Pakistan's Prime Minister Imran Khan, speaks to the nation in his first televised address in Islamabad, Pakistan August 19, 2018. Press Information Department (PID)/Handout via REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. NO RESALES. NO ARCHIVES.
Pakistan's Prime Minister Imran Khan, speaks to the nation in his first televised address in Islamabad, Pakistan August 19, 2018. Pool via Reuters

Pakistan's Khan says austerity begins at home



Pakistan's Prime Minister Imran Khan plans to have only two servants instead of the 524 normally reserved for a sitting premier and he intends to sell off a fleet of bullet-proof vehicles.

Seeking to plug some of the nation's financial shortfalls, the latter step could be considered bold in a country where Islamist militants still pose a threat.

In his first speech as prime minister on Sunday he called on the rich to start paying taxes and said the country will begin an austerity drive to reduce debt, starting with offloading his office's car fleet.

Mr Khan set out his vision for a "New Pakistan" and spoke at length about the need to reshape the country by introducing an Islamic welfare system, reducing poverty and slashing high debt levels.

"We have formed a bad habit of living on loans and aid from other countries," he said, under a portrait of his hero and Pakistan founder Muhammad Ali Jinnah.

"No country can prosper like this. A country must stand on its own feet."

The 65-year-old former cricket legend was sworn in as prime minister on Saturday after his party swept to power in last month's election.

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Mr Khan's appeal has soared in recent years on the back of his anti-corruption drive, which has resonated with young voters and the expanding middle class in the mainly-Muslim nation of 208 million people.

But he has inherited a host of problems at home and abroad, including a currency crisis and fraying relations with Pakistan's historic ally, the United States.

Mr Khan did not shed any light on policy plans to deal with the currency woes that analysts expect will force Pakistan to seek another International Monetary Fund (IMF) bailout. Instead, Khan focused on debt and said former central bank governor Ishrat Husain would lead a task-force to drive austerity.

Criticizing what he called the colonial-era mindset and lavish lifestyles of Pakistan's ruling elite, Khan announced he would live in a small three-bedroom house instead of the palatial prime minister's residence.

"I want to tell my people, I will live a simple life, I will save your money," he said.

Khan appealed to overseas Pakistanis to invest in the country and urged the wealthy to start paying taxes, a perennial problem in a nation famous for tax dodging and where less than 1 percent of the population files income tax.

"It is your responsibility to pay taxes," said Khan. "Think of this as a struggle, that you need to pay tax for the betterment of your country."

Khan, who has never held a government position, named his 21-person cabinet over the weekend, opting mostly for experienced politicians.

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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