The Edge - Mar 2012 (Issue 31) by Firefly Communications

CONTENTS

2012

www.theedge.me

CONTENTS FINANCE & ECONOMICS

.38. MARKET WATCH

Dheeraj Shahdadpuri reveals the latest analysis of lead economic indicators.

.40. BALANCE SHEET

Richard Kohinga writes how Doha is not alone in investing billions of dollars in infrastructure.

ON THE COVER

At present there is much attention being paid to small and medium enterprises, entrepreneurship and ‘start-ups’ in Doha. But just how real is the momentum in the entrepreneurial movement in Qatar? Speaking to a number of key players in recent months, TheEDGE takes a contemporary snapshot of this space. (Page 54).

.42. SPECIAL REPORT

Qatar’s 2012 real estate forecast.

.44. PERSONAL FINANCE

How to finance your property dream.

.46. ECONOMIC BAROMETER Central Banks take measures to prevent another global meltdown.

FEatures .50. IN THE SPOTLIGHT Gulf shipping safety.

.74. MANAGEMENT COLUMN

The importance of ethics in business.

.64. ON THE PULSE

Erika Widén reports on Qatar’s banking credit sector.

KNOWLEDGE & EXPERTISE .70. PRODUCTIVITY AND WELLBEING

How to have a work/life balance.

.72. LEGAL INSIGHT

SMEs on the Qatar Exchange. TheEDGE

CONTENTS

BuSINESS INSIGHt

.80. BUSINESS INSIGHT INTERVIEWS

TheEDGE spoke to Yousuf Al Jaida, director of asset management and banking of QFC Authority, about the Markab PPP study and what it might mean for Qatar.

REGuLArS .08. .09. .12. .20. .22. .30. .25. .83. .88. 4

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FROM THE EDITOR CONTRIBUTORS NEWS ETCETERA QATAR IMPACT MIDDLE EAST MATTERS COUNTRY FOCUS ENERGY AND RESEARCH TRAVEL & LIFESTYLE 10 THINGS

fROM THE EDiTOR

FROM pUBlIcATIoNs dIREcToR Mohamed Jaidah m.jaidah@firefly-me.com MANAgINg EdIToR Miles Masterson m.masterson@theedge-me.com dEpUTy EdIToR Erika Widén e.widen@theedge-me.com REgIoNAl sAlEs dIREcToR Julia Toon j.toon@firefly-me.com +974 66880228 HEAd oF BUsINEss sAlEs Emma Land e.land@firefly-me.com +974 33197446 sAlEs MANAgERs Achraf Mannai a.mannai@theedge-me.com +974 55127480 Joseph Issac j.issac@firefly-me.com +974 33675301 dIsTRIBUTIoN & sUBscRIpTIoNs Azqa Haroon a.haroon@firefly-me.com +974 55692471 cREATIVE dIREcToR Roula Zinati Ayoub ART dIREcTIoN Lara Nakhlé dEsIgN cooRdINATIoN Charbel Najem dEsIgNERs Sarah Jabari FINAlIsER Michael Logaring pHoTogRApHER Herbert Villadelrey pRINTEd By Ali Bin Ali Printing Press, Doha, Qatar

THE EDiTOR

Globally, it is widely accepted that small and medium businesses enterprises (SMEs) and entrepreneurs drive economies and create most new employment opportunities. Arguably, nowhere are SMEs more vital than in Gulf Cooperation Council (GCC) countries, which have large public sectors, are still largely dependent on hydrocarbons to generate gross domestic product (GDP), and have tens of millions of young people entering the work force in the next decade. It is hoped that many of the new generation of Qatari business start-ups will become the large firms of tomorrow, providing much-needed stimulus to the long-term economic private sector growth, GDP and diversification goals beyond oil and gas. Strongly allied to this is the need to create employment for Qatari nationals outside of the public sector. According to the Qatar National Development Strategy 2011 – 2016, released late last year, “Only five percent of Qatari nationals work in the private sector [and] Qatari entrepreneurship is also limited. Only two percent of Qataris manage and invest in their own businesses.” Ninety-eight percent of private sector companies in Qatar are classified as SMEs, according to a 2011 report by Qtel, and according to Al Khaliji bank, there are more than 10,000 companies here classed as SMEs. It is clearly an important and growing sector of the local business landscape. In an attempt to obtain as comprehensive a contemporary snapshot of this market space in Qatar as possible, in recent months TheEDGE spoke to a number of small businesses owners and aspirant entrepreneurs, as well as a crosssection of additional stakeholders in the SME sector, including organisations and not-forprofit companies supporting and encouraging

entrepreneurs – as well as private, public sector and financial institutions and educators. Ours is by no means a definitive overview, but it does provide us with an adequate pulse check of this market segment. While we learned there is obviously much positive activity at present, from our feedback there are obviously also still many challenges that independent entrepreneurs and SMEs in Qatar face. These include obtaining access to sufficient funding, including the mandatory QR200,000 for a commercial registration licence (CR) for start-ups, stringent legal and regulatory requirements, and a need for strong support infrastructure and ongoing funding, training and development opportunities. However, there is also no doubt that across the spectrum, the motivation and aim to develop SMEs is extremely strong in Qatar, with government departments, the public and private sectors, financial and academic institutions all recognising this need and doing good work. How long it will take to reach a point where these goals are deemed reached remains to be seen. But, one thing is clear: from 2012 onward, there will never be a better time to start a business in Qatar. To digress, TheEDGE is also proud to announce the launch of our new website www.theedge.me The new site will feature content from current and back issues and online exclusives, and additional content and interviews from our cover story this month. Enjoy the issue and please visit our site soon, and let us know what you think. Miles Masterson, Managing Editor

firefly Communications PO box 11596, Doha , Qatar tel: +974 44340360 fax: +974 44340359 www.firefly-me.com

theEDGE is printed monthly © 2012 firefly Communications. All material strictly copyright and all rights reserved. reproduction in whole or in part, without the prior written permission of firefly Communications, is strictly forbidden. All content is believed to be factual at the time of publication. views expressed by contributors are their own derived opinions and not necessarily endorsed by theEDGE or firefly Communications. No responsibility or liability is accepted by the editorial staff or the publishers for any loss occasioned to any individual or company, legal or physical, acting or refraining from action as a result of any statement, fact, figure, expression of opinion or belief contained in theEDGE. the publisher (firefly Communications) does not officially endorse any advertising or advertorial content for third party products. Photography/image credits and copyright, where not specifically stated, are that of Shutterstock and/or iStock Photo or firefly Communications.

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CONTRiBUTORS

coNTRIBUToRs

pg.30 RAcHEl MoRRIs Journalist MENA Region Doha, Qatar

p.32 WAlId oRABy General manager Metito Qatar/Bahrain Doha, Qatar

pg.38 dHEERAJ sHAHdAdpURI Analyst Dubai, UAE

pg.40 RIcHARd KoHINgA Director, Head of Markets KPMG Doha, Qatar

p.42 THoMAs BAcoN Analyst Oxford Business Group Istanbul, Turkey

p.44 dAVId RUssEll CEO Guardian Wealth Management Doha, Qatar

pg. 46 KARIM NAKHlE Senior Business Strategist Doha, Qatar

p. 50 EdWARd JAMEsoN Senior Business Journalist MENA Region London, United Kingdom

p.70 lAUREN pENNy CEO & Partner Art of Abundant Living Doha, Qatar

p. 72 FoUAd El HAddAd Senior Associate, Corporate and Commercial Law Clyde & Co. Doha, Qatar

p.74 JoHN MUllINs Associate Professor London Business School London, United Kingdom

pg. 84 VIcToRIA scoTT Journalist Doha, Qatar

FolloW tHEEDGE oNlINE: WWW.THEEDGE.ME

FolloW Us oN TWITTER: @THEEdgEQATAR JoIN oUR FAcEBooK gRoUp: WWW.FACEBOOK/QATARTHEEDGE JoIN oUR lINKEdIN gRoUp: THEEdgE MAgAZINE QATAR

About TheEDGE: theEDGE is an ambitious business magazine targeting professionals operating within Qatar’s multi-sector business landscape. Printed monthly, theEDGE was launched in July 2009 to ﬁll the market void and to provide the business community with insight into the latest business trends and market developments. theEDGE is distributed 11 times yearly to a readership base of more than 10,000 professionals, providing advertisers with the needed additional reach and frequency to their most important and affluent audience. theEDGE is an authoritative business resource serving both large and small business operators. Please e-mail info@theedge-me.com should you wish to contribute.

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NEWS ETCETERA

TO OF THE MONTH O H P

The

E D G E M A G A ZI N E

THE ARAB WINTER

As an uncharacteristically freezing and snow-driven winter negatively affected travel and commerce in most of northern Europe, through the Balkans to Russia, throughout January and February this year, the Arab world was not immune. In February snow fell in thick, cold blankets in the Tunisian town of Ain Drahem (pictured) and elsewhere in North Africa. In Ain Drahem, cars were left stranded as some roads became impassable, and in the town of Siliana the Arab Tunisian Bank organised an aid drop for people in the Northern Tunisian regions caught in a severe cold snap. Gulf nations such as Qatar, which should have started warming up considerably by now as the hot summer draws near, have not been escaped, as the cold north wind has consistently kept temperatures unseasonably low throughout the first months of 2012. (Image Corbis)

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NEWS Etcetera

NEWs Etcetera 142 percent mobile subscription in Qatar: ictQATAR by ASIF IQBAL

The mobile subscription rate in Qatar stands at 142 percent, the Supreme Council of Information and Communication Technology (ictQatar) said recently, referring to the fact that many subscribers hold multiple connections. These figures were revealed during the ‘Everything Mobile’ forum organised by ictQatar at the Sharq Village and Spa in February. Speaking at the forum, ictQatar Publications Manager Kholoud al Ali emphasised Qatar’s high rate of mobile connectivity, and said that the mobile is “truly changing the way we communicate with friends and family, the way we do business, how we learn and how people around the globe access information.” The two-day interactive forum studied the phenomenon of the cell phone in the Arab world from a business, consumer and regulatory perspective. Leaders in mobile technology, social media and digital commerce from all over the world attended the event, which attracted nearly 500 participants. Specific topics, discussed on both days, include a m-commerce and finance, mobile entertainment and games, mobile software and hardware, mobile public services, location-based services and, mobile applications. Speaking at the opening of the forum, Kevin Rose, the founder of Digg and co-founder of Milk Inc, discussed the “disruptive” mobile applications that have emerged in recent times. “Most mobile applications are in the entertainment and communication fields. Within a few years, there will be more applications that can be used for entrepreneurship, education and health, which result in high growth in mobile commerce and education.” He also said that conventional methods will have to be changed drastically to cope with modern applications

(From left) Marwan Marouf Mahmoud, executive director of ICT Industry Development at ictQATAR, addressing the gathering while Chris Hutchins, vice president of business Milk Inc, Dan Stuart, Managing director of LivingSocial Middle East, Rob Jonas, vice president and managing director of Europe and the Middle East for inMobi and William Hoffman, head of Telecommunications Industry at World Economic Forum look on during a panel discussion, in Doha

as more and more smartphones and tablets are being used by the younger generation. A panel discussion that followed discussed the implications of m-commerce.

QRail awards QR1.95 billion contract to QDVC Qatar Railways Company (QRail) has signed a QR1.95 billion contract with Qatari Diar Vinci Construction (QDVC) for the new phase of works on the Lusail Light Rail Transit system. The chief executive officer of QRail, Saad Ahmed Ibrahim al Mohannadi and the deputy chief executive officer of QDVC Hamad Al Bishri at a function in Doha recently, signed the agreement. Speaking after the agreement signing function, al Mohannadi said, “the contract covers civil engineering works in seven underground stations, the construction of a viaduct over the motorway between Doha and the northern part of the

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country, and preliminary works on an LRT depot and maintenance workshop. The works are expected to take approximately 38 months to complete.” The full Lusail LRT project of four lines totaling 30 kilometres, ten underground stations and 25 atgrade stations, is being built in several engineering study and construction phases. The design phase was launched in August 2007, followed by earthworks and excavations for cut-and-cover tunnels in March 2009, tunnel construction in March 2010, and preparation of underground station construction in June 2011. The next

by ASIF IQBAL

and final phase of the works will include rolling stock and systems. Handover of the turnkey project is set for 2016.

Chief executive officer of QRail, Eng. Saad Ahmed Ibrahim Al Mohannadi (left) with deputy chief executive officer of QDVC Hamad Al Bishri (right)

NEWS ETCETERA

QATARGAS CEO RECEIVES THE ‘EUROPEAN GAS CONFERENCE ExECUTIVE OF THE YEAR’ AWARD Qatargas Chief executive officer (CEO) Khalid Bin Khalifa Al Thani has been presented with the coveted title ‘European Gas Conference - Executive of the Year’ during an awards ceremony on the sidelines of the 2012 European Gas Conference recently. In recognition of this prestigious Award being bestowed and following the Awards ceremony, Qatargas CEO, Khalid Bin Khalifa Al Thani said: “I am very pleased and honoured in having received this award on behalf of Qatargas, which today, under the guidance of HE Dr. Mohammed Bin Saleh Al Sada, Minister of Energy and Industry and Chairman of Qatargas, is the largest liquefied natural gas (LNG) producing company in the world. For Qatargas, Europe remains one of our key LNG markets and over the last few years LNG supplies from Qatar have helped the diversity and security of Europe’s energy supplies. The State of Qatar has invested heavily in Europe’s LNG sector, which has helped to create flexibility and capacity in the European gas market. At Qatargas we are committed to providing needed LNG solutions and we would like to see Qatari LNG remain a part of Europe’s global LNG mix for the foreseeable future.” The CEO was recognised by the European Gas Conference Awards Panel for his passion in leading a world-class company, with a vision to be the world’s premier LNG Company by 2015, known for its people, innovation, operating excellence, environmental responsibility and corporate citizenship, contributing towards achieving successful and sustainable development.

QATAR OCCUPANCY STABLE AS NEW HOTELS COME ONLINE More than 6,000 new hotel rooms enter market in Q3 2011 alone; Qatar visitor preregistrations for Arabian Travel Market surge by 133 percent against 2011 figures Qatar has recorded positive hotel performance results in 2011 according to STR Global, reflecting increasing demand and interest in business and tourism as it prepares to host the 2022 World Cup. Occupancy remained stable last year, edging 0.4 percent higher from 2010 while average daily rates increased 0.7 percent STR Global said. Meanwhile, more than 6,000 hotel rooms comprising 25 hotels and 10 hotel apartments opened up in the market in the third quarter of last year according to the Qatar Tourism Authority. Supporting these positive results, Arabian Travel Market (ATM), the leading travel exhibition in the Middle East, is witnessing strong online visitor interest months ahead of the event. The number of pre-registered visitors from Qatar is already up 133 percent from last year, while the number of visitors who are interested in buying products and services from Qatar has risen 109 percent. “Over the coming 10 years the rise in visitors to Qatar will be driven largely by the business sector, as the Gulf state continues to put in place world-class infrastructure for the World Cup, and also beyond for its 2030 vision,” said Mark Walsh, portfolio director, Reed Travel Exhibitions. In addition to the construction of 12 new football stadiums, Qatar is building 77 new hotels and 42 hotel apartments ahead of the 2022 tournament. More than US$100 billion (QR364 billion) worth of infrastructure is also due to be completed, including the new US$11 billion (QR40 billion) Doha International Airport, the US$6 billion (QR21 billion) Doha port project and a US$25 billion (QR91 billion) metro and railway system.

NEWs IN brIEf QNB CAPITAL: THE OUTLOOK FOR QATAR’S UNEMPLOYMENT IS POSITIVE A recent report from the International Labour Organisation (ILO) Global Employment Trends 2012, highlighted a number of challenges in the global labour market. The world will need to create 600 million jobs over the next decade to provide 400 million new jobs for the growing global labour force and eradicate worldwide unemployment of 200 million. Unemployment in Qatar is lower than in any other country in the Middle East at 0.6 percent, including expatriates. This is mainly a consequence of extremely low unemployment among expatriates. As expatriate residence permits are linked to their employment, very few unemployed expatriates remain in the country. Among Qatari nationals, the unemployment rate was 3.9 percent in March 2011. This is slightly lower than a year earlier when it was 4.1 percent. Unemployment among Qatari nationals is low as there are numerous opportunities available in the public and private sector.

FIREFLY RELEASES QATAR DISCOVERY DVD

“With Qatar Discovery, we wanted to dispel the clichéd myth that Qatar is somehow old-fashioned and has nothing to offer other than oil and gas. It was our vision to show Qatar in a younger, trendier, artistic and more exciting way than has ever been done before,” said Mohamed Jaidah, producer of Qatar Discovery during its recent launch. Available for QR90

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NEWS Etcetera

2012

events calendar MARCH DOHA, QATAR

5-7

Qitcom 2012

11 - 14

2nd Annual Road Planning Design and Construction Middle East

11-13

MultaQa Insurance Conference

25 - 26

Architectural Lighting Qatar

26 - 28

DIMDEX 2012 Maritime Defence Exhibition

“With today’s decisions, we are given an opportunity to move towards more stable conditions, to reduce the uncertainty which has affected the economic activity and enhance confidence in the prospects of the Greek economy.” A recent agreement has been reached on a rescue package to the tune of US$170 billion (QR618 billion) that will allow Greece to pay its debts. Lucas Papademos, the Greek prime minister, described the day as a historic one for the Greek economy.

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NEWS IN QUOTES “We are presenting a games plan that dovetails perfectly with the significant investment Qatar is already making in sports facilities and essential infrastructure over the next few years. Our focus on utilising existing venues and those already planned and budgeted means we can have certainty in delivering an accessible and low cost games in 2020.”

Qatar Olympic Committee General Secretary Sheik Saoud bin Abdulrahman Al Thani told reporters in Doha recently. Doha would like to stage the Olympics 2020 from October 2 to18, and the Paralympics from November 4 to 15 of the same yar.

“Yes, I am a candidate in the presidential election…I took this decision because France, Europe and the world have for the last three years seen a series of unprecedented crises, which means that not seeking a new mandate from the French people would be abandoning my duties.” Nicolas Sarkozy, the French president, has officially announced recently in an interview with France’s TF1 channel that he was running for reelection, with fewer than 10 weeks to polling day and the centre-right leader trailing in opinion polls.

“We are not after an atomic weapon. We want to break the supremacy (of the world powers) that relies on nuclear weapons. God willing, the nation will reach this goal…despite what the enemy (the West) says, nuclear energy is directly linked to our national interests.” Iran’s supreme leader Ayatollah Ali Khamenei insisted recently that his country is not seeking an atomic weapon, following an unsuccessful visit to Tehran by United Nations nuclear watchdog officials.

NEWS ETCETERA PR

Fifty One East Captivates the audience of the Doha Jewellery and Watches Exhibition

Fifty One East, Qatar’s premier retail luxury chain, captivated visitors of the Doha Jewellery and Watches Exhibition. Showcasing an unparalleled collection of the world’s most renowned and luxurious brands, Fifty One East’s stand featured timepieces and other jewellery creations from Rolex, Boucheron, Tudor, Armand Nicolet, Alena Gorchakova, Diamanti BRM, Erwin Sattler, Faberge, Fitzroy, Guy Laroche, H. Moser & Cie, Pasquale Bruni, Victor Mayer, Vulcain, Parker and Waterman. The Doha Jewellery Exhibition was held last month from the 20 till the 26 of February at the capital’s Exhibition Centre.

Al Gassar Resort Celebrates Launch with Spectacular Evening Event

A celebration event was held last week to mark the opening of the newest landmark destination in Doha, Al Gassar Resort. The extravagant evening was held at the luxurious ‘Al Gassar ballroom’ that sits within the heart of the development. The opening of Al Gassar Resort, is a celebration of the development’s components, especially the Al Gassar Ballroom and the Al Gassar Residence that boasts the very latest in high-end accommodation, accompanied by five-star deluxe services and amenities which are now available for discerning visitors and residents.

Samsung welcomes new addition to Tablet family with the launch of the Galaxy Tab 7.7

The Samsung Galaxy Tab 7.7 is the world’s first tablet to feature the brilliant Super Amoled Plus display. The new Galaxy Tab 7.7 demonstrates Samsung’s commitment to offering consumers a wide choice in the mobile tablet market as it joins the ranks of Samsung’s renowned Galaxy Tab 10.1, 8.9, 7.0 and 7.0 Plus.

Porsche Centre Doha celebrates the arrival of the new 911 Carrera

Porsche Centre Doha, Al Boraq Automobiles Co WLL, celebrated the arrival of the new 911 Carrera and Carrera S Coupé with a thrilling reveal show at The Qatar National Convention Centre recently. The icon, highly anticipated by sports car aficionados and now available in its seventh generation, has undergone a complete redesign.

Saleh Al Hamad Al Mana Co. inaugurates new Infiniti showrooM

Saleh Al Hamad Al Mana Co. the exclusive distributor of Nissan, Infiniti and Renault in Qatar inaugurated the New Infiniti showroom in Qatar. The new showroom is built on the Infiniti Retail Environment Design Initiative (IREDI) platform, Infiniti’s unified global standard. Infiniti is the fastest growing Japanese luxury automotive brand in the region, at the start of a new six-year growth plan that will see sales rise to take 10 percent of global luxury market sectors by 2016. The Showroom was inaugurated by Hisham Al Mana, chairman, Kamal Al Mana, executive director, of Saleh Al Hamad Al Mana Co. alongside Gilles Normand, corporate vice president, Africa, Middle East and India (AMI).

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NEWS TECHDESK

techdesk website reviews

www.theedge.me TheEdge Magazine now has its own fully-fledged website. We have populated the website with some of our best content from the past year or so, including business interviews and insights, feature stories, opinion pieces and columns, and travel and lifestyle articles and reviews. The new website will also feature breaking news and online exclusives. www.doha2020.qa This website is the home to Qatar’s Olympic bid aspirations, where you can find out all about what has motivated Qatar to bid for the world’s largest sporting and athletic gathering in eight year’s time. This includes information relating to Qatar’s official application for the bid in late February, as well as a number of interesting videos and other bid-related facts. www.bqfp.qa Bloomsbury Qatar Foundation Publishing is a partnership of Qatar Foundation and Bloomsbury Publishing Plc. Its focus is on publishing books of excellence and originality in six main areas: fiction and non-fiction for adults and for children, educational books for schools, academic books for universities and researchers, classics of Arabic literature, and reference books.

TECH GADGET: WORLD’S THINNEST NOTEBOOK?

In February Acer unveiled what it calls the world’s thinnest ‘Ultrabook’ the Aspire S5. The ultra-slim device measures only 15 mm at the maximal point, weighs less than 1.35 kilograms and is built with a 13.3-inch (34 centimetre) LCD. In addition, The Aspire S5 features an Intel Core processor, SSD storage and increased shock resistance, professionally-tuned Dolby Home Theater v4 and a long battery life via the PowerSmart battery pack. The Acer Ultrabook S5 will be available in Qatar from Q2.

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Web and Tech News QATAR TRAFFIC TRIPLES TO E-COMMERCE WEBSITE MyUS.com, a website in the international package forwarding and shipping sector, has reported a three-digit growth from Qatar. Year-over-year shipments from MyUS.com have risen to over 120 percent to Qatar. The shipped items range from gaming and electronic products to household items, such as vacuum cleaners to high-end apparel and home goods brands. “As one of the USA’s largest export markets in the Middle East, Qatar has always been a very strong market for MyUS.com,” says John Wright, vice president sales and marketing. “It shows by how many items actually pass through our warehouse bound for Qatar. At year-end, our shipping weight to Qatar was up 140 percent.” UAE RESIDENTS SPEND 15 HOURS A WEEK ON WEB Many United Arab Emirates (UAE) residents are spending at least 15 hours a week surfing the web, according to Steve Hamilton-Clark, CEO of TNS MENA, a Dubai-based custom marketing research agency. Hamilton-Clark‘s message is that brands are now faced with the challenge of embracing digital media channels right across their business, or risk losing relevance. “It is not simply about being good at digital marketing. It is about the success of the whole business in a world that looks to have embraced digital for life,” he said. The TNS Digital Life global programme showed that 69 percent of Internet users in the UAE spend at least two hours a day online. Ninety percent of users nationwide use the Internet for research, and 84 percent of the global population belong to one or more social networks, and 47 percent of Middle East-based respondents cited it as their most important online activity. GBI ANNOUNCE UNDERSEA CABLE READINESS Gulf Bridge International (GBI), the Middle East’s first privately owned, regional cable operator, and TE SubCom, a TE Connectivity Ltd. company and an industry pioneer in undersea communications technology, announced in February they have achieved the status of ready for service for the GBI undersea cable system. The system will deliver much-needed bandwidth capacity to the Gulf region, connecting Qatar, the UAE, Iraq, Kuwait, Bahrain, Oman and Saudi Arabia in a ring configuration, with onward connectivity to India and Europe and additional connectivity to follow. “Achieving this status for our cable system puts GBI one step closer toward accomplishing our mission to connect the world to the Gulf,” said Ahmed Mekky, (left) board member and CEO, GBI.

QATAR iMPACT

coNNecTIoNs Access to the Internet and mobile communications are perhaps the most important business tools we have. Kamahl Santamaria asks if residents of Qatar are being asked to pay too much for them.

as an avid Twitter user, I have noticed something appearing more regularly in my tweet stream recently – the hash tag #QtelFail. It is kind of self-explanatory – indeed the suffix fail has become a popular online meme for people to express their displeasure with any person or company. And it is something that you – as that person or company – ignore at your own peril. I doubt Qtel is ignoring it. Qtel enjoyed market dominance for years. It was simply the only option when it came to phones and Internet in Qatar, but it was also forced to quickly change its approach when Vodafone was awarded Qatar’s second mobile licence in late 2007. That new approach was extremely visible. New-style shops, more services, fresh advertising. All good healthy stuff in a competitive market. What I wonder though, is has it changed enough for the sake of the country? With Qatar’s new international standing, is Qtel keeping pace with what a growing population expects and needs? Right now, I think the answer is no. To be fair, there is not much difference in the mobile market. Qtel charges QR0.55 per minute for pre-paid voice calls, and Vodafone Qatar QR0.49. But compare both to Etisalat

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in the United Arab Emirates, which charges only QR0.30. And it gets worse when you look at Internet access – in my opinion, a business tool just as important, if not more important, than the mobile phone. The best Internet speed Qtel can offer where I live is two Mbps (megabits per second) at a cost of QR300 a month. But BT in the United Kingdom (UK) provides up to 40 Mbps for about QR143 – half the price. Perhaps it is an unfair comparison. Qatar is obviously still a very young country, and its infrastructure is going through what amounts to a technological revolution to keep pace with growth levels. And Qtel is stepping up with its new Fibre service, promising speeds of up to 100 Mbps. But still, pricing is a huge issue. A 100 Mbps connection will cost QR650 a month. Again to use BT as an example, the UK equivalent would cost only QR200. Why does it have to be so expensive here? Apparently the people of Qatar share the same concerns. Eighty one percent of respondents in an opinion poll in Al Sharq newspaper felt neither Qtel nor Vodafone Qatar were providing a comprehensive nationwide network, and that their charges were very high. Seventy-two percent said there was no real competition and that promotions by the two companies were really just ploys.

Still the focus falls on Qtel, because of its huge responsibility to the country. Without it, Qatar faces being cut off from the rest of the world. That might sound like an overstatement, but an article published in September 2011 in the long-standing American magazine The Atlantic pointed out that Qtel being the exclusive provider of Internet access in Qatar could spell big problems. It stated Egypt has nearly 200 (Internet Service Providers) ISPs, Syria around 10, and Libya four. With only one here, The Atlantic said: “If Qtel goes down, Qatar disappears off the face of the Web”. Qtel has a mission statement: To be among the Top 20 telecommunications companies in the world by 2020. And in just the past five years it has made massive strides. There have been investments in Kuwait and Indonesia, and a partnership with a Saudi company to launch Wi-fi services across Asia and Africa. But its core market is still Qatar, and that goal is now only eight years away. Residents and business owners can only hope that Qtel responds even more rapidly to their needs in that short space of time. Kamahl Santamaria is a Doha-based news anchor with Al Jazeera English and host of the channel’s business and economics programme Counting the Cost.

MIDDLE EAST MATTERS

successor In the region, founders and leaders of companies do not seem to want to identify and develop future successors. Dr. Tommy Weir explains

oes the US$13 billion (QR47 billion) Ralph Lauren, Inc. have a ready successor for the 71-year-old founder Ralph? Unfortunately, it does not appear that they are ready for the departure of their founder and chief executive officer (CEO). Businesses in the region, lack of succession planning and the act of identifying and developing future leaders for a business is a concerning risk. And the most critical role to be planned for is that of the CEO. A regional example was the unfortunate and untimely death of Nasser Al Kharafi last spring at the age of 67. He was the leader of the Kuwaiti business conglomerate M.A. Kharafi & Sons, with interests in Zain Telecommunications, National Bank of Kuwait and Americana, the operator of several American fast-food chains. If the rumours are true, the internal uncertainty over succession that emerged put his years of dedication at financial risk. I wonder how many of the family empires across the Gulf Cooperation Council have a successor in place and are ready for the future? Succession planning is especially tough for founders of companies where they have been the leader, brand representative and patriarch. Unfortunately, the difficulty of the task does not abdicate the responsibility to the business and stakeholders.

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When Silicon Valley legend Steve Jobs retired in August 2011, Apple quickly announced that he would be succeeded by long-time heir apparent Tim Cook – whose future was prepared and planned. Leaving no surprise, the analysts did not expect Jobs’ resignation, which had long been foreseen, to derail the company’s fabled productlaunch roadmaps even though there was an immediate reaction to the stock value. When conducting succession planning, the wise business takes a comprehensive view rather than just planning for CEO succession. In my conversations with founders and other senior executives there is a concern about the quality and readiness of a future cadre of leaders. Apple is known for its great bench strength of candidates for internal promotion and ready qualifications to lead at higher levels. Here are three points to think about when you take on this strategic exercise: 1) The most important succession planning consideration is to calculate the risk of vacancy and impact of a position on the business. The higher the risk and the impact the more crucial it is that you have ready successors in place. 2) Succession planning is very similar to athletics. Teams that have great “bench strength”, meaning players who are ready to replace another who gets hurt, tired or is just having a bad game, usually outperform their competitors. By succession planning an organisation is making sure that they have leaders in line for each leadership position.

3) Another consideration in succession planning is to make sure that you have future roles for gifted leaders. Again, just like in athletics – when you have a promising player on your bench you work to develop his/her ability and make sure you have a position coming available that he/she can step into. For your up and coming (high potential) leaders you need to be sure that you have future roles for them, and that they know you do. Otherwise, your talented employees will not stick around. For the proverbial “elephant in the room” – how to succession plan in the family business when the founder should be passing control to the next generation? Most patriarchs are like Nasser Al Kharafi was, and they hold on to control until it is too late. Recently, during lunch with the son of the founder of a regional business, he shared how his dad is still holding all of the control at 78 years of age. There comes a time when the founder needs to shift his focus to building the future leader of the business rather than just building the future of the business. Across the region, CEO succession is one of the most neglected and strategic risk mitigation strategies. It is time to erase the risk called succession planning and confront the challenge. Dr. Tommy Weir is an authority on fast growth and emerging market leadership, and an advisor and author.

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ENERGY & RESEARCH TEMPTING ASIA:

QATAR’S LNG PRICING STRATEGY Qatar currently enjoys a dominant position as the globe’s largest LNG supplier. But as rival exporters ramp up production capacity and emerging economies become the drivers of Asian demand growth, Doha may be forced to rethink its strategy. Jamie Stewart reports.

Thanks to a recently signed deal Ras Laffan Liquefied Natural Gas Company, a subsidiary of RasGas, will deliver two million tonnes per annum (Mta) of Qatari gas to a South Korean firm for 20 years, starting in 2013. (Image courtesy Ras Laffan)

n 12 February 2012, Qatari energy giant RasGas formally finalised a mega liquefied natural gas (LNG) supply deal with South Korean state-owned company Kogas. Under the terms of the sales and purchase agreement, Ras Laffan Liquefied Natural Gas Company, a subsidiary of RasGas, will deliver two million tonnes per annum (Mta) of Qatari to the South Korean firm for 20 years starting in 2013. This will be in addition to incremental medium term volumes from 2012 to 2016. The new deal comes on top of two existing long term sales and purchase agreements signed between RasGas and Kogas in 1995 for 4.9 Mta, and in 2007 for 2.1 Mta, bringing the total annual long term quantities under the three deals to a huge nine Mta. This means RasGas will be singlehandedly responsible for meeting around a quarter of South Korea’s anticipated LNG demand. The deal followed quickly in the wake of a 1.5 Mta, 20 year supply agreement with state-owned Taiwanese firm CPC Corporation, also starting in 2013. Qatari energy minister HE Mohammed bin Saleh Al Sada labelled the South Korea deal “a perfect example of how Qatari LNG producing ventures continue to respond to customer’s needs through the capabilities and flexibility they have.” On top of this, Qatar enjoys a cosy relationship with South Korea. RasGas is 30 percent owned by, United States energy behemoth ExxonMobil while fully state-owned Qatar Petroleum owns the 70 percent majority stake.

ENERGY & RESEARCH

Qatar has long been able to leverage its good relations with South Korea, Taiwan and Japan to maintain a strict pricing stance. But despite the enduring and fruitful relationship maintained by Doha and South Korean capital Seoul, and the capability and flexibility of Qatar’s supply infrastructure, experts warn that Qatar may have a fight on its hands over the decade ahead if it wishes to penetrate further into Asia’s LNG markets. OIL PARITY The earthquake and tsunami that struck Japan with devastating consequences on 11 March 2011 triggered a frantic energy crisis, as the Japanese government scrambled to fill the gaping hole left in power production by the loss of the Fukushima nuclear power plant. Japan turned to back-up gas-fired power plants to provide the electricity urgently required to begin the massive clean-up operation, and to start mapping out its route along the road back to recovery. Today, almost a year on, the degree to which Japan’s tragedy has altered the energy supply landscape can be better understood. Inevitably, the post-Fukushima import scramble altered the balance between supply and demand on the Asian side of the Pacific basin. Qatar was able to ramp up its huge supply infrastructure in order to come to Japan’s aid without disturbing its ongoing contractual obligations. “Japan’s buyers have well established relationships with the Qatari supply consortia, which can offer them the supply security that other producers do not enjoy,” RBI energy analyst Ben Wetherall said. In December, the most recent month for which figures are available, Qatar retained its position as Japan’s biggest supply source, delivering 1.39m tonnes of LNG, more than double the total from the same month in 2010. The figure, according to Japanese finance ministry data was a shade under a fifth of Japan’s total imported LNG. In addition to the volume of supply agreements, Qatar has long been able to leverage its good relations with South Korea, Taiwan and Japan to maintain a strict pricing stance based on oil parity contracts. In most cases the price of LNG is less than the price of crude oil in barrel of oil equivalent terms. At the height of what was a sellers’ market from 2005-2008, however, Qatar was able to command prices at, or close to, full oil parity. Doha has made clear that it wishes to rebase a significant proportion of its flexible LNG to Asian markets where demand for imports is expected to be strongest, particularly in light of the US’ ongoing shale gas revolution.

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Qatari energy minister Dr. Mohammed bin Saleh Al Sada labelled the deal with South Korean firm Kogas “a perfect example of how Qatari LNG producing ventures continue to respond to customer’s needs through the capabilities and flexibility they have”.

But, Wetherall explained, maintaining good relations with Asia’s fully-fledged markets may not be sufficient for Doha to achieve this lofty ambition: “While LNG demand in the established Asian markets will undoubtedly increase in coming years, the main driver of demand growth is expected to come from India and China, both of which are more price sensitive than Japan, Korea or Taiwan.” SUPPLY EVOLUTION Towards the end of 2010, Qatar reached its long-term LNG production goal of 77 Mta, making it the world’s leading producer of LNG by a very comfortable margin. “Qatar is in a unique position among LNG producers,” Wetherall said. “Its pricing strategy is completely detached from its cost of production. The sheer economics of scale means it can outperform any other liquefaction project, yet it has been reluctant to be seen to comprise the integrity of its pricing strategy.” This apparent unwillingness to compromise may be a symptom of a rapidly evolving LNG supply-side equation. Take Australia for example. The nation is the world’s fifth largest LNG exporter but, through a number of mega projects, is aiming to become the world’s second largest LNG exporter by 2020 with planned production capacity of 60 Mta, behind only Qatar. It therefore pays for Qatar to lock in as much of its long-term LNG export volume at close-to oil parity as possible, because its ability to dictate pricing will soon wane with rival exporters steadily ramping up production While today Qatar can take advantage of its dominant supply position, it will in coming years be forced to re-think its pricing strategy if it wishes to capture a significant chunk of the emerging Indian and Chinese markets.

ENERGY & RESEARCH

Exposure of global energy economy to Hormuz will increase – study The importance of the Strait of Hormuz to the global energy transit system will increase over the next two decades, according to the world’s foremost energy authority, writes Jamie Stewart

ny disruption to rights of transit through the strait could have an impact on global energy markets that would dwarf the potential consequences of the ongoing threat posed by Iran in 2012, analysts have said. According to International Energy Agency research, crude oil supplies from the Middle East will grow from two million barrels per day (bpd) two years ago to a massive 36 million bpd by 2035. “Increasingly the destination of oil exports from the Middle East is likely to be the eastern seaboard of Asia, and China in particular,” influential United Kingdom-based think tank Chatham House said in a report published last month. The majority of exports would pass through the Strait of Hormuz. Analysts at the think tank identified a number of key maritime “choke points” at which the global energy transport system is vulnerable to disruption. These include Bab Al Mandab in Saudi Arabia, the Suez Canal and the Strait of Hormuz, through which the vast majority of Qatar gas exports must pass. The threat of disruption to these key maritime choke points has long been a fixation for strategic planners, energy companies and financial markets. “SERIOUS CONSEQUENCES” “There is no doubt that disruptions to key energy choke points – whether maritime or onshore, and whether resulting from the actions of non-state actors, inter-state political tensions and conflict, or from industrial or maritime accidents – could have serious consequences for the level and volatility of energy prices,” the report said. Iran’s repeated threats to close the Strait of Hormuz this year have edged up the price of crude oil, which at the time of writing was at a three week high just short of $120/bbl. Oil traders said that continued geopolitical wobbles, principally the Hormuz situation, were keeping “supply jitters on the radar”. But the Chatham House report warned the potential for supply woes to push up prices could increase over time. The salience of choke points in the global energy economy may increase over time if production or transport becomes more geographically concentrated, and if general market tightness weakens the resilience of the system to supply shocks,” the report said. The study concluded that the security of maritime choke points ultimately rests on “the observance of international law”, which classes measures closing international straits as generally illegal in peacetime,

Khalid Mohamed A. Al Attiyah, Qatar minister of foreign affairs, participated in a panel discussion during the 48th Munich Security Conference at Hotel Bayerischer Hof in February. At the conference Turkish and Qatari officials said a military strike on Iran would be disastrous for the region. (Image Getty Images)

while international law requires maintaining rights of transit passage during war. Security of the choke points also rests on the willingness and capacity of interested members of the international community to “enforce it if necessary”, it said – mirroring the threatened counter actions of the United States in Hormuz over the past month. TheEDGE

ENERGY & RESEARCH

Energy And Research briefs

MENA oil producers, such as the United Arab Emirates and Saudi Arabia are set to invest up tp US$525 billion (QR 1.9 trillion) in the next five years on energy projects. Pictured is an LNG carrier in Dubai port.

country sits upon the world’s third largest proven reserves of natural gas behind Russia and Iran.

RASGAS–EDISON NEGOTIATIONS CONTINUE Giant Qatari energy firm RasGas is facing another round of tough negotiations with Italian utility Edison concerning a long-term gas supply contract between the two parties. RasGas is contracted to supply Edison, Italy’s second-largest importer of gas, with 6.3 billion cubic metres of liquefied natural gas (LNG) per year. But Edison said last month it expected to renegotiate its long-term deal with Qatar, as well as a similar supply contract with Libya, citing high prices under the deals in relation to “spot gas” markets, on which single cargoes of gas can be purchased. The utility said “huge quantities” of spot gas was available on European hubs, which meant it was paying over the market price through its long-term supply deal. This was the reason behind a 27 percent year on year fall in profits, Edison claimed. Edison launched legal proceedings against RasGas in March last year saying it had a “right to earn reasonable margins”. RasGas has not publicly commented on the matter, and the case is ongoing.

MENA OIL PRODUCERS ASESS ENERGY DEMAND COSTS Saudi Arabia is looking to spend US$141 billion (QR513 billion) on energy projects in the next five years, according to figures released in February by the Arab Petroleum Investment Corp. The total investment would make the country the largest hydrocarbon investor among the oil producing countries of the Middle East and North Africa (MENA) region. The United Arab Emirates, which ranks second behind Saudi Arabia, is intending to invest US$76 billion (QR276 billion). Total five year spend among the oil producing nations is forecast to be US$525 billion (QR1.9 trillion), unchanged from earlier forecasts “despite the current political upheaval in the region”, the report said. Energy demand across the MENA region is expected to increase in line with population growth and rapid economic diversification.

QATAR UNVEILS RAS LAFFAN DOWNSTREAM GAS SCHEME Two of Qatar’s largest energy firms inked a deal in February to develop a mega petrochemical complex in Ras Laffan Industrial City. The downstream hydrocarbons project, scheduled for completion in 2018, will be supplied by feedstock from existing natural gas plants in Ras Laffan City. In line with Qatar’s stated goal to sustainably develop its vast natural gas resources. Qatar Petroleum has an 80 percent equity interest in the project, with Qatar Petrochemical Company (QAPCO) taking up the remaining 20 percent stake. The plant will produce various petrochemical products to be marketed primarily in high-growth markets across Asia, Africa and Latin America. QAPCO chairman Hamad Rashid Al Mohannadi said the project will “provide Qatar with the required solid foundation to extract optimal value from its abundant natural gas resources.”The

RISING LNG SPOT PRICES COULD BOOST QATARI COFFERS Qatar could cash in on the short-term liquefied natural gas (LNG) market later this year despite poor demand in the northern hemisphere at present, energy analysts have said. The northern hemisphere has been hit by a sustained period of below average temperatures in recent weeks. Stocks of LNG – which were running high for the time of year due to a mild start to the winter – rapidly depleted. “If the low temperatures continue, stocks will be reduced ahead of the summer season and buyers will be lured back into the market ahead of the expected rebound in demand in April,” ICIS Heren LNG analysts said in a report published in February. Qatar sells the majority of its LNG through long-term contracts, while excess production is sold cargoby-cargo on the spot market. It is the world’s largest LNG exporter, so stands to benefit from any rise in spot market prices.

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Country Focus

Aussie Rules Qatar has slipped below Australia’s investment and business radar for some time. But a recent ‘super’ business delegation from one of Australia’s most populated states and a new diplomatic interest has signalled a new awareness in what Qatar can offer the ‘Lucky Country’. Rachel Morris reports.

ith its lush rolling hills and farmland, the Australian state of Victoria is about as far away from the desert peninsula of Qatar that anyone can imagine. But the two small states have forged a new business relationship and an aggressive strategy is set to bear fruit in coming months. Last month a delegation of more than 100 Victorian businesses left the state’s capital Melbourne bound for the Middle East. First stop was Doha. It was the start of an Australian ‘Invasion’. Coming hot on the heels of the ‘Super Delegation’ was a visit in late February by a team from the business-oriented Australian Gulf Council, led by former Australian deputy prime minister Mark Vaile. Just days before the Victorian delegation, the northern state of Queensland’s special adviser on trade, Loftus Harris visited Doha in search of opportunities and partnerships. And, within two weeks of his appointment, new Australian Ambassador to the United

Arab Emirates (UAE) and Qatar, Pablo Kang, visited Doha to meet Australian companies and citizens living here, signalling a new diplomatic imperative. Australia has shied away from Qatar in recent years, preferring instead to focus on the UAE and other markets like Saudi Arabia for its goods and services. But the tide has turned and in January and it was announced that the Australian government was working with Qatar to set up their embassy in Canberra in 2012. It is fair to say Qatar and its great potential is well and truly on the radar of Australian governments and businesses. Leading the charge is the southern state of Victoria. Victoria is the bread basket of Australia and the largest food exporting state – it is home to more than 2000 food processing companies and produces goods valued at around AUD9 billion (QR35.2 billion) a year. Qatar, a country with very little in terms of local production, is an ideal market for companies. The Victorian delegation focused on food and beverage producers, events specialists and engineering and infrastructure – all areas that Qatar is keen for imports, business relationships and assistance. Leader of the Victorian delegation, Louise Asher, state minister for innovation, services and small business, says it is indicative of the growing interest in the region generally. “It’s the largest ever trade mission out of Australia,” Asher told TheEDGE. “It shows that people are on the lookout for investment opportunities. The fact that we are starting the mission in Qatar is sending a signal.“ Asher says the Victorian government is able to support companies in her state in a ‘structured’ way on trade missions, which ultimately benefit the economy’s bottom line. ”We are trying to embark on a fairly aggressive trade engagement programme,” says Asher. “What we are trying to do is a signal to these companies in that we are trying to assist them in markets where they might need assistance.” Currently Victoria’s trade with Qatar sits at AUD180 million (QR701.2 million) and with some of the state’s biggest names including the renowned Bega Cheese, Dairy Australia, Ararat Meat exports and engineering powerhouse SMEC taking part, the ante is set to be upped. This assistance for smaller companies involves assistance in setting up appointments and the all-important access to decision makers. “In terms of access in emerging markets (some companies) need a bit of support and assistance from the government and a state government is able to do that,” she says. “For a lot of small companies,

Victoria’s trade with Qatar is at QR701.2 million and with some of its biggest companies involved is set to grow further.

country focus

Qatar and its great potential is well and truly on the radar of Australian governments and the country’s businesses. our home markets aren’t large enough.” This point is echoed by John Butler, the commissioner for Victoria – Middle East and North Africa, Victorian Government Business Office, which has been established in Dubai for 15 years. Butler says the volume of interest expressed by Victorian companies to take part in the trade delegation was strong. “We work closely with a lot of these companies, they may have attended other trade missions to China and other markets. The response was overwhelming,” he says. Minister Asher said the companies taking part played to the strengths that Qatar is trying to develop in coming decades. “We have food and infrastructure businesses and one of the things that we are hoping to look at is that Australia has a range of events expertise,” she says. “And obviously not only do we hold them, we manufacture the seating, know how to run events because we know how to run big events like the Melbourne Cup and the (Australian Football League) Grand Final and the (Formula One) Grand Prix. “So given the FIFA World Cup there might be some opportunities for our business and also opportunities for Qatar to get tried and tested product.” Another area of expertise is the Meetings Incentive Conferences and Exhibitions (MICE) market, which Qatar is trying to develop to enhance tourism and diversify beyond oil and gas revenues. “MICE is something we’re actually quite good at. We’ve [the State of Victoria] written a significant amount of business in the MICE

market, around AUD200 million (QR770.9 million) in MICE events in recent months,” she says. “We’re happy to share that expertise.” In terms of Qatari investment in Australia, Qatar has already snapped up landholding in the fertile western districts of Victoria as part of the country’s long-term food security plans. “It’s a partnership developed with the owners,” John Butler says of the AUD35 million (QR136.3 million) purchase by Hassad Foods of 8000 hectares of sheep grazing and cropping land. Minister Asher says the Victorian government, led by the conservative Liberal Party, was actively seeking investment from countries like Qatar. Victoria has one of the world’s strongest and most resilient economies – larger than that of Singapore, Hong Kong, the Philippines or New Zealand “We’re after investment in Victoria. We need foreign capital in our state. So whatever we are interested. It is a two way street. Everything is up for discussion,” Asher says. FAST FACTS – VICTORIA Victorian food and beverage exports to the Middle East and North Africa (MENA) are worth around AUD760 million (QR2.8 billion) per annum. Approximately 100 Victorian food companies export directly to the MENA region, with many other products exported indirectly to the United Arab Emirates and other Gulf Cooperation Countries count. Victoria’s capital Melbourne was recently voted in Fortune magazine’s top 15 ‘best new cities to do business’. The city was praised for its strength in R&D in sectors such as Biotech as well as its availability of affordable industrial land and a world-class port. Victoria accounts for only three percent of Australia’s land mass, yet accounts for 25 percent of Australia’s population and 24 percent of Australia’s economic activity. Both Qatar Airways and Emirates Airline operate direct flights from the Middle East to Melbourne.

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OPINION

ARID NATION The Qatar water industry’s strategic plans

As water conservation and desalination is one of the most important aspects for the human and business development in the Middle East, Walid Oraby takes a look at what is being done in this area in Qatar at present and concludes the country’s water industry is setting a good example for the region.

ommunities around the world face an increasingly wide array of challenges with the demand for water increasing in parallel with the demographic pressure, urban growth, dwindling natural resources, increasing industrial activities and climate change, which are all upsetting the environmental balance and living conditions of people around the world. According to the Aquastat 2008 report, the Gulf is one of the most arid regions of the world, and has access to just one percent of the world’s freshwater supply coupled with five percent of the world’s population and the lowest rainfall – which presents an even bigger challenge. By 2020, the Gulf region’s water requirements are set to grow even further in the agricultural, domestic and industrial sectors. With that said, and as a result of a series of projects that are under way in Qatar, the country is facing no serious obstacles in meeting water demand in the foreseeable future, and already has plans in place to increase

OPINION

its desalination capacity. This is supported by the Qatar’s National Development Strategy, which will see billions invested in the private non-hydrocarbons sector, ensuring a steady stream of capital flowing into the critical infrastructure sectors over the next decade – including water. This presents huge opportunities for growth in the water industry. In both of the most recent conferences in Qatar, Projects Qatar 2012 and Water World Middle East Conference and Exhibition, the challenges that may face Qatar, as an example of rapidly growing cities, were highlighted and solutions discussed. Applying public private partnership models were among the solutions, where growth potential has been noted with organisations becoming more interested in the infrastructure industry in Qatar, especially in the water and wastewater treatment projects. According to Issa Hilal Al Kuwari, Qatar General Electricity and Water Corporation (Kahramaa) president’s statement on February 6, 2012 during the opening of the Power-Gen Middle East conference 2012, he mentioned that around 72 million imperial gallons per day (MIGD) will need to be added to the network by 2015 and between 2016 and 2020 and an additional 192 MIGD will be required. The Qatari government is keen to keep promoting investment opportunities to local and international firms to meet these ambitious goals. The government acknowledges and rewards industry expertise, which acts as a great motivation and driver for investors in further growth in Qatar. Following the trade events in Qatar, it was announced at the MEED Quality Awards for Projects 2012 that the Gulf Cooperation Council is investing US$1 trillion (QR364 trillion) worth of projects by 2020, which includes US$106 billion (QR385 billion) worth of projects in Qatar alone that have yet to be awarded. This is major investment, and goes to show the commitment of the governments of the region to improving and developing infrastructure and construction projects, and indeed the potential the region holds as a key hub of business, industry and trade. Such potential is providing new platforms for many companies to play a role in the strategic development of Qatar and this, coupled with major events that have taken place in Qatar, or will take place in the future, have positive implications for the infrastructure of the nation, which includes water and wastewater treatment projects. A good example of this would be the 2022 World Cup, where Metito seeks to contribute effectively to the construction works and facilities that are to be provided to serve an event of such international significance and interest. The same platform was extended to the iconic The Pearl-Qatar, the first in Qatar to be available for freehold ownership by foreign nationals. The-Pearl Qatar is managed by the United Development Company (UDC), Qatar’s largest private sector shareholding company, with a mission to identify and invest in long-term projects that contribute to the country’s growth. This is an important, ambitious and prestigious project, which clearly demonstrates the budding economy of the country, and the forward thinking strategy its leaders are following. For The Pearl-Qatar, Metito is completing an engineering, procurement and onstruction (EPC) project comprising a sea water reverse osmosis desalination plant of 35,000 cubic metres per day

Qatar can really be held up as a positive example in the region on how to tactically manage the water sector.

Qatar, says the author, is in many ways leading the region by example when it comes to desalination and other projects relating to water conservation. (Image Courtesy Metito).

product capacity, including marine sea water intake and reject outfall works, to supply water for district cooling, potable use and irrigation. Sea water from the Arabian Gulf with a capacity of more than 100,000 cubic metres per day and salinity (TDS) of 48,000 milligrams per litre (mg/l) is reduced to as low as 400 mg/l in a two stage RO membrane based treatment process complemented by pre-treatment and post treatment of water, all in full compliance with World Health Organisation as well as Qatar’s local water quality standards. Such projects are vital in arid landscapes, which suffer minimal rainfall, and the water industry can play a leading and sustainable role in Qatar’s plans for growth. Apart from what has already been commissioned, we do not envisage a major increase in water desalination output, as Qatar has been very successful with managing new capacity and bringing it on-stream to keep pace with growing demand. According to Business Monitor International desalinated water production is set to grow from nearly 80,000 million gallons in 2011 to over 100,000 million gallons by 2015, as a result of projects already under way, and this is actually relatively limited growth compared to other countries. Qatar can really be held up as a positive example in the region on how tactically managing a water sector through effective use of public private partnership models can ensure a steady hand is kept on a country’s water industry and its resources. Qatar is growing at a remarkable rate, but it has not lost sight of the implications that increased infrastructure will bring, and so it is positioning itself effectively for the future. For its part, Qatar’s state utility Kahramaa has to be among those applauded for its vision, intelligent investment and strong project capabilities.

Walid Oraby is the general manager of Metito Qatar and Bahrain. TheEDGE

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FINANCE & ECONOMICS

• Market Watch • Balance Sheet • Special Report • PERSONAL FINANCE • Economic barometer

Central Bank Watch (P.46)

Karim Nahkle takes a closer look at the precautions taken regionally and internationally by central banks to prevent another global financial system catastrophe.

ALSO IN THIS SECTION: • Market Watch: Asif Iqbal looks at how Qatar’s gross domestic product is expected to grow according to the IMF. (P.39) • Balance Sheet: Richard Kohinga explains how Qatar is not alone in investing billions of dollars in infrastructure. (P.40) • Special Report: Thomas Bacon writes that Qatar’s real estate sector is forecast to remain stable throughout 2012. (P.42) • Personal Finance: David Russell advises as to how to finance your property dream. (P.44)

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MARKET WATCH

Global MARKET WATCH by Dheeraj shahdadpuri

Growth cools down in China and India The latest set of global economic forecasts for the current year is pointing towards softening of growth rate, primarily on account of the two year old debt crisis of the 17 nation euro area that kept financial markets on the edge during the second half of last year. Many economists and analysts are of the view that the euro area might face a mild recession this year, on account of spending cuts implemented by a number of regional countries as a means to consolidate their respective fiscal balances. But, the European Central Bank’s recent non-standard measure of providing unlimited three year loans to regional banks at the benchmark interest rate of one percent has helped in avoiding a feared credit crunch, and has stabilised market sentiments, at least for now. Also, agreement over the early launch of a permanent rescue fund, European Stability Mechanism, which has an initial firepower of EUR500 billion (QR2.5 trillion) has contributed to the optimism. As a result of these positive developments, the bond yield of troubled regional countries has fallen from historic highs, and stock market indices world over have rebounded sharply (at the time of writing), which many believe is a classic case of a relief rally. Although recent signs of improvement are encouraging, outlook for the region in the foreseeable future will depend on the latest set of austerity measures required to be implemented by Greece to avail the next bailout package and the debt swap negotiations going around with private creditors that can bring down the debt of Greece to a more sustainable level. The United States (US) economy is showing signs of isolating itself from the euro area debt trouble. The fourth quarter Gross Domestic Product (GDP) reading, which came in at 2.8 percent (preliminary estimates) on account of increased consumer spending and inventory restocking, has helped in restoring global investors’ confidence in addition to the aforementioned progress made in the euro area to suppress fears of the bloc’s breakup. The recent jobs market report released by the Bureau of Labour Statistics, which revealed that a hefty 243,000 jobs were added in the month of January 2012 (highest since last April) and as a result of which the unemployment rate fell to a three year low of 8.3 percent, has raised hopes that the economy is heading in the right direction. The renewed economic strength being currently witnessed is in a stark contrast to elevated concerns of mid last year, when it was increasingly being believed that the US can trip back into recession, on account of spill over effects of the euro area debt crisis and intense political debate which was then taking place to raise the debt ceiling of the country, which a few perceive as unsustainable in the long run. However, based on the continued improvement witnessed in last couple of months, it is widely anticipated that the US economy may continue to tread in positive territory throughout the year; however a sharp rebound may remain elusive.

Many economists and analysts are of the view that the euro area might face a mild recession this year on account of spending cuts implemented by a number of the region’s countries.

COMMODITIES

CORNER

BY DHEERAJ SHAHDADPURI In line with the rebound seen in global equity markets, commodities space also witnessed increased buying support, on the back of renewed risk appetite, the gold price, which tumbled to levels near US$1550 (QR5642) towards the end of December has made a steady upward trend so far this year and is currently trading above US$1700 (QR6188). The price of the precious metal, however continues to trade well below its all time peak of US$ 1923.7 (QR7000) touched in September last year, as lately investment demand for the metal is increasingly being driven by the movement of the US dollar against the need for taking cover in a safe haven. The price of Brent crude oil on the other hand has also firmed-up on improved market sentiments besides being supported by Iran’s threat of blocking Strait of Hormuz, which can disrupt supplies of petroleum products from the energy rich Middle East region. The recent sharp uptrend in Brent price has once again widened the spread against its US counterpart to above US$15 (QR55) after having narrowed to US$7 (QR25), West Texas Intermediate continues to be plagued by logistics problems at the landlocked Cushing delivery point. Copper, which remained under selling pressure during last year on account of slowing global economic activity, has also witnessed continued buying support from investors so far this year. This is on account of the price of the metal, which has again surpassed the key psychological mark of US$ 8000 (QR29,120) per tonne, and looks to be on the upswing in 2012.

MARKET WATCH

IMF: Qatar growth to exceed MENA BY ASIF IQBAL The International Monetary Fund’s (IMF) latest report on Qatar forecasts robust economic performance over the medium term (2013-16). Qatar’s real gross domestic product (GDP) growth is expected to average 5.3 percent for that period, exceeding the regional and world levels. The IMF expects the non-hydrocarbon sector to be the main driver of growth, increasing by 9.6 percent on average during this four-year period. There will be little change in oil and gas production over this period, until the Barzan gas project comes on stream in 2016. According to QNB Capital, the strong growth in the non-hydrocarbon sector will be supported by high hydrocarbons prices. This is because strong hydrocarbons revenue tends to boost both government spending and private consumption, reinforcing economic activity in the non-hydrocarbon sector. Therefore, the recent strong growth in the hydrocarbons sector will trickle down to the non-hydrocarbons sector in the medium term. The oil price assumptions on which Qatar bases its budget tend to be considerably lower than prevailing oil prices. This suggests that unless there is a dramatic drop in oil prices below the conservative scenario assumptions, Qatar’s growth will continue to stay stable. The IMF is forecasting that there will be a 24 percent increase in the non-hydrocarbon component of government revenue over the period. This will take it to almost QR150 billion in 2016, when it will represent 56 percent of the total fiscal income. This is sizable increase on 2013, when it is forecast to be just 50 percent of the total. QNB Capital notes that investment income from Qatar’s foreign holdings is a major contributor to this growing non-hydrocarbon revenue. The government aims to fully finance the budget from its non-hydrocarbon revenues by 2020, providing a safety buffer in the event of hydrocarbon price shocks. The IMF’s medium term forecasts suggest that it will make good progress towards this objective. The IMF also forecasts average inflation of four to five percent during 2013 to 2016. Inflation has fallen in recent years-mainly due to an oversupply of property, which led to lower rental prices. Additionally, strong economic growth will drive domestic demand and hence prices, according to QNB Capital. The Qatari authorities acknowledged that the economy could face potential inflationary pressures over the medium term from three channels. Firstly, the expansionary effect of the Barzan gas project that will start in 2012 and be completed by 2015. Secondly, the implementation of major projects in the non-hydrocarbon sector. Thirdly, expansionary government expenditure, including recent salary increases for nationals. The former two channels pose little concern to the authorities, as they are growth generating. The impact of the public sector wage increase will depend on how much of the salary increase is spent rather than saved. Most of the inflationary pressure in 2013-16 will come from the non-tradable sector, notwithstanding the excess supply in real estate, which will keep rents depressed. Compared to the overall Middle East and North Africa (MENA) region and the world, Qatar’s inflation will be respectively below the average and above the average. The IMF’s overall economic outlook for Qatar is therefore positive, with strong growth, moderate inflation and fiscal surpluses, which will to continue in the medium term. Consequently, Qatar is going to outperform compared to regional and world averages. This will lead to real GDP growth in Qatar superior to the MENA region by an annual average of 0.6 percentage points and the advanced economies by an annual average of 2.6 percentage points The International Monetary Fund predicts the non-hydrocarbon sector will be the main during 2013-16, based on IMF forecasts. driver of Qatar’s future economic growth. (Image Corbis)

TheEDGE

BALANCE SHEET

The great global

infrastructure opportunity Qatar is not alone when it comes to investing billions of dollars in infrastructure. Richard Kohinga explains a recent survey by industry experts and some of the local implications.

he global need to redevelop roads, bridges, energy and residential infrastructure is at an all-time high, as major urban areas around the world strain to adequately support rapidly growing populations. For the world’s engineering and construction industry this is mostly a good news story, but not without its challenges. As resources are stretched and priorities determined, many businesses are going to find their efficiency and risk management processes put to the test. According to a recent global KPMG engineering and construction survey, companies are adapting quickly to meet the critical demand for new infrastructure. Towards the end of last year, KPMG conducted face-to-face interviews with 161 senior leaders – many of them chief executive officers – from leading engineering and construction companies in 27 countries around the world (including Qatar). Fifty-two percent of respondents were from Europe, the Middle East and Africa. The results were published last month in KPMG’s International’s Global Construction Survey 2012, The Great Global Infrastructure Opportunity. The report provides some valuable insights on the big issues and where the opportunities lie. The survey revealed that many industry players are global in reach, operate in multiple geographies and are working on projects mammoth in scale. Geno Armstrong, KPMG’s international sector leader, engineering and construction notes the implications of such complex operating environments. “With increased scale comes increased complexity, as global industry players navigate a tough political, commercial, regulatory and governance environment,” Armstrong says,

BALANCE SHEET

Respondents from Europe, Middle East and Africa (EMEA) see energy as their biggest revenue producers, while rail ranked second. “This will test their risk management ability to the maximum extent.” Risk Management Concern With projects anticipated to become more complex, maintaining margins and mitigating risk are major concerns for most respondents. Globally, 45 percent of respondents say that quantifying risks is the chief concern and nearly 50 percent want to understand the link between strategy and risk. “Despite considerable investment, risk management still comes up a bit short,” Armstrong says, “Our survey revealed that nearly 54 percent of respondents said they failed to identify upfront issues that later caused margin erosion and only 36 percent believe that their project review processes are very efficient.” Creating Efficiencies To mitigate risk, manage project complexity and effectively meet the anticipated increase in demand, companies are seeking solutions to address efficiencies in their procurement/supply chain. Nearly 60 percent of survey respondents say improvement in this area will improve profits and enhance cash flows. Almost 40 percent of respondents say the primary causes of inefficiencies in their supply chains were disparate processes and systems. Cost cutting, however, still remains a challenge for companies, with organisational culture seen to be the main culprit for implementing the cuts for 61 percent of respondents, and a surprising 17 percent of respondents globally said that cost reduction was not a priority at all. Survey respondents acknowledge that information technology (IT) optimisation is

critical to improving efficiencies, yet 50 percent say that overhauling IT systems takes too long and costs dearly. Others (30 percent) say that there are not enough available enterprise resource planning packages available that are tailored to the construction sector. “IT investment does not come cheap,” says Douglas Gates, principle, KPMG in the United States advisory practice. “Nevertheless those brave enough to fund major IT enhancements are now reaping the rewards of great centralisation and transparency across their supply chains.” Energy Sector Just over 40 percent of respondents globally anticipate that the energy sector offers the greatest opportunity for revenue in the next 12 months. Second behind energy were roads/ bridges tied with residential at 24 percent, followed by rail and mining. Respondents from Europe, Middle East and Africa (EMEA) see energy as their biggest revenue producers, while rail ranked second. “The demand for firms and individuals with sector-specific engineering and construction skills will rise as [power] projects proliferate around the globe,” says Peter Kiss, KPMG’s global head of power and utilities. “This should prove to be a major source of income for the industry as a whole.” While 49 percent of respondents expect their backlogs will grow from five percent to over 15 percent in the next year, 71 percent of respondents cite economic uncertainty as their biggest ongoing concern, followed by a skills shortage (31 percent) and thirdly, government deficits (30 percent). Sixty-two percent said that they expect margins on current bids to remain unchanged from their current backlog. Fifty-seven percent

said their revenues in 2011 increased from 2010, with the Asia Pacific region seeing the greatest growth (72 percent) followed by EMEA (53 percent) and then, the Americas (41 percent). Investment Barriers What respondents say may be the primary barriers to public-private partnerships in infrastructure investment is a perceived lack of policies, leadership and investment by the public sector, as well as a lack of initiative in the private sector. Less than half (47 percent) of respondents believe government policies will have a positive impact on investment, which is roughly equal across all three regions, with Asia Pacific being the most positive (49 percent) followed by EMEA (47 percent) and the Americas (41 percent). Moreover, respondents showed concern about the public sector’s ability to drive infrastructure investment, with 80 percent of respondents globally saying that lack of leadership will hamper investment. And while respondents globally anticipate that energy (34 percent) followed by transportation (33 percent) will likely attract the most private sector investment for their companies, two-thirds see a lack of private sector initiative as another barrier to investment. Fifty-six percent of the American respondents see transportation as having the biggest appeal for investment. “With austerity policies in many countries constraining the scope for public sector spending, it is vital to create an environment that encourages private sector investment,” says Armstrong. Commenting further on infrastructure investment, Nick Chism, KPMG global head of infrastructure says, “As governments around the world seek to create 21st century infrastructure, they need to create an environment that encourages private sector investment. This means addressing regulatory and legislative barriers and showing the kind of long-term will that transcends immediate political popularity.” Richard Kohinga is the director and head of markets, for KPMG in Qatar TheEDGE

SPECIAL REPORT

Property

Projections By Thomas Bacon

or Qatar’s 2012 real estate sector, the situation is expected to be much the same as the preceding 12 months, with most forecasts projecting a year of steady progress, though there are concerns that oversupply in some segments could keep prices down in the short term, as the flow of new developments more than matches current demand. A recent report by property consultancy Asteco said that while rents for residential properties had been broadly stable in the last quarter of 2011, there had been a healthy increase in the number of transactions and enquiries, a trend expected to continue into the new year. There had also been a rise in the number of sales in prime locations such as The Pearl-Qatar in the fourth quarter of the year, a move the Asteco report said indicated a return of investor confidence. The improvement in the market could be given further impetus if contracts for major developments, in particular those for the country’s rail network, sporting stadiums and associated construction projects were awarded, said the report, which was issued on January 14. Though the completion of new projects will continue to add stock to the market, with supply set to outstrip demand, Asteco does see the sector reaching sustainable growth levels by the end of the year, Jed Wolfe, Asteco Qatar’s managing director, told Oxford Business Group (OBG). “The ever increasing amount of international companies coming to Qatar is having a positive effect on the real estate market,” Wolfe said. “Due diligence and research are being prioritised in order for efficiency and operational costs to reach sustainable levels.” The somewhat subdued level of activity in the real estate sector last year is reflected in recent data issued by the Qatar Statistics Authority (QSA), which showed that while the 2011 consumer price index (CPI) rose by 2.1 percent, the rent and utility component of the index eased by 5.6 percent over the 12-month period. This could change though, according to a report from QNB Capital, carried by the Gulf Times on January 16, which said the housing CPI was tipped to grow by 1.4 percent across 2012, as the country’s expanding population – especially due to inflow from overseas – would heat up demand. Property sales may be given a boost by the higher levels of credit expected to flow into the marketplace this year, with Qatari banks having ample liquidity and increases in disposable income, meaning buyers could be drawn towards the real estate sector in greater numbers. A study conducted by Saudi-based Samba Financial in early January predicts that domestic credit growth in Qatar could hit 20 percent this year, well clear of any other Gulf state.

TheEDGE

However, one challenge in this regard is the country’s mortgage law, which allows retail borrowers (as well as commercial borrowers) to borrow up to 70 percent of the value of a property. “There needs to be a distinction and a change in policy between retail and commercial mortgages,” Arron Browne, the managing director of LS:RES, the residential sales division of LS: Keep Moving, a local property firm, told OBG. “Retail mortgages are very unfavourable at the moment and are holding back the real estate sector.” Though there are some concerns that Qatar could see a glut in the property market with a large number of prestige residential and commercial developments set to be rolled out in the coming year or so, it is unlikely the country will see a major drop-off in activity. “It is important to control growth in the state’s real estate sector so as not to create a bubble,” Steven Humphrey, the director of Davis Langdon, an AECOM Company, a global construction consultant, told OBG. “However, the risk is low as the money being invested is real and not speculative which should account for real growth.” Most analysts see any supply side excess in the real estate market as a temporary situation, one that is likely to balance out by the end of this year. As such, investors may be looking at moving into property ahead of the expected rebound gaining momentum, seeking out quality before the next cycle of high demand and higher prices kicks in. Thomas Bacon is an analyst at Oxford Business Group.

PERSONAL FINANCE

Financing your property

dream For expatriates carving out careers in Qatar, investing in one of the spectacular luxury developments on offer is a tempting option. But in the current economic climate, careful thought should be given as to how best to finance your venture, explains David Russell

nvesting in the Qatar property market has been an option since 2004, when the government opened up the market to foreign buyers. The move saw three main designated areas allocated to foreigners looking to buy freehold property, Doha-based The Pearl-Qatar, right next to The Pearl district, West Bay Lagoon plus outof-town historic Al Khor City, whose name means ‘sea on three sides’. Elsewhere, there are nearly 20 leasehold areas where foreigners can also buy property. However since the credit crunch of 2008, Qatar’s local property market – like everywhere else – has taken a knock. A glut of unsold property built during the boom period means prices have come down. So expatriate investors who will at some stage look to move away from Qatar should keep a weather eye on the secondary and tertiary buyers’ market. If there is a surplus of property when prices are low, careful thought needs to be given as to who you will sell to when the time comes to move on? So while making an investment in property can still makes sense – particularly as part of a diversified portfolio – buyers need to look ahead when assessing the long term value of such an asset, and make sure their mortgage offers the right kind of protection if circumstances change. Determined buyers have a number of local formalities to put in place before they

can go knocking on the door of lenders for a mortgage. Borrowers must provide proof of their financial ability to repay a loan. Financial circumstances will be investigated, as will the terms of your employment contract and residence permits. This kind of attention to detail is routine and should not prove a problem if you can prove the ability to afford the repayments long term. So, having amassed your documents and secured an agreement in principle on the desired property, what type of mortgage is available for an expatriate living in Qatar? BANK LOANS Starting with the local market, expatriates have been able to secure a mortgage for a local property purchase for the past seven years. Commercial Bank provides mortgages to resident expatriates and to non-residents buying in the designated areas. The bank promises a more personal service for those who visit the bank, where a manager will explain the bank’s mortgage policy as well as the process of buying real estate in Qatar. Doha Bank also provides home loan facilities to foreigners. Features of a typical mortgage include a repayment period up to 20 years, insurance cover, loans on new or existing properties and what the bank promises are “highly competitive interest rates”.

Shari’ah mortgages are widely available. Ahli United Bank explains that in the case of home finance, Murabaha is the most common form of financing by Islamic banks in the Middle East. With a Murabaha arrangement, the sale of the property by the bank to the client must take place after the bank has purchased it and is in possession of the property. This is because Murabaha involves two separate transactions – the bank first owns the property, then sells it to the client. When the bank sells the selected property to the buyer it does so with a profit mark-up. The buyer then pays this amount to the bank in the form of monthly payments over a fixed period of time. Ahli United Bank looks for a deposit of between 17 to 25 percent of the value of the property as well as proven residential status of the applicant. The payment term is a minimum of five years and maximum of 15 years. For some, the more familiar name of HSBC has a local presence in Qatar and offers local mortgages. You will need a minimum salary of QAR20,000 for a loan to value (LTV) offer of up to 65 percent for a maximum repayment term of 15 years. The LTV offer on constructed properties is 65 percent. A property under construction reduces to a 60 percent LTV and 50 percent for apartments. HSBC says its rates are “competitive” and available on application. Given that expatriates cannot always predict how long they will remain in any one location – unexpected job loss, family circumstance, promotion are all reasons why expatriates unexpectedly leave a country – many turn to the international mortgage providers because of inherent flexibility on portability, currency denomination and other terms and conditions that are structured with an expatriate’s needs in mind. Many expatriates secure peace of mind with an international mortgage that is based in one of the offshore finance centres such as Jersey, Guernsey and the Isle of Man. Such centres offer a well-regulated environment providing a number of sophisticated options for property loans with enough intrinsic flexibility to match an expatriate’s itinerant lifestyle. There are not that many international lenders advertising loans for Qataribased property. Engaging the services of

PERSONAL FINANCE

Expatriate investors who will at some stage look to move away from Qatar should keep a weather eye on the secondary and tertiary buyers’ market. professional, well-regulated international mortgage broker would cut down much of the leg-work in finding a lender, as well as enable you to find a bespoke mortgage offer tailored to your particular needs and suitability viz length of the loan and currency denomination – which is an area expatriates need to pay attention to. In almost all cases, the currency you borrow should link to the income stream from which you will be financing the loan. The Qatari riyal is linked to the United States (US) dollar, so if your income is part derived in a third currency – say sterling or euro – then you will need to bear in mind that the fortunes of the US dollar to your income currency will in all probability be your greatest element of risk, unless your actual loan repayments tie into sterling or euro. If your income is predominantly paid in the local currency, then taking out a local currency loan makes a lot of sense. However, you will want to check with the lender on the portability of such a loan and whether there is scope to switch the currency denomination. Keeping your feet on the ground is hard with such tempting properties on offer, but a firm hold of your mortgage options will make sure you do not hit a brick wall.

David Russell is the chief executive officer of Guardian Wealth Management LLC, Doha, Qatar. TheEDGE

ECONOMIC BAROMETER

CENTRAL BANK WATCH

The world’s major central banks announced concerted emergency measures to underpin fragile eurozone banks and prevent the global financial system from freezing up. Karim Nakhle looks at the measures being taken internationally and regionally to prevent another global meltdown.

conomists have said repeatedly that the European Central Bank (ECB) is not the solution to the eurozone’s sovereign debt crisis, and have questioned whether it can even serve as a bridge to a fiscal agreement,

given the financing needs of troubled eurozone sovereigns and the legal constraints on ECB primary market bond purchases. In addition to, and perhaps because of, these challenges, the ECB leadership has rather steadfastly ruled out a lender-of-last-

resort operation to the eurozone periphery. But as that crisis has carried over to the European banking system, the ECB has been more willing and able to take an activist role. In perpetuation of the trend, a liquidity crunch is gripping the European banking system, as banks with relatively healthy balance sheets continue to hoard excess reserves at the ECB rather than lend on the interbank market. The ECB is still struggling to reverse the flow with conventional openmarket operations, even as more banks bid on liquidity providing tenders, particularly those at longer maturities. Back in December, when the eurozone crisis was at its peak, the ECB, joined some of the world’s major central banks (The Federal Reserve, The Bank of Canada, the Bank of England, and the Bank of Japan) in a coordinated action to inject liquidity into the global financial system, as the eurozone’s financial crisis threatened to squeeze credit worldwide. Given a scenario of a still-elevated risk of United States (US) recession, more quantitative easing is anticipated in 2012. It is expect that a weakening in US growth in H1 2012, due to greater fiscal drag and the fallout from the eurozone crisis and global slowdown will drive the Fed to additional accommodation, likely by mid-2012, and the Fed will usher in changes to its communication policy early in 2012. Meanwhile, any rise in the risk of a destabilising financial shock from the eurozone could push the Fed toward aggressive unconventional easing sooner than expected. In reality, the Fed needs to climb up the unconventional ladder (via purchases of assets other than Treasuries) to keep policy effective. Over the past decades, the growing weight of emerging market economies has triggered some important structural shifts in the global economy. In terms of the real economy and global finance, the world has moved towards more multi popularity as emerging market

ECONOMIC BAROMETER

economies gradually attain greater importance in global trade, global finance and global policy dialogue. Therefore, emerging market economies, including the Middle Eastern countries are moving full steam ahead with new fiscal policies, to mitigate risk and limit the damage of a new global crisis. Emerging Markets Emerging European central banks continue to face the difficult trade-off between growth concerns and financial stability, given their economies’ close linkages to the eurozone banking system. The Hungarian central bank (MNB) is perhaps in the toughest position given the country’s external debt position, persistent pressure on the currency and a recent sovereign rating downgrade to junk status. It raised its policy rate by 50 bps in November as part of an 150-bps rate hike cycle (expected by RGE) through the end of Q1, making it one of the few central banks in the world raising rates these days, and by far the most aggressive. Despite the risks to growth, we expect the MNB to retain a hawkish stance as it waits for an IMF loan programme to be put in place. The Central Bank of Turkey (CBT) has embraced a similar

The influence of central banks on the markets can be seen from this image of a specialist talking on the phone on the trading floor of the German Stock Exchange beneath the display board with the Dax curve in late 2011. The European Central Bank, the US Federal Reserve and other important central banks intervened with a coordinated action into the money market and the DAX closed higher due to the action. (Image Corbis)

Qatar’s Central Bank chief warned of fallout from Europe’s debt crisis, stating that the debt crisis crippling countries in the eurozone will have an indirect impact on the GCC financial sector. policy stance: despite an ostensibly loose policy rate, the CBT has used other monetary tools – including the overnight lending rate – to raise bank funding costs and defend the currency, which will continue to come under pressure if eurozone troubles perpetuate risk aversion. While we do not discount the possibility of some policy reversal late next year, the National Bank of Poland (NBP) is the only regional central bank poised for loosening in the near term. Eurosystem and GCC In an unprecedented move, to ease the fear of Arab investors, comfort large sovereign wealth funds, and to foster the relationships between their institutions, the Eurosystem – comprising the ECB and the 17 national central banks of the euro area – and the central banks and monetary agencies of member states of the Gulf Cooperation Council (GCC) held a high-level seminar in Abu Dhabi recently. The main issues addressed at the seminar pertained to current economic, financial and fiscal challenges in the euro area, systemic risk analysis and the prevention of financial crises, and to topical issues concerning the international monetary and financial architecture. The euro area’s experience contains important lessons for the GCC’s monetary integration process. The seminar discussions focused on three topics, current economic, financial and fiscal challenges in the euro area, stressing the importance of fiscal discipline, competitiveness and economic policies for member states of a monetary union, in addition to effective supranational mechanisms for surveillance, enforcement

of rules as well as crisis management. While some euro area countries were facing severe challenges, on aggregate the euro area’s fiscal accounts were stronger than those of other major advanced economies. Another topic on the agenda was systemic risk analysis and the prevention of financial crises, where the key lesson learnt from the global financial crisis was the need for a macro-prudential approach to the financial sector by making the financial systems more resilient. Tools to identify and assess systemic risks and policy frameworks for macroprudential supervision where introduced to the GCC bank leaders. Last but not least, international monetary and financial architecture was also a key topic, where participants noted that the shift towards multi popularity is far less pronounced in international currency usage, given that emerging market currencies so far play only a limited global role. Also highlighted was the policy challenges related to global imbalances, international capital flows and global governance Qatar Central Bank The Qatar Central Bank (QCB) chief warned of fallout from Europe’s debt crisis, stating that the debt crisis crippling countries in the eurozone will have an indirect impact on the GCC financial sector. Addressing a symposium organised by the Qatar Financial Center Regulatory Authority (QFCRA) on financial risk management in the GCC in response to the global financial crisis, QCB governor HE Sheikh Abdullah bin Saud Al Thani said the policies of GCC were aimed at guaranteeing TheEDGE

ECONOMiC BAROMETER

The Qatar Central Bank has stressed the importance of raising awareness about risk management and the significance of inspiring confidence in the financial sector, which it says can be achieved by effective regulations and periodical analysis of the markets.

the sectors stability and boosting confidence in the market; these policies succeeded in encouraging investors and revitalising the markets. However, the road is still long for the financial institutions to reach the pre2008 investor confidence level. QCB has stressed the importance of raising awareness about risk management and the significance of inspiring confidence in the financial sector. This can be achieved by effective regulations and periodic analysis of the markets. Accordingly, the QCB launched a couple of initiatives recently, such as the Qatar Credit Information Center (QCIC), with the objective of enhancing transparency and regulating the market more efficiently, and has established the risk management authority, tasked with studying systemic risks and recommending policies to counter them. As a result, risk management has now become a high priority for the banks and other financial institutions in the country. UAE CENTRAL BANK Monetary conditions in the United Arab Emirates (UAE) were marked in 2011 by a sustained low level of inflation, moderate expansion in money supply and a tangible rise in the central bank’s foreign assets. Looking forward, the central bank of the UAE will remain focused on managing liquidity, and would be turning its attention to controlling inflation only if inflationary

TheEDGE

pressures re-emerged in the event of fast output expansion. Measured by total assets of operating banks, banking activity grew by a moderate 4.2 perent during the first 11 months of 2011, with lending activity posting a mild recovery from relatively stagnating volumes in the immediate post-crisis period. The US$11.8 billion (QR59 billion) progression in lending volumes is mostly tied to public sector related loans while private lending is still suffering from corporate deleveraging. With a growing fiscal-driven global distress creating pressures on bank operating conditions, UAE banks benefit from higher capitalisation, more stable funding resources, more liquid assets and less reliance on foreign funding than at the onset of the previous crisis episodes. SAUDI ARABIA’S CENTRAL BANK Saudi Arabia has played an important role in stabilising the oil market and supporting the global economy. This constructive global and regional engagement reflects Saudi Arabia’s role as a leader in not only the oil market but also the region and the global economy. The balance sheets of Saudi commercial banks are very strong, with only very limited exposure to Europe. Saudi Arabia ensures its banks are well regulated, and are complying with Basel II, and also already complying in

most of the bank ratios of liquidity and capital adequacy of Basel III. The central bank has preserved financial stability in the wake of global economic crisis and implemented reforms, in addition to maintaining strong economic policies and government oversight of the financial sector, mitigating the effects of the global financial crisis on the Saudi economy. The country has made significant progress in social development and is now close to the G20 average for most indicators. Access to housing and job creation is still a challenge, but is being handled closely. Saudi Arabia, the world’s largest exporter of crude oil, saw a record budget surplus in 2011 of more than US$81 billion (QR295 billion) on the back of high prices on the world market. CENTRAL BANK OF EGYPT Despite inflation at a four-year low and the economy stalling, the CBE hiked rates by 100 bps to lessen pressure on Egypt’s reserves. Inflation bottomed out at seven percent y/y in October 2011, but sequential increases in the monthly inflation rate and the lagged effect of FX depreciation will take inflation back to double digits. The CBE should hike rates again in H1 2012 by another 50-100 bps, to prevent further dollarisation and capital flight. If domestic conditions deteriorate further, we could see even more hikes in 2012, adding to financing pressures and cutting into domestic demand. The International Monetary Fund (IMF) is seeking more than double its war chest by raising US$600 billion (QR3 trillion) in new resources to help countries deal with the fallout of the eurozone debt crisis. With huge foreign exchange reserves, the Gulf’s Arab oil exporters might be expected to contribute to any multilateral effort to strengthen the IMF. The role of the GCC central banks is to continue prudent macro measures to make sure the banks continue to be well regulated and follow all required rules, as well as serving their purpose in the economy, hoping that this will keep the region immune and safely steering away from a new global crisis.

IN THE SPOTLIGHT

TROUBLED WATERS

Gulf shipping in 2012: Piracy, Protection, Iran and the UN A secure exporting shipping industry is vital to trade and commerce in the Arabian Gulf, but with piracy and nuclear geopolitics on the very shores of the Gulf Cooperation Council states, this year will be anything but plain sailing, as Edward Jameson finds out.

IN THE SPOTLIGHT

n Saturday 21 May 2011, five small motorboats each carrying five crew approached a container ship as it sliced through the sun-splashed waters 30 kilometres south of Rase Jack, Iran. Two of the skiffs approached to within just 10 metres of the large ship – unusually close even for a small boat – while the remaining three skiffs maintained their distance. As the picture unfolded before the container crew, they realised with alarm that those aboard the small boats were toting rocket-propelled grade launchers. The container crew prepared to go “into citadel”, a stronghold on ships into which people retreat for shelter from battle. The waters on the doorstep of the Arabian Gulf, and mere kilometres from Iran, were thought to be safe from piracy... For four years up to and including 2010, the globe’s maritime authorities watched with dismay as acts of piracy off the coast

Shipping companies, including those based in the Gulf, have turned to private security to protect their interests. of East Africa increased in frequency, particularly off Somalia, despite the best efforts of the international community to stamp out the scourge. At the time of writing in February 2012, almost a year after the container ship incident off Rase Jack, Iran, nine vessels and 151 crew were being held in waters off Somalia, according to the International Maritime Bureau (IMB), a branch of the International Chambers of Commerce. According to a study published by the United States (US)-based One Earth Future Foundation (OEFF), Somali piracy cost the global economy US$7 billion (QR25 billion)

Ironically, though there has been increased activity from Somali pirates in the region of late, the increased activity of Iran’s naval war games and exercises in the Arabian Gulf might thwart their activity around the Strait of Hormuz and into the gulf itself – although of course Iran’s so-called “sabre rattling” brings with it a host of potentially more grievous security issues. (Image Corbis)

last year. Factors that contributed to this immense figure included ransom payouts totalling around QR580 million, insurance totalling QR2.3 billion, and the cost of hiring private armed security teams, which totalled as much as QR4.2 billion. Partly as a result of this immense spend, along with the actions of the globe’s naval forces and preventative measures taken by the ships themselves, acts of piracy appeared to level out last year. In 2011, the incident off the coast of Iran was one of 439 attacks worldwide, down marginally from 445 in 2010. The 439 attacks in 2011 resulted in 45 hijackings, also down from 49 in 2010. The picture in Somalia, however, which alone accounted for roughly 54 percent of global attacks, is somewhat different. In 2011, there were 237 attacks in Somali waters, up from 219 in 2010. But despite this the number of hijackings plummeted, from 49 in 2010 to 28 in 2011. “Navies have been very proactive. From September 2011 they went after suspected mother ships,” IMB director Pottengal Mukundan tells TheEDGE. “By attacking the motherships, along with all the weapons and equipment that the mother-ships carry, the navies force them back to Somalia to replenish, and thus prevent a number of hijackings.” According to an IMB statement, the overall figures for Somali piracy “could have been much higher if it were not for the continued efforts of international naval forces”. In the last quarter of 2011 alone, pre-emptive strikes by international navies disrupted at least 20 pirate groups before they could become a threat to commercial fleets, the IMB says. The last quarter of 2010, it adds, saw 90 incidents and 19 vessels hijacked. In 2011, those numbers fell to 31 and four respectively. TheEDGE

IN THE SPOTLIGHT

Despite the number of Somali pirate attacks remaining steady, the incidents themselves have increased in ferocity and magnitude. A WORRYING TREND ...As the crew of the container ship off Iran prepared to go into citadel, the smaller skiffs surrounded the large boat on both sides and continued their pursuit at a speed of 21 knots, or 36 kilometres per hour. The larger vessel increased speed and conducted evasive manoeuvres as the crew of the bridge frantically contacted the Iranian authorities and sent distress messages. But before the container crew were forced into their stronghold, just 180 kilometres east of the Arabian Gulf, an Iranian warship responded to the distress signal and forced the skiffs to flee. It was the closest that piracy came to the Arabian Gulf in 2011. Not everybody, however, has been as fortunate as the crew of the container ship were. In addition to the 151 crew held in Somali waters at the time of writing, 49 crewmembers were being held hostage on land in Somalia. “This complicates the issue,” Mukundan says. “The crew are away from the vessel, nobody has any idea where they are being held or who by, and you do not know who to talk to in order to get the crew back. The moment you take these people ashore you have a completely different dynamic.” This, Mukundan says, is a “worrying factor” that has only emerged in recent years. Despite the number of attacks remaining steady, the incidents themselves have increased in ferocity and magnitude. In some cases, vessels have been held for more than a year while in others, crew have been retained as hostages even after ransoms have been paid. According to the OEFF, last year 1118 seafarers were held hostage around the world – and 24 of them died. Not content with relying on the countering

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actions of navies, shipping companies including those based in the Gulf, have turned to private security to protect their interests. “There is no doubt this prevented a number of hijackings last year,” Mukundan says. But he calls it a “grey legal area”. There are unanswered questions regarding who takes command should the armed team start firing upon the pirates. Who gives the instruction to fire? “Is it the captain, or is it the armed team’s leader?” Mukundan says. Despite the alarming proximity of last May’s incident to the Arabian Gulf, piracy is yet to spread west of the Strait of Hormuz. “It is a psychological barrier for the pirates,” Mukundan says. “For them to go into the Arabian Gulf means that they have to go through the Strait of Hormuz, and the ship still has got to come back out and into Somalia. They do not want to take that step.” In reflecting the spirit of international cooperation that has characterised the

globe’s fight back against Somali piracy, the actions of the Iranian navy in protecting the container ship last May contrast sharply with the political situation unfolding today in the Strait of Hormuz. IRAN AND HORMUZ The piracy issue is of the utmost concern to the Gulf shipping industry, but it is far from the only challenge on the horizon. The ever changing game of cat-and-mouse between the West and Iran, and the latter’s continued threats to close the strait, bring with them a threat not just to the regional shipping industry, but to the world as a whole. As reported in TheEDGE last month, the Strait of Hormuz hosts 40 percent of the world’s oil tankers and is vital to global energy supply. Qatar, Saudi Arabia, United Arab Emirates (UAE), Kuwait and Bahrain export the vast majority of their oil and gas through the Strait of Hormuz. At the time of writing Iran was again preparing to gather its forces to conduct another naval exercise in the Strait – the seventh in a series dating back to 2006. The country must inject its escalating threats to close the Strait of Hormuz with sufficient credence if it is to stave off a military attack over the dangerous issue of its nuclear ambitions. At the end of January 2011 a Kuwaiti maritime official revealed that Gulf Cooperation Council naval forces had

Somalian pirates, suspected of attacking the container ship Taipan off the Somalian coast on Easter Monday 2010, and their lawyers sit in a courtroom of the Hamburg district court before the start of the hearing in Hamburg, Germany, in January 2012. International naval forces from Germany, US, United Kingdom and China have all been involved in catching Somali pirates and releasing captured hostages in recent years. (Image Corbis)

IN THE SPOTLIGHT

“contingency plans” should Iran attempt to close the strait. Even the very right to transit through the strait itself is a complex legal matter, the waters of which have been further muddied by Iran. The nation is signatory to the 1982 United Nations Convention on the Law of the Sea, which states that “all ships and aircraft enjoy the right of transit passage, which shall not be impeded”. However, according to international commercial law firm McNair Chambers, Iran has signed “but not ratified the convention; therefore some argue that the convention is of questionable force in the Strait of Hormuz”. What happens next is heavily dependent on political developments, McNair Chambers pointed out in a summary of the situation at the end of January. It also pointed out that unilateral blocking of the strait at its narrowest point would require Iran to impinge on Omani waters off the coast of Musandam. The continued volatility and the spectrum of threats to the Gulf shipping industry are symptoms of a range of regional development issues: some economic, some political and some arguably social. Somalia is a country that since 1991 has been ripped apart by civil war. There is no central government control over the vast majority of the landmass, no rule of law, no democratic rights. It is officially recognised as a failed state. Piracy, along with a share of the potential multi-million dollar ransom payout, is seen as a legitimate way out by a people who are largely cast as illegitimate (see box). Iran, on the other hand, is no failed state. Its rulers claim to view what they insist is a peaceful nuclear programme as a rightful step towards redressing the balance of power between the Middle East and the West. It is a defining characteristic of global security today that, caught in the middle of all this, is perhaps the world’s most important shipping channel, a vital artery that keeps the heart of the Gulf ticking. A healthy maritime industry is a precursor of Qatar’s – and the wider Gulf’s – development, long-term economic diversification, and long-term prosperity.

ANARCHY IN SOMALIA In the failed state of Somalia, one of the poorest countries on Earth, there is no rule of law. Localised forms of conflict resolution have been the norm in many parts of the country since the collapse of the last central government in 1991. It is widely recognised as one of the harshest, most violent states on the planet. With more miles of coastline than any other African country, it also boasts a rich maritime tradition. It seems regrettably inevitable, therefore, that with multi-million dollar cargoes passing within a few hundred miles of the shore, a smattering of desperate people will turn to desperate measures in desperate times. Piracy is a heinous, violent crime, yet the scourge can never be stamped out through guns and firepower alone. For progress to be made, Somalia’s failed-state status must be addressed from an economic and social angle. A groundbreaking study published in January by United Kingdom-based think tank Chatham House seeks to take an initial step in doing just that. The report’s author, Dr Anja Shortland, says

that piracy has had a positive impact on local economies and therefore “a military strategy to eradicate piracy could seriously undermine local development”. Using satellite imagery the study demonstrates how pirates appear to be investing money principally in Garowe and Bosasso, two large cities in the north of the country, rather than in the coastal communities where pirate activity takes place. “Piracy appears to lead to widespread economic development and therefore has a large interest group behind its continuation. However, most beneficiaries are located in the provincial capitals,” Shortland says. “The international community should bear these results in mind when developing land-based strategies to resolve Somalia’s pirate problem.” A land-based solution might involve replacing piracy as a source of income to relevant local communities. However, it is unclear where the beneficiaries from piracy are located, whether revenue from pirate activity is mostly channelled abroad or used domestically and how widely the benefits are spread.

MV Sirius star is one of the more high profile Gulf owned crude carriers (Vela is a Saudi-owned company based in the UAE) to be captured by Somali pirates, which occurred off the coast of Kenya in 2008, only to be released in 2009 for a ransom of US$3 million (QR 1 billion). (Image Getty Images)

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QATAR’S ‘ENTREPRENeuRIAL ECOSYSTEM’

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At present there is much attention being paid to small and medium enterprises (SMEs), entrepreneurship and ‘start-ups’ in Qatar. But just how real is the momentum in the entrepreneurial movement in the country? Is there any genuine and tangible progress really being made to facilitate small start-ups and assist local entrepreneurs, many of whom still face many obstacles in getting their business ideas up and running? Speaking to a number of key players and some small business owners in recent months, TheEDGE takes a contemporary snapshot of this market space. By Miles Masterson, with reporting by Erika Widén ENTER ENTERPRISE QATAR It is one of the aims of the Qatar 2030 National Vision to engender a positive environment in which innovative small independent businesses can thrive Set up in 2008, Enterprise Qatar’s (EQ) founding aims were to examine similar endeavours regionally and overseas, evaluate the SME space in Qatar, and come up with plans to facilitate solutions and manage all concerned towards this common goal. In early 2011, EQ launched its SME Evolution Programme, a free web-based training programme for small and medium enterprises and hosted workshops. The same year, in conjunction with a number of educational institutions, the Supreme Council of Information and Communications Techmology (ictQatar), the Qatari Businessmen Association (QBA) and Qatar Development Bank (QDB), EQ launched the Al Fikra Business Plan Competition. This was aimed at both students and professionals alike, the winners receiving QR200,000. By all accounts this was a resounding success, so much so that the 2012 version, sponsored by Exxon Mobil and in partnership with KPMG, was recently launched. This year EQ also launched the Ernst & Young Entrepreneur of the Year (EOY) 2011 Award. A 25-year-old worldwide event held in 140 cities across 50 countries, this is the first time EOY has come to the Middle East. STARTING WITH BEDAYA The Bedaya Center, a 50/50 joint partnership between Silatech and Qatar

Development Bank (QDB), was launched in August 2011. Bedaya has its headquarters, replete with computers, Wi-fi and an expert staff of consultants, located in Katara Cultural Village in Doha. The colourful set up was designed, built and is serviced by Qatari startups, reflecting Bedaya’s aim to promote and assist young local entrepreneurs. In November 2011 Bedaya held its first major event, ‘Celebrating Qatar’s Young Entrepreneurs’, in partnership with Qatar Science and Technology Park (QSTP) during Global Entrepreneurship Week. Here young people were able to meet, network with and learn from some of Qatar’s most successful established entrepreneurs.

Elaine Gold is an experienced independent consultant and businesswoman, with a background in entrepreneurship mentoring programmes in the United Kingdom. Saleh Al Khulaifi, Bedaya’s manager, is a young Qatari who joined the Bedaya Center in November with a Master of Science in Technology Entrepreneurship. The newest member of the team is Stephen Brannon from the United States, incoming communications director at Silatech. Silatech had been considering such a project promoting entrepreneurship from early 2011, Al Khulaifi reveals, in conjunction with Qatar Development Bank, who also have a vision to develop entrepreneurship

Saleh Al Khulaifi assists budding young Qatar entrepreneurs at the Bedaya Center in Katara, Doha. Opened in August 2011 the centre, which is a join intitiave between Silatech and Qatar Development Bank features computers, Wi-fi and on-site professional advice, aims to contribute to the local enterpreneurial ecosystem and foster a spirit of entrepreneurism in Qatar.

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opportunities for youth in Qatar. “Bedaya is there so we don’t duplicate those efforts and manage things jointly between Silatech and QDB,” he says. “’Bedaya’ in Arabic means ‘start,’” explains Al Khulaifi. “We want Bedaya to be the start for youth in Qatar, focusing on the ages of 16-30. Our end goal in each is to aid a young person to have confidence in the career choice that they have made and to have a brandable or an employable CV. And on the other hand, we also want to encourage entrepreneurs who have a bankable business plan.” “We want to see entrepreneurs or aspiring entrepreneurs coming to us at every stage,” Gold adds, “from young people who would like to start a business at some part of their lives, to young entrepreneurs who already have a business up and running, looking for more funding to go to the next stage, along with more detailed business and legal advice. So whilst we will never be a training organisation ourselves, we are signposting and partnering with the best.” Bedaya is in the process of setting up partnerships, with what Al Khulaifi terms the different segments of the “ecosystem of entrepreneurship” in Qatar. This includes educational institutions like colleges and universities, as well as for the younger kids in the schools. Most of the universities and business schools in Qatar, for example, feature classes – many of them relatively new – covering entrepreneurship and innovation. “We have connected with Qatar University,” says Al Khulaifi, “who are doing the formal teaching of entrepreneurship, and we fill in the gaps with networking and mentorship programmes, and then we link them to financiers, of which QDB’s loan guarantee programme Al Dhameen is one.” “A number of the colleges have invited us along at different stages to talk to the students,

Shareefa Fadhel, cofounder and managing director of Roudha, and Aysha Al Mudehki, whjo also cofounded Roudha and is executive director of Injaz Qatar, are committed to developing SMEs for Qatari women and in the case of the latter, promoting a sense of entrepreneurial social responsibility among local school kids. (Image Nabil El Andari)

or because they are running their own internal programmes or competitions,” adds Gold. “We have been involved in those, assessing those businesses and providing feedback as well, and we intend to do more of that.” Gold goes on to explain how Bedaya is setting up informal networking groups that meet every second Sunday, as a place where those who have passion and energy for entrepreneurship can mix and share ideas. “That came from talking to young entrepreneurs who said they would really like to hang out with people who think like they do,” she says. A focus of Bedaya, offers Silatech’s Stephen Brannon, is also to help those in careers at companies develop themselves within their organisations, to develop innovative “intrapreneurship” to benefit companies internally, and also to promote working in the private sector to Qataris.

Enterprise Qatar’s founding aims were to evaluate SMEs in Qatar and come up with solutions to their challenges. 56

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“Another aspect of it,” adds Brannon, “is to cultivate an awareness that it is okay to fail, because most entrepreneurs don’t succeed at first, and that is actually a hindrance that a lot of people have because they feel they have to succeed the first time, which holds a lot of people back. We want to cultivate an overall mindset and connect people and give them the tools that they need.” Bedaya, continues Brannon, wants to start small and replicate the results regionally. “It is part of our local outreach, it is something that we give back to Qatar,” he explains. “But we are also charged with providing employment opportunities, enterprise and engagement for young people throughout the Arab world. The Bedaya Center is a prototype of the kind of model that we can replicate in other countries. In addition to walk-in career and entrepreneurship centres,” says Brennan, “we are looking to build online portals where young people can go in and get access to assessment. and different kinds of tools that will help them with their career path, give them entrepreneurship opportunities, and connect them with employers.” On the investor side, Bedaya can also link entrepreneurs to private financiers. “We want to support and encourage young

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entrepreneurs at all stages of their journey –from making sure they have a valid business plan, to linking them to investors, to teaching them how to pitch their ideas and to be bankable,” says Al Khulaifi. WOMEN AND CHILDREN FIRST: ROUDHA AND INJAZ Roudha is an organisation set up in 2010 specifically for female Qatari entrepreneurs, and Injaz Qatar, an a non-profit entity set up a little over five years ago, to assist local youth in succeeding in the global workplace. TheEDGE met with Shareefa Fadhel, cofounder and managing director of Roudha, and Aysha Al Mudehki, who also cofounded Roudha and is the executive director of Injaz Qatar. “I think that we both have an internal drive and passion that pushes us,” says Fadhel, of how Roudha came to be. “We also saw a niche [and] an opportunity.” Roudha occupies a necessary place in the Qatar entrepreneurial ecosystem. as it is exclusive to women, many of whom might not feel comfortable working alongside males for religious or cultural reasons. Adds Fadhel, the organisation’s centre mentors and provides female Qatari would-be entrepreneurs with workshops and training, as well as support groups. “When we did the research we found out that 46 percent of Qatari educated females with university degrees and higher education are actually sitting at home and aren’t currently engaged in the work force,” explains Al Mudehki. “We want to try and encourage them and make them try to create a value from what they have learnt. We did a few focus groups and it is within the culture that women marry at a relatively early age and then they have kids, but then there is a point in time where they want to go back into the work force and that bridge doesn’t exist in Doha.” A central belief of Roudha is that Qatari women do not need to change their culture or religion to aspire to and achieve success in business, especially as independent entrepreneurs. They also feel that policies should be put in place in Qatar to ensure that a proportion of vendors across all sectors must be Qatar-based or run by locals, and that working from home is made viable and legal.

QATAR SMES ON THE GROUND TheEDGE interviewed five highly creative Qatar entreprenuers to find out what inspired them to start their own business, and from their perspective what the entrepreneuer and SME space is like at present in the country. Mohammed Farid: The Youth Company What is the nature of the business? The Youth Company (TYC) is the first Youth Social Enterprise in Qatar [and] strives to promote, establish, and operate sustainable services and facilities which integrate environmental, social and economic factors [and] provide a worldwide platform for youth development and to supply the community with useful youthful consultancy services What fears did you have prior to starting your business? That the country would not be ready for my idea; that the youth, the community, and the corporate world would not understand what TYC is trying to do; that they could not get the right idea on how they could join and help. But, I was definitely wrong. Everyone around me welcomed TYC passionately.

finally had a break with ictQatar. They let us lend a hand in handling QITCOM 2011…it was a very important event for TYC as we were able to get our brand, ideas, and other services exposed and exhibited to other big companies. What is the most satisfying aspect of having your own business? To see your ideas come true and see the business grow. I strongly believe the important thing is helping others and letting the business influence their lives to develop. What advice would you give to future entrepreneurs? ‘Giving up’ was never in my heart and mind. Everyone can say anything they want to say, and even if they’re against your idea, if you believe in it, go for it. Try to take as many risks as you can.

What was the biggest obstacle you encountered? Now I understand better that business is business and it is actually a serious legal matter…it was very hard to deal with the proper process of starting TYC, as I had to go through a complicated corporate world. How did you overcome those obstacles? After a month of continuous meetings with companies, and no positive response, we

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Any entrepreneur or start-up faces many fears – of failure, or of doing your best or it not being acceptable by the community. “That is one of the main challenges that we face,” explains Fadhel. “Being women is another challenge I think, which is a fear that we have. Every time we enter an organisation we have to tell each other that we are women, we are strong and we can do this.” “I don’t want to say that it is the main obstacle,” adds Al Mudehki, “but it does make it challenging as a woman…you need to be confident and we need to learn about negotiating skills, we need to learn about how to cut a deal. So I think for me that was challenging and I learnt this through experience and time.” As a young organisation Roudha is yet to develop a track record, but its founders are optimistic and highly motivated to achieve their goals of helping Qatari women entrepreneurs to succeed. “Once there is a comfortable environment for females to come out and start their business in respect to our culture,” says Al Mudehki, “I will be satisfied.” In her capacity as executive director of Injaz Qatar, Al Mudehki works within the Qatari entrepreneurial ecosystem in a different manner. “Injaz Qatar is a member and affiliate of Junior Achievement Worldwide,” explains Al Mudehki. “Junior Achievement has existed since 1912 and we are in 123 countries [and] Injaz Al Arab is in 14 Arab countries. We are a non-governmental organisation (NGO) and what we do is connect the volunteers, professionals from the private sector [to] dedicate some of their time and go to schools and deliver our programmes.” Al Mudehki believes that it is important to have these skills early. “The spirit of entrepreneurship should all be there from when you are around 14 years of age, not just when you are 22,” she explains. Injaz’s schools programme is either incorporated into the school’s curriculum, or is extracurricular, and they plan to expand into all the independent and public schools, something that has already been implemented in GCC states such as Saudi Arabia and the United Arab Emirates. In one of their entrepreneurship programmes in Qatar, groups of students

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“46 percent of Qatari educated females with higher education aren’t currently engaged in the work force.” – Aysha Al Mudehki, Roudha and Injaz Qatar. between 16 and 20 years old have to establish a company from scratch, voting for executives and raising stocks, for example. At the end of the term, they liquidate the company and share dividends among all the stockholders. “They sense the responsibility that some of the profits should be given to charity,” adds Al Mudehki, “so these are the certain values or skills that are needed to become an entrepreneur or to establish your own company in the future.” The winners then compete against other students and go to regional finals, alongside the 14 Arab member countries. “I’d like to emphasise,” says Al Mudehki, “that the ones who deliver the programme are normal people, anybody that is working in the private sector, we then train them on the programmes. But what makes it special is that they break the barrier between the teacher and the student so they feel like this person could be a mentor or a role model. It makes the students think that this person has done it, so why can’t they?” “The Qatari students,” adds Al Mudehki, “are really smart, and if you give them the opportunity they will be able to accomplish great things.” BIG BROTHERS: THE ENTREPRENUERS’ ORGANIZATION The Qatar chapter of the Entrepreneurs’ Organization (EO) is headed up by Khalifa Al Misnad. EO is a global network of more than 8000 business owners in 121 chapters and 40 countries. Celebrating its 25th anniversary in 2012, internationally EO conducts events, leadership-development programs, has an online entrepreneur forum, and business owner education opportunities, among other resources.

To qualify for membership individuals must be the founder, co-founder, owner or controlling shareholder of a company that grosses more than US$1 million (QR3.64 million) annually, among other requirements. EO Qatar, says Al Misnad, has 12 members so far and is still in its phase of setting up operations in the country. This year they have ambitions to become involved with all those in the Qatari entrepreneurial ecosystem, in conjunction with EQ. With its high profile and highly successful members, EO Qatar, explains Al Misnad, sees itself as a ‘big brother’ type of entity that can help to promote SMEs in the country and talk to and mentor entrepreneurs. “EO is a young entrepreneurs’ organisation,” he continues. “Generally locally we are talking about low thirties as our average age, which is relatively young. I think these college and high school students can

Khalifa Al Misnad heads up the Qatar chapter of the global Entrepreneurs Organization, which is putting together a large entreprenuerial event in Doha at the end of March. (Image Nabil El Andari)

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relate to us, and we can relate to them as well, which is really important. So this is why we find that we are in a position where we have a duty to give back as an organisation.” At the time of writing, EO Qatar was also organizing a first of its kind ‘Majilis’ event in Doha at the end of March this year, with well-known keynote speakers in the realm of global entrepreneurism being confirmed, says Al Misnad. The Majilis event will comprise talks and workshops and provide a networking opportunity. More than 100 local entrepreneurs are expected to attend, as well as Al Misnad hopes, students from business schools, colleges and universities and schools. “It’s just a way to get everybody under the same umbrella,” he says. As a local entrepreneur with a number of successful start-up companies under his stewardship, Al Misnad is well position to comment on entrepreneurship in Qatar. Despite it being the beginning of a real SME movement here, and a great enthusiasm among young Qataris to start their own businesses more now then ever, he agrees many might still be too wary to make the transition. “A lot of people have motivation,” he offers, “but that doesn’t always translate into starting your own business, as some people are scared to leave their comfort zone, so that I think is the initial biggest factor. With all of these new institutions being created, they are going to help all of these young budding entrepreneurs.” However, there are definitely barriers to SME growth in this region, Al Misnad agrees, one of them being regulation. “I think the government has realised that there is a lot of red tape and we need more transparency. But Qatar’s economy is relatively young, especially compared to that of Dubai, which opened up for business a lot longer before we did. So I think we are heading in the right direction, but people are starting to realise that the issue is there, but regulations aren’t going to change as quickly as we like, so there are now other platforms there to try and kick-start businesses and make it a little easier on them.” While Al Misnad agrees access to capital is also an issue for many local start-ups, he makes an interesting point that this is not

Aysha Fakhroo and Maha Al Essa: +974 Design What is the nature of the business? We’re a design agency located in Qatar, Passionate about encouraging creativity by offering a wide range of design services such as ad campaigns, corporate identities, brochures and website designs. Where did the idea derive from? We are Qatari women that want to change the interpretation of design in Qatar. And what better way to start than by establishing a purely Qatari one-of-a-kind design agency that understands the Qatari culture? Why did you decide to become an entrepreneur? Self-expression. We wanted to express our abilities and offer what we have to the Qatari market. We believe that passion and creativity is a major reason why there is so much growth when it comes to smaller businesses.

We are Qatari women that want to change the interpretation of design in Qatar. And what better way to start than by establishing a purely Qatari oneof-a-kind design agency?

What fears did you have prior to starting your business? The biggest fear was penetrating the Qatari market, competing with larger and international design agencies. [But] we don’t believe in fears because fears means lack of confidence in our services and that is definitely what we don’t have. What do you think needs to be done to improve and assist Qatari entrepreneurs? There are a lot of initiatives in Qatar that have been developed to support entrepreneurs, but lack publicity. More targeted awareness and communication should be done from these centres to create awareness. What is most satisfying about being and entrepreneur? ‘One of the main things that we are proud of as the 974Design founders is the fact that within the short period since we were established (June 2010) we have managed to build a positive reputation and image for our company. What advice would you give to future entrepreneurs? Always be optimistic.

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as much of an obstacle in Qatar as is often imagined. Qatar he feels is in fact fertile ground for those start-ups with access to private investors and who are willing to take that first step. “I think that we are actually in a better situation to take that jump and not potentially fail compared to other places,” Al Misnad adds. “In Qatar, most people have an opportunity to find some form of vacancy, especially with Qatarisation in place. So if I want to go and take that chance, why not?” BANKING ON LOANS Nevertheless, obtaining finance to launch a business or especially to grow an SME to the next level is still a necessity for many small local firms and start-ups. “The availability of finance is essential to SME growth,” Mansour Al Mahmoud, CEO of QDB, told Oxford Business Group in their The Report Qatar 2011. “Unfortunately many struggle to access external finance from conventional banks, particularly if they lack an established track record or assets to use as collateral.” Accordingly QDB set up the Al Dhameen programme, partnering with local banks to guarantee commercial bank loans to private sector businesses that qualify. One such partner is Barwa Bank, which in February 2011 signed an agreement to join the programme. Through this agreement, small and medium enterprises can access the wide range of Shari’ah compliant financing solutions provided by Barwa Bank, while benefiting from QDB’s support through Al Dhameen. “We have a team of about 30 people who are dedicated to servicing the SME sector,” Keith Bradley, general manager and head of Barwa Banking group, tells TheEDGE, “and we are being proactive in going out and targeting and acquiring quite a large number of new customers in various sectors.” With a spate of infrastructure projects planned in the short term in Qatar, the

construction-contracting sector is one of the main areas of Barwa’s focus in the SME space. They also have on their books trading companies, support and services companies and retailers and others, including a taxi firm. While he concurs that opening up the economy to diverse kinds of businesses is an absolute necessity, Bradley also puts forward that it is early days yet, and the local environment needs to shift more towards making it more competitive for SMEs than at present. “But I still believe there is a lot of scope and there is going to be even more over the next few years, as the economy expands and the government is encouraging that through programmes like Al Dhameen. I also understand there are plans to set up free zones, which has been a big driver for SME growth elsewhere in the region.” A relative lack of finance, agrees Bradley, is also an impediment. Even though there is access to a reasonable amount of liquidity in Qatar through family, friends or private loan arrangements, these can be very expensive for SMEs. “So we are trying to provide a lower cost alternative, whilst keeping in mind the fact that SMEs are a lot more risky to work with than more established players.” However, Bradley, who has worked in this field in a number of countries around the world, also adds that most have some sort of government-backed initiative to assist startups and grow SMEs. For their part, Barwa try to assist those who approach them for loans to start or grow their business as best they can, either through personal service at one of their branches or online. Bradley adds that Barwa will be investing heavily in improving their online services and expanding their product range for SMEs in the near future. “Typically,” Bradley explains, “there are two things SMEs are looking for. One is convenience. These guys are very busy – they have 101 great ideas they want to execute and

“What my students light up about is creating businesses that matter, creating meaning.” – George White, CMU Qatar. 60

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the last thing they want to do is spend hours in the bank trying to make things happen.” “Once they have demonstrated that they can translate ideas into a profitable business,” adds Bradley, “then we are in a position to provide finance for further expansion. So the two come into play at different stages as the SMEs develop.” Some applicants, of course, fail to secure a loan, or do but then don’t evolve into a profitable concern. There are many reasons for this says Bradley, including macroeconomic factors such as the financial crisis, but one consistent factor is that they fail to translate a great idea into an actionable project and deliver it to the market profitably. Bradley agrees with the sentiment that properly managed, easing rules on immigration can also be a boon for an economy, as worldwide expatriates are generally predisposed to starting their own businesses, especially those servicing the rest of the world, if the conditions exist for them to do so, as well as employ those with the kinds of skills they need that might not be available in the local population at that time. Yet, Bradley points out that there are many positive factors that make Qatar an attractive place to set up a company. “Notwithstanding the QR200,000 CR, start up costs are relatively low here,” he says. “It depends what

Associate teaching professor of entrepreneurship at Carnegie Mellon University in Doha, George White says that now is a great time to start a business in Qatar (Image Nabil El Andari)

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your business is, [but] it is a dynamic place... there are a lot of opportunities.” COMPETITIONS, BUSINESS AND EDUCATION in the ‘ecosystem’ Apart from obtaining a bank loan, there are the local competitions that would-be entrepreneurs in Qatar can enter. There are many firms throwing themselves behind these initiatives, which are run by EQ in conjunction with most of Qatar’s universities. Incorporated as an EQ programme in 2011, Al Fikra is aimed at students and professionals alike, and features up to QR 50,000 as first prize in both the student and professional sections. According to George White, associate teaching professor of entrepreneurism at Carnegie Mellon University (CMU) in Qatar, who has been involved since its inception, the aim of Al Fikra is to raise awareness regarding entrepreneurship in Qatar, as well as to help the winners turn their ideas into businesses. “We have had more success with the education part right now,” White says, adding that the business plans themselves are not always “airtight”, and due to a lack of market data here often lack accurate medium- to long-term financial projections, for example. “But that is okay,” White adds, “because this country is growing so fast there are opportunities that will be there [that] the US or Europe don’t have.” In his lectures at CMU, White says there is much interest and awareness in entrepreneurship, especially the abovementioned social aspect. “[The students] do tend to want to know the starting mechanics of how they actually do it,” White explains, “But what they did light up about was creating businesses that mattered, creating meaning.” Since the creation of the Qatar 2030 National Vision, the judges have begun observing entries to see winning entries in the 2011 event, the finalists and of winners of which included a mobile application in Arabic, a pill dispenser for elderly people and an idea for eco-tourism, among others. Following the success of Al Fikra, the EQ Ernest & Young Entrepreneur of the Year (EOY) competition was launched in Qatar in 2012. “EQ,” says Firas Qoussous, managing

Stefan Lindberg - Jones: Think Big Qatar What is the nature of the business? We are primarily a video, photography and animation production company registered as Ginger Camel. Under Ginger Camel we have set up a business website called www. thinkbigqatar.com which helps businesses of all sizes promote their company to other companies and clients using video advertising and promotion on the Internet. Where did the idea derive from? We wanted to set up a website that would be like a soap box for companies to broadcast their message about themselves using online video, and to break down the idea that having a professional video produced would be very expensive. Why did you decide to become an entrepreneur and have your own business instead of a regular full time job? I had been involved in television for the last 18 years…I was asked by a couple of friends

if I could look into setting up a business for them here in Qatar. This I did, but they changed their minds in the final hour. Instead of feeling disappointed I turned the situation around and realised that this was my opportunity to start my own business. What fears did you have prior to starting your business? Initially my fear was, do I have the skills to make my business a success? I knew I would have to go out and sell my services, which I had never done before and then deal with clients. What is most satisfying to be an entrepreneur or having your own business? Every day is never the same and you get to meet some interesting people. What advice would you give to future entrepreneurs? Be focused, be patient, be positive and just do it.

“There is strong entrepreneurship from the Qatar expatriate community who see gaps in the market compared to places they lived before.” TheEDGE

COVER STORY

Aziz Sharif: Mannzili.com What is your business? Mannzili.com is a property search engine specialising in Qatar. Where did the idea come from? The idea arose through the difficulty we experienced when searching for properties in Qatar for ourselves. There were limited online resources and the popular classified sites provided little to no usability and information. What fears did you have prior to starting your business? My biggest concern was the entry of competitors with similar values. I was also concern by the possibility that our vendors wouldn’t immediately appreciate the value that we could provide. What was the biggest obstacle? We were lucky in that we planned our business very thoroughly. We only encountered two obstacles. One was a

“Our idea arose through the difficulty we experienced when searching limited online resources for properties in Qatar for ourselves.” 62

TheEDGE

technical bug, which led our site being offline occasionally, which we have resolved… and the other is convincing our vendors to update their content on a regular basis. What is the most satisfying aspect of being an entrepreneur? Watching an idea grow into something recognisable by others. I’m always delighted when I meet someone who has a Mannzili property search experience. What do you think needs to be done to improve and assist entrepreneurs? Simplifying the company registration process and limiting the establishing requirements would go a long way towards promoting entrepreneurship in Qatar. What advice would you give to future entrepreneurs? Don’t fall in love with your idea, always evaluate and revaluate. It is very important to be unbiased when looking at yourself and your idea.

partner, Ernst & Young Qatar, “works towards creating a supportive environment to enable innovative entrepreneurs to succeed, and Ernst & Young’s EOY programme...will encourage others to follow the lead of these exceptional entrepreneurs.” TECHNOLOGY AMBITION: ictQATAR Among the key sectors popular in entrepreneurship in Qatar, information and communications technology (ICT) is prominent. This, says Ali Al Khulaifi, ictQatar’s ICT market development manager, is a reflection of Qatar’s aspirations to be a ‘hub’ in this sector as well as in ICT Qatar’s entrepreneurial programmes. In early March, ictQatar will host its second annual ICT industry exhibition and conference, QITCOM, which will once again feature its ‘Innovation Theatre’, a forum where young people can pitch their technology business concepts to a panel of experts. “Our Digital Agenda 2015,” says Al Khulaifi, “is matched to the National Vision 2030. The ultimate goal is for the State of Qatar rather than to be dependent on hydrocarbon industries, to be a knowledgebased economy. We see the ICT sector as an accelerator to such a transformation.” Al Khulaifi explains that addressing the lack of Arabic digital content online, which despite the vast number of Arabic speakers in the world, only comprises three percent at present, is a key part of this strategy. ictQatar has also identified key development areas, which focus on increasing this Arabic content, and doubling the contribution of ICT to GDP and the workforce in the sector by 2015. “Those are aggressive targets,” says Al Khulaifi, “and we will not be able to achieve them unless we engage the private sector, and at the same time engage our youth and entrepreneurs, which will help us achieve our vision and direction at a faster pace.” ictQatar is engaged in several initiatives to achieve these goals and encourage IT entrepreneurs. This will occur by identifying the opportunities and gaps in the market, the best investment opportunities available in the ICT market and providing incubation services in the Incubation Center,” explains Al Khulaifi, “to provide facilities to

COVER STORY

entrepreneurs and innovators, moving their ideas and business plans from idea to a commercialised business.” At QITCOM, Al Khulaifi adds, these young innovators will be able to mingle with all the established players in the IT industry and attend workshops and coaching sessions. ”The Innovation Theatre is an entrepreneurial hub where we engage the youth, women and talented individuals to inspire them to innovate, learn and engage in developing the next generation of local content in the areas of mobile, web, gaming, media and content.” Prior to the exhibition, interested individuals must register online to participate in sessions at the event or to compete for the start-up competition. These registered participants then get access to free training and coaching provided by potential.com to help them propel their ideas and interests to the next stage. “Those taking part in the competition,” explains Al Khulaifi, “will then go through a fun and engaging pitching process at the QITCOM event in front of expert judges and investors, where the most voted participants will end up winning financial and incubation services prizes, that help them start up their venture and bring it to market. Several of the 2011 Innovation Theatre winners will be sharing their progress report at the theatre this year to showcase their exceptional progress since they won last year.” Hoewever, Al Khulaifi is realistic about what this industry faces, like many others in Qatar, in fast-tracking entrepreneurism and SMEs. “We have some challenges when it comes to regulations. We are working with relevant stakeholders to ensure the laws and policies are encouraging public private partnership and encouraging specifically the investment within the ICT sector, to ensure for example that nationality quotas will not restrict employers from recruiting specialised candidates from a specific nationality. “We are investigating and addressing key challenges that entrepreneurs are facing and we are trying to minimise those issues,” closes Al Khulaifi, adding that another goal is to expose Qatari talent within the ICT sector to internships opportunities at multinational ICT firms. “This will all take some time, but these are our goals within the next five years.”

Ahmed Al-Hammadi: CarSemsar What is Your business? CarSemsar.com is an online portal for autos. We list cars for agents as well as individuals. Where did the idea derive from? The founders all had extensive exposure to the United States where such websites have proliferated in the market. The need to have an easy way to search for cars and compare prior to making a decision to buy is a great asset that we wanted to bring to Doha. What was the biggest obstacle? When we started the business there was not a strong understanding of the benefits of a pure online business in the country, as such selling the idea to financiers was extremely important. We pitched the idea to various entities to get funding and were finally able to secure funding from two angel investors. How did you overcome those obstacles? The business plan we prepared was extremely detailed. We outlined our

marketing strategy, pricing, human resources needs, as well as cash-flow expectations. From the beginning we allowed for nearly two years of operation prior to generating revenues. We also outlined a formidable advertising campaign to increase the penetration of the website in the market from the early stages of the business. Is there a strong entrepreneurship spirit in Qatar? There is a strong entrepreneurship spirit in Qatar, but smaller non-financially strong entrepreneurs find it much harder to start their businesses as compared to more established groups with financial backing. What advice would you give to future entrepreneurs? It’s important not to give up if you fail once, twice, or more. You need to work really hard and take ultimate responsibility [for the business]. You need to be willing to do everything possible to make your business successful and all that can only be done with a lot of patience.

“There is a strong entrepreneurship spirit in Qatar, but smaller nonfinancially strong entrepreneurs find it much harder to start their businesses.” TheEDGE

ON THE PULSE

Doha’s appealing loans

and financial schemes TheEDGE spoke with several banks around Doha to gain insight into the popular finance schemes and loans available for Qataris and expatriates. The subject of credit in Qatar is often controversial, as loans are not always obtained out of necessity, but also to support a lavish lifestyle. Erika Widén reports.

espite the worldwide financial crisis, in 2010 Qatar had the world’s highest growth rate, and throughout the crisis the Qatari government protected local banks by directly injecting investments into the domestic banks. Qatar has the lowest unemployment rate in the region; therefore the credit sector is thriving since employment is strong. In recent years the small Arabian Peninsula has been a gateway of job opportunities for the world. An influx of expatriates coming from all continents compensates for the increasing demand of the workforce, which constitutes more than 75 percent of the total current population. Banks throughout the country have made it easy for newly arrived expatriates by offering quick access to credit, making their transitional period of having left their homeland and settling in Qatar easier. The most common

loans taken by expatriates are vehicle finance, as it is a crucial basic necessity. Doha’s banks offer appealing loans and finance schemes to both expatriates and Qataris. Attractive billboards and flyers promote different payment schemes with competitive interest rates, all of which are regulated by the Qatar Central Bank (QCB). QCB sets different limits for local and expatriates in terms of maximum loan limits, tenor and payments for vehicle loans; Qatari nationals are eligible for a higher value of loans and also given a longer tenor to pay off the liabilities, whereas expatriates are offered a lower amount and shorter tenor for the repayments. In addition, given some of the restrictions on expatriates in terms of land ownership, most mortgages are given to Qatari customers. SOCIAL ECONOMIC PRESSURE According to an article published in the New York Times, Qataris appear to have made

it big, meaning they tend to drive big cars, live in a big house and get large loans to pay for expensive watches and an outsize lifestyle, portraying an image that the majority of locals are pressured to fit, and live up to an elite society.In an article published last year in The Peninsula newspaper, a Qatari writer mentions that Qatari men tend to get into debt particularly with regard to the marriage process and the high costs to complete the marriage, underlined the popularity of loans among locals in the country at present. A local Arabic newspaper reported that the rentals of marriage halls alone varies from QR100,000 to QR750,000, while other costs related to the marriage can add up to another QR500,000. The recent Emiri decree to raise the wages of all Qatari nationals working in the public sector by 60 percent was praised by the Qatari population in late September 2011. The Qatar Tribune newspaper quoted Hamad TheEDGE

ON THE PULSE

al Muhanadi, a Qatari national during the recent raise. “Qataris will be able to pay off their debt now…the salary increase will be helpful to those Qataris who have taken huge loans – paying which seemed to be easy at the beginning but turned out to be difficult later.” Of course, there are numerous reasons why an expatriate or a Qatari may apply for a loan or financial scheme, and Qatar currently has a total of 18 banks offering various loan arrangements. Eleven banks of these are domestic entities, and seven are subsidiaries or local foreign institutions. With so many lending institutions, the Qatari banking sector is one of the most dynamic in the region as per Oxford Business Group The Report Qatar 2011.

Attractive billboards and flyers promote different payment schemes with competitive interest rates, all of which are regulated by the Qatar Central Bank. countries,” says to TheEDGE Navin Nair, HSBC acting senior manager, retail banking and wealth management. Nair, when asked what measures does the bank take when a customer is not able to pay back the loan, says, “We have a suite of

options for our customers to assist them in difficult times…we cater to all the personal banking needs of an individual, offering them tailor made wealth management and insurance products, loans and credit cards, and state of the art banking services that leverage on

ISLAMIC BANKING Islamic banking differs from traditional conventional banking, as it complies with religious requirements and is also regulated by QCB. The principles of Islamic banking comply with the Islamic Shar’iah, which is the practical application of the development of Islamic economics. Shar’iah prohibits the acceptance of specific interests or fees known as Riba, for any type of loans. In addition investing in businesses that provide goods or services considered contrary to Islamic principles is also forbidden, or as they say in Arabic “Haraam”. Instead Islamic banking uses the Murabaha mode of financing which includes a profit margin agreed by both parties. In other words, once the bank has agreed with the customer on the total amount to be charged, the customer is not exposed to any hidden costs during the entire tenure of the financing. TYPES OF LOANS As a regular financial lender, HSBC retail banking and wealth management in Qatar offers three types of loans to Qataris and expatriates, which include personal loans, vehicle loans and mortgages. “All customers who are applying for a loan should provide the bank with documentation that will confirm their employment with an approved employer, valid Qatari ID/ passport and a proof of residence in Qatar. For expatriates customers it is also required to provide details of residence in their home

TheEDGE

Navin Nair, HSBC acting senior manager, retail banking and wealth management tells TheEDGE how to apply for a loan and how the bank has a suite of options to assist their customers during difficult times.

ON THE PULSE

Andrew Ball, group head of Al Khaliji consumer banking speaks to TheEDGE about the various loans the bank has to offer to both Qataris and expatriates.

HSBC’s global expertise and knowhow. Loans are just part of the wide range of products HSBC offers to its clients.” Al Khaliji bank of Qatar, besides offering personal loans, vehicle loans and credit cards, offers overdraft facilities against salaries or shares, or securities or term deposits. “We also offer customised home loan solutions, and equity release loans under our mortgage programme only for Qataris,” says Andrew Ball, group head of Al Khaliji consumer banking. The facilities are offered to both expatriates and Qataris. “The quantum of facility including certain attributes may be different for these segments, it is usually higher for Qataris and is regulated by both the QCB guidelines and our credit policy,” says Ball. The difference, which is mostly on quantum of facility and tenure, is governed by QCB guidelines and the credit policy of Al Khaliji bank, it is also a fact that long term permanency and stability is perceived to be higher with Qataris versus expatriates.

In Qatar, in order to apply for a loan or a financial scheme, a particular bank must approve the company where the employer works. Al Khaliji bank currently has 300 approved companies, entitled to apply for a loan. Existing companies are periodically reviewed and new companies continuously added. Individual facilities are however governed by the credit policy, central bank guidelines and credit history of the individual, according to Ball. There are many examples in Qatar of unfortunate people who have fallen on the wrong side of this situation, sometimes through no fault of their own or via circumstances they could not control. TheEDGE spoke to a professional graduate from the Levant region, who came to Qatar with a relatively high-paying job offer. He acquired a fouryear instalment vehicle loan and after two years of paying his instalments on time, he was terminated from his work. He informed the bank and presented his termination letter. Within three months of failed payments, the

The Qatari banking sector is one of the most dynamic in the region as per Oxford Business Group’s The Report Qatar 2011.

Do Bank Loans Involve Hidden Costs? Hidden cost is a popular terminology used in banks, meaning they are the charges that have not been transparently disclosed to the customer at the time of account opening or loan origination. TheEDGE asked several conventional banks in Qatar about hidden costs and all disclosed that their customers are entirely aware of the pricing highlights before she or he agrees to a transaction. Moreover, the extra tariffs and charges are displayed clearly in branches and on the Internet as per QCB regulations. When the question was referred to the local Islamic banking, they highlighted that there is not such thing as hidden costs since in the Shari’ah it is stated that there is no interest fees nor extra charges. Murabaha Mode of Finance According to Barwa Bank Murabaha is a contract for selling a specified tangible asset at a mutually agreed profit added to costs. The payment of the sale price (costs + agreed profit) is usually deferred for a future date or dates. Total profit agreed for the period does not change with the change in market dynamics, therefore ensures contractual certainty. bank filed a case against him and immediately a travel ban was issued. The young professional in his early 30s is not permitted to travel until he has finalised the complete loan. In general in Qatar, travel bans are not lifted until both parties resolve a dispute and the case is abandoned or, if not, until the matter is resolved by a court, which may require months to process the case. Moreover, Al Khaliji bank has defined procedures consistent with the legal framework of the state of Qatar to address defaulters or inconsistencies in a customer’s repayment, regardless of her or his nationality. “As a bank we are obliged to track and follow defaulting customers and seek resolution. When all efforts fail, the bank resorts to legal recourse,” concludes Ball. TheEDGE

KNOWLEDGE & ExPERTISE • prODuCtiVitY AnD WellBeing • legAl inSight • BuSineSS MAnAgeMent

lEgAl INsIgHT: sMEs oN THE QATAR ExcHANgE

Qatari legislative initiatives have been put in place to drive SMEs forward, as they are essential to Qatar’s National Vision 2030 for a diversified economy, including a special listing on the Qatar Exchange, which Fouad Al Haddad examines more closely. (P.72)

Also IN THIs sEcTIoN: • •

productivity and Wellbeing: Lauren Penny explains the the importance of a balance in one’s personal and work life in order to achieve productivity and wellbeing. (P.70) Business Management: For two years Mo Ibrahim Foundation announced that it was unable to award

its annual Ibrahim Prize for Achievement in African Leadership. John Mullins and Terry Rhodes look at how corruption has been thriving not only in Africa but also in other parts of the developing world, and reveals methods for conducting ethical business in corrupt environs. (P.74)

LEGAL PRODUCTiViTY iNSiGHT AND WELLBEiNG

WORK/LifE BALANCE: WHAt It rEALLY MEANS? Work/life balance is a term thrown around constantly. Leaders will agree they need more balance, but to most leaders they find this elusive. Productivity is measured â&#x20AC;&#x201C; wellness is not. Explains Lauren penny

PRODUCTIVITY AND WELLBEING

oday’s world is faster than ever before, modern-day technology, daily turn of events in the financial markets and the pace of global organisations driving leaders to work seven days a week. Add to the mix budget constraints, staff shortages, demanding customers and fierce competitive markets all compounding the effect that drives work at the expense of life and wellness. Leaders and entrepreneurs face the same challenge, with the percentage likely to rise further for the entrepreneur. There is a saying “atleast the entrepreneur can choose which 16 hours of the 24 hours they work”. Leaders set the week together with areas of life that is important to them. However quite often, most leaders strive for a day or a week to achieve their ‘balance’ until a crisis hits and the balance is the first thing that deteriorates. Balance is then referred to as a ‘nice to have’ and ‘wishful thinking’. As workload builds so does the stress levels, and what was seen before as ‘nice to have’ leads leaders to start to lose their perspective on issues and ability to look at problems creatively. Work hours increase due to the inability to think quickly, conflict between colleagues evolves, simple tasks seem like huge mountains to overcome. Leaders’ personality traits start revealing negative behavioural signs during periods of prolonged imbalance. A short period of imbalance is normal, and at times required, however prolonged imbalance can be detrimental to health, relationships and career. When leaders find themselves out of balance, they are often out of balance with their personal values and priorities. Work/life balance issues are of great concern to those organisations expecting high performance delivery over a sustained period and whereby the pressure can lead to ineffective leaders, burn out, health issues and absenteeism. For organisations striving to attract, motivate, and retain top talent in this highly competitive market, it is critical to ensure their leaders are sustaining their work/life balance. So what can you do if you are presented with this situation or if you are leading an organisation where overload has become the norm? Or perhaps you are an entrepreneur

Assess the most important areas of your life and schedule them like a meeting. like me, where you have become your own worst boss. Suggest these immediate steps, which should go some way to streamlining your work and life. Assess your workload As leaders we can get caught up in being busy yet ineffective, often over analysing, in pointless meetings or running from A to B without time to implement and act. Review what is really urgent and has to be done and what is important for the long run. Address your strategy, ranking strategic importance of goals, tasks and projects to identify the critical areas. Focus your energy on the value adds and delegate the rest. Work in cycles How many leaders are literally beset with back-to-back meetings, chasing the clock and return to the desk with a pile of work to complete? Maintain working cycles and encourage and act executives to take short, frequent breaks during the day, enabling recovery. Suggest the 90-minute work cycle followed by 15 minutes rest. Take a break in the fresh air; leave the desk and stretch. Prioritise Being an entrepreneur, I wear many hats and it is a constant juggle. Prioritise the day including both work and other areas of life that are important to your balance. Refrain from overlapping these, or if you do, simply bring it to your awareness and prioritise ruthlessly the following day. Identify important areas in your life and schedule them This seems simple yet often not carried through. How many leaders know that they should exercise, yet override this due to last minute urgent workload? How many know the importance of rest, yet mindlessly drink another coffee to keep them in the office for

another hour? How many leaders work over a year only to realise that they did not achieve a personal goal they set out to achieve, as the goal slipped further and further down the action list? Short periods of time where an imbalance occurs is okay and accepted, if say you have a project deadline, or an event to deliver, however prolonged periods of imbalance can be detrimental to your productivity, achievement and health. Stop now and assess what are the other areas of life that are important and schedule them – just like you schedule a meeting or a project. The other areas may or may not require the same ratio of time, however it is important that you do achieve them; it could be a simple as one hour over seven days. You determine the number of hours of each element that fulfils you. Set yourself to achieve your perspective of work/life balance by scheduling these elements in your day. A few of the elements are listed: • Family • Personal time • Health • Hobby • Relationships • Self development Be strict with yourself and honour yourself. Schedule your week aligning effective work hours together with scheduling the important areas of your life. At the end of the week or daily if possible, assess what occurred, did you achieve your schedule as planned? Did you override your schedule? Review why: Could it have been prevented? Review how you can learn from this and improve for the following day. From my perspective work and life is intertwined – as raised above it is important to honour all the important elements in your life. Set your month ahead along these guidelines and enjoy your enriched work/life balance. Lauren Penny is CEO and partner of Art of Abundant Living in Qatar. TheEDGE

LEGAL INSIGHT

SMEs in Qatar

and listing

on QE Venture Market

By Fouad El Haddad

he development and support of small and medium enterprises (SMEs) is necessary to bolster economic diversification in the State of Qatar. In recent years this sector has been considered weak, however, legislative initiatives have been put in place to drive it forward. SMEs are material to Qatar’s National Vision 2030, which has set up a number of strategic goals, including building a well-diversified economy. The new approach focuses on stimulating services for SMEs, supporting diversification and creating employment opportunities for the national work force. Qatar Authority for the Development of SMEs The Emiri Decision No. (17) of 2011 (Emiri Decision) establishes a Qatar Authority for the Development of SMEs (the Authority) which is run by a board (the Board), holding all powers necessary for achieving the Authority’s objectives. The Emiri Decision defines SMEs as such small and medium scale enterprises as may be determined by a Board’s resolution. Article (4) of the Emiri Decision describes the Authority’s responsibility as encouraging the development of the SME sector in Qatar. It is mandated to put a strategy in place to encourage growth for these enterprises by providing them with technical assistance and coordinating with banks and governmental institutions for the purpose of financing and marketing projects.

LEGAL INSIGHT

QE Venture Market Listing on Qatar Exchange (QE), or going public, is the process of offering shares of a previously privately owned company to the general public. In Qatar the initial public offering (IPO) process is governed by Qatar’s Commercial Companies Law Number (5) of 2002 as amended and is regulated by the Qatar Financial Markets Authority (QFMA). QE is creating a junior bourse for SMEs to give a lift to this sector, the QE Venture Market. QE Venture Market will be dedicated to SMEs who will by definition have a minimal track record and a higher risk profile but companies nonetheless who are growing and need the access to capital that being listed entails. The establishment of a secondary market would give SME owners an opportunity to be listed in the bourse in accordance with lighter and flexible regulations, while giving further finance sources in order for them to grow and expand their businesses. On the 17th of January 2012, QE announced the readiness of technical and regulatory infrastructure dedicated to the market. The market is able to receive listing applications to be submitted by business owners from Qatar and the Gulf Cooperation Council countries and give information on the listing criteria and trading rules. Companies in the QE Venture Market will benefit from the same regulatory safeguards as those afforded to main market companies but will be readily identifiable as a separate and dedicated marketplace. Over time, it is expected that QE Venture Market company to graduate to the main market as they grow and develop the necessary track record.

nominal value must be paid-up (100 percent required in the case of public offering).

Listing Requirements for QE Venture Market SMEs operating through the medium of joint-stock companies (also known Qatar Shareholding Companies or QSC) must, among other things, satisfy the following requirements:

Foreign Investors Incentives And most important for any foreign investor is that: • Non-Qatari companies are eligible to list; and • The reporting language is in dual English/ Arabic. A listed SME must satisfy, among other requirements, the following ongoing disclosure and periodic disclosure requirements:

Capitalisation Minimum subscribed capital of QR5 million. Minimum of 50 percent of the

Minimum Shareholders Applicable rules require an issuer to have a minimum of 20 shareholders. Securities Ordinary shares. Whole class must be listed. Track Record One-year track record of core business is a requirement and issued audited financial statements for that year. Accounting Standards Reports must be drawn up in accordance with International Accounting standards (IAS) and International Financial Reporting Standards (IFRS). Profitability None for purposes of QFMA Listing Rules but shareholders’ equity, shown in the last audited financial statements, must not be less than 75 percent of the paid up capital. Minimum Free Float QFMA Listing Rules require an issuer to have a minimum free float of 10 percent. Lock-Up Requirements (applicable for converted companies) A lock-up 50 percent of the shares of owners of private joint-stock company (closed shareholding company) converted to a public joint stock company for one year. All Board members are required to retain a minimum number of shares for the duration of their office.

Ongoing Disclosure • All types of information/events capable of affecting the price of the securities. • Time and venue of AGM & EGM (to be made available to shareholders a minimum fifteen calendar days prior to the meeting). • Date of Board of Directors meeting to discuss semi-annual and annual financial results (minimum fifteen calendar days prior to meeting). • Any decision relating to the rights of securities holders. • Details of pending or future lawsuits which may have a meaningful impact on business. Periodic Disclosure • Quarterly reports within 30 days of end of relevant period. • Semi-annual reviewed reports within 45 days of end of relevant period. • Audited annual reports within 90 days of end of relevant period. In addition to the QFMA Listing Rules and QE Rulebook, companies on the QE Venture Market are required to adhere to specific elements of the Corporate Governance Code published by QFMA. The Code is a set of rules designed to deliver efficient, effective and entrepreneurial management that contributes to the board discharging its duties in the best interest of shareholders.

Note: All Qatari Laws (save for those issued by the Qatar Financial Centre (QFC) to regulate its own business) are issued in Arabic and there are no official translations, therefore for the purposes of drafting this article we have used our own translation and interpreted the same in the context of Qatari regulation and current market practice. This article should be used for information purposes only. It is not legal advice and should be relied upon as such. If any reader requires legal advice, this should be obtained from an experienced lawyer, who can provide advice, which is tailored to the relevant facts and circumstances. For any information in respect of legal issues, please contact Fouad El Haddad or David Salt at (fouad.haddad@ clydeco.com.qa) or (david.salt@clydeco. com.qa). TheEDGE

BUSINESS MANAGEMENT

MANAGING ETHICALLY IN

CORRUPT ENVIRONMENTS

BUSINESS MANAGEMENT

In 2009 and 2010 the Mo Ibrahim Foundation announced that it was unable to award its annual Ibrahim Prize for Achievement in African Leadership. The foundation, which promotes ethics and good governance in Africa and recognises excellence, was unable to select a suitable laureate from the democratically elected former heads of state who met the requirements. Corruption, apparently, is thriving in Africa and of course many other parts of the developing world, begging the question, John Mullins and Terry Rhodes ask, how does a company operate ethically in such environments?

n December 2008, a German engineering company agreed to pay about EUR1 billion (QR 4.8 billion) to American and German authorities for engaging in a systematic pattern of bribing government officials to win infrastructure contracts in 10 countries between 1999 and 2007. However, the executive who oversaw a portion of this company’s bribery budget for its telecommunications business, said the payments were vital to maintaining competitiveness and keeping the business unit operational. Uwe Dolata, a spokesman for the association of federal criminal investigators in Germany, later said that bribery was part of the company’s business model and they had “institutionalised corruption”. Surely, despite the supplications of corrupt government officials, there must be a better and more ethical way to win contracts and run a global business? HONEST TACTICS Turns out, there is. Mo Ibrahim is founder and chief executive officer of telecommunications company Celtel (and the Mo Ibrahim Foundation’s principal donor and board chair), he built his business in sub-Saharan Africa around the same time as the above mentioned German firm. Ibrahim was adamant that business could be done cleanly and honestly in sub-Saharan Africa despite the region’s corrupt reputation. And Ibrahim and his team wanted to prove that doing so was both possible and profitable. These tactics were developed to deal with problems common to people who do business in the developing world and we identify them not to show how they apply in the telecom industry but to inspire the kind of creative thinking that can lead to an even broader, more comprehensive set of practices applicable elsewhere. Dealing with governments Government officials – sometimes underpaid, sometimes simply corrupt – lie at the heart of the dilemma that companies doing business in sub-Saharan Africa and similar places confront daily. Celtel developed three tactics for dealing with them: • Build the right board Ibrahim felt that, if Celtel were to operate cleanly, it would need investors and board members willing to invest in the company and to commit to protecting it against ethical dilemmas. Ibrahim said, “We were going to be in sub-

Saharan Africa for the long run and could not afford to be tangled in a corruption scandal — we could not risk losing profits and shareholders overnight.” So building an ethical board was Ibrahim’s first step toward building an ethical business. • Let governments compete for your capital Rather than treating each government licence as a scarce commodity over which it had to compete, Celtel did its best to convince governments that the truly scarce commodity was the investment capital that the company could bring from the developed world to invest in Africa. Celtel told governments that it would deploy its capital not just where markets were attractive but also where it could do business in an ethical manner. • Publish what you pay Across the developing world, multinational companies have developed reputations for extracting value – from oil to diamonds to minerals – from their foreign investments without putting value in place that serves local communities. Ibrahim wanted to address this issue head on. “We firmly believe in a ‘publish what you pay’ policy and are proud of being one of the top tax payers in a given country. We put everyone on the payroll, from managers to taxi drivers. By paying taxes, we showed how much revenue we generated in a country and how much we were contributing to the local economy. At the same time, this helped us avoid being asked for government bribes.” DEALING WITH LOCALS Because much of the necessary capital equipment must be imported into developing economies, customs officials find it all too easy to hold inbound goods ransom to under-the-table payments. Here, too, Celtel developed creative and ethical solutions: • Let it wait When Celtel entered Malawi, it put in the order for equipment after determining the cell tower locations. A few weeks later, Celtel’s local managing director went to meet the equipment at the airport. The customs officer led him to an airplane hangar where Celtel’s base stations and equipment had been offloaded. In addition to the customs forms that were to be completed, the customs official mentioned the equipment would have to be held for up to a month for ‘inspection’. However, ‘special fees’ equivalent to US$200 (QR728) could be paid to expedite the inspection. The Celtel MD looked the customs officer straight in TheEDGE

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• the eye and said, “Let it wait.” In practice, once customs officials discovered that the company would not play the usual game, they cleared Celtel’s shipments to free space for other incoming shipments that might prove more lucrative. • Create a media event In a similar situation in Congo Brazzaville, Celtel did not have the luxury of waiting, due to a tight deadline. Customs officials had indicated the equipment could be held for up to six months, unless ‘special fees’ were paid to expedite the process. Frustrated with the process, Celtel decided to try another tactic: a grand media occasion when the new equipment arrived, said an executive, “Sort of a symbolic event of our entry and investment in Congo Brazzaville. We rented three big cargo planes to ship in three base stations and a switching container…we invited the minister of communication, political dignitaries and a few local celebrities and contacted the local TV station and press. When the plane landed, everyone was so excited about the fancy equipment that it turned into a public relations spectacle. With all the media involved and public attention, the customs officials had no choice but to release the equipment to us.” Building ethical teams Clever tactics aside, managing ethically is in the hands of local partners and managers, but building ethical teams is no trivial task: • Make your partners investors In a region in which the overwhelming majority of political rulers had been overthrown in military coups, forced to resign or assassinated in office, it was difficult for Celtel to gain steady footing. The solution was to ally with local partners, but not, as some companies do, as a strategy for ‘outsourcing’ the corruption. The challenge was finding local partners who could open doors, were independent of the shifting political currents and were committed to doing business ethically. Celtel required that all local partners invest in its domestic business and thereby become long-term shareholders, rather than short-term agents looking for a fast buck. Having agreed to this first step,

Sudan born Mohamed Ibrahim, Chairman of Mo Ibrahim Foundation and CEO of African telecommunications firm Celtel (now Airtel) believes that in order to stamp out graft, business in Africa can and must be done ethically in Africa and all similarly corrupt countries. (Image Corbis)

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“We held the view if you paid a bribe once, you could expect others join the queue for future bribes.”– Mo Ibrahim would-be partners then had to pass scrutiny by the Celtel board based on a rigorous screening process that company management developed. Only following successful completion of these two steps would negotiations ensue for the final partnership. • Hire for fit, mix ethnic cultures To build a culture of meritocracy, Celtel hired all staff, from management to the cleaning crew, based on a fit with the company’s culture rather than direct industry experience, ethnicity or social connections. This was highly unusual in Africa where nepotism and tribal influences pervaded business transactions. By explicitly mixing people of diverse backgrounds, nationalities and cultures, Celtel sent a clear message that it was a meritocracy. All candidates had to apply and interview. If someone wanted to hire his cousin or brother-in-law, that candidate would have to follow the same process as everyone else and be judged as an individual, not on whom they were related to. Celtel also recruited local managers with international work experience and moved them to other countries to gain regional experience and to insulate the business from local or tribal pressures. Celtel and Ibrahim’s examples show that it can be easier to convince others to do business ethically with you than you might imagine, especially as more Western-educated people from Africa, Asia and other corruption-prone regions return to their homelands to participate in their countries’ economic renaissance. Whether in governmental or business roles, they are likely to understand your pitch that it is better for their country to do business ethically, regardless of past practices. But won’t such practices simply result in losing business to unethical, better paying competitors – whether competing for government licences or in other kinds of situations? This, in essence, was the German firm’s argument. One Celtel executive noted, “We accepted that sometimes our ethical stance could mean losing ground to competitors in the short term. But, as an infrastructure company, we had to build a sustainably profitable business. Our licences were for 10 or 15 years, and some of the assets were cemented into the ground. We held the view that, if you paid a bribe once, you could expect others to find out and join the queue for future bribes. Not paying meant better results in the long run.”

John Mullins is an associate professor of management practice in marketing and entrepreneurship at London Business School.

BUSINESS INSIGHT Inside the minds of leading business figures

INFRASTRUCTURE PROJECTS (P. 80)

The Dubai-based Markab Advisory released last month a research study entitled Public Private Partnerships: A Vehicle of Excellence for the Next Wave of Infrastructure Development in the Gulf Cooperation Council. Yousuf Al Jaida, director of asset management and banking of QFC Authority tells TheEDGE what the study means for Qatar.

ALSO IN THIS SECTION: • MALOMATIA CEO YOUSEF AL NAAMA Malomatia in Arabic means informatics, and it is a unique kind organisation in the international information technology marketplace – one that puts the national interest and investment in the future ahead of pure profits. TheEDGE speaks to the chief executive officer of the

Doha-based IT services consultancy company about how this 100 percent state owned organisation is unique in the region, in addition to highlighting how their ambition is not just to be a commercial service but is closely aligned with Qatar’s National Vision. (P.78)

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Information Technology

The CEO of Malomatia talks about their 100 percent state owned IT Consultancy Service Malomatia is a rare breed of company in the international information technology (IT) marketplace – one that puts the national interest and investment in the future ahead of pure profits. Rachel Morris meets Yousef Al Naama of the Qatar-based IT services consultancy company that looks at the big picture.

Yousef Al Naama, chief executive officer of Malomatia during a recent interview with TheEDGE.

alomatia chief executive officer (CEO) Yousef Al Naama describes Malomatia as a “Qatari company with a global vision”. “Our priorities are not just commercial,” he explains. “Our goals are closely aligned with the Qatar National Vision…we are 100 percent owned by the State of Qatar.” And it is this that sets the IT services

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and consulting company (Malomatia means “informatics” in Arabic), apart from its competitors. Created four years ago under the umbrella of the Supreme Council for Information Technology (ictQATAR), Malomatia has focused on providing consulting services for government, healthcare and education – all priorities for the Qatari government as it builds a new economy beyond dependency on oil and gas revenues. Al Naama says to achieve Qatar‘s national

vision of a vibrant knowledge based society; Malomatia uses global best practices, deploying the very best local talent and international expertise. “We are extremely focused on those national priorities,” says Al Naama. “Our niche here is to be great on enabling those sectors by having strong local capabilities and knowledge. It’s not just trying to see the opportunities out there. We have been set up to address the local capabilities of those three main sectors. We address those priorities by addressing the needs of those sectors.” Malomatia’s business model is simple and effective. “Today we have 140 people working for Malomatia. The majority, around three quarters, are on the core business area. The rest are support and management,” explains Al Naama. “We focus on the high level IT service offerings (such as business analysts and e-government experts) and we look to our partners to deliver the low end capabilities and offerings.” Al Naama says Malomatia is unique in the region, and while similar to other governmentsponsored companies in Asia, has a different, more defined agenda. “I’m aware of some other international initiatives,” he says. “Singapore and Malaysia have been able to set up something similar but their focus is on managed services and providing online platforms. Ours is different.” The difference for Qatar is that gap between the national aspirations as being able to deliver them. In short, being able to build human capital within Qatar to sustain the growth targets the country has ambitiously set for itself. “We all know Qatar is embarking on huge

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social and economic development.” Al Naama says. “However we do have great challenges around capabilities, or human capital. The question has always been around how do we address in the dynamic developments of the country and yet not jeopardise the sustainability of this growth.” Al Naama says Malomatia addresses this gap by forging international partnerships. “The core engine of our business is capabilities, subject matter experts and knowledge,” he explains. ”We always ask ourselves: by offering such a service or solution, how much are we growing in terms of capability? How are we enhancing it? What knowledge are we returning and how do we sustain such a business locally in Qatar? “The fourth priority will also be profit, but because we are 100 percent owned by the state, yes we are looking at sustaining a good commercial enterprise locally but it is down the list in terms of priorities. We do very selective strategic partnerships with international companies. We are a systems integrator, we are not a software company, we are not a hardware reseller. By understanding the Qatari national priorities in terms of what they need to enable and develop, we also look at international best practices in terms of solutions and applications.” Although still young, the company has developed its own systems to ensure the client – which includes healthcare giants like Qatar’s Hamad Medical Corporation (HMC) – has the best possible team working for them. “We do this by filtering, we are very good in doing that and working out what the client needs and how best practice can be applied,” Al Naama says. “And then together with those partners, we become the local subject matter experts in delivering those solutions to our clients.” HMC, Qatar’s state healthcare provider with 17,000 employees and a huge patient workload yet ageing IT systems, is a good example of these partnerships in action. In February this year, HMC and Cerner signed an agreement to digitise the healthcare providers medical records and other processes. Acting as a prime contractor and CIS integrator, Cerner will deliver cutting edge health IT solutions from Cerner and third party suppliers that will bring the HMC Hospital Information Management into the 21st century. This is Cerner’s first project in the region to digitise an entire country’s public health system on a single computing platform. This comes 12 months after HMC, again with support from Malomatia, signed an agreement to create a Picture Archiving and Communications System (PACS) from GE Healthcare across its eight hospitals. The project,

“Our priorities are not just commercial... Our goals are closely aligned with the Qatar National Vision.” which was implemented in record time, enables clinicians to move from using traditional x-ray film to accessing their patients’ image records on their screens at the touch of a button. The new system will facilitate improved diagnosis and patient care capabilities. “We have been very close to what has been happening at HMC,” says Al Naama. “From the early start of our company, HMC is one of the main enablers of healthcare in Qatar, so our relationship with them has been very strategic. Today, as a result of two years refining and transforming their clinical information systems, yes we are now a partner with an international company to delivery this very large and transformative project. This is a four to five year programme and to us this is one of the great projects that will see Malomatia working with an international partner to enable and deliver a large-scale project. This is a good example of what Malomatia does. This is a transformational project. It is a transformation of the way the hospital and the organisation operates. It has technical capabilities, it has change management capabilities, and implementation expertise and programme management needs, data migration experts and testing experts. It has clinical and IT capabilities under one programme. And this is what Malomatia offers today – the merging between clinical, business and the IT resources and capabilities.” The HMC partnership is a “landmark” one for Malomatia, as it plays not just to Qatar’s ambitions for a health and knowledge-based society, but has also created an opportunity for the fledgling company to create a niche for itself. “We have more than 50 plus subject matter experts in healthcare,” Al Naama says. “Some of them are doctors, some are experts in diagnostic imaging. This is unique for companies like ours and I would say we are one of the only ones.” Al Naama says these are day-to-day examples of Malomatia’s role in brokering the best expertise for the project, with a majority of their clients being, as he terms, ‘public entities’. “Public and private, we address both. From delivery in terms of project management, having the right business analysts to understand our clients in terms of gathering information, the right solution that fits the right requirements not the products’ requirements,” he says.

“Major companies are our partners, such as SAP, Oracle, Microsoft, IBM, HP. These are the large technology companies. We are very selective. Normally those companies like to sell the best features of their products. We like to position what’s best to the client’s interest regardless of technology.” According to Al Naama, in Qatar the trend is towards “modernisation” and “transformation” of processes, like what HMC is doing. “We always build a model with our partners. It’s a work share delivery model. We have a local sustainable accountability to our clients and our experts are in-house,” Al Naama says. “Malomatia comes as a vehicle to enable that sustainability. This is especially around modernisation and transformation. Clients are asking, how do I transform the existing processes in place into a more modernised and up-to-date approach?” Modernisation and also importantly change management are keys to the future of business in Qatar, as public and private bodies address competing in a global market. “These are long term operations. There will always be enhancement to the solution,” Al Naama says. “Change management is an area we try to address. Quite often you are changing the way a service or a system has been done for years. How do you deal with that in terms of change management? Through training and adaptions, and that is something we work [on] with clients.” Al Naama says the company is moving into a new phase of development – looking at new sectors as the nation’s economy diversifies. “In my view within the next few years there are two growth areas that we are currently looking into and our board has approved,” he says. “One area will be growing locally in terms of additional sectors such as growing our penetration in finance, telecom and petrochemical. These are sectors we have not been addressing because of our focus on health, education and government. Our other area of growth will be expanding into the Gulf Cooperation Council region. We have a great belief that we have the references, we have the right capabilities, we have the partnerships that could enable us to play an effective role in the region.” TheEDGE

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Infrastructure Projects

Markab study: Public Private Partnerships will be key aspect of GCC and Qatar development in February Dubai-based Markab Advisory released a new research study entitled Public Private Partnerships: A Vehicle of Excellence for the Next Wave of Infrastructure Development in the GCC. The study, sponsored by the Qatar Financial Centre Authority (QFC Authority) and the State of Qatar Ministry of Business and Trade (MoBT) concludes that Public Private Partnerships (PPPs) are poised to play a key role in underpinning the success of the next wave of infrastructure development expected in the Gulf Cooperation Council (GCC). TheEDGE spoke to Yousuf Al Jaida, director of asset management and banking of QFC Authority, about the Markab study and what it might mean for Qatar. The Markab Advisory study goes into detail regarding the economic advantages that PPPs have shown in other countries, but not much information exactly how this occurs. Can you elaborate on this briefly? The Markab report does briefly address some ways in which economic advantages have been achieved via PPPs in other parts of the world, for instance via efficient risk sharing by incorporating two different approaches to PPPs in the case of Australia. Furthermore, the usage of PPPs offers specific benefits that deliver both financial and non-financial advantages. Firstly, PPPs engage the private sector, which owing to its domain expertise, profit motivation and incentive to maximise the economic value of a project, is typically better equipped than the public sector to perform certain tasks and undertake certain risks, resulting in efficiency gains throughout the project’s lifecycle. Secondly, PPPs can provide fiscal space to the public sector as well as mitigate the non-financial limitations of the public sector with respect to procurement. A wide variety of projects including roads, airports, hospitals, railways, power projects, schools, waste management systems, stadiums and even prisons have been successfully built and managed with private sector participation. PPP projects are estimated to have exceeded US$1.5 trillion (QR5 trillion) over the last 25 years and over 50 countries have established a PPP Unit at a governmental level.

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Which countries offer the most efficient models to take as the best examples? Countries at the top of the PPP league, such as the United Kingdom (UK), Canada and Australia, share key attributes, for example, they have all have developed well-defined PPP policies and laws, established well-functioning dedicated PPP units, demonstrated a track record of several projects in various sectors, and acquired access to competitive project financing. In the example of the UK, the PFI was established in the 1990s and is considered an outstanding success in terms of the number and diversity of projects delivered. From 2002 to 2005 between US$6 billion to US$12 billion (QR21 billion to QR43 billion) of PPP projects were completed per year across sectors such as healthcare, defence, education and transport. This level of efficiency was achieved because the UK was able to develop a well-defined programme for various sectors – it provided clarity on the nature of partnership, type of contract and bidding process etcetera, so private contractors had historical reference and a sense of predictability about the process. In the case of Australia, the country’s fiscal position is very strong – public debt is around 26 percent of gross domestic product (GDP) – but PPP is still central to its public use infrastructure. Between 2005 and 2009 at least 55 PPP deals worth US$28 billion (QR101 billion) were completed. Australia operates two

PPP models in parallel with different payment scenarios. Firstly, the ‘Core Services PPP Model’ is where the private sector only undertakes ancillary service responsibility, whereas the government assumes the revenue and demand risk. In the second model, the ‘Economic Privately Funded Project Model’, demand and revenue risks are transferred to the private sector, for example

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utilities and toll roads. Australia has also been very successful in securing debt from banks and capital markets, and in this respect project finance has consistently exceeded 80 percent of the project. In the example of Canada, the PPP programme has been built on a ‘bottom up’ basis since PPP programmes were first established at provincial level. In 2008 the government created PPP Canada, the first federal level organisation to support the development of PPP projects throughout the country and in 2009 PPP Canada established a CAD1.2 billion (QR4.8 billion) fund. What can Qatar’s public and private sectors learn from this? There are key lessons to be learned from these success stories. Firstly, these examples demonstrate how efficiency gains can be achieved via effective risk transfer. By deciding on which kind of risk to transfer to the private sector, and which risk retaining, for a particular project, the public sector has better control over the total project costs. Secondly, on time and on cost project delivery is a key source of efficiency gains, while transparency that PPPs and the relevant infrastructure to enable PPPs entails, is another key driver for keeping costs under control. Thirdly, transfer of expertise and technical knowhow reduce the risk of mistakes in planning, building and operating the projects. Thirdly, by providing the public sector access to more diverse funding mechanisms and at times by transferring some of the costs associated with financing to the private sector, PPPs may impact the overall cost and availability of financing for a project. Expensive and delayed financing can completely offset any efficiency gains and so this is an important element of success to the PPP model. The Infrastructure Fund Unit in the UK, the PPP Fund in Canada and the government co-lending model in Australia are examples of the different ways in which governments have addressed funding issues. Lastly, by bringing in private sector expertise to public sector projects, a PPP may on several occasions benefit the ultimate customer, the end user of the service, by providing higher quality of services. Moreover, procurement of public services via private participation may in fact act as a catalyst for improvement of service delivery across other public sector entities. It is also important to note here that customising PPP structures towards creating ‘home-grown’ solutions is important; where countries develop PPP models which not only take into account the government’s needs but also the social, political and demographic environments as well as their long-term direction.

“The Markab report provides a high-level illustration of how PPP efficiency gains may translate up to US$30 billion (QR109 billion) in economic benefits for Qatar.” How do you think these kind of economic benefits will translate to Qatar? Although capital is abundant in the region, this report shows that PPPs can be seen as an innovative tool for efficiently delivering infrastructure projects in Qatar and the region. The Markab report provides a high-level illustration of how such efficiency gains may translate up to US$30 billion (QR109 billion) in economic benefits for Qatar. Though this is only an illustration and the exact quantification of benefits would require more in-depth studies, it provides the reader an idea of the magnitude of gains that may be achievable. Other benefits to Qatar could include: a rapid acceleration of the pace of infrastructure development; knowledge transfer to the local economy; the promotion of greater transparency and accountability; and the encouragement of excellent service delivery in infrastructure development which is particularly important for the 2022 World Cup. In terms of the GCC, the region plans to invest about US$2 trillion (QR7 trillion) over the next 10 years alone in infrastructure, leisure and tourism developments The Markab report again provides a preliminary illustration of the financial benefits that could result from the usage of PPP models. The report illustrates that efficiency gains through PPPs in the region could be in the order of 15 to 20 percent, by avoiding time and cost overruns, and, therefore, could, on the basis of US$2 trillion (QR7 trillion) in investment, result in savings worth US$400 billion (QR1 trillion) to the region. Empirical evidence from around the world, notably the UK, Canada and Australia, suggests that PPPs provide significant advantages in terms of completion of projects on time and within budget, when compared to traditional public procurement. PPPs also bring to a project the private sector’s technical ‘knowhow’ and expertise and can become an instrument to deliver excellence in infrastructure development. How committed do you think Qatar is to rolling out PPP type projects in the country in the future and in what sectors do you think the primary focus will be and why?

Infrastructure projects worth some US$200 billion (QR728 billion) are due to be completed in the next 10 years as part of Qatar’s National Vision 2030 development plan. US$80 billion (QR291 billion) are already underway while more than US$100 billion (QR364 billion) are expected to be started in the next three years. The pipeline of landmark Qatari projects includes the New Doha International Airport; a new Doha Port; the expansion of Education City; Msheireb, and gas developments in Ras Laffan. The 2022 World Cup will also give rise to considerable additional investment with approximately US$3 billion (QR10 billion) committed to building nine new stadiums and renovating another three. The event will also act as a catalyst to accelerate many of the US$200 billion (QR728 billion) of core infrastructure projects that were going to be carried out to realise the Qatar National Vision 2030 development plan. Estimates for the additional or accelerated government expenditure on related construction, transport and infrastructure vary between Moody’s US$57 billion (QR207 billion); Standard & Poor’s US$64 billion (QR232 billion); and Bank of America Merrill Lynch (BoAML) US$65 billion (QR236 billion). BoAML has estimated that the preparations will boost GDP growth by an additional two to three percent per annum up to 2020. Qatar’s Ministry of Business and Trade has set up a PPP Directorate to delineate the way forward for PPP in Qatar’s infrastructure projects. The Markab report also mentions that the Directorate is working with multilateral agencies and other governmental departments in developing the business case and policy framework for PPPs in Qatar and is expected to work on a PPP law once the policy framework is in place and the business case is established. The Directorate could be a starting point for setting up a Central PPP Unit as a focal point for the planning and implementation of the PPP initiative and related projects. Opportunities exist across a range of sectors in Qatar including power, water, railways, roads, education, health care and sports infrastructure for the 2022 World Cup. These are the core infrastructure projects needed to realise the National Vision 2030 and for the World Cup. TheEDGE

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What changes if any might need to be made to regulations for PPPs to succeed? The report highlighted that PPP can be perceived as a threat over day-to-day authority and control since it involves ceding certain responsibilities to the private sector. However, this can be addressed by taking gradual steps towards PPP implementation. Another obstacle can be an underdeveloped capital market, as large-scale PPP projects often require private sector consortiums between local and international companies. The lack of depth in regional capital markets often constrains the participation of local partners with limited financial capital. It also restricts the participation of international investors, financial investors and infrastructure funds etcetera. In this respect the QFC Authority is already working hard to develop Qatar as an asset management hub in the region and developing the presence of dedicated infrastructure funds within the QFC could play a role. Qatar is also taking steps to deepen its capital markets. In Qatar, the MoBT has set up a PPP Directorate and is developing the business case and policy framework. The MoBT is also expected to work on a PPP law and set up a Central PPP Unit for the planning and implementation of PPP initiatives. This would then need to select the most appropriate PPP model(s) for Qatar and possibly develop customised ‘home-grown’ solutions for sectors such as education and healthcare. Overall for the PPP model to be introduced more fully in Qatar there is a need to shift from PPP projects done in isolation to programmes covering a wider variety of sectors. enabling transfer of knowledge and expertise. Power sector PPPs have already been successful in Qatar. How can they can play a role in assisting other sectors? Ras Laffan is a prime example of this where, starting in 2001, it has been a template for expanding Qatar’s Integrated Water and Power Plant Project (IWPPP) programme and today is one of the largest IWPPs in the region. Top-tier global power development companies such as AES, Marubeni and Mitsubishi participated in building and managing these plants and today over two-thirds of Qatar’s power generation capacity is installed through PPP arrangements. Qatar has subsequently selectively undertaken projects in other sectors on a PPP basis, including water and waste management, transportation and education projects and is currently working on a pilot PPP project in the healthcare sector. All the building blocks are already present, including

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“The private sector is typically better equipped than the public sector to perform certain tasks and undertake certain risks.” an extensive pipeline of infrastructure projects, resident PPP expertise, leadership support and a growth momentum. The main way the power sector experience can assist us is by utilising the resident PPP expertise built up in this sector since 2001 and transferring this know-how to other sectors. Firstly, existing core infrastructure sectors where resident expertise is already in place. Secondly, other core infrastructure sectors such as railways and roads. Typical PPP projects in railways and roads are structured to pass on the demand risk to the private sector. This may be a challenge in Qatar, given its low population, so the Build-Transfer Operate (BTO) model maybe more viable, whereby the private sector undertakes the design and build risk and transfers the asset to the government on completion. Thirdly, social infrastructure, such as education and healthcare, which offers innovation opportunities in the PPP domain; however, there are no standardised solutions within this and it largely requires customised ‘home-grown’ solutions. Lastly, sports infrastructure for the 2022 World Cup. There are global precedents of having PPP as a model for building and managing sports facilities but Qatar’s position is unique. Understanding the potential revenue models, during and after the World Cup, would be the key to deciding the appropriate structure. Qatar also has the opportunity to learn from best practices from other countries around the world and region, including which specific PPP models to adopt. What role will the QFCA play? The QFC Authority could play an important role in developing the PPP model in Qatar by building on the QFC’s world-class legislative framework to attract the best among infrastructure financing companies, including infrastructure funds and asset management companies. The development of Qatar as a regional hub for asset management is already being strongly supported by the QFC. For example, the QFC Regulatory Authority published revised rules to extend the QFC’s Collective Investment schemes regime. These revised rules are set out in the Collective Investment Schemes Rules (COLL) and the Private Placement Scheme Rules (PPIV). The revised rules aim to facilitate the development of

the sector in the QFC in line with international best practices. QFC’s focus on captive insurance may be another area. A recent report by MEED Insight – the GCC Captive Insurance Guide – indicates that many contractors and project sponsors in the region are currently paying premiums based on global risk profiles rather than those specific to the Middle East, where there is a low catastrophe risk, litigation risk profile and generally lower construction-related risks. Potential private sector partners in infrastructure projects may therefore benefit from establishing a captive within the region. At the QFC, a new regulatory regime for captives was introduced in July 2011, comprising the Captive Insurance Business Rules 2011 (CAPI) and Insurance Mediation Business Rules 2011 (IMEB), making Qatar one of only three domiciles in the GCC with a focused captives regulatory regime. What does this mean for potential PPPs? It offers firms a degree of flexibility in captive structuring that was previously unavailable in the region, and increased flexibility in meeting capital and collateral requirements. Between 2006 and 2010 the insurance market in Qatar grew by an annual compound rate of 12 percent, while the rate in the GCC was 22 percent. A recent BMI report forecast that insurance premiums in Qatar will treble between 2010 and 2015. Demand for insurance – and reinsurance – services in Qatar is being driven in particular, by Qatar’s massive infrastructure growth as well as favourable macroeconomic conditions and growing consumer wealth. Qatar and the GCC markets rely heavily on international reinsurance where, for example, the aggregate GCC cession rate was 45 percent in 2011 and even higher in Qatar. The QFC Authority is strongly supporting the development of the reinsurance capacity in Qatar and this in turn would provide further support to the development of PPPs here for infrastructure development. The QFC Authority also seeks the continuous evolution of the regulatory environment to ensure the optimum conditions for financial services growth, particularly in the three key areas of asset management, reinsurance and captive insurance, as demonstrated by the recent reforms to QFC regulations.

TRAVEL & LIFESTYLE AMMAN BUSINESS TRAVEL INSIDER (P.84) This month TheEDGE gives you an insight of one of the Levant’s most ancient and yet modern cities.

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10 things: 10 famous entrepreneurs who have been in trouble with the law (P.88).

TRAVEL

Business Travel Insider: AMMAN A city built of white stone spread over seven hills, Amman is a true fusion of ancient and modern. Victoria Scott shares her tips for a successful trip to Jordan’s diverse capital city. Getting there: Qatar Airways (www.qatarairways.com) flies to Amman’s Queen Alia airport daily. Economy fares start at QR2360 in mid March, and Business fares start at QR6770. Royal Jordanian (www.rj.com), Jordan’s national carrier, flies to Amman from Doha five times a week. Economy fares start at QR2140 in mid-March, business fares from QR4310. The flight time is around three hours. Most visitors will be able to buy a visa on arrival. Contact the Jordanian Embassy in Doha (www.jordanembassy.com.qa) for details. A taxi from the airport to the city centre should cost you 17 Jordanian Dinars (JOD). Fares from the airport to the city are fixed. Currency: (Exchange rate as of January 2012) Jordanian Dinar 1 JOD = QR 5.1 Where to stay: Kempinski Amman, Abdul Hameed Shouman Street (www.kempinski.com/en/ amman) Geared up to meet the business traveller’s every need, this five star hotel offers luxury and convenience – it is within easy reach of the city’s business district. The front desk staff are helpful and friendly, and the hotel’s spa comes highly recommended. Rooms start from JOD120 (QR612) a night in mid-March, excluding breakfast. Four Seasons Amman, Al-Kindi Street (www.fourseasons.com/amman) Offering luxurious rooms and excellent business facilities, this place is what we have come to expect from the Four Seasons group. JOD165 (QR841) a night including breakfast in mid-March. Grand Hyatt Amman, Hussein Bin Ali Street (amman.grand.hyatt.com). Located in the city’s business district, Jabal Amman, directly linked to Zara Expo, Jordan’s leading

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exhibition and conference centre. JOD137 (QR698) per night in mid-March, including breakfast. Clubroom rates from JOD187 (QR953) a night. Where to play: Levant (www.levantjo.com) Levant, meaning “place where the sun rises” showcases food from Lebanon, Syria, Jordan and Palestine. Famed for its excellent service, it is the place to go for fresh, exciting, ‘gourmet’ Arabic food. Books@Cafe (booksatcafe.com) if you are looking for somewhere more informal, this lovely café and bookshop in Jabal Amman has a huge deck with fantastic views. With free Wifi throughout, it makes an excellent location for a combining business with pleasure.

Culture vulture: Although traditionally a base for explorations further afield, Amman does have a few must see sites of its own. Built into the hillside and seating up to 6000 people, the Roman Theatre is one of the city’s major landmarks. Probably built in the second century, this restored arena is still used for performances in the summer months. Located at Amman’s highest point, the area known as the Citadel (Jabal al-Qal’a) is well worth a visit. The Jordan Archaeological Museum is here, along with three important archaeological sights: the remains of a small Byzantine church, the Al-Qaser (the Palace), which dates back to 720AD, and the remains of the Temple of Hercules, built around 180AD. Splash your cash: For fashion, head to one of the city’s numerous modern malls - The City Mall and the Plaza Mall are both good options. For designer goods, head to Sharia’a Al Wakalat (Brands Street). The Balad area is the home of many souqs, traditional shops and street vendors. Souvenirs you might like to bring home include the keffiyeh, the traditional checkered headpiece worn by Jordanian men, and hand crafted Jordanian daggers and olivewood carvings. Insider top tip: Head to the Citadel at sunset. Time it right, and you will hear the muezzin call from all over the city as you take in the beautiful view.

LIFESTYLE LIFESTYLE

A Guide To: Doha’s…best brunches

What would a Friday be without a brunch? TheEDGE shares its favourite places for a spot of weekend over-indulgence. Marriott With its lovely sea view, relaxed ambience and oodles of choice, the Marriott’s brunch is a perennial favourite. There is a play area for the kids with a face painter on hand, and with food options from around the world. (4429 8888) Brunch served noon-3.30pm. QR235 with soft drinks, QR340 with alcohol. Grand Hyatt The Grand Hyatt has two brunch options – one at Isaan offering all-you-can-eat Thai food, and The Grill hosts their more conventional brunch. The Grill’s terrace allows you to sit outside. Special kids dishes are offered, and you can also take advantage of the hotel’s supervised Jaula Kids Club, free if you are having brunch (4448 1234) Brunch served 12.30pm-4pm. QR250 or QR359 including alcohol. Ritz Elegant surroundings in the hotel’s Lagoon restaurant and excellent food make this a very popular choice. You will be accompanied by live music and children have their own junior buffet and entertainment on the Lagoon terrace. Book a window seat for a sea view. (4484 8000) Brunch served noon-4pm. QR220 or QR295 including bubbly.

W Doha Brunch aficionados rave about the Spice Market brunch at the W; “Great food, great tunes and great staff” says one regular customer. Here you can take your pick from the restaurant’s Southeast Asian cuisine, accompanied by a DJ playing hit music from around the world. (44535363). Brunch served 12-4pm, QR280 with soft drinks, QR320 with bubbly.

TheEDGE Getaway - Four Seasons Seychelles Luxury and privacy go hand in hand at the Four Seasons Seychelles. The resort, situated on the main island, Mahe, has 67 beautifully decorated private villas, some by the beach and some nestling in the hills, giving stunning sunset views. Each villa has its own infinity pool and private deck. And if you loved tree houses as a child, opt for one of the villas perched on stilts amongst the trees. Spread out across a large area, transport around the resort is by golf buggy. The beach has brilliant white sand and turquoise water – a classic piece of paradise. The hotel’s spa has a view so gorgeous it is likely to relax you on sight. But if it is activity you are after, there is a jogging trail through the jungle, a well-equipped gym and complimentary yoga. And if you have come with your family, there is an excellent kids’ club and babysitting available, with thoughtful touches like complimentary childproofing of your room before your arrival. They have thought of everything, so you do not have to. Worth the luxury price tag, we reckon.

A hilltop Ocean-view villa at the Four Seasons Seychelles costs EUR975 (QR4560) a night in mid-March, including breakfast. www.fourseasons.com/seychelles

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LifESTYLE

SUMMER ESSENtIALS Toby bateman, buying director of fantastically iconic shopping website, www.mrporter. com, recommends some must-haves for the fashionable man’s summer wardrobe in 2012: BRoWN sUEdE loAFERs Summer calls for laidback and anything but black, and these brown suede loafers from Jimmy Choo are as casual as dress shoes can get. Wear with jeans or chinos on the weekend and look perfectly pulled-together, or team with a blue suit at the office for the height of professional style.

BRIEFcAsE Update your image with a new briefcase, preferably a beautifully made classic such as a Swaine Adeney Brigg option. This understated style will look good for years and last for decades. gREy sUIT Everyone has navy and charcoal suits, but this light grey checked suit from Paul Smith is undoubtedly the most stylish option for summer. IpAd cAsE Instead of touting a boring black iPad case (or one overwrought with logos), why not refresh your favourite tech gadget for the season with a new Commes des Garcons holder? Their leather iPad case is available in

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chocolate brown, but we think the turquoise is more unexpected. MoNK-sTRAp sHoEs As mentioned in a previous issue of TheEDGE, monk-strap shoes are all the rage. This John Lobb pair offers a more rugged feel with a substantial sole, and is available in either grain leather or suede. Wear with trousers with deep cuffs.

READ iT: tHE 3rD

ALTERNATiVE Subtitled ‘Solving Life’s Little Problems’, this best-selling book by United States author Dr. Stephen Covey is all about finding solutions to conundrums and conflicts outside of the conventional two methods of confrontation and/or compromise. Covey feels that neither produces the ideal outcome, which is the clichéd ‘win-win’ finale. In this easy-to-read and enlightening offering, Covey offers his take on how, if we seek out the third alternative and abandon selfish self-fulfillment, we can make our personal and professional lives more successful.

Available from Virgin Megastore for QR119.00. WHITE T-sHIRT If American style has taught us anything, it is that few people look bad in blue jeans and a simple white T-shirt. The classic white T-shirt from J.Crew is close to perfection. Weekend style could not be easier. JApANEsE JEANs As Toby Bateman says, “The Japanese take their denim very seriously, which is why they produce the world’s finest.” A washed selvedge denim pair from Edwin has a great slim fit cut and feels like your favourite old pair. coloURFUl dEcK sHoEs Who can remember what we wore before the current deck shoe revival? This summer, stay on trend in a colourful pair that will look as at home in Doha as in the Hamptons.

NoKIA SMArtPHONE uPDAtE

Nokia Smartphone owners in Qatar can update their current phone with the latest Nokia Belle software update. The new software delivers the latest innovative technologies to enhance the consumer experience and improves smartphone performance while allowing users to upgrade their existing mobile handsets. The upgrade will allow Nokia N8, E7, E6, X7, C601, C7, Oro, Nokia 500 devices to experience a whole load of enhancements. These include new widgets, more customisation options, new apps and built-in NFC functionality. To upgrade Nokia Belle, users need to run the latest version of Nokia Suite 3.3 on their PC and connect their handset.

10 TEN THINGS

Bill Gates In 1975, then aged 19, Gates was arrested for speeding in New Mexico, and charged with speeding and driving his Porsche 911 without a licence. Gates, who was in his car with Paul Allen, was freed on bail of US$1000 (QR3640) – it was only the first of three such arrests in the late seventies.

Julian Assange The WikiLeaks founder released hundreds of thousands of sensitive government documents to the public, and was most recently accused by two women of rape and molestation. In 2010, he was arrested and taken into custody in London on a Swedish warrant. Martha Stewart The homespun crafts maven became tangled in an insider trading scandal which involved her selling her shares in a drug company the day before an FDA decision caused the stock to fall. She was convicted of conspiracy and obstruction of justice in 2004, and spent five months in a West Virginia prison. She took less than a year to make a full comeback. Henry T. Nicholas Technology billionaire and cofounder of Broadcom, Henry T. Nicholas was portrayed as a drug fiend who trafficked in the likes of cocaine and methamphetamine, spiked the drinks of employees and associates, hired prostitutes for himself and others, and maintained several narcotics dens, including one underneath his Los Angeles mansion. It took two years of accusations before the criminal and civil cases against him were thrown out for lack of evidence. Peter Moceo While Peter Moceo was passionate about his business, a high-end rice pudding shop in New York called Rice to Riches, it was

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Entreprenuers Behind Bars Entrepreneurs by nature enjoy living life by their own rules. Unfortunately for this infamous lot, the law was none too pleased.

his sideline in gambling that made him truly wealthy. In 2005, Moceo was arrested and charged with being the mastermind behind a US$22 million-a-year (QR80 million) gambling ring, which reportedly operated out of his rice pudding store. Joe Francis Joe Francis – the young entrepreneur who made his millions with the Girls Gone Wild films – has had many run-ins with the law, including a 2003 arrest in which he was charged with racketeering, drug trafficking and child pornography, a case thrown out of court in 2007 for lack of evidence. In 2008 he was convicted on child abuse and prostitution charges, and sentenced to jail time. In 2009, Francis stated that the Internal Revenue Service had seized over US$100 (QR364) million in cash from his bank accounts after he had failed to pay personal income taxes for three years. Kim Dotcom Popular Hong Kong-based file-sharing service, Megaupload, was shut down by United States authorities who accused the founder, Kim Dotcom, of facilitating millions of illegal downloads, which they claimed cost US$500 million (QR1.8 billion) in lost revenue for entertainment artists. Dotcom, a German national formerly charged with insider trading, is in a New Zealand prison for the duration of his trial. Pink Lee Pink Lee, founder of Pinkberry, may have some anger management issues. He was recently arrested in Los Angeles for felony aggravated assault for allegedly beating a homeless man panhandling near his car in June 2011. The victim was hospitalised for a broken arm and cuts to the head. But this was not an aberration in behaviour for Lee, who

was convicted in 2011 for the misdemeanour of carrying a loaded firearm. In 2010, he left his position at his frozen-yoghurt chain, Pinkberry, and only serves in an advisory position these days. Gabrielle ‘Coco’ Chanel When the Nazis marched on Paris, she retired and moved into the Hotel Ritz with her new boyfriend, Nazi intelligence officer Hans Gunther von Dincklage, 13 years her junior. After the liberation of France, Chanel was arrested for her wartime activities. Winston Churchill, a close friend of her former lover, the Duke of Westminster, intervened on her behalf and she was released. She soon sold the rights of Perfumes Chanel in exchange for a monthly stipend that supported Chanel and von Dincklage. Lakis Gavalas Businessman Lakis Gavalas was arrested late last year for non-payment of VAT amounting to nearly EUR150,000 (QR750,000), and rumours soon surfaced of his potential involvement in money laundering. The entrepreneur, often dubbed ‘King of Lifestyle’ and Greece’s “Guru of Fashion” has had legal woes before, including allegations of tax evasion to the tune of EUR5 million (QR25 million). He is currently in jail awaiting trial.