The Edge - Mar 2013 (Issue 42)

contents March 2013

w w w.t h e e d ge. m e

cover story

>46

According to a recently released report, family businesses in Qatar and the wider Gulf region are expected to go through dramatic changes. How they deal with these challenges will decide if family run businesses continue into the next generation and onwards.

Business News 8 Qatar Impact 16 Country Focus 42

Finance & Markets 21

Simon Watkins writes that no matter how wealthy Qatar as a country is, it cannot survive in a stable fashion on oil and gas money alone.

Energy & Sustainability 27

Jamie Stewart explains how Doha will survive decoupling of oil and gas prices.

Family run businesses in Qatar have played a vital role in the nation’s private sector.

Many of them began as entrepreneurs, and built large diversified conglomerates. Their future success is however not guaranteed as they face challenges on numerous fronts.

features Business Interview: Mansoor Al Ansari 52

The Managing Director of the Qatar Football Association national teams discusses challenges and business opportunities in sport.

Feature Story: Retail rising

58

Aparajita Mukherjee looks at the unprecedented growth of malls in Qatar, and asks if this trend is sustainable.

Feature Story: For the long haul 66

Simon Watkins asks if there is room for three major carriers and hubs in the Middle East with such close proximity to each other.

Business Management: The sins of management 72

London Business School’s Julian Birkinshaw questions what it is about bad bosses that we find so fascinating and whether they can change.

Construction & Real Estate 31

Karl Townsend discusses the benefits of property management.

Tech. & Communications 35

Shehan Mashood asks if the latest BlackBerry will be a hit or miss for the company.

Business Insight 77

The Edge talks expatriate startups with Kirby Kearns, architecture with Mark Fenwick and science and inventions with Wajid Abbas.

Products Page 86 10 Things 88 The Edge | 3

publications director mohamed jaidah m.jaidah@firefly-me.com managing editor miles masterson m.masterson@theedge-me.com deputy editor erika widĂŠn e.widen@theedge-me.com digital editor/editorial asst. shehan mashood s.mashood@theedge-me.com regional sales director julia toon j.toon@firefly-me.com | +974 66880228 head of business sales manu parmar m.parmar@theedge-me.com | +974 33325038 sales manager adam kynnersley a.kynnersley@theedge-me.com | +974 66079716 sales manager joseph issac j.issac@firefly-me.com | +974 33675301 distribution & subscriptions azqa haroon a.haroon@firefly-me.com | +974 55692471 creative director roula zinati ayoub design coordinator sarah jabari designers teja jaganjac and rodel aquino finaliser michael logaring photographer herbert villadelrey proofreader geoff instone printer ali bin ali printing press Doha, Qatar

firefly communications PO Box 11596, Doha , Qatar Tel: +974 44340360 / Fax: +974 44340359 www.firefly-me.com TheEDGE is printed monthly Š 2012 Firefly Communications. All material strictly copyright and all rights reserved. Reproduction in whole or in part, without the prior written permission of Firefly Communications, is strictly forbidden. All content is believed to be factual at the time of publication.

Views expressed by contributors are their own derived opinions and not necessarily endorsed by TheEDGE or Firefly Communications. No responsibility or liability is accepted by the editorial staff or the publishers for any loss occasioned to any individual or company, legal or physical, acting or refraining from action as a result of any statement, fact, figure, expression of opinion or belief contained in TheEDGE. The publisher (Firefly Communications) does not officially endorse any advertising or advertorial content for third party products. Photography/image credits and copyright, where not specifically stated, are that of Shutterstock and/or iStock Photo or Firefly Communications.

4 | The Edge

editor’s letter I would like to begin my editor’s letter this month with a dose of shameless self-promotion, preceded by an explanation. For a short time, recent visitors to our website www.theedge.me may have noticed that access to it was preceded by a warning that it may have been infected with malicious software or ‘malware’.

Unfortunately the warning was borne out by a reality all too common around the world these days, and our old website had indeed been invaded by sources unknown, rendering visitors vulnerable.

We of course acted swiftly and immediately took the site down when we discovered the problem. Fortunately, for The Edge and its followers, we were at the time in the final stages of designing a completely overhauled website, of a far more impenetrable foundation and on an exponentially more secure server. The old website is in no way connected with the new and thus we are proud to announce the relaunch of www.theedge.me, far greater in scope than its predecessor.

The new site of course reflects our 2013 redesign, a fresh approach that has been well received throughout Doha. And from this month onwards, online readers can expect far more exclusive content and more regular updates pertaining to Qatar’s business community, as well as more unique features and enriched content planned for our website in 2013. Whether you visited the old site at all, or indeed have not yet logged onto our online presence, we would encourage you to do so. Please also join our Facebook group and follow us on Twitter to keep up to date with the latest Qatar business news and further exclusive content.

Moving onto the current print version in your hands, our March 2013 edition is crammed

The new website www. theedge.me reflects our 2013 redesign, a fresh approach that has been well received throughout Doha.

with interesting and thought-provoking articles.

In our Family Values cover story on page 46, Shehan Mashood deals with the issues and challenges faced by family businesses across the Middle East and specifically in Qatar. The article was largely informed by a recent report compiled by PwC and The Pearl Initiative, a regional private sector led organisation formed to promote transparency, accountability and best business practices in the Arab world. The feature is a fascinating insight into the issues these businesses – of which there are many in Qatar – face, including subjects such as succession and corporate governance.

In our special sector focus on page 58 we then delve into the lucrative world of Qatari organised retail, with special emphasis on the spate of new shopping malls appearing and set to appear in the country in the near future.

While any growth and activity in a large sector such as this, which has wide-ranging benefits for a host of businesses across supply chains and services, is welcome – serious questions come with it. How much is too much? Will there be enough stores and customers to fill the acres of mall retail space planned for Qatar? What will the effect be on less organised retail such as the souqs and small independent stores? The Edge’s Aparajita Mukherjee investigates.

A final feature I would like to draw attention to is my interview with Mansoor Al Ansari, managing director of the national football teams for the Qatar Football Association (QFA).

Though much of the latter organisation is publicly funded, Al Ansari explains to The Edge how, with the long term goal of a successful World Cup 2022, and hopefully fielding a strong Qatari team for the event, he is focusing on creating and influencing a business-like environment within the QFA and related entities.

He also discusses how, through the avenues of sponsorship, television coverage and other activities, the local sports sector features many business opportunities.

Which, as always, is what we at The Edge like to hear. Enjoy the issue.

Miles Masterson Managing Editor The Edge | 5

8 | The Edge

photo of the month

Finely Focused

China’s Liu Shiwen serves to opponent Ding Ning during the women’s singles final table tennis match at the ITTF Pro Tour Qatar Open held in Doha late February. Also representing China, Ding Ning the World Champion (seen in the background) beat out Liu Shiwen the number two seed, in five games to win the tournament. Speaking at a press conference, Adham Sharara, president of the International Table Tennis Federation was quoted in the local press as saying, “The level of entries was very high. I did not expect so many Chinese, Japanese and Korean players to be here. In Kuwait, the entry was quite strong, but here in Qatar…it was stronger, it was impressive.” (Image by Reuters/ Fadi Al-Assaad) The Edge | 9

news business

Qatar Holding opens a new investment arm

By Simon Watkins

In February, Qatar created a new US$12 billion (QR43 billion) investment firm, the Doha Global Investment Company (DGIC). Backed by blue-chip assets from its US$100 billion (QR365 billion) plus sovereign wealth fund (SWF), Qatar Holding (QH), and its subsequent listing on the Qatar Stock Exchange (QSE), as recently announced by QH, is intended to: “Stimulate more wealth distribution down the line, giving Qataris a chance to be part of the country’s growth, while also bringing in sophisticated foreign investors once it is listed,” according to R. Seetharaman, chief executive officer of Doha Bank. Certainly the former may be true, as an initial public offering (IPO) will add enormously to the bourse’s liquidity.

But the question of foreign investor involvement is an entirely different matter. Firstly, although there is vague talk that foreigners will be allowed to buy into the firm’s stocks at some point in the future, will this really pan out? Although supposedly separate from QH, the remit for the new firm looks surprisingly similar to the SWF, with Hussain Al Abdullah, Qatar Holding’s vice chairman, saying that DGIC will invest in shares, bonds, real estate, and private equity opportunities around the globe, just like QH. SWF’s are the jewels of a country’s financial trophy cabinet, so it would be an extraordinary event to allow foreigners to take meaningful stakes in one. And second, even if they are allowed, would they want to? It is difficult to see what type of institutional investor would want a part of this type of opportunistic operation without having a major say on investment policy, which Qatar may never allow.

As an initial move into opening up a broader and deeper stock exchange, though, DGIC may play some part, and doing this for the QSE will be necessary at some point soon. In this respect, over the course of 2012, international investors withdrew Qatari equities, and worse still, international lenders cut their exposure to Qatar by US$11.5 billion (QR41 billion), according to data from the Bank for International Settlements.

All of this has militated into a situation in which Qatar’s domestic banks have been compelled to step into the lending breach. In The Qatar Holding funded Doha Global related news, in February Doha Bank announced the launch of Investment Company will be listed on the Qatar Stock Exchange, and while shares will be a two-phase capital increase in the form of a QR1.55 billion riyal available for Qataris it is uncertain at present rights issue to local investors. whether foreigners will also be able to invest.

(Image Reuters/Corbis)

Law to regulate public-private partnership soon Qatar hopes to soon have a law in place to regulate public-private partnership (PPP), which will allow the private sector to participate in key infrastructure projects. The minister of business and trade, His Excellency Sheikh Jassim bin Abdulaziz Al Thani, hinted the move is part of long-term plans aimed at accelerating the transition from public sector-led development to a market-driven economy.

He recently told the Oxford Business Group’s The Report (Qatar 2012) in an interview: “We are currently working on a public-private partnership law that will permit the private sector to participate in key infrastructure projects more readily”.

Qatar already has a successful track record of partnerships between the private and public sectors. Citing an example, the 10 | The Edge

Number of the month

The newly formed Doha Global Investment Company (DGIC) is initially being bankrolled with US$3.5 billion (QR12 billion) of assets by parent company Qatar Holding.

QR12 billion minister said over two-thirds of Qatar’s power generating capacity was installed through PPPs. The government now aims to repeat this success elsewhere. The private sector plays an increasingly important role in the development of the economy.

Moreover, the government recognises that the future of the economy hinges upon the growth of the private sector, and thus endeavouring to create real opportunities for entrepreneurship and innovation between the public and private sectors.

news business

QDB and Shell sign SME agreement

25% The percentage of unemployment among the young people in the Arab region.

Qatar Shell has partnered with Qatar Development Bank to assist in the development of local small and medium enterprises (SMEs) to supply contracts for Shell businesses in Qatar. This partnership will provide local companies and manufacturers access to business opportunities as well as help them raise their operating standards.

“We are passionately committed to SME and local content development,” said Wael Sawan, managing director and chairman of Qatar Shell Companies. “Not merely as an aspect of corporate social responsibility, but because it makes good business sense for us to do so.”

“We believe this to be an essential partnership for SMEs in Qatar to be on par with global competitors and suppliers,” said Mansour bin Ibrahim Al Mahmoud, chief executive officer of Qatar Development Bank.

“QDB will not only provide access to funding but also access to business advisory support, links to potential strategic partners as well as facilitate access to local regulatory and support institutions,” added Al Mahmoud SMEs listed with QDB and other institutions and/or incubators will have access through the agreement to Shell’s tenders to supply various

materials and services required by the company.

A recent example of Shell awarding a contract to a local company was the signing late last year of an agreement between Qatar Shell and Venture Gulf Engineering to include Qatar Vinyl Company Ltd. as an approved local manufacturer of Hydrochloric Acid.

“The problems young people face in our region Doha hosts Arab youth and cannot be entrepreneurship conference three day conference organised by Silatech and the Arab Urban Development Institute (AUDI) solved by Aconcluded recently in Doha, with more than 350 attendees from throughout the region sharing governments strategies and lessons in promoting youth entrepreneurship. Held under the patronage of HH Sheikha Moza bint Nasser, ‘Arab Youth and Entrepreneurship: Holistic Approaches to Nurturing alone. The Local Ecosystems’ brought together leading entrepreneurs, local Arab government officials, NGO representatives, corporate executives, youth leaders and the media to seek same can be researchers, synergies and complementarity in entrepreneurship interventions. Silatech co-organised the event in partnership with others. Leading said for the recent entrepreneur and founder and vice chairman of Fadi Ghandour stressed in the keynote private sector Aramex, address that “It is of utmost importance to offer young the right environment that will encourage them and for civil people to build their future with their own hands and support projects.” He also stressed on the vital role the society.” - their private sector can have in supporting the social and development in the countries and societies Silatech chief economic in which they operate.

The Arab region has the world’s highest rate of executive unemployment among young people, at 25 percent. a number of initiatives have been introduced, officer Dr. Tarik While the region has yet to realise the full benefit of a holistic, M. Yousef. approach to youth entrepreneurship programmes.

Mansour bin Ibrahim Al Mahmoud, chief executive officer of Qatar Development Bank and Wael Sawan, managing director and chairman of Qatar Shell Companies signed into effect a partnership to promote SMEs in Qatar in February.

Keynote speaker at the recent Arab Youth and Entrepreneurship in Doha, and founder and vice chairman of Aramex, Fadi Ghandour commented in his speech “It is of utmost importance to offer young people the needed backing and right environment that will encourage them to build their future with their own hands and support their projects.”

(Image Reuters/Corbis)

The Edge | 11

news

business in brief Muntajat achieves initial commercial milestones

Muntajat, the company with the exclusive rights to market and distribute Qatar’s regulated chemicals and petrochemicals, has announced the completion of His Excellency Mohammed the transition of bin Saleh Al Sada, minister marketing, sales of energy and industry and chairman of the board and distribution of directors of Muntajat activities of Qatar announced that the company had taken its Fuel Additives first order for methanol and methyl products in Company Limited February. (Image Reuters/ (QAFAC) to Corbis) Muntajat. They are part of the regulated chemical and petrochemical products that Muntajat will purchase, market, distribute and sell to customers in more than 120 countries worldwide, as mandated by Emiri Decree No. 11/2012. “By consolidating the distribution and marketing channels of these products, His Excellency Dr. Mohammed bin Saleh Al Sada, minister of energy and industry and chairman of the board of directors of Muntajat said, “[Muntajat] will play an increasingly important role in supporting the progress of both the global chemical and petrochemical industry, as well as Qatar’s national economy.”

Turkey and the QFC have the most islamic finance friendly tax systems

Turkey and the Qatar Financial Centre (QFC) have the most Islamic Finance friendly tax systems out of eight countries in the MENA region, reviewed in a study conducted by three leading experts, Mohammed Amin, Salah Gueydi and Hafiz Choudhury, and sponsored by Qatar Financial Centre Authority in partnership with the International Tax and Investment Center, based in Washington DC. The study, Cross border taxation of Islamic finance in the MENA region - Phase One, shows that while simpler Islamic finance transactions can be carried out in some countries without prohibitive tax costs, of the countries reviewed only Turkey and the QFC have a tax system that enables sukuk transactions to be carried out without excessive tax costs.

BNY Mellon principal paying agent for US$3 billion Qtel programme BNY Mellon, the investment management firm, has been appointed as the principal paying agent, registrar, exchange agent, and transfer agent for Qtel International Finance Limited’s new US$3 billion (QR10 billion) Global Medium Term Note (GMTN) programme unconditionally and irrevocably guaranteed by Qtel.

Global Finance names Standard Chartered as best bank for liquidity management in Middle East Standard Chartered was named “Best bank for liquidity management in the Middle East” for the second consecutive year by renowned international finance magazine Global Finance. A variety of subjective and objective criteria were used for choosing the winners. Factors considered include: profitability, market share and reach, customer service, competitive pricing, product innovation and the extent to which treasury and cash management providers have successfully differentiated themselves from their competitors around core service provision.

Al Jazeera Finance signs US$95 million syndicated facility arranged by QInvest Al Jazeera Finance (AJF) has signed a US$95.0 million (QR 345.8 million) threeyear dual currency murabaha facility with a syndicate of banks from the GCC, its first syndicated financing transaction. QInvest acted as sole bookrunner and structuring advisor to AJF. Qatar Islamic Bank took the mandate lead arranger (MLA) role and is also acting as the Investment Agent.

Ahli United Bank, First Gulf Bank UAE and QInvest were the lead arrangers.

Words & Numbers “There are already rules in place in Qatar to ensure the safety and quality of imported meat but the horsemeat scandal has underlined the need for making the rules even stricter.”

Dr. Mohammed Saif Al Kuwari, deputy chairman of the committee and director of the Laboratory and Standardisation Department at the Ministry of Environment told the media recently, following the European horsemeat scandal.

12 | The Edge

2.7

US$ billion (QR9 billion) Italian businessman Maurizio Borletti has joined up with Qatari investors in a bid for control of Printemps, the luxury French department store and tourist attraction.

“We strongly believe that for any project to succeed we need to spend 90 percent of our time on planning and 10 percent on implementation.

That early part of planning and research time that was spent allowed us to form the partnerships that then created Qatar District Cooling Company.”

Omar Alfardan, chairman of Qatar Cool, said recently during Qatar Cool’s 10th year anniversary.

10

square kilometre area township project that will create an interface between Doha city and the new Hamad International Airport.

events business

Qatar, March 2013

event of the month 11 – 12

MultaQa

Hosted by the Qatar Financial Centre Authority (QFCA) and organised by Global Reinsurance, Multaqa Qatar was launched in 2007 to showcase the burgeoning Gulf Cooperation Council insurance and reinsurance sector, and highlight opportunities for international businesses in the region. Combining a world-class business programme with unparalleled networking opportunities, the event is designed to provide senior executives with a platform from which they can do business – Multaqa meaning meeting place.

Seven years on Multaqa Qatar remains focused on providing a first class platform for local, regional and international decision-makers to come together, shape the direction of the industry and do business. www.multaqa.com.qa

10 – 17

Tasmeem Design and Art Conference

Tasmeem Doha is the international art and design conference held biennially at VCUQatar. Over the past eight years, Tasmeem has gathered scholars and practitioners of art and design to discuss critical issues and engage with students and local communities. The 2013 conference addresses themes of hybridisation/ interdisciplinary or collaborative work. Do not miss Doha_On Centre at Tasmeem this year; an installation

by Makower Architects on the ‘Soul of the City’. www.tasmeemdoha.com

12 – 14

World Cargo Symposium

The theme of the seventh World Cargo Symposium in Doha will focus on Action for Sustainability.

The aviation industry needs long-term strategies and investment for sustainable development. The seventh World Cargo Symposium will be building the future of the industry through modernisation programmes, the development of people, carbon footprint, social responsibility and the economic impact of air freight to the world. www.iata.org/events

19 – 20

Middle East Securities Forum

event of the month 18 – 20

Innovate Qatar

The event is intended for companies and individuals who wish to showcase innovations or new technologies regardless of industry sector. Innovate Qatar is a platform to showcase innovations rather than talk about future plans. Companies who have successfully bridged the gap between ideation and execution will find Innovate Qatar to be a portal through which they can reach investors and end-users alike. Innovate Qatar aims to engage visitors and exhibitors by organizing activities and exhibition highlights that will foster a spirit of innovation.

The exhibition activities will centre around connecting innovators with business/govt. leaders who are in need of innovation and new technology solutions. www.innovateqatar.com

14 | The Edge

Brokers, custodians, regulators, exchanges, CSDs, asset managers and sovereign wealth funds will all be convening in Qatar in March at the Middle East Securities Forum 2013. Attended by top finance minds in the world, under discussion will include the challenges and outlooks for Middle East exchanges, the role of sovereign wealth funds, asset management, as well as other topics related to the economy of the Middle East and its countries. www.icbi-events.com

25 - 28

MEA Trade Mission to Qatar

Expanding on Qatar’s economic growth and continuing to build UK-Qatar trade links, the Middle East Association (MEA) is leading a trade mission to Qatar in March. The mission will focus on the opportunities arising from Qatar’s needs to develop in time to host the FIFA 2022 World Cup. Major infrastructure projects such as transport (rail, ports and roads), real estate and professional services for major projects will be of particular interest. www.the-mea.co.uk

Qatar Impact

Changing Channels The Edge columnist Kamahl Santamaria has been with Al Jazeera English since its inception. This month, he looks at Al Jazeera Media Network’s latest attempt to break into the United States market.

L

et me say from the outset that I am writing this as someone who works in the media and knows both Qatar and Al Jazeera quite well. What follows does not necessarily reflect the views or stance of the Al Jazeera Media Network (AJMN).

However, I think it is fair to say that I am pretty excited and supportive of AJMN’s new push to take Al Jazeera’s journalism into the United States (US) – a market that for a number of reasons has been hard to crack.

There is no doubting that Al Jazeera has helped put Qatar on the map. Of course it is the country’s natural resources and wide investments that have allowed it to expand at such an impressive rate, but just the fact that I can begin a news bulletin with the words “Live from Doha” represents a big change in, at least, the media landscape.

And that has only been in the last six years since Al Jazeera English has been broadcasting. Remember it was 10 years earlier that Al Jazeera gave the Arab world a voice it had not heard before.

Now the stable includes documentary, sports and children’s channels. All pretty impressive for a 16-year-old.

But despite reporting from and about the US for years, actually broadcasting there – and gaining acceptance – has been a problem.

It is no secret that Al Jazeera for many years did not have a good relationship with the US government. Politicians derided it for broadcasting “propaganda” and saw it as some sort of radical mouthpiece for elements within the Arab world. Al Jazeera’s bureaus in Kabul and Baghdad were both hit by US missile strikes, despite Qatar and the US having strong diplomatic and military ties.

And although the stance has certainly softened – Hilary Clinton only recently said of Al Jazeera “you feel like you’re getting real news around the clock instead of a million commercials and arguments between talking heads” – breaking into the US market has ultimately been a commercial issue.

The solution may lie with AJMN’s purchase of a struggling cable channel owned by former US vice president Al Gore.

Current TV is now in the hands of AJMN – after a deal worth, according to some estimates, US$500 million (QR1.8 billion) – and within a few months will be turned into Al Jazeera America. It will be a channel with the same journalism heritage as Al Jazeera Arabic and Al Jazeera English, but as a point of difference will broadcast from the United States to the United States.

16 | The Edge

Why do it? Well US audiences have been largely unable to watch Al Jazeera English on cable TV because of a reluctance to broadcast it. And while some would say that the demand for Al Jazeera was not there because CNN, Fox and MSNBC already have the domestic market sewn up, 40 percent of Al Jazeera’s online viewing does come from the US. So clearly there is an audience.

Broadcasting on Current TV’s distribution network will put Al Jazeera America into around 40 million homes. That’s a great start for a network that only reached around 4.7 million American homes up until now.

But do not for a minute believe that Al Jazeera America is about taking Qatar and its views to the US. I lose track of the amount of times people ask me about what influence the Qatari government has over Al Jazeera’s editorial policy – most recently it was a group of young and very politicallyminded students from Northwestern University Qatar.

The fact is there is no influence, and taking Al Jazeera to a US audience is about journalism not policy.

As a result of the new channel, the name ‘Qatar’ will surely be mentioned. The strong media interest surrounding Al Jazeera America’s on-air launch almost guarantees that.

But what the media and viewers should see, first and foremost, is quality journalism from a perspective they have arguably not had enough of a chance to see before.

Kamahl Santamaria is a Doha-based news anchor with Al Jazeera English and host of the channel’s business and economics programme Counting the Cost.

This section is brought to you by Qatar Financial Centre Contents: Qatar seeks to bolster investment sector 21 . The uncertain future of GCC economic integration 23 . Qatar’s rapidly expanding mobile sector 24 . Investment banking analysis shows MENA growth 26.

finance & markets Qatar’s inability to obtain inclusion as an emerging market from global equity market benchmark MSCI, has, opines the author, somewhat thwarted its prospects of external investment, at least in the short term. (Image courtesy Qatar Exchange)

Qatar seeks to bolster investment sector No matter how blessed a country is with hydrocarbon wealth, ultimately it cannot survive in a stable fashion on oil and gas money alone, writes Simon Watkins

F

or a start, it will find itself largely hostage to the volatile fortunes of global commodities. It will also find it increasingly difficult to sterilise all the incoming cash on its capital accounts, leading to fundamental endemic domestic currency appreciation, unless that currency is pegged – and even if this is the case then excess capital inflow will eventually manifest itself in inflationary pressure.

And in the end, of course, the oil and gas will run out entirely. Qatar, of course has been quick to realise that its natural

Brought to you by:

The Edge | 21

sectors | finance & markets

resources wealth brings with it problems as well as benefits, and is continuing to diversify its economy away from this overreliance, but how and to what effect?

Looking at the second question first, a number of worrying signs began to emerge in its financial and investment sector in the middle of last year. Over the course of 2012, to begin with international investors withdrew a total of around US$600 million (QR2.2 billion) out of Qatari equities, with net outflows during all but two of the previous 16 months, according to data from Deutsche Bank. In each of the second and third quarters of last year, international lenders also cut their exposure to Qatar by US$11.5 billion (QR42 billion), according to data from the Bank for International Settlements. And, even more specifically, the landmark and extremely well publicised tie-up between the NYSE Euronext and the Qatar Stock Exchange suffered a major blow when the former reduced its ownership level to just 12 percent.

Qatar has not helped either by imposing limits on foreign ownership of shares (typically only up to 25 percent of a company), which has been the main reason why Qatar failed to enter the MSCI emerging markets index on several occasions (most recently last July) when it was an attractive prospect to foreign investors. But now that its economy is looking less than stellar, being included in the index would have at least increased its prospects of attracting foreign investment flows into its stock market, should the Qataris want to do so.

Qatar’s domestic banks have been compelled to step into the lending breach, given the dearth of international finance available to Qatar. Looking at the same two watershed quarters of last year (Q2 and Q3) in fact, total lending by banks increased to represent 120 percent of deposits, according to the Qatar Central Bank, implying that Qatari banks were reliant on short-term borrowing from capital markets and other domestic banks. In its most recent judgment on Qatar’s banking system – including both the conventional and the Islamic elements – major ratings agency Moody’s highlighted the high degree of dependence on governmentrelated business and on the domestic economy.

Worryingly as well, from even the oil and gas perspective, were a couple of major events that appeared to mark a turning point. In a research report at the end of last year, Barclays Capital’s Alia Moubayed, director of research, in London, noted in a report 22 | The Edge

Major ratings agency Moody’s highlighted the high degree of dependence of Qatar’s banking system on government related business and the domestic economy.

that Italy’s Edison (a unit of France’s EDF energy group), successfully renegotiated a 25-year contract with RasGas signed as recently as 2009, which Edison said would provide a EUR450mn (QR2.1 billion) boost to its earnings. Barclays estimates that this reflected a 10 percent dip in Edison’s unit price for gas. It also set a precedent for other buyers, implying that income at RasGas, Qatar’s country’s second-biggest supplier, could dip further. “The success of Edison in arbitration could well drive other buyers to look for discounts in the coming months,” said Barclays.

Moreover, the chairman of Tokyo Gas, Norio Ichino, one of Qatar’s largest customers, said late last year that he believed the current system of linking gas prices with oil is inflating Japan’s import bill, and that there should be a de-linking of the two. “The risk isn’t solvency for Qatar’s banks, but they run the risk of a liquidity crunch,” says Nick Stadtmiller, head of fixed income research for Emirates NBD, in Dubai.

In response Qatar has massive foreign assets buying spree, and has also sought to attract capital inflows by upping its bond issuance, highlighting its shari’ah finance credentials and drafting new legislation to improve its corporate image both at home and abroad. In respect of the latter of these strategies, the Qatar Financial Centre (QFC) recently released a swathe of rules covering three areas – corporate governance, anti-money laundering, combating the financing of terrorism and Islamic finance windows in keeping with global regulatory standards

Composition of Domestic Credit, 2008-11 (In percent of total credit)

100

Public Sector Consumption Credit Growth (annual percent change, RHS)

50

Real Estate and Contractors Others1/

45 40 35

80

30 60

25 20

40

15 10

20

5 0 Dec-08 Dec-09 Dec-10 Source: Country authorities 1/ General trade, industry, services others and outside Qatar.

Qatar’s domestic credit growth composition from 2008 to 2011.

0 Dec-11

finance & markets | sectors

for insurance and banking supervision.

In terms of corporate governance, the new rules seek to strengthen regulation covering governance and risk management by requiring the governing body of a QFC-authorised firm to approve and establish a formal governance framework, risk management and internal controls framework, and remuneration policy. In addition, the new rules include a controlled function for internal audit for QFC insurers, QFC banks, and QFC Islamic banks. The rules will commence on 1 July 2013.

A new draft company law is also under discussion that seeks to boost the performance of the QSE through increasing number of the firms that would be able to list on it, according to Dr. Sayid Al Sayfi, Professor of Islamic finance at Qatar Faculty of Islamic Studies, in Doha, “It will encourage the creation of new companies and the easy flow of investment in Qatar.”

However, he adds, some of the proposed articles need clarification.

“Article (110) of the new draft law stresses that the chairman and members of the board or the directors of companies should refund the sums they had gained at the transactions they performed for their companies in which they have direct or indirect interest. The penalty should be stricter for such actions and should not be limited to just refunding the money.”

Qatari analysts highlight that fixing the nominal value of shares at QR1 to 100 instead of at QR10 as previously would broaden out the potential investor base for stock issues. Additionally, they say, revising the norms required for establishing new companies in a single window facility will speed up the process.

The law will be finalised once interested parties have voiced their views on the draft, according to HE Sheikh Jassim bin Abdulaziz bin Jassim bin Hamad Al Thani, Qatar’s Minister of Business and Trade.

Simon Watkins is a freelance financial journalist based in London in the United Kingdom

Regional Economics

The uncertain future of GCC economic integration

The Gulf Cooperation Council (GCC) was formed three decades ago with six member countries: Bahrain, Kuwait, oman, Qatar, Saudi Arabia and the United Arab Emirates. At the formation, the founding charter of the bloc was to effectively realise economic and social integration among its members.

Theoretically, economic integration of such sorts provides member countries with collective powers. It also promotes cost efficiencies among its members through efficient sharing of resources. Historically, this has particularly served well in the field of research and development, where a few countries have shared tangible and non-tangible resources to create competitive advantage.

Economic integration also encourages cross flow of investments, which brings its own set of advantages and helps in spurring the overall economic activity of its members.

But the most pronounced benefit of economic integration is felt in inter-country trade. Introduction of economic integration helps in acquiring goods and services at much lower cost from member countries.

Reduced duties or tariffs lower the prices and help countries to save substantial money, which is essentially channelled to other lucrative avenues.

The launch of the GCC Custom Union in 2003 was widely hailed as the turning point in the history of the regional bloc, which aimed to eliminate trade barriers.

Over the last several years, the GCC bloc has inched towards unity, especially through unification on various trade fronts.

According to official figures, the total volume of intra-GCC trade exchanged stood at US$85 billion (QR309 billion) in 2011. Moving beyond the trade sector, in 2008 another milestone was achieved when the member countries launched the Gulf common market to ensure equality for GCC citizens, specifically free movement.

Under the agreement, citizens also have the same rights in areas such as

The current state of the euro area has raised further doubts regarding a common currency and has encouraged GCC policymakers to see the idea of integration from a completely new perspective.

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US$85 B (QR 309 B) The volume of intra-GCC trade in 2011, in billions. employment, healthcare, education, social security and residence, as well as in economic activities such as trading in stock markets, setting up companies, and buying and selling properties. Benefits of economic integration have also been realised outside the realm of a formal charter as well. For instance, Dubai government has proactively developed policies that attract regional investments. Its tourism sector continues to be a preferred destination for many MENA residents and its real estate sector, which is open for investments by nonUAE nationals, also garners a great deal of attention. The Emirate has also been very successful in attracting a lot of investments from Western and Asian companies in a variety of different sectors that aim to serve regional consumer demand.

Economic integration among the six Gulf nations has also particularly worked well because all the members share a common heritage and history as well as similar types of political systems. And since oil continues to account a major component of the region’s GDP, economic integration further benefits the member countries, as dependence on oil revenues still leaves the GCC members vulnerable to global economic slowdowns.

Economic integration has potential to reduce such vulnerabilities, by increasing intra-GCC trade and investments, which can also support the non-oil side of the respective economies.

However, for the GCC countries a great amount of integration is yet to come.

GCC countries have had their fair share of setbacks, especially when it comes to unifying the monetary policies. The bloc has long felt that in order to achieve true economic integrity, a common currency would be required. This goal was earlier envisaged to be achieved by the end of 2010, but withdrawal of UAE and Oman from the agreement raised concerns on the viability. Efforts to launch a common currency earlier suffered an interim setback in year 2007 when Kuwait chose to de-peg its currency from the dollar, citing inflationary reasons.

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Qatar’s minister of state for foreign affairs Khalid bin Mohamed Al Attiyah attends a GCC meeting in Manama in late 2012. There is wide consensus in the union of states that there needs to be more financial and trade integration, though how this will take place and the future a common currency in the near or even medium terms seems unlikely. (Image Corbis/Reuters)

The current state of the euro area has also raised concerns and has encouraged GCC policymakers to see the idea of integration from a completely new perspective. The plight of the euro region has rightfully brought into notice that an efficient economic integration will always remain elusive till the time fiscal and monetary policies are formed in isolation and central bank plays a passive role in managing the banking industry. And until a unity is achieved, an economic bloc is only making itself more vulnerable to any severe external economic shocks.

So as far as the GCC is concerned, it is widely acknowledged that full-fledged economic integration is still years away. A great deal of work is still required to be done to make economic policies run in tandem.

Moreover, policymakers would also want to take a cautious approach and build a model that encompasses a true unified stature of its member countries and avoid such pitfalls, which have made Europe so fragile.

Dheeraj Shahdadpuri is a financial analyst currently based in Dubai in the United Arab Emirates.

Qatar Telecommunications

Qatar’s rapidly expanding mobile sector The introduction of mobile number portability (MNP) in Qatar is a move the industry regulator says will boost competition, writes Thomas Bacon It may also provide a boon for Vodafone Qatar, but with mobile penetration already at more than 165 percent, it may not be enough to completely create industry parity. According to a statement issued by ictQATAR on January 10, MNP, which enables customers to keep their mobile phone numbers when they change service providers, will allow customers to change service provider more easily. The regulator said that the move was part of its ongoing efforts to liberalise Qatar’s telecommunications market and increase its competitiveness.

The introduction of MNP has been expected for some time, with ictQATAR having initially announced that subscribers would be able to keep their own numbers when changing operators by the end of 2011. ictQATAR believes that MNP will

sectors | finance & markets

make the sector more competitive by encouraging operators to reduce rates and offer more competitive packages.

However, this already exists in the current marketplace to some degree. Mobile phone penetration rates are currently above 165 percent in Qatar, making it one of the most saturated markets globally.

Vodafone, the sole competitor of Qatar Telecom (Qtel), broke through the 50 percent market penetration rate in 2012, meaning that most of the population subscribe to both operators. As a result, a majority of Qataris utilise whichever operators’ services are most cost-effective at a particular time. MNP has not had a significant impact in other regional markets, such as Oman and Saudi Arabia, with little in the way of subscriber turnover.

But any increase in subscribers that MNP may bring will be well received by Vodafone Qatar, which is still recording losses, though it is closing the gap since first launching in 2009. On January 17, the company reported US$23.9 million (QR89 million) in losses during the last quarter of 2012, compared to the US$33.5 million (QR122 million) recorded during the same period in 2011. The operator also showed improved revenue of US$108.7 million (QR396 million) for the quarter, a US$21.9 million (QR80 million) increase on the same quarter the previous year. This improvement was in part due to a broader subscriber base, with Vodafone Qatar reaching one million customers at the end of 2012, a 26 percent increase over the 12-month period.

Qtel is expanding its holdings abroad, raising its stake in operator Tunisiana to 90 percent, after acquiring a further 15 percent from the Tunisian government in early January, to go with the 75 percent it already held through its Kuwaiti arm Wataniya. Qtel is looking to expand Tunisiana’s reach through the expansion of its 3G services and the fixed-line market in Tunisia.

Qtel is also becoming increasingly active in Iraq. Its subsidiary there, Asiacell, is set to complete a US$1.35 billion (QR4.9 billion) initial public offering (IPO) this month, opening 25 percent of the operator’s shares listed on the local exchange. The IPO, a requirement of the licence agreement issued in 2007, is widely expected to see Qtel increase its own stake in Asiacell from its current 53.9 percent to at least 60 percent.

At least some of this expansion is being funded through debt. Qtel raised 26 | The Edge

US$1billion (QR3.64 billion) through 15and 30-year bonds in an issue that closed on January 24. The company has said it will use the funds for general corporate purposes and refinancing existing debt.

While the Vodafone group recently signed an agreement to continue to manage its Qatari affiliate – in which it holds a 23 percent stake – until at least 2018, it may take some time for Vodafone Qatar to begin turning a profit, even with any advantages it may accrue from MNP. Meanwhile, despite its accelerated programme of expansion abroad, it is unlikely that Qtel will take its eyes off the ball at home, seeking to maintain its dominant market share through new services and upgrades.

Based in Turkey, Thomas Bacon is an analyst at Oxford Business Group (OBG).

ictQatar believes that mobile number portability will make the telecom sector more competitive by encouraging operators to reduce rates.

Investment Markets

Investment banking analysis shows MENA growth

According to a Thomson Reuters report on investment banking analysis for the Middle East region for 2012, investment banking fees reached US$536.1 million during 2012, a 19 percent increase over 2011.

Equity capital markets issuance reached US$9.4 billion (QR34 billion) during 2012 while total debt issuance reached US$38.6 billion (QR138 billion) in 2012, a 26 percent increase over 2011.

Goldman Sachs topped the 2012 Announced Any Middle Eastern Involvement M&A Ranking with US$5.9 billion (QR21 billion), while Credit Suisse took second place with US$5 billion (QR18 billion).

Morgan Stanley topped the Middle Eastern target M&A Ranking with a market share of 22 percent of the market. The largest deal with Middle Eastern involvement during 2012 was the US$2 billion (QR7.28 billion) stake acquisition of Centennial Asset Brazilian Equity Fund by Abu Dhabi state investment fund Mubadala.

In respect to Middle Eastern investment banking fees reached US$536.1 million (QR1.9 billion) during 2012, a 19 percent increase over 2011. M&A fees totaled $157.9 million (QR575 million) during 2012, up 23 percent from the previous year and accounting for 29 percent of the overall fee pool. Fees from equity capital markets underwriting totaled US$99.5 million (QR362 million), a 23 percent increase over 2011.

US$2 B (QR7.28 B) The value acquisition of Centennial Asset Brazilian Equity Fund by Abu Dhabi state investment fund Mubadala, the largest coming from the region in 2012.

Contents: Credit agency defends Qatar energy giants 27 . Qatar Green building sector 29 . Energy project costs set to climb in the region 29 . Gulf-wide renewable-powered desalination 30. Qatar considers Hungarian gas demand 30.

energy & sustainability Credit agency defends Qatar energy giants Doha will survive the LNG contracting shift as oil and gas prices decouple, a ratings agency says, which is essential with a weak market outlook taking shape, writes The Edge Energy and Sustainability Sector editor Jamie Stewart.

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Executives at the world’s largest gas firm Qatargas will no doubt feel positive that two global financial institutions have said that the country’s gas exporting leaders are on firm financial foundations.

he financial standing of Qatar’s giant energy producers will feel little effect from a high profile cost-saving shift on the part of natural gas importing nations to link supply contracts to short-term traded gas hub prices, according to a major credit rating agency.

The news would have made welcome reading for state-owned liquefied natural gas (LNG) producers RasGas and Qatargas, coming shortly before global investment bank Goldman Sachs predicted that short-term LNG markets, “will enter a bearish cycle,” in the 2016 to 2017 period, as a number of production projects are brought on line.

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Ongoing controversy over the financial structure of gas supply contracts has been a talking point of the LNG industry for the past year. As reported in The Edge, Italian company Edison secured a reduction in the price of LNG under its long-term contract with Qatar’s RasGas in September 2012.

But oil prices are historically high, buffeted by long-term political uncertainty in the major oil producing nations – in effect, still displaying the price inflation that set in during the Arab Spring. Gas prices, on the other hand, are low, because of a relatively well-supplied market and a demand outlook that is unable to shake off the after-effects of the global recession.

Importing nations are suffering under the price disparity. “In the current context of high oil prices and oversupply of gas in the European market, oil-indexed gas import prices have been well above European spot prices and parity levels for alternative fuels such as coal,” said Karim Nassif, analyst at Standard & Poor’s (S&P) in February. “With oil-indexed import contracts permanently out of the money importers have been forced to incur losses in their trading segments to be able to place contracted import volumes in the marketplace.”

And the contractual issue has increased in magnitude, with Russian state-owned supplier Gazprom refusing to bow to pressure from its customers to shift to hub-indexed pricing, a system that by its nature reflects the fundamentals of gas supply and demand closer than oil price movements do, and is therefore a more accurate barometer of the market place.

But S&P insisted that the credit rating of major gas producers was sufficient to weather the storm of disquiet being

directed at oil-indexed supply contracts: “We would expect the effects on gas producers RasGas’ and [Russian stateowned] Gazprom’s credit quality to be limited because their ratings already factor in a degree of price volatility and are not tied to currently high oil prices,” S&P stated.

It added that its ratings were based on a mid-term price scenario of Brent crude oil at US$80 (QR 291) per barrel, about 25 percent below the current price, leaving Qatar a lot of leeway. Moreover, S&P stated, its ratings had already factored in conditions in the market in relation to the decoupling of oil and gas prices, “are likely to persist over the short to medium term”.

And the agency largely dismissed the RasGas court case: “The arbitration award was high but not material, in our view, in the context of RasGas’ overall financial performance in 2012,” it stated.

Qatar is heavily reliant on exports of LNG to fund its economic diversification programme – a nation-building project that will take time to shift the balance of national income away from gas. So the news that its exporting leaders are on firm financial foundations is a boost, particularly as global prices for LNG look set to fall within three to four years, according to Goldman Sachs.

A report published by the investment bank mid-February stated that, “Assuming what is under construction on the liquefaction side [plants that convert natural gas into LNG for export] gets built, spot [short-term] markets can transition from 2015 into a bearish cycle…with excess supply expected to develop in the market in 2016-2017, as these projects ramp up supplies.”

A major credit ratings agency and investment bank have come out in favour of Qatar’s LNG industry in relation to a controversial price ruling against RasGas in late 2012. (Image courtesy Ras Laffan)

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US$80

The oil price upon which RasGas’ credit rating is based, 25 percent below the current level.

S&P has insisted that the credit rating of major gas producers was sufficient to weather the storm of disquiet being directed at oil-indexed supply contracts.

energy & sustainability | sectors

Energy Efficiency

Qatar Green building sector The increasing importance of green buildings in the academic and political spheres is beginning to spawn business opportunities in Qatar and across the region.

However, green buildings in Qatar could be performing below potential due to human behaviour, a team of experts brought together by the Qatar Green Building Council (QGBC) warned in February.

According to the expert team, which includes members of the QGBC as well as experts from Texas A&M University at Qatar, nearly two decades of research has shown that green buildings do not perform as well as their designers expect.

In a bid to get to the bottom of this disconnect the group has launched the first scientific study to determine whether the behaviour of personnel who maintain and operate green buildings – facilities managers – can be applied to the issue. The study will evaluate and compare three archetype buildings in Qatar that represent the commercial, institutional and residential, John Bryant, mechanical engineering professor

at the university, said, listing the RasGas Headquarters, Education City Clubhouse and Qatar’s first Passivhaus – a voluntary green building standard – the QGBC-developed project Baytna. The team believes the difference in facilities management and operations between these buildings will be reflected in their performance.

News of the study came just days after Qatar General Electricity and Water Corp announced that all new buildings in Qatar must install thermal insulators for walls to make them more energy efficient before their designs will be approved. The drive in Qatar is set to open up avenues for businesses, if the experience of the United Arab Emirates, which pre-empted Qatar with the establishment of its own green building council, is anything to go by. Gary Seabrook, who heads the UAE branch of thermal insulation company Caparol, said in February that the country’s thermal insulation market was growing at a rate of 20 percent per year because of the government’s mandatory building efficiency codes and new green testing and certification process.

Qatar’s move shows the increasing emphasis on green buildings in the region.

The need for thermal insulation may sound unusual for Qatar, but well insulated buildings keep cool air inside and warm air outside and vice-versa.

All new buildings in Qatar must install thermal insulators for walls to increase energy efficiency.

A study on efficiency in green buildings is being conducted by a group of Doha-based experts on Passivhaus, Qatar’s first sustainable building project (pictured) as well as RasGas headquarters and the Education City clubhouse.

Power Generation

Energy project costs set to climb in region Energy project costs are on the up, just at the time when the region’s requirement for investment is set to outpace GDP growth.

The cost of the average energy project in Qatar and across the six Gulf Cooperation Council (GCC) countries is expected to increase by around 25 percent over the next four years, a regional banking institution has warned.

According to the Arab Petroleum Investment Corp (APICORP), the cost inflation will be driven by three factors: • The region’s need to increase focus on nationally important, large-scale projects, which is particularly the case in Qatar as the government rolls out the giant infrastructure programme needed to host the 2022 soccer World Cup. • The rising price of engineering, procurement and construction and its components, which include material costs and contractors’ margins.

• Sustained elevated risk premiums.

“The global credit crisis has forced an up-pricing of risk,” APICORP stated in the study Review of MENA Energy Investment – Supporting the Transition. “We should expect project risk premiums to remain relatively high,” it added. “The increase in costs will come at a time when investment in power generation capacity across the region will need to grow at a substantially higher rate than that at which gross domestic product (GDP) is likely to increase.“To catch up with unmet potential demand, mediumterm [power generation] capacity growth...is expected to be much higher than that of economic output: 7.8 percent for the period 2013-17 against 4.5 percent for gross domestic product (GDP),” the study also stated.

The publication of the study coincided with the opening of the PowerGen and WaterWorld conference and exhibition, held in Doha in February. At the conference calls went up for the GCC countries to invest more money into the development of renewable energy sources in order to The Edge | 29

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meet the rising electricity demand.

“In view of the demand-supply gap and abundant availability of sunlight as a resource in the GCC, more emphasis needs to be placed on solar power as a viable energy source to meet emerging needs,” said Doha conference director Debbie Stanford-Kristiansen of PennWell Corporation Middle East. “In order to cater to peak loads, GCC Governments need to implement new projects to mitigate ageing power infrastructure and support new diversification plans.”

Stanford-Kristiansen added that rising oil and gas prices over the past year combined with increasing domestic power requirements were prompting GCC governments to increase investments in the power and water sector, as well as secure alternative sources of energy.

The steady long-term increase in oil and gas prices is good news for Doha, given the likely climb in costs for power generation projects pointed out by APICORP. Qatar’s primary export by a comfortable margin is liquefied natural gas (LNG), and any boost in income means that funds can be channelled into power generation – although the trend may not continue for long, with more global LNG production plants coming on line later this decade.

2022 preparations will require Doha to put in place some large-scale projects – and it is such projects that APICORP warns have the greatest exposure to rising costs. “Large-scale projects tend to incur significant delays and cost overruns,” APICORP added.

Water Security

Gulf-wide renewablepowered desalination

opportunities for water technology companies.

Since then Abu Dhabi-based renewable energy company Masdar has unveiled a desalination plant programme that could present an opportunity for Qatar water technology companies.

Masdar will ask industrial players across the Middle East to submit plans to pilot in-house desalination technologies.

The selected partnerships will be cofinanced by Masdar, potentially opening up funding channels to Qatar firms. “The program will bridge the gap between promising desalination technologies, which are being developed in universities and research centres worldwide, and large-scale industrial applications powered by renewable energy,” Masdar released in a statement.

Seawater desalination requires about 10 times more energy than surface freshwater production, and costs are projected to substantially increase as demand grows and fossil-fuel costs rise. International Desalination Association president Corrado Sommariva said the programme would provide an opportunity “for scaleup of technologies that address water access, while also having economic, social and environmental benefits”.

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LNG Exports

Qatar considers Hungarian gas demand Qatar will aim to extend its reach into the southeastern European liquefied natural gas (LNG) market after holding talks at the end of January in Doha with officials from Hungary.

The European nation is landlocked, but shares a border to its west with Croatia, a country that later this year is expected to present the results of a major feasibility study into the building of an LNG terminal on the Adriatic coast. This would allow Qatari LNG tankers to dock at the edge of the bourgeoning market having passed through the Suez Canal, opening up a swathe of potential demand for gas.

Energy minister Mohammed bin Saleh Al Sada signed a memorandum of understanding “on cooperation in the field of energy” between Qatar and Hungary, according to a Qatar government statement.

Countries across southeast Europe are looking to diversify their sources of natural gas supply, having been heavily reliant on imports of Russian gas for years. Al Sada met with Turkish officials as recently as December to discuss supplying Turkey, Greece and Bulgaria with LNG via a planned Turkish import terminal.

The factor by which seawater desalination requires in energy to deliver the same volume as fresh water production.

A major programme has been launched in the Middle East to tackle the region’s shortage of potable water through the development of large-scale desalination plants powered by renewable energy.

As reported last month in The Edge, Qatar was one of four Middle East and North Africa countries listed by consultancy Frost & Sullivan as hosting growing business 30 | The Edge

Sultan Ahmed Al Jaber, chief executive officer of the Abu Dhabi Future Energy Company (MASDAR), speaks during the World Future Energy Summit at the Abu Dhabi National Exhibition Centre, January 15, 2013.

Contents: Importance of property management 31 .

Increasing scarcity of affordable housing in Doha 32 . Cost management in Qatar’s construction boom 33 . QPM partners with IQPC for construction Qatar conference 34. Immediate maintenance or demolishment of old buildings 34.

real estate & construction

Importance of property management Karl Townsend explains the benefits of property management and why it is a new concept in Qatar.

B

y taking good care of our personal possessions, we hope they will give us longer service. I am thinking of your car, home and even your health.

Property management is simply the care and consideration extended to your property investments, but it covers a myriad of aspects. As I look around Qatar, it is clear this is a new concept to many property owners, which is not surprising

given its rapid development. Why then is property management so important?

Property management is a wide-ranging discipline covering the operation, control and supervision of real estate generally. The term ‘management’ suggests a need for care, monitoring and accountability given to the property during its useful life.

The physical asset aside, it also involves the processes, systems and manpower

required to manage the property, including the acquisition, control, accountability, responsibility, maintenance and its use by third parties.

Whatever the size of your property portfolio, it is important that the asset is physically maintained and kept in good order. Deterioration will have financial consequences that the owner would be well advised to avoid. Maintenance The Edge | 31

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Property management is a wide-ranging discipline covering the operation, control and supervision of real estate generally. is not just responding to a defect but planned preventative maintenance (PPM) is required. This ensures the property or equipment is inspected and maintained on a regular basis, reducing inconvenient and costly breakdowns likely to upset tenants.

Seldom do defects improve over time, the chances are you will pay more if the defect has been ignored. With PPM, the costs will be budgeted and the works programmed to minimise disruption. In short, the works will be undertaken in a controlled and coordinated manner and not under emergency conditions because a water pipe has burst or there has been a power failure.

Consequences of neglect are serious.

Prospective tenants will often decide against taking a lease if the property is in poor condition, giving rise to an extended void period. Its physical condition will adversely affect rental values and negatively impact on the capital value of your asset.

If the property is occupied, building deterioration will create an unsatisfying environment for your tenant to live or work in. This can lead to an uncomfortable relationship between owner and tenant.

Remember your tenant is there to enjoy the property for a specific purpose for which he/she is paying a rent. If serious enough, it might even result in the tenant deciding to vacate the property leaving the owner having to remarket the property.

Clearly, this is not desirable to either party.

Without tenants, there is no rental income derived from the asset. It is therefore in the owner’s best interests to keep the tenant satisfied with the product and service he 32 | The Edge

receives. Adopting established property management principles will ensure building policies are fair to all, while satisfying the long-term interests of the owner. It is critical that these are enforced responsibly.

Policies may include tenant selection procedures, approach to rent collection, arrears and evictions, operating procedures of the building, negotiation of lettings, regular tenant liaison and administering the terms of any leases granted.

With careful management of the property and by maintaining regular dialogue with the tenants, the property manager will be able to understand the tenant’s needs.

This will allow him to recognise potential issues before they surface and report more accurately to the owner. In summary, property management is time consuming and given its importance is best left to those qualified in this professional discipline.

Appointing chartered surveyors to manage your assets will allow the owner to maintain an arm’s length relationship, avoiding issues of liability and removing the hassle factor associated with management. In turn, you, the property owner, will reap the reward from the income that is generated while knowing your portfolio is in safe hands.

Karl Townsend is head of property management of Asteco Qatar.

Residential Property

Increasing scarcity of affordable housing in Doha

Aziz Sharif discusses the reasons why expatriates are paying a higher amount on rent today.

According to the CIA Fact Book website, 2012 had the highest population growth in the world – combined with a consumer price index where rent accounts for 32.2 percent of the basket, so you can see why price sensitivities should be highly elastic – meaning as rent accounts for a higher portion of income, people would naturally seek to minimise it to save more.

It is true that people will pay what they must to have a place in which to live, but affordable housing is fast becoming a scarce commodity in Qatar. Expatriates are spending a higher amount on rent in proportion to their income than in the previous decades. I personally remember when you could rent a decent villa for under QR5000 in 2003 and today it is closer to QR12,000. That is a 240 percent increase in price. By contrast, the inflation rate from 2006 to 2012 is closer to 4.8 percent per annum based on Qatar Statistics Authority (QSA) figures. The

Aziz Sharif, managing partner of Mannzili says that the influx of people employed to execute the various large-scale infrastructure projects lead by the World Cup and the National 2030 Vision has resulted in the affordable housing segment becoming overwhelmed.

real estate & construction | sectors

QSA has reported that the population of Qatar reached 1.9 million this January.

That is three years ahead of the QSA’s projections, which had the population reaching these levels in 2016. The influx of people employed to execute the various large-scale infrastructure projects lead by the World Cup and the National 2030 Vision has resulted in the affordable housing segment becoming overwhelmed.

Besides the inflationary effects of this condition, actions taken immediately will require a substantial amount of time to bear fruit. The government has taken actions to lead the development of initiative in areas such as Abu Humour and Bu Sidra. Quasi-governmental entities like Barwa Real Estate have developed projects such as Barwa City and Barwa Village. Unfortunately, this is not enough. The basis of such projects were planned with the forecast of Qatar’s population growing at rate at which the population would reach 1.9 million by 2016 and not early 2013.

There are a number of economic issues that are currently being experienced which have emerged due to this under supply. Housing supply constraints will inevitably lead to increasing labour costs, project cost overruns and immense inflationary pressure.

Conversely, an increase in the supply of affordable housing would have a number of benefits. Outside of the obvious, the retail and hospitality ramp up to the World Cup would enjoy increased stability.

What could be possible solutions to this seemingly daunting problem?

Increasing the number of projects similar to Barwa City must become more of a priority. However, the private sector must also be incentivised to deliver properties aimed at this price point by opening up the market to foreign ownership.

The potential of foreign ownership to develop this segment of the market is often underestimated. This is evidenced by developments such as The PearlQatar; are based on the belief that well paid expatriates would be willing to pay a premium for luxury property by sea. I believe that the majority of expatriates willing to invest in property in Qatar have been overlooked. Although the premiums would not be same, property developers could make their returns while also rectifying a serious issue brought about by the lack of affordable housing.

In 2003 the average monthly rent for a decent villa was under QR5000, today it is nearly QR12,000.

Quantity Surveying

Cost management in Qatar’s construction boom Simon Trafford highlights the shift of quantity surveying to cost management in today’s construction industry.

Cost managers have their roots in quantity surveying as we are trained quantity surveyors, the big difference is how we use our training that makes us cost managers, and what cost managers do is what makes the difference.

Without doubt, the United Kingdom (UK) is at the forefront of the profession’s development and innovation, where we are viewed as key members of the team on major projects for how we can to influence events – indeed, such has been the development of the profession over recent years that the term quantity surveyor is now seldom used, with cost manager now the nomenclature of choice.

4.8%

The average percentage inflation rate per year since 2006 to 2012 according to QSA.

Aziz Sharif is managing partner of Mannzili based in Doha, Qatar.

In Qatar, the cost manager’s services sits under the remit of a lead consultant or designer, clipping the cost manager of his independence.

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There is a reason for this shift in terminology, and that is that after five to seven years of studying for a profession-specific degree and a professional qualification (MRICS – Member of the Royal Institution of Chartered Surveyors), we emerge much more than simply ‘brick counters’ or ‘bill bashers’ rather as construction commercial experts.

Engaging the full cost management service independently and directly to the client and building owner allows us to advise on all aspects of the commercial and contractual efficiency of the development. Whether advising on the net and gross floor ratios (how to increase more rental or sales area); on floor to wall ratios (ensuring to not build too much external wall in relation to the required gross floor area); or reviewing specifications to drive out unnecessary cost; devising procurement strategies to optimise both cost and time aspirations. The cost manager is focused on driving the project to be as efficient as possible.

In Qatar, the quantity surveyor’s services sit under the remit of a lead consultant or designer therefore clipping the cost manager of his independence – a much valued attribute. As such, the quantity surveyor’s service is price-driven to a set of measured deliverables. This arrangement is at odds with our training and our projects, and instead relegates us to providing a reactive service that reports on completed designs with no opportunity to add value as a cost manager would.

With the construction of the vast oil and gas trains and associated infrastructure one can easily appreciate how build costs would take a back seat to time and quality in the race to commence production and start exporting high-value commodities, for which there is a seemingly insatiable global demand.

However, Qatar today is commissioning buildings with prudent budgets and big aspirations that need to perform commercially – having an independent view on commercial and contractual considerations, setting realistic budgets and programmes, and being able to drive through efficiencies to optimise value for money has never been more important than it is today.

Simon Trafford is the director of Quantax Qatar.

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Construction Event

QPM partners with IQPC for construction Qatar conference Qatar Project Management (QPM), one of the region’s premier project management companies, and the first Qatari firm in the field announced recently its partnership with International Quality and Productivity Center (IQPC) for the upcoming HSE in Construction Qatar conference on 11 March, 2013.The Ministry of Municipality and Urban Planning, and Public Works Authority Ashghal will endorse the event.

The conference will explore the main challenges in HSE within the construction industry, and this is the prime reason behind QPM’s decision to partner with IQPC. The ultimate goal of the event is to aid the delivery of projects safely, and in an environmentally sympathetic fashion to meet the highest expectations through effective technology and people management. ‘HSE in Construction’ will discuss the health and safety requirements, standards and specifications, their implications

on projects and how to develop these strands into a successful overall HSE programme.

Ministry Announcement

Immediate maintenance or demolition of old buildings The Central Municipal Council (CMC) recently called on the Ministry of Municipality and Urban Planning to prepare a list of all the buildings in Qatar that require immediate maintenance or need to be demolished. Once the list is ready, it will be forwarded to the demolition and maintenance committee at the Ministry so that it can take action against such buildings. Moreover, the CMC also proposed to issue unified guidelines for maintenance of buildings that will be helpful to property owners and the municipalities implementing the decision of the maintenance and demolition committee.

The Central Municipal Council has called for a list of all buildings in Qatar that require maintenance or need to be demolished.

The delivery of large construction projects in a safer manner will be a key topic at the HSE conference.

sector name | banner heading

Contents: A hit or miss for BlackBerry? 35. eLearning to see significant growth in Qatar 37. How the Cloud and big data are transforming business intelligence 37. Solving Qatar’s traffic problem 39.

tech & communications

Thorston Heins, CEO of BlackBerry at the BB Z 10 launch, since taking over in January 2012 has implemented restructuring programmes by cutting jobs and rebranding the organisation in an attempt to restore the phone maker to its former position. (Image courtesy BlackBerry)

A hit or miss for BlackBerry?

For years the word smartphone was synonymous with BlackBerry devices, a darling of both the enterprise and consumer markets. But it has seen steady decline over the recent years, with revenues down seven percent from last year, writes Shehan Mashood.

E

ver since the Apple iPhone, and Android enabled devices entered the market, they have relentlessly cut into the smartphone market share BlackBerry once dominated. Together the two shared 90 percent of smartphone sales in 2012 according to Strategy Analytics, a market research firm. So when

the new BlackBerry Z 10 (BB10), after much delay was launched worldwide, and not long after - early February - in Qatar, the question became, would this second chance redeem BlackBerry? The new BB10 is without a doubt a solid smartphone, and a vast improvement over its previous foray into touch screen hardware. Both The Edge | 35

sectors | technology & communications

Smartphone usage in Qatar

36 | The Edge

77%

32% Email

Instant Messaging

Social Networking

27%

49%

54%

58%

66%

75%

its hardware and operating system have been received well by industry experts.

The developers have astutely catered to enterprise customers, with features such as BlackBerry Balance that secures and separates work content from the personal. In an attempt to court Middle Eastern customers, Blackberry had worked with developers across the region to have locally relevant applications on launch. At the Qatar launch numerous local and regional developers presented their native versions of their applications.

Qatar Airways, Al Jazeera (both in English and Arabic) and Anghami a digital music app featuring arabic music were among some of the showcased. However, key communications applications such as Skype and WhatsApp are as yet missing from the new operating system.

But a solid smartphone alone does not necessarily translate into a profitable venture. The litmus test for BlackBerry will be whether they can wrestle away users from the other major smartphone makers. Indeed, it has been a long time since BlackBerry released a new device, but there have been numerous missteps including the fact that the new BB10 will only launch in United States markets in mid-March or later. This coincides with the new Samsung Galaxy that is also set to be released in March, which has lead to a downward revision of predicted BlackBerry sales figures.

However, it is noteworthy to point out that BlackBerry still has around 80 million subscribers worldwide, and while it has steadily lost market share in other parts of the world, it is still popular in the Middle East. A recent survey by YouGov, an online market research firm showed eight percent of respondents were extremely likely to purchase the new phone, while 30 percent said they were somewhat likely to do so. Sandeep Saihgal, managing director for BlackBerry in the Middle East was quoted early last year as saying the company has seen year-on-year growth of 119 percent.

Whether BlackBerry will regain its market share in the world remains to be seen, but the Middle East has shown to be one of its primary markets and is likely to stay so.

Activities Performed on the Internet (Smartphone Users versus Basic Mobile Phone Users)

IP Telephony

Smartphone Users Who Use Internet Other Mobile Users Who Use Internet

69% 1.65

Smartphone penetration in Qatar

Number of Smartphone average per household

on

Penetration of Smartphones and Tablet Computers among Mainstream Individuals by Gender

56%

Smartphones

51% 8%

Tablet Computers

11% Men

Women

Source: Qatar’s ICT Landscape 2013: Households and Individuals, ictQatar

technology & communications | sectors

Education

Business Intelligence

eLearning to How the Cloud and big data see significant are transforming business growth in intelligence Qatar The Edge spoke exclusively with Kevin Ashby, applications platform marketing manager for Microsoft in the Gulf region about how firms can leverage cloud computing and big data to augment business decisions.

What sets Windows Azure apart from other cloud computing platforms?

eLearning applications are not limited to schools but are increasingly being used by business professionals to study part-time.

A rise in academic digitisation programmes, and the increase of enrolment in online higher education and ready adoption of eLearning in the MENA region have all contributed to it becoming a dynamic leader in the IT market. eLearning revenues for the Middle East reached US$378 million (QR1.37 billion) in 2011, while the region’s growth rate in eLearning is at 8.2 percent. Revenues are estimated to reach US$560 million (QR2.04 billion) by 2016, according to an Ambient Insight report. The report showcases the growing popularity of eLearning as the preferred avenue for education by both students and teachers alike.

According to 3P Learning, a global online learning company, it is not just students in the MENA region who benefit from the many strengths of eLearning, but teachers as well. The company recently unveiled on of its most popular programmes in Arabic, one that attempts to increase student engagement and improve mathematical knowledge. Apart from being able to control the pace at which students work, it allows teachers to set the relevant curriculum for students, tailor-making a course to suit their needs.

However, it is important to note that eLearning is not limited to schools but is also used in professional programmes. ictQatar for example have developed a national eLearning portal that allows for organisations in the country to offer virtual learning options for both citizens and residents in the country.

So there is a move to the cloud discussion, or build for the cloud discussion. Azure is a platform where you can take your existing Microsoft application or indeed from your Linux platforms, and you can move into the cloud relatively quickly. You can move from a private cloud solution in your data centre to a public cloud solution relatively quickly.

Because we are able to manage that from our existing centre, from a client perspective you have something that is very easy for you to be able to decide where you want to run your virtual machine today.

Through Azure you can look at designing applications to run within a cloud based architecture. If there is an application that needs two people today and 10,000 people tomorrow, and 30 million the day after that, that can be designed into your platform.

Could you talk about how cloud, mobile computing and even social have contributed to growth of big data?

Big data is an interesting subject because it depends on how people approach it, and what they are trying to get out of going in the big data direction. Big data is a solution waiting for questions to be asked of it. So big data is really dealing in structured and

Platforms such as Windows Azure give customers the flexibility to either move or build for the cloud.

“In the past it has been difficult to go down the big data route, now we have all these approaches, making it much easier and quicker.”

– Kevin Ashby, applications platform marketing, Microsoft.

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technology & communications | sectors

unstructured data, and what we try and do from a Microsoft perspective is to make that the easiest possible to setup in terms of the infrastructure for big data in the first place.

On the other side of it you have to make it easy for people to look at information inside it, interpret it and present it in a sensible way. You look at the business intelligence (BI) tools that we have, whether that is Excel, you can build using the Microsoft tools by combining structured data and unstructured data. You then have the ability to ask lots of questions of the information that you are getting. You also need to think about where that information coming from.

In the past there was too much information coming in. Now we have the ability to set up the method in which you can capture this data and analyse it. What this means is people can explore what they are seeing.

Do firms in the Middle East understand the importance and usefulness of big data?

If you are looking at business intelligence (BI), if you spend a lot of time doing BI as part of your job then you will be looking at what big data means to you. Then you are getting into the area of how do I do something about this – in the past it has been quite difficult. You needed a lot of knowledge to be able to go down the big data route. Now we have got all these easy to use approaches, making it much easier and quicker. When I go and talk to companies in the region, I see a lot of interest in this. So I would say yes, there is a lot of potential in the region to really take advantage of this.

The region is ready for this.

What business sectors are the most advanced or interested in adopting these trends?

Retail, local government and the financial industry definitely. I would say the hospitality industry would be an interesting area to focus it at. We have seen interesting solutions that have happened around big data.

With new businesses cases coming in, will it become easier for businesses to trust their findings in the data?

As long as you build your data from a sensible way to start with then you will trust the information that comes back. And how can I get to an answer that would have taken weeks or days to achieve before, which I can now do in hours.

Have you got

the edge factor?

HE Sheikh Abdul Rahman bin Khalifa Al Thani, minister of Municipality and Urban Planning noted about the Masarak system that, “we are proud of the fact that the system is fully conceived, designed, developed and optimised in Qatar.”

Public services

Solving Qatar’s traffic problem The Qatar Mobility Innovations Center (QMIC) in partnership with Ministry of Municipality and Urban Planning (MMUP) announced recently a suite of applications and services that target three market segments: intelligent transport, road safety, and logistics management.

HE Sheikh Abdul Rahman bin Khalifa Al Thani, minister of Municipality and Urban Planning (MMUP) said, “We strongly believe that the Masarak System and Services will play a significant role in supporting Qatar’s strategic plans in road safety.” Using principles in engineering design, datamining and analysis, the platform gathers real-time data from various sources like floating car data (GPS devices), road sensors, smartphones, and then passes the raw data through the platform to produce useful realtime traffic and congestion information.

In addition, it will provide a comprehensive set of tools for traffic studies, road network planning, and a new family of locally-made intelligent road sensors.

Qatar is currently, and for the next few years will be going through a vast expansion with major infrastructure build up, new roads, new metro system, stadiums, and other structures. Such expansion is going to place huge demand on the road network, on planning activities, logistics services, and on road safety.

As the fastest growing business magazine title in Qatar, The Edge seeks proactive Sales Managers and Executives.

Reporting directly to Head of Business Sales, the successful candidates will develop new advertising revenues, build client relationships and help grow The Edge’s exposure in the market.

The right applicant will be a tenacious self-starter able to find, develop and close their own business revenue and consistently exceed their sales targets. They will also need to be able to work independently, but also fit within a young and dynamic sales team.

Requirements: • A self-starter with excellent organisational skills preferred • Must be fluent in both written and spoken English • Previous magazine, newswire or newspaper experience is not necessary • Can meet multiple deadlines in a fast-paced environment • Has a passion for business and marketing • Is familiar with the online medium but not necessary as training is provided • Minimum of one-year experience of sales is must • Salary range will depend on experience

Please send your CV to: j.toon@firefly-me.com

The Edge | 39

Stay informed about business in Qatar Online.

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Q a t a r ’s B u s i n e s s M a g a z i n e

country focus | philippines

Qatar and the Philippines: Balancing trade with workers rights Qatar is the third largest destination of Filipino workers in the Gulf region following the UAE and Saudi Arabia. The Edge discusses with Crescente R. Relacion, Philippine ambassador to Doha, the bilateral relationship between both nations and the current issues in regards to the domestic workers minimum wage. Erika WidĂŠn reports.

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philippines | country focus

T

he Republic of the Philippines is a sovereign state in Southeast Asia in the western Pacific Ocean. The Philippines has a population of more than 92 million citizens, with an additional 12 million living overseas. In the Gulf Cooperation Council (GCC) there are approximately 1.8 million Filipino residents, Saudi Arabia hosts the highest number of nearly one million, the United Arab Emirates (UAE) 500,000 and Qatar 200,000.

In 2012, Qatar ranked 21st as the Philippines’ trading partner, 41st as an export market, and 18th as an import supplier. Qatar’s main imports from the Philippines include ignition wiring sets, food preparations, pasta, sauces, bread, pastry, cakes, fruits and biscuits. The Philippines main imports from Qatar include petroleum oils, butanes, propane, urea and liquefied petroleum gases.

Diplomatic relations between Qatar and Philippines were established in 1981.

For more than a decade, the Philippine embassy in the UAE covered Qatar until 1992 when the Philippine government established an embassy in Doha. In return, the Qatari government opened an embassy in Manila in 1994.

In April 2012, His Highness Sheikh Hamad bin Khalifa Al Thani, the Emir visited the Philippines for the first time, and met with President Aquino and key cabinet members to discuss methods to improve relations in the areas of labour, tourism, agriculture, trade and investment. According to the Philippine embassy records, agreements were signed on tourism, agricultural and fisheries cooperation. Also, it was granted to establish in Qatar and in the Philippines a business council to enhance trade, investments and business opportunities. In addition a memorandum of understanding (MOU) was signed between the Department of Trade and Industry and Qatar Holdings to study further collaboration in potential investments.

According to Crescente R. Relacion, the ambassador to Qatar, following the Emir’s visit in 2012 there has been a series of exchanges between the two countries. In October 2012, the Philippines conducted a non deal roadshow in Qatar headed by the finance secretary, Cesar Purisima, accompanied by Bangko Sentral ng Pilipinas (Philippine Central Bank), assistant governor Cyd Amador and other officials.

“They met with several Qatari government officials and private sector officials aimed at updating the Qatari government on

PHILIPPINES at a glance Government: The Republic of the Philippines Capital: Manila Population: More than 92 million, with an additional 12 million living overseas GDP: US$224.754 billion (QR818,104 billion) as of 2011.

Capital: Manila

Crescente R. Relacion, Philippine ambassador to Doha explains to The Edge, the Philippine government decision to ask GCC countries to comply with the minimum wage for household maids.

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country focus | philippines

the sustained growing strength of the Philippine economy in recent years and as a follow up to the issues discussed during the state visit of the Qatari Emir,” continues Relacion, “including a follow up to the US$1 billion (QR3.64 billion) joint investment fund, which was agreed upon during the 2008 state visit to Doha of former president Gloria Arroyo.”

Consequently, a MOU was signed to appoint three representatives from both sides to discuss further the mechanisms of how to proceed with the US$1 billion (QR3.64 billion) joint investment fund. It was agreed that Qatar would contribute 85 percent of the fund, and the Philippine’s private sector will subsidise the remaining 15 percent.

“The benefits of the joint investment fund is to increase investments from both sides, and for Qataris to invest in the Philippines, mainly in tourism, agriculture, mining and real estate,” says Relacion.

On the other hand, Relacion adds

that despite Qatar’s and the Philippines’ positive bilateral relationship, there are some issues that need to be clarified, in particular the domestic workers minimum wage. In 2007, the Philippine government increased the minimum age of domestic workers applying to work abroad from 21 years of age to 23, and with an entry salary increase from US$200 (QR728) to US$400 (QR1456) a month.

Relacion explains that the domestic workers job contracts are processed through the Philippine Overseas Employment Administration (POEA), which is a government agency mandated to process, approve and deploy Filipino workers overseas. The POEA has been approving domestic workers contracts which abide by the law. Currently there are 30,000 Filipino domestic workers in Qatar, however, Relacion says to The Edge, “Some unscrupulous Philippine recruitment agencies in cahoots with recruitment

agencies in Qatar, change the salary from US$400 (QR1456) to US$200 (QR728), and this has been going for a number of years. When the domestic workers arrive to Qatar what these unscrupulous agencies do is make them sign another contract.

They have been deceived from the beginning. The unscrupulous practice of substituting contracts of domestic workers has to be stopped.”

Recently, the Philippine government and POEA have asked the GCC to comply by the law. Meanwhile, in the Philippines many recruitment agencies’ licences have been removed for non-compliance with the requirements.

“Enough is enough, and we are implementing this strictly. Qatar is a free market; the embassy will respect the choice of households in Qatar if they employ Filipino [domestic workers] or will opt for those from other countries,” concludes Relacion.

BUSINESS TRAVEL INSIDER: Manila The Philippines’ capital city is frantic, fun and has hidden historic treasures, writes victoria Scott.

GETTING THERE: Qatar Airways (www.qatarairways.com) flies to Manila twice daily. An economy return fare costs from QR3460 in February, or QR8130 in business class. The flight time is around nine hours.

Currency: The Philippine Peso. PHP1 = QR0.9 (exchange rate as of January 2013) WHERE To STAY: Pan Pacific Manila (www.panpacific.com/en/manila) Just a short journey from the airport but still within easy reach of the city’s business centres and its cultural highlights, this luxurious hotel offers fabulous views and butler service, marking it out as one of the best places to stay in the city.

A standard room costs from PHP7100 per night in February.

This includes Internet and 24-hour butler service.

WHERE To PLAY: It is a buffet, but not as you know it. Spiral (www.sofitelmanila. com/en/spiral) promises to change your opinion of buffets forever. Offering live cooking from 21 different stations, this

44 | The Edge

popular restaurant offers high quality, fresh food to suit every taste on an all you can eat basis.

SPLASH YoUR CASH: Manila’s locals love to shop. You will find three of the world’s largest shopping malls in the city – the Mall of Asia, SM North EDSA and SM Megamall. If you are looking for something more unusual, however, check out the Greenhills shopping centre in San Juan, where among stalls piled high with cheap gear, you will find some genuine gems.

CULTURE vULTURE: The walled city of Intramuros – which means ‘within the walls’ in Latin – is Manila’s oldest district. Although seriously damaged during World War II, the area still boasts cobbled streets and elegant colonial architecture dating back to the 16th century.

INSIDER ToP TIPS: Manila is well known for its beautiful sunsets. Head to Roxas Boulevard, the road which runs along the shores of Manila Bay, for a clear view.

Landmark mall Tel: 44 86 4767 - Villagio mall Tel: 44 17 8132 Bahrain - Qatar - Saudi Arabia - UAE - Oman - Kuwait - Jordan - Lebanon www.maya-la-chocolaterie.com @maya_choco /mayalachocolaterie @mayalachocolaterie

FAMILY values

Taking Qatar’s family businesses into the next era For decades family run businesses in Qatar have played a vital role in the nation’s economy, and certainly a major part of the private sector. Many of them began as entrepreneurs just over half a century ago, and built their companies into large diversified conglomerates involved in everything from healthcare to construction. The future success of family businesses is however not guaranteed, and today they face challenges on numerous fronts, writes Shehan Mashood.

cover story | family business

A

report released in January this year, Family Matters – Governance practices in GCC family firms by PwC and The Pearl Initiative, shows that most Gulf family businesses are going through a generational change.

As a new generation takes over from the founders, unresolved family issues, and unclear succession plans leading to family feuds could easily end in the fracturing of large family businesses or worse, reveals Amin Nasser, a partner at PricewaterhouseCoopers in Dubai, who advises family businesses in the Middle East on issues such as succession planning and governance. The other issue that family businesses will have to contend with if they are to grow and survive is implementing a long-term strategy that balances both the needs of a modern, accountable business and the family.

A significant number of families are going through a generational change in the next five to 10 years in the region. Whenever this kind of succession occurs, Nasser goes onto explain, there is a huge risk that a family might get fragmented since there are no proper structures in place. “We have seen a number of family feuds,” he says, “although respect for the elder generation has to some extent protected them. These families, when moving to the next generation, need to formalise the relationship between family members and create rules which are fair. They need to create a sustainable and well-structured business if they are to succeed where other families have failed.” According to Nasser, global statistics show that no more than 10 percent of family businesses survive beyond the third generation.

All this is not to say that family businesses are unaware of the importance of these issues. The Family Matters report states that the majority of GCC family firms interviewed considered corporate governance a key issue for the future, however, it is a low priority in comparison to wider operational and commercial concerns and overall profitability.

Family Governance

The driving factors behind family business success has been their conservative approach to doing business and focusing on long-term objectives. They are not under the same pressure from shareholders as listed companies, explains Nasser.

But going forward their success will depend on how they tackle key issues such as succession, remuneration, how future strategy is decided and which members of the family play an active part in the business.

Governance within the family component of the business can often be more complex than the governance of the business itself, says David Dhanoo, the chief legal officer at Qatar Financial Centre (QFC), which in September announced new regulations governing single-family offices for Qatar. These offices are usually set

Shaykh Mohamed bin Faisal Al Thani the vice chairman of Aamal Company tells The Edge, “ever since I was a child I always saw myself as a businessman.” Aamal is one of the many family business in Qatar that will go through a generational change in the next five to 10 years.

48 | The Edge

“The family can no longer directly control every aspect of the operations.”– David Dhanoo, group chief legal officer at QFC

family business | cover story

53%

The percentage of family firms surveyed, that do not have a family constitution or a family governance structure.

Amin Nasser, a partner at PwC, advises family businesses in the Middle East on issues of succession planning and governance, he tells The Edge there is a huge risk whenever families go through a generational change.

up to manage the investments and other financial needs from within their premises of a single wealthy family. A multitude of reasons contribute to the complexity of family governance, Dhanno continues, not the least being the pivotal role played by family dynamics, which are often present across generations.

Having family members control decisions and strategy is not without its advantages points out Dhanoo, with short lines of communication, and low costs, - if families can agree on a vision and strategy - this setup can be very successful. Many companies around the world are run this way.

Nevertheless, the disadvantages are many, explains Dhanoo. The lack of skills and management knowhow, confusion of interests between owners and managers (which can lead to some family members preferring short term gains to long term investment), opaque decision making (which can deter lenders and other investors) and even family feuds could damage or destroy the business.

Family feuds can stem from numerous issues.

“Conflicts in family businesses arise when family members perceive that their needs are not met,” says Nasser. “Conflicts also surface when situations are unclear or not properly understood.” Indeed, he adds, when shareholders that are actively involved in the running of the daily business make decisions, this causes friction between the family (passive

shareholders) who are unaware of how or why decisions are made.

Choosing the future leaders of a family business is a large cause of conflict within families. “One of the prime weaknesses of family as opposed to public ownership of companies,” says Dhanoo, “is the heirs to family companies may take the business for granted, and choose to enjoy their leisure instead of running the business. History is littered with instances of family companies decaying for this reason after a few generations.” Family firms in the Qatar have prospered due to the high economic growth enjoyed by the country, but have also grown harder to manage, not to mention more valuable, so ensuring that the heirs are capable and committed to the business is even more important, points out Dhanoo.

Aamal Company, for example is a highly diversified Qatari conglomerate, and one of the many succesful family run businesses going through a generational change.

They are a publicly listed family firm that has managed to enact and codify good governance practices in their business. Sheikh Mohamed bin Faisal Al Thani, the vice chairman of the company, working alongside his father, has been tapped as next in line to take over as the chairman. He explains that his father, Sheikh Faisal bin Qassim Al Thani is surrounded by highly competent executive management with extensive knowledge of the business’s operational and financial aspects to inform decision making. He also pointed out the central role his father still plays in business decisions telling The Edge, “he has a vision for the future of the company and it is very clear to us, so our roles are to continue the family business for the next generation.”

Imelda Dunlop, executive director at The Pearl Initiative, a non-profit organisation set up to increase transparency and accountability in the Arab world says that, “when you have a patriarch that is a very strong character who has set up the firm with a strong culture from day one, it is enough that he is there distilling that culture through the organisation. But as they move into the second and third generation, it is more complex since there are more family members involved.” Strategic and professional communications across the shareholders The Edge | 49

cover story | family business

David Dhanoo, chief legal officer at QFC, says publicly listed firms are ahead of privately owned family businesses because they have to meet governance requirements of the stock exchange.

and across the family are important for family businesses, if they want to avoid conflict down the line.

There is a recognition that firms need to codify the rules, they need to write them down since it is not easy to have them verbally understood or communicated purely from a complexity point of view, adds Dunlop, adding there is a need for a constitution that sets out the rules clearly for everybody.

Families moving into the next generation need to formalise the relationship between family members and create rules which are fair, “They need to create a sustainable and well-structured business if they are to succeed where other families have failed,” explains Nasser.

If the business needs a board to run the operational side of things, then the family needs a board to run the family, furthers Nasser. The Family Matters report shows that of the companies interviewed, over half of the firms did not have formal rules for family governance in place at all. And around 20 percent are in the process of establishing these structures.

Families can create councils or a shareholders assembly that is detached from the board of directors for the family business. This can provide a forum for family owners to debate issues. “In this way,” he says, “the chances of family conflicts are reduced and it is more likely that the next generation will embrace and grow the business.” The report shows that 50 percent of family firms have clearly defined responsibilities of family shareholders, the board and management. However, 48 percent of them have only partially implemented these practices. The key to averting these crises on the family front is to formalise these issues and agree on a path of action. And have them written into a constitution, so that when a situation arises in the future, there is no disagreement as to what needs to be done.

There is also an urgent need for codifying rules for matters such as which family members work within the firm, or which of them hold the most senior positions. “You need to be thinking through how you best select and develop those with the most talent within the family,” says Dunlop, “and be thinking through who in the family should be sitting on the board as well as who from outside the family should be sitting on the board.”

50 | The Edge

“We have seen a number of family feuds, although respect for the elder generation has to some extent protected these families.” – Amin Nasser, partner at PwC in Dubai

family business | cover story

Corporate governance

According to Dunlop, there is a high degree of awareness within family firms about the importance of corporate governance and the need for dynamic boards.

They want board conversations to be about the business, global challenges, and growth strategy, as opposed to talking about family issues, says Nasser.

The corporate governance structure required by a family business depends on numerous factors, furthers Dhanoo, including the nature of the business, its size and complexity. The number of family generations involved, and whether the business has non-family executives or independent non-executive directors also factor into what kind of structure will work best for a family business.

The modern trend for family run businesses has been to try and reduce the inherent risks in family ownership by introducing more professional management, says Dhanoo. And at the extreme, family companies become publicly listed and are run by full time professional managers. As family firms grow in both size and complexity there is a need for professional managers. The way family firms have adapted to this is by hiring managers who work alongside and answer to the family owners of the business, he says. This allows them to implement modern corporate governance practices while retaining their family identity.

When there are proper corporate governance structures in place, notes Nasser, effective delegation and separation of management from ownership, a well-structured board of directors that includes non-family members can offer professional and objective perspectives, leading family businesses to realise growth and increase shareholder value.

Family firms in Qatar are increasing their understanding of what good corporate governance involves, explains Dhanoo. “In many cases, their businesses are expanding fast, and the family can no longer directly control every aspect of the operations. Families can also see what their competitors – family and publicly owned companies – are doing.”

Publicly listed family businesses are slightly ahead of the curve. As a listed company they have to meet governance requirements laid down by law and the stock exchange they are listed on, says Dhanoo. Additionally they need to meet the criteria of investors of openness, the provision of information, professional management and directors that are qualified to hold places on the board. Capital markets are international, points out Dhanoo, foreign investors or fund managers expect and demand high standards of corporate governance.

Listed family businesses in Qatar are increasingly aware of what is demanded of them, and are evolving accordingly, as will family firms that look to list in the future. According to the report, two thirds of family firms have not raised external capital yet, but 55 percent of them intend to do so in the future.

The degree of concern with which family firms view adopting good corporate governance naturally differs, but the report indicates that awareness has grown and will continue to do so in the future.

Unity of vision

It may be difficult for family members from different generations to agree on a unified vision.

Especially since the older generation are usually more conservative while the younger generation are willing to take more risks, points out Nasser. But, “it is important,” he says, “that each family has a vision for the future and is fully committed to the success of the business.”

“You feel a palpable sense of this being about survival,” says Dunlop. “They know that it is their responsibility to ensure the success of the business now, and over the long term. And this means having to adapt their governance practices in such a way that it can grow across generations.”

Some of Qatar’s leading family businesses

Alfardan Group Darwish Holding Aamal Company Salam International Investment Al Mana and Partners Jaidah Group Nasser bin Khaled and Sons Ghanem Al Thani Holdings Listed in no particluar order

Many family businesses in Qatar have grown from entrepreneurial ventures to large and highly diversified conglomerates, contributing to much of the country’s private sector.

The Edge | 51

Sporting Ambition

Qatar Football Association’s Managing Director of National Teams Mansoor Al Ansari Mansoor Al Ansari’s appointment as managing director of national teams for the Qatar Football Association (QFA) in September 2011, he says, came as a surprise to no one that knew him personally or professionally. His sporting, academic and business credentials made Al Ansari the ideal candidate for the position and indeed his life story when viewed in retrospect contains an air of inevitability that he would one day take up this post. In this exclusive interview, The Edge discusses with Al Ansari his career trajectory and the management challenges and businesses opportunities within Qatar football and sports in general.

business interview | qatar football

“Promoting a healthy lifestyle was part of me being at work because I really do believe that if you do work out and if you eat healthy you do perform better, your productivity levels increase.”

A

part from being a self-confessed lifelong sports enthusiast himself, Mansoor Al Ansari is the son of a Qatari diplomat, HE Mohammed Al Ansari and therefore has travelled to many places in the world and adapted to playing the most popular sports in each. At various times, reveals Al Ansari, he has played basketball, American football, and has been involved in mixed martial arts, body building, and general fitness, to name but a few.

Moreover, 30-year-old Mansoor Al Ansari also comes from a Qatari football pedigree. “My father and my uncle…

Mohammed and Ahmed Al Ansari were the first founders of the Al Arabi Sports Club which is the second eldest football club in Qatar,” he says proudly from behind his desk, backdropped by large windows over looking the immaculate pitches of the QFA, at their dome shaped headquarters at Aspire Zone in Doha. Though his father moved on to become a diplomat, he still followed Qatari football, but his uncle Ahmed, reveals Mansoor represented the national team and has been involved in and lead various entities governing football and general sports in the country, including the QFA, and the Youth and Sports General Authority that preceded the Qatar Olympic Committee.

“Before he went to university,” adds Al Ansari, “my father was also signed in the 1960s as the first General Secretary of the Football Association before being officially affiliated to the Asian Football Confederation in 1962. So you can

Though television coverage and related sponsorship rights have somewhat negated the needs for people to attend local games en masse worlwide, Al Ansari says more can and is being done to increase attendance at Qatar’s local club and league games to match the enthusiastic turnout of fans for their national team. (Image Corbis)

54 | The Edge

imagine the influence of football on me.

My uncle Hamad was a player at Al Rayyan SC, my eldest brother Mishal was also one of the founders of Al Hilal club that turned into Al Kharaitiyat SC afterwards, and my brother-in-law was the head of football division in one of the local clubs the past few years. So I literally sit every day and all the family talks about is football.”

Al Ansari studied at Eastern Washington University in the United States, focusing on business and earning bachelor’s degree, a triple major in general management, human resources management and marketing. “I took every single summer course to make sure that I graduated within four years,” explains Al Ansari, adding that he also remained extremely active in sport and also undertook a number of related courses, including nutrition, physical therapy and personal training for his own interest.

Upon returning to Doha in 2006, seeing a need for Qatari citizens to sign up as their civic duty, Al Ansari joined the Doha Asian Games Organising Committee (DAGOC) as a volunteer, and was assigned to assisting visiting dignitaries.

“They requested a few of the bilingual, multinational people with that sort of experience [and] they gave us a lot of access to places. I was young, I was a fresh graduate and being able to represent and support a government driven initiative…it was a great opportunity,” smiles Al Ansari.

Private sector experience

Once the 2006 Asian Games had been completed, Al Ansari began a career in the Qatari banking sector. He joined the thenrecently launched Masraf Al Rayan, where, he says, he gained financial sector and general business experience in a multitude of ways. “Working in a bank that was newly established, you get a chance to work in every department,” explains Al Ansari. “It was not like working in one division where it is systematic. So I gained experience in HR development, operations and marketing, where I helped with different campaigns and projects.”

Though Al Ansari joined the Masraf Al Rayan’s corporate banking division, within two years he had taken charge of the corporate sales division in the treasury department, while still handling clients in his corporate profile. He then also took over financial institutions and began managing and interacting with international and local financial institutions as well as the government relations, albeit on an unofficial

qatar football | business interview

In this file photo, the Qatar national football team celebrate a goal during the 2014 FIFA World Cup Group E qualifier match between Iran and Qatar in Tehran. Making sure all considerations for the team including sponsorship, travel, logistics and health and fitness fall within Mansoor Al Ansari’s scope of responsibility, leaving the players to focus on one thing: winning matches. (Image Getty Images)

basis. “Officially I was head of corporate desk,” he says. “I was coordinating a lot with all of the internal divisions as well as all of the external subsidiaries, main government relationships, and local and international banks.”

Here he was seen as a positive influence in the office environment. “We went from one staff per division to having over twenty five in each department,” Al Ansari recalls further. “So I used to bring in healthy food like nuts and fruit and vegetables because what everyone would only eat would be chocolates throughout the whole day… just promoting a healthy lifestyle was part of me being at work because I really do believe that if you do work out and if you do eat healthy you do perform better, your productivity levels increase.”

On the personal side, utilising what he had learned in banking of finance and business, Al Ansari has also been a successful entrepreneur in Qatar. He is one of the founders of Entrepreneurs Organization Qatar chapter, which is a nonprofit global organization that assists in entrepreneur development.

“Due to the fact that I love food and my

family is involved in the food and beverage business,” he explains. “I set up a company called Waleema Food Services to help develop and expand our Japanese cuisine that my family owns, Oishi Sushi. Japanese food is healthy, raw food, steamed rice and vegetables. I am also bringing in a healthy fast casual sandwich concept, which I own the franchise rights for. I am in the process of opening that up now, it is just a matter of finding the right location.”

Working in the SME space in the private sector, says Al Ansari, enabled him to hone his business skills, both through experience and various courses. Clearly not one to rely on past educational qualifications, Al Ansari tells The Edge how he continually strives to better himself through knowledge, something he is taking to his current role. “Participating in these and having a hand in these business has added a lot of value,” he furthers, “as I have taken a lot of personal courses and through EO Qatar on self development, on leadership, on teamwork, motivation and so on because you manage people, so that added value to my current position, because I am managing people as well. My private

business just added to that, it educated me a little bit better, it developed me in terms of leadership, in terms of management, coordination, teamwork etcetera.”

Apart from the food and beverage sector, Al Ansari also has interests in real estate as well as a motorcycle business that distributes safety apparel. While he had been exposed to the sector during his tenure in banking, it was with the latter, he says, that he first became familiar to the world of sports business. Sponsoring four riders in the Lusail international tournament explains Al Ansari, enlightened him in this realm, he says. “What that taught me was that I was involved as a team manager, I brought in the mechanics, I was looking for sponsors and set up a sponsorship package for them, I brought in all of the accessories that they needed so all the rider had to think about is getting on the bike and racing only…everything was provided financially, so the team management, team work experience and the physiological management of the riders played a big role. This was of course before joining football.”

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business interview | qatar football

“2022 is where the sports management mentality in Qatar changed.

You had the athletes and then you had business people.That mix in between was missing, which is sport management.”

QFA appointment

Additional ventures aside, Al Ansari is very clear that his position as at the head of the national teams at the Qatar Football Association and the various associated responsibilities it entails is his primary focus. A variety of circumstances, he says, lead him to his current position. As with so many different aspects of Qatar public and private sector activity at present, the country winning the rights to host the FIFA World Cup in 2022 was the catalyst that spurred many changes, the move from banking to full time sports management specifically for Al Ansari.

Many of his ex-colleagues in the banking and general private and public corporate sector explains Al Ansari, were recruited into sport and were pivotal in the success of Qatar’s world cup bid in late 2010. Though the seeds of it were already in place, the bid victory, opines Al Ansari, precipitated a paradigm shift in the country towards sport and particularly the need for people to manage the growth and general logistics, across the board for all disciplines, but especially in football, the country’s most popular sport. “This is where the sports management mentality changed,” explains Al Ansari. “You had the athletes and sports people, and then you had the corporate and business people. That mix in between was kind of missing, which is the sport management.”

Recommended by ex-colleagues and others that knew he was perfect for the

job Al Ansari’s took on a formidable task of managing director of the National Teams Committee at QFA, a position that not only has him overseeing the development and management of every single squad from the top national team, down to schoolboy level, but also assisting in the preparation for the World Cup and a myriad of complex inter-body and inter-sport relationships within Qatar.

“The role that I took, he explains. “Was setting up somewhat of a midterm strategy for two to three years and make sure that the relationships with all counterparties - the league, the clubs, Aspire Zone and others - is clear, and to establish and strengthen these relationships.”

Of course, for the Qatar Football Association itself, all roads lead to 2022 and as the host country automatically qualifies, one of the overriding aims is to produce a national team that will be competitive for the FIFA trophy. The goal, explains Al Ansari, “it is to be able to have a well set up youth development program by taking advantage of all of the stakeholders and counterparties that are available and benefiting from it, to be able to provide the best for the players and make sure that they are getting everything that they need in the clubs and securing the future for them.”

Al Ansari then lists for The Edge the extensive role he and his management team play in facilitating the above. The office of the managing director of the

Many club and league football teams, such as Lekhwiya pictured here scoring a goal during a recent Qatar Stars match, as well as junior players at Aspire, are also members of the Qatar national and Olympic teams, part of Al Ansari’s mandate is to oversee their effective management as athletes and to coordinate match schedules.

(Image Reuters/Corbis)

56 | The Edge

qatar football | business interview

national teams consists firstly of operations department, which is the administrative coordination between their committee and the QFA. “The second division is sponsorship logistics management within the operations department,” furthers Al Ansari. “Which is basically the division that manages the rights of the sponsors. So as an example, Nike as one of our sponsors… this division makes sure that we have sufficient quantities and that the quality is right for the national team so everything you see. We make sure that the Nike brand is based on their rights and the requirements of the contract. In the sense of logistics, sponsorship management is making sure that everything is provided logistically.”

This is followed by general logistics, which covers visas and travel paperwork, transportation, accommodation and all of the other details travelling or teams visiting Qatar for games or training camps require. The second department within the committee is the medical unit, adds Al Ansari. “[This] is in coordination with Aspetar, which is a FIFA recognised medicine medical institution,” he explains, “and provides us through the national sports medicine programme a full division that is dedicated to the national team.”

Apart from all the various medical staff required within this, there is also within the structure a performance department.

The department, explains Al Ansari, has specialists that worked with the likes of David Beckham, Zinedane Zidane and Cristiano Ronaldo at European clubs, and experience and knowledge, to which he is adding continually with one of the most innovative, data-driven performance improving programmes in international sports science “One of their responsibilities,” says Al Ansari proudly, “is to be able to provide all of the data for the performance of all of the league players from all of the clubs to the clubs so that they would be able to manage and have that information to put proper training development for their players, and he does it specifically for the national teams. Ever since the setup up of this department there have been a lot of developments like having the proposal systems effectively implemented and using the analysis of every single game that we have. They brought in GPS and Polar systems that all of the players use so we are able to calculate their movement and heart rate on the field.”

Also in progress is the fourth

department of Al Ansari’s mandate, which is a youth development division. In the past, he explains, the national committee that he leads was only responsible for the first national and Olympic teams. “But now we manage all age groups from the youth all the way to the first team. There is a heavy coordination between us and Aspire Academy,” says Al Ansari, as many players from the latter also play for the national teams.

To round out his departments, Al Ansari describes to The Edge how the remainder of his responsibility encompasses managing the Qatari national and Olympic football teams themselves, including their own team each of management, administration, logistics, technical, medical and performance staff. For his own part, Al Ansari is also enlisted by the Qatari Football League and to Aspire assist in coordinating their annual calendars around that of the national team, and the Qatar 2022 Organising Committee.

“Q2022 plays a big role of course on overlooking anything that represents Qatar so the national team have to be in tune and they know what we do,” he says. “In regards to any sponsorship, in regards to participation, any big event it is always a joint effort with the FA and Q2022 such as Spain Uruguay match.”

“Due to its exposure you have so many entities coming into Qatari sports, whether they are providing supplies for stadiums, seats, lights, branding, events, PR, ticketing etcetera.”

continued on page 85

Mansoor Al Ansari’s position as managing director of Qatar’s national football team, he says, requires a combination of sporting knowledge and business acumen and he adds he is proud to play a role in their success in line with Qatar’s national vision.

The Edge | 57

Ret Ris Qatar’s retail sector in the country is experiencing unprecedented expansion, with a plethora of new malls recently opened or on their way. But how long is this growth sustainable for and will there be enough customers for all these new stores? In this special feature, The Edge investigates.

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ail ing The Edge | 59

special feature | retail malls

R

etail

Sanjay Bhatia, managing director, Alpen Capital Investment Bank (Qatar) LLC says that a large proportion of expatriates and an affluent local population make Qatar a very attractive market, .especially for fashion retailers

60 | The Edge

The ongoing increase in retail space in Qatar is in sharp contrast to the global trend for retail, which is largely in decline, due to e-commerce eroding shop floor market share and prudent consumers being mindful of their spending in an age of austerity. The Edge spoke to a cross-section of retail developers and mall owners in Doha to gauge the overall state and potential in this powerful commercial sector. By Aparajita Mukherjee

I

n recent years, new additions to gross leasable area (GLA) of Qatar’s overall retail space have become common, and announcements of major mall projects often make headlines. This confidence in Qatar’s retail market is backed by figures, with both real estate firm DTZ and Alpen Capital revealing positive research statistics on the sector’s prospects in the country.

DTZ, in its Property Times Q3 2012, states that Qatar provides approximately 300 square metres (m2) of organised retail accommodation per 1000 people which, for perspective, in Europe is 200 m2, and in Dubai 1000 m2, one of the highest in the world. According to DTZ research, “Total organised retail mall stock in Doha increased from 430,000 m2 at the end of 2010 to approximately 510,000 m2 of GLA distributed across ten main shopping malls by the end of 2011. The next mall scheduled to open during Q4 2012 or Q1 2013 is Ezdan Mall in Gharaffa. Total stock of retail mall accommodation is expected to reach 685,000 m2 by the end of 2013 with new malls scheduled to open including Ezdan, Markhiya and Gulf Mall.”

Moreover Al Futtaim Group of the United Arab Emirates has announced plans to open Doha Festival City, its first shopping mall in Qatar, at a cost of QR6 billion and Barwa Commercial Avenue is due to open 640 retail store spaces by 2015.

On the economic viability of the enormous retail expansion in Qatar and whether this growth can really be sustained with uniform tempo, Mark Proudley, associate director, consulting and research, DTZ says, “Qatar is ranked as having the

highest gross domestic product (GDP) per capita in the world by the International Monetary Fund (IMF). Coupled with limited income tax liabilities, consumers in Qatar are considered to have one of the highest levels of disposable incomes in the world, driving strong levels of private consumption and demand for retail space.”

While consumer spending power may be a given with such a wealthy population, unless Qatar’s population and economy continue to grow at levels in excess of five percent per annum, Proudley warns of the risk of oversupply in the organised retail market. “That will generate increased consumer demand and requirements for retail accommodation,” he says. “A developing retail market will not only create additional demand from existing retailers but also attract new brands into entering the market.”

Sanjay Bhatia, managing director, Alpen Capital Investment Bank (Qatar) LLC adds that there are several emerging trends that are catalysing the growth of the Qatar retail market. “A large proportion of expatriates and an affluent local population make Qatar a very attractive market,” he explains, “especially for fashion retailers. Many international brands have established their footprints in the country through partnerships with local companies who have a better understanding of the market.”

Prospects go hand in hand with sustenance, and Bhatia is of the opinion that the momentum of growth in the retail sector can be sustained. “As per our projections, Qatar is likely to register an

retail malls | special feature

Unless Qatar’s population and economy continue to grow at levels in excess of five percent per annum, there is risk of oversupply in the organised retail market.

occupancy issues

However, with at least a dozen shopping malls entering Doha and its neighbouring areas, with news of many more in the offing, are there any fear of excess capacity in the minds of the retail developers?

Some malls, especially those that opened in and around 2008 to 2009, at the peak of the global financial crisis, have had low occupancy and even now some malls in Doha have empty shops with slogans like “exciting new store coming soon” which

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annual average retail sales growth of 6.7 percent until 2016,” he says.

Mall developers like Eamon Kelly, general manager, Lagoona Mall and Olaf Kindt, director, City Center Doha agree with Bhatia’s assessment. Kelly discusses the factors that have contributed to the growth of the retail sector and says that the high GDP per capita, the substantial number of projects and the increase in public sector salaries have injected large amounts of money in the economy. “This has sparked demand in a large number of companies to enter the market, boosting competition,” he says.

Kindt categorises Qatar as an emerging market. “If one keeps in mind the expansion strategy of Qatar,” he emphasises, “its population growth and also the growth of income, the development of the level of retail with new retailers who have not yet come to Doha and who are keen to come – many of whom we have not been able to accommodate for lack of space – the sector is likely to see huge growth in the coming years, much like the construction business.”

SOURCE: DTZ

stay there for months.

Commenting on why retail growth can be accompanied by issues of occupancy Ibrahim Bitar, managing director, Salam Bounian (the parent company of Doha’s The Gate mall) and Feras Owaidat, retail manager, Salam Studio & Stores, explain that some shopping malls came at a juncture when global retail tenants could not take decisions of expansion, mostly because of the global financial crisis. This is a cyclical phenomenon and Bhatia warns

that over-capacity can cause this again.

“While supply of new GLA will be sufficient to meet demand for retail space over the next five years, a part of new additions may witness lower initial occupancy rates.”

For others, like Kelly, it might just be a deliberate strategy. “We are now sitting with at 70 percent occupancy since we aim to bring in certain brands that reflect and meet market demands.”

“Qatar has been fortunate that our leadership has protected the nation from The Edge | 61

special feature | retail malls

Ibrahim Bitar, managing director, Salam Bounian feels that the positive forecasts for retail are based on the assumption that the Qatar population will reach 3.5 to 4 million people in coming years

Many of Qatar’s business groups have diversified into the retail segement in the hopes of high returns.

62 | The Edge

the worst of the financial crisis in 2008 and 2009,” adds Owaidat. “We are confident that the current wave of development is not being carried out arbitrarily, and that a burgeoning retail sector ultimately will form part of Qatar’s National Vision for 2030.”

Any country that embarks on a strategy of growth creates a fear that the growth prospects might slow down beyond the initial phase.

Addressing this issue, Bitar says that Qatar has grown from a population base of 250,000 in the late 1980s to more than 1.8 million recently. “Our positive business forecasts are based on the assumption that the population will touch 3.5 to 4 million,” he says. “With this population base, it all boils down to how each of the malls packages its business philosophy, and includes the elements of success – like ease of location, presence of food and beverage section, brand mix, entertainment facilities, adequate parking, ease of circulation of traffic and the presence of a supermarket – into their respective malls.”

Bitar agrees there could be a degree of customer movement from one mall to another, but that does not, for him, seal the prospects of the sector as a whole. “There

certainly will be migration to and from some malls, but in the end there is enough and more room for retail expansion,” he offers.

For Owaidat, retail in Qatar is developing more rapidly than anywhere in the world but “the rising competition will develop a more sophisticated, richer offering to consumers, compelling us to enhance what we do in every way.”

But the bigger malls have not eroded away the market share of smaller supermarket based entities like Qatar’s Al Meera Mall group. Dr. Saif Said Alsowaidi, vice chairman, Al Meera tells The Edge that the volume of the customers in 2012 compared to 2011 increased significantly. “The bigger malls did not impact much on our customer base,” he says, “and the main reason behind this is the choice of our location, which invariably is within the community. It is also a question of mindset since the customers who like bigger malls are more tuned to spending longer hours in wandering around the mall in addition to shopping, and not those who head to places like Al Meera just to shop for their consumer goods.”

Investment potential

In recent years many of Doha’s business groups have diversified into the retail segment, with hopes of higher returns.

For instance, Ezdan is in the process of launching a new arm – Ezdan Mall Company – which is planning three malls in Gharrafa, Al Wakra and Wukair. This is understandable given the potentially high returns in the sector, but also begs two questions: with the ever-increasing competition, would their investments have better returns in other sectors? And would it be a challenge to find tenants, some of whom already have multiple outlets in Doha?

Bitar is of the view that the investment that retailers have made in the existing outlets has already seen attractive returns by now and most of the retailers are ready to innovate in new shopping outlets. “The Mango, for instance at the Mall, was their first outlet in Qatar though they are doing very well even now. If they now think of opening somewhere in North Road, they would surely need to go there with a new set of stock. A retailer has to be ready to move where the business logic dictates them. If they do not innovate and adapt

retail malls | special feature

to new business realities, they will surely be eaten away by the market share of another retailer.”

He also adds that, “retail has a lot of glamour and prestige attached. There are pricing and stock cycles – which essentially are the risk factors – and many businesses that diversify into retail do so because of the prestige that goes with it. Retail is detail, and only people who know how to manage the retail business do well in this space. So any investor who looks to making quick money in retail goes down a slide.”

In Kelly’s opinion, further retail expansion will only serve to attract more prominent brands from the Far East, Europe and South America as there will be more than enough space to fill. “This will give room for a wider and more varied choice of bands to benefit the Qatari consumer,” he says, whilst Kindt gives a novel angle to the logic of expansion saying that figures from most international chains that are present in City Center reflect that even though

Retail Rising

To attract and retain customers in such a competitive environment, shopping malls weave in entertainment areas to their overall offering.

67% Average retail growth in Qatar until 2016 (as estimated by Alpen Capital Qatar).

MALL FUTURE

The five largest malls due to open in Qatar by 2015 are: • Doha Festival City, Umm Salal (240,000 m2 GLA, 2014/15) • Northgate, North Doha (100,000 m2 GLA, 2015) • Gulf Mall, Gharaffa (80,000 m2 GLA, 2013/14) • Tawar Mall, Duhail (75,000 m2 GLA, 2014) • Marina Mall, Lusail (60,000 m2 GLA, 2015) For Ali Akbar Shaikh Ali, chairman, New World Centre, it is price advantage and not various mall attractions like cinemas that has secured their .market share of the competitive Qatari organised retail sector

Source: DTZ

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special feature | retail malls

they have other outlets now in Doha, their clientele has not dwindled, saying “The other outlets have enabled development of the market since they have found a new set of customers, an instance of market creation and customer absorption.”

Attractions or distractions?

To attract and retain customers in such a competitive environment, shopping malls weave in entertainment areas to their overall offering – some have water parks, others have ice-skating rinks and many have cine complexes, side by side with food and beverage and kids’ zones. Do these additions create an illusion of retail business or are do they contribute actual transactions taking place outside of them?

Lagoona’s Kelly denotes these addons are factors that create what he calls a “wow” factor in the customers’ minds. “By offering better service and amenities like free parking, easy access, professional car wash and valet parking, we create a fivestar shopping experience,” he explains.

“For us as mall developers,” adds City Center’s Kindt, it is extremely important to keep customers in the mall for as long as possible. The longer they stay in the mall, the higher the chances that they will spend, be it in the food & beverage or the fitness or entertainment section – but all these add up to business within the mall.”

However, while larger players include such facilities to woo customers, smaller entities such as Al Meera have tweaked their prices and expanded volumes.

Explaining their strategy, Dr. Alsowaidi says, “Because of the volume of our business, Al Meera was able to negotiate very competitive prices with the supplier, which helped us to keep customers intact.

The suppliers of most goods in Qatar share the same retail stores; and they are keen to offer better prices and services to those who sell more by volume. Al Meera has always attracted the attention of those suppliers, and has negotiated competitive prices from them, passing on the price advantage to our customers.”

For Ali Akbar Shaikh Ali, chairman New World Centre, a successful chain of Qatari malls that now operates across the region and that according to its website “caters to all types of customers…from the budgeted 64 | The Edge

Though some question their validity, attractions such as ice rinks like this one at City Center attract footfall to Qatar’s malls beyond those there strictly for shopping purposes. (Image Corbis)

shoppers to upscale consumers” it is the same price advantage that has secured their market share. “We are not only a onestop shop, but we also offer very affordable prices for our customers which make them come back time and again.” For New World Centre, the growth of population has contributed to 10 to 15 percent of their business growth and they are branching out into Al Khor, with a brand new food and beverage section.

Grassroots threat

To encourage market differentiation and to support the local economy, retail developers have assumed a policy of encouraging traditional Qatari products – abayas, perfumes, men’s robes – by reserving space for them in their malls, like The Gate or City Center. But do these mean that the unorganised retail market in the areas such as Mshereib will be totally eradicated?

“As a local company,” says Salam Bounian’s Bitar, “this was an express policy we had taken to encourage local industries, in addition to promoting international chains. Unorganised retail will always be affected by the growth of organised retail. Traditional business, which does

“Traditional business is bound to be swamped by the development of the sector and lose out.”

- Ibrahim Bitar, managing director, Salam Bounian

retail malls | special feature

685,000 square metres

Total stock of organised retail mall space in Qatar expected by end 2013

In sync with world trends informal traders such as those in Qatar’s souqs and regular storefront establishments being reclaimed for urban development such in Doha’s Mshereib area stand to lose the most from the country’s massive expansion in organised retail but most mall managers are adamant there should always be a place for them in Doha’s retail landscape. (Image Getty Images)

not move with the flow of population and into shopping complexes where the retail business has moved, is bound to be swamped by the development of the sector and lose out. Heritage must match smart business logic and be willing to move in with the times” Lagoona mall’s Kelly is of the view that, “there is a lot of young talent in Doha, and young Qatari designers are growing in numbers and taking off. There are greater opportunities to showcase their collections in the mall alongside international brands, which opens them up to a growing international tourist gaze at the same time.”

Kindt is keen to create a souq ambience within the proposed expansion programme at City Center: “The local retailers are always important, but they take up anywhere between 10 and 30 percent of the total market. In our expansion programme, we are reserving a space for local producers in a souq ambience, which will have only traditional stuff. This will act as a special pull for tourists as well since they would not find these anywhere else outside of the Middle East.”

Owaidat brings a different dimension when he cites the staying power of unorganised retail. “If one looks at similar examples the world over, it’s clear that developers and analysts underestimate the staying power of informal retailers.

There will inevitably be those that do not survive, but we are certain that the souqs and street-front stores that have always been part of Qatar’s shopping scene and a cultural destination will adapt, endure and even thrive, regardless of the growth and change elsewhere.”

The Edge | 65

feature story | aviation

Despite the recent worldwide grounding of Boeing 787 Dreamliners, of which Qatar Airways recently purchased 10, the airline continues to dominate the regional and international aviation industry, though maintaining this position may become more challenging in coming years as regional and international competition increases.

(Image Corbis)

The Middle East is extremely well-placed to act as a central hub for air traffic around the globe, located as it is within five and a half flying hours of a large part of the world’s population, and equidistant between two of the planet’s major financial and commercial areas of North America and Asia and its proximity to the other, Europe. In addition, the region’s three major airlines – Dubai-based Emirates, Abu Dhabi-based Etihad Airways, and Qatar-based Qatar Airways – all benefit from the massive hydrocarbon-sourced wealth of the region. The key questions now, asks Simon Watkins, is there room for three major carriers and hubs so proximal and can all three survive and prosper individually, or will consolidation or even a failure of one occur – and where will Qatar’s aviation industry figure in all of this?

66 | The Edge

aviation | feature story

FoR THE

LoNG HAUL

The Edge takes a look at the current status of the region’s aviation with a focus on competition, cargo and consolidation.

A competitive aviation world

From the monetary perspective alone, while oil and gas revenues remain there will always be financial support in abundance for the three airlines. This has acted as a funding mechanism for the expansion of each over the years, and has also spurred a boom in passenger numbers associated with the growing importance of each country in the global financial and oil and gas industries, not to mention as tourist destinations in their own right.

They are also regarded in many key ways as being tangible extensions of each country’s self-definition, determination and presence on the international stage, much like British Airways does for the United Kingdom (UK) and Qantas does for Australia. In the case of Qatar Airways (QA), chief executive officer (CEO) Akbar Al Baker, highlights precisely this symbiotic relationship. “At Qatar Airways we want to nurture a continuation of the region’s growth, and one of the best ways to accomplish this is to link Doha with as many global gateways as possible,” he says. “Indeed, we believe that by being a global connector, we act as an enabler, a purveyor of economic growth, bringing people and businesses closer together.”

However, from a global aviation industry perspective, the location and rapid growth and presence of all three regional airlines, but especially in recent years

Qatar’s national carrier, has lead to competing companies from other regions complaining that these airlines have an unfair advantage.

Tim Clark, CEO of Emirates, in Dubai, states the argument often promulgated by other airlines that Middle Eastern carriers are often on the receiving end of disproportionately generous state assistance is not only wrong, but in fact it is often the case that other national airlines are much greater beneficiaries of state funding than are Middle Eastern ones.

“Air France, for example, was given three capital injections between 1991 and 1994 from the French government totalling EUR3.8 billion (QR18.5 billion), and just a year later, the German government stepped in to support Lufthansa with EUR800 million (QR3,9 billion), to plug a gap in the national airline’s pension fund,” he says.

Qatar, of course, is ideally placed to capture The Edge | 67

feature story | aviation

business both from North American and Asian carriers (particularly through the development of ‘fifth freedom rights’ and ‘sixth freedom rights’ that allow it to fly through the airspace of other countries), rather than just ‘point to point travellers’.

In airline terms, David Bentley, director of global strategic aviation consultancy, Big Pond Aviation in Manchester in the United Kingdom, tells The Edge that might be, respectively, flying from Doha via Athens to New York rather than simply just Doha/New York, or flying from Beijing, via Doha, to, say, Johannesburg.

“In both of these ways, the opportunity to attract far greater numbers of passengers from a far wider range of cities is considerably enhanced,” Bentley says. In fact, according to Al Baker, last year, of the about 22.5 million passengers that used Qatar Airways, only around 18 to 20 percent of them started their journey from Doha, while the rest were transit passengers. Indeed in such a way, Qatar and its neighbours plan to exponentially increase passengers in the coming years, as is borne out by recent facts. “Boeing predicts that 46 percent of aircraft deliveries over the next 20 years in the Middle East will be big wide-body types to the region’s airlines as they seek to connect their hubs with every sizeable city in the world,” he underlines.

The fact that the new 10 Boeing 787 Dreamliner aircraft that he envisaged employing in his expansion plans are currently subject to wide-ranging tests, following their grounding after fire alerts on a number of aircraft, might be a short-term hiatus in those plans, but can easily be offset by more flights from its existing fleet, and, in any event, monetarily, Qatar Airways will not suffer: “Boeing will have to [pay compensation] if they deliver aeroplanes that can’t fly. We are not buying aircraft to put in museums, we’re buying them to fly,” was Al Baker’s typically forthright take on the subject.

Connecting to every sizeable city in the world of course at some point requires greater capacity, and in this respect Doha’s new airport – Hamad International – is scheduled for a ‘soft’ (first phase) opening on April 1 this year, after considerable delays. According to Al Baker, Qatar Airways will move its entire operations to Hamad International Airport (HIA) from the current Doha International Airport (DIA) in the second half of this year, although Doha itself will continue to have a dual airport operation until full operations begin at HIA in the second half of 2013.

CEO of Rizon Jet, Hassan Al Mousawi complained recently of unfair competitive prices and favouritism proffered by the QCAA to Qatar Airways, which also has its own private jet arm.

68 | The Edge

From March 2013 though, according to Qatar’s Civil Aviation Authority (QCAA) chairman Abdul Aziz Al Noiami in Doha, freight forwarders and agents in Qatar will process import and export consignments at the new airport, whilst cargo uplift and arrivals will remain at DIA from where shipments will be transported by road to the new facility. Cargo flights themselves, operated by Qatar Airways and other freighter companies, are expected to begin to and from HIA from the summer.

According to the plans, HIA will accommodate 28 million passengers annually when it opens this year, increasing to 50 million beyond 2015, and this figure, says Bentley, looks unusually realistic for the Middle East region. “Dubai’s Al Maktoum Airport, for example, will have a passenger capacity of 160 million per year, which, frankly is a ridiculous overestimate of how busy it will be,” he says.

Cargo wars

Potential passenger numbers aside, Qatar Airways cargo plans are also highly ambitious but entirely realisable, highlights Bentley, with the airline having determined late in 2011 that it intended to become one of the largest cargo operators in the world within five years. To do so, it would expand its fleet of six freighters to 11 and at the same time it placed an order for two Boeing 777 freighters at the Dubai Air Show. This said, Emirates is already a major player in air cargo through its SkyCargo division and the enormous belly hold capacity of its growing Airbus A380 fleet. Indeed, Lufthansa Cargo is on record

The major problem with regional regulatory consolidation of airlines is that one company has to give something up for the greater good if the cost benefit analysis shows that a neighbour can perform a particular service better.

aviation | feature story

Turkish Airlines CEO, Temel Kotil says the airline is now targeting major expansion in the Middle East, including Qatar with plans for a mega-hub in Instabul catering for 150 million passengers by 2018.

as saying that Emirates will become the leading airline in cargo tonnage and capacity in 2013. In the meantime, Etihad Cargo increased its total cargo volume in 2012 by 18 percent year-on-year.

However, part of its strategy went awry after Qatar Airways entered into a strategic equity and commercial partnership with Luxembourg’s Cargolux, one of the world’s leading cargo airlines, to acquire a 35 percent stake in it in September 2011.

The accord was expected to give Qatar Airways a greater foothold in the growing freight business, offering synergies with the dedicated cargo operator, which has a global reach from its Luxembourg hub.

Al Baker described the agreement as “the first major step by Qatar Airways towards substantially expanding the cargo side of its operations... a major part of its overall product offering, and which would develop Qatar as a leading global cargo hub and one of the major players in the international freight market by 2015.” But by January of this year Qatar Airways had completed the sale of its stake to the government

Though Qatar Airways continues to be the dominant player in cargo, recent moves by Etihad Cargo have increased the Emirati carrier’s activity in this space.

28,000,000 The number of passengers expected to travel through Qatar’s new Hamad International Airport annually from 2015.

The Edge | 69

feature story | aviation

Tim Clark, the CEO of Emirates based in Dubai feels that the idea that Middle Eastern carriers receiving generous state assistance is not only wrong, but other airlines around the world are much greater beneficiaries from their relationship with governments.

of Luxembourg for US$117.5 million (QR428 million), the same price Qatar Airways paid in September 2011. Luxembourg took back the stake with the intention of selling it on soon, possibly to Chinese interests. Qatar Airways apparently decided to pull out after failing to agree on a strategic direction for the airline during meetings in November. It was rumoured that other shareholders (Luxair, Banque et Caisse d’Epargne de l’Etat and Société Nationale de Crédit et d’Investissement) blocked Qatar Airways from pushing through changes.

On the passenger side, the new airport in Doha is also due to host 12 international airlines, although how the take-off slots, scheduling, and cargo business of these carriers will fare in Qatar Airways’ backyard is a subject of concern to some, particularly in light of a complaint made recently by the CEO of Qatari private jet company Rizon Jet, which alleged unfair competitive practices and favouritism by the QCAA to the advantage of Qatar Airways (which also has a private jet arm). Although a relatively small operator, Rizon Jet’s public complaint can be regarded as something of a litmus test for the private concerns that many bigger operators have operating in the Middle East as a whole against the indigenous airlines, highlights Bentley.

More specifically, Rizon Jet’s Hassan Al Mousawi has highlighted than even though the firm is a Qatari-owned company which embodies the Qatar 2030 vision to encourage the private sector to be part of the growth of the country, its progress has been hampered by the QCAA, which has created obstacles every step of the way for the small fleet of charter aircraft, as well as a private VIP terminal at DIA. Indeed, Al Mousawi underlines that since November last year, the QCAA has: rejected all applications from other private jet customers to use the Rizon Jet VIP terminal (50 percent of the company’s revenue had previously come from other jet operators using their facilities); withdrawn the company’s travel agency license only six months after it was granted; and has banned the firm from taking part in this year’s Al Khor fly-in event sponsored by Qatar Airways, after initially being invited. “If it is a level playing field then competition is okay, but this is uneven, it is unfair competition,” says Al Mousawi, who adds that: “We are all for clean, healthy competition – that is what brings efficiency and raises standards - but in Qatar we have a world-class airline that also owns a private jet business, enjoys a monopoly on ground handling, as well as being the airport operator.”

Expansion and consolidation

Though of course the big three Middle Eastern airlines will maintain their regional hegemony for some time, a threat comes from Turkish Airlines, highlights Bentley.

Turkey, of course, has traditionally been regarded as the nexus between East and West, and in recent years its economy has expanded to such a degree that the ‘T’ in the ‘MIST’ group of outperforming emerging markets stands for Turkey (the 70 | The Edge

others are Mexico, Indonesia, and South Korea).

Indeed, under prime minister Recep Tayyip Erdogan - in office since 2001 - Istanbul has set about establishing itself not only as a global trading capital, but also as a major global air traffic hub. This has been notably evidenced in the rapid development of Ataturk airport, which has increased its traffic every year. His government has been an enthusiastic supporter of Turkish Airlines by subsidising some loss making routes, such as those to Tblisi and Mogadishu, which had been ignored by the big Western carriers. Turkish Airlines CEO Temel Kotil, in Istanbul, highlights that the airline is now targeting major expansion into the Middle East, including Qatar, recently announcing in fact that the number of flights going from Istanbul to Doha will be increased to 10 per week as of 31 March this year, from the current eight per week, for example.

Moreover, there are plans to build another brand new five-runway mega-hub catering for 150 million annual passengers by 2018.

But even if Qatar Airways was able to operate at a distinct advantage in Qatar for the foreseeable

on the passenger side, the new airport in Doha is also due to host 12 international airlines, although how the take-off slots, scheduling, and cargo business of these carriers will fare in Qatar Airways’ backyard is a subject of concern to some.

aviation | feature story

future, it could not do so on a broader Middle Eastern scale, and consequently it would seem that some sort of consolidation among the three big Middle Eastern airlines might appear a necessity at some point in the near future, given the rising price of oil (which makes up more than 40 percent of an airline’s operating cost), and the notoriously thin margins of the global airline industry.

“Consolidating regulations can generate huge cost savings - as the single European Sky programme suggests - sometimes by as much as 50 percent on air navigation charges, for example,” says Phillip Butterworth-Hayes, senior aviation consultant at PMI Media in Hove in the UK. However, he adds, the major problem with regional regulatory consolidation is that one company has to give something up for the greater good if the cost benefit analysis shows that a neighbour can perform a particular service better.

Having said this, quite aside from national interests not allowing this to happen, there are solid strategic commercial reasons not to expect Qatar Airways to be susceptible to such retrenchment.

Qatar Airways has focussed its expansion efforts very cleverly on building up new traffic from the former Soviet Union states, and the Commonwealth of Independent States, many of which, of course, are closely connected with the oil industry – Azerbaijan and Kazakhstan are prime examples of this. Etihad Airways and Emirates are also looking to expand in Africa, but elsewhere are looking at more developed markets.

In this respect, Al Baker says that the airline is considering taking a stake in CSA Czech Airlines, although it has not yet commenced negotiations with the carrier. “We are getting data from the banks and the entities responsible for arranging the privatisation, but we have not engaged in talks,” Al Baker underlines. Qatar Airways is also looking at developing its Africa routes, principally to service the burgeoning trade and influence from China into the continent.

In tandem with this, other moves into the BRIC (Brazil, Russia, India, China) group of leading emerging market countries are also planned by Al Baker. “We are interested in acquiring a stake in an Indian airline, as India is a huge market, and potentially a very lucrative one,” he says. “We will be interested once we are sure that the regulations, and the laws are properly liberalised.”

Global airline travel trends

According to a recent study performed by global air transport, communications and technology company SITA, the following four trends will emerge in global aviation travel in the next few years: • The way passengers buy travel will change. By 2015, both airlines and airports expect the web and the mobile phone to be the top two sales channels. Passengers are asking for a more personalised buying experience, and the industry is responding with, for example, travel apps that alert fliers to airfare deals from their hometowns and to cities where their friends live.

• Passengers will take more control. By 2015, 90 percent of airlines will offer mobile check-in, up from 50 percent today. Passengers will use 2D boarding passes or contactless technology such as near field communications (NFC) on their phones, at different stages of their journey, such as at boarding gates, fast-track security zones and to access premium passenger lounges.

• Customer services will become more mobile and social. By 2015, nine out of 10 airlines and airports will provide flight updates using smart phone apps. The industry is also exploring apps to improve the customer experience with apps that help passengers plan their journeys to and from the airport, track their flights, access terminal maps and reserve parking spots before they arrive.

• The passenger experience will improve thanks to better business intelligence. By 2015, more than 80 percent of airports and airlines will invest in business intelligence (BI) solutions. Most will focus on improving customer service and satisfaction, often through personalised services to improve loyalty.

An artist’s rendering of Hamad International Airport, which is set to partially open for business on April 1, 2012. (Image courtesy Qatar Airways).

The Edge | 71

The seven deadly

sins of

management 72 | The Edge

leadership | business management

What is it about bad bosses that we find so fascinating? Perhaps, like every anti-hero, we find the bad manager a ripe target for criticism, or at least, extensive discussion. The London Business School’s Julian Birkinshaw, however, says that bad bosses can change for the better. It all starts with knowing what needs changing.

W

e all know bad managers — be they ambitious and aggressive, doing whatever it takes to move up the corporate ladder, or the opposite: managers thrust into their position without the skill or the will to do the job properly. I continue to be a little puzzled about why so many managers do such a poor job. We have known what ‘good management’ looks like for decades, and enormous sums have been spent on programmes to help managers manage better. And yet the problem endures. In a recent survey I conducted, less than a quarter of respondents would encourage others to work for their manager.

Perhaps the problem is that we have relied on the education of positive practices. We point to the things managers should be doing, which tends to get bogged down in platitudes. For example, when Google launched a big data-driven programme to identify what separated its top managers from the rest, it ended up with bromides such as be a good coach, empower your team and be a good communicator. Such clichés are not very original, nor authentic.

So, let us try the opposite approach — to focus on the bad behaviours we are trying to get rid of. Here is my attempt at defining what bad management looks like, using those old favourites, the Seven Deadly Sins. I developed these ideas during seminars with executives in which we discussed their experiences of good and bad management. Of course, a bit of artistic licence is necessary here, to adapt words like greed and lust to corporate life; but, on the whole, I think this list works pretty well.

I have even put a little questionaire together to help office workers rate their line manager. Does your boss succumb to only one or two of these sins? Or is he a seven star sinner? I have also illustrated some of the sins with examples of famous chief executives, because these are stories we are all familiar with. But, of course, the sins apply at all management levels in the organisation — they are as relevant to the first-line supervisor as they are to the big boss.

Greed

A greedy boss pursues wealth, status and growth to get himself noticed. In short, he is an empire builder, and we do not have to look far to find examples

of empire-building bosses. Perhaps the standout example today is Eike Batista, the Brazilian entrepreneur who has made the EBX Group (energy, mining and logistics) into Brazil’s fastest growing company and him into the eighth richest person in the world.

Formerly married to a Playboy cover girl, and an ex-champion powerboat racer, he has now set his sights on becoming the first person in the world to amass a US$100 billion fortune.

Lust

Lust is also about vanity projects — investments or acquisitions that make no rational sense but play to the manager’s desires. Edgar Bronfman, heir to the Seagram empire, leaps to mind in this regard. To the widespread astonishment of the business world, he traded in the company’s valuable holding in chemical giant Du Pont in order to buy up Universal Studios. A quick glimpse at his vitae helps explain his motives — even in his teens he was dabbling in song writing and movie-making.

Wrath

Wrath does not need a whole lot of explanation.

‘Chainsaw’ Al Dunlap, Fred ‘The Shred’ Goodwin, and ‘Neutron’ Jack Welch were all famous for losing their cool. We see this at all levels in the hierarchy.

My first boss would turn bright red and start shaking before he yelled at some poor soul for failing to debug a piece of software properly.

A greedy boss pursues wealth, status and growth to get himself noticed. In short, he is an empire builder, and we do not have to look far to find examples.

The Edge | 73

business management | leadership

Gluttony

In the business world this occurs when a manager puts too much on his proverbial plate. He needs to get involved in all decisions.

He needs to be continuously updated. He never rests. We call this micromanaging. Former United Kingdom prime minister Gordon Brown did it during his brief stay at Number 10 Downing Street, where he insisted on reviewing even minor departmental decisions and expenditures. It is not much fun working for such bosses because they have a tendency, in Charles Handy’s famous phrase, to ‘steal’ the decisions of others. There is also a risk that decision-making will get stuck: Lego chief executive officer, Jurgen Knudstorp, notes that companies are far more likely to fail through indigestion than through starvation, as Gordon Brown’s Labour government discovered.

If you are a boss, take some time and do a self-assessment, figure out which of these sins you are most prone to, and then commit to changing them to virtues.

Pride

Healthy pride quickly tips over into hubris — an overestimation of your own abilities. In all the recent corporate crises — News International, Nokia, BP, even Toyota — there was tangible evidence of hubris in the manner and words of the executives at the top. Pride does, indeed, go before a fall. Perhaps the biggest tale of misplaced pride in recent years was Enron — its executives liked to think of themselves as the smartest guys in the room, and they shortened the company’s vision from becoming the world’s leading energy company to becoming the world’s leading company.

And we all know what happened there.

Envy

This manifests itself most clearly when a manager takes credit for the achievements of others. But envy also rears its head in less obvious ways. When a manager chooses not to promote a rising star, for fear of showing up his own limitations, or when a manager keeps important information to himself rather than sharing it with his team.

Rate the Boss

Answer the following seven questions, either evaluating yourself as a manager or evaluating your current boss.

Answer each question on a 1–5 scale (1 = not at all; 5 = to a very large extent). For every question that merits a 4 or 5 score, consider it a management sin that you or your boss is prone to.

1. To what extent do you/your boss seek growth for growth’s sake?

2. To what extent do you/your boss pursue pet projects, regardless of whether they fit with the organisation’s goals?

3. To what extent do you/your boss become visibly angry at work when relatively small mistakes are made?

4. To what extent do you/your boss get heavily involved in the minute details of all projects?

5. To what extent do you/your boss seek out recognition, plaudits and praise?

6. To what extent do you/your boss try to take credit for the good work of others?

7. To what extent do you/your boss organise things for his/her own convenience rather than taking care of the needs and interests of others?

managers. The cost of sloth can be very high when management fails to make necessary strategic adjustments when the business is in crisis.

Greed. Lust. Wrath. Gluttony. Pride. Envy. Sloth. Usually, a bad manager evinces more than one of these management sins. And woe is anyone who has to work for the boss who exhibits all seven.

If you are a boss, take some time and do a self-assessment via my quick ‘Rate The Boss” exercise above. Figure out which of these sins you are most prone to, and then commit to changing them to virtues. Hesitant to look in this management mirror?

Remember, no one is perfect, and chances are you are guilty of at least one of these sins. Be brave and ask your own team to rate you, as a one-off exercise or as part of a broader assessment process. The most challenging part of my suggestion will be acting on the information you receive. But the advantage of this approach, compared to other similar exercises, is that at least we can now put a label on what you are trying to avoid.

Sloth

This is workplace apathy — the managers who fall prey to sloth are simply not doing their job. They are inattentive, they do not communicate effectively, and they have no interest in their team’s needs. Instead, they focus on their own comforts and, quite often, on personal interests outside of the workplace. We have all seen glimpses of sloth in the workplace: the boss who takes long lunchbreaks but is too busy to sit down with a group of workers who need his guidance or inspiration, the colleague who does not deliver on his part of a proposal or the executive who promises to get back to you on something, but never does. Although sloth rarely makes it to the headlines, I suspect there are shades of sloth in most 74 | The Edge

Julian Birkinshaw (jbirkinshaw@london.edu) is professor of strategic and international management at London Business School and the author of Reinventing Management.

Inside the minds of leading business figures

business insight Innovative design that pairs tradition with knowledge >80 Mark Fenwick, a partner at architectural firm RFA Iribarren Architects that won the bid for one of the stadiums for the World Cup 2022, spoke exclusively with The Edge about architecture in Qatar.

also in this section

The trials and tribulations of expatriate start-ups in Qatar >78 The Edge spoke with Kirby Kearns, managing director of Resolution Productions about the challenges of owning a business in Qatar as an expatriate.

Identifying and leveraging mega trends in the Middle East >83 The Edge spoke exclusively with Wajid Abbas, the country manager for 3M about its diversified product mix, and how he feels it is helping them tap into Middle Eastern markets.

business insight | SMEs

Entrepreneurship

The trials and tribulations of expatriate start-ups in Qatar The EDGE spoke with Kirby Kearns, managing director of Resolution Productions about the opportunities and challenges of starting a business in Qatar as an expatriate.

possible, albeit more costly. After signing up with the management company and depositing the funds required to form a business into the bank, Resolution Productions was born in January of 2007.

How did Resolution Productions get started?

Setting up Resolution Productions in 2007 was a fairly daunting proposition. It was my first attempt at a business startup and I was a stranger in a strange land. I had come to Qatar to produce a variety of films for the 2006 Doha Asian Games. Prior to this, I had spent the previous decade working as a director of photography in inhospitable environments like Afghanistan, Kosovo and Iraq. However, starting my first business was probably one of the biggest personal challenges I have ever faced.

What made you decide to start a business in Qatar?

I loved the optimism and ambition of Qatar as well as the opportunities that were ever present here. The business idea was simple. I would use my twenty years of television production experience to build 78 | The Edge

a Doha based film and digital production house with an emphasis on producing highly creative and effective films that could get measurable results for our clients. But that was a long way off and before I got to that stage, there was much work to be done.

So what were some of the challenges you faced setting up the business?

I first needed to find a local partner, register a company name, find and move into an office, seek a labour quota from the Ministry of Labour, getting a municipality license...the list goes on.

Navigating the bureaucracy was made simpler by my decision to go with a management company to sponsor the business and myself. There are several of these companies in Qatar who assist in the legal formation of companies and they make the process as simple and efficient as

It has been five years since you started out, what has kept you going?

I have always believed that if something is worth doing, it is worth doing to the best of your abilities, and this continues to be the mantra at Resolution. From the first day, we strove to produce quality over quantity and have hired the most experienced talent and best creative thinkers we can find. I am very proud of the people who work at Resolution and the body of work we have produced over the years.

Thankfully many of the clients we worked with during the early days are still clients today. These include the likes of Maersk Oil Qatar, Qatargas, RasGas, the Supreme Education Council, The Qatar Foundation and Qatar Petroleum. So we have been extremely fortunate and indeed grateful that we have ended up working with these blue-chip brands.

What do you see in the future for Resolution Productions?

From a developmental perspective, I would now like to take the company into

SMEs | business insight

new markets in the Middle East, which I have no doubt will lead to additional challenges. I would like to present Resolution Productions as a Qatar brand on the international stage. The Qatar market is still and will always be hugely important to us, but for the company to grow meaningfully, I think we need to develop our export capacity. The Middle East offers so many opportunities for Qatari companies like Resolution, and we have been actively looking for new markets both near and off shore.

Being an expatriate how do you identify with owning a Qatari company?

Even though I am Irish, it makes me very proud to see Qatar playing an active role regionally and globally. It also makes me proud to see Qatari companies grow and expand into new markets. Qatar has a lot going for itself at the moment, and people all over the world are now hearing the extraordinary Qatari growth story for themselves.

Over the past few years, the country has made big strides in developing sectors like financial services, tourism, education and health, and the government must take credit for this strategy. Like many other countries around the world, Qatar is striving to develop a strong, broadly based and knowledge-led services sector, and I firmly believe Qatari companies like Resolution have a role to play in achieving this.

I believe that Resolution is a perfect example of a Qatari company that can excel globally. It also debunks some of the myths that you can only get good quality film production work by going to an international production house. I think that this was probably once true, but the country has moved on significantly since those early days. It is a mission of mine to change this perception and to prove that ‘Made in Qatar’ can stand for excellence.

Your company has recently won some awards, could you tell us about that?

To date, Resolution has won 11 major international awards, including at last years Cannes Corporate Festival. More recently Resolution has made it to finals stage in two separate categories at the 2013 New York Film and Television Awards. These awards, billed as the worlds best film and

television are essentially the Golden Globes of our industry and extremely hard to win.

So this is clear proof that Qatari companies can deliver high quality and are capable of mixing it with the best on the international stage. This recognition is of course great for Resolution but also for the country, our clients and the industry here at large.

Many expatriates find it challenging to do business here, how do you respond to, or tackle these issues?

Of course doing business in Qatar is like doing business anywhere, and there will always be challenges and obstacles in your way, but we Irish like a good challenge. Qatar however, has some unique challenges, none of which are insurmountable.

Getting paid in a timely fashion can be an issue. This is often discussed, particularly within the expat business community and forums like the Entrepreneurs Organisation (EO), of which I am a board member.

Cash is the lifeblood of every company around the world but when companies, for whatever reasons, fail to pay suppliers on time, it can cause cash-flow problems for some firms. It then has a knock-on effect in other companies down the line. That is not good for the economy and it is not good for Qatar’s growing international reputation, particularly at a time when there is a considerable amount of overseas investment in the pipeline in the run up to the World Cup in 2022. If it continues to be an issue, it may also act as a deterrent for aspiring Qatari entrepreneurs who wish to develop their own business.

Paying on time keeps cash in circulation, keeps people in jobs and helps businesses expand as well as meet their day-to-day obligations. I do not know what the solution is, but other countries have legislation covering late payments, so maybe something similar could be introduced here. It would certainly be welcomed with open arms by the business community.

As a Qatari business and Qatari brand, are you looking to the next generation of locals to be involved in these kinds of ventures?

Film and video production can be an exciting, rewarding industry. In an ideal world, Resolution would like to be able

“Getting paid in a timely fashion can be an issue.

This is often discussed, particularly within the expat business community and forums.” to hire more young Qatari nationals, train them up and then get them working in the business. The reality however, is that their salary expectations are too high and are completely out of sync with the industry norms. Recently, the government gave all Qatari nationals working in government departments a 60 percent pay hike.

Unfortunately most businesses in Qatar cannot compete with this so it makes it very difficult for private sector firms like Resolution to hire young Qataris while at the same time remaining competitive – particularly when we are competing for work with companies from across the Middle East. A solution to this problem might be to subsidise companies or Qatari employees for a period of time. If Qatari companies can be competitive on the international stage, then it can only be a good thing for the economy.

Overall, I think Qatar is a great place to do business and the country has been good to me by giving me opportunities that perhaps I would not have had elsewhere.

There is not a country in the world where the day-to-day business environment is not challenging, and the difficulties I face here are minor to what I would be facing back in my home country. I am very proud of what Resolution has achieved so far and am looking forward to many more years of business and creative success.

The Edge | 79

business insight | architecture

Building façadES

Innovative design that pairs tradition with global knowledge Shehan Mashood spoke with Mark Fenwick, a partner at RFA Iribarren Architects, who was in Qatar recently to speak at the annual façade design and engineering Middle East conference. His firm has also won the bid to develop one of the stadiums for the 2022 World Cup.

Could you tell us a little bit about yourself and how you came to be interested in architecture and façade designing?

Architecture has been a passion since I left school and studied at Kingston in London, and then I came to Madrid and had to convalidate my studies here for a further five years. I have always felt that buildings and urban design are the most complete art form, and certainly that which has the greatest impact on the daily life of people who live in cities and towns.

Good architecture makes good user experience and I have strived to produce interesting, responsible and exciting buildings. Façades are the skins of the building and what we see from the outside, but again I see the façade as an integral part of the whole and as the skin is to the 80 | The Edge

body, it should be a reflection of what happens behind and should express what it is meant to be.

I have never designed a façade, the façade comes from the idea and evolves as part of the concept without the need to draw the façade since it appears as the design process evolves.

You have been a proponent of something called Blue Architecture, could you tell us what that is and how it is different to green building?

Blue Architecture is a new concept developed by our office, it attributes to each project an added value in the form of human scale and well being.

Blue architecture is the beginning of a growing need for buildings to be developed

to a ‘human scale’, to encourage well being and social interaction. We recognise the fundamental need to design green buildings based on saving energy, the respect of the planet, and to ensure reduced emissions etcetera. The design process has recently seemed to focus a lot on the planet alone and does not appear to treat in equal terms the issue of user comfort and wellbeing.

For this reason RFA have created Blue Architecture – architecture for people that inhabit or utilise the building, with a responsibility to and respect for the environment. If Green Architecture is sustainable architecture for nature, then Blue Architecture is sustainable architecture for people.

There has been concerted effort in the industry here to apply green building principles on large projects, are the principles of Blue Architecture also being considered in developments here?

architecture | business insight

I do not know if this is the case as Blue Architecture is a philosophy we have developed, and there are no official guidelines established and no methods of evaluation as in the LEED classification (for Green Building).

I do not feel it is a concept that is fully unique or original, as many architects do Blue Architecture without giving it the packaging we have created. Developments like Doha Land [now Msheireb Properties] have many of these local concepts and a feel for human scale and people.

Your firm won the bid for one of the stadiums for the World Cup 2022 in Qatar, could you explain if and how Blue Architecture has been employed in them?

Yes, our stadium looks to integrate the Blue Architecture principles in many aspects, the project creates special urban spaces in the design, plazas, and streets real urban spaces where different uses are introduced to better the living model of the users.

A nursery was proposed so that students with young children can come to practice sports and their families can eat and have coffee while they wait. We want the facility to become a centre for the university, a focal point of human activity, the fusion of the use of the body (sports) and the mind (education).

What is the importance of localisation when working on projects, and what are some of the things you can draw on, especially when working in Qatar?

We believe localisation is fundamental in responsible architecture and also is part of Blue Architectural principles. We feel buildings should be designed for the place they are located and also to draw on the history and traditions of the cultural values of the country they are built in.

Global architecture is mundane and boring, and this is more and more apparent in all aspects of life, Zara, Marks & Spencer, Toyota cars, are the same the world over, and create a uniformity which I find sad and at the same time challenging.

Localisation is a way to develop a building that has something to do with the place, but at the same time one must draw on technical advances in construction and materials and therefore use global knowledge applied to these buildings. From this we can say that our buildings are based on glocalisation, local traditions and global knowledge techniques.

The Cameldrome your firm designed is a very interesting concept that pairs a traditional sport with modern technology for the viewers. Could you talk about the concept and how it came to be?

The concept developed from talks at the very highest level in Qatar, and where there was a feeling that investment in traditional sports was being neglected and camel racing is a unique and exciting sport for Arab countries.

Again here we looked to implement glocalisation where we wanted to develop a movement system to follow the camel race around the track, sometimes taking 20 minutes, while at the same time using traditional respect for the whole art of camel racing.

It is a very exciting concept and even though there is no advancing, as it is on hold, it may be reconsidered once the focus of the World Cup 2022 has waned.

Are there any other projects you have worked on or are currently developing for Qatar?

Yes, we are working for the Qatar Olympic Committee on a number of concepts, and we have the commission to develop and build a number of sports facilities for ladies as community buildings.

We are also developing a concept for an avenue in Doha which will radically change the concept of road design in the city, and again with many Blue concepts involved, an avenue as an urban integrator and not as an urban divider.

Do you feel that there is an attempt here to preserve, or even revive local architectural heritage through design?

I feel that there is a great concern to preserve local architecture, even though there is not much of good quality, but the preservation should be intense and the line of their architectural history should be documented and catalogued.

I am against architectural revival imitation, any redevelopment should be either a full exact reconstruction of what was either demolished or lost, or there should be a look to create a truly Qatari architecture, and this can only happen from the early education of new Qatari architects to the best standard.

A recent decree issued by the Urban Planning and Development Authority limits the usage of glass and aluminium, how is this affecting design?

“I am against architectural revival imitation. Any redevelopment should be either an exact reconstruction, or there should be a look to create a truly ‘Qatari’ architecture.”

What is possibly the objective of the decree (which I hear was due to a comment from IM Pei) is that a glass building in such an aggressive environment [weather] is not sustainable and therefore there needs to be a certain amount of solid façade, and this is true in a way.

However, an example of a clever building that negates this concept is the Jean Nouvel tower at West Bay, which almost plays with the requirements of the decree to its limit.

It is an excellent example of how good design can be local (the screens) and global (façade design with transparent glass) On the other hand there are some hideous buildings in West bay which fulfil the decree fully, but which will never become part of the architectural patrimony of Doha.

What are some of the alternative approaches being used in design and materials for façades?

There are an infinite number of façade designs available in modern day architecture, technology and computer designs allow the imagination to develop almost to the infinite, allowing us to design and to build very complex structures and forms.

Again you only need to look at the Jean Nouvel [National] museum rising out of the The Edge | 81

business insight | architecture

ground in Doha and see how complicated the metallic structure is, and how the final façade material will adapt to these complex forms.

The architect needs to handle these tools with care, as cities cannot become full of iconic structures and forms, but at times the glare of the sun needs the shadow to allow the right balance. It is good to have glare buildings, but I sometimes prefer to create the shadows.

Some architects have pointed out that glass façade designs carried over from the West are not as applicable in towers, and not in line with the hot desert environment here in the country. Is this true? And what can architects do to get around this issue?

Glass is one of the materials which have seen the greatest technological advances, and they are achieving excellent conditions for heat and cool protection, but I feel glass buildings come from much cooler climates where maybe light is scarce while in the Middle East it is intense.

Living in Spain we have studied and understand buildings such as the Alhambra and the Cordoba Mosque, both of Arab origins, and these are two of the greatest buildings in the history of architecture. The way the sun is protected, the cloisters, the screens, the patios and the gardens with fountains, are all elements which modern day architects are selling as smart comfort criteria, but have all been invented hundreds of years ago.

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Will Qatar develop its own architectural style to make it stand out in the region?

Obviously a style will emerge as Qatar lacks a solid past in architecture, but I feel there is a stance to have quality architects working in the country, and also there is not the need for the spectacular as may have happened in Dubai. I feel they are working in the right direction, but speed is always an enemy through which bad projects will slip through, however I feel the country has a great leadership and I see many projects of exciting and contained quality. This will become the new Qatari architecture, modern but with views to their traditions.

At the summit you spoke about media façades, could you explain what that is and what some of the challenges are to developing this technology for large scale projects like stadiums?

Media façades are where the façade can include certain technological resources, to become a user experience for the building and for those watching. Stadiums are obviously a great people drawer and are also icons of modern architecture, the cathedrals of modern day. The façades of a gothic cathedral were amazing in their time and the light inside and out were the awe of the people who used them in the middle ages.

Technology needs to be used properly, but also can be a danger so great care needs to be taken in how its is used and how its is applied.

“Qatar lacks a solid past in architecture, but I feel there is a stance to have quality architects working in the country.”

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Product development

Identifying and leveraging mega trends in the Middle East The EDGE spoke with Wajid Abbas, the country manager for 3M in Qatar about the firm’s highly diversified product mix and the keys to its global success.

Everyone knows 3M as the makers of Post-It Notes and Scotch tape, what are some of the other sectors 3M are involved in, and some of the products they make?

3M is a diversified global innovation company that never stops inventing. Over the years, our innovations have improved daily life for hundreds of millions of people all over the world. We have made driving at night easier, made buildings safer, and made consumer electronics lighter, less energy-intensive and less harmful to the environment. We even helped put a man on the moon.

At 3M, we serve customers through five business groups, which increase speed and efficiency by leveraging and combining the 46 technology platform that is the core of our innovation.

Why did 3M decide to open an office in Qatar, and why now?

With Qatar’s increased investments in multiple industries, it creates an opportunity for many companies to increase their penetration. With the expected investment to support the 2022 World Cup, there will be further opportunities for growth.

The Middle East and Africa is one of the fastest growing geographies for 3M globally. Our presence in Qatar will facilitate the company’s rapidly growing business operations and will be a vital catalyst for achieving 3M’s strategic growth objectives for the region.

The decision to open a regional office in Doha is a reflection of our ongoing commitment to provide our partners with the best products, services and valuable insights based on years of technological

innovation excellence. At 3M, we strongly value our relationships with the regulatory authorities and strategic partners, and we look forward to long term collaboration with our expanded presence in Qatar.

What is your role as the country manager here in Qatar?

As the country manager spearheading the 3M office here in Qatar, my role will be to introduce our technology platforms to our customers. Our presence in Qatar would further help us to understand the local customer needs and that would eventually help us to bring more innovative products and solutions to the market.

What is your strategy in the Middle East/ Qatar, and what are the main sectors of 3M that are the most successful here?

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business insight | science

3M’s new structure, which comprises of five business groups is expected to bring increased penetration and sustainable growth. Our key strategies are geographical expansion, building local capability, business model innovation and leadership development for the countries.

As part of the geographical expansion, we would look at expanding our presence in Saudi Arabia, Qatar and some of the African countries.

One of our strategies is to follow the mega trends in the region, and there are a few attractive trends that are emerging in the area, in particular renewable energy, higher regulatory needs, emerging consumers and the ambitious plans on the railways. All these mega trends bring in significant opportunities for growth and we, as an innovative company are very well positioned to address the needs of the customers.

We are seeing increased revenue in our core markets such as healthcare, consumer and safety to name a few. The focus is on to leverage the growth opportunities in multiple segments.

Could you talk about some of the newer products and technologies 3M has brought to the market here?

3M has brought a variety of new products such as 3M Novec 1230 Fire Protection Fluid, an advanced clean agent fire suppression material that does not damage sensitive data centre electronics and allows fires to be extinguished without powering down equipment. Our Littmann 3200 e stethoscope with Bluetooth technology that is revolutionising medicine by allowing doctors to send patients readings for diagnosis to anyone around the world. In addition to these, car care products and advanced wound care systems also are included in this category.

Where do you see the biggest growth sectors for 3M in Qatar?

Our foray into this market would initially focus on leveraging the core 3M businesses and portfolios. Qatar is burgeoning at the moment; there is a wide landscape of opportunities to tap into, be it the emerging healthcare or automotive consumer and infrastructure.

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“3M is fundamentally a science company. We produce thousands of innovative products.

Our success begins with our ability to apply our technologies to an endless array of real-world customer needs.”

The core of your company is still innovation and research. Could you speak a little about that, and is any of it conducted in the Middle East?

As earlier mentioned, we are continuously striving to help create a better world.

3M has pioneered sustainable business practices with outstanding results. Our research and development (R&D) team essentially focuses on continuous R&D to develop and introduce new solutions to the market place that will meet growing needs of our valued customers.

New technology introduction and new product introduction are the life lines for the R&D lab. We work closely with the local community on developing innovations that will enable the region to excel in many ways.

How does your organisation deal with the complexity of managing so many different product lines, and maintain flexibility at the same time?

3M is fundamentally a science company.

We produce thousands of innovative products and are a recognised leader in research and development. Our success begins with our ability to apply our technologies, often in combination, to an array of real-world customer needs.

The highly diversified model is one that many businesses in Qatar and the region emulate, could you talk about what 3M’s key to success has been?

The key to success is the ability to prioritise, make the right investment and balance the portfolio efficiently. Courage, leadership and the investment in the local talent are the other areas that we continue to develop for the region.

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Sporting Ambition

Qatar Football Association Managing Director of National Teams Mansoor Al Ansari Mansoor Al Ansari’s appointment as managing director of national teams for the Qatar Football Association (QFA) in September 2011, he says, came as a surprise to no one that knew him personally or professionally. His sporting, academic and business credentials made Al Ansari the ideal candidate for the position and indeed his life story when viewed in retrospect contains an air of inevitability that he would one day take up this post. In this exclusive interview, The Edge discusses with Al Ansari his career trajectory and the management challenges and businesses opportunities within Qatar football and sports in general.

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Games, sponsorship, business

When The Edge brings up certain complaints in regards to some negative feedback regarding the Spain Uruguay match when it came to long queues, problems with the seating and other issues that surfaced on local news and social media outlets afterwards, Al Ansari listens intently before responding. “I don’t know what happened.

I got a lot of positive feedback, everyone I know that attended was happy. I believe the game was well managed,” he says, before adding that Qatar is experiencing a rapid learning curve in most areas and that the new stadiums, will largely take such issues into account. “A lot of our stadiums are a bit older and when you have fifty thousand people attending a match there is always going to be somewhat of a cluster, I do believe that in the future things are going to be more organised and more developed,” he adds.

Another more wide ranging topic relating to Qatari football matches is criticism from some quarters that, though it is the number one game in the country, local football will always be on the fringes of global sport, even with the injection of foreign talent.

Therefore it is not as a lucrative proposition for potential international sponsors as they might find in larger sporting markets.

Though he is not directly involved in that kind of overall sponsorship, his mandate in this area is confined strictly to the national teams, Al Ansari is happy to make some general observations. Television channels in Qatar, he says are playing a huge role.

“You have to bear in mind,” he says, “that the population of Qataris in the country is estimated around three hundred thousand, give or take so…when you want to fill out a stadium of twenty thousand or so, that is literally almost 10 percent of the local population. But there are Asian Football Confederation regulations on

the number of attendants that must be met for all leagues to be licensed by them and I believe that they are successful in reaching these targets and are working on developing them more. It is just a matter of reaching out to the public. I believe that the league has a priority not just to reach out to local spectators, but also to create that entertainment aspect for even the expatriates that are here. Whether they are European, Asian, no matter where they are from, and try to build that fan base.

“I believe that what the sponsors want is exposure so if they get it on TV then they are reaching a wide mass of followers.

So I don’t think that having people at the event is going to play a big role…with the accessibility of the media with Al Jazeera Sports and Al Kass it is quite convenient for you to just sit and watch the games at home,” Al Ansari says, adding that though the local league is growing fast it has a small fan base and a lot is being done to attract spectators at the actual matches themselves, saying that “it is the clubs’ role in building that fan base with the support of the FA and League.”

As far as sponsorship of the QFA national teams is concerned, QNB is currently their strategic sponsor and Nike is their kit sponsor among other sponsors. “Our sponsorship with Nike has been good so far,” says Al Ansari. “Nike is a global brand, having that relationship adds a lot of value to QFA, which is why we look at strategic sponsorships.” The procurement of all kinds of sponsorship, says Al Ansari is a push and pull process, but with many applications from brands wishing to associate themselves with the national team and FA, it is as he alludes above, not purely a financial decision as the relationship must be as snug a fit as a good soccer boot.

“They will look at what commercial value they will be gaining out of providing the sponsorship which is exposure and the network. What I look for as the MD for the national teams committee is the sports background and the sports benefit we can gain. So when I evaluate, I would prefer to go for a [brand] that already has sports sponsorship experience and a network, which will add value to me on a technical and development aspect.”

With 2022 now less than a decade away, Qatari football – and in its wake local sport in general – Al Ansari agrees offers a wide range of business opportunities beyond construction. The process for securing all manner of contracts for business in this sector is the same as others he says, and is as one would expect, in high demand. “Due to its exposure you have so many entities coming in, in sports whether they are providing supplies for stadiums or whatever,” adds Al Ansari. “Branding, events, PR, ticketing, everyone is coming in.”

2022 Ahead

In closing, Al Ansari says his main goal – with Qatar 2022 as an ever-present reminder of how important their aims are – is to ensure that the QFA, Aspire, Aspetar, the Qatari Football League, the clubs, and the Qatar 2022 Committee, are all working together towards that common end.

This, he adds, also extends beyond Qatar. “I have a strategic relationship with FC Bayern Munich as they have been here for three years because of the national teams. Trying to maintain these strategic alliances and relationships with people from the global clubs, leagues and FA’s, we try to learn from these relationships so we can try and get the better practices implemented in Doha.”

“The vision of the FA is to be a pioneering, creative football association working as efficiently, as professionally as possible with a winning mentality,” closes Al Ansari, adding that this is entirely in line with the national vision of Qatar itself, something that is close to him personally.

“That is the challenge that I took with this position, bearing in mind that being able to represent the national team is an honour by itself as you get to represent the country, I come from a family that comes from a sports background,” Al Ansari concludes, “I had somewhat of a legacy that I wanted to fulfil and when you work for something that you are passionate about a country that you love and you want to give back too, I think you are going to be as productive and as efficient as you can, because everything you do – you don’t feel as if you are doing it for yourself, but you are doing it for your country.”

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products and reviews

Nokia Asha with dual SIM

Read it: The Leadership Book Author Mark Anderson is the president of strategy and business development at Pearson International, a global education publisher who has worked in London, Malaysia and Hong Kong in various business sectors.

He also holds an MA from the University of Cambridge and an MBA from Ashridge Business School. On writing the book Anderson has said that he felt that there are many books and other forms of written advice available from famous leadership successes such as the likes of Richard Branson, but nothing that might be more accessible to people who are actual or aspirant leaders. “Those perspectives are valid, but I thought there might be an opportunity to write something that was more practical on a day-to-day basis,” says Anderson. But does the world really need another book on management practices? Anderson himself covers this in his book’s introduction, putting forward that there is in fact an often disconnect between what is taught in business schools and the kinds of leadership skills required in the real world.

Accordingly, incorporated are more than two decades experience to date into this book as well as input and advice from others, Anderson has come up with 10 different broad categories. He believes these define what it takes to be a good leader in the business world, advising readers that they have all been written independently with the idea that people at various stages of their careers can turn to the relevant part of the book.

Succinctly written, often in easy to digest point forms The Leadership Book is ostensibly a helpful tool for the modern manager, whether just starting out or a seasoned veteran.

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The Nokia Asha 310 is a dual SIM smartphone with Wi-Fi support, the combination a first for Nokia smartphones.

With the built-in easy swap dual SIM technology, consumers can use the external slot on the smartphone to insert a second SIM card, while keeping their principal SIM card in place with the ability to shift between SIM cards for personal or work use without turning off the phone. The smartphone also allows you to assign and store unique profiles for up to five SIM cards. Users can designate SIM cards for text, voice and data and switch between them at their convenience.

New Canon camera models

Canon Middle East has added four new models to its compact camera range – the new IXUS 140 launches alongside the PowerShot A3500 IS, PowerShot A2600 and PowerShot A1400. All designed to make it simpler to capture stills and HD movies.

The new models are powered

by Canon imaging technologies, the DIGIC four processor technology combines with high resolution 16 megapixel sensors to deliver detailed and colour rich images.

The new IXUS 140 and the PowerShot A3500 IS are part of Canon’s range of Wi-Fi enabled cameras. Users can wirelessly connect and transfer images or movies to both iOS and Android smartphones or tablets on the move, or upload directly to social networks. Canon also offers an online facility for storing and sharing photos and video with 10 GB of personal storage capacity in the cloud.

Omega Constellation Star Omega has pledged to donate a portion of its proceeds from each Constellation Star sold to ORBIS International, a humanitarian organisation. The Omega Constellation Star comes in two sizes, the 24mm and 27mm.

The watch features a sun-brushed blue dial with applied 18-carat white gold elements and white Super LumiNova on the hands. Its stainless steel case has a diamond-paved bezel and is attached to a stainless steel bracelet, giving it a bold appearance.

At the heart of this piece is Omega’s selfwinding mechanical chronometer movement visible through the scratch-resistant sapphire crystal case back.

The Constellation Star 24mm on the other hand is powered by Omega’s calibre 1376, a quartz movement with reliable precision.

New scanner equipped with Cloud capabilities Canon has launched a new compact desktop scanner aimed at small offices and corporate departments who need a reliable cost-effective scanning solution.

The Canon imageFORMULA DR-C120 offers easy scanning, and features a suite of software that helps businesses to scan and convert documents into existing workflows and to the cloud.

The scanner features plugins for cloud-based connectivity with Microsoft SharePoint, Evernote and Google Docs, for processing and accessing documents instantly to the cloud from anywhere around the world.

The DRC120 includes new image processing features, such as automatic de-skew that is based on both the angle and content of documents, an automatic resolution setting, and also multi stream output. The imageFORMULA DR-C120 is also more energy efficient when scanning, using less than half the power compared to many other devices in its class.

My Book VelociRaptor Duo The My Book VelociRaptor Duo is equipped with a two terabyte hard drive and two thunderbolt ports. The dual-drive storage system is ideal for editing high-resolution video, 3D rendering, graphic design, and other demanding digital media applications. This solid-state drive delivers data transfer rates of up to 400 megabits per second for greater workflow productivity.

The dual-drive storage system offers RAID 0 for performance or RAID 1 for protection; and the twin Thunderbolt ports offer daisy-chaining multiple high performance peripherals without impacting data transfer speeds or performance.

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10 things

Businesses you did not know were family owned Family businesses today control some of the largest and most diversified companies in the world. We take a look at 10 companies you might not have guessed are still either run or partly owned by families.

Wal-Mart Stores

Founded in 1962, in the United States, by Sam Walton and his younger brother they built Walton’s Five and Dime store into the world’s largest retailer.

The company operates under 55 different names, as ASDA in the United Kingdom, Best Price in India and in 15 other countries. Rob Walton, the son of Sam Walton is chairman of the company today.

Thomson Corporation

10 things

Its beginnings date back to the 1930’s when Roy Thomson started his first paper, and in 2008 it merged with Reuters Group to form the Thomson Reuters Corporation. It is now one of the largest media companies offering financial information.

The Thomson family owns a controlling interest in the new corporation, and David Thomson from the second generation is now CEO.

Ford Motor Company

Founded by Henry Ford in 1903, credited with developing mass production techniques that made cars affordable. William Clay Ford Junior the greatgrandson of Henry Ford serves as the executive chairman today, and the family holds a minor stake.

Tata Group

India’s largest conglomerate, Tata is highly diversified, operating in numerous business sectors. Ratan Tata as Chairman of the group from 1991 to 2012 is credited with Tata’s huge success.

Cyrus Mistry is the new Chairman, a relative to the Tata family through marriage. The family still owns a majority stake in the group.

LG Corporation

Formerly known as Lucky Goldstar this conglomerate operates in more than 80 countries today. LG Corporation is the holding company that manages its various sectors that include electronics, chemicals and telecom services. The

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Koo family in South Korea owns a controlling stake in the company. Koo Bon-Moo, chairman of the group is the eldest grandson of the founder.

L’Oréal

The world’s largest cosmetic company is still owned by the daughter of its founder, Liliane Bettencourt who controls around 30 percent of shares and voting rights in the company. In addition to owning shares in The Body Shop, L’Oréal Group owns shares in numerous ventures in finance, healthcare and insurance.

Sainsbury’s

Founded in 1869 Sainsbury’s is one of the United Kingdom’s largest supermarket chains. The Sainsbury family still retain a significant share of the company, however they have reduced their stake in the recent years. Qatar’s sovereign wealth fund holds the largest stake today in the company.

Samsung

Opened in 1938 as a small trading company in South Korea by Lee Byung Chull, he merged 10 years later to create what is Samsung Corporation today. The highly diversified firm operates in numerous sectors, electronics being the largest. The Lee family’s Lee KunHee is chairman and CEO of the company today.

IKEA

Founder of IKEA, Ingvar Kamprad started his company when he was 17 years old in Sweden, and today is the largest furniture retailer in the world. Today he is the chairman of the executive committee and wields tight control over the company’s operations.

LVMH

The company was formed when champagne producer Moët Hennessy merged with French fashion house Louis Vuitton in 1987. The major shareholder in the company is Groupe Arnault the family holding company for LVMH’s chairman and CEO Bernard Arnault.