Abu Dhabi // The deployment of Pakistani troops to Saudi Arabia would cap a diplomatic push by Islamabad’s army chief and prime minister, who have visited the kingdom, Kuwait, Qatar and the UAE in recent months.
A number of economic and security interests have aligned to underscore the strategic importance of the relationship for both sides.
The GCC is the world’s largest importer of arms, but as budgets are set to remain tightened in an era of low oil prices, its members are also looking for cheaper alternatives. This imperative comes in parallel to a longer-term goal of diversifying strategic relationships away from a dependence on the United States.
“You can’t afford having these very expensive contracts with western companies and contractors, so what [the GCC] will do is go toward cheaper contractors, so that’s why they are looking towards China, towards Pakistan, towards Turkey – it’s just the natural move,” said Andreas Krieg, a professor at the Defence Academy of the United Kingdom’s Joint Command and Staff College.
“Over the last two years the Qataris have really turned their backs towards the West and looked toward the East, as all the Gulf countries are doing right now”
The UAE has the most advanced Arab military and defence sector, but Qatar and Saudi Arabia have further to go in terms of the capacity of their forces and their domestic defence industries – both areas where Pakistan can play an important role.
Qatar in particular is working closely with Pakistan and Turkey in this field, and the three countries are in the early stages of talks aimed at joint production of new defence systems. Qatar has also expressed interest in the fifth generation JF-17 fighter jet which Pakistan developed with China.
“In the past Pakistan was just seen as a supply of manpower but now I think the Qataris have realised there’s a lot more to get out of Pakistan than just manpower,” Mr Krieg said.
A demonstration by Pakistani pilots of the JF-17 last year in Qatar was intended by Islamabad to show Qatari officials that “‘Yes we have a lot of manpower but we’re not a backwards country, we have great technology and we have a military-industrial complex that you can use’,” Mr Krieg added.
Pakistanis provide training to GCC armed forces and thousands serve in Gulf uniforms in most of the GCC’s militaries, including entire battalions of Pakistanis in the Saudi military. “So there is a very intimate relationship already that goes beyond any relationship ... with western countries”, Mr Krieg said. “There is a dependency on Pakistan anyway.”
For Pakistan, the expansion of the export-orientated aspects of its defence industry is an important part of its economic growth, with the government setting a target of expanding the trade to US$1billion (Dh3.67bn) in the next two years, defence production minister Rana Tanveer Hussain told Bloomberg News last week.
Islamabad sees the GCC as a key market for this expansion. The Pakistan Ordnance Factory recently opened an office in Dubai, which covers the entire Middle East.
During Gen Qamar Bajwa’s talks in Doha earlier this month, the Pakistani military said it agreed to provide troops to help Qatar secure the 2022 World Cup. Qatar’s armed forces are too small, and also do not have the counter-terrorism and infrastructure security capacity that is crucial for any country hosting the world’s largest sporting event.
While the Pakistani troops may not provide the same quality service as western private contractors, they are cheaper and never overcharge the Qataris, Mr Krieg said.
After prime minister Nawaz Sharif’s visit last week, Kuwait has reportedly agreed to build a refinery in Balochistan as well as a pipeline that would take energy products from Karachi to industrial hubs in Punjab province.
Last summer Pakistan also signed a US$22 billion (Dh80.8bn) deal for Qatar to supply it with liquefied natural gas (LNG) for two decades. And officials in Doha have been in discussion with Islamabad to at some point build an LNG pipeline connecting Karachi – where Qatar has already agreed to build a new LNG terminal – to western China.
“All the GCC countries are looking towards China, and Pakistan is a great gateway,” Mr Krieg said.
At the same time, Pakistan is also looking to increase economic and political ties with Iran, however, to pursue shared interests and to maintain its policy of balancing Riyadh and its rival Tehran.
“That is more to do with ... Iran’s potential role in Afghanistan and Pakistan’s effort to develop a regional consensus involving Iran, Russia, China, the Central Asian states to seek a solution” to the conflict and stymie the rise of ISIL there, Mr Hussain said.
Pakistan also does not want Iran to ally more closely with its arch-rival India, whose ties with Tehran are growing, he added.
tkhan@thenational.ae
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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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.”