The other day a friend asked why I always offer up a jaundiced view of Lebanon’s prospects, and added that it was probably a good thing that I would be spending more time abroad, as this would give me the space to develop a sense of perspective. “You might,” he ventured, “once again love the country you’ve been bashing every week for five years.” Ouch.
But charting Lebanon’s economic “progress” as well as its potential for private enterprise and investment of any stripe, is, these days, a thankless task. Lebanon, by its very nature, is either a brief feast or lengthy famine, and at the moment we are scrabbling in the dirt for radish leaves.
The Syrian civil war has crippled us; the government is in an induced coma, and the Arab tourists have gone to Marbella, where they can drive their Lamborghinis without fear of disappearing into a pothole or being kidnapped by Bekaa tribesmen.
All this has left the private sector, the country's main economic engine, clutching at increasingly desperate straws. Last week, Lebanon's Daily Star ran a story that tracked the migration of the country's residential real estate boom – or bubble depending on how you see it – from Beirut, where demand for luxury homes aimed at wealthy expats and high-net-worth Arabs has fallen off because of security concerns and political uncertainty, to the more affordable and less volatile Christian suburbs of Metn and the Keserwan.
Nothing unusual there, you might think. What with the conflicts in Syria and Iraq and the spate of recent car bombs in Beirut, Lebanon’s Christians are in a bunker mentality and the land is relatively cheap. It also stands to economic reason that buyers who are priced out of the capital are naturally going to look for affordable homes in areas on the urban fringes. Yadda, yadda, yadda.
But what made this story leap out from the screen was a quote from one property developer who would have us believe that “with the return of [former prime minister] Saad Hariri, [Lebanese] are [now] considering buying property before prices go up”. In other words, he would have us believe that Mr Hariri’s brief visit, after three years of self-imposed exile in Saudi Arabia, heralded something of a golden dawn of stability and prosperity.
“All it takes,” he said, “is three months of stability. If we have that, then construction and property sales will continue to grow throughout [the rest of the] year.”
So much madness wrapped up in so few sentences. But let’s start with what actually constitutes a period of prosperity. According to our man, three months will do it. I’ve known gamblers to have longer runs of luck at the casino, but I guess that’s the nature of a “smash and grab” economy.
But how in the name of all things sane can they believe that the sudden arrival of an absentee MP, albeit the son of an assassinated ex-premier, is a sign that a “deal” has been struck and Lebanon can once again make hay. Has the Lebanese business community taken leave of its senses? Has it forgotten that only two weeks earlier, the Islamic State had been battling the Lebanese army in the Bekaa, while the international community is once again pouring weapons and manpower into Iraq?
Mr Hariri has apparently jetted back to Riyadh and as far as I can tell Lebanon is still in the precarious situation it was in before his moccasined feet touched the tarmac in Beirut. The reason for his “return” was, as far as I can tell, twofold: to oversee a US$1 billion donation to the Lebanese army to help it counter any future extremist violence and to donate $15 million to Arsal, a Sunni town in the Bekaa that has become a hotbed for insurgents battling the Syrian regime. It was an exercise in flying the moderate Sunni flag in a time of heightened tension. Nothing more, nothing less.
So now you know.
Michael Karam is a freelance writer based in Beirut and Brighton
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Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
Mohammed bin Zayed Majlis
The Bio
Favourite place in UAE: Al Rams pearling village
What one book should everyone read: Any book written before electricity was invented. When a writer willingly worked under candlelight, you know he/she had a real passion for their craft
Your favourite type of pearl: All of them. No pearl looks the same and each carries its own unique characteristics, like humans
Best time to swim in the sea: When there is enough light to see beneath the surface
A State of Passion
Directors: Carol Mansour and Muna Khalidi
Stars: Dr Ghassan Abu-Sittah
Rating: 4/5
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.”
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia