UAE and EU hold talks on trade deal

The UAE and EU held talks on Wednesday over a Comprehensive Economic Partnership Agreement, as Dr Thani Al Zeyoudi, Minister of State for Foreign Trade, met the bloc’s trade chief, Maros Sefcovic, in Dubai.

The Cepa would strengthen economic ties and unlock new avenues for co-operation. It will pave the way for the removal of trade barriers, enhance market access for goods and services and stimulate investment in key sectors.

“Our negotiations towards a UAE-EU Comprehensive Economic Partnership Agreement are of great importance to both the UAE and the EU,” said Dr Al Zeyoudi, in comments reported by state news agency Wam.

“By working together, we will strengthen our supply chains, drive innovation and create jobs that will benefit our communities and economies for many years to come.”

The EU is among the UAE’s key trading partners, with non-oil trade last year reaching $67.6 billion – 8.3 per cent of the Emirates’ total.

“The launch of EU-UAE trade talks is an important milestone. We will now work together to seal a deal that can benefit our peoples and businesses, bringing us closer together in a spirit of co-operation,” European Commission President Ursula von der Leyen said in a statement.

“Such an agreement would help strengthen ties between the EU and the Gulf region, offering new opportunities for EU businesses while bolstering our partnership in areas that matter to EU citizens like renewable energy and digital technologies.”

Mr Sefcovic said it was “natural to seek to grow our relations with long-standing and trusted partners” such as the UAE. His visit also included talks with private sector representatives, focusing on opportunities for increased collaboration and investment flows between the UAE and the EU, Wam reported.

Asked by The National whether the Cepa with the UAE could become a blueprint for a future EU-GCC free trade agreement, Mr Sefcovic said: “We have kept our partners fully informed.”

Analysis

Maros Sefcovic is juggling multiple international trade agreement files, but his message was clear when he spoke to The National on Wednesday.

The EU-UAE bilateral trade deal will be finalised soon, he said. It is in everyone’s interests to do so. Both sides want to move quickly and are in alignment. He said the UAE is a very important partner for the EU. It’s full speed ahead - and with some lofty ambitions - on the road to a free trade agreement.

We also talked about US-EU tariffs. He answered that both sides need to talk more and more often, but he is prepared to defend Europe's position and said diplomacy should be a guiding principle through the current moment.

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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.”