Qatar helps Egypt stave off IMF loan

Qatar's prime minister announced US$3 billion (Dh11.02bn) in aid to Egypt yesterday, reducing pressure on Cairo to finalise a $4.8bn loan from the International Monetary Fund that would require cuts in subsidies.

The deal stands to further strengthen ties between the two countries, and it bolsters Qatar's reputation as a financial backer of Islamist governments in the region.

"We reached an agreement to add more bonds from the Qatari government in the amount of $3bn (Dh11bn). During the coming days, we will discuss the details of issuing those bonds," Sheikh Hamad bin Jassim bin Jabr Al Thani said after meetings in Cairo with the Egyptian prime minister, Hesham Qandil.

The emirate also promised to supply Egypt, which had been facing the prospect of power cuts, with natural gas this summer during peak demand. Sheikh Hamad did not elaborate on the value of the shipments.

Egypt's Islamist president Mohammed Morsi took office in June 2012 and since then, Qatar's aid to Egypt has reached $8bn, the majority of which has come in the form of bonds to bolster the central bank.

Egypt has seen its foreign currency reserves dive in recent months amid falling receipts from tourism and foreign investment. Last month, the central bank announced Cairo had just $13.4bn left in its coffers compared with $36bn two years ago.

Yesterday's announcement was preceded by three days of meetings between Qatari officials and the Egyptian central bank governor, Hisham Ramez.

Qatar's aid could buy Egypt time in its negotiations with the IMF, whose team has been in Cairo since last week in hopes of finalising a deal. The current package would provide Egypt with $4.8bn in loans but would require Egypt to lower fuel and food subsidies, which the financial institution argues are inefficient and wasteful of Cairo's limited budget.

Western lenders and analysts have also argued that the loan is crucial to Egypt's financial future, offering investors assurances about the country's ability to undertake fiscal reform.

Cash injections from Qatar, meanwhile, will likely feed a growing backlash in Egypt over Doha's growing role in the country's post-revolution economy. Many have worried that Qatar has attached strings to its aid, such as privileged investment opportunities.

At their most sinister, those rumours included media reports that Doha was secretly purchasing the Suez Canal and leasing the pyramids.

Laughing off allegations following last month's Arab League summit in Doha, Sheikh Hamad told reporters that the stories were "fabrications" created by people taking advantage of the media in Egypt.

"They said we will rent the pyramids [for $200 billion]. I don't think that $200 billion is a good deal for renting pyramids only for five years," he said jokingly at the summit's press conference in late March.

But a flurry of Qatari investments in Egypt have been mired in regulatory objections.

Egypt's financial regulator is holding up a proposed joint venture between QInvest, majority owned by Qatar Islamic Bank, and Egypt's EFG Hermes, a leading Middle East investment bank, which will expire if not approved by May 3.

Kwok W Wan, an editor at Argus Media, which publishes analysis of the energy market, said that gas exports to Egypt could prove to be a business venture for Qatar, which has sought to expand its roster of long-term natural gas contracts. Doha's current clients in Europe and Asia have begun shifting towards shorter-duration contracts.

"New Egyptian gasfields have not started up as expected," he said.

edickinson@thenational.ae

* With additional reporting from Reuters

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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.”

Recipe: Spirulina Coconut Brothie

Ingredients
1 tbsp Spirulina powder
1 banana
1 cup unsweetened coconut milk (full fat preferable)
1 tbsp fresh turmeric or turmeric powder
½ cup fresh spinach leaves
½ cup vegan broth
2 crushed ice cubes (optional)

Method
Blend all the ingredients together on high in a high-speed blender until smooth and creamy.