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August 2015
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Rashid N. Al Kaabi, vice chairman of Al Sraiya Holding Group, says that the only way to keep up with change is to “always be one step ahead with resources, technology, and even strategies”.
54 Richard Banks, founder of RMBanks and Company, says, “The Saudi market is extremely liquid, but what they know they need is an improvement in the way that the market works, more research, more coverage, a better understanding of governance and they have as their primary goal essentially the improvement of professionalism.” (Image Arabian Eye/Reuters)
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Business Interview: Achieving strength and growth 42
Finance and Markets
Vice chairman of Al Sraiya Holding Group, Rashid N. Al Kaabi, talks to The Edge’s Aparajita Mukherjee on Al Sraiya completing 40 years of business sucess.
cover story ‘Wasta’ is one of the most cohesive traditions in Arab society, forging social bonds that extend deep into the workplace. But IN THE WORKPLACE is there a place for it in the modern, international labour market? Radhika Punshi and David Jones, co-founders of The Talent Enterprise, examine wasta’s impact on the region’s workforce.
features
Energy & Sustainability 27
Business Interview: Rashid N. Al Kaabi, vice chairman of Al Sraiya Group on managing change
- August 2015
Vol. 7 No. 8
- QATAR’S BUSINESS MAGAZINE - Vol. 7 No. 8 - Issue 70 - August 2015
WASTA
How does Arab society's 'hidden force' influence the region's modern working paradigm?
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Euromoney Qatar's Richard Banks What the Iran deal means for Qatar Cebu Airlines' new Doha-Manila service ictQATAR improves worker connectivity
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The private equity market in Qatar, the Gulf Cooperation Council, and the Middle East as a whole appears to have significantly matured over the last five years, and is poised to generate even more business over the next five years.
Competition for Qatar in its key liquefied natural gas market is set to become stiffer, provided that the deal struck on July 14 to lift sanctions on Iran Tech-savvy Qatar, with its high penetration in exchange for curbs on its nuclear programme of smartphones and Internet connectivity, makes it through the United States. offers enormous opportunities for the e-commerce industry but the country has Real Estate & Construction 31 some challenges to yet overcome, writes Some of the best assets in the world are owned Syed Ameen Kader. by Qatari nationals. Shaista Zulfiqar looks at
Feature story: E-commerce 48
Qatar's growing investment interest in Dubai.
Business Interview: On a steady course 54
Richard Banks, founder and principal of RMBanks and Company, offers his twitter.com/TheEdgeQatar informed analysis on the effect the changes in Saudi might have on the Gulf linkedin.com/company/ the-edge-magazine-qatar Cooperation Council markets, energy prices and the economic outlook for www.gingercamelmedianetwork.com/edge 2015 into 2016.
Qatari investors have shown interest in properties in Downtown Dubai, a large mixed-use complex, which is an important part of development in Dubai.
The Edge | 3
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Tech & Communications 33
Businesses must act now to capitalise on, and to stay relevant in, the Middle East’s growing digital landscape, writes M. Iqbal.
Business Insight
Introducing... The Edge's Weekly
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Beschir Hussain, co-founder of Hellofood Middle East, talks about why he set the venture up, and their plans for the year in the region; and Alex Reyes, general manager, Long Haul Division, Cebu Pacific Air, shares how he intends to make the Manila-Doha route profitable while remaining low cost.
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The Edge now has a business news podcast on the Ginger Camel Media Network. Hosted by our Managing Editor Miles Masterson and featuring the editors of The Edge and QCN magazines as well as special guests, The Edge Business News podcast covers business news, current affairs and analysis of the main news stories across all sectors related to the economy and society in Qatar, as well as Arab countries and the rest of the world. Please subscribe to The Edge Qatar Business News podcast and download our weekly edition for up to date insights into the world of business in Qatar and beyond.
“Our overall business plan for long haul is to fly to cities where there is a concentration of overseas Filipinos,” says Alex Reyes, general manager, Long Haul Division, Cebu Pacific Air.
regulars From the Editor For more info go to www.gingercamelmedianetwork.com/edge
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editor’s letter Anyone who has lived in Qatar for more than a few years might remember the ‘Got Wasta?’ stickers, featuring a Gulf national dressed in a traditional attire, with, if I recall, a wry grin and a knowing wink. I have no idea who printed them or for what purpose, but these stickers would often appear on vehicle bumpers, lamp posts, etcetera. I haven’t seen one lately and if there are any still in Doha, these would now be faded to the point of illegibility by the severe Arabian desert sun. Like many newcomers to Qatar a few years back, these stickers were my first encounter with the Arabic term, ‘wasta’. To my newby expatriate mind, wasta seemed to be a fantastic substance that bestowed, on those who possessed it, the power to do the magical. As with physical strength, wasta could grow or decline. One could not practically measure it, but clearly one knew if one had much, if any, wasta or not. And of course, like all new expatriates, sweaty behind the ears, I had absolutely none. So wasta, I was led to believe by some who had been here far longer than I, is partly the power nationals in the region hold over sponsored expatriates, and also to conduct deals and bestow exclusive favours for one another. It is also often associated with going outside normal channels to make otherwise impossible business progress in Qatar or other parts of the Gulf Cooperation Council, as the case may be. Thus, for me in the beginning at least, the stigma of the word wasta was mostly negative. Now, in 2015, my experienced and more knowledgeable and somewhat more wrinkled self knows this only to be partly true. Firstly there is a ‘good’ form of wasta, which helps move things along without causing any real harm. Secondly, one can yet achieve much in the region without requiring too many ‘insider’ contacts, though having a wasta-rich ‘public relations officer’ in the business no doubt helps us to process work permits, visas and the like. Indeed, in this sense wasta most often refers to connections within the bureaucratic behemoth
that is the Gulf state. From the outside a disgruntled expatriate might look down on those who use their connections here to speed up permits, licences or other forms of official approval; but I bet they would jump at the chance to use these informal channels if so able. Moreover, wasta, in the sense of “it’s not what you know, it’s who you know” exists at least as much here as it does anywhere else in the world including the ‘old boy’, fraternities, Freemasons and other similar networks of the West. But even if one does not have the privilege of hailing from such exclusive institutions, can anyone never say they got the nod on a business opportunity, contract or job because they had some sort of personal connection to a key decision maker? I think not. Yet the danger of wasta, or any form of preferential treatment, is when it crosses the line from harmless favours for family, acquaintances or countrymen, to damaging and unfair nepotism or favouritism for those who have a less-than savoury agenda or do not deserve it, at the expense of those who do. In our cover story on page 36 by David Jones and Radhika Punshi we delve deeper into the world of wasta. While we do focus on ‘good’ and ‘bad’ wasta in a general business sense, as human resources experts, our authors zone in on wasta in the working environment, which, they argue, often can mean the exclusion of expatriates, women and the youth – and perpetuates what they call ‘rentseeking behaviour’ in the region. Finally, on behalf of all the staff of The Edge magazine and indeed Firefly Communications I would like to bid a fond farewell to our erstwhile colleague James McCarthy, long time regional managing editor of Sur La Terre magazine and founding editor of our company’s most recently launched publication, the motoring title Volante. Not many people know that McCarthy was the first editor of The Edge and in many ways laid the foundations for the great magazine we have today. McCarthy’s contribution was a combination of old-school editorial integrity and superlativeladen turns of phrase and pithy headlines, and he leaves Qatar after nearly seven years of service at Firefly and we all thank and wish him the best for the future.
The danger of wasta is when it crosses the line from harmless favours for friends, to Miles Masterson damaging and unfair nepotism. Managing Editor 8 | The Edge
2022 triumph 10 | The Edge
photo of the month
Liu Yandong, vice premier of the State Council of China Republic and head of the Beijing 2022 Delegation, speaks to the media after the announcement of her country’s victory in its bid to host the 2022 Winter Olympic Games at the 128th IOC Session on July 30, 2015 in Kuala Lumpur, Malaysia. Beijing, which beat out Almaty in Kazakhstan in the final round, is the first city to ever host both the summer and winter games. (Photo by Stanley Chou/Getty Images) The Edge | 11
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Stock in trade
Doha pushes ahead with plans to boost the Qatar Stock Exchange’s appeal to foreign investors. By Simon Watkins.
main story
In August 2014, legislation was passed that raised the ceiling on foreign investor ownership in Qatari companies listed on the Qatar Stock Exchange (QSE) to 49 percent from 25 percent. Following this, the second quarter of 2015 alone has seen six companies increase their non-Qatari ownership, according to the Qatar Central Securities Depository (QCSD). Four of these are in the financial services sector (Qatar General Insurance and Reinsurance Company, Qatar Insurance Company, the Commercial Bank of Qatar, and Doha Bank), with the others being property developer Ezdan Holding, and the diversified trading, property, and industrial company, Aamal. Even more propitious for enhancing Qatar’s prospects of attracting international investment in order to bolster its own capital base at a time of enduring low hydrocarbons prices are a slew of developments announced recently in Doha. Already, since Qatar was added to the global equities benchmark MSCI Emerging Market Index in May 2014, an additional USD2 billion (QAR7.28 billion) of foreign funds has flowed into the Qatari bourse. According to Rashid Al Mansoori, chief executive officer of the QSE, as of July this year foreigners represented about 40 percent of daily trading activities. With last year also featuring the successful initial public offering (IPO) of Mesaieed Petrochemical Holding Company – which raised around US$880 million (QAR3.2 billion) for the 26 percent stake previously held by Qatar Petroleum (making it the country’s biggest IPO in five years) – Qatar’s Stock Exchange is now ranked by Bloomberg as the second most promising emerging market for 2015, behind South Korea. This view is also likely to be boosted by expected IPOs from Barwa Bank and Qatar First Bank, although specific timings are as yet unknown.
With the regional competition for foreign capital flows having ramped up notably in June as Saudi Arabia opened up its benchmark Tadawul All Share Index – the largest bourse in the Arab world by far – Qatar appears to be moving quickly to maintain its first-mover advantage in the region’s stock markets. (Image Arabian Eye/Reuters)
12 | The Edge
The second quarter of 2015 alone has seen six companies increase their non-Qatari ownership, according to the Qatar Central Securities Depository. Nonetheless, with the regional competition for foreign capital flows having ramped up notably in June as Saudi Arabia opened up its benchmark Tadawul All Share Index – the largest bourse in the Arab world by far – to foreigners (see Business Interview with Richard Banks on page 54), Qatar appears to be moving quickly to maintain its first-mover advantage. For a start, March saw the QCSD allow the citizens of fellow Gulf Cooperation Council (GCC) countries to be given the same investor rights in listed Qatari companies as Qatari nationals, and it also appears to be in the process of increasing the variety of financial assets available for investment, with an eye on foreign capital. Further news emerged recently from the QCSD that the introduction of exchange traded funds (ETFs) and real estate investment trusts (REITs) is currently under discussion. Indeed, according to Al Mansoori, it may be that two out of three planned ETFs are awaiting regulatory approval ahead of
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Qatar Stock Exchange Saudi Arabia Tadawul All Share Index Dubai Financial Market General Index All values rebased at start to 100. Source: Bloomberg
a possible launch this year. “These products are very popular with international investors and are not widely available in the Middle East’s capital markets, so they should give Qatar an edge,” Christopher Cruden, CEO of hedge fund, Insch Capital Management, in Lugano, told The Edge. The presence of the QCSD itself is also highly beneficial from the perspective of foreign investor trust in a new emerging market listed stock exchange and the companies listed on it, given the QCSD’s remit since it went live in January 2014 to manage the safekeeping, clearing, and settlement of securities and other financial instruments listed on the QSE. “Companies operating in a more international environment have the opportunity to improve their management, accounting, and legal practices, in line with international best practices, which ultimately leads to more efficient structures overall,” furthered Cruden. Indeed, by leveraging these operational advantages, it may well be argued that the notoriously unchanging big state petrochemical firms, and their state-directed funding mechanism – the banks – will become nimbler, more profitable operations that manage cash flow in such a way that marginalises the chances of having to suddenly chop and change growth and development plans, Cruden added.
NUMBER OF THE MONTH
QAR
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The amount of foreign investment that has flowed into Qatar’s bourse since it was upgraded to Emerging Market status in May 2014. According to Rashid Al Mansoori, chief executive officer of the QSE, as of July this year foreigners represented about 40 percent of daily trading activities.
business quotes
news
“The deal is very, very powerful on its constraints on the Iranian programme and enhanced verification. I remain confident that this agreement will go into effect.” In late July United States (US) Energy Secretary Ernest Moniz had to defend vigorously the pending nuclear deal with Iran, which has been pilloried by the Republican party in the US, and which must still be passed by the US Congress and was subject to accusations of further hidden “side deals” kept from participating P5+1 nations and congress, to which Moniz was responding. “If we now undercut this agreement, it’s hard to see how there would not be very negative consequences and very negative consequences that we would see very quickly,” he added.
“This is the People’s Agenda, a plan of action for ending poverty in all its dimensions, irreversibly, everywhere, and leaving no one behind.” UN Secretary-General Ban Ki-moon’s statement following agreement on the Outcome Document of the Post2015 Development Agenda in July. “I welcome the agreement achieved today by Member States on the outcome document of the United Nations Summit to adopt the post-2015 development agenda to be held in New York from 25 to 27 September 2015,” said Ki-moon. “It seeks to ensure peace and prosperity, and forge partnerships with people and planet at the core. The integrated, interlinked and indivisible 17 Sustainable Development Goals are the people’s goals and demonstrate the scale, universality and ambition of this new Agenda. The Summit will chart a new era of Sustainable Development in which poverty will be eradicated, prosperity shared and the core drivers of climate change tackled. Critically, the Summit will also contribute to achieve a meaningful agreement in the COP21 in Paris in December.”
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business in quotes
“What we bring to the market is competition, we bring fantastic choice in regard to product and services.” Etihad Airways President and CEO James Hogan in a speech at the recent Global Business Travel Association (GBTA) Convention in the US. Ostensibly, at least in part, subversively commenting on the continuing saga between certain US airlines and other aviation stakeholders over allegations of government subsidies for his airline (as well as Emirates and Qatar Airways), Hogan added, “Our equity strategy is about how we build our network. We work in a digital age where the consumer, whether it’s corporate or leisure, can go online and they look to points of the world they wish to travel. Now within that, we have a partnership with these airlines where we’re now strengthening our global network – top line generating revenue and bottom line tackling cost together.”
“Deregulating oil prices should support the national economy in the longer term whilst also helping consolidate government finances.” Michael Armstrong, FCA and Institute of Chartered Accountants in England and Wales (ICAEW) regional director for the Middle East, Africa and South Asia (MEASA), commenting on the recent announcement by the United Arab Emirates of its new oil price deregulation policy. “The context – of sustained lower oil prices – means that the UAE has chosen the right period to adjust oil subsidies,” continued Armstrong. “As ICAEW’s recent Economic Insight report noted, removing subsidies during a period of subdued global oil prices should mean the inflationary impact will be felt less sharply. This more so as consumer protection is a stated focus of the new fuel price committee.”
14 | The Edge
Business News in Brief Registration starts for Summer Career Camp 2015
Qatar Career Fair (QCF), a member of Qatar Foundation for Education, Science and Community Development (QF), is hosting its third Summer Career Camp in August. Open to Qatari male and female high school students, the QCF camp offers its participants a variety of activities, educational and academic programmes, and interactive workshops. Separate classes will be held for each group of students attending the camp, which will be held at Education City’s Recreation Centre daily from August 23 to September 3.
Summer Career Camp 2015 aims to provide world-class education, work experience, and career opportunities to Qatar.
Dubai International Motor Show reflects Middle East’s booming automotive industry
The biennial Dubai Motor Festival is set for over 20 percent growth and will welcome more than 100,000 visitors from across the globe this November. The 13th Dubai International Motor Show has received an influx of new exhibitors resulting in a 23 percent expansion in floor space. The show will expand into the Dubai World Trade Centre’s Zabeel Halls, increasing the total floor space to 80,000 square metres to meet the keen interest of new manufacturers and exhibitors wishing to attend.
Organisers of Dubai International Motor Show expect more than 100,000 visitors to attend the event in November.
business in brief QNRF unveils joint research initiative with British partners
Qatar National Research Fund (QNRF), a member of Qatar Foundation Research and Development (QF R&D), has launched a joint research support programme in partnership with the United Kingdom Government’s Science and Innovation Network, The British Council, and UK Higher Education International Unit. As part of the new initiative entitled ‘Qatar/ UK Research Networking Programme’, two-member teams are invited to submit proposals regarding the organisation of research workshops in Qatar.
news
Start-up Watch Fixing a tech problem Five college students in their early 20s have come up with a technological start-up that may make finding IT, mobile or web support as easy as calling a taxi through Uber.
Global tax issues to impact GCC In November 2014 the WikiLeaks scandal known as ‘LuxLeaks’ affected all nationalities and brought the issue to the top of the European Commission’s (EU) agenda. The EU has since opened investigations to all its 28 member states, and there is a growing concern that investors from the Gulf Cooperation Council could be dragged into these investigations. A group of tax experts recently met in Doha at a seminar hosted by international law firm Pinsent Masons to discuss global tax issues.
Msheireb announces first tenant for MDD’s commercial district
Engineer Abdulla Hassan Al Mehshadi, CEO of Msheireb Properties (right) and Mohammed Hajaj Al Shahwani, vice president, ICSS, finalised the tenancy deal.
Msheireb Properties announced the International Centre for Sport Security (ICSS) as its first official tenant in the commercial district of the company’s prestigious Msheireb Downtown Doha (MDD). MDD will be a new commercial hub for the city of Doha. The ICSS’s new headquarters will be situated in the Al Baraha area of MDD, which is at the heart of the commercial district.
The FixNation team at the European Innovation Academy competition held in July in France.
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orking on the similar model to the Uber app, this new venture, FixNation, was the group’s contribution to the European Innovation Academy competition held in July in France. The beta version of web-based app has been created and launched in Qatar by a five-member team, including Sampriti Jain, Muhammad Ahmed Shah and Maher Khan from Carnegie Mellon University in Qatar (CMUQ), and two other students – Karl Martin Miidu from Tallinn University of Technology and Tomas Mesaros from the University of Economics in Bratislava. “The project was pre-launched as a part of the competition. We are currently working on developing the back-end and design aspects of the website. We plan on launching the product officially sometime in September,” says Jain, who is currently enrolled in the Bachelors of Science programme in Business Administration at CMUQ. She handles business marketing at FixNation. FixNation wanted to start off with Qatar as three of their team members are based here. “Qatar has a good population of upper to middle class expats who own a good number of tech devices. It is a small and tight knit community and we thought it would be a good market to start with,
test our product and learn how to sell it in bigger markets,” she says. FixNation plans on expanding to the US market with its September launch. “This will be our main target market besides Qatar. We are in the process of figuring out which states or cities we plan to launch the product in as well as register FixNation in,” Jain adds. The application basically works on the Uber model. The customer sees a map with a list that shows all the available technicians in their area. Once the customers identify a technician that they would like to hire, they will contact the technician through the app by providing a description of the problem. “We will suggest a per hour price of USD12 (QAR44) and we would expect the technicians to adhere to it or risk a bad rating,” she explains. The unique thing about the app is that any customer can become a technician at any time by selecting the option and filling out their details. It uses Google Maps for mapping, Google Geolocation for retrieval of GPS coordinates from provided address. For a payment solution, they are exploring possible choices, including PayPal, Braintree Matketplace, Stripe Connect or PromisePay. www.fixnation.co
The Edge | 15
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events
Business events calendar September-October 2015 11-13 October Employee Health & Wellbeing Conference
Health and safety experts from around the world will assemble in Doha to discuss issues on worker health protection at the first Employee Health and Wellbeing Conference, taking place on October 11 to 13, 2015. The three-day event embedding the theme, ‘Global Action Plan: Protect Worker Health – Let the Business Thrive’, will discuss issues relating to the economic burdens of workplace injury and illness. Supported by the Supreme Council of Health, the event programme is designed to enhance professional capabilities of occupational health practitioners through peer-led interactive sessions.
The three-day event will have topics relating to health and safety in the workplace.
13-15 October HQ 2015
Events Listing September
The HQ 2015 offers great opportunity for exhibitors to meet potential customers from the entire Gulf region.
Held on a yearly basis in Doha, the HQ Show 2015 is being launched at a time when Qatar is emerging as a major player in the hospitality and franchise investment market in the Gulf Cooperation Council, due to the requirements of the 2022 World Cup, in terms of food and beverage/HORECA (hotels, restaurants, cafes) supply and hotel construction. The three-day event, to be held at Doha Exhibition Centre (DEC), will also allow franchise brands, hotel groups, developers, banks and consultants to network and create new business opportunities with hotels and franchise investors.
26-27 October Future Landscape & Public Realm Qatar
The second edition of the Future Landscape and Public Realm Qatar will provide an opportunity for landscape and design professionals and high-level decision makers to assemble under the same roof to discuss new innovations, key challenges, and future opportunities in this sector. Powered by Project Qatar, the event will focus on a number of issues such as the development of youth and sporting facilities within Qatar’s public realm, efficient use of local plants and local materials to minimise environmental impact, and ongoing and upcoming public and landscaping projects and guidelines in Doha.
6-9 September Port Development Week 7-8 September Future Interiors Qatar (Project Qatar) 8-9 September 4th Annual ITS & Road Safety Forum
October 4-6 October QBX Expo 4-7 October ISQua 2015 International Conference 11-13 October Employee Health and Wellbeing Conference 12-14 October Kitchen and Bathroom Accessories Exhibition 13-14 October Qatar Transport Infrastructure 2015
The Future Landscape and Public Realm Qatar looks to explore the challenges and opportunities in creating sustainable and attractive outdoor environments in Qatar.
16 | The Edge
14 October Back2Business 2015
Special advertiSement
The company law of Qatar undergoes a make-over The Commercial Companies Law, No. (11) of 2015 (New Companies Law) was promulgated by HH the Emir of Qatar Sheikh Tamim bin Hamad Al Thani on 16 June 2015 and will come into place thirty days after publication in the official gazette. Much of the New Companies Law mirrors provisions in the old companies law but there are some significant changes affecting both joint stock companies and limited liability companies . Limited liability companies are now (a) being permitted to have only one member as opposed to the minimum two members under the old companies law. As such this has necessitated dispensing with the old single person company and (b) whereas under the old companies law the share capital of a limited liability company had to be “sufficient to carry out its objects and in all cases not less than 200,000 Qatar Riyals”, the New Companies Law does not specify any minimum capital requirement. With joint stock companies the name of a joint stock company was previously a Qatari Shareholding Company and these words were to follow the company’s name. Now joint stock companies are to be known either as as Qatari Public Shareholding Company or a Qatar Private Shareholding Company. The New Companies Law also provides that if a Qatari Public Shareholding Company fails to offer its shares for subscription within 60 days from its date of incorporation, it shall automatically convert into an limited liability company. It is also the case that where a Qatari Public Shareholding Company does not list for trade within one year from its date of incorporation it shall automatically convert into a Qatar Private Shareholding Company. The nominal value of shares in Qatar Public Shareholding Companies and Qatari Private Shareholding Companies have now been altered to 100 Qatar riyal instead of the previous ten Qatar riyal. Also for boards of Qatari Public Shareholding Companies, persons are now limited to being board members of no more than three Qatari Public Shareholding Companies and one third of board positions may be occupied by independent directors who require no share ownership qualification. Furthermore, attendance at a board meeting is now permitted by electronic means and board decisions are also clearly permitted to take place by circular resolution in urgent cases provided that the same is agreed by all board members and it is ratified at the next subsequent board meeting. Under the old companies law there was recognised by Article 68 a type of Qatari Shareholding Company in which the shareholders included the Qatar government or a government owned entity (51% or more). Pursuant to Article 68 of the old companies law where legislative provisions of the old companies law contradicted any provision contain in the company’s memorandum and articles of associations the provisions of the memorandum and articles of association would prevail. This allowed any government company or joint venture company significant freedom to exclude itself from the provisions of
the old companies law. Under the New Companies Law, freedoms under Article 68 remain in place but only whilst an Article 68 company remains a Qatar Private Shareholding Company, once it becomes a Qatar Public Shareholding Company it must comply with all the provisions of the New Companies Law. Significantly Article 19 of the New Companies Law now provides that the Minister of Economy and Commerce is empowered to determine by a resolution methods for incorporation procedures in a manner that “guarantees the accomplishment thereof easily, including the representation of all related authorities in the single window system”.
AHMED JAAFIR Head of Corporate structuring Al Tamimi & Company a.jaafir@tamimi.com
FRANK LUCENTE Partner, Corporate Commercial Al Tamimi & Company f.lucente@tamimi.com
Follow us on Twitter @AlTamimiCompany Join us on LinkedIn - Al Tamimi & Company www.tamimi.com
qatar perspectives Why CSR is important for Qatar Corporate social responsibility (CSR) is the voluntary commitment an organisation undertakes which is above and beyond legislative requirements. It is important for organisations to position themselves as leaders in society, writes Fahad Zainal, who recommends that organisations implement CSR initiatives by making them inalienable from its structural framework.
CSR is not only an important part of increasing a firm’s competitive edge; it also raises brand awareness and helps build relations between the community and employees.
By working alongside local communities, non-profits and other socially focused businesses, organisations are given the opportunity to make a worthwhile difference, one that will have a positive impact on their community in the long term. The Qatar Financial Centre’s (QFC) current CSR focus is on three areas: youth, community, and education and training. It also supports the Qatar National Vision (QNV) 2030, which under the pillar of human development outlines Qatar’s plans to develop its economy and society by building on human capital and resources. Through its initiatives, the QFC aims to contribute to the growth of Qatar’s economy, by providing youth with the necessary tools to enter and prosper in the non-hydrocarbon sector. Steps have already been taken towards achieving these objectives through the Kawader and Injaz Qatar programmes. Along with forging a strategic partnership with Injaz, and through educating and training youth in Qatar, and by giving them an insight into the private sector, the QFC will help establish leaders of tomorrow in the region. The people of Qatar are of the upmost importance when devising a CSR strategy.
As a result of opening up a dialogue with the community, local companies are able to keep up-to-date with the needs and concerns of the local populace, and see where they have resources that can plug a gap or otherwise meaningfully contribute to the greater good. Before conducting any CSR activities, it is important to ensure the initiative meets a number of different requirements. Does the activity address a significant social problem? Who are the main beneficiaries of the activity? How does this activity reflect on the organisation? Is this activity designed to be sustainable? Does this activity align with the organisation’s objectives, purpose and values? CSR is not only an important part of increasing a firm’s competitive edge; it also raises brand awareness and helps build relations between the community and employees. Furthermore, to move forward in business, organisations have to think ahead to what will affect them in the future, taking into account changes in society, government legislation, environment and the economy, and they have to recognise that they have a role in reacting to these changes and acting, not just in terms of economic issues, but more diverse societal issues as well.
20 | The Edge
Fahad Zainal is the chief administrative officer of Qatar Financial Centre Authority.
qatar perspectives What is the potential impact of
higher US rates on Qatar? With the United States (US) Federal Reserve likely to raise the interest rate anytime before the end of this year, Qatar may have to do the same, as its currency is pegged to the US dollar, writes Oliver Cornock. For many months now, investors worldwide have been keenly observing every statement of US Federal Reserve chair Janet Yellen, in order to get a sense whether and when the interest rate would be hiked. The July meeting of the Federal Open Market Committee (FOMC) had also prompted yet another round of speculation. Yet, while there is still much contention over the exact timing and scale of any rate rise, most investors are agreed that before the year is out, US rates will get their first major hike in almost a decade. This has major implications across the global economy, with the countries of the Gulf Cooperation Council (GCC) – including Qatar – unlikely to be immune from the impact. With the state’s currency pegged to the dollar, rate rises posted in Washington will likely mean rate rises in Doha. How these will play out as Qatar looks to maintain growth and spending in an environment of falling oil and gas prices – and therefore state revenues – is a major question for the country’s planners and businesses. If the US does raise rates later this year – and some analysts suggest this could come as early as September – emerging markets (EMs) are thought particularly likely to suffer. Raised rates will make the US even more of a preferred destination for investors than it already is, boosting capital outflows from EMs. What has been exercising minds in Doha more then, is the potential impact of a strengthening dollar and higher US rates on the Qatari riyal, local bond yields – which have already been rising – and interest rates. The dollar peg means Doha is obliged to follow the US when it raises or lowers its rates. The question thus becomes, while it may make sense for the US Federal Reserve to raise rates this year, does it 22 | The Edge
make sense for Qatar – and other GCC countries – to do likewise? A first glance at the economic indicators suggests not. Lower oil prices have impacted the economy, and while those prices stabilised around USD65 (QAR237) a barrel in the earlier part of the year, they have since fallen again, with Brent crude trading at around USD53 (QAR193) at the end of July. The government also cut its gross domestic product (GDP) growth forecast for 2015, while the International Monetary Fund (IMF) expects a gradual slowing in real GDP growth over the next few years, as public investment tapers off. While the US Federal Reserve is likely to raise interest rates on the back of accelerating growth in the US economy, encouraging extra growth is more of a concern in the Gulf. However, the currency peg still has its advantages, as does a stronger dollar. The latter has had a deflationary effect within Qatar, while also strengthening the purchasing power of revenue from dollarpriced exports, such as oil and gas. On the peg itself, the IMF remains in favour, reporting back in April that the peg has served Qatar well, both when oil and gas prices have been high and when they have been low. According to the IMF, the peg anchors prices and provides stability to income flows and financial wealth. It further stated that while there are disadvantages to the restrictions on monetary policy a peg creates, in Qatar, fiscal and macroprudential policies can handle anything these restrictions throw up. Doha does also have some time to play with, as its rates are already higher than US ones – the Qatar Central Bank deposit rate has been steady at 0.75 percent since
2011, while the US Federal Reserve funds rate has been around 0.25 percent. July’s FOMC meeting saw the US decide to keep rates unchanged for now, but Qatar will likely have to respond to a rise soon. Many investors will thus be waiting to see just how in or out of sync that response is obliged to be.
Doha does also have some time to play with, as its rates are already higher than US ones.
Oliver Cornock is the regional editor, Middle East, for Oxford Business Group.
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finance & markets
A pedestrian stands in front of a signboard of CapitaLand in Shanghai, China. CapitaLand Ltd’s serviced residence arm and Qatar Investment Authority, the state’s sovereign wealth fund, are partnering in a USD600 million (QAR2.2 billion) venture as South East Asia’s biggest developer boosts its fund management business. The venture will initially focus on Asia Pacific and Europe. (Image Corbis)
GCC private equity markets need
more maturity
The private equity market in Qatar, the Gulf Cooperation Council (GCC), and the Middle East as a whole appear to have significantly matured over the last five years. We now see deal structures, volumes and values that suggest that the region is becoming far more sophisticated, and is poised to generate even more business over the next five years. But there is work that still remains to be done, writes accounting analyst David Petrie.
O
ne of the key recent developments has been significantly increased understanding of different business strategy options on the side of sellers. Historically, private equity was seen purely as a capital raising measure, with some of the other benefits – which are perhaps better understood in other more mature markets – seemingly not as readily appreciated. This has had the potential to block growth at a time when all of the GCC countries are resolved to step up efforts to diversify their economies away from hydrocarbon resources. Qatar is certainly stepping up efforts to move away from an energy-based economy. Thanks to a lengthy period of
24 | The Edge
political stability, high quality infrastructure, and one of the lowest corporate tax rates in the world, Qatar looks like achieving its aim of becoming a leader in terms of both its business environment and attracting foreign investment. The 2010 legal changes that allow foreigners to own the entirety of a company in some sectors – such as IT, culture, sports and distribution – also mean that it should be in a favourable position to attract international investors.
Adding value
However, perhaps the most notable development is that we are now seeing greater understanding of the value that private equity transactions can bring
beyond simply bringing in the money. Firstly, when private equity investors decide to put money into a business, they are usually doing so because they share the owners’ goals and objectives. So they may not just be aiming to bring capital, but also to provide new perspectives, knowledge and strategy which can all be of added value. Secondly, if a business is considering going to market for an initial public offering (IPO) in the future, as a longerterm capital-raising strategy, then having institutional shareholders on board earlier can give the company credibility. Finally, private equity can be a preferable option to an IPO for family-owned businesses, which are typically looking to retain a measure
sectors | finance & markets
Private equity can be a preferable option to an IPO for family-owned businesses, which are typically looking to retain a measure of control over the business. of control over the business – while still growing and expanding regionally or internationally. Previously, a lot of education might have been required on these added-value aspects of private equity. This, in turn, has led to delays in transactions. But now we are seeing organisations – and particularly family-owned businesses – becoming more sophisticated in how they structure and govern the business in order to attract private equity investors. This could well be partly in response to the concerns of international private equity firms.
Challenges remain
It is true that, across the Middle East, there are some challenges for private equity compared to more mature markets. Transactions tend to be more complex, partly thanks to a lack of data, but also Mergers & acquisitions
Domestic deals slow in region
Total M&A activity targeting the region has fallen, as decreased domestic deal value signals a lack of confidence in home markets, according to Mergermarket. The value of H1 2015 M&A in the Middle East dropped 29.4 percent to USD18.9 billion (QAR68.8 billion) compared with H1 2014, the lowest H1 deal value since 2009. H1 domestic activity (92 deals
owing to cultural and linguistic challenges. Moreover, for many countries in the GCC, the comparatively recent sophistication of their financial markets means that there can be a level of inexperience for senior management in leading an organisation through these large, often intricate, deals. Ultimately, the potential rewards for private equity in both Qatar and the wider Middle East are high – the availability of wealth, a young and ambitious demographic, and rapidly improving infrastructure are all driving an environment of tremendous business opportunity. In some countries, there are perceived risks owing to the unpredictable geopolitical situation. Perhaps because of this, and the possibility of deterring risk-averse investors even from the more sophisticated and stable GCC markets, companies would do well to focus on 25%
ensuring they are as attractive as possible. There is still scope for improvement in areas such as governance and transparency. If businesses can improve their quality of accounting, financial reporting and corporate governance procedures, they will be in a good position to raise capital, whatever route they choose.
David Petrie is head of corporate finance faculty, Institute of Chartered Accountants in England and Wales.
QATAR Real GDP by Sector (% change, year-on-year)
20%
16.7% 13.0%
15%
10%
6.0%
Non-hydrocarbon
6.3% 4.0%
5%
4.1%
0%
-5%
Hydrocarbon Total
2010
2011
2012
2013
worth USD9.1 billion, QAR33.1 billion) also saw a 52 percent decrease compared to H1 2014, with 36 fewer deals. In contrast to the decline in domestic M&A, companies are spending more on acquisitions outside of the region in search for growth. Outbound activity increased 47 percent year-on-year to reach USD20.9 billion (QAR76 billion), the highest H1 value on Mergermarket record since 2011, despite seeing 14 less deals. The increased outbound activity was led by South Africa, following a few high-valued deals within the consumer and leisure industries. The outbound deal value more than doubled to USD6.4 billion (QAR23.3 billion) in H1 2015 from the same period last year, reaching
2014
2015
Sources MDPS and QNB Economics analysis
QAR
33.1
billion
The cumulative value of 92 deals in H1 domestic activity. its highest H1 value on record, with the UK being the prime target (five deals worth USD6 billion, QAR21.8 billion). The Edge | 25
energy & sustainability Iran is looking at building floating LNG (FLNG) plants above an offshore natural gas field, where liquefaction, storage and transfer is carried out at sea by specially converted ships.
Abadan refinery, the largest in Iran, in the south western Iranian city of Abadan. Seemingly set to return to the world of gas exports, Iran has revealed plans to refine its natural gas on ships instead of land-based refineries, presumably to speed up the export process. (Image Arabian Eye/Corbis)
Iran sanctions deal to raise competition in Qatar’s key refining and LNG markets According to analysts, if the historic deal struck on July 14 to lift sanctions on Iran in exchange for curbs on its nuclear programme makes it through the United States (US), competition for Qatar in its key liquefied natural gas (LNG) market is set to become dramatically stiffer, reports Simon Watkins.
T
he raw data does look concerning for Qatar, currently the world’s leading LNG supplier, with Iran having estimated proved natural gas reserves of 1193 trillion cubic feet (Tcf), second only to Russia’s, 17 percent of the global figure, and more than one-third of Organization of the Petroleum Exporting Countries’ (OPEC) total, compared to Qatar’s 872 Tcf, and an estimated 157 billion barrels (bbbl) of proved
crude oil reserves (around 10 percent of the world’s total), compared to Qatar’s 25.2 bbbl. “Basically, if you are an integrated oil company, Iran is the future now in the same way that Saudi Arabia was in the 1930s and 40s. Missing out on this will put you on the margins of the global hydrocarbons game for the next 20 or 30 years at least. It’s as simple as that,” Christopher Cook, director of global energy consultancy, Wimpole International,
in Edinburgh, told The Edge. Jeremy Stretch, chief strategist for CIBC in London, comfirmed to The Edge that Iran is likely to have an LNG and oil refining pricing strategy that reflects its desire to re-establish its position as a global hydrocarbons superpower as soon as possible. “The heads of Iran’s oil and gas industries have already made it very clear that they want to push up oil and gas production dramatically, and that they regard exploiting the global LNG market as a key priority,” he said. Indeed, the current targets are to increase crude oil production to at least three million barrels per day (mbpd) by the end of this Iranian calendar year (and then to 5.7 mbpd by 2018), natural gas production up to one billion cubic metres per day (bcm/d) by 2018, and annual petrochemical production to 180 million tons by the end of 2022. Purely in LNG terms, Iran’s plans to build capacity for exporting 40 million metric tons a year (compared to Qatar’s 77 million tonnes of annual output capacity) remain on track, according to a recent statement from Alireza Kameili, managing director of the state-run National Iranian Gas Company (NIGC), in Tehran. He added that talks are also ongoing with over 170 foreign companies interested The Edge | 27
sectors | energy & sustainability
Iranian petroleum and other liquids production and consumption, January 2011 to June 2014 million barrels per day 4.5 4.0
US imposes sanctions on Iran’s Central Bank EU import ban in effect and sanctions on shipping insurance in Iran’s oil sector enacted
3.5
Implementation of Joint Plan of Action begins
total oil production
3.0
crude oil production
2.5 *next exports
2.0
oil consumption
1.5 1.0 0.5
*Note: Iran’s total oil production minus consumption. It encompasses crude oil, condensate, natural gas plant liquids and refined oil products.
M
Ja n11 ar -1 M 1 ay -1 Ju 1 l11 Se p11 No v1 Ja 1 n12 M ar -1 M 2 ay -1 2 Ju l-1 2 Se p12 No v1 Ja 2 n1 M 3 ar -1 3 M ay -1 Ju 3 l-1 3 Se p13 No v1 Ja 3 n14 M ar -1 M 4 ay -1 4
0.0
Jeremy Stretch, chief strategist for CIBC, told The Edge: “The heads of Iran’s oil and gas industries have already made it very clear that they want to push up oil and gas production dramatically.”
in buying Iranian gas, the preferred delivery option for which is in LNG form. As a part of this, he said, and due to their high economic viability, Iran is not only looking at LNG being transferred through pipelines or on ships but also at building floating LNG (FLNG) plants – involving floating production of LNG above an offshore natural gas field, with liquefaction, storage and transfer all carried out at sea by specially converted ships – to expand the country’s options. “With preliminary negotiations held, the operational and executive work will immediately begin after the lifting of the sanctions,” Kameili said. Prior to the ramping up of pressure from the US and Europe in 2010, Iran had contracts with the Anglo-Dutch Royal Dutch
Note: Iran’s total oil production includes crude oil, condensate, and natural gas plant liquids (NGPL). The difference between total oil production (blue line) and crude oil production (brown line) is mostly condensate and a smaller volume.
Source: US Energy Information Administration
Shell, Spain’s Repsol and France’s Total to build three LNG plants in the country, and Kameili has made it clear that resuscitating these projects, among many others, can realistically be achieved relatively swiftly. According to NIGC figures, achieving a target of 10 percent of the global gas market share will require further investment of around USD60 billion, which, according to a range of analysts spoken to by The Edge, Iran will have no problem in raising without delay. “The Russians and the Chinese already have extensive interests in Iran, and have made it clear that they wish to invest as much as they are allowed to going forward, and the Europeans have been lining up in the Oil Ministry in Tehran for many months now looking to funnel investment, and get a
foot back in Iran, at the earliest opportunity,” says Wimpole’s Cook. In this vein, only last month, Iranian Oil Minister, Bijan Zanganeh, visited Germany to discuss LNG options with Linde, the Aachen-based engineering giant, underscoring that, even if the US Congress votes to keep US-specific sanctions in place, then the EU will move ahead anyway in dealing with Iran, on the legal basis of the July 14 Vienna agreement. Moreover, the deal with Linde alone – which again was put on hold in 2010 – was for the German firm to supply all necessary equipment towards the construction of a 10.5 million metric tons per year LNG production plant, on top of the 40 million metric tonnes per year LNG production target already announced by NIGC.
Kahramaa announces that first solar power facility will be operating by next year In line with Qatar’s target of generating 20 percent of its domestic energy needs from renewable energy sources by 2030, the state-run Qatar General Electricity and Water Corporation (Kahramaa) recently announced that its first solar power facility will be operational by 2016. The solar power station, with a generation capacity of 10 megawatts (MW) to 15MW, will go ahead on a 100,000 square metre (sqm) site at Duhail, and will ultimately be able to generate 200MW of solar power by 2020 – two percent of Qatar’s total domestic energy requirements – according to the firm. The development is a cornerstone of 28 | The Edge
the first phase of the government’s plan – reiterated recently by the Energy and Industry Minister, HE Dr. Mohammed bin Saleh Al Sada – to produce an initial extra 200MW of solar energy, with a target of 1.8 gigawatts (GW) of solar capacity installed by 2020. Over the next two years or so, first phase new capacity is due to come from a number of small-
100,000 square metres State utility Kahramaa's solar site at Duhail in Qatar.
energy & sustainability | sectors
Qatar’s Minister of Energy and Industry HE Dr. Mohammed Bin Saleh Al Sada recently reiterated Qatar’s intention to produce an initial extra 200MW of solar energy, with a target of 1.8 gigawatts (GW) of solar capacity installed by 2020. (Image Arabian Eye/Reuters)
scale plants generating five to 10MW each, installed on under-utilised land, and at a cost of around USD30 million (QAR109 million) per year, according to Al Sada. Qatar, of course, is ideally placed to pursue such a strategy successfully, given that every square kilometre of land in the country yearly receives solar energy equivalent to 1.5 million barrels of crude oil, according to industry figures. It is also in need of extra power generation capacity, with the Economist Intelligence Unit forecasting that the Gulf Cooperation Council’s electricity needs will increase on average by seven to eight percent per year until 2020, and even faster within the faster growing economies like Qatar. Providing at least part of this from a solar solution dovetails with the country’s National Vision 2030 aims of promoting sustainability and environmental awareness and reducing dependence on fossil fuels, highlights Roger Nightingale, CEO of global economics consultancy, RN Associates, in London. In this vein, in addition to the scheduling of a number of large-scale solar power plants, solar desalination projects, and solar panel manufacturing plants, Qatar Foundation (QF) has undertaken and completed the Solar-Smart Grid project, which is the first commercial photovoltaic (PV) project to be granted approval for grid connection from Kahramaa. According to industry estimates, these solar energy smart-grid-enabled systems are already generating up to 85 percent of Qatar’s total solar energy output. An adjunct to this was recently announced by the Qatar Environment and Energy Research Institute with plans to set up a solar map by next year, which will help identify specific locations
Qatar’s new solar power station, with a generation capacity of 10 megawatts (MW) to 15MW, will go ahead on a 100,000 sqm site at Duhail, and will ultimately be able to generate 200MW of solar power by 2020. (Image Arabian Eye/Corbis)
According to industry estimates, Qatar’s solar energy smart-gridenabled systems are already generating up to 85 percent of its total solar energy output. across the country that receive a particularly high-intensity of solar radiation in order for solar cells to be installed at such locations. A key issue that Qatar has also made considerable strides towards addressing is that of price competitiveness in the area of the photovoltaic (PV) cells required in the solar energy process. Perhaps the pivotal point in this regard was last year’s signing by Qatar Solar Energy (QSE) – a private initiative supported by the Qatar government – of a landmark agreement with Kazakhstanbased energy company, Kazatomprom, which will supply QSE with the raw materials used in the production of solar panels.
40
million tonnes Iran’s energy plans include build capacity for exporting 40 million metric tons of LNG a year.
This partnership allows QSE, and consequently the Qatar government, to secure the entire value chain in solar energy production from raw material to smartgrid development and provides a sturdy foundation from which QSE will further expand its production capacity (to 2.5GW, according to a statement at the time from QSE’s chief executive officer, Salim Abbassi). As highlighted by The Edge last October, the agreement with Kazatomprom means that QSE will be supplied with solar grade silicon, the raw material used to make solar panels, at a competitive fixed cost for the next 10 years, securing Qatar’s position at the forefront of the Middle East and North Africa solar energy market, given that demand for raw poly-silicon is projected to increase exponentially, in line with the global move towards utilising more renewable energy as part of the global energy mix. The Edge | 29
real estate & construction Qatari investors look abroad, including Dubai, for better yields
Qatari investors have shown interest in properties in the Downtown Dubai, a large mixed-use complex, which is an important part of development in Dubai.
Qatar remains a prosperous nation which boasts the highest gross domestic product (GDP) per capita in the world. No surprises then that we find some of the best assets in the world are owned by Qatari nationals, writes Shaista Zulfiqar.
I
n England alone, the Qatari royal family owns 20 percent of Camden market; high-end store Harrods; 87 storeys of the European Union’s tallest building, the Shard; the London Olympic village; almost 50 percent of the most expensive apartment block in the world located at 1 Hyde Park; the Chelsea Barracks site, as well as the United States embassy building in Grosvenor Square. These monolithic investments provide an insight into the power and wealth of
Qatari royals, as well as other residents of the richest country in the world. The Qatari real estate market is also thriving. Buoyed by the upcoming 2022 World Cup, the realty sector is seeing a massive surge in activity in both residential and commercial segments. However, the soccer tournament has not restricted Qatari investors from looking for more lucrative markets elsewhere.
Dubai investment
Apart from Europe and other world markets, Qataris have kept a keen eye on its nextdoor neighbour, Dubai – one of the fastest rising global cities in the world with a plethora of opportunities for both investors and professionals. Dubai has long arrived on the world scene
QAR
517
million
Invested by Qataris into Dubai’s real estate sector in Q1 2015. and is now working towards cementing its position as a serious contender on a global level. Its far-sighted vision to move away from oil dependence and diversify its economy has paid off, with the real estate sector paving the way for Dubai’s phenomenal progress. The Edge | 31
sectors | real estate & construction
Qataris know that well, which is why they are among the leading investors in the realty sector of Dubai. Qatari per capita investment in Dubai’s real estate between January 1, 2014 and November 15, 2014 reached AED937 million (QAR929 million), according to Dubai Land Department (DLD) figures. The number of investors? A mere 100, meaning the average per person investment was AED9.37 million (QAR9.29 million). The staggering numbers are not only reflective of the power of Qatari wealth but also the promise that Dubai’s real estate holds. Qatari investors clearly understand the potential of Dubai’s property sector and the massive per capita investment speaks volumes about their trust in Dubai’s future, a trust reinforced when Qatari investors again put AED522 million (QAR517 million) into Dubai realty in the first three months of 2015.
Search swelling
Apart from the DLD figures, Bayut.com, a Dubai-based property portal, has provided some insights into the search trends of Qatari vis-à-vis Dubai market. Bayut noted that of all searches by Qataris into the Dubai real estate market, the majority (78.29 percent) searched for properties that were up for sale in Q1 2015, compared to a mere 45.31 percent who did that in Q1 2014. On the other hand, only 21.71 percent of Qataris searched rental spaces in Q1 2015, compared to 54.69 percent last year. Within these searches, apartments remained the most searched unit type,
Apart from Europe and other world markets, Qataris have kept a keen eye on its next-door neighbour, Dubai – one of the fastest rising global cities in the world. taking up 80.61 percent of the searches. The favourite areas for apartment searches remained, in order of most queries, Downtown Dubai, Dubai Marina, Dubai Sports City and Jumeirah Lake Towers. Average Q1 2015 prices in these areas were AED4 million (QAR3.9 million), AED1.2 million (QAR1.1 million), AED742,617 (QAR736218) and
AED635,845 (QAR630,366), respectively. However, Bayut found that there was a considerable rise in searches for villas as well, with searches almost tripling from 7.55 percent to 18.5 percent, quarter on quarter. Shaista Zulfiqar is a senior communication & PR for Bayut.com.
manager,
Type of Dubai property searches by Qataris 100.00% 90.00% 80.00%
Q1 2014
70.00%
Q1 2015
60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%
Apartment
Villa
Other
Source: Bayut.com
International firms eye the USD2.8 trillion GCC construction market Qatar continues to be one of the most sought after destinations for global construction firms. With USD2.8 trillion (QAR10.20 trillion) worth of projects planned or ongoing in the Gulf Cooperation Council (GCC) countries, international firms, including Chinese, are increasingly eyeing the construction market in the region. This was the observation made during a meeting of a select group of Chinese construction industry executives and service professionals with Deloitte in Dubai. Cynthia Corby, Deloitte Middle East Construction Industry Lead Partner, said, “There is a growing number of Chinese 32 | The Edge
construction and construction-related companies coming to do business in the Middle East.” Deloitte recently released its annual report, GCC Powers of Construction 2015, which also highlighted that the GCC currently has USD172 billion (QAR626 billion) worth of planned and underway projects. Qatar is also expected to see a surge in the number of international construction firms in coming years as the country is gradually ramping up its project awarding
in the run up to the 2022 World Cup, and the Qatar National Vision 2030. In July, Italian firm Salini Impregilo Group, along with its joint venture partners, Galfar and Cimolai, won a contract worth EUR770 million (QAR3102 million) for the construction and operation of the Al Bayt stadium in Al Khor. Other major construction projects that are expected to be awarded soon include QRail, Qatar Economic Zones, and Occidental Petroleum Corporation (Oxy) - Idd e Shargi North Dome Expansion Phase 5.
tech & communications Analysts predict connected devices will grow from nine billion now to at least 50 billion in 2020.
“As the Middle East continues to be an early adopter of latest innovations, businesses in the region will have to define their approach now to stay relevant in this new digital economy,” Hannes Liebe, COO of SAP MENA, tells The Edge.
Digital boom brings both promise and threat to Qatar’s businesses Businesses must act now to capitalise on, and to stay relevant in, the Middle East’s growing digital landscape, writes M. Iqbal.
D
riven by new technologies such as big data, predictive analysis and the Internet of Things, the Middle East’s digital economy is expected to double by 2018 – and local businesses will have to act now to stay competitive in this growing digital landscape.
“As the Middle East continues to be an early adopter of latest innovations, businesses in the region will have to define their approach now to stay relevant in this new digital economy,” says Hannes Liebe, COO of SAP MENA, an enterprise application software company. A new SAP
and Economist Intelligence Unit report indicates that organisations are already seeing the business benefits of an increase in the accessibility of information, whether on prospective clients, existing customers, or on internal data of any kind. “This will be not just another evolution in technology,” says Liebe. “It will be a revolution for both the way businesses are run, and also how new business models are suddenly possible.” The digital economy’s growth is being driven by the rise of the Internet of Things, which analysts predict will see connected devices grow from nine billion now to at least 50 billion in 2020. “With the emergence of the digital economy backed by initiatives such as ‘smart cities’, organisations are demanding a holistic ICT approach to be able to digitise business processes across platforms, cloud-based services, analytics and citizen-centric applications,” says Liebe. “We also anticipate an increasing need of ICT skills in those new technologies. To meet these market demands, decision makers from the public and private sectors must be prepared to invest in ICT learning, and training workers on ICT and e-business skills.” Businesses that embrace these digital transformations could see their revenue increase by as much as 30 percent, according to McKinsey & Company. The Edge | 33
sectors | technology & communications
Connecting Qatar’s migrant workforce to the Internet The Ministry of Information and Communications (ictQATAR) aims to quadruple the number of worker accommodations that are connected to the Internet by the end of 2015. Seventy-five locations will be added, taking the total number to about 100, reports M. Iqbal. This forms Phase Two of the Better Connections Program, run by the ictQATAR in partnership with the National Human Rights Committee, Qatar Rail, Ezdan Holding Group, Msheireb Properties, Qatar Fuel (WOQOD), QDVC and UCC.
The Phase Two launch event, held at InterContinental Doha – The City in July, featured a panel discussion where partners and stakeholders reviewed the progress made over the last year. This included setting up and equipping 25 ICT facilities at
QATAR'S ICT BY THE NUMBERS Qatar falls in networked readiness rankings
Qatar’s Connectivity Boom
Qatar’s rank in the Global Information and Technology Report 2015’s Networked Readiness Index has fallen from: #1 in Arab nations in 2013 and 2014 to #2 behind UAE in 2015.
Despite the slip in the rankings, according to ictQATAR’s Annual Report 2013/14, Internet penetration in Qatar increased between 2010 and 2013, bringing the state closer to complete connectivity.
Qatari households
UP 84% - 96%
worker accommodations, and training 50 volunteers. The volunteers will train selected workers, who will then be responsible for helping their colleagues use the computers. The Better Connections Program was launched in May 2014 to give contractors and employers a practical framework to provide training and access to ICT facilities to their migrant work force. Phase One was launched in January 2015, in partnership with the Supreme Committee for Delivery & Legacy, Qatar Foundation, ROTA, RAF, Microsoft Qatar and CH2M Hill. The initiative is part of ictQATAR’s larger effort to increase the Internet penetration in Qatar. Under its iParks initiative, the Ministry already provides free Internet access to visitors in nine parks across the state. About 700,000 people accessed the Internet through these iParks in 2013, according to ictQatar.
Mainstream population
UP 82% - 98% This is driven in large part by the significant increase in broadband connections. Mobile broadband connections increased by Worldwide, Qatar has slipped from
#23
in 2013 and 2014 to
QATAR’S ICT VISION
#27
out of the 143 countries included in the 2015 index.
Networked Readiness Index 2015 & 2013 2013
2014
2015
QATAR (23)
QATAR (23)
UAE (23)
UAE (25)
UAE (24)
QATAR (27)
Bahrain (29)
Bahrain (29)
Bahrain (30)
Saudi Arabia (31)
Saudi Arabia (32)
Saudi Arabia (35)
Oman (40)
Oman (40)
Oman (42)
Source: Global Information and Technology Report
34 | The Edge
A number of Qatar’s public parks have free WiFi, allowing Internet access for many who otherwise might not have any. (Image FotoArabia).
32%
between 2012 and 2013 to 1,665,419.
The number of fixed broadband connections increased by
17%
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Wasta in the Workplace
How does Arab society’s ‘hidden force’ influence the region’s modern working paradigm? 36 | The Edge
‘Wasta’ is one of the most cohesive traditions in Arab society, forging social bonds that extend deep into the workplace. But is there a place for it in the modern, international labour market? Radhika Punshi and David Jones, co-founders of the first human capital ‘think tank’ in the Gulf Cooperation Council (GCC), The Talent Enterprise, examine wasta’s impact on the region’s workforce. The Edge also canvassed some local business people to find out their take on the concept of this phenomenon in Qatari business circles.
I
n Arab society, the notion of networking reaches far beyond LinkedIn endorsements, and into what is known in Arabic as wasta. Variously translated as ‘pull’ or ‘sway’ and even nepotism, wasta is often about using social influence, sometimes undue, in order to obtain a scarce resource and/or to get something done, often seemingly impossible for others, quickly. Once part of the fabric of Arab existence, since the discovery of oil and gas in the region and the expansive and rapid growth of countries such as Qatar, wasta has taken on a negative connotation, one that is not entirely undeserved as a synonym for nepotism and favouritism in the region’s majlises, boardrooms and businesses. But it is a far more complex phemonenon that some locals are also quick to try to dispel. “Wasta means connection,” explains Khalifa Saleh Al Haroon, Qatari entrepreneur, for example. Best known from the web portal I Love Qatar, with its popular Mr Q 'QTip’ webisodes, Al Haroon adds, “You create connections based on relationships. When you have a good relationship with someone they’re more likely to help out and support. Additionally, wasta isn’t something that’s unique to Qatar or the Middle East. It’s something that exists globally. We call it wasta, others call it clout.” Moreover, fellow Qatari businessman Ali Al Humaidi refers to one of its original purposes, which was to enable these connections. “Wasta was never known in the ugly or shameful way it stands today,” Al Humaidi tells The Edge. “In fact, throughout the Arab and Bedouin history, the word and the act of mediation is a way of life to bring people together and to bring points of views closer. To this effect, whenever an Arab needed to approach someone they didn’t know, he/she would invite a mediator to soften the approach. In modern times, the old need for the mediation no longer exists but the practice itself, which is part of the heritage/culture and way of life that has continued, is used and applied in different circumstances.” However, as Al Humaidi mentions, wasta has become a pejorative term. At its worst it arguably promotes what economists refer to as ‘rent-seeking behaviour’, where the connected few obtain a disproportionate share of the surplus economic
gains afforded by the region’s vast fossil fuel reserves, not through innovation or productivity, but through, in part, whom they know. Of course, wasta has a social function. In traditional societies, where family and tribal ties were critical in terms of establishing identity and trust, it served as a positive force for social cohesion. “In the absence of systems, processes and regulations,” continues Al Humaidi, “wasta is an alternative legitimate way for paving the way and making introductions or even asking for favours specially in a society and social structure that respect ties and relations, not forgetting Arabs’ tribal lifestyle in a very harsh desert environment needing to build alliances, and wasta become stronger in such social structure.” However, within the GCC’s rapidly growing and changing societies, unfortunately indiscriminate wasta can arguably lead to some of the region’s key demographics – particularly women, youth and expatriates operating in the region’s workplaces – experiencing a heightened sense of exclusion. The region’s workplaces are renowned for being
Wasta has become a pejorative term and at its worst arguably promotes what economists refer to as ‘rent-seeking behaviour’. The Edge | 37
cover story | workplace wasta
uniquely broad in terms of their diversity, but they are noticeably less so in terms of their inclusion. Elaine Gold, a management consultant who has been working in Qatar for eight years, agrees. “I have worked with a number of companies and individuals coming in ‘cold’ to Qatar,” she says, “and it is practically impossible to do business until you have spent at least six months building relationships, working out who really is the decision maker and then another six months pitching to the decision maker. In Qatar, who introduces you, who you have done business with in the past, and having a tried and tested product or service are most important. Anyone trying to market a new idea, innovation or prototype, finds it particularly hard to find an opening.” As the region grapples with the natural friction between modernism and traditionalism, established social mechanisms such as wasta also have to
The ‘wasta iceberg Effect’
compete with ‘alien’ imports like open markets and meritocracy. Especially in the workplace, wasta can cause significant challenges in perceptions of fairness, managing expectations, promoting productivity, and achieving greater levels of employee engagement. Furthermore wasta, arguably, reduces the potential benefits of positive competition between talent inside organisations, such as ensuring that the most productive employees rise to the top. Any perception of the futility of this competition (caused by negative ideas of wasta) could negatively impact the effort, engagement and productivity of those employees – and, by extension, the performance of the organisation as a whole. Established elites then suffer from a long-term diminishment of international competiveness, while employees suffer from disengagement, frustration and – to borrow another word from colloquial Arabic
Wasta can lead to some of the region’s key demographics – particularly women, youth and expatriates operating in the region’s workplaces – experiencing exclusion.
Visible expressions of culture • • • • • • • •
Organisational structure HR policies & practices Organisational values Reporting relationships Employment contract Leadership and behavioural competencies Titles & grades Communication
• • • • • •
Physical work environment Work/life balance Performance management Compensation, benefits & incentives Promotion & career progression policies Diversity and inclusion programmes
Unspoken aspects of culture • • • • • • • • • • • • •
Decision-making & delegation Personal interactions Personal networks and relationships Personal preferences (competition vs. cooperation) Psychological contract Actual workload distribution Values, beliefs and attitudes Wasta National/expatriate cultural norms and expectations Unwritten rules, assumptions & unconscious interpretations Multi-generational/gender stereotypes & assumptions Perceptions of fairness and equity Impact of family, religious and community values
Source: The Talent Enterprise Visible and unspoken expressions of culture in the GCC. Due to the complex and often unique nexus of interaction with nationals and expatriates in Gulf business environment, wasta is often a largely unseen force, say the authors.
38 | The Edge
workplace wasta | cover story
– being ‘tufshan’: powerless and adrift. The most concerning trend from an organisational perspective is the significantly lower level of employee engagement reported, as compared to the rest of the workforce. The Talent Enterprise’s research in employee engagement demonstrates that, on average, less than 50 percent of nationals are fully motivated and actively contributing to their jobs. This is generally pronounced among youth, with under25s and 25- to 34-year-olds reporting alarmingly low levels of motivation. It is not difficult to imagine the impact of this on individual performance and organisational productivity.
Women in the workplace
Traditionally excluded from the maledominated wasta nexus, the region’s females currently report lower levels of employee engagement (50 percent) compared to their male counterparts (57 percent). One of the main reasons cited for this is a perceived lack of fairness at work. This is most visibly evident in the unequal distribution of pay and benefits Even though many employers would claim to have equal pay and benefits from a philosophical point of view, the reality is quite stark. According to World Economic Forum (WEF) estimates, the pay gap between men and women in the Middle East and North Africa (MENA) region ranges from 20 to 40 percent. Another area where women in the region are at a considerable disadvantage is in their relative lack of access to networking, both formal and informal, during and after work. The power of these networks to strengthen business relationships is often underestimated; many critical decisions are made, largely by male peers, during informal shisha sessions. This is potentially when the male-dominated wasta is most
20-40%
The range of the pay gap between men and women in the MENA region.
active, with absent females losing out. These issues are not unique to the Arab world. A global study found that, on average, men found it easier to use informal means to persuade a senior colleague to back their development, whereas women benefit more from structured help because they are generally more reluctant to promote themselves and less inclined to socialise during and after work.
Youth and unemployment
Youth unemployment rates within the broader MENA region are the highest globally. A 2015 WEF report puts jobless rates amongst youth under 25 at 27.2 percent in the Middle East and 29 percent in North Africa. Combine this with some of the more negative effects of wasta, and the impact is particularly damaging for longterm productivity and efficiency. Uniquely for the region, education has an unexpected effect on predicting joblessness. If job seekers have been to college, their likelihood of being unemployed almost doubles, whereas in most other countries and regions in the world, graduates have a significantly higher chance of being employed. Clearly more research is required, but this indicates that the region’s labour markets are not sufficiently efficient, and suggests that outcomes are determined by other, noneconomic, exogenous factors – including, it must be argued, wasta.
Wasta arguably reduces the potential benefits of positive competition inside organisations, such as ensuring that the most productive employees rise to the top.
Thanks to male-dominated wasta, women in the region are at a considerable disadvantage in their relative lack of access to networking, both formal and informal, during and after work say the authors. (Image Arabian Eye/Corbis)
The Edge | 39
cover story | workplace wasta
27.2%
The unemployment rate among youth under 25 in the Middle East.
One of the first barriers faced by youth is at their entry into the formal labour market. A recent survey by The Talent Enterprise found that students’ main source of finding a job was through their friends, family and connections – and not through their college placement counsellors or by establishing contact with employers directly. This research is supported by findings from the Brookings Doha Center, which revealed that major obstacles identified to gaining labour market access. These included: “lack of awareness of how to jobsearch, connecting with employers and access to career advice; needing connections or wasta to get a job. Many students said that despite their willingness to go through open competition to find employment, they found it difficult to actually find a job by responding to job vacancies or through sending out resumes to potential employers”. This is further substantiated by Gallup, which found in 2009 that “the perception that jobs are only given to people who have connections (wasta) is not dominant in any one region, but youth in Bahrain (32 percent) are among the most likely to mention this. When asked separately whether knowing people in high positions is critical to getting a job, majority of youth in every country surveyed agreed.” If or when youth find a job, they then have to navigate the complex world of career progression. Ostensibly, wasta promotes a patriarchal approach to work, where family names and personal relationships trump meritocracy. Ambitious and career-oriented youth can find this wasta frustrating. Moreover, over the next decade, the local workforce in our region is expected to become progressively younger and according to the Arab Social Media Report 2013, younger people in the GCC display some of the highest level of social media penetration in the world – indicating an alternative approach to networking, compared to the older generation’s. 40 | The Edge
GCC students most preferred source of finding a job GCC NATIONAL STUDENTS
EXPAT STUDENTS
UK STUDENTS
Searching online/job portals etcetera
23%
14%
21%
Via friends, family and personal contacts
24%
23%
13%
Through securing part time work, internships or apprenticeships first
13%
21%
17%
I don't know yet
15%
17%
18%
Government agencies
10%
2%
2%
Your school/college student placement cell
8%
13%
12%
Recruitment consultants/ talking directly with prospective employers
5%
8%
6%
Advertisements/ newspapers
2%
3%
2%
Marked differences in the way Gulf national youth, expatriate youth and youth in the United Kingdom approach job seeking, point to the influence of wasta in the region, hypothesise the authors.
Source: The Talent Enterprise Youth Employability Research (2015)
Indeed, overall, the Talent Enterprise research indicates that when wasta impedes the youth’s access to jobs or progression within their careers, this leads to an overall lowering of engagement, optimism and life satisfaction.
Expatriate relationships
The term ‘expatriate’ is an anachronistic misnomer. It implies a unified social group with a common identity and shared interests. The reality is a broad spectrum of workers, ranging from construction labourers and domestic workers to globally mobile executives, technicians and entrepreneurs. Occupying the highest echelons of international expatriation affords high earnings, low taxes and the opportunity to work closely with local elites and develop an individual wasta network. Yet, many of the region’s expatriates who contemplate a return home earlier than planned (‘expat flight’), struggle with navigating the unknowns within their organisational cultures, and cite a general lack of transparency and meritocracy, even in the private sector. Some reference the strength of personal relationships, where
People policies are changing rapidly across the GCC and companies that embrace standards of diversity, development and inclusion will prevail.
Continued on page 64
workplace wasta | cover story
A short conversation about
wasta
The Edge talks to two successful young Qatari businessmen about their take on wasta in local business, Khalid Al Jaber and Khalifa Saleh Al Haroon.
Khalid Al Jaber
Khalifa Saleh Al Haroon
Do you think it is possible to do business with little or no wasta in Qatar? Khalid Al Jaber: I do believe it would
as favour they are making for their relatives, friends and partners. Maybe others consider it as ‘credit’ to use for other wasta in the future; which means many don’t even consider it as wasta or avoid using this term. But networks such as ‘old boy’, can be way more organised compared to wasta in Qatar or the region.
be possible, especially amongst the young entrepreneurs who are trying to apply changes in everything including doing business without the use of wasta. However, this could cause a conflict or a gap between two generations, which would end up in the younger generation using wasta in order to let their business run smoothly. Khalifa Saleh Al Haroon: I do think it’s possible to start a business with little or no wasta. When I set up my business, I didn’t really know many people, but I networked, and built clout. That’s not to say that having wasta doesn’t help speed things up or open up doors.
Do you think Qatar’s wasta in business is necessarily any different to ‘old boy’ networks in the West and why? Al Jaber: I don’t see it any different
except that many in Qatar consider wasta
What do you think are the worst potential effects of wasta in Qatar’s business and/or semigovernment sectors? Al Jaber: Wasta could give an
opportunity to someone who doesn’t earn or deserve this opportunity, while others who can provide better quality of business/service are being hidden just because they could not use wasta. This scenario is happening in Qatar now and I don’t see it changing as long as it is running like this. Women, if they are not members of the Qatari businesswomen associates, they will need wasta to run their business. This would [also] be a big challenge for the youth to face if they want to do their business without wasta.
Al Haroon:
I do think that certain companies have a certain advantage over others due to their connections. However I’d also say that what makes a good businessman, or an even better entrepreneur, is the ability to find solutions where it appears there are none. I’m seeing that many young men and women are starting businesses online, for example. They build a brand or a personal reputation as an influencer and then sell their products. When it comes to business circles, start-ups have a load of different networking opportunities through QBIC, Bedaya, Injaz, and other start up centres. The negative side to wasta is usually when it comes to tenders. People worry that other companies get projects because they’ve got a personal relationship or influence on the project they’re bidding for. Others complain about processes. Whereas someone might get rejected for a licence for their business, for example, they may see that someone with wasta has the power to get what they were denied. Having said that, looking at what the government and institutions are doing to increase transparency when it comes to processes, the playing field is becoming more level.
Is there such a thing as ‘good’ wasta? Al Jaber: As some consider wasta as
favour, I believe it could be ‘good’ wasta. However, as long as it is bypassing the system and procedures then it is a ‘bad’ wasta. Good wasta would apply only if the system itself is jammed because an employee is trying to make something hard or impossible. For example, once I visited a ministry to finish some documents, the employee on the counter refused to proceed, claiming that its end of the day and they are leaving. However it was 40 minutes before end of working hours. In that case, I had to call someone in the management to process my documents. The good wasta here in my point of view is to report the lazy employee to management and to get my documents done smoothly. Al Haroon: I actually created a QTip on wasta where I stated, “With great wasta comes great responsibility” (yes, I repurposed that quote from Spider-Man). It’s what you do with your influence that matters. The Edge | 41
Rashid N. Al Kaabi, vice chairman of Al Sraiya Holding Group, says that the only way to keep up with change is to “always be one step ahead with resources, technology, and even strategies�.
42 | The Edge
qatari market | business interview
Achieving
strength
and growth The success formula for Al Sraiya Holding Group, in the words of its vice chairman Vice chairman of Al Sraiya Holding Group, Rashid N. Al Kaabi talks to The Edge’s Aparajita Mukherjee on reaching an important milestone in their corporate history: completion of 40 years of operation. Al Kaabi shares the lessons that these years have taught them and what he looks forward to in the coming years.
F
orty years in the life of a company and in a country as rapidly changing as Qatar does spell resilience and an unmistakable innovative spirit. For Rashid N. Al Kaabi, vice chairman of Al Sraiya Holding Group, the only way to keep up with change is to “always be one step ahead with resources, technology, and even strategies”. Al Kaabi maintains that research is key to sustain the level of innovation that the Al Sraiya group has managed to accomplish. Along with research, Al Kaabi mentions that the group as a whole is continuously on the lookout for new opportunities that could bring in new ideas that could allow them to break into new markets. In his opinion, a diverse workforce can
conquer these new horizons. Commenting on the role that the workforce plays in Al Sraiya group’s success, Al Kaabi says, “Employees with different skillsets and backgrounds can bring different ideas and perspectives to the table depending on their experience.”
Business divisions
The biggest milestone in the 40 years of Al Sraiya’s corporate history, according to Al Kaabi, is their expansion into five different and distinct fields: engineering, trading, industrial, hospitality and general services. While coming up with these segments, the group has ensured that they cover almost the whole market, allowing them to secure a healthy number of projects to make each division self-sustaining. According to Al Kaabi, opening many companies under each division is also an accomplishment on its own. The mandate before each of these companies, in the words of Al Kaabi, is “to take the lead in each field” and achieving that does count as another accomplishment.” “An additional milestone,” furthers Al Kaabi, “that fuels the group’s strength is the ability for all companies to support, supply and function together.” It is the entire dynamics of working under one umbrella that has made
“Being able to accomplish projects and new business plans completely inhouse is what makes us unique, and eliminates the burdens and complications of outsourcing.”
The Edge | 43
business interview | qatari market
One of the prestige projects of Al Sraiya Holding is the road development works in Wakrah North and South, on the outskirts of Doha.
the group resilient, in the opinion of Al Kaabi. “The art of collaboration that each company has with the others, has allowed the brand name to establish itself in the Qatari market,” he adds. How does the group come up with a vision or strategy that suits all of these business groups at the same time? Al Kaabi explains, “The general strategy of the group focuses on strength and growth, and this heavily parallels with the Qatar National Vision 2030.” Al Kaabi also draws attention to the necessity of each business division having its own gameplan. He says, “Each group needs its own strategy that outlines how to use our different resources to fulfil its purpose; we cannot implement the exact same strategy for all the fields.” Citing an example, Al Kaabi mentions that the engineering field is focused on developing Qatar’s infrastructure, while the hospitality field is focused on attracting visitors and increasing tourism. “Therefore, all fields are looking to benefit the vision and to introduce higher quality standards, but in their own way,” he says.
Highlights of the construction sector Commenting on the key highlights and trends for the construction sector in the last 12 months, Al Kaabi tells The Edge, that the Qatar market is currently focused on everything that is big – mega projects, mega investments, mega accomplishments, 44 | The Edge
adding, “Qatar’s economy has significantly grown in the last few years due to its preparation for the 2022 World Cup.” Detailing out the fact that the country’s development agenda is over and above its 2022 World Cup plans, Al Kaabi explains, “Plans to achieve the goals laid out by Qatar National Vision 2030 has attracted the attention of all construction companies, who are continuously searching for new projects that could help fulfil these goals. All new and ongoing projects are dedicated to the growth of the country, which also encourages companies to network with international brands for resources and new technology. That being said, expansion is key in the coming period. It is now preferable for construction companies to employ the help of other fields such as engineering and industrial. All sectors need to overlap for concrete achievements. The Al Sraiya website mentions “total construction solutions”. Commenting on the range of services they offer, Al Kaabi tells The Edge that Al Sraiya Holding group is able to handle projects from beginning to end, particularly in the construction field. Al Kaabi adds, “Our companies such as Al Sraiya Trading and Contracting, Badr Contracting, BinSraiya Readymix and Simsima Blocks & Interlocks supply each other with everything needed to accomplish a project (for example, products, materials, consultation, architecture, machinery, etcetera), which allows the group to provide all the needed
“Continuity and consolidation will always be one of our priorities, as they are key to upholding our rank as one of the leaders in Qatar’s market.”
qatari market | business interview
Millennium Hotel Doha, owned by Al Sraiya group, has already earned two awards during the International Hotel Awards 2015 – a Five Star award for the Hotel Category for Qatar, and a Highly Commended award for the Hotel Website Category for Qatar.
Al Sraiya Trading and Contracting has also constructed differnt types of mosques at Rayyan.
solutions under one roof. This is what gives us the strength to be a leader in the field.” Citing recent examples of recent Al Sraiya projects which illustrate the group’s total construction solutions, Al Kaabi mentions the QAR1.2 billion mega sewer project which was awarded to Al Sraiya Strabag Road & Infrastructure WLL and the QAR508 million project that Zublin, a group company under Al Sraiya, has signed on for the construction of one of Qatar Energy City’s projects. In the former project that is aimed at converting the foul-sewer drainage in the Doha South Catchment from a pumped network to a gravity sewer network, Al Sraiya Strabag will be handling the design and building of the second and central segment of the Main Trunk Sewer. For the Qatar Energy City project, Zublin will complete it in 29 months in conjunction with the highest standards complying with the US Green Building Council LEED Certification requirements for energy efficiency. Commenting on these mega projects, Al Kaabi says, “These projects are only
an example of the type of projects we are dealing with and shows you who we are working with and for. These are some of Qatar’s largest projects that we are involved in and clients rely and entrust us with them because they are well aware of our capabilities.” In view of the competitive nature of the construction sector, how does the Al Sraiya group arrive at key decisions such as pricing and quality control, yet arrive at projects that are competitive in the very commercial sense? Al Kaabi mentions that Qatar’s market has become competitive and, in his opinion, the safest method to maintain its position as a leader comes through one key variable: research. Qualifying this, Al Kaabi says, “Research enables us to assess and know all our competitive strengths and weaknesses, and helps to arrive at strategies to always be one step ahead, and pushes us to make smart decisions, particularly when it comes to pricing. “Also, we have been in the market for 40 years and the experience we have collected throughout adds to our strength. We have specified teams who constantly monitor the The Edge | 45
business interview | Qatari market
Al Kaabi tells The Edge that Al Sraiya Holding group is able to handle projects from beginning to end, particularly in the construction field. Al Kaabi adds, “Our companies such as Al Sraiya Trading and Contracting, Badr Contracting, Bin Sraiya Readymix and Simsima Blocks & Interlocks supply each other with everything needed to accomplish a project (for example, products, materials, consultation, architecture, machinery, etcetera) which allows the group to provide all the needed solutions under one roof.”
market in terms of quality and technology and through regular meetings information is shared and discussed to see what else we can do for our clients and ourselves,” adds Al Kaabi. As the Integrity Sponsor for Project Qatar, the initial goal for the Al Sraiya group was not to obtain exposure or to get new business, as the group is already involved in some 46 | The Edge
of Qatar’s largest projects. Commenting further, Al Kaabi says, “The benefit we were hoping to receive has more to do with the positive feeling of giving back to the market, the community and to Qatar itself.” In Al Kaabi’s opinion, with each of the companies contributing to the infrastructural development of the country and being a leader in the market, the Al
Sraiya group feels that it is their duty to support an event such as Project Qatar, “because of the purpose it fulfils,” says Al Kaabi, adding, “As Qatar’s construction industry is continuously booming with new developmental plans, it is essential for both regional and international agents, dealers and buyers to be provided with a suitable, professional environment to network.”
Qatari market | business interview
QAR
1.2
billion
The size of the mega sewer project awarded to Al Sraiya Strabag Road & Infrastructure WLL.
Business model
According to Al Kaabi, the totality of the Al Sraiya businesses heavily support and supply to each other. “In fact, many of our business can overlap in terms of management and staff as cooperation amongst them is key to the group’s success,” he says. “The five fields we have expanded into cover almost everything from hospitality to construction to consultation and it only makes sense that the companies support
each other,” says Al Kaabi, who believes that the above mentioned qualities make the group strong enough to take a leading position in the market. “Being able to accomplish projects and new business plans completely in-house is what makes us unique and eliminates the burdens and complications of outsourcing,” he says. Al Kaabi furthers, “This alone saves the extra effort needed to form networks with suppliers and contractors and allows us to invest that energy, money and effort into other affecting factors within the group. Because everything is done in-house, the holding group is able to sustain itself on its own without the assistance of other companies which, we believe, is what you need to accomplish if you want to remain the Qatar market leader.” Talking of the performance of the other businesses under the Al Sraiya umbrella, Al Kaabi says, “Overall growth has so far been continuous, and we are looking forward to more achievements by the end of the year and in the near future.” Al Kaabi mentions that their other businesses have all shown an increase during this year’s first quarter, particularly in the hospitality sector. He adds that Millennium Hotel Doha has already earned two awards at the International Hotel Awards 2015 – a five star award for the Hotel Category for Qatar, and a highly commended award for the Hotel Website Category for Qatar. Aleph Printing Press has also recently invested QAR5 million in its own machinery and equipment. The money, Al Kaabi explains, is to be used to purchase new large-size printing machines, new automatic finishing machines, a new line
of book bindery tools with gold edging, as well as a new line die cut to enhance its printing press services.
Corporate plans
Commenting on the plans of the Al Sraiya group’s plans till the end of 2016 and whether continuity and consolidation (strength) is more of a priority over growth and expansion, Al Kaabi tells The Edge, “Continuity and consolidation will always be one of our priorities, as they are key to upholding our rank as one of the leaders in Qatar’s market. However, in business, priorities continuously shift depending on each phase. We have already accomplished what we wanted in terms of establishing roots in a range of fields and taking the lead in cementing Al Sraiya’s reputation in the market, and we have maintained this status for many years.” Charting out the next phase of their business growth, Al Kaabi says that after stabilising and growing in each field, Al Sraiya’s main priority will always be growth and expansion “because taking the lead is not just about accomplishing what everyone else has, it is about being one step ahead. The way to do so is through growth and exploring new opportunities which in turn leads to expansion,” says Al Kaabi.
According to Al Kaabi, the totality of the Al Sraiya businesses heavily support and supply to each other.
The Edge | 47
E-commerce
untapped Tech-savvy Qatar, with its high penetration of smartphones and Internet connectivity, offers enormous opportunities for the e-commerce industry, but the country has some challenges to yet overcome, writes Syed Ameen Kader.
48 | The Edge
in Qatar:
potential
The Edge | 49
feature story | e-commerce
Q
ataris live in a highly techsavvy society where almost everybody has smartphones and web connectivity. With current Internet penetration of as high as 85 percent, Qatar is expected to become one of the most digitally connected countries in the world. For a nation where two-thirds of the population fall within the 15 to 44 age group – the one with highest appetite for online browsing and shopping – it is hard to believe that e-commerce is still in its infancy here. With only 14 percent of its population currently buying online, Qatar’s story tells us that there must be some fundamental issues behind its slow e-commerce growth but most importantly, it tells us that it is a huge untapped market. So, what has held Qatar back for so long? Why do people have such a reluctance for online shopping compared with the rest of the world? Firstly, it is not just Qatar; the whole Middle East and North Africa (MENA) region seems to have a trust issue when it comes to buying online as 80 percent of online transactions are still done through cashon-delivery (COD) – a trend that is the very opposite to developed markets. For example, in the United Kingdom and Italy, the COD model contributes only four percent and 10 percent respectively to total online sales – as consumers increasingly prefer to purchase through electronic modes of payment such as credit cards, debit cards and PayPal. So why does this region prefer COD over other modes of payment? Howaida Nadim, advisor to the Ministry of Information and Communications Technology (ictQATAR), says when you compare Qatar with the US or UK, you first have to look at the size and population of those countries. “It’s a question of ecosystem working properly – you have the Royal Mail and other companies offering logistics in the UK. In Qatar, logistics is also an issue. It’s not just the question of paying for products online, but how they are going to be delivered,” she says. Nadim says another major issue, other than the fact that Qatar has a very low percentage of credit card holders, is trust. “It is [credit card users] almost 14 percent. Most of the people have debit cards in this country but unfortunately, the current financial system does not allow those to be used for online shopping. Since there is no mechanism in place for consumers to use debit cards, they have very few options to 50 | The Edge
Lalith Kumara Badhuge, project manager, Digital Industry Development Department, ictQATAR, says, “The PSPs are now coming up with value additions, which were not available to businesses before. For example, they are offering new options where cash can be collected on behalf of the merchant and it will be transferred to the merchant.”
buy online,” she says. Qatar’s financial regulators and banks have adopted a very conscious approach towards allowing online transactions. Besides, many banks in this region have started to curtail the amount of credit issued post the global financial meltdown. Due to the Qatar Central Bank’s directive, customers are only allowed one credit limit (per salary account) with exposure limited to twice the net salary. Although the number is very high when it comes to debit cardholders, the majority of banks choose not to allow debit cards for e-commerce transactions due to a history of fraud. However, that trend is changing with more Qatari banks such as QNB, Commercial Bank and Doha Bank gradually allowing their debit cards to be used for online transactions, with extra levels of security.
Trust factor
The lack of trust could also be due to the number of incidents of online and cardrelated frauds that the Gulf Cooperation Council (GCC) has faced in the past. Most recent among them being with Rakbank and BankMuscat, who lost a total of USD45 million (QAR164 million) to hackers in two separate incidents in December 2012 and February 2013, respectively. Francis Barel, business development
14%
The percentage of Qatar’s total population that shops online.
e-coomerce | feature story
“In Qatar, logistics is also an issue. It’s not just the question of paying for products online, but how they are going to be delivered.” – Howaida Nadim, advisor to the Ministry of Information and Communications Technology, ictQATAR. manager, Middle East and North Africa, PayPal, says, “It appears that for many Middle Eastern consumers, they do not feel secure sharing their credit card details online with individual retailers.” However, online data security is not a challenge that is unique to this region only. Banks and financial institutions across the world are equally vulnerable to online fraud and data theft. That is why the market has seen the emergence of third party payment service providers (PSP) – who act as a middleman between the merchant and consumer. PSPs play a very critical role in the e-commerce value chain as they offer alternative and safer modes of payment for online consumers. However, their presence has been very limited in Qatar thus far. It was only in 2013 that PayPal entered into the Qatari market through a partnership with QNB. “Customers set-up their account in minutes and simply log in to make a payment, meaning their credit card details are never shared with the merchant,”
says Barel. As online security changes, he adds, the market will see a decline in COD purchases in the region, with consumers feeling more comfortable using their credit cards online. Qatar’s e-commerce industry is quickly evolving as the market begins to understand that it is all about providing more options to consumers. The industry realises it needs to develop local solutions for issues affecting its growth. Although PayPal offers a global solution, it has its own limitations for Qatari online merchants, as they cannot withdraw funds in the local currency and there is also a restriction on the amount that can be withdrawn – all of these factors lead to cash flow issues. That is why Qatar has developed its own PSP, QPay, which offers cheaper solutions as transactions can be conducted in local currency. Established in January 2012 by the Qatar Central Bank, QPay allows individuals, companies and public institutions to make payments
Francis Barel, business development manager, Middle East & North Africa, PayPal, says, “It appears that for many Middle Eastern consumers, they do not feel secure sharing their credit card details online with individual retailers.”
The Edge | 51
feature story | e-commerce
online using credit cards, debit cards and bank accounts. QPay was the only PSP in Qatar, but that is changing with Qatar Central Bank expected to allow other leading local PSP players such as Dubai-based PayFort to enter the Qatar market this year. Considering the fact that the majority of online transactions in this region are done through COD, PayFort has started to offer new options such as PAYatHOME and PAYatSTORE that allow merchants to increase their consumer-base by selling online through vouchers (that are sent via e-mail or SMS) and without a credit card. Lalith Kumara Badhuge, project manager, Digital Industry Development Department, ictQATAR, says, “The PSPs are now coming up with value additions, which were not available to businesses before. For example, they are offering new options where cash can be collected on behalf of the merchant and it will be transferred to the merchant.” He says that the more PSPs you have in Qatar, the cost of transactions will come down significantly.
Building an ecosystem
While Qatar may have been a slow mover, it has started to understand and recognise what e-commerce can bring to the country. It is only in the last five years that Qatar started looking at e-commerce more seriously, but it is moving quickly now. The country enacted its first e-commerce law in April 2010, followed by the establishment of the separate Ministry of Information and Communications Technology (ictQATAR) in June 2013; and subsequently, the formation of an independent Communications Regulatory Authority (CRA) in 2014. And it has not finished yet. Qatar is in the final stages of modifying the law that still treats an online start-up as a brick-and-mortar business because the process is considered cumbersome and lengthy for e-commerce purposes. Nadim says the government definitely wants to encourage small and medium businesses but, “we need to make sure the supply chain is ready for that. We need to ensure that they have the right ecosystem, they are protected by the law, the consumers are protected and they have the right mechanism for payment for goods”. But Qatar still has logistical constraints when it comes to delivery. Its national 52 | The Edge
Qatar has a strong presence of retail outlets and shopping malls as many people still prefer to go to there as part of the shopping culture. (Image FotoArabia)
postal system, QPost, is ostensibly not capable of handling the huge demand of Qatar’s e-commerce business. Moreover, the country’s inadequate transport infrastructure, lack of multimodal transportation options, and limited warehousing capacity could hamper the growth of the logistics market. However, the government is building a number of infrastructure projects such as rail and metro networks, the expansion of Qatar Airways cargo fleet, Hamad International Cargo terminal, a new deep-water sea port boosting sea fright capacity, and road network upgrades. Barel adds, “One of the key challenges an e-commerce start-up faces in Qatar – and across many countries in the MENA region as a whole – is logistics.” He points out that there is no standardised address or ZIP code system in Qatar. “While companies such as Aramex compensate for this with commercial deliveries, the MENA region has a long way to go in developing infrastructure, which enables e-commerce,” says Barel. However, Qatar’s address system is being upgraded with the re-numbering of streets and houses – a process which is expected to be completed by the end of 2015. The lack of infrastructure is also creating new opportunities for local companies which have started to offer logistical solutions within Qatar.
It is not just Qatar; the whole MENA region seems to have a trust issue when it comes to buying online as 80 percent of these transactions are done through cash-on-delivery.
e-commerce | feature story
QAR
800
billion
Qatar’s e-commerce market at a glance Market Size
Channels
Qatar’s expected B2C market size by 2019. “Today, you have special companies being created just to do delivery for home businesses promoted through Instagram,” says Badhuge. For example, Pick & Drop Delivery Service is a local company started by some young Qatari citizens to meet the logistical needs of home businesses. It is considered to be the first licensed Qatari company in this field that provides an internal delivery Qatar’s expected B2C market size service. It delivers different kinds of by 2019 materials such as food, clothes, accessories and various other items. Hamad Jaber Al Shahwani, owner and general manager, Pick & Drop Delivery Service, says, “The idea came up after we found that the electronic [e-commerce] market is growing and consequent need of a delivery service. Many people are doing home business these days and this business cannot be run without someone offering them a delivery service. In addition, we noticed that the home business traders rely on unorganised delivery services to deliver their goods to the customers.” Since the company is run by a group of Qatari nationals, Al Shahwani says, they are fully aware of how the Qatari community needs this service. “That’s why we can provide such a service according to the Qatar State’s rules and laws. Also, we are aware of the best possible way to provide delivery service, which complies with Qatar’s tradition and culture,” he says. Currently, the Pick & Drop Delivery Service is dealing with COD, but in future, it plans to go online and provide different modes of payment. “Regarding e-commerce, we believe that we are the middle point that connects the traders with their customers. We are looking forward to contribute to developing the electronic market and the logistics services,” Al Shahwani concludes.
QAR
800
billion
20% QAR
80%
MOBILE
3.71 billion
WEB
Segments
21%
18%
TRAVEL
15%
ELECTRONICS
10%
11%
HOUSEHOLD
10%
ENTERTAINMENT
CONTENT
9%
FASHION
HOTELS
3%
3%
AUTO
Penetration
SPORT
Population
14%
E-buyers
Average Transaction Value
2.3 million
0.3 million
Waiting Time
947
QAR Per Transaction
8.8 Days
PAYMENTS
19%
Credit cards
75%
Cash-on-delivery
6%
PayPal Source: ictQATAR
The Edge | 53
ON A STEAdy course Market insights with regional consultant Richard Banks
Richard Banks has hosted the Euromoney Qatar Conference since 2012 and is confident the country’s economy will continue to grow. “The financial resources and the political will of the administration in Qatar is to continue on the course on which they are set,” he says.
54 | The Edge
regional markets | business interview
Richard Banks is the founder and principal of RMBanks and Company – a global investment communications consultancy. Banks is also consulting editor to Euromoney Conferences in the Middle East, as well as a lead advisor to the Saudi Stock Exchange as they open up their market. Banks travels the Gulf region frequently and recently sat down with The Edge editors, Miles Masterson and Aparajita Mukherjee, to offer his informed analysis of the effect the changes in Saudi might have on the Gulf Cooperation Council (GCC) markets, energy prices and the economic outlook for 2015 into 2016, as well as Qatar’s fortunes in the short term.
The Saudi effect I think it is very important to see this step in the opening in the Saudi market as just that, as a step. The Saudi market has been open to foreign investors through the swaps and participatory notes programmes for a number of years. The opening up to qualified foreign investors (QFIs) on June 15 this year was really just the next step in this process. We have been analysing the extent of the flow into the market and as we expected and as the Saudi Stock Exchange expected, it has been relatively light – look to the autumn and 2016 to see an increase in that flow.
The Saudi QFI programme is aimed specifically at institutions with a five-year track record and assets under management in excess of USD3 billion (QAR11 billion). It has not been designed to
bring in extra capital but to increase the professionalism and the institutionalisation
USD
570
billion
The Saudi Stock Exchange’s market capitalisation, which Banks expects may increase from USD10 to USD15 billion (QAR36.4 to QAR54.6 billion) in foreign capital by the end of 2015.
of the market. The Saudi market is extremely liquid, but they need to improve the way the market works with more research, more coverage and a better understanding of governance. Their primary goal is essentially the improvement of professionalism. In terms of ownership and what role the foreign investors will play in that, I think it is sensitive and is something the Saudis need to manage carefully.
the same period, so it is a nuanced story. I think it can only be positive in the medium term, by which I mean a year or two, for all the markets in the region, because it is going to raise the level of coverage and professionalism. If you have now got a liquid market the size of South Africa or bigger than Mexico, at the core of a regional equity market, it makes the whole thing much more worthwhile for international investors to cover the region. Once you start looking at Saudi, why not add some of the others? Some of the market characteristics in terms of the way that many of the companies are owned and controlled are pretty similar across the region, and I think it can be nothing but good for the region.
Prior to the market opening up, the Saudi Stock Exchange was pegged at USD570 billion (QAR2 trillion). I think perhaps between USD10
and USD15 billion (QAR36.4 to QAR54.6 billion) of foreign capital will flow in by the end of the year; others have said between USD20 billion and USD40 billion (QAR72.8 to QAR145.6 billion). The authorities, the Saudi Capital Market Authority (CMA) and the Stock Exchange are not really that concerned with headline numbers. What they want to see is the right sort of investor coming in. In terms of the capital flowing into the market, the real game changer will be when Saudi becomes part of the MSCI ‘Emerging Market’ Index. The publicly stated time frame is 2017 and I think that is fairly realistic. There are a few things that need to happen between now and then, but the people that I work with in the Kingdom are absolutely committed.
In terms of the effect on other markets in the region, so far the picture of the markets this year has been pretty mixed. The Abu Dhabi, Dubai, Muscat and Saudi markets were all net recipients of international investment in the first half of this year and Qatar, Kuwait, Egypt and others lost foreign capital over
“The opening up of the Saudi market can only be positive for all the markets in the region, because it is going to raise the level of coverage and professionalism.” The Edge | 55
business interview | regional markets
Cross-border investment, regional nationals investing in neighbouring markets, should also increase – in the GCC region in particular, but also in North Africa and the Levant. The intra-
regional capital flow is pretty appalling in terms of their size compared to other regions in the world. The intra-regional trade is always an issue. The region is an enormous trading bloc with other parts of the world, but is appallingly bad at trading with each other. Any initiative, of which I feel Saudi opening to QFIs is one, that encourages capital to flow into productive opportunities between countries of the region has got to be a positive thing. It is a win-win for everybody.
The energy matrix Of course the other major influencer on the economic fortunes of the region is the oil price. For example, the next Qatari budget
will be drawn up on a projected oil price of USD45/barrel (QAR169) down from USD65/ barrel (QAR 237). The numbers may not, on the surface, look as positive as they have in recent years. However, the underlying strength and capacity of the economy will be unchanged. If low headline prices remain extant for the long-term then Qatar, like all energy producing nations, will need to revise its financial strategy. We think it a good thing that the administration is doing that anyway and has started a gradual transition to a more balanced economic model.
We have come off a decade of high energy prices, which is always a recipe for low energy prices. In the short term, the impact for the
Gulf states will probably not be major as long it does not go on for a decade. There are plenty of opportunities for the Qataris, for example, to continue to finance their investment programme. Qatar has substantial financial resources in terms of what it has already put away in the Qatar Investment Authority (QIA) and other sovereign entities and the fact that the debt-to-gross domestic product (GDP) ratio is relatively small. It is the stated policy of the Qatari authorities to develop the debt market, so from a capital markets point of view, we might also see the development of a Qatari sovereign yield curve. Indeed, we forecast that Qatar will post strong numbers relative to both its direct peers (GCC) and global averages. That’s pretty good in itself 56 | The Edge
Traders on the stock market floor in Riyadh, Saudi Arabia. “The Saudi market is extremely liquid, but they need to improve the way the market works with more research, more coverage and a better understanding of governance. Their primary goal is essentially the improvement of professionalism,” says Banks. (Image Arabian Eye/Reuters)
and the envy of many nations. Otherwise, I am bullish and see them continuing pretty much the same.
A big unknown is the 2022 FIFA World Cup. Though I am not an expert, I feel that Qatar will keep it. I think they should, it has gone too far to be undone. I am sure a lot will come out from FIFA over the next few years, but I think the Arab world and the GCC in particular need to be included in these global sporting events. For all the allegations and accusations, Qatar’s decision to accept that responsibility is one to be applauded, and I think the sniping that we have around the world, we need to put that to bed and get on and deliver an excellent event.
Overall, there are a couple of other shadows in the background, of which a serious decline in regional stability is one, such as a full-on conflict between Iran and Saudi Arabia. Those are the sorts of things that would interrupt Qatar’s growth story, but I don’t think that is likely. The financial resources
“Qatar’s economy will continue to grow at more or less the same rate that it has this year and exogenous shocks will not derail that.”
regional markets | business interview
USD
45
The price per barrel at which the Qatari state budget will be set for the coming fiscal year.
and the political will of the administration in Qatar is to continue on the course on which they are set, and I think that is viable. It is perhaps not the most exciting thing today, but within the normal bounds of economic projects, we feel that Qatar’s economy will continue to grow at more or less the same rate that it has this year and exogenous shocks will not derail that, unless they are of such an enormous impact that no one will be worrying about a percentage point or two.
Euromoney is set to hold its fourth Qatar conference from December 9 to 10 at the Ritz Carlton in Doha. Firstly the conference
will look at ways the financial markets and the financial sector could be potentially disrupted so it will be looking at ways
Banks on stage with Egypt’s Investment Minister Ashraf Salman at a recent Euromoney Conference in Cairo. Euromoney Qatar will return to Doha on 9 and 10 December 2015. (Image Arabian Eye/Reuters)
that technology is increasingly important between institutional and retail customers. Half the conference will look at whether companies such as Google, Facebook or PayPal can be disruptive; and entities that can change the way banks work and what this means for compliance and regulation. The other half is Euromoney doing a live overview of the economic and financial strategies of Qatar we have been discussing and more, so it is a series of different things, but all aimed at a financial and investment audience.
Now you can hear it! Richard Banks was interviewed by The Edge for our weekly podcast on the Ginger Camel Media Network. Please log onto:
www.gingercamelmedianetwork.com/edge
to listen to the full discussion and other podcasts produced by The Edge.
GCC stock markets by country and sector weights Country weights
14.26%
64.39%
Sector weights
11.08%
20.88% 7.85% 1.97% 0.45%
8.17% 5.87% 3.81% 2.89% 2.08% 0.84%
55.45%
Saudi Arabia 64.39% Qatar 14.26% United Arab Emirates: 11.08% Source: MSCI
Kuwait 7.85% Oman 1.97% Other 0.45%
Financials 55.45% Materials 20.88% Telecommunication services 8.17% Industrials 5.87%
Consumer staples 3.81% Consumer discretionary 2.89% Utilities 2.08% Energy 0.84%
The Edge | 57
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Inside the minds of leading business figures
business insight One single application for ordering all types of food from any restaurant 60 Beschir Hussain is the co-founder of Hellofood Middle East, and in an exclusive conversation with The Edge, talks about why he set the venture up, their expansion to 40 countries, and their plans for the year in the region.
We want to see the market double or triple in size 62
In an exclusive interview with The Edge, Alex Reyes, general manager, long haul division, Cebu Pacific Air, shares how he intends to make the Manila-Doha route profitable while remaining low cost.
62
Cebu Pacific uses Airbus A330-300 aircraft, with a configuration of 436 seats, for its long haul routes. This keeps the airline’s cost for available seats per kilometre quite low.
The Edge | 59
business insight | online food
FOOD DELIVERY
One single application for ordering all types of food from any restaurant Beschir Hussain is the co-founder of Hellofood Middle East. In an exclusive conversation with The Edge, he explains why he set up the venture, their expansion to 40 countries, and their plans for the year in the region. Hussain’s passion is to build companies. Commenting on his role at Hellofood Middle East, he says, “I am the co-founder and currently the chief executive officer at Hellofood in the Middle East, the leading food online ordering marketplace in the region. My educational background is in philosophy and economics.”
When was Hellofood launched and in which countries are you present?
Hellofood Middle East was launched in 2013, starting with Saudi Arabia. The market feedback exceeded our expectations, which granted us the opportunity to partner up with Mobily Ventures and the Jordan-based venture capital company iMENA to further expand in the region. Today, we are operating in Saudi Arabia, Jordan, Lebanon and Qatar. We recently also acquired the online food ordering portal 24h, with which we cover the United Arab Emirates (UAE).
consider local requirements, customer preferences, and market conditions that, taken together, shape the final product and service that we ultimately offer our restaurants and consumers. For instance, we launched Hellofood Deliveries in Saudi Arabia, our own cross-vendor same-hour delivery service to help our partner restaurants to deliver their food. This is a very capital intense business and not part of our core business, but we saw a need for it and therefore built it. We kicked off our delivery operations with 10 drivers on the ground in Jeddah and are planning to expand to Riyadh this year.
What drove you to set up Hellofood in the Middle East?
If you were to talk about the performance of the company, what would you say?
The Middle East has a relatively strong food-ordering culture, to the extent that more than 95 percent of the food here is being ordered over phone. With Hellofood, I wanted to provide customers the possibility to have one single application from which they can order any type of food from any restaurant of their choice. At the same time, the business model helps small- and mediumsized restaurants to increase their transparency in the market. In order to increase their sales, restaurant owners have been opening new outlets, which help them to increase their geographical coverage. Opening a new branch, however, is associated with high upfront fixed costs. The moment we place these restaurants online, we create a “virtual outlet“ on the internet for them at zero cost.
Of the 40 countries that Hellofood operates in, which model have you adopted for the region? We are brokers, connecting restaurants with end consumers. This is what we do in all our markets. However, we certainly respect and 60 | The Edge
The company is growing at a sustainable rate of 30 percent month on month, which, according to global standards, is significantly above average. We are aiming at growing faster by expanding into more areas and more cities over the next 12 months. The group has recently raised USD110 million (QAR400.4 million), which will allow us to further invest into our operations, especially in Saudi Arabia and the UAE. At the focus of our operations is always the customer.
How does the launch in Qatar figure into your business plans for 2015 and 2016? And what are your growth and expansion plans in the region? We recently announced the acquisition of talabat.com through Rocket Internet, Hellofood’s majority shareholding company. Talabat is a highly complementary business with a strong geographical presence in Qatar. Our goal in Qatar is to penetrate the markets in which we are currently operating and to focus on further improving our customer experience. In Saudi Arabia, we
online food | business insight
“Our goal in Qatar is to penetrate the markets in which we are currently operating and to focus on further improving our customer experience.”
“We certainly respect and consider local requirements, customer preferences, and market conditions that, taken together, shape the final product and service that we ultimately offer our restaurants and consumers,” said Beschir Hussain, the co-founder and CEO of Hellofood Middle East.
will be investing into the growth of our Hellofood brand, in the UAE it will be 24h and in the remaining Gulf Cooperation Council (GCC) countries, including Qatar, it will be Talabat.
Do you have plans to include more food outlets and restaurants in your list in Qatar when you launch? How do you decide whom to include in your services?
We are always looking to expand our offerings by considering what restaurants our customers demand. Our partner restaurants should ideally have a reliable delivery infrastructure in place. In some cases, we are also willing to invest and build the infrastructure for our restaurants. At present, we have more than 800 active restaurants. Our partner restaurants offer a variety of dishes on our platform, ranging from bakery, soups and salads to seafood, schawarma and pizza. Our sales team strives to cover all sorts of cuisines, such as Italian, Lebanese and Chinese food. Of course, we see clear consumption trends of our customers and thus try to take these insights in our lead generation process into consideration.
You launched the first same-day grocery delivery service in Jordan. What was the reason for launching this service? Jordan has 1.2 million households with 5.3 individuals per household. When people order, they order for entire families. As a result, the average value of each transaction is relatively high – above EUR25 (QAR98). The service, in collaboration with Dukkan, was launched in December last year and can be accessed via the website or mobile app. We currently have 400 products on our platform and the delivery is limited to people living in West Amman.
It is still early to evaluate the service, but we are happy with what we have seen so far.
Going by your experience in the region, what top consumer trends can you talk about?
The world in general is becoming more mobile. Especially emerging markets, such as Saudi Arabia and the UAE, are witnessing a significant increase in smartphone users. This has obviously transformed the way people decide from where and how to order their food for lunch and dinner. When we launched Hellofood Middle East in 2013, we put a lot of effort into the development of a customer-friendly mobile app that guarantees a convenient, fast and fun experience. Today, we count more than 10 million mobile app downloads globally, of which about five percent come from the Middle East. Regionally, 85 percent of our orders are generated via mobile. It is the highest mobile order share compared to any other country in which the group operates worldwide.
What is the mission of your other venture Avicenna Foundation?
Avicenna Foundation is a merit-based scholarship-granting institution that seeks to promote academically-gifted and socially-committed students in Germany. I established the foundation together with friends and colleagues in 2012. Today, Avicenna Foundation has more than EUR11 million (QAR44 million) under its management and has given admission to 65 talented students. We aim to increase that number to 500 students after the first five years of our operations. The foundation has a dedicated and fully-functioning management team which runs the day-to-day operations. I function as an advisor, but I‘m not involved in the daily operations any more. The Edge | 61
business insight | aviation industry
Low-cost carriers
We want to see the market
double or triple in size
In June Cebu Pacific Air launched twice-a-week direct flights between Manila and Doha, making it the first Filipino and the only low-cost carrier (LCC) to serve Qatar on this route. The same route is already being served eight times a week by Qatar Airways – something that puts Cebu Pacific in direct competition with the Gulf carrier, although the airline caters to different price segments. But can Cebu Pacific make this route profitable while remaining low cost? The Edge’s Syed Ameen Kader spoke to Alex Reyes, general manager, long haul division, Cebu Pacific Air, to understand how the airline is going to make it work. You already fly to Dubai, Riyadh and Kuwait in this region. So Doha must have been very much on your radar for quite some time?
Yes, we do work so hard to get any new destination or city onto the route map. It is not just months but years of preparation that you put in to start a new route – right from actual route studies, to making sure all the permits are in place, and then getting the right timing. So it is a big relief that we have finally managed to achieve that.
Do you intend to increase the frequency on this route?
Our expectation is that we will be a smashing success on the frequency of two. But, yes, we do have plans to actually grow on this route. However, our constraint right now is the air rights that we have under the bilateral agreement between the Philippines and Qatar. It currently limits the number of flights between Manila and Doha to a frequency of eight. But the countries recently concluded a new air agreement, which resulted in an increase in air rights. It has been increased from a frequency of eight to a frequency of 14 per week for carriers of either country. However, this capacity limit is only for the Manila–Doha route. In fact, in 62 | The Edge
“We always say if we enter a certain destination with an intention to only take market share away from our competitor carriers, then we are not doing a good job,” Alex Reyes, general manager, long haul division, Cebu Pacific Air told The Edge.
aviation industry | business insight
“Our overall business plan for long haul is to fly to cities where there is concentration of overseas Filipinos.” Cebu Pacific Air crew pose with officials during the launch of the Doha-Manila flight in June.
the other cities, it is actually open skies. That means there is no restriction on the number of times you can fly to cities such as Clark, which is two hours drive north of Manila; and Cebu, our second largest metropolitan area in Philippines.
What has been your strategy for route expansion?
Our overall business plan for long haul is to fly to cities where there is concentration of overseas Filipinos. According to our government statistics, in the Middle East region alone, there are around three million overseas Filipinos. That means a lot of them go home at least once a year and if they are working alone, they will have relatives coming in to visit them. So we started with Dubai first because all the data showed that Manila–Dubai was actually the largest long haul market of the Philippines. Next on our priority list was Saudi Arabia, which has about 1.5 million Filipinos. Then we launched Kuwait and now Qatar.
Are they all direct flights?
Yes, they are all direct flights. That is what we offer differently. When we looked at the traffic patterns between the Philippines and the various Middle East cities, we realised that many of these traffics involve doing one or two stops. Sometimes the itineraries are really crazy, as you would be going up north to even Beijing and then going back south to the Philippines. That is why we offer direct flights, which can fly you home in just eight to nine hours.
Does this Doha–Manila route put you in direct competition with Qatar Airways?
I do not think we are in direct competition with them because their product is different from ours. They offer full service. We always say if we enter a certain destination with an intention to only take market share away from our competitor carriers, then we are not doing a good job. We should never have entered in that market. What we look at is to actually grow and stimulate the marketplace. If we come with a product that is offering 30 to 40 percent lower fares, what we want to see is for that market to double or triple in size. So if people were only travelling once a year, they should be able to travel twice or thrice in one year now because of lower fares. This is a totally new market that we are trying to create with a different product offering. That is what we have been successful at in all the international destinations that we have started up till now.
Is it not difficult to run a lowcost carrier on long haul routes? How do you manage?
It is in our DNA to be cost conscious in every single thing that we do – from our uniforms and seat configurations to the aircraft that we use. So even a very small cost differential, when you put it all together, can add up to a significant cost base. For example, weight is always going to be an important component. The heavier the aircraft is on a long-haul route, the higher
the fuel burn is. So when we design our aircraft, we do pay a lot of attention to the weight – every single piece of equipment on the aircraft has to justify its presence. That is why we use next generation seats, which are three to four kilograms (kg) lighter than what is out there in the market. Our unit load devices, the containers that go in the belly for luggage, are ultra lightweight too, allowing us to remain 20 to 30 kg lighter than other airlines that use traditional aluminium containers.
Which types of aircraft do you use on long haul routes?
We use Airbus A330-300 aircraft for our long-haul routes. All the aircraft that enter our fleet are brand new – either bought or leased. It is a key part of our fleet strategy to always have new aircraft because they are reliable and we get full manufacturer’s support. Today, we have a fleet of 55 aircraft, all of which are bought or leased straight from the factory. The A330s that we fly have a configuration of 436 seats. It is all economy seating, and the seat benches are 30 inches minimum. Since we use next generation slim seats, 30 inches feel like 31-inch. Some of the other carriers would probably configure it between 330 to 350 seats, and a LCC may fit around 370 seats, but we are the only ones to operate with 436 seats on the A330. That’s a big advantage for us because it keeps our cost for available seat per kilometre quite low. In fact, one of the lowest in the world – that’s our secret. The Edge | 63
continued from page 41
loyalty trumps performance as a factor and so directly or indirectly, the legacy of wasta in the workplace continues to be a hindrance, especially for newcomers. Even when those expatriates stay, there still may be significant productivity issues, with overall labour productivity at low levels within the region compared to most international benchmarks. Also, expatriates are often employed for their technical capability and experience, regardless of their position in the management hierarchy. This has a significant impact on the quality of leadership and the ability and willingness to coach and mentor national staff amongst expatriate managers. This is a critically important barrier to overcome if the region’s labour markets are to become more sustainable in the future. The region’s already-segmented labour market is further characterised by the largely transactional nature of working relationships between nationals and expatriates, or sponsors and employees. While this can be attributed to the impermanence of employment and a lack of long-term residency prospects, wasta must sometimes impact the expatriate’s sense of personal ownership, investment and accountability as decision-makers and business leaders.
people want to do business with people that they know, like and trust. The difficulty here with wasta is that you may not get the opportunity to develop that potentially mutually beneficial relationship.” The good news is that even incremental shifts in the level of engagement will have a disproportionately positive impact on key indicators such as performance and productivity. Indeed, the persistence of wasta in the workplace is inconsistent with the stated commercial modernisation philosophy of most GCC nations, all of which are members of the International Labour Organization (ILO) and are signatories to the Declaration on Fundamental Principles and Rights at Work. Yet these formal commitments to international labour standards are not necessarily always reflected in the practical experience of business within the region. The expectation is one of a traditional society based on social norms and cultural doctrines, yet combined with a modern, global economy. This is a fundamental tension in the region’s model of government-directed development. The operation of wasta in the workplace represents a major facet of this dichotomy between the traditional and the modern. So is wasta – at least, in its current form – approaching the end of its existence? Of course, relationships, networks and reciprocal obligations will remain, as they do in any working culture. But people policies are changing rapidly across the GCC and
companies that embrace standards of diversity, development and inclusion will prevail in the continuing war for talent. “It is becoming more possible to do business in Qatar without wasta,” furthers Ali Al Humaidi, “as rules for doing business have started to take reliability, quality and cost into account and they are no longer traded for good deeds between friends and relatives.” Indeed, as rent-seeking behaviour requires the existence of economic rent and higher wages in order to persist, as the economies of the region diversify into knowledge-based economies, international competitiveness and productivity will become ever more important, as local workers compete with workers from across the world.
Now you can hear it! Listen to author David Jones discuss Wasta in the Workplace in more detail on our weekly podcast, The Edge business news from Qatar and beyond, on the Ginger Camel Media Network. Please log onto:
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The way forward
The most concerning trend from an organisational perspective is the significantly lower level of employee engagement reported by national talent in the region. On average, only one of every two nationals is fully motivated and actively contributing. It is not difficult to imagine the impact of this on individual performance and organisational productivity. A generally lower participation in the workforce, combined with lower morale among GCC nationals in general, creates a cycle of continued reliance on expatriates, particularly in truly commercial organisations. Says Gold: “In any country
64 | The Edge
One downside of excessive prelevance of wasta in the region’s workplaces is much lower levels of employee engangement among nationals and expatriates than global norms, write the authors.
products & reviews
Reviews
Toyota Camry
2016 comes with new design
I
n an effort to raise the bar in the mid-size sedan segment, Toyota has launched a redesigned version of its Camry model with some distinctive changes in its interiors and exteriors. The new interior features soft-touch materials throughout the cabin, and advanced instrumentation with intuitive controls helps keep the driver’s eyes on the road ahead. The Camry 2016 version comes with side character lines, giving it a sleeker look, and the company has made some changes in bumper and grille as well. The car features a 2.5-litre fourcylinder engine that produces 181 horsepower and 235 NM of torque, allowing it to deliver best-in-class engine performance and quietness. The engine employs Dual Variable Valve Timing with intelligence (Dual VVT-i), which controls valve timing on both
the intake and exhaust camshafts. The newly developed Electric Power Steering (EPS) is tuned for better oncentre feel, enhanced stability and more direct-feeling steering inputs. A new generation frame construction has been adopted for the front seats to provide enhanced comfort. A power eight-way adjustable driver seat and four-way adjustable front passenger seat are also available. The rear seats split and fold forward so passengers can carry more things, with ample leg-room. Tail lamps wrap around into the tapered rear quarters for a more sophisticated look, while 17-inch wheels and an available dual exhaust signal impressive performance, helping motorists get the most out of their drive. With regard to safety features, the car includes Enhanced Vehicle
Stability Control (VSC), Traction Control (TRAC), Anti-lock Brake System (ABS), Electronic Brake-force Distribution (EBD) and Brake Assist (BA). Its EBD control utilises ABS hydraulic control to optimise the distribution of braking force between the front and rear wheels in accordance with driving conditions and vehicle load. The new Toyota Camry is available in 10 colours, including two new colours – dark blue, and a metallic blue colour with bright sparkle. It is offered in the Middle East in four variants – the GL, GLX, SE and the sporty XSE. Since its debut in 1982 and subsequent evolution over six generations, Camry has established its presence in the standard mid-size sedan market – both in the Middle East and around the globe – selling more than 15 million units worldwide.
The Edge | 65
products & reviews
Read it:
The Middle East Unveiled
Subtitled ‘A Cultural and Practical Guide for All Western Business Professionals’, this book follows in the estimable tradition of the most well-known title in this genre, Don’t they know it is Friday? by Jeremy Williams. Having read and reviewed the latter for this magazine, naturally this reviewer would hold it up as a comparison to The Middle East Unveiled. Firstly, like Williams, a career diplomat who has spent more than four decades in the region, this book’s author Donna Marsh has lived and worked in the Middle East since the late 1970s. However Marsh hails from a far more businessorientated background and is in fact now a ‘cross-cultural’ consultant to large businesses and governmental organisations. The difference is apparent in her book, which takes a far more pragmatic format and as the title suggests, is almost wholly focused on the business visitor or expatriate sojourner from Europe, North America or Australasia. Thus, this book is highly detailed, providing information on cultural mores and practices and how these translate into the business environment.
Read it:
Available at Virgin Megastores in Doha.
The Yes Book
The art of negotiation is not limited to the world of business. While it may not be evident, each one of us uses it in our daily lives. In The Yes Book: The Art of Better Negotiation, Clive Rich introduces a collaborative concept of negotiation. Unlike a skill perceived to master a rival, today, negotiation is the means to maintain relationships. For Rich, collaboration, not competition, is the new face of negotiation. Beginning the book by explaining the gist and key elements of negotiation, the author explains some reasons behind the shift in how negotiation is perceived today. As the business environment becomes more and more competitive with influx of new organisations, maintaining relationships through cooperation is inevitable. Other externalities that have promoted the idea of negotiation as a collaborative technique include globalisation and new technology. The book is divided according to the stages of negotiation, namely attitude, process and behaviour. Stressing on the role of a positive attitude in a negotiation process, Rich establishes that a negative attitude will only bring negative outcomes. This, however, can be turned around if you recode your experiences and beliefs positively about yourself and your surrounding situations. Explaining the next stage of negotiation that is ‘process’, Rich highlights the importance of taking out time to prepare. “If you miss out preparation, then you are preparing to miss out,” he writes. Similarly, a part of preparation includes one’s familiarity with a climate one finds most comfortable. Negotiation carried out in an unfamiliar 66 | The Edge
Like Don’t they know it is Friday? it provides specific information on each country in the region and offers a number of tips on how to behave, dress and interact with locals in both a business and social settings. Arguably, unlike its predecessor whose author clearly holds great affection for the region, The Middle East Unveiled is far more detached and reads far more like a text book. While the former is also mostly aimed at anyone from anywhere coming to work in the region, thanks to its stated aim in its subtitle, The Middle East Unveiled also ostensibly focuses more in parts on the different kinds of expatriates a Western visitor might encounter. Mostly objective and fact based, this can be slightly patronising in places, certainly when it comes to a reference to white South Africans working in the region for example, some of whom are singled out as exhibiting “behaviours and attitudes that can only be described as congruent with the values of the apartheid era”. Downright racist, in other words. As your reviewer hails from said country, this soured an impression of an otherwise decent-seeming book and placed a lot of other information in it under question. Sure, some people like that might exist but certainly surely not in large enough numbers to warrant its own section? Most South Africans in the Gulf might find this odd at best, unnecessary stereotyping at worst. However, such gripes aside, this book seems like a decent reference for anyone from “the West” working in the region.
or uncomfortable environment reduces the chances of success. That said, as prepared as you may be, a successful negotiation is always complemented by the right behaviour, which may vary depending on what type of person you are negotiating with. Eventually, an individual’s behaviour at different stages of negotiation must acknowledge the fact that negotiation is as much about meeting needs of the other side, as it is about achieving one’s own wants – the idea which takes us back to the collaborative idea of negotiation. Spread across 300 plus pages, The Yes Book attempts to become a reader’s practical guide to successful negotiation with examples referenced from one’s daily life, and strategies on how to go about dealing with such situations.
Available at Virgin Megastores in Doha.
products & reviews
Breitling Colt Collection Breitling has launched its military inspired Colt Chronograph Automatic and the Colt 36 to its Colt collection in the Middle East. First launched in the 1980s, the collection, was initially intended for the armed forces. The 44 mm-diameter Colt Chronograph Automatic is available in four versions with well-defined characters, including a quartz chronograph and a ladies’ watch. Styling offers black, blue or silver dials. The Colt 36 offers a feminine expression with its 36 mm diameter and mother-of-pearl dials.
Four Smartphones Four, the mobile brand born in the United Arab Emirates, has announced the launch of three new smartphones. The S40 has a 3.5-inch screen, and comes with a 1.3 GHz Dual Core Processor and the Android 4.2 OS. Allowing 3G browsing, the four-inch S180 is for heavier Internet users. Finally, the ultra-sleek S300 features a 5.5 inch screen, a sharp 8MP rear camera, 1.2 GHz Quadcore processor and the Android 4.4 OS.
Bang & Olufsen
Bang & Olufsen has unveiled BeoPlay A2 – its first ever Bluetooth speaker. BeoPlay A2 is a two-channel speaker featuring True360, which ensures that everyone listening to the ultra portable speaker enjoys equally good sound. BeoPlay A2’s rechargeable Li-ion battery has enough power to keep the music going for up to 24 hours on a single battery charge. The product is accessorised with a short, exchangeable, premium leather strap that lets you easily carry the speaker with you wherever you are going.
Sony Bravia LCD Sony Middle East and Africa and Fifty One East in Qatar have announced the launch of Sony’s line of Bravia 4K LCD televisions, built with a new 4K Processor X1, with advanced clarity, colour accuracy and contrast. The new models range in size from 49 to 75 inches and include three new series. Combined with the 4K X-Reality PRO upscaling algorithm technology, these televisions are designed to provide the best image quality.
App Reviews By M. Iqbal
Sunrise Calendar (iOS, Android)
Getting started with this free calendar app from Microsoft takes less than a minute, assuming you choose Facebook or Google sign-up. If Google Calendar feels sparse, this app retains the clean look while still managing to feel polished and feature-rich. For instance, it will even show you the weather information for the day.
Asana (iOS, Android) Asana is an innovative workplace management tool that lets you create tasks for yourself and team members, add to-dos, reminders and requests. You can also communicate with each other using the in-app comment system and manage project details such as due dates. It supports over 36 of the most commonly used web services and apps, such as Dropbox, Sunrise Calendar and Evernote, and is free for up to 15 people teams.
Jotterpad (Android) Designed for creative writing, Jotterpad bills itself as the “perfect” tool for writing novels, essays and screenplays. The clean interface and the default font do lend themselves to making writing distraction free, as much as can reasonably be expected on a mobile phone. It supports Dropbox, so you can work on your document on-the-go and have it synced and ready for further editing once you reach a PC. Some of the more useful features, such as the built-in dictionary and ability to export are reserved for the paid upgrade.
The Edge | 67
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