Lebanese Prime Minister-designate Saad Hariri is redoubling efforts to resolve an eight-month stalemate by launching talks to form a unity government.
Mr Hariri yesterday met Foreign Minister Gebran Bassil, a day after a long meeting with President Michel Aoun, to discuss a way forward.
Lebanon has been without a government since an election almost eight months ago, as its rival parties jostled over the allocation of Cabinet positions, further unsettling the country’s fragile economy.
“We have resumed work on the issue of the government,” Mr Bassil told reporters after meeting the prime minister at his Beirut residence. “I have made some suggestions to the prime minister regarding the issue,” he said, explaining that they had both agreed to reach out to relevant parties to end the impasse.
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Read more:
Lebanon: No sign of consensus as political deadlock enters eighth month
Moody's revises Lebanon's rating to negative on higher geopolitical risks
Lebanon on brink of economic ruin, finance minister warns
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Mr Hariri and Mr Aoun are “determined to form a government”, state news agency NNA reported the prime minister saying after the two met on Tuesday.
“We have fallen behind. We must form the government,” Mr Hariri said at the presidential palace. “The president and I are determined to meet again and finish this issue because the country cannot continue without a government.”
Yesterday, militant group Hezbollah also said it believed a government will be formed soon. The vice president of the organisation’s political council said the will to end the deadlock is there.
Mahmoud Qomati also said that a government needs to be formed to improve deteriorating living conditions in the country.
A breakthrough to create a national unity government in line with Lebanon’s sectarian power-sharing system seemed close last month, but did not materialise and the impasse continued.
But Mr Hariri said on Sunday he still believed a government would be formed early in the new year.
Lebanon has the world’s third-highest level of debt to GDP and Finance Minister Ali Hassan Khalil said on Sunday it faces an economic crisis that could turn into a financial one.
Mr Hariri has pledged to carry out reforms that could unlock billions of dollars of international investment.
The International Monetary Fund has stressed the importance of Lebanon managing its debt, while bond yields and the cost of insuring against Lebanese sovereign debt showed signs of stress in recent months.
The inflation rate increased from 1.5 per cent in 2017 to 7 per cent last year, leaving Lebanese consumers with a shortage of money and less buying power.
Economic growth slowed from 8 per cent in 2010 to 0.6 per cent in 2017, according to the country’s statistics agency.
The IMF projects a GDP growth of just 1 per cent for 2018.
The political and economic crisis has aggravated public discontent. Hundreds of demonstrators took to the streets of Beirut last month, where they called for the government to fall for what they described as poor management.
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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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