• Displaced Syrians queue to receive humanitarian aid, consisting of heating material and drinking water, at a camp in the town of Mehmediye. AFP
    Displaced Syrians queue to receive humanitarian aid, consisting of heating material and drinking water, at a camp in the town of Mehmediye. AFP
  • Pakistani flood survivors catch water bottles distributed by military helicopter in Bssera village near Muzaffargarh. Pakistan issued fresh flood warnings putting parts of Punjab and Sindh on alert. AFP
    Pakistani flood survivors catch water bottles distributed by military helicopter in Bssera village near Muzaffargarh. Pakistan issued fresh flood warnings putting parts of Punjab and Sindh on alert. AFP
  • A Pakistani health worker administers polio vaccine drops to Afghan refugee children during a polio vaccination campaign in Lahore. AFP
    A Pakistani health worker administers polio vaccine drops to Afghan refugee children during a polio vaccination campaign in Lahore. AFP
  • People gather prior to a food distribution at the Internally displaced person camp (IDP) of Farburo in Gode, near Kebri Dahar, southeastern Ethiopia. AFP
    People gather prior to a food distribution at the Internally displaced person camp (IDP) of Farburo in Gode, near Kebri Dahar, southeastern Ethiopia. AFP
  • Women carry a sack of seeds in the opposition controlled town of Thonyor. The United Nations warned of a growing risk of mass deaths from starvation among people living in conflict and drought-hit areas of the Horn of Africa and Nigeria. AFP
    Women carry a sack of seeds in the opposition controlled town of Thonyor. The United Nations warned of a growing risk of mass deaths from starvation among people living in conflict and drought-hit areas of the Horn of Africa and Nigeria. AFP

Foreign Office shake-up provokes fears of waning UK influence abroad


Thomas Harding
  • English
  • Arabic

Britain's Foreign and Commonwealth Office has for years been at the back of the queue when resources were allotted to ministerial departments.

Critics have said that relatively sparse resources at the disposal of its leadership have hampered efforts to represent Britain abroad.

That is about to change next month when the Foreign Office merges with the Department for International Development to enable it to wield considerable power on the international stage.

The £14 billion (Dh57.77bn/$15.73bn) commanded by the latter is far in excess of the slightly more than £2bn overseen by Foreign Secretary Dominic Raab.

The shake-up is designed to ensure that with political direction to fulfil Britain’s foreign policy aims, the new Foreign, Commonwealth and Development Office will be a significant power broker.

An RAF aircraft with supplies in Beirut earlier in August. Many fear Britain will lose its international influence should such aid be pared back. EPA_EFE
An RAF aircraft with supplies in Beirut earlier in August. Many fear Britain will lose its international influence should such aid be pared back. EPA_EFE

British Prime Minister Boris Johnson has been unequivocal in why he wants the merger.

“If ‘Global Britain’ is going to achieve its full and massive potential then we must bring back Dfid to the FCO," Mr Johnson said last year.

"We can’t keep spending huge sums of British taxpayers’ money as though we were some independent Scandinavian NGO.

“UK aid will be given new prominence within our ambitious international policy.

"The Foreign Secretary will be empowered to make decisions on aid spending in line with the UK’s priorities overseas.”

In the turmoil of Brexit, trade deal talks and the Covid-19 pandemic, next month's merger has been largely overlooked and little discussed.

UK aid will be given new prominence within our ambitious international policy

Unlocking new resources for wider security or political objectives is on the agenda.

One advantage seen by Tobias Ellwood, the chairman of Parliament's Defence Select Committee, is that aid to countries will be “conditional”.

That might cut down on the millions spent in places such as Libya and Afghanistan “with little effect on the economic prospects of those countries”.

The billions Britain spends on aid already means significant influence within international organisations such as the UN, said Mr Ellwood, a former defence and foreign office minister.

But that does not always resonate at home, he said.

“The budget speaks volumes in terms of our soft power and that is not entirely appreciated by the British population because we don’t see it,” Mr Ellwood said.

The aid budget has tremendous reach in the developing world and is respected because “the homework has been done on how we spend our money, which is respected by our friends and allies who row in behind us", he said.

The Department of International Development is a largely independent player that operates outside Whitehall politics, and is often referred to as “an NGO masquerading as a government department”.

It was created under Tony Blair in the late 1990s to separate aid from politics, mainly after the scandal over the Pergau dam in Malaysia, where development cash for its construction was given in return for a lucrative arms deal.

A blow to Britain's reputation

Those who have worked at the department say its “incredible reputation abroad” could well be lost if it is subsumed by the Foreign Office.

“This is a really valuable soft power asset for Britain,” said Laura Round, a former special adviser to the department’s former secretary of state, Penny Mordaunt.

“Not only does the UK have the third-largest development budget in the world, it also has a wealth of expertise, from education to health care and climate change, that needs to be protected.”

(Dfid) is a really valuable soft power asset for Britain

“But if the new department makes it clear that alleviating poverty and development goals remains at the heart of the new department, there should be no loss of soft power.”

Others do not believe that the benefits of soft power have been properly scrutinised within the ministries, and even the Ministry of Defence.

“They individually bring skills and aid that strengthens the bond between Britain and the state we are dealing with,” Mr Ellwood said.

“That then requires cognitive thinking as to how you go about taking advantage of a significant aid budget and the soft power that brings.”

In countries such as Afghanistan, all three departments learnt to work effectively together and were able to bring a degree of stability with each maintaining independence.

The department’s main focus is on health and disaster relief, and it delivers most of its aid to Nigeria, South Sudan, Bangladesh, Ethiopia and Syria.

Mr Ellwood said a “nationalistic foreign policy element” could cloud what “Dfid has achieved in the past".

“If we make sure the ethos of Dfid really comes through in this new merger, it could and should work,” he said.

There are also worries that the somewhat liberal elements in the department might clash with the more traditional bureaucrats found in the Foreign Office, and that could lead to a brain drain.

“Dfid is home to some of Whitehall’s best civil servants,” Ms Round, who is now with the public relations firm Freuds, said.

“What sets them apart is not just their expertise, it is their passion for their work.”

Conservative MP Tobias Ellwood believes Britain stands to lose its 'soft power'. Getty
Conservative MP Tobias Ellwood believes Britain stands to lose its 'soft power'. Getty

She also believes the Foreign Office could help convene major events with development and aid goals in mind.

“This could prove to be a significant boost to UK foreign policy,” Ms Round said.

Will Britain lose its soft touch?

The soft power reputation could be lost swiftly if British diplomacy and business become the priority, as it arguably did for the departments in Australia and Canada when they merged.

Nadine Haddad, of World Vision in Australia, said her country had lost diplomatic and soft power influence after a merger that led to more private-sector use in aid with less accountability.

“Aid is part of the UK DNA and it is the birthplace of world-leading institutions,” Ms Haddad told an online seminar held by the Big Tent think tank.

Ms Round said Britain’s transparency in its programmes had enhanced the Department for International Development's reputation.

“The new foreign office will only continue to benefit from the ability to amplify the UK’s international standing if it recognises these advantages and nurtures them,” she said.

The desire to continue aid to impoverished countries is held dear by some in the Conservative Party, including Harriett Baldwin, who held ministerial posts at both the merger partners.

During a parliamentary debate she requested that Mr Raab ensured at least half of the budget was spent on the poorest countries and those suffering most from conflict.

Ms Baldwin is among several who have called for a parliamentary committee to scrutinise how aid money will now be spent.

Commentators have said it is vital that the new department is given a coherent mission, although with its formation just a few weeks off, that has yet to materialise.

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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.”