Russia and Egypt are to resume direct flights on Wednesday following a more than two-year hiatus after a bomb downed a Russian charter over the Sinai peninsula in 2015.
Moscow officials stopped direct flights citing security concerns after the attack, in a major blow for the Egyptian economy, which relies heavily on tourism and had been a popular destination for Russians.
On Wednesday evening an Aeroflot plane is due to take off from Moscow's Sheremetyevo airport to Cairo, in a first step towards restoring flights to holiday destinations on the Red Sea.
On Thursday, Egyptair will restart its service between the two capitals, and the two companies will together carry out five return flights between Moscow and Cairo a week.
But the move in itself will not immediately help Egypt's troubled tourism sector, Russian officials have said.
"Tourists do not need direct flights to Cairo. The transfer from Cairo to sea resorts is long and uncomfortable, and no one will be going there in that way," Russian Tourism Industry spokeswoman Irina Tyurina said.
"In practice, the situation is the same as it was before, when people would get there independently via Minsk or Istanbul — either big fans of Egypt or Russians who live there," she said.
"Egypt is not yet back as a tourist destination for the Russian market."
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Flights were suspended at the end of 2015 after a bomb downed a flight carrying holidaymakers from the Red Sea resort of Sharm El Sheik, killing all 224 people on board, mostly Russian tourists.
The attack was claimed by ISIL.
The number of foreign tourists in Egypt went from 14.7 million in 2010 to 5.4 million in 2016, on the back of the suspension of flights and the turmoil following the uprising that toppled former President Hosni Mubarak.
In 2017 that number recovered to 8.3 million visitors, according to official figures.
Revenues from tourism at the same time dropped by two thirds, from $11.6 billion in 2010 to $3.8 billion in 2016, according to the Egyptian Central Bank.
Moscow and Cairo are to decide on a date to discuss the resumption of flights to Egyptian tourist destinations once flights between the two capitals have resumed, the Egyptian ambassador to Russia Ihab Nasr has said.
Russian officials have meanwhile not hidden their concerns about direct flights being restarted.
"The resumption of direct flights to Egypt, in particular to resort areas, is a great worry for us," Aleksandr Neradko, head of the Russian Federal Air Navigation Authority, said last week in comments reported by Russian agencies.
Eight Russian experts will be sent to Cairo airport to check security measures are being enforced on flights towards Moscow, according to the Egyptian daily Al Ahram.
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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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