressed relations between his country and the Muslim world. Arabs, many of whom have been alienated by American foreign policy in recent years, appreciate Mr Obama's decision to give a major speech in an Islamic country, he said.

The Prime Minister yesterday met in Dubai with King Abdullah of Jordan where the leaders discussed Arab and international efforts on the Middle East peace process and bilateral relations. WAM, the state news agency, said the visiting head of state was concluding a two-day visit during which he also met with Sheikh Khalifa bin Zayed, President of the UAE and Ruler of Abu Dhabi.
lmorris@thenational.ae

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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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