Business Interview: Qatar Business Incubation Center’s Ahmed Abdulwahab
Vol. 6 No. 4 - Issue 54 - April 2014
Why embracing IT is not a choice for Qatar’s SMEs
Reining in rising prices
How Qatar is resisting inflationary tides
Career mapping in Qatar
Balancing national needs with HR realities
PLUS:
Qatar leads financial centre rankings Doha’s impending energy choice Increasing infrastructure budgets Teach for Qatar education initiative
contents April 2014 TheEdge54 Front Cover.pdf
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Business Interview: Qatar Business Incubation Center’s Ahmed Abdulwahab
Vol. 6 No. 4 - Issue 54 - April 2014
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- QATAR’S BUSINESS MAGAZINE - Vol. 6 No. 4 - Issue 54 - April 2014
cover story
Why embracing IT is not a choice for Qatar’s SMEs
Reining in rising prices
How Qatar is resisting inflationary tides
Career mapping in Qatar
Balancing national needs with HR realities
PLUS:
Qatar leads financial centre rankings Doha’s impending energy choice Increasing infrastructure budgets Teach for Qatar education initiative
It is becoming a near impossibility for businesses to stay competitive and innovate in the marketplace without the aid of technology. Whether reaching out to customers through a simple website, or using email to communicate with clients, an investment in even the most basic IT infrastructure is a matter of necessity and not choice, writes Shehan Mashood.
50 Despite the recent commercial rent freeze, and a likely extension of this to the residential sector, bottlenecks in spending in the lead up to the 2022 World Cup are likely to push inflation still higher in Qatar, placing more of a burden on domestic banks, writes The Edge’s international financial correspondent Simon Watkins. (Image Corbis)
features
Business Interview: Throw away the business plan
56
Ahmed Abdulwahab, the head of incubation centre at Qatar Business Incubation Center, tells The Edge that unlike other incubators, their aim is to have entrepreneurs focus solely on the customer.
Feature story: Reining in rising prices
50
Simon Watkins writes that the slew of data from Qatar point to the challenges authorities face between fuelling state-led growth whilst keeping a lid on inflation.
Business management: How much of career mapping in Qatar is universally applicable? 60
When labour supply in a country such as Qatar depends on an expatriate population base, can there be a unified human resource policy that can apply to all employees, asks Aparajita Mukherjee.
60 Abdulla Ahmed Kamal Naji, learning and development manager, Qatar Petrochemical Company QSC, says that their new recruits, who were taken on board last year, are currently in the formal stages of the development programme.
The Edge | 3
contents page
sectors
Finance & Markets 25
At the ninth Multaqa Qatar 2014, the forum discussed the prospects of the insurance sector in Qatar, with the consensus that it will gain from Qatar’s economic growth.
Energy & Sustainability 29
Doha may soon come under pressure to lift its moratorium on North Field gas production, writes The Edge’s Jamie Stewart.
Real Estate & Construction 33
With six stadiums in their advanced stages, early works will begin for another five in 2014, during which 10 stadium tenders will be awarded in total.
Tech & Communications 37
Rob Reeg, president of MasterCard technologies and operations, speaks about what the future of the payments industry looks like for both customers and merchants.
Healthcare & Education
41
A recent study by EY on youth employment in the GCC concluded that many employers do not believe that the local education system prepares young people with job market skills.
Business Insight 65
Rajeev Menon, group CEO, Gulf Warehousing Company, speaks with The Edge about how the firm has grown in the past 10 years and the opportunities and challenges in the logistics market. Kevin Hughes, general manager of Q-Auto, says customer satisfaction is the key to long-term business success in automotive retail.
regulars From the Editor 8 Photo of the Month 12 Business News 14 Qatar Perspectives 18 Reviews 73 4 | The Edge
Group CEO, Rajeev Menon, of Gulf Warehousing Company, tells The Edge, the greatest opportunity for GWC will be the need to fill the gap between supply and demand in the logistics industry.
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PROTECTED OR NOT? CRIMINAL LIABILITY OF A MANAGER Recently, accidents such as fires, building collapses and gas tank explosions, amongst others, occurring in places of business and outlets have made headlines in the local news. As a result, there is concern with respect to which parties may be held liable for such accidents. More specifically, a significant concern has arisen as to whether a manager of a place of business or outlet may bear liability for the consequences arising from such accidents, which liability could include imprisonment and fines and/or the imposition of travel bans. In determining the possible liability of a manager, several factors must be considered including the nature of the accident that has occurred, the type of company involved (shareholding company, limited liability company, partnership) and whether or not the manager’s name is listed on the company’s commercial registration (CR). While the liability of managers should be determined on a case-by-case basis, some general considerations apply in all cases. Broadly speaking, two types of liabilities affecting the manager could arise from an accident: civil liability and criminal liability. The focus here is on the possibility of criminal liability of the manager arising from an accident that has occurred in connection with or on the premises of the business or outlet. A manager may feel insulated from criminal liability with regards to acts or omissions made on behalf of the company and undertaken in his or her capacity as manager. However, this assumption is not entirely correct. In Qatar, managers may face criminal liability if their acts on behalf of the company would lead to consequences that would be considered criminal under the penal law. A manager may also face criminal liability for committing a private act that violates other laws (such as the Consumer Protection Law, the Public Hygiene Law, the Civil Defense Law, etc.) and results in the imposition of criminal penalties. For example, under Article 17 of the Commercial and Industrial Outlets Law (No. 3 of 1975), managers/ supervisors are held jointly liable with the employer for breaching the said law; Article 20 goes on to provide that the manager/supervisor may be punished by imprisonment and fined for such violation. With respect to general criminal liability, Article 37 of the Qatar Penal Code (Law No. 11 of 2004), is the general “catchall” provision that gives rise to the criminal liability of managers. Under Article 37, with the exception of Ministries, governmental bodies, organisations and institutions, a Company (legal person) is liable for the crimes committed by its representatives, managers and agents acting on its behalf, and the Company would be subject to the imposition of fines and other appropriate sub-penalties under the law. If the original penalty for the crime as determined by law differs from the imposition of fines, then the penalty will be limited to a fine not exceeding QAR 500,000. However, Article 37 goes on to provide, “This does not prevent punishment of the perpetrator by the penalty decided by law.” Under this general provision, managers can be found criminally liable. No clear standards or parameters establish when Article 37 will be applicable. In addition, no definition is provided for “managers.” However, amongst other considerations, a manager would likely be implicated if his or her name appears on the company’s CR as an authorised signatory of the company. Managers can take certain steps to potentially mitigate liability:
1. The employment contract of the manager must precisely list the manager’s responsibilities and liability. 2. The listing of the manager’s name on the CR should be seriously considered as this could lead to the imposition of criminal liability, which could include the imposition of a travel ban on the manager in the event of an accident. 3. Where an accident has occurred, a manager should consider contacting the company’s legal department or a lawyer prior to giving any statements or other evidence. 4. Ignorance of the law is not a defense. Managers should take all steps necessary to understand and adhere to the applicable law. While the list above provides some general guidelines, the criminal liability of a manager in a aonly on a case-by-case basis after consideration of all relevant factors. Accordingly, obtaining advice from legal professionals is highly recommended.
roy GeorGiades Associate Al Tamimi & Company r.georgiades@tamimi.com
Zehra Manni Associate Al Tamimi & Company z.manni@tamimi.com Follow us on Twitter @AlTamimiCompany Join us on LinkedIn – Al Tamimi & Company www.tamimi.com
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6 | The Edge
editor’s letter By the mid-1990s, the Internet had become fairly widespread in most of the Western world. Many companies had websites or were developing them. And though e-commerce was in its infancy, by 1995 Jeff Bezos had launched Amazon.com. But the story of how technology can influence a business I refer to here does not necessarily relate to using the Internet for commerce, but merely as a communication tool. As a rookie journalist working in London, I first came across the Internet whilst freelancing for a dynamic publishing agency run by a group of highly creative individuals aimed at the freethinking youth market in the United Kingdom (UK). One of the first things they did was set up email addresses for all their staff members and create a magnificently designed website which had advanced graphics for the period, and was creating a stir amongst influential UK agencies – and gaining them bookings and commissions. Returning to my native Cape Town soon afterward, I started up a similar concern and satellite office within the fold of an already highly successful publishing company in the youth culture and sports segment, based in a different South African city. I soon learned that the concept of the Internet had barely penetrated in South Africa, where bandwidth was pitiful at the time, but which was also just awaking from its post-apartheid slumber and more than a couple of steps behind the global pace in most respects. But by the close of the 1990s, affordable (but often dire) Internet access had arrived. Utterly convinced having a website and email was the future, I placed a formal request for budget for the same from head office. And was promptly denied. “What do you need email for when you have phone and fax?” asked the managing director (MD), an otherwise highly astute businessman.
“And why would a company ever need a website? Hardly anyone is online, who is going to see it?” So I went ahead and did it anyway, paying for email access for my office out of my own pocket and utilising a student who was about to graduate from Africa’s first ever web design course to create a branded website as part of her final year project, in 1998. Our basic website was one of the first of its kind in South African publishing, beaten to the title of “first” by mere months only by a handful of some of South Africa’s largest publications. The reaction was almost immediate. Tapping into a youth market of 20-something generationXers and teenaged millennials, our business experienced a surge of email communication following the launch of our website. Though it is mostly speculation on my part, I have no doubt it earned us new business. And within six months, everyone at our head office had email addresses, and all our stable titles and the parent publishing company had their own hastily thrown together websites. (Ours, incidentally, was the first portal in our firm to enlist subscribers, conduct reader surveys, perform e-commerce transactions and earn advertising revenue). The point I am trying to make is obvious I am sure. Those small companies in Qatar, or anywhere for that matter, who ignore the steady advance of technology into the business world do so at their own peril. Whilst it is probably not necessary for a small one-man shop in Doha’s souq to have a website, it could probably benefit from having some sort of social media presence, for example. And the benefits for larger businesses are well documented, both in this issue and elsewhere. Yet it is clear from recent ictQATAR data in our cover story by technology editor, Shehan Mashood, on page 44, that many business owners in Qatar still feel like my former MD once did about technology. He was fortunate enough to quickly realise his folly and catch up fast, before our competitors did. But these days things are moving much faster, and companies that do not embrace IT are eventually going to be left behind as roadkill on the information superhighway, whatever sector or size. Of that, there is no speculation or doubt.
Firms that don’t embrace IT are eventually going to be left behind as roadkill on the information Miles Masterson superhighway. Managing Editor 8 | The Edge
12 | The Edge
photo of the month
Celebrating the win The 19-year old Jack Miller of Australia celebrates a victory with a wheelie at the end of the Moto3 race during the MotoGP held in Qatar. In a thrilling night-time race, at the Losail International Circuit, the top six riders finished within a span of 0.586 seconds of each other, with Miller clinching his first-ever victory. (Image Getty Images) The Edge | 13
news business
Qatar maintains lead position in GFCI ranking
Qatar has maintained its top ranking in the Middle East region in Global Financial Centres Index, GFCI 15, which covers 83 financial centres across the world. Mark Yeandle, associate director, Z/Yen Group told Aparajita Mukherjee that they attribute the ranking to Qatar’s strong performance. Qatar’s rating rose by 15 points, mainly driven by its increasing competitiveness and perceived significance as a financial centre and its ranking stands just ahead of Dubai in the Middle East region, stated GFCI 15, which was released by the London based Z/Yen Group. Qatar is ranked 26th, according to the report, but it fell two places, though the average ratings in GFCI 15 are higher overall than in GFCI 14. Explaining the rankings of the country, Mark Yeandle, associate director, Z/Yen Group, told The Edge that Qatar’s performance was strong and it increased by 15 points in the index. “This, however, Mark Yeandle, associate director, Z/Yen Group is lower than the told The Edge that professionals around the globe generally consider Qatar to be slightly more average increase competitive now than it was at the same time last year. over the whole
“Qatar is ranked 26th, according to the report, but it fell two places, though the average ratings in GFCI 15 are higher than in GFCI 14.” 14 | The Edge
index and this resulted in Qatar being ‘overtaken’ by two centres. Buenos Aires went up by 60 points and was up 21 places to 25th and Tel Aviv went up 39 points and 11 places to 21st,” said Yeandle. Qatar’s average global assessment is 694 and its ex-regional average is 690, slightly up from 690 and 683, respectively, in GFCI 14. Commenting on these averages, Yeandle said, “This rise in the ‘raw’ assessments (given by finance industry professions in responses to our online questionnaire) is relatively small but indicates that professionals around the globe generally consider Qatar to be slightly more competitive now than it was during the timeframe for GFCI 14 responses. This is obviously a good story, although assessments from European respondents (48 percent of all assessments given to Qatar) were significantly lower than the mean.” All regions, except Europe and the offshore centres, have given favourable assessments to Qatar, with the Americas being significantly more favourable than the Middle East/ Africa and Asia/Pacific respondents, GFCI 15 stated. The biggest gains in the competitive Middle East and Africa region were seen in Riyadh, which jumped 16 places to 31st position in the world; Bahrain by 12 places to 40th; Tel Aviv by 11 places to 21st, and Johannesburg by 11 places to 50th. Abu Dhabi jumped 10 places to 32nd. However, Istanbul declined three places to 47th and Casablanca entered the GFCI for the first time in 62nd place. GFCI 15 used 25,441 financial centre assessments completed by 3,246 financial services professionals. The GFCI is updated regularly and ratings change as assessments and instrumental factors change.
news business
Doha’s rental inflation to reach 3.8 percent in 2014
The Pearl-Qatar is popular among the affluent segment of Doha’s residents. According to Al Asmakh Real Estate Development Company, a two-bedroom apartment in The Pearl can be leased on an average monthly rate of QAR15,000, and a one-bedroom at QAR13,000.
Experts believe Doha will see rental inflation in 2014 despite current stability in rents, writes Farwa Zahra Based on the analysis of land transactions in Qatar, published by the Ministry of Justice, Qatar Central Bank forecasts overall rental inflation of 3.8 percent in 2014, starting from middle of the year, while staying stable for the first few months.
Considering the increasing influx of expatriates in the run up to the 2022 World Cup, Johnny Archer, head of valuation, research and advisory at Asteco Qatar, does not see rents stabilising in the case of the residential sector. “The impact of new developments coming to the market is more likely to see rents plateau at their current levels in the short term,” he said, “The rental market will continue to be supported by new arrivals to Qatar and it is unlikely that rents will ease down to any significant degree unless there is a prolonged period of oversupply.” Despite a larger number of units in Doha, the occupancy level in residential leasing is as high as 90 percent, according to data provided by Al Asmakh Real Estate Development Company in its latest report for the last quarter of 2013. Increase in rents was already forecasted in Qatar Economic Outlook 2013-2014, which stated: “Rents are already going up and the high population influx in 2013 and 2014 will raise demand for and hence the cost of services.”
Online shopping in Qatar on the rise, according to new survey Consumers in Qatar are increasingly using the Internet for their shopping needs, according to the 2014 Online Shopping Behaviour Study conducted by MasterCard. Nearly 50 percent of those surveyed indicated they access the Internet for online shopping of which more than 80 percent said they were highly satisfied with their online shopping experience. by Shehan Mashood Aaron Oliver, the head of emerging payments for Middle East and Africa, MasterCard said, “Companies can expand their online presence to grow their business and diversify their customer base. For consumers, online shopping is convenient, fast and safe. When you consider the benefits, it is not surprising that more people are going online to make purchases.” According to the study, Qatari consumers cited the security of the payment facility, reputation of website, and convenient payment methods as the most important considerations when making an online purchase. It is unclear how the recent Qatar Central Bank directive, which effectively stopped online purchases using debit cards, has impacted consumer behaviour. While smartphone penetration rate in Qatar is one of the highest in the Middle East, only 15 percent of individuals surveyed made purchases using mobile phones in recent months and an additional 21 percent confirmed their intent to use their phones to make a purchase in the six months following the study.
Number of the month
The percentage of customers in Qatar that intend to use their phones to make a purchase in the next six months.
21% “With increasing Internet penetration levels and the introduction of highly engaging mobile shopping apps, mobilecommerce is certainly an emerging business avenue for companies in Qatar. While currently in its nascent stage, mobile shopping in Qatar is expected to become popular as consumers become aware of the safety and security features and begin getting more familiar with the numerous benefits of being able to shop on the go,” added Oliver. The Edge | 15
news
business in brief Words & Numbers
10%
The expected growth rate of private sector in Qatar in 2014.
“We should neither stigmatise full communities with terrorism, nor attach it to those who differ politically with us , because that would proliferate terrorism rather than isolating it.”
Ministry of Interior to be the honorary sponsor of QITCOM 2014 The Ministry of Interior (MoI) has become the honorary sponsor of the Qatar ICT Conference and Exhibition (QITCOM 2014), organised “QITCOM 2014 by the Ministry of seeks to attract the best institutions, Information and companies, and Communications exhibitors locally, regionally and Technology, scheduled internationally,” said Rinal Chaaban, to be held from May 26 QITCOM project lead, fischerAppelt Qatar. to 28, in cooperation
The increase in the amount of Qatar’s government spending in the first half of FY2014, reaching QAR93.2 billion.
“Women’s leadership is entering a new age in the GCC and the wider Middle East. In recent weeks, several high-profile appointments have been made.” Wendy Alexander, associate dean, Degree Programmes and Career Services, London Business School, on the status of women in the GCC’s labour market.
16 | The Edge
A group photo with Arfat Qayyum (second from left) at Qatar University’s College of Business and Economics.
with fischerAppelt Qatar. Commenting on MoI’s sponsorship, Rinal Chaaban, QITCOM project lead, fischerAppelt Qatar, said the sponsorship highlights MoI’s role to enhance its services and turn them from paper-based to electronic.
Al Khalij Commercial Bank’s head of private banking, Arfat Qayyum, addressed students of Qatar University’s College of Business and Economics, sharing his experience and providing insights on private banking. He engaged students in a discussion about the workings of the banking sector in Qatar. This initiative comes as part of the bank’s corporate social responsibility to support the human development pillar of Qatar National Vision 2030.
Audi presents outlook for 2014 in its annual press conference
Stenden to drive service quality assurance initiative
HH The Emir Sheikh Tamim bin Hamad Al Thani, addressing the Arab League Summit in Kuwait City.
33%
Al Khalij Commercial Bank shares insights on private banking
The annual press conference of Audi revealed that the brand will be launching 17 new cars in 2014 alone.
At the annual press conference, held in Ingolstadt, Germany, Audi presented its key figures for the 2013 fiscal year. The board of management of Audi AG also gave its outlook for 2014. In front of more than 300 international journalists, Audi boss Rupert Stadler said, “2013 was an extraordinary year and we also remain on course for success in 2014.”
Lean Startup programme begins at QBIC Qatar Business Incubation Center (QBIC) kicked off its 10-week Lean Startup programme for the start-ups and scale-ups that had been shortlisted. The Lean Startup is an entrepreneurial programme that provides hands-on learning experience on how to successfully start a company. The participating teams will spend most of their time being out in the market in order to talk to customers, partners and competitors.
Stenden University Qatar is establishing its position as a driver of innovative initiatives in service management training, research and technology to support tourism in Qatar with the development of Qatar PLUS. Coinciding with the appointment of Dr. Eddy Tukamushaba, an international expert in service quality, hospitality education and destination branding, Stenden looks to roll out its new service quality assurance certification later this year.
Qatar Stock Exchange conducts training on strategic planning
The training programme conformed with international standards in the development of executives.
A leading provider of specialised training services, Qatar Stock Exchange (QSE) concluded an integrated training programme on leadership development and strategic planning. The training programme targeted QSE directors and department heads in line with the strategy to develop the capabilities and skills of its employees.
events business
Qatar, April 2014
event of the month 7 - 8 April Arab Future Cities Summit
Qatar’s Lusail City, The Pearl-Qatar, Energy City, United Arab Emirates’s Masdar City, Dubai Smart City and the six projects shaping up in Saudi Arabia, clearly reflect a shift of smart cities from vision to reality. In its third edition, Qatar’s Ministry of Municipality and Urban Planning is hosting the two-day Arab Future Cities Summit 2014. City promotion specialist, Michael Charlton who has consulted for five Olympics, two World Cups and one World Expo, will also be present at the event. “Qatar’s clear commitment to public spending coupled with the most stable business environment in the region makes it the ideal location to host a gathering of senior stakeholders committed to creating smarter cities,” said Charlene Corrin, conference producer at Expotrade Middle East, organisers of the summit.
UPCOMING EVENTS 12 - 15 May Project Qatar
Project Qatar returns for its 11th year. It is one of Qatar’s largest events, and will be held for the first time at the Qatar National Convention Centre. Organised by IFP Qatar (International Fairs & Promotions), Project Qatar this year will have 27 pavillions spread across 41,500sqm of indoor and outdoor exhibition space, with more than 2,100 participating companies and guests from over 50 countries.
26 - 28 May QITCOM
Qatar’s largest ICT event, QITCOM returns for a third year. It will feature a three-day conference, focusing on the challenges and opportunities of ICT in Qatar, the role ICT plays in Qatar’s significant economic and social development and how ICT gives Qatar a competitive advantage by fuelling entrepreneurship and innovation. QITCOM 2014 is organised by fischerAppelt, Qatar, in collaboration with the Ministry of Information and Communications Technology (ictQATAR). Now in its third edition, it is set to become one of the region’s preeminent ICT events and also includes an exhibition and regional awards programme.
26 - 29 May CHRVI
Ali Al Khayat, senior urban planning researcher at the Ministry Of Municipality and Urban Planning, speaks at last year’s Arab Future Cities Summit.
The Cooling, Heating, Refrigeration, Ventilation and Insulation International Exhibition, will present ways to achieve sustainable development in this vital construction sector. There is a significant potential for reducing energy use avoiding CO2 emissions via improved industrial isolation.
The Edge | 17
qatar perspectives
Qatar’s development plans driven by non-oil sector Qatar’s strong growth between 2009 and 2013, Abdul Hakeem Mostafawi of HSBC Bank, Qatar, points out, is not so much driven by energy as it is by the non-hydrocarbon sector. As testimony, he cites several instances, arguing that wise national investments, and carefully balancing the interests of the current generation with those of the future generations will take the country on the path of success. In July 2008, HH The Emir Sheikh Tamim bin Hamad Al Thani (then Heir Apparent) announced the Qatar National Vision 2030. Today, months into his new role as the Emir of Qatar, he is still charting economic and social progress based on this clear vision to invest in world-class infrastructure and to create a dynamic and more diversified economy in the future. From the third quarter in 2013, Qatar recorded growth of around 6.5 percent, the strongest rate of any Middle Eastern economy. What is more significant about this growth rate is the fact that the key driver was not, as one would expect, oil and gas, but rather the expansion in the non-oil sector. The main contributing factor is the construction activities associated with the infrastructure build-up - new roads, the new port and the new railway. Although much of the progress is associated with 2022 World Cup, it is notable that many of the larger infrastructure projects were planned before Qatar was nominated as host to this event. The projects market, estimated to be worth USD285 billion (QAR1.03 trillion), kicked off with the announcement of the 2022 World Cup event in 2010. Up to that point, Qatar had only awarded USD9.8 billion (QAR35.67 billion) of contracts (in 2009) and USD11.4 billion (QAR41.5 billion) (in 2010) as the international construction downturn slowed progress. In 2011, awards jumped to USD16 billion (QAR58.24 billion) and remained at 18 | The Edge
“Although substantial progress is associated with 2022 World Cup, many of the larger infrastructure projects were planned before Qatar was nominated as host to this event.” this level in 2012. In 2013, a steep increase of another 21 percent to USD19.4 billion (QAR70.62 billion) in awarded projects was further evidence that the country’s vision is starting to become a reality. Qatar Rail announced packages worth USD8 billion (QAR29.12 billion). Hamad International Airport (USD17.5 billion, QAR63.7 billion), Qatar Rail (USD40.2 billion, QAR146.33 billion), Lusail City, Festival City, and Qatar Foundation Headquarters (USD8.7 billion, QAR31.67 billion), to name a few, are some of the major infrastructure projects already underway and all have been in the pipeline for more than half a decade. And all of these developments are greatly contributing to the current economic growth in the country. On the back of infrastructure development there is also growth in the population. The total population, now over two million people, is growing at seven percent per annum, feeding a greater demand for housing, consumer goods, education and health. With the listing of Mesaieed Petrochemical Holding Company, a unit of state-owned Qatar Petroleum, on the Qatar Stock Exchange on 26 February this year, another important affirmation of the 2030 National Vision became a reality. The Initial Public Offering is part of Qatar’s plan to distribute its wealth among local citizens through stock market listings of government-related entities. The listing will contribute to achieving economic diversification, expanding private sector participation in the development process, and providing a real opportunity to all
citizens to benefit directly from economic growth. The sustainability of the economic growth will be founded in its diversification. The long-term view is to develop Qatar’s sport, health and education tourism that will guarantee regular economic activity. The projects in line with this ambition are developing fast and the vision will be a reality soon with the opening of Sidra Research Hospital, the continuous expansion of Qatar Foundation’s Education City, as well as the investment in sport development and sport activities. Qatar is progressing well on its path to building a bright future for its entire people. Through wise investments that carefully balance the interests of the current generation with the interests of future generations, there is no doubt that the country’s leaders will succeed in their ambitions.
Abdul Hakeem Mostfawi is CEO of HSBC Bank Middle East Limited, Qatar.
qatar perspectives GCC geopolitics and regional trade Tensions in the Gulf Cooperation Council (GCC), caused by the recent withdrawal of ambassadors by the Kingdoms of Bahrain and Saudi Arabia, and the United Arab Emirates (UAE) from Qatar, have sparked a diplomatic crisis, unprecedented in recent times. Michael Stephens of RUSI Qatar unravels the business implications of this crisis. In an attempt to cool tensions, Qatar refused to reciprocate the gesture, and its ambassadors to the three countries remain at their posts. But Qatar has also indicated that it will not be pushed around by its neighbours. Indeed there is very little sign that Qatar is willing to give way to the demands stipulated by the three nations. The current juxtaposition of the diplomatic stances leaves little hope of an immediate solution, and this is, of course, a cause for worry. Indeed, many regional commentators and political analysts expect that things may get worse before they get better. That being said, the ladder of escalation is a long one, and should matters get worse, it is likely to be a gradual escalation of coercive diplomatic and economic measures put in place over time, and not an immediate package of harsh sanctions. Such a policy would benefit none, especially as trade between Qatar and its neighbours continues to grow rapidly. Bilateral trade between Qatar and the UAE and Saudi Arabia now stands at USD6.4 billion (QAR23.3 billion), although it is important to note that according to Bloomberg, this represents less than five percent of Qatar’s total trade. Any sanctions imposed on Qatar by its neighbours would bite, but not be sufficient enough as to be crushing. How this will affect business in Qatar is unclear at present. Threats to close off Qatar’s airspace, land borders and sea lanes have all been reported, and have found their champions in the Saudi and Emirati 20 | The Edge
“Any sanctions imposed on Qatar by its neighbours would bite, but not be sufficient enough as to be crushing.” press. But there is little to substantiate these reports at present. But it is important to remember that while the diplomatic disagreements rage above the heads of most of Qatar’s residents, life for the most part will continue as normal and Qatar’s economy is unlikely to take a heavy hit as a result. The latest monthly report from Qatar National Bank indicates that if anything, Qatar’s economic growth is still extremely strong. The population continues to rise (now estimated at 2.12 million) fuelled by a large influx of workers for the 2022 World Cup. This population increase is likely to drive domestic consumer demand regardless of political developments. Barring a severe blockade on Qatar’s ports (which is unlikely to occur), the industrial sector will continue to show strong growth, particularly as construction projects for the 2022 World Cup start. It is also extremely unlikely that telecoms would be affected by any further diplomatic problems, again fuelled by population, and infrastructure increase and the associated demand for communications. Furthermore, the vast bulk of Qatar’s economic wealth is still driven by the hydrocarbon sector, and the current crisis in Crimea has come at a fortuitous time for Qatar, keeping hydrocarbon prices high. Although the Qatari bourse dropped by 2.1 percent on the day of the announced withdrawal, much of its future performance will be shielded by the continued strong performance of hydrocarbons. Indeed in the week to March 22, the bourse had shown a slight recovery of 0.2 percent with 27 of the 43 listed companies showing a gain, although it should be noted that overall trading was still down. For the moment, there is no need for panic. Qatar’s economy is likely to remain
robust for some time to come, driven by a global need for hydrocarbons and also by Qatar’s insatiable thirst for domestic growth, and the country should be able to weather the diplomatic storm, even if it continues. Qatar’s relationships with the international community will ensure that whatever the situation in the GCC, the country will not be isolated as it prepares for the 2022 World Cup.
Michael Stephens is a researcher at the Royal United Services Institute in Qatar and a regular contributor to media outlets such as The Guardian, BBC.co.uk and The Economist.
This section is brought to you by Qatar Financial Centre Contents: Insurance sector to benefit from economic boom 25. Capital management initiatives for banks in Qatar 28.
finance & markets
HE Sheikh Abdullah bin Saud Al Thani, governor of QCB (and also the chairman of the QFCA and the QFCRA), said insurance and reinsurance are important sectors as Qatar has already embarked on huge infrastructure development projects ahead of its preparations to host the 2022 World Cup. (Image Reuters/Arabian Eye)
Insurance sector to benefit from economic boom At the recent ninth Multaqa Qatar 2014, hosted by the Qatar Financial Centre Authority (QFCA), the forum comprising bankers, insurers, brokers and reinsurers discussed the prospects of the insurance sector in Qatar, with the consensus that the industry will gain from Qatar’s economic growth. by Aparajita Mukherjee Brought to you by:
atar’s medium-term economic prospects and project spending will have a positive impact on the insurance and reinsurance industry, Qatar Central Bank (QCB) Governor and Chairman, Qatar Financial Market Authority, HE Sheikh Abdullah bin Saud Al Thani told the ninth MultaQa Qatar 2014, held in Doha last month in his keynote address. “Economic prospects in Qatar are still positive in the medium term,”
Sheikh Abdullah said, adding that overall there has been positive economic momentum and particularly in the non-oil segment. Indeed, the International Monetary Fund has said that Qatar’s inflation-adjusted growth could remain at around six percent this year and that the non-oil sector could outperform hydrocarbons. Sheikh Abdullah, who is also the chairman The Edge | 25
sectors | finance & markets
of the Qatar Financial Centre Regulatory Authority (QFCRA), said insurance and reinsurance were important partners as Qatar has already embarked on huge infrastructure development projects ahead of its preparations to host the 2022 World Cup. According to various reports, more than USD150 billion (QAR546 billion) is being planned to invest in order to upgrade the infrastructure in the country, which has already taken steps to strengthen privatisation. “This economic development will have a positive impact on [Qatar’s] insurance industry as it would increase the level of premiums and open newer opportunities,” Sheikh Abdullah said, adding that proper risk management is a key to addressing and limiting the risks associated with insurance. Taking a cue from the four-pillared Qatar National Vision (QNV) 2030, which is a roadmap for the country’s sustainable development, he said both the QCB and the QFCRA have put in place the required regulatory framework to support economic development and achieve financial stability. Sheikh Abdullah added that the partial privatisation of state-owned energy companies, which started with the initial public offering (IPO) of Mesaieed Petrochemical Holding Company (MPHC), will continue in the coming years. “The economic development strategy includes 10-year plan which aims partial privatisation of state-owned energy companies, and its first phase started in Janaury this year with IPO of MPHC,” said Sheikh Abdullah.
6%
Qatar’s inflation-adjusted growth in 2014, according to IMF.
MENA insurance barometer
The second MENA Insurance Barometer, published by the QFCA at the Multaqa conference, has revealed a strengthening of confidence in the region’s insurance sector. According to the survey, compulsory insurance requirements and continued investments into infrastructure projects will drive demand. The barometer is based on 38 in-depth interviews with senior insurance executives and intermediaries operating in the region. Three-quarters of the executives polled expect regional insurance premiums to outgrow gross domestic product (GDP) over the next 12 months. Between 2007 and 2012, the region’s economies grew at an inflation-adjusted growth rate of 4.7 percent per annum – markedly faster than the global average of 3.3 percent.
Geographical split of MENA insurance premiums Qatar in 2012 2% The region’s four largest insurance markets – Turkey, Iran, UAE and Saudi Arabia – account for almost threequarters of the total premium.
Algeria 3%
Others 10%
Lebanon 3%
Turkey 25%
Egypt 4% Morocco 6%
Iran 19%
KSA 12% UAE 16%
Source: Swiss Re, sigma, QFC Insurance Barometer
26 | The Edge
“Based on their strong fundamentals, the MENA insurance markets will continue to grow. The barometer enhances market transparency as a key prerequisite to doing insurance business and, therefore, is an essential part of our commitment to the sector,” said Shashank Srivastava, CEO and board member of the QFCA. According to the survey, personal lines are set to benefit from additional compulsory insurance requirements, while commercial insurance will receive a boost from new infrastructure and construction projects. Opportunities arise from the large pipeline of major infrastructure and construction projects, the low insurance penetration levels of about 1.3 percent (premiums as a share of GDP), a mere fifth of the global average of 6.5 percent, and the population growth, fuelled by a continued influx of expatriates. The region’s greatest strengths are its continued economic growth and the solid rise in direct insurance markets. Moderate natural catastrophe exposures and a young and growing population are further assets. The region’s insurance markets also display weak spots: current insurance prices, both in personal and commercial lines, are perceived as insufficient. However, as rates might have hit the bottom, an increasing number of executives expect stable to rising prices and hence improvements in profitability. Despite the weak pricing, only 16 percent of respondents expect MENA insurance markets to consolidate over the next 12 months as improved levels of capitalisation and the family ownership of many regional insurers remain obstacles.
Commercial insurance will receive a boost from new infrastructure and construction projects.
sectors | finance & markets
Banking industry
Capital management initiatives for banks in Qatar Omar Mahmood and Angshuman Dey of KPMG Qatar look at the recent initiatives in strengthening the bank’s capital management process and essential elements thereof. As part of Qatar’s vision to become a progressive and diversified country, the banking and finance sector is currently undergoing major changes trying to meet the new business environment. Qatar is seeking to diversify the economy and create a manufacturing base and promote small and medium enterprises (SME) sector. Banks in Qatar have to play a critical role to achieve this, which implies growth of the asset book of the banks.
The growth
In Qatar, higher lending associated with large infrastructure projects, a low cost of funding and foreign acquisitions have all supported banks’ growth. Loan growth in Qatar was 23 percent in 2013. With the acceleration of investment projects ahead of the 2022 World Cup, these trends are likely to continue going forward. Higher lending, a low cost base and low provisioning requirements have all supported the banks’ overall profitability, with a return on equity of 16 percent in 2013. Sustenance of such growth beyond national boundaries requires financial sector reforms, regulatory changes, governance and capital management.
Improved financial regulation
In its continuous effort to develop a strong and resilient banking and financial sector, Qatar Central Bank recently introduced a series of measures, such as Basel III directives, stress testing and internal capital adequacy assessment process (ICAAP, Basel Pillar 2, including Supervisory Review and Evaluation). These standards have long been introduced and adopted by other central banks regionally as well as globally. Keeping in view the rapid loan book 28 | The Edge
growth and continuous increase of Real Estate Price Index, the banking sector has to align their business model and strategy supported by robust capital management and liquidity. The positive regulatory moves may present significant strategic and operational challenges for the local banking industry, but these challenges can also be viewed as opportunities to create a strong and forward-looking banking industry that has a competitive advantage, not just in the Middle East but worldwide.
Key elements management
of
capital
The four fundamental components for a sound capital management process are internal control and governance, capital policy and risk capture, forward-looking view, and management framework for preserving capital. Implementation of capital assessment and management process requires significant commitment in terms of resources including infrastructure and senior leadership’s time. Hence, it would be prudent to derive optimal benefit from such investment. Banks in Qatar may have to look into realignment of the policies, processes and key performance indicators at a bankwide level, to demonstrate that a robust process is in practice on a day-to-day basis. It calls for a structured and time-bound approach and shall not be seen as a mere regulatory requirement. There has been widespread concern among regulators and market analysts about banks’ internal modelling and the
accuracy of the resulting risk weighted assets used for capital management, resulting in calls for greater simplicity in regulatory requirements from some leading regulators. In essence, banks need to ensure that they fully understand their capital and liquidity needs. This needs to be based on clear statements of strategy and risk appetite that drive both their internal assessment of capital and liquidity and how they manage their businesses. The capital management requires balancing risk sensitivity, simplicity and comparability. Proper evaluation should be done to assess the advantages of greater simplicity and comparability; and the potential disadvantages of overly simplistic approach. Banks in Qatar should adopt a ‘fit for purpose’ capital management framework based on the standards and practices.
Omar Mahmood is partner and head of financial services, and Angshuman Dey is senior manager, management consulting at KPMG in Qatar.
International reserves remained robust in January 2014 (USD billions, left axis; Months of import cover, right axis) Months of Import Cover International Reserves
45
45
40
40
35
35
25
25
20
20
15
15
10
10
5
5
0
0 2008
2009
2010
2011
2012
2013
Source: Qatar Central Bank (QCB) and QNB Group analysis
Contents: Moratorium or growth? The energy choice facing Qatar 29. Kickstarting Qatar’s nascent recycling industry 30 . GDI eyes growth in Qatar onshore extraction 32 .
energy & sustainability Moratorium or growth? The energy choice facing Qatar Doha may soon come under pressure to lift its moratorium on North Field gas production, writes Jamie Stewart, The Edge’s editor of the Energy and Sustainability Sector.
I
nertia is a word that you would rarely associate with the politics of Qatar – the nation bringing the World Cup to the Arab world and which regularly treads a tightrope between Eastern and Western interests on the global stage. Yet, this is the word chosen in a new report to describe Qatar’s energy policy in relation to the extraction of the land’s most precious export, natural gas, from the giant North Field. Decisions taken some years ago over the rate at which Doha should extract gas from beneath the seabed of the Gulf north of the peninsula have, the report suggests, led to “under-investment” – a term rarely, if ever, used previously when describing Qatar’s hydrocarbon exports. According to the most recent Economic Commentary report, published by the Arab Petroleum Investments Corporation (APICORP), Qatar must today be considered in the same vein as Kuwait. “Under-investment, which has been particularly apparent in Kuwait, is now the case in Qatar as well,” the APICORP report stated,
Substantial new LNG production facilities are due to come online while demand is also set to grow as the world will gradually turn to cleaner natural gas. (Image Reuters/Arabian Eye)
The Edge | 29
sectors | energy & sustainability
1.9%
If natural gas supply and demand both grow substantially over coming years, the marketplace, as the collective whole of its two parts, will also grow, particularly within the area of LNG exports. (Image Corbis)
before describing the Kuwait situation. It then continued, “In contrast, Qatar’s stagnation stems from a long-standing moratorium on further development of the North Field. As a result, and despite a shift in emphasis on enhancing oil recovery and expanding the petrochemical industry, energy investment in Qatar has lost momentum.” This may not seem like an imminent concern for the country that comfortably leads the world in liquefied natural gas (LNG) exports, that earlier this year was reconfirmed as having the third-largest proven reserves of natural gas in the world; and in which annual natural gas production is five percent of the world’s total while consumption is less than one percent.
Pressure
So what, in Doha’s eyes, should LNG stand for? The government may very soon find itself under increased pressure to lift the moratorium, which was first announced back in 2005 to conserve the nation’s most valuable resource, but some feel has outlived its purpose.
“Qatar’s stagnation stems from a long-standing moratorium on further development of the North Field” – APICORP report. 30 | The Edge
The percentage by which natural gas demand is expected to grow per year, between 2012 and 2035.
Substantial new LNG production facilities are due to come online as the current decade rolls on while demand is also set to grow as the world turns slowly but surely from burning carbon-intensive coal to the relatively cleaner natural gas. “Between 2012 and 2035, natural gas demand is expected to grow by an average 1.9 percent per year, outpacing all other energy sources,” Qatar National Bank (QNB) stated in a mid-March commentary focused on the natural gas industry, citing figures from the latest BP Energy Outlook, which covers the period out to 2035. “This is likely to lead to higher natural gas prices, including for LNG.” In QNB’s report, it made clear that, growth will come, led by the burgeoning economies of the East, “Overall, natural gas is expected to be the fastest growing of the fossil fuels,” it states. Non-OECD (Organisation for Economic Cooperation and Development) countries, led by China and India, should generate 78 percent of natural gas demand growth with industry and power generation accounting for the largest increments to demand by sector,” it stated. And a further prediction, more perhaps than any other, should give Doha reason to consider the sustainability of its moratorium. “LNG exports are expected to grow more than twice as fast as gas consumption, at an average of 3.9 percent per year, accounting for 26 percent of growth in global gas supply to 2035,” QNB states, again in reference to the BP report. Should natural gas supply and demand both grow substantially over coming years – which is as much a certainty as anything can be in global energy development – the marketplace, as the collective whole of its two parts, will also grow, particularly within the area of LNG exports.
Kickstarting Qatar’s nascent recycling industry Recycling is a sorely underdeveloped area of Qatar’s economy, despite inherent and sustainable benefits. But with the country’s progress in green projects, one local bank has just taken the first step towards developing the nascent sector.
A Qatari bank spoke of the importance of large-scale recycling to the economy of the country as it unveiled plans to finance a giant QAR118 million used-tyre recycling plant in Mesaieed Industrial City. But, the announcement was followed within a fortnight by figures proving that the nation has some way to go if it wishes to build a comparatively healthy recycling sector. According to Qatar Statistics Authority’s most recent report about sustainable development, published in mid-March, “The recycling rate is still in decline” across the peninsula, with just nine percent of total waste generated being recycled, “which is far less than Switzerland and Germany where recycling passed 50 percent,” the authority stated. Despite being far behind when compared to some countries, it must be remembered that Qatar is still a young nation, with an economy that is developing and steadily diversifying. And projects, like
qar
118
million
The cost of the used-tyre recycling plant in Mesaieed Industrial City.
sectors | energy & sustainability
A 20,000 square-metre greenfield project, the Modern Recycling Plant (MRP), is being financed by al khaliji. (Image Corbis)
that being built in Mesaieed Industrial City, are just the kind of industrial-scale schemes needed to make an impact in the net total of waste produced across the country. The 20,000 square-metre greenfield project, the Modern Recycling Plant (MRP), is being financed by Al Khalij Commercial Bank. Recycling at the plant will be a threestage process. First is the raw material stage where tyres will be broken into small pieces and shipped to the factory. Next, in the primary products stage, tyres will be dismantled into their three component materials – rubber, linen, and silk – whereby silk and linen will undergo a cleaning process, before being stockpiled for resale. The final products stage will be when the stored rubber is used and converted into rubber flooring and tiling products for sporting activities and venues. According to the MRP chief executive, Ibrahim Al Muhannadi, there is much more to recycling than practical steps and business opportunities. “This project is only a starting point to support a knowledge-based economy, building on our firm belief that the industry itself is a foundation for innovation, and for the creation of new products that contribute to economic growth,” he said. He added that recycling has served as a “solid pillar for the economies of developing countries,” adding that Qatar should pump investment into the sector now while it is “witnessing a period of economic prosperity” . Although the creation of a knowledgebased economy and the recycling of tyres may not immediately go hand-in-hand in most people’s thoughts, Al Muhannadi explains 32 | The Edge
further, “Recycling should be a fundamental practice in any society, as it reduces the need for raw materials, conserves energy and preserves our natural resources.” The decision to provide funding falls under the Al Khalij Commercial Bank Generation Green programme, the bank states, which aims to support environmental development and social responsibility in Qatar. This will become ever more important in Qatar as the nation moves away from it reliance on upstream hydrocarbons for income, which previously went some way to protecting the nation from global economic crisis. The MRP is a step in the right direction for Qatar, although compared to the examples of other nations, where recycling of total waste has surpassed the 50-percent mark and beyond, Doha still has some way to go. As Al Muhannadi said, Qatar should invest now.
“Recycling should be a fundamental practice in any society.” - Ibrahim Al Muhannadi, MRP chief executive.
GDI eyes growth in Qatar onshore extraction Qatar-based Gulf International Services has released a bullish outlook for its hydrocarbon drilling business, saying it “will favourably consider any prospective acquisition” that meets set criteria amid “favourable” market conditions.
Specifically, the company’s subsidiary Gulf Drilling International (GDI) revealed in March that it is considering to acquire further landbased extraction rigs. The bullish statements suggest room for growth in Qatar’s onshore oil and gas sector. “With market conditions remaining favourable, the company continues to evaluate opportunities for further growth,” the GDI statement revealed. “If an asset is suitable for the long-term requirements of a targeted client and can be acquired on favourable terms within the capital constraints of the company, GDI will favourably consider any prospective acquisition.” The company is set to put three assets into operation by the end of this year: one, onshore rig, bringing its onshore total to seven; and two, offshore assets, bringing its total offshore to 11. This will mean the number of operations conducted by GDI will have doubled from nine to 18 between the start of 2012 and the end of this year. This is an impressive growth rate considering Qatar’s moratorium on offshore gas extraction effectively began when its 77 million tonnes per annum target was reached in late 2010.
Jamie Stewart is a freelance journalist and oil and gas industry researcher and analyst based in the United Kingdom.
Contents: Five stadiums for 2022 World Cup to begin early works in 2014 33. What does the GCC dispute mean for the real estate sector of Qatar and the wider Gulf? 34.
real estate & construction Five stadiums for 2022 World Cup to begin early works in 2014
The Aspire Zone, also known as Doha Sports City, is one of the largest sports facilities in Doha. At the Qatar Projects Conference, Yasser Al Mulla, project manager at Al Rayyan Precinct for 2022 Supreme Committee for Delivery and Legacy told that the year 2014 will see five stadiums begin the early works on foundations and construction. (Image Corbis)
With six stadiums in their advanced stages, early works will begin for another five in 2014, during which 10 stadium tenders will be awarded in total.
A
ddressing the visitors on the first day of the MEED Qatar Projects Conference 2014, Yasser Al Mulla, project manager at Al Rayyan Precinct for 2022 Supreme Committee for Delivery and Legacy, said, “We are in the advanced stages of design work for six stadiums and this year we will see five stadiums begin the early works on foundations and construction.� Al Mulla also told that the budget for stadiums and other sports infrastructure for the World Cup has been increased by USD4 billion (QAR14.5 billion). With Al Wakrah stadium under construction, the next large stadium planned is the Lusail Iconic stadium, designed to accommodate more than 86,000 people. Other projects connected to the 2022 World Cup include expanding hotel keys by 80,000. Qatar Projects, which started in 2003, returned with two tracks: infrastructure and transport track, and energy and utilities track. Speaking about the former sector, Ali Al Kuwari, acting group CEO of Qatar National Bank forecasted the country would spend USD29 billion (QAR105.5 billion) on The Edge | 33
sectors | real estate & construction
projects in 2014, with highest investments in construction and transport sectors expected to fall anywhere between 34 and 46 percent. In 2013, Qatar awarded around USD20 billion (QAR72.8 billion) worth of contracts on various construction and infrastructure projects such as Qatar Rail’s Doha Metro Red and Green Lines and several stations. In a review of the GCC projects market from 2008 to 2013, MEED representative indicated a 26 percent growth between 2012 and 2013 in Qatar, compared to the GCC average of 21 percent during the same period. Public Works Authority (Ashghal) also revealed plans to launch USD27.5billion (QAR100 billion) worth of expressway and interchange projects over the next five years. In 2013, Ashghal awarded contracts worth more than USD3 billion (QAR10.9 billion). The company’s representatives also revealed its plan to complete road projects by 2020.
QATAR PROJECTS AT A GLANCE In 2013,Qatar awarded
In 2014, Qatar is expected to award
QAR
QAR
billion contracts
billion contracts
26%
21%,
in 2012 and 2013
in 2012 and 2013
72.8 105.5
Qatar’s expected projects market growth
GCC’s projects market growth
What does the GCC dispute mean for the real estate sector of Qatar and the wider Gulf? With Dubai and Doha being the highlights of Gulf’s real estate developments over the last few years, can the recent diplomatic disagreement of UAE, Saudi Arabia and Bahrain against Qatar change the game in favour of politically quieter states such as Oman? explores Farwa Zahra With recent political rift stirred between Qatar and a group of three other Gulf states Saudi Arabia, United Arab Emirates (UAE) and Bahrain, Saudi Foreign Minister Prince Saud Al Faisal has said that the dispute will persist if Qatar does not revise its foreign policy. Ostensibly, the political rivalry has a potential to affect cross-border real estate investments made by Gulf citizens. As some countries take an active political stance, quieter nations such as Kuwait and Oman remain comparatively safer zones for real estate investments. According to the Cost of Living GCC Report 2013-2014 (CLR), owning an apartment is lot less expensive in 34 | The Edge
Oman than in neighbouring countries, suggesting the country as a safer location for investments. While a studio apartment in Oman in the GCC freehold market costs from USD78,000 (QAR 283,920) to USD249,600 (QAR908,544), in Kuwait it is between USD105,900 (QAR385,476) and USD282,400 (QAR1 million). However, the market for villas shows a reverse trend. Lower prices for villas in Kuwait, according to the report, are primarily attributed to lower demand for such units. Confirming the increasing interest of GCC buyers in Oman, Christopher J. Steel, managing partner of Savills Oman, said, “There is an increase in demand from GCC nationals. It is understood that UAE nationals are the largest buying population over the last few years but there is also strong demand from Qatar, Kuwait and Bahrain.” Speaking about the aspect of risk mitigation in Oman’s real estate, Steel said, “It is politically, economically and socially very balanced and the growth plan put in place by the government
“Oman has become a good place to diversify a real estate portfolio. It is seen as stable politically and economically.” Benjamin Cullum, Hamptons Oman.
real estate & construction | sectors
“Oman is politically, economically and socially very balanced and the growth plan offers significant upstream confidence.” Christopher J. Steel, Savills Oman.
Benjamin Cullum, general manager of Hamptons in Oman, says that Oman has been of interest to GCC nationals either for investment or for owning a second home due to its regionally unique climate and geography.
offers significant upstream confidence.” Benjamin Cullum, general manager of Hamptons in Oman, agreed when he said, “Oman has become a good place to diversify a real estate portfolio, it is seen as stable politically and economically.” “This more controlled approach is clearly of appeal to some investors, primarily those that have higher risk ventures elsewhere and wish to ‘balance’ their portfolios with some safer options,” said Steel. The Edge | 35
sector name | banner heading
Contents: Is wearable technology the future of payments? 37 . Saving costs by data centre planning 38 .
tech & communications Is wearable technology the future of payments? The Edge spoke with Rob Reeg, the president of MasterCard technologies and operations, about what the future of the payments industry looks like for both customers and merchants. What sort of technologies do you see emerging in the payments industry in the future? Our goal is to position ourselves as a technology leader in the payments industry by making our products safe and secure for our cardholders and banks to use, and by tapping into mobile and wearable technology to provide consumers with new and innovative ways to pay. How will payment be integrated into wearable technologies? What scenarios do you see them being used in? Consumers are looking for convenience and security and that is where wearable technologies can fit in. At GITEX Technology Week last year in Dubai, we demonstrated how gadgets such as Google Glass can be turned into a next generation payment tool. As we begin to see more universal acceptance of different payment tools, including mobile devices, consumers will no longer need to carry a card product to make everyday purchases.
Sergey Brin, cofounder of Google, demonstrates Google Glass, a wearable device with a head-mounted display. Rob Reeg, the president of MasterCard technologies and operations, says MasterCard has already built a Google Glass payment application, and believes integrating payment systems into wearable technology will definitely be one of the future trends in the industry.
The Edge | 37
sectors | technology & communications
Are there any other project areas under development? Our team at MasterCard Labs is constantly working on developing payment solutions of the future. The team is looking at how we can integrate the purchasing experience in digital media. To give you an example, we are testing a product that allows shoppers to sift through a fashion magazine digitally, choose an item of clothing they like, create their own avatar and have the avatar try on the item of clothing. At the end of the day, it is all about the user experience. Consumers want to buy, and merchants want to sell. Our challenge is to make that process safe, secure and convenient for both of them. Does this mean you are moving away from payment processing to a company more focused on user experience? We are looking to integrate the user experience with the payment processing system. The payment processing system will always be our core strength. What kind of impact do these technologies have on consumer behaviour? Here in Qatar where there are almost two phones per person, the acceptance of technology is far greater and faster than some of the other geographies around the world. So, a key focus for us is to develop new products and services that are relevant to this market and that can also be rolled out globally. Although some of our solutions
will be specific to smartphones, we want to make them as ubiquitous as we can so that the greater global population can also benefit. What role does legislation play in rolling out new technology? We operate in 210 countries around the world, so we have to ensure we comply with 210 different regulatory bodies. Governments around the world including in the Middle East and Africa region are looking to better serve their citizens – and they want to do it in the most efficient way.
Do you have companies approaching you to integrate MasterCard systems into their own technologies? We are regularly approached by organisations. One of the things we have started this year is a venture capital approach to new ideas and innovation, where we look to help start-ups with facilities and initial funding to get them up and running. There are so many great ideas out there, and we want to be in the know of the best ideas right from the start, rather than seeing something at the tail end. What are your thoughts on cryptocurrencies such as Bitcoin? From a regulatory standpoint, the environment around the whole topic of digital currency is in the very early stages of development. There needs to be a level playing field for how digital currency is approached, regulated and monitored. There is a central role that governments and regulators must play to define the rules around topics like consumer protection, value stability and anonymous transactions, among other things. As you might expect, we have R&D work going on in this area and we’ve recently filed for patents in the space. We are advancing the future of payments through technology, partnerships and people.
“Consumers will no longer need to carry a card to make everyday purchases.” – Rob Reeg, MasterCard. Saving costs
by data centre planning
The investment in data centre delivered services and managed services will continue to remain a focal point of operators’ strategy, writes an expert from a network infrastructure firm.
Rob Reeg, the president of MasterCard technologies and operations, says they will start a venture capital approach to investing in new ideas this year, by offering start-ups with Series-A type funding and facilities.
38 | The Edge
As enterprises race to keep up with the data tsunami by adding capacity through co-location, upgrades or the construction of new data centres, their costs are increasing rapidly. According to IDC, the Middle East and Africa are leading the sales, where switch sales increased by almost 23 percent year on year.
sectors | technology & communications
Plan, monitor and manage
There is no magic formula to prepare a data centre for everything the future holds. However, there are a number of fundamental areas that should be considered carefully. Collaboration across all areas of the business is vital. This includes identifying the key organisational stakeholders, in order to understand the business and technology drivers relevant to a company. The second element is to partner with technology leaders who have the proven experience, knowledge and the innovation to deliver the solution. This strategy is the basis for a plan that will help provide a scalable, agile and sustainable IT infrastructure and facility. The proactive management (gathering information from all stakeholders involved) of a facility is also fundamental to its sustainability and risk mitigation. We all understand how quickly technology evolves, this is driven in most part by us, the consumer, demanding higher bandwidth and low latency. We are in a mobile age and these demands create challenges in the data centre. The cabling infrastructure is the foundation for everything that sits on the network and drives the business, so the quality, design and performance of the solution should also not be underestimated.
Future developments
As data centre design and operations become more complex, the ability to effectively scale and upgrade a facility is also a concern. Pre-wired and tested data centre solutions, known as modular data centres, are being increasingly used by some of the largest organisations in the world, allowing additional IT and support systems to be brought into service, quickly and as required. These modular solutions are pre-wired, terminated and tested, allowing for rapid deployment once they reach the site. Each module can be custom-built to suit a customer’s requirement, containing the necessary cabling, storage, server and network resources for initial operations, along with the supporting utility services. As more resources are required, simply add another module to provide quick and seamless integration. This allows the data centre to grow with the business, while realising significant savings in both capital and operational expenditure.
David Hughes is the senior technical manager at CommScope MEA.
40 | The Edge
Contents: Qatar launches new education initiative 41 . Neuroscience conference in Qatar 42.
healthcare & education
HE Sheikha Hind, speaking at the launch of Teach for Qatar, said the young people who had benefited from higher education in Qatar now have an opportunity to give back to the community by joining fellowship programmes.
Qatar launches new education initiative
A recent study by EY on youth employment in the Gulf Cooperation Council concluded that many employers do not believe that the local education system prepares young people with the necessary skills, training or attitudes for the workplace. Teach For Qatar is one initiative that is hoping to address this challenge. by Shehan Mashood
O
ne of the main challenges seen by experts is a growing mismatch between the skills students are gaining through their formal education, and the skills that employers need to drive productive and profitable businesses. Frank Edwards, the workforce director at Pearson, a global firm focused on education, said recently, “The mounting skills gap crisis is having a damaging impact on countries not only in the Middle East, but right around the world. It can be
attributed in part by entrepreneurship and productivity stagnation and the overall slowing of economic growth in affected countries as well as structural weaknesses in education systems. The problem is also having far-reaching social and political ramifications that policy leaders are keen to address.� Only 29 percent of employers feel that current local education prepares students with the necessary technical skills, stated the EY survey. The study also revealed that
less than one-fifth agree that it prepares young people with the right attitude for work. With more young people entering the workforce, the need for long-term investment in developing skills in students is as important as job creation to promote sustainable growth, stated the EY report. While there have been numerous efforts made to address the education gap in Qatari schools, the most recent is Teach For Qatar, a non-governmental organisation for engaging recent The Edge | 41
sectors | healthcare & education
graduates to teach at independent schools. Formed in 2013, it was officially launched by Her Excellency Sheikha Hind bint Hamad Al Thani recently and became a member of the global NGO network Teach For All. According to Teach For All, despite Qatar being one of the richest countries in the world, based on academic performance the country ranks in the bottom eight percent of 65 countries participating in the Programme for International Student Assessment (PISA). In the last available study, from 2012, it
ranked worse than the Organisation for Economic Co-operation and Development (OECD) countries in mathematics, reading and science. Although, it did show that they were getting better. The aim of the NGO is to attract recent university graduates and young professionals from various backgrounds and specialisiations, provide them with rigorous training and place them as teachers in independent schools across Qatar for what they call a two year ‘fellowship.’ Ten local independent schools have
already signed agreements to hire teachers recruited and trained by the organisation. According to Teach For All, the programme is expected to place 30 fellows in classrooms by September 2014. HE Sheikha Hind speaking at the launch said, “I call upon our youth who have benefited from the flourishing of higher education in Qatar to take advantage of this opportunity to give back to their community, and be part of a process of change that perhaps they once dreamed of effecting when they were young students themselves.”
Education
Neuroscience conference in Qatar
Attendees at the Qatar Clinical Neuroscience Conference hear speakers discuss health issues such as depression, strokes and traumatic brain injury, and their impact on society.
The Qatar Clinical Neuroscience Conference was held in Doha recently, where two and a half days of high-level discussion of the latest advances in neurological treatments, were discussed.
The symposium was developed to incorporate two of the most common neurological issues – injuries and disorders of the brain – in the healthcare arena. Affective disorders such as depression, and strokes and traumatic brain injury have been defined by the World Health Organization (WHO) as two of the most serious health problems today, affecting not just Qatar, but the entire globe. In fact, of the 20 leading causes of death, 14 of them are based in neuroscience while one in six people will experience a serious episode of depression at some point in their lives. 42 | The Edge
Dr. Matthew E. Fink, the chairman of the department of neurology at Weill Cornell Medical College in New York, said that strokes are the second leading cause of death in the world but that if the knowledge we have is applied to the general population, 80 percent of strokes could be prevented. He said that epidemiological studies had shown that stress was a major risk factor for strokes – and not just ‘bad’ stress. Even joyful occasions can create stress, he added, and startlingly, the risk of suffering a stroke doubles in the two weeks following a birthday. Other new research that was also showcased at the conference included a demonstration of how fibre optics could shine light on specific areas of the brain that affected the anxiety response in mice, was also was presented by Dr. Karl Deisseroth from Stanford University. Similar
research is being conducted on how the same technique could be used to learn more about disorders like depression, social dysfunction and even drug addiction. Among the presentations directly related to Qatar, was research presented by Dr. Ziad Kronfol, a professor of psychiatry at WCMC-Q and a consultant at Hamad Medical Corporation. His research within Qatar and the region showed that while many of the characteristics of patients with bipolar disorder were shared across international borders, there were some aspects more common to the Arab world. “Bipolar patients in the Arab world more often exhibit conditions not typically associated with bipolar disorder, like diabetes and obesity,” said Dr. Kronfol. “The disorder also tends to run in families. However, bipolar patients in the Arab world do not display as many additional psychiatric conditions as those in other regions.” Earlier this year, Qatar launched a new National Mental Health Strategy to confront mental health issues in the country, and the programme is likely to benefit from such knowledge-sharing exercises.
80%
The percentage of strokes that could be prevented.
Why embracing IT is not a choice for Qatar’s SMEs
urge of n
The ency now
cover story | business technologies
It is becoming a near impossibility for businesses, even a small firm employing less than a handful of people, to stay competitive and innovate in the marketplace without the aid of technology. Whether it is reaching out to customers through a simple website, or using email to communicate with clients, an investment in even the most basic IT infrastructure is a matter of necessity and not choice. by Shehan Mashood
I
f one wants to understand the benefits of why SMEs should start making significant increases in their investments in technology, Stephan Berner, the managing director at Help AG, a firm that specialises in IT security, tells The Edge, “We simply have to take a look at how ICT has radically transformed and streamlined the business process of public and enterprise-sized organisations. Improvements to employee productivity, asset management, client servicing, flexibility and scalability, are all made possible by deploying new technologies.” In fact, a study commissioned by software firm, Red Hat, found that some of the most successful companies around the world pursued a strategy of deploying IT as their main approach to innovating their operations and products. For example, understanding and engaging with customers is one of the most listed areas where IT will be used in the future to innovate, with 55 percent of survey respondents saying processes will change significantly and 20 percent saying it would be transformed completely. The government also understands the importance and role of the technology sector in delivering on the task of increasing the contribution of the small- and medium-sized enterprises (SMEs) in Qatar, which according to Qatar Statistics Authority data from 2010, make up 90 percent of registered firms in the country. According to the Ministry of Information and Communications Technology, the government is investing more than QAR6.2 billion between 2010 and 2015 as part of a five-year plan. This includes the rollout of next generation communications infrastructure such as high-speed broadband and legal and regulatory frameworks to increase the overall size and competition in the ICT sector, which could create better choice for customers. Many technology companies are already seeing the potential for SME-related growth in Qatar. Most recently, technology giant Microsoft hosted a workshop in Qatar aimed primarily at SMEs, where Jean Philippe Courtois, the president of Microsoft International gave a keynote on how technology could help SMEs compete in an increasingly globalised marketplace. Courtois, who joined Microsoft back in 1984 when it was a small business, spoke to the audience about the technologies they were deploying in Qatar, and how businesses could benefit saying, “I can tell you that in having many discussions with owners and business managers in enterprises everywhere, and not just the large firms but SMEs. They say two things, at the senior level, it is about driving volume and customers, it is about reducing costs, streamlining costs, and increasing productivity of your workforce, it is about attracting talent, which is very important in Qatar. And making sure that you use technology innovatively.”
What is Qatar doing?
“This is a great time for making [IT] investments,” says Berner, “Over the last two years, there has been a definite upturn in the market in Qatar.” He adds that programmes such as the SME subsidy 46 | The Edge
“Organisations in Qatar have maintained a reactive approach to IT security. They think of it as akin to insurance.” – Stephan Berner, Help AG.
business technologies | cover story
scheme announced by the Qatar Stock Exchange (QSE) in February of 2014 are great incentives for generating funds for much-needed investment. A memorandum of understanding signed by the QSE and Enterprise Qatar outlines a proposal that aims to support SMEs in managing some of the costs incurred in becoming a publiclylisted company. “This will allow them to successfully gather new funding from public investment,” furthers Berner. “At the same time, they will become accountable to their shareholders, which means that SMEs will have to ensure they have the right infrastructure in place to help match their ambitions. IT will definitely play a big role in their success,” he adds.
“SMEs using communications services have two to three times more customers and employees in the country and internationally.” – Jean Philippe Courtois, president, Microsoft International.
Why is there not enough adoption?
However, despite the obvious upsides to investment, there are numerous challenges that are limiting change within the current business environment. Berner tells The Edge that in his experience as a firm providing IT security, organisations both in Qatar and the wider region have until recently maintained a reactive approach to IT security, for example. “They think of it as akin to insurance and no one likes to pay for it,” he adds, “but when things go wrong, everyone likes to have it in place.” Unfortunately, cybercrime is very pervasive in the region and Berner says that it is no longer a question of whether you will be attacked, but rather, when. “While there is an understanding of this in the enterprise space, SMEs are still focusing their IT investments in technologies that enable core business operations and often deploy these with little or no consideration for security,” he continues, and this means critical systems are easy targets for attackers. In addition to cyber security, small businesses also have the challenge of limited budgets and trends such as employees’ need for mobility to contend with. There is also the matter of finding people with the right technical skill sets to manage the IT infrastructure, says Berner. According to figures from ictQATAR, in 2012, IT only made up two percent of the total workforce. As part of its five-year strategy, it aims to have 40,000 people working in the industry by 2015. “There is a definite challenge in the region,” says Berner about hiring employees
Jean Philippe Courtois, president of Microsoft International spoke to local business owners about the importance of cloud, saying Microsoft wants to enable 10,000 SMEs in Qatar through their platforms.
The Edge | 47
cover story | business technologies
IT-enabled SMEs increased revenues 15 percentage points faster and created jobs almost twice as fast as other SMEs. Citing the study, Courtois also pointed out those organisations using cloud services such as email, collaboration tools and unified communications online, are also growing twice as fast as others. He added that “small businesses using communications services like Skype, happen to have two to three times more customers and two to three times more employees in the country and internationally.” It means their offerings are much stronger and better, he explained.
Cloud and other technologies
Help AG’s managing director, Stephan Berner tells The Edge that in many cases, SMEs will not really be given the choice of deploying technology but will rather be forced to do so due to employee demands.
with the correct skills, “Again budgets have a part to play. But, one solution though would be to look into technologies that are easier to manage. Today, business enablement solutions offer rich feature sets and can be easily administrated through a single user interface. Even troubleshooting and reporting is simplified in these systems.” Importantly, however, Berner believes that in many cases, SMEs will not really be given the choice of deploying technology, but will rather be forced to do so due to employee demands. “The trickling down of the bring-your-own-device (BYOD) trend from the enterprise space into the SME space is a good example of this,” he says adding, “Many employees now bring their smart devices to the office and expect to connect them to the company network. This can actually be beneficial to the organisation.” It is not just anecdotal evidence that is being used to make the case for IT investments by firms. A study produced by Boston Consulting Group, and commissioned by Microsoft, found that 48 | The Edge
Qatar has made significant strides in its development of communications infrastructure, which will aid the workforce significantly from embracing technologies such as the cloud. According to Qatar’s ICT Landscape 2013, produced by ictQATAR, broadband use by businesses is almost universal with almost every business in the country connected to the Internet either through fixed or mobile broadband. This is up from 80 percent in 2008, which has put Qatar ahead of countries such as the United Kingdom, France and Australia. “Encouragingly, SMEs, which tend to lag behind on other ICT measures, have made sharp gains in broadband usage,” states the report. The increasing need for mobility and connection has led to the cloud becoming perhaps one of the most vital areas for IT investment in SMEs. Even though
the report by ictQATAR in 2013 stated that 86 percent of businesses surveyed in Qatar had not heard of the cloud, if they had a corporate website or an email account, they were relying on two technologies that used the cloud. Today, the cloud offers far more to businesses than simple communication tools. For a start, it reduces capital expenditure drastically. Berner says that budget restraints have for a long time been a key differentiator for ICT between enterprises and SMEs. “But today, cloud services and managed services have truly levelled the playing field,” he says. Instead of investing in an expensive network infrastructure and server in the office, companies can host their data and applications on cloud servers and pay only for what they use. According to the ictQATAR report, barriers to adoption of the cloud included, “a lack of familiarity/knowledge, not being sure how the services would be helpful to business, and a lack of need, as well as data
90%
Companies registered in Qatar in 2010 were SMEs.
According to a recent study by software firm Red Hat, understanding and engaging with customers is one of the most listed areas where IT will be used in the future to innovate. (Image Corbis)
business technologies | cover story
security and privacy concerns”. However, one-fourth of small businesses and 36 percent of medium-sized businesses said they intended to deploy cloud-based applications in the future. Courtois also spoke about the ability of cloud to improve business agility and reduce costs. Citing examples, he said that the Qatar News Agency had used their cloud platform to manage the company’s media assets and scale based on demand. This had saved the company 60 to 80 percent of their storage costs, he explained. The rise of cloud-based applications has meant that employees in the workplace can collaborate easily and more effectively than before. “At 75 percent, Qatar actually enjoys the highest smartphone penetration in the Middle East,” says Berner. “So the deployment of business applications on mobile platform is something that we can expect to see.” Email clients, task and project management applications, customer relationship management platforms and data analytics applications are all putting services, that were previously outside the scope of SME budgets, into the hands of small businesses through flexible pricing schemes. Berner says, “For enterprises with larger budgets, we are more likely to see custom-developed applications that are hosted on company data centres. This would offer more specific functionality while guaranteeing a higher degree of security. But for SMEs, the lower pricing and the flexibility in terms of scalability that is offered by [applications] would certainly make them a more attractive proposition.”
The future
Berner believes that advances in technology have made IT far more affordable than ever before for SMEs to use IT to make a real impact on their organisations. “With cloud services,” he says, “the inhibiting upfront capital expenses for IT infrastructure are eliminated, and replaced instead by far more attractive operational expenses. It also allows the IT services being delivered to be scaled either up or down in line with the organisation’s requirements.” This flexible nature, he says will “help SMEs cope with the uncertainties of business while still enabling them to access vital IT services,” allowing them to innovate and compete in the future.
SMES AND TECHNOLOGY IN QATAR COMPUTER PENETRATION Small businesses
58%
Medium-sized businesses
94%
BROADBAND PENETRATION Small businesses
25%
Medium-sized businesses
61%
WEB PRESENCE AMONG BUSINESSES Small (1-9) 75%
17%
7% 1%
Medium (10-49) 40%
43%
15%
1%
Web presence in Arabic only
Web presence but not in Arabic
Web presence in Arabic plus one more language
No Web presence
THE USE OF SOCIAL MEDIA FOR MARKETING AND CUSTOMER SERVICE Small businesses – 19% Medium-sized businesses – 30%
Source: Qatar’s ICT Landscape 2013: Business by ictQATAR Note: Small businesses are classified as companies with one to nine employees. Medium-sized businesses have between 10 and 49 employees.
The Edge | 49
sector name | banner heading
50 | The Edge
sector name | banner heading
Reining in
rising prices Wider rent freezes to come as Qatar fights inflationary tides
The Edge | 51
feature story | macroeconomics
The recent move by the government to compel commercial landlords to offer retailers and other commercial tenants a one-year lease extension, effectively freezing rents for many businesses, would appear to be a good step to curb inflationary pressures. (Image Corbis)
T
Despite the recent commercial rent freeze, and a likely extension of this to the residential sector, bottlenecks in spending in the lead up to the 2022 World Cup are likely to push inflation still higher in Qatar, placing more of a burden on domestic banks writes Simon Watkins
52 | The Edge
he slew of data from Qatar in recent weeks all point to the increasing possibility that the country is finding it more challenging to pull off one of the most difficult balancing acts in practical economics: fuelling state-led growth while keeping a lid on inflation, without recourse to a significant treasury and capital markets sector. It is not that the authorities are unaware of how important managing inflation is, for a range of economic and social factors. His Highness the Emir Sheikh Tamim bin Hamad Al Thani singled out the dangers of inflation last June (when he took over the crown from HH Emir the Father Sheikh Hamad bin Khalifa Al Thani) as a key problem for the country that needed to be addressed “by all available means and tools”. But, economic theory and economic practice are far more difficult to reconcile, particularly given the base inflationary effect from vast hydrocarbons wealth and an indigenous population of only around 300,000 Qataris out of a total 2.1 million and from a commitment to host the 2022 World Cup.
In broad terms, although the International Monetary Fund (IMF) projects that Qatar’s consumer price inflation (CPI) will rise to four percent in 2014, the fact that this is still modest in absolute emerging markets’ (EM) terms pales next to the adjunct fact that this would mark a full one percent increase from 2013, which itself is 1.1 percent higher than the year preceding that.
Retail price estimates
Indeed – many less innately conservative economic organisations, such as the United Kingdom’s Economist Intelligence Unit (EIU), estimate further risks to the upside, estimating Consumer Price Index (CPI) of 4.2 percent this year, 4.6 percent in 2015, and over five percent for the three years thereafter. A one percent increase per year in CPI would be a cause for concern for any country at any time, even in the Emerging Market world, but during the current fiveyear period of net global deflation can be regarded as concerning.
macroeconomics | feature story
With the highest per-capita income, lowest unemployment rate, and limited landmass, it is unsurprising that the Qatari real estate sector has the sharpest inflation.
Qatar land prices and rental inflation
(Indices, 12 -month rolling averages, Jul 2011 - Feb 2014) Average Land Prices Rent CPI
150
100
6 - month lag 50 Jul-11
Jan - 12
Jul - 12
Jan -13
Jul-13
Jan - 14
Sources: Ministry of Justice (MoJ) and QNB Group analysis.
With the highest per-capita income country in the world, more than USD100,000 (QAR364,000) per annum, the lowest unemployment rate (just under one percent), and an extremely limited land area, it is unsurprising that the sharp end of inflation remains concentrated in the real estate sector, so it was clearly highly sensible to address this as a priority. In this context, the recent move by the government to compel commercial landlords to offer retailers and other commercial tenants a one-year lease extension, effectively freezing rents for many businesses, is a good step. Moreover, with immigration and population growth projected by the EIU to come in at an annual average of around 6.4 percent from this year to 2018, placing even further demand weight on an already stretched residential real estate sector, the necessity of extending such an arrangement to non-commercial property is clearly high, and discussions about doing so are apparently ongoing, according to sources in Doha. There is precedence for this: in 2008, landlords were limited to a 10 percent increase on tenants renewing their leases, although these provisions expired in 2010 as the global financial crisis started to bite in the Middle East. Indeed, according to the Qatar National
Bank Group, rents started to fall in early 2009 until the second half of 2012, when the trend reversed and the cost of leased accommodation began to rise. Having said this, of course, with average residential rents projected to rise by between four and five percent in the second half of this year alone, according to local real estate brokers in Doha, translating observance of the letter of a law to freeze rents into abiding by its spirit are two entirely different things. “As it currently stands, faced with any effective rent cap for existing tenants, landlords tend to exploit loopholes and look to replace an existing tenant with a new one, so circumventing any rent freeze,” highlights Jahangir Aka, managing director of SEI Investments Middle East, in Dubai. In the event of further legislation being introduced to curb escalating rents (on commercial and residential property), provisions would need to be made to protect the rights of existing tenants to allow them to extend their leases, suggests Johnny Archer, head of valuation, research and advisory for Asteco, in Doha. “This would be the logical step to avoiding the scenario of landlords just expelling existing tenants, and raising rents for new ones immediately,” he says. Rents are the most obvious manifestation of the latent inflationary pressure that The Edge | 53
IMF predicts that Qatar’s consumer price inflation will rise four precent in 2014, and while modest in absolute emerging markets’ terms, it is a full one percent increase from 2013, which was a 1.1 percent increase from the year preceding that. (Image Corbis)
comes from Qatar’s position as the world’s top liquefied natural gas (LNG) exporter, and the most socially sensitive (aside from food prices, which are consequently always going to be held in check).
Fall in overall revenue
“As it currently stands, faced with any effective rent cap for existing tenants, landlords tend to exploit loopholes and look to replace an existing tenant with a new one, so circumventing any rent freeze,” highlights Jahangir Aka, managing director of SEI Investments Middle East, in Dubai.
54 | The Edge
Looking further ahead for direction in this regard, then, it is interesting to note that the country’s overall revenue fell by 19 percent (to QAR118.5 billion) in the first half of this fiscal year, according to preliminary finance ministry data. This was the first decline in this period since the quarterly data series started in 2008, but still did not result in any decline in inflation-fuelling spending; far from it, in fact, with government spending rising by nearly 33 percent (to QR93.2billion) over the same period, according to the finance ministry – the fastest rate of increase compared with the same period a year ago since at least 2008.
The government is likely to reschedule about 15 percent of its planned building projects in the run up to 2022 World Cup in an effort to avoid spending.
macroeconomics | feature story
19%
Fall in overall revenue in the first half of this fiscal year. Such a historic discrepancy in revenue and expenditure, according to recent statements by the IMF, may push the fiscal balance into a deficit over the medium term when combined with flat production of LNG, falling crude oil output from mature fields and lower hydrocarbon prices. “Plans to spend some USD140 billion (QAR509.6 billion) in the run up to the World Cup entail a possibility of overheating in the near term and low return and overcapacity in the medium term,” the Fund also stated. Cognisant of this, it appears, local sources say, that the government is likely to reschedule about 15 percent of its planned building projects in the run up to 2022 World Cup in an effort to avoid a spending and thus create inflationary bottleneck over that period. Ostensibly, all projects associated directly with hosting the 2022 World Cup will take priority, and go ahead as scheduled, but others will be delayed so that the spending does not swell the already anticipated USD140-200 billion (QAR509.6-QAR728 billion) on infrastructure spending planned in the run up to 2022. In order, of course, for aggregate government spending to be more evenly spread out over the years up to 2022, it is essential that those projects that should be underway in this construction window do so, and Yasser Al Mulla, project manager at Al Rayyan Precinct for the Supreme Committee for Delivery and Legacy, in Doha, said recently that all 2022 World Cup projects are on track to be completed on time.
According to Qatar National Bank Group data, rents started to fall in early 2009 until the second half of 2012, when the trend reversed and the cost of leased accommodation began to rise.
Spending schedule
Looking over the next couple of years, though, there is a rising chance that slippage of the smoothed-out spending schedule may occur, as Qatar finds itself in greater competition for sheer manpower and materials from elsewhere in the region. In this respect, not only is Saudi Arabia currently in the process of accelerating a housing construction programme, but also Dubai is preparing to host the
2020 World Expo, which may make the projected additional 400,000 workers for the next phase of Qatar’s infrastructure development programme difficult to find. All the more so, as spelt out by the IMF early in March, given the recent negative publicity about deaths of migrant construction workers building World Cup infrastructure. Continued on page 71
Qatar rental market summary Rental Rate (QAR per month)
Q4 2013
Apartment
Villa Office
Min
Max
Studio
3,000
11,000
1 BR
3500
12,500
2 BR
4500
16,500
3BR
6250
19,000
3 BR
7500
20,500
4 BR
9300
33,000
5 BR
10500
42,000
Per sqm
90
275
Sales Prices (QAR/sqm) Min
Max
9,500
17,700
Source: Asteco
The Edge | 55
Throw away the business plan How one incubator is getting entrepreneurs in Qatar to adopt a lean start-up vision with a focus on customer validation
Ahmed Abdulwahab, head of the incubation centre at QBIC, tells The Edge that unlike other incubators, their aim is to have entrepreneurs focus solely on the customer.
entrepreneurial development | business interview
Entrepreneurship programmes, incubation centres and start-up weekends are a dime a dozen in Qatar, so why should we be excited about the latest in series of ventures to catalyse entrepreneurship in the country? First off, the Qatar Business Incubation Centre’s (QBIC) aim is to build QAR100 million companies by focusing on customer validation. Ahmed Abdulwahab, head of the incubation centre at QBIC tells The Edge about what they are trying to do differently. by Shehan Mashood
atar recently opened a 20,000-square metre business incubator facility in Doha’s industrial area. It is the largest such facility in the Arab world, another one in a series of investments made by the Qatari government to encourage entrepreneurship in the country. The facility is owned and run by the Qatar Business Incubation Center (QBIC), founded by the Qatar Development Bank (QDB) and the Social Development Center. But that is not the story, says Ahmed Abdulwahab, head of the incubation centre at QBIC, rather emphatically, “That’s not the message at all, the key message is that we are different, we are very much operational, and our mission is to develop the next QAR100 million companies.” It is not about a generic mission to change the ecosystem that nobody actually understands, he explains, “We want to be very operational. We are entrepreneurs, the key management of QBIC are entrepreneurs and we want to be focused on what is most important for entrepreneurs.” Abdulwahab left a job in Saudi Arabia at Siemens in 2007 to start a company in Switzerland, and a second in the United States. “After exiting, I moved back to Saudi Arabia,” he tells The Edge. While there, he became the founding manager of the Entrepreneurship Center at King Abdullah University of Science and Technology, which in less than two years was selected as the best higher education institution in the Arab world for entrepreneurship in 2012. He joined QBIC seven months ago to launch the centre. “We developed QBIC’s programmes following the life cycle of an entrepreneur,” he explains, starting with a speaker series to get people excited about entrepreneurship. Next are start-up sessions, “Its like a start-up weekend, with the kinds of activities where entrepreneurs have to turn their idea into some kind of start-up business within a couple of days.” This, he says, is for them to get a feel for, and see whether they have an entrepreneurial flavour. It serves two purposes: to test the candidate, and also to generate business ideas.
Real ideas and real money
“It’s not about a contract, all of that means nothing. Even revenues mean nothing, it’s about getting cash.”
The next step is perhaps the more serious and daunting one, which is the lean start-up programme. “It is a 10-week programme where we have entrepreneurs turn an idea into real start-up businesses by entirely focusing on what is most important in any start-up, which is customer development,” he explains. Following this is the lean scale-up phase. This, he says, is for young companies that have the potential for extraordinary growth. “We don’t call them SMEs, we call them scale-ups because these are young companies that have significant potential to scale, where we happen to accelerate their sales and marketing machine. And then overall what we provide is incubation,” he says. Most recently, QBIC has also approved a new method of smart financing, which, he says, is the first of its kind in the Middle East and North Africa (MENA) region. “This is something we are really proud of,” he says explaining the way it works, “In the beginning, once we incubate the entrepreneur, they will get QAR100,000 as starting capital. Do you require a business plan for that? No. Do you require them to incorporate the company? No. What we are requiring is that you must have an excellent business idea and fulfil the preconditions to be incubated.” When asked about the preconditions, Abdulwahab says the entrepreneur’s background, their idea of course, whether is scalable, and if it is something that people really need to have, are areas that will be examined. Once they are accepted into the incubation centre, their objective is not to develop a product, but rather, he says, to do customer validation. And what exactly does customer validation entail? “This is the bottom line customer validation,” he says pulling out of stack of riyals from his pocket and waving it with a smile, “everything else is just nice to have.” People want to be nice, he explains, when asking them about an idea or product, most are likely to say they like it. “But you know, if you ask them, are you going to buy it? They are going to say no.” The Edge | 57
business interview | entrepreneurial development
“Entrepreneurs are not expected to write a business plan, but have three months to do customer validation.”
Participants in QBIC’s programme at Katara Cultural Village during their challenge to generate as much cash as possible in two hours with a seed fund of five riyals.
Customer-related financing
When entrepreneurs enter the incubation programme, they are not expected to write a business plan, but have three months to do customer validation. The QAR100,000 is released based on the accomplished customer validation, Abdulwahab tells The Edge. The programme is based on targeted customer-related milestone planning where the money is released in stages. During this period, unlike other institutions, QBIC does not require the entrepreneurs to incorporate their company in case they fail. The fortunate few that are successful in validating their product will then get help in incorporating the company, he says. After the validation and incorporation of the idea, QBIC will invest an average of around QAR200,000 in addition to the initial investment made, not as a loan, but as equity financing. This is another first in Qatar, says Abdulwahab. However, he adds that the maximum equity they will want to own in a start-up will be no more than 30 percent, as they want to make sure the entrepreneur is always incentivised. “We do not want to own a majority at anytime, because the moment you own a majority, 58 | The Edge
the entrepreneur becomes more an employee than entrepreneur.” For start-ups that are in the scale-up phase, around QAR500,000 is provided with up to an additional QAR4 million through Qatar Development Bank’s Al Dhameen lending programme. However, Abdulwahab stresses that entrepreneurs should always be on the lookout for other sources of financing. “They should not be dependant on us,” he says. But he says, “Our objective is unlike most accelerators or incubators in the region or even worldwide, that focuses on helping entrepreneurs and start-ups scale up to get Series A funding, Series B and Series C funding, that are not actually sustainable because they focus the entrepreneurs on the wrong key metrics.” It focuses them on looking at what they need to do to get the next round of investment, which means they are fulfilling investor requirements, and not customer requirements, he says. Giving them the incentive to generate cash from customers is key. In order to drill the idea of customer validation into those in the programme, they recently held an exercise where entrepreneurs were asked to come up with an idea and generate cash in just two hours. The challenge is based on the popularised five-dollar challenge where people are encouraged to tap into their entrepreneurial spirit to generate as much cash as possible from a limited ‘seed fund’ of five dollars. “We asked them to think about an idea that you could generate cash in two hours, and they said it was impossible,” he says. The participants were told they had 20 minutes to form groups and come up with an idea, and were also shown a big envelope that said seed fund, but were not told how much money it contained. “When they opened up the envelope they got another shock,” he says with a grin, “There was only five riyals as a
seed fund. They had an hour and 59 minutes time to get out and sell. And amazingly, after two hours they came back with QAR3878.” One participant who was an artist, decided to draw a picture and sell it, another leveraged his large Twitter following by selling a social media campaign to promote a person. “And the interesting part,” he says “is nobody used the seed fund.” Abdulwahab believes that what they learned in those two hours is more than anything they could have learned in business school. They learned the ultimate customer validation. “It’s not like saying I got a contract, all of that means nothing. Even revenues mean nothing, it is getting cash,” he says. “In the end it is cash flow. So they understood really quickly what needs customers have, what they would pay money for now, not in two days or in three months. It was a complete change of mindset. When they went out, they didn’t see people running around, they saw potential customers.” The other key takeaway from the exercise was understanding how not knowing the value of the seed fund impacted their decision making. “If we told them you would get QAR5 or if we had told them you would get QAR100,000, their creativity would have been around that figure.” They would have thought about what they could do with the specific amount to generate cash, he opines. “But, because we didn’t tell them how much was inside, their creativity was unlimited.” Abdulwahab says these challenges are already having an impact on the ideas entrepreneurs had at the start of the 10week programme. “The next stage is what we call two weeks notice, which is, they have two weeks to do customer validation with their own project.” Following this, the participants will be required to place their idea into a business model canvas and then validate the model as they go along. In the following weeks, topics such as intellectual property, the importance of networking, which Abdulwahab says is absolutely important, will be covered, including how to pitch to investors. He adds that they want to teach entrepreneurs how to create a “killer business presentation not just focusing on what to pitch, but also how to pitch, so the soft skills of the entrepreneur”.
entrepreneurial development | business interview
The problem today
“We all have the wrong assumptions about start-ups,” he says. The main problem according to Abdulwahab is that people often make assumptions that are completely contrary to what the realities are. “For example,” he says, “we used to believe, when you set up a company, the first thing you do is provide a business plan. Which is now, I learn, more of a fiction book than a business plan. So you sit down inside a centre for the next couple of months and you create a business plan. This is going to take the next four to five months with spreadsheets and beautiful pictures. You sit and document the future unknown. And then, the next step is you raise funding. That is what we used to believe and the problem with that is most pitches never get funded, only one percent of submitted business plans get admitted and get venture capital money. For the fortunate few that are the one percent, they are told to spend the money right away by developing a prototype, the alpha version, the beta version and so on. And then you prepare the big launch party and the product is out.” When most try to sell their product, they wonder why the customer is not behaving as they should according to the business plan, he says. In all likelihood, developing a business plan, securing funding, creating a product and
launching it has probably taken the best part of a year. “The issue with that is, it is all about an execution of a predefined plan which is the actual cause of most start-up companies failing,” points out Abdulwahab. “What we now know, as Steve Blank, the successful serial entrepreneur says, no business plan survives the first customer contact, because, from when you write the business plan to when you get here, the world has changed.” What QBIC wants to get their entrepreneurs to do is to turn the process on its head and have an idea or product validated at the beginning to maximise the chances of success while minimising risk. The entrepreneurship scene in Qatar is of course not without its challenges, which have been written about extensively. However, Abdulwahab chooses instead to focus on their operational activities and create real results. “Once we show some successful start-ups, then we can go and ask for some exceptions, but not right now in the beginning,” he says. “Go out and do something extraordinary, don’t dream about your next idea, go out and actually do it. If you fail, it is not an issue. What you learn from it, what you learn in a start-up in one or two years might be even more than what you learn in 10 years working in a corporate environment,” he concludes.
30%
The maximum equity stake QBIC will hold in any company it invests in.
Entrepreneurs in the 10-week programme engage with Professor Les Charm, from the Babson College in the United States, during one of the speaker series.
How much of
career mapping in Qatar is universally applicable?
60 | The Edge
Effective talent management is a must for any successful organisation and depends critically on a definitive growth path. This, experts argue, is central to employee retention. But when labour supply in a country such as Qatar relies, to a significant degree, on an expatriate population base, can there be a unified human resource policy that can apply to all employees? asks The Edge’s Aparajita Mukherjee
E
mployee recruitment is one of the important functions in most organisations and the human resource (HR) department spends considerable time, energy and discretion on finding, attracting and employing the best candidate. A seasoned HR professional looks at hiring as a good mix of art and science. “The trick is to have the right balance in place that will allow you to get hold of the best and remove the not-so-good candidates,” says Haytham Abi Mershed, partner, advisory services, EY Middle East. But the value from new recruits can only be realised if the talent is retained long enough. And this is where career mapping comes in to prevent good employees from leaving an organisation. A Bayt.com survey suggests that in terms of attracting and retaining top talent in Qatar, the construction industry is considered by 49 percent of surveyed professionals to be the most popular. Banking and finance (33 percent), and oil, gas and petrochemicals (37 percent) are also perceived as extremely popular with Qatar’s top talent. HR professionals believe that in order to retain people, a company needs to ask The Edge | 61
business management | human resources
internal questions such as: are there real career opportunities available? Are they visible to the existing talent pool? And are there support structures that facilitate internal career moves? They, however, point out that most of the questions are tied to the belief that any individual will plan his entire career with one company, in one country, which is not reflective of the global job realities today. In a country such as Qatar, which is characterised by a workforce that is both transient and heavily dependent on expatriate workers, companies here cannot afford to deal with the negative implications of having different policies based on nationality though they have to abide by the agenda of nationalisation. Suhail Masri, vice president, sales, Bayt.com is of the opinion that skills and qualifications ought not depend on the nationality of the candidate. He clarifies, “Good candidates can be sourced from any country and Qatar is no exception. From the thousands of Qataris registered on Bayt.com, the talent pool is extremely diverse – there are entry level as well as C-Suite talent and senior executives across the entire spectrum of demographic, geographic and industry lines.” Mershed believes that graduate intake is an excellent entry point to drive the nationalisation agenda. Towards this, there is a need for organisations to contribute to localisation as part of a wider nationbuilding exercise. “But,” he adds, “I don’t see the need for separate policies. In fact, you would be pleasantly surprised at the calibre of some of the Qatari graduates who, with the right educational qualifications, can be considered second to none.”
“There is no need for separate policies for fulfilling the nationalisation agenda. The calibre of some Qatari graduates is second to none.” – Haytham Abi Mershed, partner, advisory services, EY Middle East.
Issue of transparency
One of the reasons that people change their jobs relates to the frustration that they suffer because the organisation they opted for had not been transparent on the growth prospects. Either relevant policies do not exist or new realities (for instance, a better candidate) interfere with existing HR policies. Masri says that Bayt.com’s career experts always advise companies to be transparent. He says, “As far as transparency is concerned, with fresh graduates in particular and other millennials, transparency is highly valued in an organisation, and many of the top 62 | The Edge
The Qatar Career Fair which is an annual event, ostensibly held usually in the first half of the year, and to be held in H2 of 2014, is one of the largest such events held in Doha. Seen here is a booth promoting roles in technology for young people by ictQATAR a few years ago at the Qatar Career Fair. (Image ictQATAR)
human resources | business management
talent would be attracted to companies that are less bureaucratic and hierarchical.” As a recruiter, companies should always make sure they convey the brand values; and what the company stands for, why is the company doing something exciting and why a potential recruit would want to work for a company. To achieve the perfect talent-job match, says Masri, it is necessary that the employee also matches the company culture – for this, companies can briefly describe the work culture, and make sure to also mention the people skills that would best match the organisation. By being transparent, Masri says companies can set realistic expectations as to what working with the company will be like. “A satisfied employee will increase the bottom line and save the company’s time, effort and money. Transparency, integrity, support and gratitude is what the talented professionals are after in their quest for their ideal employer today.” In Mershed’s opinion, being true to potential candidates must be nonnegotiable. The people that are hired are the future of the company and it is critical that they have the right and full picture before coming onboard. “The last thing you want is to have graduates who are unhappy with the roles they have been offered – it damages their careers as well as the organisation’s reputation.”
Afaf Hamad Al Rawashda, director of human resources and training, Qatar Finance and Markets Authority , says that fresh graduates start their career at the middle level of the career ladder, which she says, “is the starting point of the senior level as per of the HR governmental bylaws”.
Fresh graduates
For Qatar in particular, according to the latest Bayt.com Middle East and North Africa Job Index survey (March 2014), a huge majority of the new opportunities in the next six months are for fresh graduates and first-time employees in particular: for junior executives (42 percent), coordinators (32 percent), and executives (26 percent). Companies that The Edge spoke with said that they have a charted growth path for new recruits at the entry level and, in the case of more promising candidates, some have provisions for a quicker career development. Abdulla Ahmed Kamal Naji, learning and development manager, Qatar Petrochemical Company (QAPCO) QSC, says that their new recruits who were taken onboard last year, are currently in the formal stages of the development programme. “The development programme is customised to prepare each graduate to become a professional jobholder. In
“By being transparent, you set realistic expectations on what working with your company will be like.” – Suhail Masri, vice president, sales, Bayt.com.
“Our graduates have started at Vodafone Qatar about six months ago and they have embarked on a rotation programme based on which they will assume the roles that suit their skills the most,” says Eisa Abdulla, head of Qatarization at Vodafone Qatar.
Abdulla Ahmed Kamal Naji, learning and development manager, Qatar Petrochemical Company QSC, says that their new recruits who were taken on board last year, are currently in the formal stages of the development programme.
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business management | human resources
addition, we have a fast-track programme for those who demonstrate special talent and outstanding abilities in the field.” Eisa Abdulla, head of Qatarization at Vodafone Qatar says, “Our graduates started at Vodafone Qatar about six months ago and they embarked on a rotation programme based on which they will assume the roles that suit their skills the most.” Afaf Hamad Al Rawashda, director of human resources and training, Qatar Finance and Markets Authority (QFMA), says that fresh graduates start their career at the middle level of the career ladder, which, she says, “is the starting point of the senior level as per the HR governmental bylaws”. She adds that there are three salary ranges – minimum, medium and maximum – to differentiate between the employees in the same grade, so graduates with one year of experience will now be receiving one basic salary increment equivalent to between one percent and six percent, based on the performance appraisal. Qatar Airways’ recruitment policy, according to Dr. Kholode M. Al Obaidli, vice president nationalisation, looks at recruiting both fresh graduates and experienced professionals. “All fresh graduates recruited in 2013 are in their first year of a two-year development rotation programme. As they complete a rotation, they will then come back to the business unit they were in, prior to moving on to their next rotation with a new department or division.” Offering a consultant’s perspective, Mershad says, “As far as graduate intake is concerned, one would be best advised to stick to the career ladder that has been assigned to a graduate programme. There are certain basic experiences (both technical and soft skills related) that one acquires only on the job, however bright a student maybe.”
allow us to identify high flyers who could be fast-tracked and promoted to higher positions,” says Naji. In contrast, Khaled Al Sayeh, head of human capital department, at QIIB, rules out any such possibility. “The bank has rules for promoting and we definitely abide by these, though the management may review some particular cases,” he says. Vodafone Qatar, being a merit-based company, and believing in performance, rewards its staff according to deliverables instead of seniority. “Therefore, we will certainly consider promoting those who have been truly outstanding,” says Abdulla. QFMA, according to Rawashda, does promote exceptionally talented people with high ambition, but that comes with some specific conditions related to performance
Candidates with more promise
If some of the candidates are more promising than expected, would organisations in Qatar look at promoting them to a higher position, even if by normal HR rules, they may not qualify for the slot? At QAPCO, fast-tracking is possible, but candidates would have to demonstrate excellent performance over a period of time to qualify. Then, they would be offered the best possible support in their future development. “Often, the first months on the job can be a revelation and 64 | The Edge
50.5%
The percentage of MENA respondents who recruit senior executive talent online, according to Hiring Management in the MENA poll (August 2012).
and years of experience. She rules out grade promotions, and adds, “Different kind of rewards are always available for eligible employees.” In Mershed’s views, if an exceptionally promising graduate is identified, it should be possible to use appropriate HR policy systems to ensure that the candidate is fast-tracked based on performance once in the organisation.
Career fair recruitments
Career fairs have become a potent source of manpower supply in Qatar. The annual Qatar Career Fair sees participation from a diverse range of companies – private and public sectors – and companies such as QAPCO, QIIB, Vodafone Qatar and Qatar Airways are unanimous on the benefits. “Career fairs allow us to work on some of misconception associated with the industry, which may not always be perceived as attractive as other sectors. Often, graduates are surprised by the variety of positions and opportunities that we can offer,” says Naji of QAPCO. For Abdulla of Vodafone Qatar, career fairs are a fantastic platform to meet some of the best talent in Qatar. “Last year, we recruited 14 candidates at the career fair and some of them have joined our Job Share programme, a scheme Vodafone Qatar brought to the market to help these students gain workplace experience while balancing their academic responsibilities.” Masri of Bayt.com, segregates career fairs for entry-level positions, though he says that the region’s top companies are looking to the Internet to hire senior talent, as can be seen from the Bayt.com Hiring Management in the MENA poll (August 2012): 50.5 percent of MENA respondents recruit senior executive talent online. Commenting on Qatar as a job market, Mershed of EY Middle East says, “There is still much to do, but one is beginning to see better use of recruitment tools such as online applications, social media, etcetera, to connect with potential candidates.” In his opinion, personal references still seem a preferred comfort route for both line managers and HR professionals, but with increasing job openings in the marketplace, the flood of candidates and pressure to hire fast, Qatar is likely to see more activity in this space, and gradually is likely to be technology led.”
Inside the minds of leading business figures
business insight Providing targeted logistics solutions depends on the client’s needs >66 In an exclusive conversation with The Edge, Rajeev Menon, the CEO of Gulf Warehousing Company, talks about the firm’s growth over the past 10 years, and the logistics industry in Qatar.
The automobile industry in Qatar is growing 68 Kevin Hughes, general manager of Q-Auto, the official dealer of Volkswagen and Audi in Qatar, talks to The Edge about investing in service excellence.
66 While Qatar is undergoing massive infrastructure reform, the CEO of Gulf Warehousing Company, Rajeev Menon, explains that the expected pay-out in the near future will more than make up for it. “We have therefore invested in our own underlying infrastructure and set our strategies accordingly,” he says. (Image Corbis)
The Edge | 65
business insight | warehousing services
logistics
Providing targeted logistics solutions depending on the client’s needs Rajeev Menon, the group CEO of Gulf Warehousing Company (GWC), a Qatari logistics firm, speaks with The Edge about how the firm has grown in the past 10 years and the opportunities and challenges they see in the competitive logistics market. Can you tell us about the business focus of GWC? The business focus of GWC is to become the preferred logistics provider in Qatar and in the region. We aim to achieve that by offering a variety of logistics services, including warehousing, transportation, freight forwarding and freight management, as well as other niche services in-house. We have also been longstanding partners with the public and private sector in developing the logistics infrastructure that would satisfy the growing demand here in the State of Qatar.
Rajeev Menon, group CEO of Gulf Warehousing Company, tells The Edge, the greatest opportunity for GWC will be the need to fill the gap between supply and demand in the logistics industry in the coming years.
66 | The Edge
How competitive is the warehousing and logistics market in Qatar? What does GWC do to differentiate itself ? There is a high level of competition in the logistics market whether it be from organisations providing their own logistics infrastructure, or whether it is from other third-party logistics providers. In order to differentiate ourselves, we are providing nuanced and targeted solutions that depend on the specific client’s needs. We cater to a variety of clients, from large multinational corporations to small- and medium-sized enterprises, so one-size-fits-all solutions will simply not suffice. We design our core logistics infrastructure, therefore, to be able to handle their different needs all
warehousing services | business insight
in one location, a one-stop-shop with a variety of services that can be combined in a variety of ways depending on the individual client. Therefore, an organisation does not need to contract one group for warehousing, another for customs clearance, and a third for shipping. All of these services and more are available in one location. Currently, third-party logistics occupy only 12 percent of the overall logistics market – but that is changing, and we expect to see this slowly change to match the rates in other markets. How have GWC and the logistics industry changed in Qatar over the past 10 years? GWC was originally a warehouseonly focused operation, providing basic warehousing services and management to the local market. However, as the need for professionally built and managed warehousing grew, so did our ability to provide such facilities. We also now offer dry, temperaturecontrolled, cold, chilled as well as hazmat storage solutions. We have distributed our warehouses strategically across the nation, with facilities in Ras Laffan to the north, Mesaieed to the south, and many locations in the Doha Industrial Area. We have also expanded into the transportation field, and now have possibly one of the largest transportation fleets in the country, with 1171 vehicles providing a variety of transport services. We are also industry leaders in freight forwarding and customs clearance, and our niche services such as record management and international moving and relocation gain more ground every day. We serve a variety of clients including big multinational corporations, integral governmental authorities, and a number of SMEs, providing for them essential services that handle the details while they take care of their core activities. How have the infrastructure delays – such as the airport in Qatar – affected the delivery and logistics industry? Qatar is undergoing massive reform in its infrastructure, the expected pay-out in the near future shall more than make up for it. We have, therefore, invested in our own underlying infrastructure and set our strategies accordingly.
How do you plan logistically for traffic and the closures of road networks in Qatar for infrastructure development? First, it is important to consider that we have based our operations in strategic locations, the Logistics Village Qatar, for example, has easy access to the main roadways leading into Doha, and is only 20 kilometres away from the city centre, the airport, and the main port in Doha. Likewise, our Ras Laffan and Mesaieed facilities are essentially adjacent to the operations of the major players in the petrochemical sector, reducing our road transport time considerably. Further, our road transport operations are controlled from a central command that monitors traffic patterns and plans travel routes through a transport management system. With our expertise in road transportation analysis, optimisation, implementation and management, we are delivering cost-effective solutions that meet our client’s transport needs. Can you tell us about the Logistics Village Qatar? The Logistics Village Qatar (LVQ) is a unique logistics hub that spans across one million square metres. It is the biggest facility of its kind in the country. It is the embodiment of our philosophy of providing all forms of logistics services in one location, offering warehousing and storage, truck depot, data centre and record management services, container yard and many more. It was set up as a response to the demand for professionally built and managed facilities of its type by some of the biggest players in the region, a demand, which only continues to grow, and needs to be satisfied. What other infrastructure investments have you made? We continue to expand our facilities in Ras Laffan and in Mesaieed, primarily service the energy sector. These facilities in particular specialise in the hazmat, chemical, temperature-controlled and cold storage, and we have worked to continually refine and expand these facilities to meet with demand. Are there any other major developments or trends in the logistics industry? We are definitely going to see a
“The regional logistics market has no choice but to expand in service for such events such as the 2022 World Cup and the Expo 2020 in Dubai.”
continuing trend towards third-party logistics in the coming years. We are also going to see more and more consolidation and centralisation of services within specialised hubs such as the LVQ. What other opportunities do you see in the future for GWC? The greatest opportunity for GWC shall be the need to fill the gap between supply and demand in the coming years. We have been proud to be a strong partner to the State of Qatar in supplying a large portion of its logistics infrastructure, and our future strategy is to continue to provide innovative supply-chain solutions to the State of Qatar and also to our regional and global clients, which includes projects similar to LVQ, we feel particularly poised to provide such planning and design services, and make maximum use of any project we undertake to execute these designs and establish these new facilities. Is the delivery and logistics market growing? And if so, what is driving it? The regional logistics market has no choice but to expand, whether it is in service of such events as the 2022 World Cup in Qatar or the Expo 2020 in Dubai, or if it is because the GCC continues to capitalise on its central position connecting East to West, and its close proximity to the majority of the world’s continents. The Edge | 67
business insight | automotive sector
LOCAL DEALERSHIPS
The automobile industry in Qatar is growing As an official dealer of Volkswagen and Audi in Qatar, Q-Auto offers a complete product line-up in the Gulf state. In an interview with The Edge, Kevin Hughes, general manager of Q-Auto, says customer satisfaction is the key to long-term business success, and reveals the company’s plans to continue investing into service excellence. Tell us about Q-Auto. Q-Auto has been the official dealers of Volkswagen and Audi in Qatar. Today, we have a full product line-up available in Qatar and we do believe that customer satisfaction is the key to long-term business success. Can you tell us about the new showroom? Our investment in the new and upscale showroom, located on Salwa Road, reflects the confidence and success of Q-Auto. Audi and Volkswagen showrooms, combined, cover over 6200 square metres in floor space, making them two of the largest car brand showrooms in Qatar. In addition, both dealerships will have a combined number of over 200 dedicated employees. I believe that Qatar is the perfect place to expand our facilities; and we are confident that investment in our facilities and services, such as the new showroom, is key to continuing the growth and success of both brands. What are about some post-sales services you offer. Do they differ for Audi and Volkswagen? As a distributor, Q-Auto works under the guidelines of both Volkswagen and Audi, and as a part of that, we offer our customers an array of services, including sales, after-sales, parts and accessories. We place great emphasis on offering an array of after-sales benefits at exceptional rates. One example would be the recently launched Audi campaign “Fabulous 68 | The Edge
Four” which aims to celebrate the new showroom opening; the dealership offers buyers four after-sales benefits: warranty, service, maintenance and insurance for up to five years. We are investing heavily in our human resources. In addition to a new showroom, we are opening a newly enlarged service centre in the Industrial Area and two new quick service centres in Doha. These state-of-the-art facilities will definitely allow us to increase our sales and keep our customers satisfied. What are some leading trends in Qatar’s automotive market? The automotive sector in the Middle East remains upbeat and Qatar has set its sights on being a significant force in the global auto industry. Automotive enthusiasts in Qatar appreciate excellent quality and high performance vehicles. We have recently noticed that the concept of leasing is growing and has created a niche market in Qatar. Therefore, Audi has accommodated to local buyers by introducing a hassle-free leasing plan with zero upfront costs. The advantage of adopting the plan is that customers can drive the most sought-after models with an array of value-added benefits, including full warranty, maintenance, service and comprehensive insurance. What makes the automotive sector in Qatar so attractive is its position as a key industry in the global economy, and I firmly believe that Qatar will quickly become a very attractive destination for continued
investment by the automotive industry. What is the level of competition in Qatar’s automotive sector? How does Q-Auto deal with it? The market is thriving and there is a demand for our high-quality, Germanengineered vehicles. When it comes to Volkswagen, quality, value, price and aftersales services are definitely among our top priorities. Furthermore, when it comes to price, Volkswagen continuously monitors market prices to ensure that its customers are offered the best possible price. Value is the key to customers in our market and this is Volkswagen’s advantage. Our equipment level, safety, innovation, long service intervals, environmentally friendly credentials and creativity, coupled with our German engineering is superior and we have the capability to have cars produced in various countries with the same level of quality and innovation. Audi is a unique offering in comparison to competitors, differentiating itself in important aspects of performance, design and dynamics. The brand takes pride in offering their buyers the best engines, dynamic stability control for added security, as well as the most advanced technology to enhance performance while preserving fuel economy. As for the interior, Audi designers strive to create luxurious, stylish designs from finely crafted materials. How was the automotive market in 2013? What are the growth forecasts for 2014?
automotive sector | business insight
“The automotive sector in the Middle East remains upbeat, and Qatar has set its sights on being a significant force in the global auto industry.”
Kevin Hughes, general manager of Q-Auto, believes that Qatar will quickly become a very attractive destination for continued investment by the automotive industry.
During 2013, Volkswagen increased its sales by 58 percent compared to the previous year. Moreover, Audi’s sales figures also soared in the same year and have grown by over 59 percent in the local market. In 2014, the introduction of new models will certainly contribute to our efforts and fulfill the needs of our local customers. The new, completely redesigned Golf R is due to arrive this February. The Touareg is one of our most popular vehicles for 2014. The Jetta is also an exciting addition to our line-up of cars in 2014. As for Audi, the 2015 A8 L is a luxurious sedan that raises standards in terms of design, FSI engine performance and control dynamics. In addition, we have also received shipments of the latest 2015 models of the R8 V10 plus. What are some distinguishing features for 2013 models? Which of them were most popular?
The Volkswagen Passat was the key driver for the outstanding performance in 2013. The model is larger, more comfortable and sets benchmarks in safety, technology, space and luxury. Aside from this brand, the Touareg has proved to be a firm favourite. The Tiguan, the seventh generation Golf and Golf GTI have also contributed to exceptional sales figures discussed earlier. Audi has incorporated a number of unique features in the 2013 models. For example, our pricing strongly reflected value for money, especially when compared to our competitors. Our most popular models would be in the SUV category, with both the Q7 and Q5 taking the lead due to their powerful engines and finely crafted interior. What are the challenges you face in Qatar’s automotive market? What about the opportunities? Both Volkswagen and Audi are wellestablished brands in the German
automobile market and are recognised internationally for their reliability, style and quality. Qatar has experienced a growth surge over the last 10 years and is developing at a rapid pace in all industry segments. When narrowing down on the automotive market we see that the level of growth in the country has progressed at a steady pace over time. Competition is present and quite strong in the local market, especially in the luxury automobile segment. The Qatari market is fairly price elastic where customers are more sensitive to price when deciding on what to buy. Currently, customer preferences tend to be geared more towards smaller cars and SUVs, a need that we accommodate adequately at Volkswagen and Audi with the Touareg and Q range. In addition, buyers today have high expectations when it comes to service and after-sales maintenance, ensuring that they are entitled to excellent service standards before their purchase. At Q-Auto, we have made both these aspects key points of focus in our strategy for both brands. How do these challenges and opportunities differ for Audi and Volkawagen? Both brands face similar challenges and opportunities in the local market. The automobile industry in Qatar is growing in size and with this expansion is an increase in customer expectations; therefore brands face the same challenge of meeting and exceeding these expectations. The Edge | 69
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Spillover Continued from page 55
Reining in
rising prices
Nonetheless, the Supreme Committee for Delivery and Legacy’s Mulla highlighted in midMarch that 10 tenders would be issued this year for the stadiums’ project managers and design consultants. “We are in the advanced stages of design work for six stadiums and this year we will see five stadiums begin the early works on foundations and construction,” he said, adding that the authorities in Doha now expect to spend USD4 billion (QAR14 billion) more than originally planned on building stadiums and related sporting infrastructure than before. The burden of funding all of this is likely to continue to fall on the domestic banks, of course, adding to ongoing concerns about debt ratios within the system. In this context, the latest report from the QNB stated that although the overall loan book exhibited a slight improvement in February, total domestic public sector loans with local banks picked up by 1.8 percent month-on-month (m/m), after 1.7 percent growth in January. The ‘contractor segment’ posted the biggest growth, in percentage terms, up 6.6 percent m/m, while the general trade segment (which contributes 13 percent to private sector loans) loan book grew by 3.1 percent m/m and over five percent for the three years thereafter. In its staff discussion note published in March 2014, the IMF has urged the adoption of macroprudential policies by the governments of the region, including Qatar, to manage inflation more efficiently in the current scenario. The Edge | 71
automotive | product reviews
Reviews
BMW 6 Series
Gran Coupe
B
MW 6 Series Gran Coupe, when it was first launched in 2011, was the first four-door Coupe in the history of the brand. Building on the aesthetic styling of the BMW 6 Series, the proportions of the Gran Coupe are reproduced in an unusually lowslung, package given the car’s four-door construction. The Gran Coupe, however, has a sweeping and contoured bonnet with a long wheelbase that gives the car a stylishly stretched appearance and a set-back passenger compartment.
The interior has a driver-focused cockpit with door panels that flow into one another, providing a connection all the way from the instrument panel to the rear compartment. The BMW 6 Series Gran Coupe comes with 4+1 seats, while a 113-millimetre longer wheelbase than the BMW 6 Series Coupe offers an increase in legroom for the rear passengers. The seats are fitted with leather upholstery and front seats are heated. It also has an electric seat adjustment with memory function for the driver and front
passenger, and electric steering wheel adjustment. The Gran Coupe has 18-inch lightalloy wheels, xenon headlights with LED daytime running light rings, cruise control with braking function, and heated exterior mirrors. All the engine variants work with an eight-speed sports automatic transmission, and technology such as the Auto Start-Stop function and ECO PRO mode, activated using the Driving Experience Control switch to help to reduce fuel consumption. The Edge | 73
products & reviews
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74 | The Edge
Self-avowed ‘How to’ books are rarely reviewed in The Edge. Though in the past we have featured some publications of this ilk, you know the ones – filled with advice and tips on how to be a better leader etcetera, books with blatant titles such as How to become a CEO are generally, in our opinion, trite and full of clichéd content and we tend to avoid them if we can. However, we decided to take a chance on this interesting diminutive publication, ranked as a top Amazon.com business book, and the book in question turns outs to be a worthy read. While How to become a CEO does contain some fairly predictable and hackneyed ‘business management’ tips, it also contains many more you might not expect, such as “don’t smoke” or “skip all office parties”. In fact, what sets this book apart is its delivery. The book’s succinct, get-to-the-point style will resonate with busy managers or executives with little time to spare with phone book-thick business instructional tomes. The smoking one is a particular gem, as author Fox surmises that even smokers are put off by other smokers when they do not freshen their breath, smoke at inopportune times or leave overflowing ashtrays lying about. Among many tips about appearance, Fox also advises people to get their teeth whitened and straightened if they are skew. This may sound superficial but for those willing to do anything to get to the top, in some corporate environments a Colgate smile might be what it takes. But such superficialities are in the minority, and there are deeper and more meaningful points to be made by Fox. Overpaying staff, passing on credit for projects well executed to others, staying fit, watching your boss’ back and many other rungs on the ladder to success are covered, all in such a way that How to become a CEO really lives up to its title and potential as a ‘how to’ book that is actually useful and should be required reading for anyone in business, bad teeth or not. Available at Virgin Megastores in Doha.
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