World less peaceful than a decade ago, global index shows

The world is less peaceful than a decade ago, mostly due to conflict in the Middle East and Africa that is costing the global economy trillions of dollars, an international index showed on Wednesday.

"There's been a gradual decline in peacefulness over the last decade," said Steve Killelea, head of the Institute for Economics and Peace (IEP), which is headquartered in Australia.

"The reason for this slow, gradual decline in peacefulness really comes back to the conflicts in the Middle East and North Africa, and the spillover effects into other areas," Mr Killelea told the Thomson Reuters Foundation in a phone interview.

Europe has faced a migrant crisis since 2015, following wars in Libya and Syria. More than 1 million people from Africa and the Middle East, as well as many from Afghanistan, have tried to reach the continent via Turkey or by sea.

By analysing data from think tanks, research institutes, government and universities, the IEP estimated that in 2017 violence cost the economy $14.8 trillion - nearly $2,000 a person.

If the least peaceful countries - such as Syria, South Sudan and Iraq - were as stable as the most peaceful - be it Iceland or New Zealand - that could add an extra $2,000 a head to their economies, IEP said in its annual Global Peace Index report.

"As you can see, peace is integrally locked in with economic wealth," said Mr Killelea, who described the study as the only research that measures the economic impact of violence.

Europe was ranked as the most peaceful region in the world, while the Middle East and north Africa were the least peaceful.

The United Nations in May said the humanitarian crisis in Syria was worse this year than at any time before in the country's seven-year civil war.

In neighbouring Iraq, ISIS poses a threat along the border with Syria, even though the country declared final victory last December over the militants, which overran a third of Iraq in 2014.

The sub-Saharan African region accounted for nearly half the 11.8 million people worldwide who were displaced within their countries by violence and conflict last year, according to a report by the Internal Displacement Monitoring Centre.

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.”