UAE's diplomatic flurry attracts new allies



ABU DHABI // As the UAE strives to become a bigger regional player and the only Arab country with western-backed nuclear energy it has reached out to Europe, Latin America and even into the Pacific in an effort to bolster its diplomatic relations around the world.

The past year has witnessed a slew of diplomatic activities led by Sheikh Abdullah bin Zayed, the Minister of Foreign Affairs, with visits to more than 90 countries in the first six months of 2009 alone. Most of the visits were part of the UAE's efforts to garner support for its June bid to host the International Renewable Energy Agency (Irena) headquarters in Abu Dhabi. But Sheikh Abdullah made it clear after the capital's Irena success that these new relations with other countries would be followed up in order to "enhance our relationship with them in other levels".

In November, the nation signed a pact with Portugal to exchange diplomatic missions. And in May, Sheikh Abdullah and his Portuguese counterpart, Luis Amado, signed a declaration to open embassies for both countries in Abu Dhabi and Lisbon. Diplomatic observers have said the number of overseas visits by Sheikh Abdullah and other officials this year, whether in the run-up to the Irena contest or afterwards, was perhaps unprecedented in the history of Arab diplomacy.

These visits have resulted in newly forged diplomatic ties and brought existing relationships to new levels with several countries. For example, the UAE established diplomatic ties with East Timor in November. In October, ties were created at the ambassadorial level with Haiti, Liechtenstein and the Pacific island of Palau. And earlier this year, diplomatic ties were struck with Liberia and St Vincent and the Grenadines.

In May, the UAE signed an agreement with France designed to allow Emirati diplomats to be stationed in French embassies in countries where the Emirates have no diplomatic mission. France's foreign minister, Bernard Kouchner, has said they could start with French embassies in Africa. A diplomatic source said yesterday that the first of these could be in place within two months. He said details were still being worked out, but once the first diplomat is posted it will take much less time to send others.

"It will start with a limited number and extend according to the need of both parties." Earlier this week, the last diplomatic episode of 2009 was concluded with the visit of the South Korean president, Lee Myung-bak, to Abu Dhabi. A visit coinciding with the capital's decision to hire a consortium of Korean firms to build four nuclear reactors. Khaldoun al Mubarak, chairman of the Emirates Nuclear Energy Corporation (ENEC), stressed that the nuclear deal would push the relationship between the two countries well into the future. "The nature of this project will require a partnership that endures for nearly 100 years," he said in a statement released by ENEC earlier this week.

The UAE has diplomatic missions in at least 69 nations, according to the Foreign Ministry's website, but has diplomatic relations with more than double that number. "Part of it has to do with Irena," said an informed source. "But it has been always the plan to increase representation and to have more direct contact with a wider range of countries." In October, Sheikh Abdullah led a delegation to Latin America, meeting leaders and officials from Mexico, Argentina, the Dominican Republic, Nicaragua, Uruguay, Cuba, Chile, Ecuador, Panama, Peru, Colombia and Brazil.

"The visits provide one-on-one conversation where the UAE explains its views on a wide range of regional and international issues in a direct manner," said the source. With stronger diplomatic ties often comes greater co-operation on trade. For example, when the UAE signed a diplomatic declaration with Portugal, the two sides also signed a memorandum of understanding to speed up the conclusion of a double-taxation agreement, as well as another protecting investments.

UAE foreign policy has been focused for years on boosting American and European trade and military ties and supporting the governments of Iraq, Afghanistan and Pakistan. Dr Mohammed bin Huwaidin, a political scientist at the UAE University, said the reach of the country's foreign policy had expanded rapidly following the Iraq war. This expansion has been marked by a desire to ensure stability in the region. The UAE has also helped massively in the reconstruction of post-Saddam Iraq, and last summer forgave nearly US$7 billion (Dh25.69bn) owed by Baghdad.

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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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LA LIGA: Sporting Gijon, 13 points in 1997-98.

BUNDESLIGA: Tasmania Berlin, 10 points in 1965-66

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