Power centralisation in a different disguise


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In a comment piece for the pan-Arab newspaper Asharq al Awsat, Abdul Rahman al Rashed highlighted the complex issue of state-controlled enterprises in the Middle East, pointing out that Egpt has ended years of a privatisation policy, while Iran has just initiated one. "Egypt did the right thing because it could not persuade Egyptians to queue every morning to salute private companies' flags." Apparently, Egyptians have more affinity with state-owned institutions, the author wrote.

Iran is currently moving its economy to the private sector. Yet the concept of privatisation is somewhat different. The new owners are the Revolutionary Guards, who have established oil, telecoms and shippings companies. The ownership swap ensured the regime elite kept a grip on key economic activities. Perhaps this change could still serve employees' interests. Last week, for example, the government, as a show of concern, ordered more than two million employees to stay at home because of the soaring temperatures. This also explains how bureaucratic governments depend on their army of faithful - but for the most part "unproductive" employees - in order to ensure the prestige of the state apparatus and their power.

"It is only possible to understand the return of the Iranian physicist Shahram Amiri to his country in light of the upsurge in espionage that reminds us of the Cold war era," wrote Salah al Qallab in an opinion piece for the Kuwaiti newspaper Al Jareeda.

After the demise of the communist bloc, which ended the Cold War, it was taught that "spy wars" were no longer necessary. But as soon as Russia recovered and strove for a position equal to the US, it emerged that spying is not solely motivated by ideological reasons. Espionage reflects a conflict of interest, even among countries that should in principle stand on the same ground. At any rate, the epic of Mr Amiri cannot be accidental. It is fabricated. This was shown when the US demanded that Tehran release Americans under arrest after illegally entering the country. It is unlikely that those Americans were only tourists. Similarly, it is impossible to believe that Washington simply kidnapped Mr Amiri while he was in Mecca for a pilgrimage. The kidnapping plot is expected to unfold in the coming days. This is the onset of a season of spying.

In a report in the London-based newspaper Al Hayat, Mohammed al Achab writes that the European Union was still waiting for Morocco's response regarding a new fishing agreement proposal. Europe called on Morocco to invest income generated from such an agreement in development projects that would benefit the residents of the coastal Sahara provinces.

Rabat has not yet replied to European suggestions, although it has previously obliged the European fleet to meet stringent conditions on fishing quotas, nets and equipment. Moroccan authorities have already said that part of the agreement called for income to be channeled towards development programmes in the disputed Sahara. Kris Peeters, the president of EU Agriculture and Fisheries Council, described the agreement, which expires next year, as very important to many countries in Europe, particularly Spain.

Meanwhile, observers accuse Spain of using the Western Sahara dispute as a bargaining chip. This has prompted Moroccan authorities to consider the fishing issue in light of the entire EU to avoid "Spanish harassment". Rabat has also pushed for status as a special trade partner with Europe, which would help to balance its relations with Spain and defend its economic rights with its European partners.

Global state-owned investor ranking by size

1.

United States

2.

China

3.

UAE

4.

Japan

5

Norway

6.

Canada

7.

Singapore

8.

Australia

9.

Saudi Arabia

10.

South Korea

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Key findings of Jenkins report
  • Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
  • Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
  • Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
  • Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
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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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