Asia

South Korea president makes hushed visit to Myanmar

Lee Myung-bak headed to Myanmar today for the first visit by a South Korean president since an assassination attempt on one of his predecessors almost 30 years ago.

Bloomberg News

May 14, 2012

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SEOUL // Lee Myung-bak headed to Myanmar today for the first visit by a South Korean president since an assassination attempt on one of his predecessors almost 30 years ago.

Mr Lee travelled to Yangon after a summit in Beijing and is due to meet President Thein Sein. The trip was not made public ahead of time, as North Korea attempted to assassinate the South Korean president Chun Doo-hwan while visiting Myanmar in 1983 and tensions on the Korean peninsula are high following the North's botched rocket launch last month.

The democracy advocate Aung San Suu Kyi took her seat in parliament this month after spending 15 years under house arrest, affirming a political opening in a nation where only one person in 30 has a mobile phone.

The US lifted some economic and financial sanctions on Myanmar and Japan last month forgave about US$3.7 billion (Dh13.58) in debt.

"Korea corporate interest in Myanmar has grown since last year on optimism the US-led sanctions would be eased," said Kim Jong-sang, the director of the emerging market research team at the Korea Trade-Investment Promotion Agency in Seoul. "Cheap wages, which are a third of that in China, is one appealing factor."

Trade between the two countries amounted to $966 million in 2011, according to South Korean government statistics. Myanmar exported US$299 million worth of clothing, beans, marine products, jade and timber to South Korea and imported $667 million of South Korean motor vehicles, engines, spare parts, tin and steel products, and raw plastic materials.

North Korea may also be on the agenda when Mr Lee and Thein Sein meet. Hillary Clinton, the US secretary of state, in her visit in December expressed concern that Myanmar might be engaged in weapons trading with Kim Jong-un's regime. The US has blocked North Korean ships thought to be carrying arms to Myanmar.

Myanmar resumed diplomatic relations with the North in April 2007, having cut ties after the assassination attempt on Mr Chun that killed about 20 people, including the South Korean deputy prime minister and foreign minister.

The incident took place as Mr Chun was paying his respects at a mausoleum commemorating Ms Suu Kyi's father, Aung San.

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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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