Economic diversification key to a sustainable Middle East future, UAE forum told

Waleed Al-Muhairi, deputy group CEO of Abu Dhabi’s Mubadala Investment Company. (Supplied)
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Updated 12 February 2020

Economic diversification key to a sustainable Middle East future, UAE forum told

  • Change in the Middle East not happening 'quickly enough' for people on the ground, says Goldman Sachs partner
  • GCC states will need to maintain relevance as 'economic actors' through continuous growth, says Mubadala Investment Deputy Group CEO

DUBAI: Diversifying economies and tackling common global issues such as climate change, unemployment and geopolitical conflicts will be key to the Middle East’s transition to a more sustainable future, a leading forum in Abu Dhabi heard on Tuesday.

The opening session of the 2020 Middle East and Africa Summit, convened by the California-based Milken Institute, featured a panoply of speakers including corporate executives, investors, government officials and decision-makers.

Offering “regional insights into tomorrow’s global opportunities,” they discussed the requirements for more sustainable and inclusive economies in the Middle East and examined the impact of US-China trade war on the rest of the world.

The two-day forum has gathered more than 1,000 business executives, investors, government officials and philanthropists to discuss topics such as trade, capital markets, financial inclusion, food security, job creation and gender parity.

In his remarks, Waleed Al-Muhairi, deputy group CEO of Abu Dhabi’s Mubadala Investment Company, outlined the GCC bloc’s economic diversification scenarios with particular reference to the UAE’s efforts to reduce its dependency on oil.

He pointed out that the country’s “hydrocarbon wealth” has resulted in “world-class infrastructure and great education and health care” with effective leadership.

“That quest for economic diversification and the bridge that hydrocarbons have given us is something we will continue to look at,” he said. “It will be important for us in the next 20 to 40 years.”

Al-Muhairi added that GCC states will need to maintain relevance as an “economic actors” through continuous growth and smart investments.

“To do that, you have to make sure your economy is innovation-led, and that you are not just a consumer of technology but eventually a developer and exporter,” he said.

Al-Muhairi said GCC countries must also continue to look for ways to best address some of the region’s biggest issues, such as the high rate of unemployment among young people.

“It is really important for us to think about how we can absorb all the young people of today to make sure they have productive ways to contribute to the overall wellbeing of society.”

Drawing on her background as a partner at Goldman Sachs, Dina Powell McCormick said environmental, social and governance issues — the three central factors in measuring the sustainability and societal impact of an investment — are on “top of the mind” of most investors today.

“We are sitting in a region of the world where 75 percent of the population is under the age of 30 and yet 50 percent of the human productivity is under-utilized,” she said.

According to her, as large pools of capital — both private and public — make more investments and change the dynamics around new technologies and policy, “tackling suitability issues” and creating “inclusive human growth” remain the two main areas of focus.

McCormick said high levels of public frustration are evident in the protests happening in several Arab states, which indicate that changes are “not happening quickly enough” for people on the ground.

As for sustainability, she said: “We are all very eager to talk about clean energy and new technologies, but are not honest about just how carbon-dependent we are.”

McCormick said slow economic progress in parts of the Middle East is primarily felt by local communities, adding that more sovereign wealth funds, companies in the private sector and business leaders are starting to take the initiative in addressing this issue and work with governments.

In conclusion, she cautioned that repeatedly holding discussions on topics such as women’s empowerment and youth unemployment without initiating change will lead to a “dangerous” future.

For his part, Raymond Dalio, co-chairman and co-chief investment officer at Bridgewater Associates, spoke on a number of possible global challenges.

Discussing widening wealth and political gaps, technology issues and climate change, and shifts in the “world order,” he said: “You have the emergence of a great power (China) to challenge and compete with an existing world power (the US).

“(What is underway) is a trade war, a technology competition, a geopolitical conflict — and there could be a capital conflict.”

In his remarks, Dalio referred to China’s “impressive” efforts to diversify its economy, pointing out that over the last 35 years, average life expectancy in the country has increased by 10 years while average income has swelled by 26 times.

“Both (the US and China) have to take care of themselves and do the best they can. There’s competition and it’s going to be competitive,” he said.


S&P 500 inches closer to record high

Updated 12 August 2020

S&P 500 inches closer to record high

  • US stock market index returns to levels last seen before the onset of coronavirus crisis

NEW YORK: The S&P 500 on Tuesday closed in on its February record high, returning to levels last seen before the onset of the coronavirus crisis that caused one of Wall Street’s most dramatic crashes in history.

The benchmark index was about half a percent below its peak hit on Feb. 19, when investors started dumping shares in anticipation of what proved to be the biggest slump in the US economy since the Great Depression.

Ultra-low interest rates, trillions of dollars in stimulus and, more recently, a better-than-feared second quarter earnings season have allowed all three of Wall Street’s main indexes to recover.

The tech-heavy Nasdaq has led the charge, boosted by “stay-at-home winners” Amazon.com Inc., Netflix Inc. and Apple Inc. The index was down about 0.4 percent.

The blue chip Dow surged 1.2 percent, coming within 5 percent of its February peak.

“You’ve got to admit that this is a market that wants to go up, despite tensions between US-China, despite news of the coronavirus not being particularly encouraging,” said Andrea Cicione, a strategist at TS Lombard.

“We’re facing an emergency from the health, economy and employment point of view — the outlook is a lot less rosy. There’s a disconnect between valuation and the actual outlook even though lower rates to some degree justify high valuation.”

Aiding sentiment, President Vladimir Putin claimed Russia had become the first country in the world to grant regulatory approval to a COVID-19 vaccine. But the approval’s speed has concerned some experts as the vaccine still must complete final trials.

Investors are now hoping Republicans and Democrats will resolve their differences and agree on another relief program to support about 30 million unemployed Americans, as the battle with the virus outbreak was far from over with US cases surpassing 5 million last week.

Also in focus are Sino-US tensions ahead of high-stakes trade talks in the coming weekend.

“Certainly the rhetoric from Washington has been negative with regards to China ... there’s plenty of things to worry about, but markets are really focused more on the very easy fiscal and monetary policies at this point,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

Financials, energy and industrial sectors, that have lagged the benchmark index this year, provided the biggest boost to the S&P 500 on Tuesday.

The S&P 500 was set to rise for the eighth straight session, its longest streak of gains since April 2019.

The S&P 500 was up 15.39 points, or 0.46 percent, at 3,375.86, about 18 points shy of its high of 3,393.52. The Dow Jones Industrial Average was up 341.41 points, or 1.23 percent, at 28,132.85, and the Nasdaq Composite was down 48.37 points, or 0.44 percent, at 10,919.99.

Royal Caribbean Group jumped 4.6 percent after it hinted at new safety measures aimed at getting sailing going again after months of cancellations. Peers Norwegian Cruise Line Holdings Ltd. and Carnival Corp. also rose.

US mall owner Simon Property Group Inc. gained 4.1 percent despite posting a disappointing second quarter profit, as its CEO expressed some hope over a recovery in retail as lockdown measures in some regions eased.

Advancing issues outnumbered decliners 3.44-to-1 on the NYSE and 1.44-to-1 on the Nasdaq.

The S&P index recorded 35 new 52-week highs and no new low, while the Nasdaq recorded 50 new highs and four new lows.