Benjamin Netanyahu given political slap in the face


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TEL AVIV // It was a political slap in the face for Benjamin Netanyahu.

The right-wing Israeli prime minister may have gained a third term as prime minister in Tuesday's election after his Likud party and its ultranationalist electoral ticket partner won the highest number of seats - 31 - in Israel's 120-member parliament.

However, the Israeli leader has emerged politically weakened because yesterday's near-final tally showed that Likud and Yisrael Beiteinu together lost a quarter of the seats that the two parties hold in Israel's outgoing parliament. The result was also significantly lower than the 45 seats they had expected when announcing their union last year.

The outcome was worse for Mr Netanyahu because - contrary to predictions that Israeli politics were swinging irrevocably rightward - the camp of the right, and the combined one of the centre and left, seemed to unexpectedly win an equal number of seats.

That could place Mr Netanyahu in a quagmire, experts said. Namely, he may have to moderate his hard-line stance on issues like settlements and the Palestinians to draw centrist parties to his government and form a large coalition, while risking the ire of his pro-settler political and financial backers, analysts said.

At the same time, the conflict with the Palestinians is likely to be low on the next government's agenda as many voters' surprisingly high support for centrist parties reflected a discontent more about economic issues and the power of the ultra-Orthodox than about the deadlocked peace process, according to experts.

Israeli media was flooded with condemnation of Mr Netanyahu yesterday, with the liberal Haaretz newspaper labelling him a "man of the past", and a columnist for the right-leaning NRG news website predicting he'll become "the weakest premier in the country's history".

Gabriel Weimann, a professor of political science at Haifa University, said: "It was a huge loss for Netanyahu. He not only lost much of his support base, but he lost the possibility of creating a stable coalition from a strengthened position."

The premier's mistakes, analysts said, ranged from underestimating growing dissatisfaction over the high cost of living in the country to losing some of the Likud's more moderate voters by joining forces with the far-right Yisrael Beiteinu party of Avigdor Lieberman in November.

Mr Netanyahu is likely to begin intensive negotiations with potential political partners within a week, when he is expected to be tapped by the Israeli president to form a coalition. He will then have up to six weeks to cobble together a government.

Analysts said his next coalition will probably include the unexpected political star of the elections, Yair Lapid, the 49-year-old head of the centrist There is a Future party and a popular ex-television news anchor and newspaper columnist. The movement of Mr Lapid, the son of a prominent former justice minister with a fiercely anti-religious agenda, garnered 19 parliamentary seats and became the second-biggest party after Likud.

Experts said Mr Lapid, who campaigned on ending army draft exemptions for the ultra-Orthodox and on mitigating economic hardships, is likely to play a key role in the upcoming coalition negotiations, possibly forcing Mr Netanyahu to abandon his traditional right-wing and ultrareligious political allies in favour of a more moderate government. Yesterday, Mr Lapid called for "as broad a government as possible" that would include "moderate forces from the left and right".

Despite being considered a centrist who favours negotiations with the Palestinians, Mr Lapid's debut in the political arena is not expected to help reignite deadlocked peace talks.

After all, the upstart politician has mostly ignored Israeli-Palestinian ties during his campaign. In a rare statement on the issue, he said in October that Israel's aim with the peace talks should be "a divorce agreement we can live with." However, he pointedly made that statement during a campaign speech at the contentious Jewish settlement of Ariel, located deep inside the West Bank, suggesting his possible support for Israel retaining that community in a peace pact.

Israel insists Ariel is one of five so-called major settlement blocs it plans to keep under any peace pact, but the Palestinians have indicated they would oppose the Israeli annexation of Ariel.

The likelihood that Mr Netanyahu may also add the far-right Jewish Home party to his next government would also make a settlement with the Palestinians even less probable.

Jewish Home's leader, Naftali Bennett, considered an election winner as well by grabbing votes from disgruntled Likud supporters and garnering 11 seats for his party, rejects Palestinian statehood and advocates for an Israeli annexation of most of the West Bank.

Palestinian officials yesterday expressed pessimism about a possible restart of peace negotiations with the next Israeli government despite the better-than-expected results of the centre and left.

Hanan Ashrawi, a member of the executive committee of the Palestine Liberation Organisation, told reporters in the West Bank city of Ramallah: "I don't see a peace coalition or a peace camp emerging now and revitalising itself."

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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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