NEW DELHI // A parliament again deadlocked over corruption threatens the finance minister's ambitious reform agenda, dealing a harsh dose of political reality in the aftermath of his roadshow to North America to sell the India story.
Two long-stalled reforms - one to lift the foreign ownership for insurers to 49 per cent from 26 per cent and another that would simplify land acquisition for factories - were to be introduced in the legislature in the past week but were sidetracked by the political ruckus.
With opposition parties disrupting parliament and questioning investigations into multi-billion-rupee scandals related to allocations of telecoms airwaves and coal mines, there is no guarantee the bills will be passed during this session, which ends on May 10.
Palaniappan Chidambaram promised investors during his roadshow in Boston, New York, Ottawa and Toronto to get the bills on insurance and land reform passed in the current session, hoping their passage would boost investment from its lowest growth in eight years and help spark an economy growing at its slowest in a decade.
"If we can pass the land bill, if we can pass the insurance bill and if we can pass the Goods and Services Tax bill, that will be an accomplishment of this parliament," Mr Chidambaram said last week, appealing for bipartisanship on economic issues.
Mr Chidambaram is increasingly spoken of as a future prime minister if the Congress party retains power, although he denies any such ambition.
While the main opposition Bharatiya Janata Party (BJP) has agreed in principle on land reform, it has refused to back the insurance bill, and with national elections due by May 2014, it is not in a mood to compromise.
"Chidambaram is misleading," BJP spokesman Prakash Javadekar said.
"The government is in its last days of office. They cannot bring the economy back to health."
New Delhi's poor record of delivering on promises, coupled with myriad regulatory hurdles, including high-profile tax battles with foreign companies such as Vodafone and Royal Dutch Shell, has driven investors away.
Mr Chidambaram warns sceptics against underestimating his ability to deliver, pointing to his success in reining in a bloated fiscal deficit and carrying out fuel, retail and aviation industry reforms.
No one had thought fractious coalition politics would let him drive through those reforms, but the benefits are already evident.
Etihad Airways last week made a Dh1.39 billion investment in India's Jet Airways, a deal that was made possible by the rule change and was helped along by the government.
Luck also seems to be favouring Mr Chidambaram, with India getting a boost from the correction in global oil and gold prices, easing its import bill and current account deficit.
But with the election fast approaching, the noise in parliament is getting shriller by the day, making it difficult to carry out meaningful legislative business.
Europe’s rearming plan
- Suspend strict budget rules to allow member countries to step up defence spending
- Create new "instrument" providing €150 billion of loans to member countries for defence investment
- Use the existing EU budget to direct more funds towards defence-related investment
- Engage the bloc's European Investment Bank to drop limits on lending to defence firms
- Create a savings and investments union to help companies access capital
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
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.”
