An old flag is waved during a  2011 demonstration in Benghazi before the fall of Muammar Qaddafi.
An old flag is waved during a 2011 demonstration in Benghazi before the fall of Muammar Qaddafi.

Libya's hot spot feels the chill



BENGHAZI // Along the seafront of Libya's second-largest city is a large courthouse where the revolution's first demonstrations massed. Next door, the world's press converged at the rebel-run media centre, and down the road is the vast Tibesti Hotel, where deals were forged when and the envoys of an array of countries met in the lobby.

It has been more than 18 months since the people of this eastern city began the uprising against the rule of Muammar Qaddafi, kindling the war that would bring him down and usher in a new Libya. The city became the war's hot spot and many people here hoped the neglect that Benghazi had suffered for decades would be over.

Yet as residents watch a fledgling government emerge in the capital more than 1,000 kilometres west, they fear that the new authorities will centralise business and politics in Tripoli just as Qaddafi's regime did.

"We need to have decentralisation," said Amina Megherbi, a member of the General National Congress representing Benghazi. She said that her constituents' primary concern is that the central government is unable or unwilling to control security, encourage investment and allow a political voice for the people of Benghazi.

"The government is weak," Ms Megherbi said. "Libya is a large country, with widespread cities and people suffer from going to the capital for every small detail. All the economic strength is in the capital."

As yet, she said, it is still not clear how municipal authorities will implement policies decided in Tripoli. Local councils are selected and govern in haphazard ways across the country.

In the streets of the middle-class Keish area of Benghazi, a crowd leaving prayers one recent Friday complained that they had seen little sign of their new government making any difference to their lives.

"There is no law and no police," said one worshipper. Another complained that services were provided only intermittently, although food and fuel subsidies had increased.

Others were more optimistic. "This is a transitional period," said Abdulqader Sayeed, an employee in the economics ministry. "The government can't organise itself ... when the constitution is written, we will know more."

Like many in Benghazi, Mr Sayeed opposed the idea of a federated Libya, in which the country's regions would have a greater degree of autonomy. But he believes that nationalised companies such as the airline and oil company should be relocated, at least partially, to Benghazi.

The simmering resentment feeds into deep historical grudges. Libya only emerged as a unified entity after the Second World War, and Benghazi enjoyed joint-capital status with Tripoli under the rule of King Idress until Qaddafi took control of the country in 1969.

While the bulk of Libya's vast oil deposits are in the east, Qaddafi spent the bulk of the country's riches in the capital in the west, as well as in Sirte and his other favourite cities.

As the congress struggles to its feet in Tripoli, some worry that regional isolation from central powers may be a difficult habit to break.

Salim Betmal, the head of the municipal council in Misurata, said communication breakdowns during last year's war isolated his city to the extent that it became independent of the transitional council leading the country. Since then, he said, it has been difficult to convince residents to respect the new government.

The abrupt move of the transitional governing council last year to Tripoli from Benghazi, after the fall of the capital to rebels, was a mistake, he said.

"The hot spot had been in Benghazi and suddenly it was Tripoli," he said. "It was done in the wrong way, you should not feed these feelings of east and west."

There are those, however, that are hopeful that the gulf between the two cities - and between the east and west of the country - can be bridged.

"Most countries in a post-conflict situation are worse off," observed one western diplomat, referring to the vast oil income that the Libyan government has at its disposal to placate the population of a few million. "The government, by having control over oil revenues will have patronage, and as long as it manages these things. The fact is, they can be pretty generous to everyone."

To integrate the east more effectively into the life of the nation, it may be given representation on the committee drafting the country's new constitution out of proportion to its relatively low population when the process of writing the country's new constitution begins. Notably, Libya's new prime minister, Ali Zidane, also has turned to politicians from Benghazi to help form his cabinet.

Most residents of Benghazi are, for the moment, keen for the government to do its job. Increasing violence has made people wary of exacerbating problems, said Ramadan Al Darsi, a Congress member for Benghazi.

"There is a very big popular desire to settle down," he said.

Omar Sallak, a member of Benghazi's city council, expects his efforts to organise rubbish collection on a very limited budget to get easier as the government organises. And while he dismissed the western region as "crazy", he said that it was part of an indivisible Libya.

"Libya is moving towards a state," he said. "Libyans have started to understand that they need each other."

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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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