The Edge - Nov 2010 (Issue 16) by Firefly Communications

From The Editor

Foreign trade is one of the sectors playing a central role in shaping the economic relations between Qatar and the rest of the world. Export revenues are the chief source of financing public expenditure and development in the country. The state supports a freemarket policy and is part of the World Trade Organization, which Qatar joined in 1996. Qatar’s commitment to free trade played a valuable role in hosting and facilitating the launch of the Doha negotiations (the Fourth Ministerial Conference in 2001 – the Doha Round) the global trade negotiations, which aim to open markets and promote economic development. Qatar is an active member in the Gulf Cooperation Council, the Organization of Petroleum Exporting Countries, the International Money Fund and the Organization of Arab Petroleum Exporting Countries. Additionally, it is a member of the Arab League and joined the United Nations in 1971, and has been an active participant in its various bodies and agencies. The hydrocarbon industry continues to dominate Qatar’s export market and Asia is the primary destination for Qatari exports, most notably Japan, which acquires the majority of crude oil from Qatar. In 2009, Japan took out pole position for Qatar’s major trade partners constituting QR58.9 million in trade followed by the European Union (EU) (QR44.3 million), South Korea (QR40.9 million), Singapore (QR16.3 million) and the United States (US) (QR12.7 million). Qatar’s top five major export partners were Japan (QR52.8 million), South Korea (QR34.2 million), Singapore (QR15.3 million), EU (QR14.7 million) and India (QR7.4 million). While the EU topped the charts for Qatar’s major import partners with QR29.7 million in trade, followed by the US (QR10.9 million), South Korea (QR6.7 million), Japan (QR6.5 million) and China (QR3.8 million). While the hydrocarbon industry flexes the most muscle for the state’s economy, Qatar’s leaders have grown savvy in recent years to the fact that they cannot solely rely on a depletable resource-based economy. This mindshift has forced the country to embark upon an aggressive and major diversification programme. As part of this programme, Qatar has opened its doors to a growing number of investors, entrepreneurs, foreign workers, international companies and both domestic and foreign individual investors. Qatar has evolved into a future focused forward thinking state, which has learnt from the free zone infrastructure success of its United Arab Emirate neighbour, Dubai.

Qatar has already developed popular free zones such as the Qatar Financial Centre and Qatar Science and Technology Park in a bid to encourage international investment. Building on this success the Ministry of Economy and Commerce of Qatar plans to develop three further free trade zones in various locations in Qatar, which are expected to be completed by 2013. On the economics of Qatar’s diplomatic front, while American political influence is declining in the Middle East, Qatar is an emerging power with increasingly significant political and economic relations, which has regional and global dimensions. In recent years, the tiny Persian Gulf emirate has spared little effort to bolster its international economic and diplomatic profile. It mediates conflicts across the Middle East and Africa, while pursuing policies that are often anathema to many of its allies. It has largely succeeded in these efforts because the disputing parties have welcomed its involvement, believing Qatar to be an impartial nation with large purse strings. The country’s leadership plays a prominent role in the Arab world in promoting democratic values, good governance, the rule of law, popular participation in political processes and, more broadly, in reforms on a political, economic and social level. However, the guidance and goodwill the state provides at home and abroad will not, by itself, be enough for Qatar to sustain prominence. This emirate still faces several challenges relating to the delicate diplomatic balance it maintains with two of its greatest allies, the US and Iran. Qatar hosts the Pentagon’s Middle East forward headquarters at Assaliyah, and the largest airbase outside North America, at Al Udeid. However, it has maintained close relations with Iran – sometimes to the frustration of regional powers such as Saudi Arabia and Egypt. So far, Qatar has been successful in manoeuvring between sometimes-conflicting bilateral relationships. But, closer relations with Iran could have a wider impact in the region, in particular on Qatari relations with Saudi Arabia. Both Saudi Arabia and Egypt are wary of Qatar’s moves, and should Qatari ties with these countries come under strain, it may draw closer to Iran in response. Qatar will have to remain vigilant of regional attempts to obstruct its ascension in the diplomatic realm. And there may be no greater test of Qatar’s statecraft than its ability to navigate the looming confrontation between the US and Iran.

Kelly Lewis Managing Editor

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WHO WE ARE

Managing editor Kelly Lewis k.lewis@firefly-me.com +974 55067574 Acting editor Miles Masterson m.masterson@firefly-me.com +974 66080447 COPY EDITOR Megan Masterson megan.masterson@firefly-me.com +974 55348748 REGIONAL SALES DIRECTOR Julia Toon j.toon@firefly-me.com +974 66880228 SENIOR SALES manager Emma Land e.land@firefly-me.com +974 33197446 Sales Executive Giuseppe Ciccarello g.ciccarello@firefly-me.com +974 33842744 Marketing administrator Azqa Haroon a.haroon@firefly-me.com +974 55692471 Creative director Roula Zinati Ayoub Art AND DESIGN Lara Nakhlé Rena Chehayber Rana Cheikha Charbel Najem Hadeer Omar

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 12 times yearly to a readership base of more than 7500 professionals, providing advertisers with the needed additional reach and frequency to their most important audience. TheEDGE is an authoritative business resource serving both large and small business operators.

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TheEDGE is printed monthly © 2010 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 Getty Images and/or iStock Photo.

CONTENTS

CONTENTS www.theedge-me.com

.9.

November 2010

Contributors

A brief introduction to the specialised team of contributors who lend their expertise and insight to TheEDGE.

.10. NEWS IN BRIEF

A snapshot of the latest business developments affecting the business landscape within Qatar and the GCC region.

.13. NEWS IN NUMBERS & PICTURES Important statistics that made an impact.

.14. news in quotes

Powerful statements about the monthâ&#x20AC;&#x2122;s biggest stories.

.16. web watch

Our top website picks for the business community.

.17. ON THE EDGE

What lessons can Qatar learn from the disastrous public relations campaign of the 2010 Commonwealth Games?

.18. BURNING QUESTION

In this new section, TheEDGE approaches heads of trade and industry to get their feedback on our burning question of the month.

.20. BUSINESS INSIGHT

TheEDGE speaks to industry professionals to uncover the latest news on the business front.

TheEDGE

CONTENTS

.37. INSIDE EDGE

Phil Strange questions the motives of the world’s central banks with regards to currency issues.

.40. COVER STORY

Qatar has made headlines the world over with its intelligent and politically savvy international investment strategy. Rachel Morris reports.

.46. ECONOMIC BAROMETER

Karim Nakhle profiles the actions being taken by powerful countries to exert control over their currencies. Could this be the new Cold War?

46 .28. THINKER’S CORNER

Gallup and the Silatech Index indicate that the Arab League’s brightest young minds are keen to emigrate.

.30. IN THE SPOTLIGHT

As scandal hits both FIFA and international cricket, Christine Toner investigates rising corruption in sports.

.34. MARKET WATCH

We survey the promising results of the World Economic Forum’s Global Gender Gap Report 2010.

.49. ON THE PULSE

Far-fetched as it may sound, there exists the possibility for sustainable desert farming, which could change the region’s economies. Edward Jameson takes a closer look.

.52. GREEN BUSINESS

Sam Pickering investigates how sustainable biofuels will benefit Qatar’s quest to be carbon neutral.

.55. ENTREPRENEUR

Miles Masterson interviews Maryam Al Beshri about her first-of-its-kind business, Biz-Events, a franchise focused on corporate team building.

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CONTENTS

Visit Our New Showroom Located in Al Khor opposite side of Al Khor Mall

.58. SPECIAL FEATURE

Investing in art is increasingly seen as a lucrative means of financial returns. Miles Masterson investigates the global rise in interest in so-called ‘Islamic art’ and asks whether buying art is indeed a wise investment.

.63. BUSINESS VIEW – REAL ESTATE

Edd Brookes takes a closer look at the new residential hot spot of Doha, The Pearl.

SPECIAL REPORT .68. New regulations for Islamic banking in Qatar will

change the way conventional banks offer Shari’ahcompliant services. Greg Harris reports.

.70. BRAND BEAT

Charlotte Stubbs asks if the creative energy and different objectives of art and design can be harnessed to help an organisation connect with its marketplace.

.72. BALANCE SHEET Opening Hours: Saturday - Thursday 7am-5pm Friday Closed P.O.BOX 150 Doha, Qatar T +974 4421 8601 F +974 4417 0351 E isd@jaidah.com.qa

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Ahmed Hussain’s overview of issues affecting how foreign entities are able to conduct business in Qatar.

.75. LEGAL INSIGHT

Nikk Bond and Hani Naja discuss the details of Qatar’s new E-commerce Law.

CONTENTS

.78. BUSINESS KNOW-HOW

What is the one critical trait that today’s greatest leaders have in common? Wassim Karkabi discovers that it is not what you may expect.

.81. HEALTH & SAFETY

When there are no standardised methods for measuring health and safety perfomance, Mark Kenyon recommends a proactive approach.

.84. INDUSTRY FOCUS

Derek Atkinson looks at the exciting new developments that may offer solutions for environmentally friendly alternative fuels.

81 .100. EVENTS AND CONFERENCES

Your monthly go-to list for the latest business opportunities in Qatar.

.102. qATAR PROJECTS

An update on projects taking shape in Qatar.

.103. TENDERS

Your monthly go-to list for the latest business opportunities in Qatar.

.88. HOW-TO GUIDE

Get the best out of your corporate blog.

.92. TECH TOOLS

TheEDGE looks at the latest gadgets hitting the shelves this month.

.94. LIFE & STYLE

Thomas Woolf discovers the danger of ‘sick building syndrome’ on the bottom line, and Megan Masterson goes mad for Melbourne.

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CONTRIBUTORS

The Usual Suspects...

p.30 Christine Toner Economic Correspondent London, United Kingdom

p.37 Phil Strange Chief Financial Officer Dun and Bradstreet South Asia Middle East

p.40 Rachel morris Freelance Journalist Middle East and North Africa Region

p.46 Karim Nakhle Senior Business Strategist Doha, Qatar

p.49 Edward Jameson Senior Business Journalist Middle East and North Africa region

p.52 SAM PICKERING Managing Director BG2 Global Solutions London, United Kingdom

p.63 Edd Brookes Director and Head of Valuation DTZ Middle East

p.68 Greg Harris Editorial Manager Oxford Business Group Doha, Qatar

p.70 CHARLOTTE STUBBS Client Services Creative Action Design Doha, Qatar

p.72 Ahmed Hussain Partner in Charge KPMG Doha, Qatar

p.75 Hani Naja Legal Consultant DLA Piper Doha, Qatar

p.75 Nikk bond Senior Legal Consultant DLA Piper Doha, Qatar

p.81 Mark Kenyon Health and Safety Group Leader URS Qatar LLC Doha, Qatar

p.94 Thomas Woolf Founder PTX Performance Training Doha, Qatar

All contributors to TheEDGE are wellregarded leaders in their respective industries. If you are interested in joining the esteemed panel of contributors, please contact the managing editor, Kelly Lewis at k.lewis@ firefly-me.com

TheEDGE

NEWS IN BRIEF

LOCAL FIFA QUESTIONS SPAIN AND QATAR OVER BID COLLUSION FIFA’s ethics committee will investigate the leaders of the Iberian and Qatar bids to host the World Cup over allegations of vote trading. The investigation was formally opened late last month. Ethics committee chairman Claudio Sulser is looking at the allegations that the two bids agreed to back each other in the separate contests for 2018 and 2022 respectively. FIFA general secretary Jérôme Valcke said the collusion allegations were first brought to his attention several weeks ago. The committee will also consider what role executive committee members allied to Qatar and Spain may have played. QATAR MOST PREFERRED EQUITY MARKET IN GCC Twenty-five brokers published 288 research notes on 133 companies during the third quarter, compared to the 270 research notes on 110 companies published in the second quarter of the year, according to a recent report by Kuwait Financial Centre Markaz on Gulf Equity Research Statistics. During this quarter, 19 percent of all Gulf companies received research coverage, representing 71 percent of the total market cap. Qatar remained the most preferred equity market, with all 19 research notes during the third quarter receiving “buy” ratings. NEW QATAR PROJECTS TO TOP US$120 BILLION OVER THE NEXT 10 YEARS Qatar is to invest QR450 billion into local projects over the next 10 years, according to a senior government official. Speaking to the Arab daily newspaper Alwatan , Yousef Hussain Kamal, the country’s Minister of Economy and Finance said that the government would invest billions of riyals into the development of infrastructure, oil, gas and petrochemical projects. “However, this does not mean that Qatar will stop investment abroad,” he said. Kamal said Qatar’s investments enjoy diversity and variety internally and externally.

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QATAR TO OPEN EMBASSY IN SAN JOSÉ Qatar announced plans to open its sixth embassy in the Americas in the Costa Rican capital of San José. The embassy would be Qatar’s only diplomatic office on the Central American isthmus and one of five in the Americas. It would also be the only Arab embassy in Costa Rica. The groundwork for diplomatic relations was laid in the Oscar Arias administration, during an exchange in New York in September 2007, and a later visit by Arias to the Middle Eastern country. Arias’s visit was reciprocated in January when the Emir of Qatar visited the northwestern province of Guanacaste. During that meeting, representatives from both countries discussed investments from Qatar in fields such as technology, science and the economy. QATAR AND UAE RANK EIGHTH GLOBALLY IN BROADBAND LEADERSHIP The Qatar and United Arab Emirates (UAE) broadband quality is better than most of the developed countries, including those of G-7 states, and has been ranked among top 10 in a survey of broadband leadership. According to Cisco’s third annual broadband quality survey, broadband access to households has reached 100 percent as against 70 percent last year and 65 percent in the previous year. The UAE ranking has been constantly improving over the past three years. It was ranked eighth worldwide in 2010 against 12 in 2009 and 18 in the previous year. Qatar has also been ranked on par with the UAE in 2010. In terms of evolution, the UAE has seen steady improvement in the ranking. It has jumped to eighth position in 2010 from 12 in 2009 and 19

in the previous year. However, Qatar fell from second position in 2009 to eighth this year. ARABS EYE INITIATIVE TO COMBAT HUMAN TRAFFICKING IN MIDDLE EAST The five-day Conference of the Parties to the United Nations (UN) Convention against Transnational Organised Crime hosted more than 300 delegates and experts representing member states last month. Director General of Qatar Foundation for Human Trafficking Combating, Maryam Al Maliki submitted, during the meeting, a report on the role of Qatar as subsidiser and financer of the above-mentioned initiative. In addition, a report was also presented by the Norwegian delegate on the role of his country in offering financial support to the Arab initiative. GULF AIRLINES FACE NEW EUROPEAN CHALLENGE The Gulf’s airlines, which over the last decade conquered the world’s skies with armadas of long-haul jets serviced by glitzy airports, face a new challenge to their business from their European rivals, even as they move to double their capacity. Led by Emirates, Qatar Airways and Etihad Airways, Gulf carriers have US$200 billion (QR728 billion) of new jets on order for delivery over the next 10 years, a buying spree that will more than double the number of seats they can offer fliers. “We’re heading for a big bloodletting,” Philip Butterworth-Hayes, lead consultant at the British-based aviation consultancy PMI Media, told The Media Line. “This growth rate is sustainable for the moment, but the big legacy carriers in Europe are starting to forge more effective alliances.”

NEWS IN BRIEF

INTERNATIONAL HARRODS COULD SOON BE A HOTEL Well-heeled London travellers may soon be able to shop at Harrods without ever leaving their hotel, according to London’s Evening Standard. The newspaper reported that Qatar’s royal family is looking to open a hotel atop the store to attract wealthy tourists to the ritzy Knightsbridge area, home to such top-tier hotels as the Mandarin Oriental. The idea is reported to be still in the planning stages, but is said to be part of a strategy to expand the Harrods brand – which includes an in-store Harrods Bank that sells gold bars and coins – by opening a chain of luxury hotels in other cities. DEAL TO DEVELOP WALKIE TALKIE SKYSCRAPER Land Securities and Canary Wharf Group have agreed a GBP500 million (QR2.8 billion) joint venture backed by sovereign wealth from China and Qatar that will see the development of London’s next large skyscraper, the Walkie Talkie. Canary Wharf, the owner of the Docklands estate, recently finalised a deal to buy half the 690,000 square foot tower development for about GBP250 million (QR1.4 billion). The developer is expected to bring in China Investment Corporation, Qatar Holdings and Morgan Stanley, three of the main shareholders of Songbird, its parent company, to acquire stakes in its share of the scheme. GERMANY UNDAUNTED BY SIGNS OF SLOWDOWN German business sentiment hit a three-anda-half year high last month, another sign that the recovery of Europe’s largest economy could continue despite problems faced by the United States and other big trading partners. The Ifo Institute for Economic Research said its business-climate index rose to 107.6 last month, 1.2 points more than in September, a move that surprised analysts, who had expected the index to decline. “The only path for German business confidence appears to be up,” said Alexander Koch, an economist at Unicredit, noting that companies seemed “unimpressed” by signs that the global economy is slowing.

TheEDGE

SHARP PULLS OUT OF PC BUSINESS Sharp announced its plans to withdraw from the PC business to focus solely on new endeavours like the Galapagos tablets slated to be released this December, in addition to e-books, music and video content for the Galapagos and similar products. This move comes after Sharp’s admission of its inability to bring profitability to the standalone PC business model. However, the Japanese electronics giant maintains this to be a “strategic” move, and the company may return to the PC business in the future. However, Sharp will still manufacture ultra compact devices, which include the Netwalker series of devices. INDIA’S ABG SHIPYARD BAGS ORDERS WORTH US$84 MILLION ABG Shipyard, an Indian ship manufacturing and repairing company, announced that it has received orders worth US$84 million (QR305 million) from two different customers. The first order is worth US$65 million (QR236 million) from Qatar-based Halul Offshore, which is being jointly promoted by Qatar Shipping Company and Qatar Navigation, it said in a filing to the Bombay Stock Exchange. The second order, of US$17.5 million (QR63.7 million), is from an Italian shipping company, Marnavi Spa.

GULF COUNTRIES HAVE THE LARGEST ECOLOGICAL FOOTPRINT Ranking among the top 10 in the world is usually an amazing accomplishment, but not when it comes to the data released late last month. According to World Wildlife Fund international Living Planet Report, two Gulf states hold the dubious distinction of first and second place among countries with the largest ecological footprints. United Arab Emirates ranks first, followed by Qatar, while Denmark, Belgium, the United States, Estonia, Canada, Australia, Kuwait and Ireland round out the top 10. REACTIONS TO ASTAKOS CANCELLATION The sector head for development and competitiveness of Greece’s main opposition party – New Democracy – Costis Hatzidakis, and sector head for energy and natural resources, Michalis Yannakis, made a joint statement late last month in reaction to the cancellation of the Qatari investment in Astakos, underlining that the government’s jubilation has proven to be premature. They also underlined that the government policy on the specific investment was not clear, considering that some of the ministers involved appeared to support its acceleration and others its deceleration.

NEWS IN NUMBERS

News in Numbers

#364,000,000

The Gulf Cooperation Council (GCC) states are expected to spend as much as US$100 billion (QR364 billion) over the next few years buying F-15 Eagles, F/A18 Hornets and Lockheed Martin’s Thaad missile defence systems, according to recent reports. Fears of a threat from Iran are driving GCC states to spend billions on new arms. Last month, the United States unveiled a record arms export plan to sell Saudi Arabia up to US$60 billion (QR218 billion) in aircraft, helicopters and other arms. The United Arab Emirates is also expected to spend as much as US$17 billion (QR61.8 billion) in coming years to buy an advanced missile defence system and fighter planes. Gulf states need to consider the safety of their citizens and up-and-coming financial hubs in Dubai, Abu Dhabi and Doha that have attracted billions in foreign investment. They are increasingly nervous about a retaliatory attack by Iran if it faces military action by Israel or Western states over its nuclear programme.

Pic of the Month

This Month in History The Paris-based Louvre is opened to the public as a museum by the French revolutionary government.

The United States introduces income tax.

British archaeologist, Howard Carter, finds the entrance to Pharaoh Tutankhamun’s tomb in the Valley of the Kings in Egypt.

Nazis close off the Warsaw Ghetto from the rest of the world in occupied Poland. In Alabama, the Hodges Meteorite crashes through a roof and hits a woman in the only documented case of a human being being hit by a rock from space.

American president, John F. Kennedy is assassinated in Dallas, Texas.

The Netherlands experiences Car Free Sunday caused by the oil crisis, and highways are deserted except for cyclists and roller skaters. Lebanese magazine, Ash-Shiraa, reports that the United States has been secretly selling weapons to Iran in order to secure the release of seven American hostages.

Yasser Arafat’s death is confirmed by the Palestine Liberation Organization.

Anti-nuclear puppets sit on a bench with a sign reading ‘Irradiated for ever? No’ in order to protest against the castor container transport to the storage facility for nuclear waste in a salt deposit in Gorleben, northern Germany.

Barack Obama becomes the first AfricanAmerican to be elected President of the United States.

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NEWS IN QUOTES

“the whole of the gulf cooperation council (gcc) region has witnessed large inflows from western economies…interest rates have come down [in qatar] quite dramatically over the course of the nine months [this year] and as a result, a lot of the hot money has flown elsewhere into the gcc where [interest] rates are higher.”

“We’re willing to take calculated risks on early stage ideas and projects that can have dramatic impacts while offering attractive returns…this willingness to be ahead of the industry and invest in large-scale innovative projects is core to our success as a company.”

“Heavy-handed regulation and structural deficiencies are holding back member airlines, while global competitors are forging ahead, sponsored and supported as instruments of national policy.”

“The countries with the biggest ecological footprint per person are: United Arab Emirates, Qatar, Denmark, Belgium, United States, Estonia, Canada, Australia, Kuwait, Ireland.”

“England 2018 is delighted it is now clear the Fifa World Cup will be coming to Europe in 2018 following the withdrawal of the United States bid.”

“Are we looking at it? Yes. Have we considered it? Yes. Is it something we would do? No plans have been put forward but it is one of them.”

Commercial Bank of Qatar chief executive Andy Stevens told Zawya Dow Jones, dismissing fears that heavy capital inflows into the Gulf Arab state could hurt the banking system.

A new report by the World Wildlife Fund, the Zoological Society of London and the Global Footprint Network, Living Planet Report, stated.

Rick Needham, Google’s green business operations director said in relation to Google’s investment in the Atlantic Wind Connection transmission project.

A spokesperson from the England bid committee said – England has formally withdrawn its bid for the 2022 event and is seen as a leading contender for the 2018 bid.

CARTOON CORNER

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Association of European Airlines chairman and British Airways CEO Willie Walsh said at the body’s Presidents’ Assembly in London recently, likely referring to the aggressive growth of Persian Gulf-based airlines, Emirates, Etihad Airways and Qatar Airways.

Harrods managing director Michael Ward told the Evening Standard in relation to rumours that the luxury store could soon become a hotel.

WEB WATCH

http://paper.li

TheEdge ’s new column profiles websites from the region and around the world of interest to the the Middle Eastern business community. www.weforum.org

What is it? The World Economic Forum (WEF) is arguably the most powerful independent organisation of its kind, whose motto is ‘entrepreneurship in the global public interest’, and facilitates initiatives and conferences towards this end. Why should you log on? This is the WEF’s primary online information portal, and contains details of their activities, events, communities and affiliates, as well as access to WEF’s research reports. Keep an eye on this site in the lead up to Davos 2011 for expert analysis and commentary.

TheEDGE

What is it? The purpose of the site is primarily to organise links shared on Twitter into a user-friendly online newspaper style format, and it has grown into one of the most popular new online social media marketing formats. Why should you log on? Tech-savvy business wishing to develop their online marketing strategy beyond Facebook and Twitter, may be interested in creating their own digital newspaper using this innovative related and fun widget technology.

www.fool.com

What is it? A Shakespearean reference to jesters of the Middle Ages, which “both instructed and amused, and could speak the truth to the king – without getting their heads lopped off.” Motley Fool’s mantra is “to educate, amuse and enrich” as they offer ostensibly sage financial advice to their subscribers. Why should you log on? Aimed at both experienced and novice investors around the globe, Motley Fool provides a plethora of sensible stock tips, business news and information, and regular newsletters.

www.zappos.com

What is it? Started by Tony Hsieh in 1999 as an online shoe store, Zappos.com has grown into one of the world’s most powerful online retail companies, selling a variety of items from clothing to sunglasses and watches. Why should you log on? Any business interested in developing an online retail strategy would do well to visit this website, which also contains a variety of digital resources, including blogs, videos and further insights into their business model.

www.silatech.com

What is it? The website recently launched by Silatech, an initiative founded and chaired by Sheikha Mozah bint Nasser Al Missned of Qatar to address the need for jobs and opportunities for young people in the Middle East and North Africa (MENA) region. Why should you log on? Silatech has partnered with research firm Gallup, and as it develops, this website is set to become a vital information and contact resource for those interested in and relying on youth employment and entrepreneurship in the Middle East.

ON THE EDGE

WHAT CAN GO WRONG, WILL. After a shambolic build-up to Delhi’s 2010 Commonwealth Games, and weeks before the announcement of the 2022 World Cup host country, here is our guide to the stuff-ups that Qatar would do well to take heed of. By Megan Masterson

efore the 2010 Commonwealth Games in Delhi even kicked off, the world was braced for the worst. Poorly disorganised with glaring failures in almost every sphere of preparation, the nation had to call in the army and – believe it or not – monkeys in an effort to run an event that many countries threatened not to show up at. It began at the athlete’s village, images of which were beamed around the world, showing conditions that were described as filthy, unhygienic and, according to one critic, “unfit for human habitation”. There were toilets that did not flush, exposed electrical wires running through pools of stagnant water, a partially collapsed floor, building rubble in the bathrooms, an Indian boxer who fell through his bed, elevators that did not work, and animal paw prints on bedding… and then there were the snakes. Workers discovered a 1.2-metre-long deadly cobra slithering down a drain in the new tennis stadium a day after a snake was discovered in a South African athlete’s room. In total, seven snakes were discovered at sports venues and six at the athlete’s village, including five poisonous cobras This, sadly for the country keen to prove itself as an emerging power, was only the beginning of a disastrous campaign that put it in the global spotlight for all the wrong reasons. Some of the dramas endured were beyond human control, such as the outbreak of dengue fever, a mosquitoborne disease that causes internal bleeding and possible death. But the majority of the events that soured the games were because of mismanagement and rampant corruption. When a bridge collapsed days before the start of the games, it required the help of the army to rebuild. Then a giant scoreboard crashed to the ground at a Rugby Sevens venue just before a match kicked off. It soon

emerged that bribery was to blame for shoddy work all over the city. Several contractors’ offices were raided post-games to investigate claims of corruption. Certainly, a lack of cash was not behind the nation’s problems. The budget for the two-week event ballooned from GBP450 million (QR2.5 billion) to GBP4.22billion (QR24 billion). Once the athletes began arriving, a whole new slew of problems arose. When 15 Australian and English swimmers fell ill, officials launched an inquiry into whether poor water in the swimming pool was the reason, and many of the competing countries refused to let their athletes train in what they suspected to be ‘dodgy’ water. As it turned out the swimmers were suffering from the famed ‘Delhi belly’, an affliction that hit many athletes, including Robert Hurley. The Australian headed home after picking up a stomach bug following a meal in the athlete’s village. Pity the English competitor, Rebecca Adlington, who abruptly ended an interview with BBC Sports, saying, “I need to go before I am sick on you.” Of course, a soccer World Cup brings with it an entirely different set of possible glitches, most of them tied to what was described in South African media as the “Death Star” – and that is the Fèdèration Internationale de Football Assocation (FIFA). FIFA brought its own form of imperialism to the African continent, when two Dutch women were arrested at the 2010 World Cup for wearing orange minidresses with tiny beer logos. The charge? Ambush marketing. Politicians and companies became increasingly vocal in their distaste for FIFA’s strong arm tactics. No wonder then that one of the most popular T-shirts sold in South Africa this year featured the slogan, “Fick Fufa”. Qatar, consider yourself warned. TheEDGE

BURNING QUESTION

WHAT DOES A DEFLATIONARY CYCLE RATHER THAN AN INFLATIONARY CYCLE MEAN TO YOUR BUSINESS?

ELECTRONICS OSAMU MIURA, MANAGING DIRECTOR OF SONY GULF

In a bid to continue to deliver the business community with compelling editorial content TheEDGE, this month, is introducing a new and regular section under the banner of ‘Burning Question’. For this new section we are directly approaching heads of industry and trade in a bid to unearth leaders’ views on particular topic of debate and/or interest. Each month, members of the business community will be approached for this column and be given the opportunity to respond to the opinion column.

If you would like to participate in our Burning Question section, please contact Kelly Lewis on k.lewis@firefly-me.com

Broadly speaking a deflationary cycle would have a negative impact on any business. With a receding economy, there is absolutely no growth in any given market. For our product offerings at Sony, which greatly focus on luxury purchases for the end-consumer, the normal trend in a deflationary environment would be to stall or to decline the purchase. In contrast, an inflationary cycle would cause the cost of goods and services to peak. This phase would experience liquidity and a boom in the market leading consumers to make purchases resulting in overall growth for all businesses, be it big or small. Prior to 2008, our market experienced a hyper-inflationary phase, where although prices of commodities were skyrocketing, consumers were still willing to spend money as they had a steady flow of income. Post-2008, when the economy faced a downturn, our market went through the deflationary phase. Prices of goods fell as fast as they had risen, many people lost their jobs and amount of disposable income was greatly controlled. There was no confidence in the market and overall growth suffered. However, the current scenario in the region is looking relatively positive. There has been a gradual but sustained improvement in the market. Consumers are regaining confidence and spending power is steadily gaining momentum as well.

“Post-2008, when the economy faced a downturn, our market went through the deflationary phase. Prices of goods fell as fast as they had risen, many people lost their jobs and amount of disposable income was greatly controlled.” 18

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FINANCIAL SERVICES SAFDAR KHAN, VICE PRESIDENT, QATAR AND OMAN, MASTERCARD WORLDWIDE Electronic payments serve as a powerful catalyst for economic activity and growth in societies around the world, therefore MasterCard’s strategy remains to consistently help our stakeholders weather the headwinds of economic events. MasterCard’s business model as a franchisor, processor and adviser represents a competitive advantage, as financial institutions around the world tap into the power of the MasterCard brand, payment-processing network and industry expertise, to build stronger relationships with their cardholders. This model has served MasterCard well and continues to do so now as we work with our stakeholders to optimise portfolios, maximise efficiencies, and mitigate risks. Our research shows that in the Middle East and Levant region, 63 percent of the consumers planned on maintaining the same level of discretionary/recreation spending in the last six months and 20 percent planned to increase their discretionary/recreation spending. A deflationary cycle may have an adverse effect on consumer spending, but while many consumers may shift their spending away from discretionary items to nondiscretionary expenses, we believe they will still choose payment cards to better manage their finances. MasterCard’s world-renowned brands drive value for financial institutions seeking to increase usage, merchants striving to attract customers, and consumers seeking greater ease and convenience no matter where in the world they go. Markets offer tremendous opportunities; technological advances are driving new and innovative product ideas; and, the secular trend toward electronic payments continues to gather force. Our ongoing dialogue with regulators and governments also allow us to play our part in advancing commerce in each market, globally.

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Hedge Funds

Hedging your bets In recent times the hedge fund industry has come under intense speculation and scrutiny. To gain more insight on where the industry is heading Kelly Lewis spoke to a world-class thought leader in the field of hedge funds, professor of Finance for the London Business School and director for the Hedge Fund Research Centre, professor Narayan Naik. Naik is also a consultant to the World Bank, several private corporations and investment banks. What do you predict the future of the hedge fund industry to look like? As an academic researcher, I believe after the credit crisis of 2008, the industry looks very different going forward. What we are finding is that the industry at an aggregate level globally is becoming top heavy. What I mean by top heavy is the top 10 percent of the hedge fund management companies are controlling 85 to 90 percent of the assets under management. These findings are based on five different databases that we receive every month. We consolidate them, remove duplication and identify any errors, etcetera, because not every hedge fund company reports to all the databases. Then we add up all the assets managed by that particular hedge fund company across all its hedge funds, the share class categories, the jurisdiction categories, the currency categories and we sort them by the declining order of their size, or by the total assets managed by a particular family. Additionally, there is a well-known list called Institutional Investor’s Top 100 Hedge Fund Firms, from which we find about 45 to 50 percent of that top 100 report to the standard databases like Hedge Fund Research, Eureka Hedge, and Barclays Hedge and so on. But, ultimately what we find is that the market is becoming more and more concentrated. Secondly, since the end of 2001, we have conducted an exercise with hedge fund families where we place them in different deciles, for example, the top 10 percent. If I look at the number of hedge fund families, which were existing in 2001 and which were still existing at the end of 2009, we find their survival rate is 90 percent plus. Therefore, in the top decile category – the top 10 percent by assets under management – 90 percent of the families are

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still in business, but the remaining 10 percent have either stopped reporting, or may have fallen into the second decile. Very few hedge fund families die and disappear from the databases, but rather they stop reporting as they have gathered enough assets and don’t need the advertising anymore. However, in the same period from 2001 to 2009, the bottom decile – the smallest 10 percent of the companies, which are assets under management – we find 70 percent of them just disappeared, they either died or progressed to the second, or third decile from the bottom. So they do grow, but there are many others, who for want of a better word, are slowly bled to death. What I mean by that is the assets under management are slowly dwindling, their performance is not stellar and investors slowly withdraw money…at a certain point in time, they just drop off from the databases. So the moral of the story here is that the big firms either have better survival capabilities compared to the small ones, or they have better risk management ability. Another thing that has happened, not only from the manager’s point of view, but from the investor’s point of view, is that investors are growing more and more cautious about who they are giving their money to, to manage. This is partly because in 2008, investors received a nasty shock when a number of hedge fund firms imposed gates and lockups stating ‘We cannot return your money’, or ‘It’s in your best interest that we give your money a couple of years down the road’, which may be true…maybe there is some small print in the contract, which allowed them to do that, but investors really did not expect this to happen because it had never happened in the previous 20 years. So these gates, redemptions, suspensions or delays,

I am sure was a part of the contract, but the hedge fund managers had never implemented or imposed it, or taken the liberty of imposing it, and that shocked quite a few investors and now hedge fund managers will say, ‘Hey it was part of the contract’. Another problem was the investors who were wanting redemptions for their liquidity needs, or cash flow needs. The only ones that were providing redemptions were the liquid strategies like the managed futures or commodity trading advisors, or equity, long/ short or market neutral, those kind of people, who are at the liquid end of the market. They started redeeming and, unfortunately, it turned out that these were the strategies, which did well in 2008, but a number of funds of hedge funds that were facing redemptions just looked at their portfolio and asked, ‘Who is giving me monthly liquidity?’ and just redeemed out of it to pay for the investor’s redemption request. As a result, their strategic balance was not decided by the risk-return opportunities of different strategies, but by the liquidity terms the different managers were offering, and they did much worse because they redeemed out of strategies that were doing better, because in an illiquid situation where there is a liquidity crisis, which it was in 2008, the less liquid strategies do badly, the more liquid strategies do well. As a result fund of hedge fund business came under much more scrutiny. The market environment is challenging to some extent because there is a great deal of volatility and all sorts of uncertainties out there like the sovereign debt crisis, and investors are left questioning how many further such shocks are ahead. Therefore, investors are getting much more cautious and risk averse in terms of who they are giving their money to. What that means is that they seem to be looking for track record and finding comfort in size. They go

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for the blue chip or the big names rather than emerging managers, who may be doing some exciting things, but investors do not want the risk of small managers blowing up. This means it will be difficult for smaller managers to start up business or survive. Those who survived 2008, may remain small because of this kind of acrossthe-board reaction by investors, particularly institutional investors. And the new ones will find it more difficult to start their funds because of the increased regulation, both in the United States (US) and within the European Union, as well as some other countries that are following their lead. This, therefore, imposes much more cost in terms of compliance and in terms of reporting, and in the United Kingdom (UK) particularly we have seen that it’s quite a bit. What that means for the Middle East is, although there are different kinds of opportunities in this part of the world, the established firms, which have a presence in the region, may have some advantages over the smaller players that are starting out afresh… even if they may have bright ideas, it is just that they are swimming against the tide. While some of them will manage to succeed, others will find that they have to put in more effort as compared to 2005 or 2006 if they were in that part of the world. Additionally, there are parts of the Middle East that have not been adversely affected by the economic crisis, which means there are chances and opportunities out there if firms are able to identify them and know how to exploit and benefit from them. In regard to Middle East-based hedge funds, they have suffered the economic recession less than their US- and Europe-based counterparts. However, the hedge fund market in the region as a whole is still considered to be an embryonic market. What does the future of Middle East hedge funds look like? I think the Middle Eastern hedge funds are in a better position partly because the economy to some extent has not been affected as much. Secondly, investors may become a little more cautious about managers, as they tend to feel more confident about companies within their geographical location. For example, when individual investors from the UK are investing, they tend to feel more comfortable about companies that are based within the UK rather those based in other parts of Europe. Further, within Europe they would feel more comfortable with companies in the bigger nations as compared to the smaller nations. Therefore, I think that Middle East-based investors may feel

“Although there are different kinds of opportunities in this part of the world, the established firms, which have a presence in the region, may have some advantages over the smaller players that are starting out afresh.” a little more comfortable with the local guys as compared to going abroad. However, investors will still look abroad, but the trend may be that they are more inclined to look toward the domestic talent partly because they got burnt in 2008 by some of the overseas talent…there are opportunities in the Middle East region and the local talent may have a comparative advantage in exploiting it as compared to somebody who does not understand that part of the world as well. In the wake of the downturn, competitiveness coupled with the current volatility in the markets has lead to a constant push to create new hedge fund investment models and strategies. As the number of competing hedge funds has increased in recent years, what type of strategies are required for hedge funds to perform? Hedge fund strategies are clearly linked to the economic cycle. In a bull market, a more directional equity long/short hedge or long-bias strategy works better, while in a bear market, or in a downturn, more highly distressed investing, partly credit-related and such kind of strategies, which are more targeted to the illiquid end of the market, can withstand the test of time. Fund managers recognise this and investors would like the manager to be style-pure. So if there were a merger arbitrage manager, who has done well, the investor would like to kind of categorise them as a merger arbitrage manager, but what happens if there are no merger deals going on? There are not many managers, who will return money to investors, so what managers say is there are not enough merger deals available…the merger arbitrage manager will naturally diversify their business risk, because they know that merger arbitrage works better when the economy is booming and lots of merger deals are going on. But they have to survive as well, they cannot shut the shop and then come back after two years and restart, it is costly. It’s not that it can’t be done, but it’s costly returning the money and there’s no guarantee that the investors will come back again. As a result, what happens is managers experience tremendous pressure and in a way they

deviate from being style-pure, they become multi-strategy. They start as a single strategy, they make money, they make their name, but just from a business survival point of view, in response to different market conditions, they become multi-strategy funds as such. There are different strategies, which will work well, and in today’s market, would be more to do with distress investing based in the middle to illiquid end of the market. While there are strategies, which benefit when the markets are more volatile, such as long volatility type of strategies. Having said that, you cannot stereotype the entire world economy by this. Given the current state of the markets and the recent downturn, can you discuss the importance of risk management procedures at both the business and portfolio management levels? This is very important, in fact what we noticed is that people, when they think about mutual funds, long only types of strategies, the main risk comes from the asset side of the balance sheet, in the sense of what kind of assets they invest in and what kind of trading strategies they follow. While when it comes to hedge funds, you have these asset classes, the trading strategy, but you also experience a risk, or are exposed to a risk that comes from the liability side of the balance sheet, which comes from the prime brokerage borrowing, or funding, or leveraging that you use. Most of the time when the leverage gets too cheap and there is an abundance of it, and these go simultaneously, the wealth of competition makes it cheaper and that is the time when a number of hedge funds will gear themselves up considerably. If this is the case and when suddenly they experience a shock as they did in 2008, they struggle and liquidate perfectly logical trading strategies on the asset side of the balance sheet, which makes sense, but they needed the money because they were receiving margin calls from the prime brokers, or the lenders, and they were forced to liquidate at fire-sale prices, at not-so-attractive prices, due to the positions they were holding. Therefore, what we realise when we look at the performance of TheEDGE

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“‘There are old pilots and there are bold pilots, but there are no no old-bold pilots’...however, their experience tells them it is not necessarily just the performance that investors care about, but rather the risk management part of it.” these big hedge fund families, is that, generally speaking, they tend to be delivering closer to absolute return like payoff, while the smaller ones have been subject to more market volatility. So I think the experience of these big firms, which have survived previous shocks and have been in existence for longer they kind of keep their gunpowder dry just in case they need it. In a way they do risk management much better. There is an old saying, which is, “There are old pilots and there are bold pilots, but there are no old-bold pilots.” Bold pilots are the ones who fly too close to the ground…these are the young guys, who want to show fantastic performance, etcetera, and then there are the old pilots, who do risk management and fly at a safe distance from bankruptcy and such kinds of problems and they survive, but not so much with an impressive performance. However, their experience tells them it is not necessarily just the performance that investors care about, but rather the risk management part of it…this is the experienced pilot who has seen some ups and downs, and who knows how to navigate when things get tough. In regard to regulation of the hedge fund industry, do you think that there needs to be heavier regulation on the industry, paired with greater disclosure on the part of the hedge fund managers and operators, in a bid to help the industry become more profitable and sustainable, as well as offering investors less risk and more return? Some amount of regulation is required and is desirable, but I think regulation measures are becoming too heavy to some extent. Additionally, there is no globally coordinated regulation effort and the US wants to regulate it their way because their duty is towards the US investors. Actually some of the fund managers I have come across have returned the capital of American investors saying that it’s too costly for them to service and answer all the queries of the Securities and Exchange Commission (SEC) and the Internal Revenue Service. They say they would rather return the American money and replace it with money from Europe or other parts of the world.

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So the world of the hedge fund manager is becoming like a silo – there are those who are willing to accept US money, those who are concentrating mainly on the UK and Europe and those who are focused on the rest of the world. The industry regulations are becoming more territorial if I may say. There is one set of rules for hedge funds, which are based within the EU, and there is a different set of rules for hedge funds operating out of say Japan or Australia, or the Middle East, when they want to sell to investors in the EU and these barriers are a little more rigorous. Regulation serves some purpose, but think of it this way, if there is going to be fraud or if there is going to be a problem, no matter how much regulators try, they are not going to be able to wipe it out. A simple example of this is Enron. It was an onshore, UK, SEC-regulated company followed by numerous analysts, it belonged to various indexes, and an abundance of fund managers had it in their portfolios, but that did not stop the company from blowing up. So I think some amount of regulation is good, but there has to be some coordination, some uniformity and the European and American regulators need to work together as a consortium, to establish more uniformity in regulatory standards. Do you have any closing statements? Well, in the hedge fund world I think there is a new challenge coming up, which is from the so-called hedge fund replicators, the synthetic hedge funds or hedge fund clones, and what that does is that it distinguishes the hedge fund strategy from a hedge fund manager. Think of it in this way: The assembly lines of automobile companies are constructed by robots or machines, and the advantage of having a machine is that it does not require breaks, it works 24 hours and it carries out certain pre-specified things. What has happened in the hedge fund industry is that research has shown that a part of the hedge fund return comes from the strategy, and part of it comes from deal selection and security selection. And a few years ago it was not possible, but now there are a number

of vehicles that are available, which allow you to access the strategy return at a much cheaper rate compared to the fees charged by hedge fund managers. Instead of paying say two percent fixed management fee and 20 percent incentive fee, or in the case of funds of hedge funds on top of it, you have one percent fixed management fee and 10 percent incentive fee, loosely speaking, it is not exactly three and 30, but it is pretty high, a part of it you might be able to get it at 60 basis points or less than one percent fixed, which is the replication through the clones, with almost daily liquidity, much more transparency, onshore, no counter party risks and things of that sort, using financial market instruments. So this is something like when Vanguard introduced its S&P 500 tracking fund. Today what you find is that a sizeable amount of money goes into this passive tracking fund and some amount of money goes to active managers. Some active managers survive to outperform the passive index, which is the benchmark, while others struggle because of the fees, transaction costs, and so on and so forth. Something similar is happening in the hedge fund world as well.Because of academic research over the past 10 or 12 years, we have identified what part of the return belongs to the strategy, and a number of investment banks have started offering products, which give the strategy-based return at a much cheaper price and daily liquidity –more transparency, no Enrons, no Madoffs, no Bear Stearns – those kinds of operational risks, and it gives an additional tool in the hands of the investors to compare and benchmark the hedge fund manager’s performance. Clearly the good managers love it because they say ‘Now I can prove that I have alpha, and I can add value’. While the managers, who do not have that much and who may be contaminating their return with some market exposure, find it more difficult to justify their fees vis-à-vis libor. The investor will say ‘Well for half a percent or one percent fixed deal I can get this risk return profile, which is similar to the strategy you are following, I will give you money only if you outperform that and I will give you a performance fee only if you beat that’. So, libor is no more the benchmark nor is the treasury bills. This so-called absolute return space is now becoming a relative return space, where it is relative not to cash or libor, but it is relative to the synthetic hedge funds or hedge fund clones or some passive investment strategy, which replicates hedge fund-like pay off.

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Energy Financing

Position of power The Middle East remains one of the strongest markets for those involved in the power and water industries. Currently there are power generation, transmission and distribution projects planned or underway worth an estimated US$125 billion (QR455 billion) in the Gulf Cooperation Council (GCC) region and by 2019, future investment in power and water desalination is estimated at more than US$135 billion (QR491 billion). Last year, Qatar held the record for growth in power demand among the GCC countries and by 2015, Doha’s growing demand for power and water is set to increase by 10.8 and 9.5 percent respectively. Kelly Lewis spoke directly to Matthew Nathan, director, HSBC Project Team in the United Arab Emirates (UAE) during last month’s PowerGen Middle East conference to discuss the challenges related to financing power projects in the region. What are the most prominent challenges facing project financing in the Middle East currently, and what are the differences in the business environment and mitigating risk in the region as compared to Western-type markets? Well, it’s a fairly complex area, so let me deconstruct that question. There is a distinct difference in, for example, project financing of a power project and/or a utility project such as wastewater. For the purposes of this article, I will define project financing in respect to essential public infrastructure. By essential public infrastructure, I mean what is essential for the public’s wellbeing; power, water, wastewater, roads, ports, schools, universities, hospitals, etcetera. The challenges facing procures, or government procurement authorities in mobilising private capital to finance these types of essential public infrastructure in today’s market, I would argue that primarily, financing is one of the key challenges. The other main challenge is perhaps competition for resource. Firstly, let’s think about those two key elements: Mobilising private sector financing and competition for resource. Mobilising private sector financing is an obvious one given the constrained liquidity in the market for project financing, and here we are talking about procurement by way of a privatisation. Therefore, we are moving away from government procured, standard engineering, procurement and construction (EPC) type procurement, and we are suggesting

that the government is now moving into a privatisation model, whereby they are looking to the private sector to bring both expertise to this sector, know-how, as well as the financing required to build the essential public infrastructure as we’ve defined it. So the next question: Why is there an issue with financing? Again, it is a constrained liquidity market where there is a significant pipeline of projects in the region with a reduced number of pools of liquidity, and the reason for that reduced pool of liquidity is due to the financial crisis, and shrinkage of various banks’ balance sheets and complete stepping away of some of the banks from project financing. However, all is not bleak and we have still seen well structured projects in the region, especially when it is to do with essential public infrastructure because that is a risk that banks typically like, and where we have seen significant capital still successfully mobilised for those types of projects in the region. In regard to the differences in the business environment as compared to Western-type markets and mitigating risk in the region; a key difference is that a lot of the build out of essential public infrastructure in the emerging markets, for example, the Middle East, are greenfield-based. The governments in the region are at an infancy stage of building out their infrastructure, whereas in developed markets, typically there is a mix of aging assets, which need to be refinanced, or rehabilitated with some measure of greenfield opportunity.

Additionally, because the economies in the developed markets are by their very nature not growing at the same pace as those in the emerging markets, a combination of having the brownfield assets already having been built and a slower growth of the economy, there is not such a strong pipeline of new greenfield build-up. Whereas that completely exists in an economy like in the Middle East, for example, where there is a lack of infrastructure build-up coupled with strong economic growth, which requires even stronger demand for essential public infrastructure going forward. That I would argue is the key difference. Therefore, developers in the emerging markets typically need to expand their horizons and look for new business opportunities in the emerging markets. Are there trends emerging in power projects being financed through global and regional multilateral institutions, borrowing from regional development banks and private funding sources, or is it largely a combination of public/private ownership? Yes you’re absolutely right. Typically the governments in the Middle East have always sought to procure the infrastructure through standard EPC procurement. What governments here would do is either fund that from their government’s own balance sheet or borrow from either development banks, or from the capital markets to fund infrastructure build-up. And there is a trend, a shifting, which I refer to as a paradigm shift, which is for these government agencies to look towards the private sector by TheEDGE

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way of public-private partnerships (PPP) to assist them in the roll-out of the infrastructure and the reason for this trend basically stems from the fact that, A: There is such a strong demand in the pipeline for infrastructure that the government cannot sustain that kind of sort of build-up on a simultaneous basis, unless they look to mobilise private sector financing, because otherwise it is a strain on their budget. B: If they continue to adopt this sort of the ‘old school’ standard EPC procurement, they can then only build-out projects sequentially as opposed to simultaneously. Finally, I guess which is a key point sometimes overlooked, by going down the different PPP models, for example, sharing or involving the private sector in the infrastructure build-up in the region, the added benefits of that, which are overlooked, is the fact that there is a risk sharing element – in the sense that by mobilising the private sector, you are then de-risking the governments from constructing, operating and maintaining these assets, and you are basically getting people who do this for a living. This is the core business of the private sector developers, equipment manufacturers and EPC contractors to do this. The 2010 World Energy Outlook is due to be released this month by the International Energy Agency (IEA). But in its 2009 report, the IEA it identified that as a result of the financial crisis, investment in upstream oil and gas had been cut by more than US$90 billion (QR327 billion) in 2009 compared with 2008. But in a bid to meet the world’s growing energy demand, many are calling for increased investment in fossil-fuel projects. How do you see this gap between project financing and development being bridged in regard to the Middle East going forward? Clearly project financing has a role to play as one has seen from the recent mega transactions in Saudi Arabia, for example, the Jubail Refinery Complex. I am not intimately close to the deal, but it succeeded in mobilising significant private sector capital for the funding of the refinery. Typically oil and gas investments require large amounts of liquidity and, so one could argue, obviously there is

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“It’s instrumental for the future to certainly grow as the bond investor market develops over time...in the short-to mediumterm, we still see project financing and traditional pools of liquidity as being extremely important... for project financing.” a role to play for the project finance banks simply because by mobilising as much debt as possible for the project, you inevitably reduce the project’s cost of capital, because that is cheaper. So the proof is in the pudding. I guess that the hydrocarbon sector is still capable of mobilising that sort of capital. In other jurisdictions, for example, in Kuwait where there is a need and demand to grow the oil and gas upstream investment, again developers and sponsors and the Kuwaiti authorities are looking to mobilise ways and methods to muster private sector capital to fund their production facilities. Therefore, I agree with the statement and I think there is a role for project finance to play in these oil and gas sectors to help meet the growing demand for energy. In recent years there has been decreasing trend in energy project financing in the Arab world. Is this a reflection of capacity restraints of GCC banks, and should businesses look for capital beyond traditional sources? First of all addressing the trend, I think if we look at the period 2007 to 2008, we were pretty much at the peak of the project finance markets and indeed the trend has shifted downwards since then. However, it has recovered slightly in 2010 and looking, I think, strongly to rebound in 2011…that is the view. Now, whether or not sponsors, procurement authorities and developers should look to alternative sources of capital, I think there is always a need to do that. The question is: What are those alternative sources of capital that we are talking about? There are not that many. If we look to financing projects by way of debt, you either look through your pools of liquidity to come from the commercial banks, which are indeed constrained as compared to their heydays and their

multilaterals…going back to pools of liquidity for commercial banks and the multilaterals, there are the export credit agencies, and the likes of the development banks, for example, the World Bank, Islamic Development Bank and the African Development Bank, which are the pools of liquidity by way of debt finance. In regard to alternative sources of capital… project bonds per se are indeed a potential additional source of liquidity, however, they’re unproven and they’re typically shorter-term, and don’t yet have the ability to absorb most of the construction risks. Most of the bonds that have been issued in this region...the risk of construction has not been passed over to the bond investors and, therefore, one needs to question what is the benefit…it’s short-term, there is a very low liquidity still for project bonds and the risk diversification from the government, or the sponsor does not achieve as much as you would do by way of sort of standard project financing. I think it’s instrumental for the future to certainly grow as the bond investor market develops over time, but for the time being I think in the short- to medium-term, we still see project financing and traditional pools of liquidity as being extremely important to continue to support the growth of project financing. What is the regional outlook for power and utility project financing in 2011? Traditionally, I think the power and utility sector has attracted the most amount of project financing in the region. Looking at the power and water projects, for example, in the region, the private sector has, in the Middle East and North Africa region, participated in approximately 30,000 megawatts, and in the process mobilised US$35 billion (QR127 billion) in this sector. Okay, those numbers do not mean

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“I think there will be a growing spread of project financing across the [Gulf] region, as obviously banks will look not to concentrate all of their asset build in one country per se, but rather spread across the region...” anything unless you put them in context and I guess what I am trying to say is, traditionally this has been the house, or the stronger draw for project financing in the region. The reason for this is basically very well developed frameworks and well developed IPP framework in most of the GCC countries, notably in the UAE, Saudi Arabia and Oman and Bahrain, which have numerous facilitated banks becoming comfortable with the risk allocation and, therefore, willing to participate strongly in support of those sectors. So to answer your question, I expect that trend to continue and to be the leading draw for project financing, for two reasons. One, for the reason I just mentioned, because the IPP framework is already in place and there is continued strong demand for growth, for power in the region. One source, for example, that you can download is the Oman Power and Water Procurement Company seven-year (2010-2016) demand outlook for power and desalinated water. Another source is the website for the Egyptian Electricity Transmission Company, which publishes supply and demand figures. From these sources you will soon see that the growth for power demand is expected to surge circa five to seven percent year-on-year for the next five years. If you take Egypt, for example, which has a grid of around 30,000 megawatts…a seven percent growth is, to give you some context, basically two gigawatts of new capacity required year-on-year and that is huge. We are looking at two to three billion dollar projects just in the power sector alone in one country and I suspect that the number is somewhat understated. In recent years there have been countries in the GCC that have received a greater share of project financing from traditional streams in comparison to

neighbouring countries, for example Saudi Arabia. Do you predict to see GCC project financing level out to be more proportionate to other GCC countries going forward? There has been a balanced development across the GCC – with Oman, Saudi, Bahrain, and the UAE leading the way, but it is just in terms of the quantum of projects, there is a lot more going on in Saudi Arabia because of sheer size of the county’s project. Therefore, it seems to have received the most, but if you look at the numbers relatively, I would say the recipients have been fairly balanced across the four countries of the GCC that I mentioned. Additionally, I think there will be a growing spread of project financing across the region as obviously banks will look not to concentrate all of their asset build in one country per se, but rather spread across the region, and in fact, banks will look to grow into North Africa as well. So we will start to see North Africa rise to be recipients of increased project financing going forward as well, and particularly in Egypt where they have just opened up their power market. If I go back to your previous question – where power has been the home for project financing – a very comfortable asset class for banks, given the familiarity with the IPP model and that Egypt has just opened up its IPP tender bidding again after a hiatus of almost 10 years, with a circa 2.3 gigawatt project in Egypt, I think we will start to see this shift not only in the GCC, but growth in the North African market as well. Qatar’s power demand growth per annum for 2010 stands at nine percent as compared to 7.7 percent for the GCC. In 2011, Qatar is expected to reach 10 percent of the total GCC power consumption. Considering that Qatar’s

growth demands will only continue to grow, how can local companies design attractive project packages in a bid to attract financing? What does the procurement authority need to do to ensure strong interest in its project…and going back to the first question that you asked: What are the key challenges faced by procurement authorities and sponsors alike? The first thing that the procurement authority need to do, is to think about what are the key challenges in procuring infrastructure in today’s market. One of the key challenges is that we are facing a constrained market in terms of resources. We are not in the same type of environment as we were in 2007 and early 2008, where it was a completely ridiculous EPC market and where prices were inflating at 20 to 25 percent year-on-year due to overarching demand, and not enough supply, we are not in those kinds of markets. However, because there is such a strong pipeline of projects, there is still a need for the government to consider competition from their regional counterparts. Going forward, Qatar will not be the only country tendering for an IPP or IWPP, there will be tenders from Oman, UAE and from Saudi Arabia. Therefore, you are putting out a tender, or you are floating a tender and are seeking to compete with your regional brethren if you like. So that is what I meant by competition for resource. Companies need to think about making a project attractive, so that in the context of competition in the region, for example, in the power sector, developers will look at your bid, take it seriously and bid competitively, and equally banks will pay the due attention. The last point, in order to consider those challenges in its totality and, therefore, structure a balance risk allocation, a tender framework, that is able to attract the interest and attract the types of sponsors that the country wants to see bid for its project, they should hire good and experienced advisors, who have a proven track record in assisting governments in structuring those types of processes – time saved in the structuring will save exponential amount of time once the request for proposal is out of the market for a poorly structured project. TheEDGE

BUSINESS INSIGHT

Cyber Security

Ensuring the integrity of computers and industrial networks The spread of illegal activity on the Internet and independent computer networks is intensifying. Indeed, the methods of international computer-based criminal cabals – such as the ‘Stuxnet’ industrial worm, now widespread in parts of the Middle East – are becoming highly sophisticated. According to Stefan Tanase, a senior security researcher at European-based Kaspersky Lab, criminals infiltrating companies of all sizes in ‘targeted attacks’ are also on the rise. Tanase recently hosted a talk at the International Data Corporation (IDC) conference in Doha. Miles Masterson spoke to Tanase about the growth of cyber crime and malware, and how to prevent it. Malware is an abbreviation of malicious software, a term used by computer security experts to describe programs, worms and viruses designed to infiltrate computers and networks for criminal reasons. Tanase noted alarming statistics on this kind of computer crime, which he warned were increasing sharply, and thrive on the ignorance of computer users and organisations. “We process about 40,000 new malicious programs every day and about 15 million in a year,” he revealed. In recent years, cyber criminals worldwide have realised that utilising these programs is a highly lucrative means to earn illicit income by either conducting their own scams, or essentially becoming online mercenaries providing their services to the highest bidder, which can include companies intending to undermine or even destroy their competitors. Among other purposes, these methods of operating include: stealing money from individuals through online banking scams; subjecting companies to extortion by ransoming information or to restore a network they have crippled; hijacking bandwidth and computer storage space for illegal rental or to use as unwitting ‘proxies’; conducting industrial espionage; or sabotaging the operating systems of corporate, industrial and government networks. Among others, some of the more widespread malware and methods include: • Botnets (which allow an attacker to take control of a user’s computer and turn it into a ‘zombie’ to appropriate information or computer capacity);

TheEDGE

• Didos (‘distributed denial of service’, when the attacker who has gained control of a botnet, overloads and shuts down a server or network), • Phishing (online banking scams that steal user’s credit card or personal and banking details, utilising fake emails leading to copycat websites), • Trojans (a popular type of banking malware mostly utilised to siphon funds from private bank accounts without the user’s knowledge). Of the latter, Tanase said a Trojan called ‘Zeus’ was the most sophisticated and could bypass even the most secure online banking technologies. Utilising keystroke logging, Zeus can monitor online banking activities undetected and divert funds from your account when you make payments. “You don’t see anything on your screen and you think you are paying your bill,” explained Tanase, “but your money is going into the account of the criminal.” Increasingly, malware programs such as Zeus are being transferred through social media such as Facebook, stated Tanase. “Social networks are a very hot distribution network for malware because they bring in a component that was missing from the lifecycle of malware and this is trust.” This not only has risk repercussions for individuals using computers at home, but also at the workplace, where many employees of companies large and small visit social media websites during working hours. As an example, Tanase described what he termed a “classic

social engineering trick”, incorporating the abuse of social network trust that criminal programmers use to spread malware. “A user will receive a link from one of their trusted contacts, saying ‘Hey this is a video of me’”, explained Tanase. “They are is much more likely to click on that link, as opposed to a link received in a random email. Usually the user is presented with a socalled video player, and then when you try to play the video, it will say that you need to upgrade the version, or install this product, but it is actually a piece of malware – a Trojan or a virus.” Even the most seemingly secure networks of large organisations are vulnerable. Recent examples of this include well-documented infiltrations of American private and public institutions. Internet search giant Google was also a victim of a cyber attack in China late last year. “Google publically admitted in January that at the end of 2009 its Chinese office branch was attacked…saying the only purpose of the attack was to extract confidential information from its networks,” said Tanase. “This was the most sophisticated attack that it had ever seen…and the first moment everybody realised how dangerous targeted attacks can be.” Though in Google’s case the attacks were suspected to have emanated from China or Taiwan, Tanase said that the sources of information- or sabotage-driven targeted attacks could be much more difficult to locate than banking scams, which usually leave some sort of

BUSINESS INSIGHT

trail. This is because stolen information etcetera can be easily moved through scores of countries on computers belonging to innocent individuals – ‘proxies’ – and is impossible to trace. “Usually they like to host them in countries where the legislation is very permissive, so servers getting seized or shut down is very low,” Tanase stated. “That is why China is a popular place to host malicious websites, but the thing with China is that it will probably be very hard to take down by any law enforcement, but at the same time they will not get such good connectivity. The servers cyber criminals use need to be close to the victims.” Regardless, no matter where they originate from or what means they use to infect computers, Tanase claimed that targeted attacks were a growing problem for businesses worldwide. “Their aim is to infiltrate an organisation to get their hands on confidential information, such as future product specifications, sensitive source code, executive emails, customer information, third party data hosted by the victim or credentials for production systems,” Tanase stated. Another form of targeted attack is malware worms (self-replicating programs that rapidly affect networks), injected into corporate, parastatal and governmental computer networks, many of which are not connected to the Internet. This includes specific worms, such as ‘Stuxnet’, which infects Windows-run ‘Scala’ networks in Siemens industrial control systems, and, stated Tanase, was the most sophisticated piece of malware ever seen. “Right now Stuxnet is the turning point,” he explained, “[and] can really affect infrastructure; water pipelines, factories and the systems controlling information in power plants. It doesn’t steal credit card numbers or do anything with functionality that could point us towards the author’s intention. It is specifically designed to inject code into the Scala networks, specifically into devices called the programmable logic controllers (PLCs), which run code designed take care of automation processes.” Once it infects a system, Stuxnet spreads throughout computer networks. Because most of these networks are not connected to the Internet, Tanase said, they required some sort of internal access via subterfuge. However, once loaded, he said they could spread quickly via USB sticks and other portable means. Stuxnet is also more difficult to detect than its predecessors because the malware is programmed to hide itself, he added. “If you open up Windows and go to the folder where the worm should be, you won’t see it because it has modified Windows itself.”

“The bigger a business gets, the more the need for information technology security, so it makes sense to have someone in the team who takes care of cyber security, and if not, hire someone to do it or outsource it to a consultant.” The technical intricacies are myriad, but the bottom line is Stuxnet and other programes like it, present a very real threat not only businesses, but also the security of all extensive automated networks worldwide, including airports and military installations. When it comes to advice on how organisations and institutions can tighten their cyber security, Tanase suggested a two-fold strategy approach. “One is the human part and the other is the technical, because you can have the best technology to protect you, but if the user switches it off it becomes useless. So it is a matter of both educating the users and the implementing the best protection.” Firstly, Tanase advocated elevating the general level of awareness among all employees, including towards Internet scams and social media, almost to the point of paranoia. “Just simple things, like how to spot a suspicious or phishing email...they should also have a reporting process, so that the moment an employee suspects he is being targeted [there is] an immediate follow-up,” he said. Depending on the size of the organisation, Tanase advised all companies to appoint an individual, or team, dedicated to enforcing cyber security and “not just the classic system administrator, who is busy with email boxes getting clogged up and computers not working”. Secondly. Tanase said companies must also ensure their computer systems and networks were airtight. These steps include: • Ensuring that all software is updated, as older versions often include ‘bugs’ that have not been fixed, which hackers can exploit, • Avoiding a corporate monoculture that uses the same computer programs and software across the entire system. Uniform systems are cheaper to install and simpler to train employees to use, but varying these will make it more difficult for hackers to infiltrate networks, • Avoiding the most popular programs and browsers, as malware programmers tend to focus on these for widest reach (which is why

Windows is more vulnerable than Linux or Mac OS, for example), • Enforcing the separation of internal networks in departments and buildings within an organisation wherever possible, as this also makes it more difficult for a hacker to access the entire networks. • Investing in ’proactive software’, which, put simply, can isolate a perceived cyber threat and warn companies such as Kaspersky, which can take immediate measures to assist in the prevention of further infection, • Being wary of anti-virus software that comes from uncertified or dubious sources, especially online, as these have been known to spread the malware they are actually supposed to guard against, • Establishing a relationship with the local computer emergency response team – of which Tanase said Qatar had one of the best in the Gulf region. Nevertheless, while there is a low level of cyber crime and malware infection in the Middle East as compared to other parts of the world, the area is becoming increasingly vulnerable to targeted attacks, as the current high prevalence of Stuxnet in Iran and the United Arab Emirates attests. “While Qatari businesses rank-low as a potential target, targeted attacks are imposing a growing concern,” stated Tanase. Fortunately, worldwide, cyber security experts such as Tanase are making headway in preventing, isolating and repairing these attacks. Though international law is erratic and the Internet is notoriously hard to police, by working with law enforcement agencies such as the United States’ Federal Bureau of Investigation and Interpol, cyber criminals are increasingly being prosecuted. Nevertheless, closes Tanase, it is also the responsibility of companies to make sure they put the necessary measures in place. “The bigger a business gets, the more the need for informtion technology security, so it makes sense to have someone in the team who takes care of cyber security, and if not, hire someone to do it or outsource it to a consultant.” TheEDGE

THINKER’S CORNER

THE BRAIN DRAIN Many of today’s brightest young minds are determined to leave their Arab League home nations and emigrate to foreign shores. Where do they want to live? What is motivating them? And what does this ‘brain drain’ mean for the future of the countries they leave behind? By Dalia Mogahed In a 2010 Gallup survey conducted for the Silatech Index, one in three students across 19 Arab League countries said they would like to permanently move to another country if they had the opportunity. With nearly all of these potential emigrants living in middle- and low-gross domestic product (GDP) countries such as Sudan, Yemen, Morocco, Lebanon and Jordan are at risk of losing significant proportions of their population if these emigration desires become reality. Among the students surveyed across the low-GDP Arab states – Comoros, Djibouti, Mauritania, the Palestinian Territories, the Somaliland region, Sudan, and Yemen – nearly four in 10 students (38 percent) would like to permanently leave their country if given the chance.

The same is true for three in 10 students (30 percent) in the middle-GDP states – Algeria, Egypt, Iraq, Jordan, Lebanon, Libya, Morocco, Syria, and Tunisia. In contrast, only two percent of students across high-GDP Arab countries Bahrain, Kuwait, and the United Arab Emirates (UAE) expressed a desire to emigrate. These findings, combined with additional Gallup research which focused on youth in the region more broadly, suggest that economics are one likely driving force in young people’s aspirations to relocate. Across all youth in the region, those who perceive their national economy poorly are more likely to want to permanently leave. The findings underscore the gravity of the risk within a demographic group that is key to the future of any country – 15- to 29-year-olds in the process of gaining further education.

The implications are significant, both for the countries at risk of losing the young minds they are educating, and for the countries they would someday like to call home. THE US TAKES TOP SPOT Aside from local economic concerns, Arab students’ desires to emigrate also have global implications. The United States (US) attracts more of these students than any other country, with approximately two in 10 of those who wish to emigrate saying they would choose to move there. Eighteen percent of those in middle-GDP countries and 21 percent in low-GDP countries put the US at the top of their desired-destination list, despite stricter visa regulations, a continually complex relationship between that country and many Arab League member states, as well as the US’s domestic controversies over Muslims’ and Arab-Americans’ civil rights. Yet, Muslim Americans, many of whom are first-, second-, and third-generation immigrants from Arab League countries, are among the most educated groups in America, a factor that may be key in attracting others from these regions to the US. These aspirations, in the face of potentially diminishing opportunities

THINKERâ&#x20AC;&#x2122;S CORNER

in their home countries, may risk creating greater cross-national frustrations. However, Americaâ&#x20AC;&#x2122;s attractiveness to students also represents a potential foundation for greater cooperation between nations. Leaders in the US and the Arab League would do well to consider these dynamics as they make decisions regarding foreign relations and immigration policies. In addition to the US, students from both mid- and low-GDP countries are also attracted to the UAE to a similar degree, with 13 percent in the middle-GDP group and 14 percent in the low-GDP group saying they would like to move to that country permanently. Students in low-GDP countries expressed more interest in moving to Saudi Arabia than those in mid-GDP countries, perhaps because of the relatively high interest in Saudi Arabia among youth in the low-GDP countries. Even among non-students, those surveyed in low-GDP countries expressed a clear preference for Saudi Arabia. Among non-students in mid-GDP countries, however, there is no clear and consistent preference, with those in the middle-GDP countries preferring France for possible relocation. KEEPING TALENT AT HOME The findings make it clear that many students across the Arab League have their eyes set on countries other than their own, even as they gain their education at home. For the millions of students whose desires are unlikely to translate into reality, their home countries and other countries in the region may benefit by doing more to make conditions in their

High-GDP Countries

The Silatech Index analysis is conducted by Gallup scientists and researchers pursuant to the Silatech-Gallup partnership. In addition to systematically measuring the perceptions of young people across the region on the challenges related to employment and entrepreneurship, Gallup analysts lead the effort in disseminating the findings of the Silatech Index to regional and global leaders and institutions engaged in addressing the challenges surrounding young people and employment in the region. countries more appealing to students currently inclined to emigrate. In particular, the UAE may be in a position to attract some of the best and brightest from the region, if it chooses to welcome them. Many countries, most notably the UAE, currently rely on foreigners for a significant portion of both their high- and low-skill workforce. Yet, at the same time, such countries are working to bring their own populations into the skilled workforce, which could make emigration opportunities to these countries less abundant with time. This may be a mixed blessing as it keeps more young minds at home, but increases the urgency for middle- and low-GDP Arab states to work harder to engage their young educated citizens. Leaders should strive to better understand the motivations of students across the region, particularly whether their inclinations to emigrate are driven by economic, political, social, or other factors. Doing so will provide a road map to understanding how the demographics of these countries could potentially shift and change as young people become more educated and better positioned to act on their desires.

Middle-GDP Countries Egypt

Palestinian Territories

Kuwait

Morocco

Mauritania

United Arab Emirates

Lebanon

Comoros

Jordan

Djibouti

Syria

Sudan

Algeria

Yemen

Iraq

Somalil and region

Tunisia

United Kingdom

12% Saudi Arabia

10% 16% 11%

France

8% United Arab Emirates

13% 7%

United States

18%

Non-Students Students Top emigration destinations across middle-GDP Arab states among those aged 15 to 29 who desire to emigrate.

4% 5%

United Kingdom

2% 7%

Low-GDP Countries

Bahrain

Libya

France

11% 14%

Saudi Arabia

30% 17% 22% 21%

United Arab Emirates

United States

Non-Students Students Top emigration destinations across low-GDP Arab states among those aged 15 to 29 who desire to emigrate.

TheEDGE

IN THE SPOTLIGHT

While it has been a huge year for sports, the coverage has not been all positive. Some of the year’s biggest stories have been about corruption, with the cricket scandal featuring three Pakistani players grabbing the lion’s share of the headlines. Christine Toner reports on the rise of corruption in sports.

Former South African cricket captain, the late Hansie Cronje, admitted to accepting cash to ‘forecast’ results.

IN THE SPOTLIGHT

he Commonwealth Games has dominated the recent news for all the wrong reasons. What started with a collapsed bridge and shoddy athlete’s accommodation soon turned into allegations of corruption and mismanagement, with investigations into how contracts were awarded and how work was supervised. Around the same time, a cricket scandal erupted that involved three Pakistani cricketers – one of whom was the national captain, Salman Butt – who allegedly worked with gamblers to fix matches against England. The players have been questioned and investigations are ongoing, but, in a sport plagued by rumours of corruption over the years, can cricket survive the latest allegations? Tom Rostance, a sports journalist with the Press Association, says the scandal has left the future of the Pakistan team in jeopardy. “There have been doubts over the integrity of test match cricket for several years, with cases such as the late South African captain, Hansie Cronje, fixing a game against England several years ago,” he says. “The sport will survive but the future of the Pakistan team is not so clear. They are in a shambolic state. They can’t play matches at home for security reasons and now tours to Australia last winter and England this summer have been dogged by scandal and controversy.” While most major sports have, at one time or another, been tainted by accusations of corruption, cricket does seem to suffer more than most. Some believe that the reason for the prevalence of corruption in the sport is down to history. Cricket became popular in the 18th century when rich spectators began betting on results. Gambling, it seems, has always been entwined with the sport. Betting on sports is huge business. Sport England estimates that sport-related gambling in England grew from GBP1.7 billion (QR9.8 billion) to GPB2.8 billion (QR16.2 billion) in 2008. An estimated GBP1 billion (QR5.8 billion) was made in bets in the United Kingdom (UK) alone on the soccer World Cup in 2010. German research firm, Sport and Markt, estimates that the global gambling market will be worth EUR263 billion (QR1.3 trillion) by 2012, with much of that driven by Internet and sports gambling. But when the integrity of sporting events is called into question, this massive industry suffers, says Betfair’s legal counsel, David O’Reilly. “If the sport is perceived as honest, straight and fair, that is good for betting firms because people will spend money with confidence.” “If you take the Pakistan allegations, although unrelated to the UK-regulated betting industry…it is not really a positive story for betting in the UK, That is because the perception is that ‘cricket is now something we may have to be careful about.’” Matt Johnson, head of regulatory legal advice at the English Football Association (FA) concurs. “It is imperative that sport is straight, and is seen to be straight. If it loses that then people don’t want to bet, that is not in gambling firms’ interests, and it is not in our interests.” Corruption has reared its head in football as well, at even the highest echelons of its administration. As we were putting this issue together, news broke that senior Fèdèration Internationale de Football Association (FIFA) officials had been caught trying to sell their votes in the bidding race for the 2018 World Cup. A Sunday Times investigation alleged that Amos Adamu, a Nigerian member of FIFA’s executive committee, asked for US$800,000 (QR2.9 million) to endorse one of the bid candidates. The newspaper also implicated Reynald Temarii, a FIFA vice-president and president of the Oceania Football Confederation, who reportedly wanted US$2.3 million (QR8.3 million) for a sports academy.

Another controversial story arose around the same time that implicated Qatar, Spain and Portugal in a voterigging scheme, as claimed by former FIFA general secretary, Michel Zen-Ruffinen. Ruffinen, who was caught on tape, later stated that he was merely repeating “rumours”, while Qatar strongly denied the allegations. In May this year, The Mail on Sunday published statements made by Lord Triesman, who at the time was the head of the FA and the England World Cup bid, suggesting that Spain and Russia had an agreement, in which Russia’s 2018 bid would be supported by Spain if Russia helped bribe referees in Spain’s favour at the 2010 World Cup. The allegations were investigated by

“IF THE SPORT IS PERCEIVED AS HONEST, STRAIGHT AND FAIR, THAT IS GOOD FOR BETTING FIRMS BECAUSE PEOPLE WILL SPEND MONEY WITH CONFIDENCE.” FIFA, who found no evidence of wrongdoing. With such accusations and statements about behind-the-scenes machinations at football’s highest level, it is no surprise that a corruption culture also exists among the players. Various players have been accused of match-fixing over the years. In 1994, it was alleged that goalkeeper Bruce Grobbelaar had fixed matches during his time at Liverpool Football Club to benefit a betting syndicate. Grobbelaar was investigated after being caught on camera by The Sun newspaper, discussing match fixing. Grobbelaar, along with striker John Fashanu and goalkeeper Hans Sergers, was charged with conspiracy to corrupt, but after two trials in which the juries could not agree on a verdict, the trio was cleared. Corruption in sport is becoming commonplace, with high profile reports surfacing in sports as diverse as snooker and rugby. In April of this year, the snooker world was rocked by scandal when the world number one, John Higgins, was accused of taking money in return for fixing games by deliberately losing frames. The player was caught out in an undercover operation by newspaper, News of the World. Higgins was suspended and an investigation was launched. In September he was cleared of match fixing but found guilty of bringing the game into disrepute by not reporting the approach the newspaper TheEDGE

IN THE SPOTLIGHT

made towards him. He was suspended for six months and ordered to pay a fine of GBP75000 (QR434,000). In rugby, Australian rugby team Melbourne Storm was at the centre of controversy when it was alleged they were breaking salary cap rules by secretly paying players extra to stay with the club. The investigation is ongoing. Back in the UK, the ‘Bloodgate’ scandal of April 2009 involved Harlequins rugby player, Tom Williams, who was caught on camera taking a blood capsule from his sock, putting it into his mouth and being taken off the field with his ‘injury’, allowing

Thierry Henry admits to intentionally handling the ball in a match that ended Ireland’s World Cup dream.

Suspended Fifa official, Amos Adamu, suspected of selling his vote to bidding countries.

John Higgins is cleared of match-fixing allegations, but admits to bringing snooker into disrepute.

TheEDGE

his team to send on a specialist kicker who would give them a better chance of drawing against Leinster. In a disciplinary hearing, Williams indicated that once he came off the pitch, it was decided that his lip should be genuinely cut in the privacy of the physiotherapy room to cover up the scam. What damage is corruption in sports causing? A scandal can have catastrophic social and economic effects on a sport, but the implications on a player are even more drastic. So why do sports professionals become embroiled in scandals – be they betting scams or substance abuse – considering the risk to their careers if they are found out? “There is a chance that they might not be found out, that they might get away with it,” says Doctor Victor Thompson, a clinical sports psychologist. “The risks are that they might be found out, punished, shamed, penalised within sport, dropped from their team or banned. The rewards?...to make a lot of money.” Substantial increases in the earnings of professionals, prize money and the sums wagered on events heighten the stakes. Players’ behaviour must also be shaped to some degree by a sport’s governing body, which must ensure best practice in areas such as corporate governance, financial dealings, public relations and disciplinary proceedings. Sometimes the behaviour of a governing body is as much at fault as that of an unethical or cheating player. Witness the farcical prosecution of Flavio Briatore by the Fèdèration Internationale de l’Automobile in which a French court overturned the Italian’s lifetime ban from Formula One. Or FIFA’s decision that there was no legal foundation to consider Thierry Henry’s handball against the Republic of Ireland because it was not a serious infringement. Or the Rugby Football Union’s shoddy treatment of England coach, Brian Ashton, after the 2007 Rugby World Cup. All add to the impression that sport is an amalgam of greed and incompetence. The effect of corruption on other players, the fans, friends and families of corrupt sports professionals are equally significant. “Not only does your view of the player get crushed, but you start to question the other players, the game and the point of you believing in and supporting a sport where this is possible,” says Rostance. To gauge the amount of money a sport can bring to an economy, one need only look at recent events. This year, London mayor, Boris Johnson, announced that three sporting events – the triathlon world championships, the pentathlon world championships and a four-nation basketball tournament – were expected to earn the city and extra GBP3.35 million (QR19 million) in one weekend. Accountants, Grant Thornton, predicted that, thanks to the World Cup 2010, an extra 2.2 million foreign tourists would visit South Africa in the next five years. Without the fans’ belief and interest in a sport, it will struggle to survive. But could corruption undermine the integrity of a sport so much that fans may stop following it? Rostance believes so. “It’s certainly possible,” he says. “You will always retain a percentage of hardcore fans who watch regardless, but casual supporters may well switch off. I don’t know the impact on other sports which are beset by scandal, but if you look at athletics and cycling, where the top performers seem to fail drugs tests on a regular basis, the integrity of those sports has been severely hit. You have to feel for the genuine athletes, because the instant reaction now when someone achieves the amazing, like Usain Bolt, is ‘He must be cheating.’” So, can corruption be eradicated from sports such as cricket? Rostance does not think so. “As long as there are people making money from it who are willing to offer than money to young and impressionable sportsmen, then you will always have the threat of it. “You have to say great strides have been made in the fields of drug testing, etcetera, and I’m sure sport is cleaner now than the 70s and 80s… But when it comes to spot betting, as the Pakistan no-ball scandal shows, there are so many opportunities to cheat without directly affecting the match result, that it can be very hard to detect. “The International Cricket Board must make it their number one priority, or the actions of just a few individuals will tarnish a sport loved by millions.”

MARKET WATCH

Ricardo Hausmann, Laura D. Tyson and Saadia Zahidi discuss the findings of the World Economic Forumâ&#x20AC;&#x2122;s Global Gender Gap Report 2010.

MARKET WATCH

e are at a unique turning point in history. Never before has there been such momentum around the issue of gender parity on the global stage. Numerous multinational companies have aligned core elements of their businesses and products to support and provide opportunities for women in the communities in which they are active. The United Nations has created a new entity for gender equality and the empowerment of women. There is a strong movement around greater investment in girls’ education in the developing world. Businesses around the world are starting to take into account the increasing power of women consumers. As women begin to make up more than half of all university graduates in much of the developed world, there is an increased consciousness that this talent must be given the opportunity to lead. Several countries have introduced legislation that mandates minimum requirements for women’s participation, in both business and politics. The World Economic Forum (WEF) has been among the institutions at the forefront of driving this change in mindset, primarily by emphasising the message that gender gaps have an impact on competitiveness, and by engaging the business community. Measuring the size of the problem is a prerequisite for identifying the best solutions. Through the Global Gender Gap reports, for the past five years, the WEF has been quantifying the magnitude of gender-based disparities and tracking their progress over time. By providing a comprehensive framework for benchmarking global gender gaps, the report reveals those countries that are role models in dividing resources equitably between women and men, regardless of their level of resources. In 2008, the WEF launched its Global Gender Parity Group and Regional Gender Parity Groups in Latin America, the Middle East, Africa and Asia.

To date, these multi-stakeholder communities of highly influential leaders – 50 percent women and 50 percent men – from business, politics, academia, media and civil society have jointly identified the biggest gaps in each region, based in part on the findings of this report, and have collectively committed to strategies to improve the use of female talent. The Global Agenda Council on the Gender Gap, an expert council, has used the insights of this report to propose the creation of an online repository of information on best practices to close gaps in economic participation, education, health and political empowerment. There is also the impact we cannot measure –– the countless universities, schools, researchers, media entities, businesses, governments and individuals that use this report as a resource for their work. The Global Gender Gap Index was created with the specific purpose of being comparable across time. The 2010 report aggregates five years of data and seeks to reveal country progress in a transparent manner. By doing this, we hope the report will serve as a call to action to the international community to pool its knowledge and resources and to leverage the current unique window of opportunity so that faster progress can be achieved. Every moment that we wait entails colossal losses to the global society and economy. The Global Gender Gap Index is a framework for capturing the magnitude and scope of gender-based disparities and tracking their progress. The index benchmarks national gender gaps on economic, political, education- and health-based criteria, and provides country rankings that allow for effective comparisons across regions and income groups, and over time. The rankings are designed to create greater awareness among a global audience of the challenges posed by gender gaps and the opportunities created by reducing them. The methodology and quantitative analysis behind

the rankings are intended to serve as a basis for designing effective measures for reducing gender gaps. The index’s scores can be interpreted as the percentage of the gap that has been closed between women and men. The 2010 report features a total of 134 countries, representing more than 93 percent of the world’s population. Out of these, 114 have been covered since the first edition of the report five years ago. Thirteen out of the 14 variables used to create the index are from publicly available hard data indicators from international organisations, such as the International Labour Organization, the United Nations Development Programme and the World Health Organization. INDEX RANKINGS Nordic countries Iceland (one), Norway (two), Finland (three) and Sweden (four) continue to demonstrate the greatest equality between men and women, according to the report. The level of gender equality in France (46) has sunk as the number of women in ministerial positions has fallen over the past 12 months. The United States (19) closed its gender gap, rising 12 places to enter the top 20 for the first time in the report’s five-year history. The climb reflects the higher number of women in leading roles in the current administration and improvements in the wage gap. Ireland (six), Switzerland (10), Spain (11), Germany (13) and the United Kingdom (15) are among the European countries dominating the top 20. Luxembourg (26) and Greece (58) made the biggest improvements in closing their gender gaps, climbing 37 and 27 spots respectively, owing to gains in political and economic participation. The Philippines continues to set the example in Asia, ranking ninth overall because of a strong performance on all four dimensions of the index: health and survival, educational attainment, economic TheEDGE

MARKET WATCH

participation and opportunity and political empowerment. Singapore climbs to 56th position from 84 last year as a result of new data, which shows a significant improvement in women’s estimated earned income. Japan (94) improved moving up seven places from last year with improvements in women’s average estimated earned income. Lesotho (eight) and South Africa (12) top the ranking in Africa. Lesotho has a high level of female participation in the labour force and female literacy, with more girls than boys enrolled in primary and secondary education. However, levels of healthy life expectancy remain low for both women and men. In South Africa, high numbers of women in parliament and ministerial level positions, combined with narrow gaps in education, contribute to South Africa’s top 20 position. In the Arab world, the United Arab Emirates (UAE) (103) is the highest-ranking country, performing ahead of most countries in the region on education and political empowerment indicators. It is followed by Kuwait (105), Tunisia (107) and Bahrain (110). In Latin America and the Caribbean, Trinidad and Tobago (21) and Cuba (24) lead the way. Argentina (29) is another strong performer. Brazil (85) and Mexico (91) are in the bottom half of the rankings, and Guatemala (109) continues to hold the last position in the region. Pakistan (132), Chad (133) and Yemen (134) display the widest gaps between women and men in 2010. Middle East and North Africa Israel (52) continues to hold the top spot in the Middle East and North Africa region, buoyed by a higher-than-average performance on the economic participation and opportunity subindex. However, Israel loses seven places relative to its position last year. There are small losses on all four subindexes, driven particularly by a widening wage gap and a

TheEDGE

smaller proportion of women in ministerial level positions. The UAE (103) gains nine places to attain first position among the Arab countries. The labour force participation rate of women has increased from 41 to 43 percent and the wage gap narrows relative to the US$40,000 (QR146,000) maximum value for men. New data shows that literacy rates for women are now higher than those of men, there are small gains in primary, secondary and tertiary enrolment data, and the proportion of women holding ministerial level positions has increased. Kuwait (105), Tunisia (107), Bahrain (110) and Mauritania (113) follow next in the rankings, favoured by higher-than-average performances on educational attainment. Compared with last year, Kuwait’s ranking does not change, Tunisia gains two spots and Bahrain gains six places. Bahrain’s improvements are mainly driven by significant improvements in the proportion of women legislators, senior officials and managers and the proportion of women holding ministerial level positions. The highest-ranking economies of the region have invested large amounts of resources in increasing women’s education levels. In many, the tertiary education enrolment rates of women are higher than those of men – these countries will now need to better integrate these women into the economy to reap the benefits of this investment. Lebanon (116), Qatar (117), Algeria (119) and Jordan (120) follow next in the rankings. Lebanon enters the index for the first time this year. While Lebanon performs well on health, it lags behind on the other subindexes, in particular economic participation. Qatar’s strength lies in education, although gains in labour force participation and wage equality have boosted Qatar’s overall ranking by eight places. Algeria loses two positions relative to last year, while Jordan falls seven places. While there have been notable gains in labour force participation of women in Jordan, recent

data shows new estimates of earned income that place Jordan lower than previously reported. Jordan’s key strength continues to lie in the area of education where primary, secondary and tertiary enrolment rates of girls are higher than those of boys. Oman (122), Syria (124), Egypt (125), Morocco (127), Saudi Arabia (129) and Yemen (134) occupy the bottom half of the region’s rankings. Egypt gains one spot relative to last year but continues to be one of the lowest-performing countries from the region on educational attainment. Saudi Arabia’s performance over the past five years puts it among the highest climbers of the 114 countries that have been included in the report since 2006. Between 2009 and 2010, the labour force participation rate of women has climbed from 20 to 22 percent, the perception of the wage gap for similar work has improved, literacy rates have improved and women’s enrolment in tertiary education has increased from 35 to 37 percent. Saudi Arabia remains the lowest-ranking country in the region on political empowerment, with the lowest possible score of zero. Finally, Yemen continues to occupy the last place in the region as well as in the overall rankings of 134 countries. It remains the only country in the world to have closed less than 50 percent of its gender gap, and it deteriorates further this year relative to its own performance in 2008.

The report was authored by Ricardo Hausmann, director of Harvard’s Center for International Development and professor of the Practice of Economic Development at the John F. Kennedy School of Government, Laura D’Andrea Tyson, the S.K. and Angela Chan professor of Global Management at the Haas School of Business at the University of California Berkeley and Saadia Zahidi, director of Constituent Communities and head of the Women Leaders and Gender Parity Programme at the World Economic Forum. To download the full report please visit: www.weforum.org/gendergap

INSIDE EDGE

A monopoly on

money Phil Strange questions whether the policy decisions that are being made by central banks are a new form of protectionism.

INSIDE EDGE

he global economy has made worthy progress from the troughs witnessed during the back end of 2008, and the recovery so far has surpassed even the most aggressive estimates. However, uncertainty has resurfaced with the recent government debt concerns in Greece, Spain and Ireland, and the announcement by the United Kingdom (UK) government of a GBP6.2 billion (QR35.2 billion) austerity programme to cut record deficits that equal 11 percent of gross domestic product (GDP). As the world comes slowly and unevenly out of recession, exchange rates have become an important and divisive factor. It appears that countries with strong currencies are looking to temper that strength, and those with weaker currencies are not rushing to rescue the situation. Meddling with money Let us turn an eye to the Japanese yen. On September 14, the Japanese yen changed hands at JPY82.88 (QR3.70) to the United States (US) dollar, reaching a 15year high, and currency markets witnessed intervention by the Japanese government to stem the yen’s appreciation. The last time the Japanese government resorted to intervention was in 2004 when the yen moved sharply up from JPY120 (QR5.37) to the US dollar. But the effect of unilateral intervention measures has been short-lived, which is evident from the yen’s movement to the sub-JPY85 (QR3.80) level witnessed in September 2010. In the current scenario, when the global economy is beginning to show signs of recovery, an appreciation in the domestic currency is a cause of concern for Japan as it creates the fear of more expensive exports, which, in turn, will negatively impact domestic growth. It is worth noting that the Japanese intervention cannot be equated to China holding down its yuan. The yuan’s rate, which has been managed for a long time now, is widely accepted to be undervalued

TheEDGE

by a minimum of 20 percent. The Bank of Japan’s action, on the other hand, was initiated when its currency rose to a 15year high. The Bank of Japan revised its benchmark rate downwards to between zero and 0.1 percent from 0.1 percent, saying that it will take additional easing measures valued at JPY35 trillion (QR1.56 trillion). These measures include a JPY5 trillion (QR223 billion) temporary fund to buy various assets, which means a release of an equivalent amount of yen into the system. Currency market history is replete with examples of government intervention when foreign currencies have been perceived to have significantly weakened against the domestic currency. Significant US intervention came during 1985 to 1987 when, under the Plaza Agreement, the US bought the German mark and the yen with the aim of correcting the overvalued dollar. Later, the US was seen purchasing the yen and the euro in 1998 and 2000, respectively, when these two currencies were agreed to be undervalued. But what sets the current situation apart, is the fact that these earlier interventions were carried out with the cooperation of the parties involved, while presently such cooperation seems to be absent. The US economy, which emerged out of recession in June 2009, has shown weak growth figures in the first two quarters of 2010. The chances of a double dip recession are slim, but a spate of disappointing economic data has raised expectations of a further stimulus by the Federal Reserve in the form of a second phase of quantitative easing, which will release more dollars and put further pressure on the greenback. Poor economic data currently being published and the ‘dovish’ stance of the Federal Reserve Federal Open Market Committee does little to stem the depreciation of the currency. Three months ago, the euro fell to EUR1.22 (QR6.19) against the dollar and there was even talk of the imminent demise of the European currency. Rapid appreciation since then has seen a 13

percent rise, with the euro currently trading above 1.38 (QR7). This is re-igniting eurozone concerns that the euro is too strong, especially against the Chinese yuan. After recent meetings between eurozone officials and the Chinese Prime Minister, Wen Jiabao, there were European calls for a “significant and broad-based appreciation of the yuan”. European Central Bank president, JeanClaude Trichet, has since resisted calls from within the eurozone to act, saying that he believes in allowing major currencies to float freely. In the UK, the new coalition government has announced austerity measures to reduce government borrowing, with the Bank of England maintaining historically low interest rates and discussing further quantitative easing. These actions have helped to depress the sterling, with the sterling trade-weighted index falling to 80 in early October, representing a four-month low. Again, UK officials appear unconcerned about the depreciation of sterling, even with its inflationary consequences and, indeed, with inflation running at 3.1 percent above the Bank of England target of two percent. A global backlash? Brazilian finance minister, Guido Mantega, indicated that a trade and exchange rate war was imminent if countries such as the US and Japan continued to manipulate their currencies in a downward direction. The Brazilian real has appreciated against the dollar in recent times, with the Brazilian economy experiencing a boom and high interest rates attracting investor attention. Similarly, Thailand officials are concerned about this year’s nine percent appreciation of the bhat on the back of a THB127 billion (QR15.4 billion) inflow of foreign investment, largely into the bond market from July to September alone. In an attempt to stem the capital inflows and resulting currency appreciation, on October 12, the finance minister, Korn Chatikavanij, announced a 15 percent tax on the interest income that foreigners earn on Thai bonds.

INSIDE EDGE

“The currency pair at the forefront of this very public debate is undoubtedly the yuan and the United States dollar.”

South Korea and Indonesia share similar concerns about their rising currencies. Is there a role for a global institution to police countries that intervene to manipulate exchange rates for their own economic benefit? The G-20 has turned to the International Monetary Fund (IMF) to help them resolve the widening divisions between their members. In response, the IMF managing director, Dominique Strauss-Kahn, indicated that the IMF would produce ‘spillover reports’ which would point out how one country’s economic policy decisions were affecting other economies around the world. It remains to be seen whether such reports from the IMF will then lead to punitive sanctions against countries deemed to be manipulating their currency for selfish reasons. So the debate being played out seems set to continue for some time. The currency pair at the forefront of this very public debate is undoubtedly the yuan and the US dollar. Timothy Geithner, US Treasury secretary, notably did not criticise Japan for its recent intervention to stem the rise of the yen, but has been very vocal about China’s intervention to prevent a rise in the yuan. China, however, appears to be flexing its newfound economic muscle by resisting US demands to cease intervention and allow the yen to appreciate. It will be a very difficult task to install a coordinated global policy on exchange rate management anytime soon. It is also unlikely that protectionist measures will be taken by countries against other currencymanipulating nations, as overt tariffs, import quotas and duties will harm an already delicate global economic recovery. However, while many nations languish with low economic growth and high unemployment conditions, this issue will certainly remain in the public eye. TheEDGE

COVER STORY

Qatarâ&#x20AC;&#x2122;s wealth of

opportunity

For a small and young country, Qatar garners its fair share of headlines. From the purchase of United Kingdom (UK) stalwart Harrods to billion dollar investments in Asia, Qatarâ&#x20AC;&#x2122;s overseas investment strategy is both intelligent and politically savvy. Rachel Morris reports

COVER STORY

he Russians are coming… this time, and everyone is welcoming them. In October this year, Russia came knocking on Qatar’s door. It came in the form of a trade delegation from the Eurasian nation and it was a stunning 75-people-strong. Russian Ambassador to Qatar Doctor Vladimir Titorenko was upfront about the aims of the biggest delegation to ever visit a Middle Eastern country. “The current volume of trade and investment between the two countries is low, compared to their levels of economic growth. We are working on how to improve on that front where there will be mutually beneficial relations,” he said. However, Russia has been on Qatar’s investment radar for some time. According to Russian media reports, a joint investment fund with Qatar and Gazprombank, Russia’s largest non-state-owned bank is to be established this year. It is reported that both sides have already invested US$150 million

Harrods department store in Knightsbridge, central London.

(QR546 million) each in a joint commercial real estate project, which is expected to generate investment returns of 20 percent per annum. Russia is ripe for the picking for a country with cash like Qatar. Its assets are valued low and the recession has dented the economy. It was only a matter of time before the Gulf came knocking. For a small country, Qatar continues to punch above its weight on an international level. While Qatar’s Emir Sheikh Hamad bin Khalifah Al Thani has sought to establish the country as a key player in regional politics and diplomacy, there has been feverish working behind the scenes to establish trade relations and a physical presence beyond our immediate Gulf Cooperation Council (GCC) and Middle East and North Africa (MENA) neighbours. This is driven not just by good economic and business sense, but also by an imperative to diversify the economy and shift beyond Qatar’s dependence on the extremely lucrative but eventually dwindling oil reserves.

Qatar Financial Centre Regulatory Authority chairman Phillip Thorpe says the government’s overseas-targeted investment programmes were aimed at diversification, with the aim of either reducing or eliminating oil and gas dependency over the next two decades. Backed by surplus funds from the country’s oil and gas income, the Qatar Investment Authority (QIA), the Gulf’s youngest sovereign wealth fund, has been making big-ticket acquisitions and investments in the overseas market, especially in the retail, real estate and financial sectors. “In the past, investments in the United States (US) or Europe had promised solidity and stability. In light of the crisis it has become clear that extreme market movements can occur anywhere. Stability as a competitive advantage of US and European markets is a thing of the past,” says Steffen Kern, economist at Deutsche Bank in Frankfurt. The world’s largest exporter of liquefied natural gas became one of the fastest growing economies worldwide in 2009. It grew at an TheEDGE

COVER STORY

average pace of 17.4 percent over the past five years and it is set to largely outperform other Gulf energy producers. This year’s growth figures are even more vigorous. With all those profits, Qatar has money to spend. Expanding Qatar’s overseas investments, through the QIA and other vehicles, is a priority for the government in the near future. Much has been written of Qatar’s limited resources beyond oil and gas. A small country, it does not boast the tourism potential of the United Arab Emirates (UAE) and Oman, nor the natural resources to establish other industries like its MENA neighbours. Many speculate about Qatar’s desire to move beyond a ‘hydrocarbon future’. Moves are well underway within Qatar to build a ‘knowledge-based economy’ – witness the work underway at Qatar Science and Technology Park and Education City as evidence of this commitment. Sidra, a medical research and clinical centre, is rising fast from the desert surrounding Education City and seeks to put Qatar on the research map. But there is another key to this new and bright future – Qatar’s overseas investment portfolio and ultimately its international agenda. Prime Minister Hamad bin Jassim bin Jabor Al Thani has previously gone on the record to state that Qatar’s aim is to look for investment opportunities in markets further afield. The prime minister speaks with authority on this, being head of Qatar’s main investment vehicle, the US$70 billion (QR254 billion)-plus QIA. From Vietnam to Russia to the obscure, but stunning Comoros Islands off the Kenyan coast, Qatar is showing a bit of leg and taking the investment plunge. Real estate, retail, agriculture and industrial projects are emerging as the focus for the QIA’s international investments, not just the brand name investments like Porsche, Harrods and Canary Wharf. And it is obvious that Qatar loves a bargain. Qatar is using the weakening of real estate prices to swoop in and snap up prime assets at bargain basement prices, and the flagging US dollar is helping its strategy.

TheEDGE

According to real estate consultancy Jones Lang La Salle, Qatar is emerging as the most powerful player in real estate on a global level. Qatar, which has emerged as “a new global powerhouse”, is expected to rank as the number one global overseas investor in 2010, according to the firm. “Cash-rich and with a strong appetite for splashy overseas assets, Qatari vehicles have lately outshone their counterparts from the region and are projected to carry on with their rapid expansion across the real estate world,” Jones Lang La Salle said in a report released earlier this year. The report speculated that Qatar’s foray into the London real estate market is likely to be followed by further investments in other markets across Latin America, Eastern Europe and Asia – all places known for undervalued assets and massive growth and investment potential. “Qatar is the epitome of energy-rich GCC nations, with a large appetite for real estate investment, fuelled by the rapid growth in oil and gas revenues over recent years,” the report stated. This is beyond the big ticket ‘Lamborghini’ investments in London and Paris including Harrods. Qatar has been quietly building an industrial and sector-based investment portfolio, which would rival even the most adventurous and diversity-driven multinational. In Russia, Qatar has flagged US$500 million (QR1.8 billion) for running geological exploration in the polar Urals project, The Peninsula reported. The sovereign wealth fund (SWF) is keen on investing in gold, copper and other minerals in the Russian geological zone. If successful, this mining investment could be the motherlode. Brazil, part of the emerging BRIC bloc (Brazil, Russia, India and China), is also set to benefit from some of Qatar’s money with Qatar Holding, part of QIA, plonking down more than US$2 billion (QR7.2 billion) for a stake in a Brazilian bank. Brazil has been tapped as a country of enormous potential and Qatar is getting in on the ground floor of financing for these mooted mega projects.

Sheikh Jassim bin Abdulaziz bin Jassim Al Thani of Qatar addresses the audience during Porsche’s annual general meeting earlier this year.

COVER STORY

German Chancellor Angela Merkel shakes hands with Qatar’s Emir Sheikh Hamad bin Khalifa Al Thani and the Consort of the Emir Sheikha Mozah bint Nasser Al Missned.

As Standard Chartered regional head of research (Middle East, North Africa and Pakistan) Marios Maratheftis pointed out, countries like Qatar are fast discovering the fabulous and lucrative benefits of overseas investment. Maratheftis says the world has witnessed in recent years a windfall of oil gains being invested offshore, rather than sitting around their home country. He believes that countries like Qatar may eventually see their overseas investment income overtake hydrocarbon revenues. No one is sure when this could happen, but Qatar is banking on it happening sooner rather than later. Its investments have escalated in the past 12 months as it cherrypicks the best of overseas assets. And like the Russians, many countries such as Malaysia, Thailand and Vietnam are not shy to ask. Asia and Eastern Europe have been in the QIA’s sights. Malaysia is one the biggest

beneficiaries of Qatar’s largesse, with a US$5 billion (QR18.2 billion) price tag put on the QIA’s investment in real estate and energy projects. Malaysia is looking to boost foreign investment after emerging from its first recession in a decade. Southeast Asia’s third-largest economy reported a net outflow of MYR17.8 billion (QR20.3 billion) in direct investment in the six months through September 2009. “Malaysia is an attractive investment destination with plenty of opportunities to consider and explore,” said Qatari Prime Minister Sheikh Hamad bin Jassim bin Jabor Al Thani on the day of the announcement of the venture in March this year. Indonesia has also benefitted from Qatar’s overseas investment, with a US$1 billion (QR3.64 billion) fund established between the two countries to invest in infrastructure and exploitation of the country’s natural resources.

Like other investment vehicles, China has also come into Qatar’s sharp focus. Qatar has established a foothold in the country and plans further expansion and investment in the country sooner rather than later. Qatar is exporting gas to the country, which faces an energy crisis. The QIA’s investment in the initial public offering (IPO) of Agricultural Bank of China is seen as a long-term bet on the growth prospects of the Asian powerhouse and also signals further cooperation between the two countries in future. Qatar Holding plans to open an office in China to promote its activities in the Asian region. However, the investment strategy comes at a price beyond dollars and euros. Qatar’s investment strategy has been flamboyant (Harrods), prudent (China) and politically intriguing. “Growing financial clout does increase the options for Arab countries with SWFs

TheEDGE

COVER STORY

Russian Prime Minister Vladimir Putin and Qatari Prime Minister Sheikh Hamad bin Jassim Al Thani meet for talks in Moscow earlier this year.

to play a more active role in international affairs,” says Sven Behrendt from the Carnegie Middle East Center. There is no doubt that Qatar’s investment portfolio has drawn attention to the country and its political aspirations. When foreign journalists write about Qatar now, they are slowly replacing “oil rich sheikhdom” with “Qatar, the small Arab country, which recently bought UK flagship Harrods”. But investment by foreign entities, notably a country’s SWF, can result in an uneven playing field within that country. Many of those countries that are ripe for these kinds of overseas investment often have internal political problems, which can and have been exacerbated by an influx of foreign money. Edwin M. Truman, a senior fellow at the Peterson Institute for International Economics, has written extensively about state-driven investment. He says there is scepticism in some quarters about the “motives” for investment in certain countries. He adds that economic diversification can, in many cases, be confused for “interference” or a flexing of nascent political muscle. “The fact that governments own these assets raises the potential that their management will be guided by political, rather than economic and financial, considerations or that the economic and financial considerations are motivated by support for national champions (if a country accumulates excess oil reserves and invests them in foreign energy projects, this looks like exploitation of economic power not diversification),” Truman writes. “Consequently, host-

TheEDGE

country jurisdictions are under increasing pressure to limit the scope of such investments, raising the spectre of political confrontation and financial protectionism.” Qatar’s investment in agricultural projects in Africa and Asia are well documented and are as controversial as they are lucrative for those countries. This is mainly because these investments are to grow crops and other food sources to send back to Qatar to ensure food supplies. Experts caution over investing in projects and companies in countries such as Sudan, Egypt and Lebanon where political tensions bubble just below the surface on a daily basis and regularly spill over into violence. “It is no coincidence that Indonesia and Malaysia are both Muslim countries with

COVER STORY

deep and symbolic ties to the Middle East,” says one GCC-based political analyst. “This is driven from a true sense of brotherhood as well as knowledge of how these societies operate on a cultural as well as political level.” This sense of ‘brotherhood’ has led to investment in the Comoros islands, a tiny idyllic, but dirt-poor chain of islands off the coast of Kenya. Nearly US$1 billion (QR3.64 billion) has been set aside to build a luxury eco resort on the main island, employing hundreds in a country where they barely live above subsistence levels. In an act of kindness as well as a smart political move, Qatar stepped in to pay the wages of hundreds of government workers who had not been paid for more than a year because of the parlous state of the Comoros economy. In this case, Qatar’s investment has been seen as a lifeline to a struggling Muslim country rather than a political act. Vietnam is an interesting case. A poor, but tightly controlled economy, Qatar’s investment in Vietnam’s agriculture and industry has so far not stirred internal dissent and has instead bolstered the government. However, these political issues also come into play in countries like Russia

The weakening US dollar is providing the impetus for countries like Qatar to seek investment in markets and many are speculating about more big Qatar-related announcements in coming months. and the Ukraine, where Qatar has bought cereal farmland and where internal political instability is a daily issue. Interestingly, Qatar’s relationship with the Eastern European giant extends as far back as to the 1980s, when it was one of the first GCC countries to establish ties with the former Soviet Union. Qatar’s investments are not just about the ruble or yen, but rather they are about strategic alliances.

Backed by surplus funds from the country’s oil and gas income, the Qatar Investment Authority, the Gulf’s youngest sovereign wealth fund, has been making big-ticket acquisitions and investments in the overseas market.

With all the offshore buying sprees, where does this leave Qatar in terms of reciprocal investments? The country has never been shy about touring its wares, but in most cases, the countries slated for investments need Qatar more than it needs them. However, through establishing relations and agreements, Qatar is benefitting in a way, that is not always recognised. Countries like Vietnam and Malaysia are establishing labour agreements with Qatar, bringing over workers to fuel Qatar’s own construction boom as well as providing staff for the country’s burgeoning hospitality market. Chinese and Vietnamese engineers and labourers have flooded into Qatar, filling gaps on construction sites. The weakening US dollar is providing the impetus for countries like Qatar to seek investment in new markets and many are speculating about more big Qatar-related announcements in coming months. “I’d expect them to be looking at a broad range of assets as they build up a large, balanced portfolio,” Simon Williams, chief economist at HSBC in Dubai said recently about Qatar’s ambitious and headline-making investment aims. “Qatar will be a major player in global markets for many years to come. It is a small economy that is still in the process of capitalising on its enormous hydrocarbon resources,” he said.

TheEDGE

ECONOMIC BAROMETER

The new

Cold War?

As the United States and China face off against each other in a currency war, Karim Nakhle asks if we are witnessing the beginning of a new Cold War, one that, once again, will hold the fate of the globe in its hands.

ECONOMIC BAROMETER

currency war, also known as ‘competitive devaluation’, is a term used to describe the competition between countries to achieve a relatively low exchange rate for their native currency, in order to help their domestic industry. Although rare through most of history, a widely recognised episode – generally considered to have been an adverse situation for all concerned – occurred in the 1930s. Back then, all participants suffered as unpredictable changes in exchange rates reduced international trade. But history has a habit of repeating itself, and here we are, 80 years later, facing a new global currency war, which broke out in October 2010. While the majority view from senior policymakers and journalists is that ‘currency war’ is too strong a term for the current situation, there is a risk of further escalation. The 2010 outbreak of competitive devaluation is being pursued by different mechanisms than was the case in the 1930s, and opinion among economists is divided as to whether it will have a net negative effect on the global economy. As their economies continue to stagnate and the risks of further global financial turbulence increase, the major powers, spearheaded by the United States (US), are waging an increasingly open economic war against China, demanding that its currency, the yuan, rise significantly. The mounting global economic tensions have sparked a call from the Institute of International Finance, representing more than 400 of the world’s leading banks and financial institutions, for a new currency pact to be agreed on by the world’s leading countries by the time of the G-20 meeting scheduled for this month in Seoul, South Korea. A face-off between two great powers As countries struggle to cope individually with the lack of upward momentum in global growth – and in many cases unacceptably high unemployment – urgent action is needed to arrest the disturbing trend towards unilateral moves on macroeconomic, trade and currency issues. With tension growing between Washington and Beijing over the level of the Chinese currency (which sent the dollar to an eight-month low against the euro), the World Bank has warned that a full-scale currency

war risks a return to the protectionism of the 1930s. Fears are that the tension between the two world powers will hinder the global economy’s recovery. The US says China has been deliberately intervening to keep its currency low, thereby boosting its exports. It has denounced China’s actions, warning that it can set off “a dangerous dynamic”, and is urging the international community to put pressure on Beijing to allow the yuan to appreciate. China’s premier, Wen Jiabao, reported that margins on Chinese exports were thin and that forcing the yuan higher would lead to social unrest. The International Monetary Fund talks, which took place on October 10, ended in acrimony without an agreement between China and the US over currency manipulation, and dire warnings from all intermediaries that we are entering a competitive devaluation phase of the crisis – one that will, in all likelihood, lead to competitive trade policies once those involved realise that such currency tactics are a dead-end street. A fight for survival It is all a far cry from Pittsburgh last year, where G-20 countries agreed to coordinate not only fiscal and monetary policies, and banking re-regulation, but also macroeconomic policies. In a way this has happened – the countries are certainly coordinated in trying to shovel the economic dirt onto another country. Economists learn a lot from history, but seem not to have yet reached a chapter that explains that in an increasingly interconnected world, we need not to be merely conscious of the negative effects policies have on others, we also need to take action to prevent it, and act accordingly. Tensions can lead to trouble if not properly managed. The recent economic crisis is still affecting jobs and livelihoods across the world. If ever there were a time when we should not turn our backs on international cooperation, it is now. Unfortunately, when talking about ‘currency war’, many do consider their currency to be a weapon, and that is not good for the global economy. In fact, this is the real threat, as there is no domestic solution to a global crisis, and a closer look at the origin and development of the currency wars shows that global cooperation is impossible as well.

In the early months of 2009, when governments around the world were carrying out stimulus packages aimed at boosting their economies, there was talk of such collaboration. But it was short-lived. By the end of 2009 new contradictions had emerged, as the financial crisis of Dubai, near-bankruptcy of Greece and Spain, Portugal and Ireland’s financial crisis pointed to the emergence of the so-called sovereign debt crisis. By May of this year the European banking system faced collapse and was only propped up through the provision of a EUR750 (QR3.7 trillion) bailout. The crisis effected a policy reversal as financial markets dictated their agenda to national governments. They demanded that fiscal stimulus packages be ended and a programme of sweeping spending cuts be initiated, aimed at wiping out social gains won by the working class over the entire post-war period. At the same time, the economic stimulus provided by the lowering of interest rates had run its course. In both the US and Japan, short-term interest rates set by the central bank are so low that monetary authorities have resorted to ‘quantitative easing’ – the purchase of government bonds – in a bid to lower long-term rates. But these measures have failed to boost economic growth. In six of the world’s major economies – the US, Japan, Germany, France, the United Kingdom and Italy – gross domestic product (GDP) in the second quarter of this year still had not returned to where it was in the second quarter of 2008. Moreover, these economies are estimated to be operating at about 10 percent below their past trends. With stimulus packages and interest rate cuts either ruled out or ineffective, national governments are seeking to expand exports, by reducing the value of their currencies, as the sole remaining measure available to provide an economic boost. But, by its very nature, an export stimulus cannot boost the world economy as a whole. Rather than providing a life raft, competitive devaluations are more like shipwrecked sailors trying to stay afloat by climbing on each other’s shoulders. The impact on MENA Developing countries are, increasingly, the engine of global growth, and consequently are playing a crucial role in the TheEDGE

ECONOMIC BAROMETER

recovery. They are expected to account for about one-half of global growth in the years ahead, making this a very different world from the one of 10 years ago. The growth of these developing nations now provides an important source of demand for exports in developed countries. Unsurprisingly, developing countries want more representation in international bodies and changes in the financial policies of the developed countries. The consensus is that the global economic governance is suffering from serious weaknesses, and there is a need for more coordinated economic policies, with more balanced representation of all the nations having a stake in the global economy. So how will the currency war affect our region? According to Euromonitor International, there is a growing role of economies in the AsiaPacific for Middle East exports. The role of export markets in Asia has grown in importance since the global economic crisis of 2008 and 2009, and economies in the Middle East are increasing their exposure to big importing countries like China and India: • In 2009, the Asia-Pacific region accounted for the highest proportion of Middle East and North Africa (MENA) exports at 35.8 percent, followed by Europe at 20.5 percent. Intra-regional trade is also high and accounted for 12.8 percent of total exports in 2009. Export demand from countries in Asia-Pacific play a key role for the MENA region and MENA exports sent to this region witnessed a period of growth of 117 percent between 2004 and 2009, reaching US$292 billion (QR1 trillion) in 2009, • As the world’s largest liquefied natural gas (LNG) importer, Japan accounted for the largest share of MENA exports sent to Asia in 2009 at 32 percent. Japan’s economy will remain an important export destination for MENA exports as it has no proven oil reserves and was the third largest consumer of oil (after the US and China) in 2009, • China and India’s importance as export destinations for MENA exports grow yearon-year, with an annual average growth rate of 24.6 percent in China and 44.4 percent in India between 2004 and 2009. In 2009, China accounted for 21 percent of MENA exports to Asia, up from a 4.3 percent in 2004, while India accounted

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for 7.1 percent of MENA exports to Asia, up from two percent in 2004. China has limited energy sources and is highly reliant on energy imports to support its rapid economic growth. There is good growth prospect for the region in 2011, despite the currency war, since higher commodity prices will help push growth in the MENA region, particularly in Middle East economies. The region will continue to increase its exposure to Asian markets and push to drive regional investment. According to the World Trade Organization, global trade in the first half of 2010 has increased by 25 percent year-onyear and is set to grow by 13.5 percent in 2010. The MENA region will benefit from this increased trade flow. Higher commodity prices and greater demand from Asia will boost export growth during the year – demand for raw commodities such as oil will continue to rise as rapidly growing emerging economies, like India and China, compete for resources, and crude oil prices, which are expected to reach US$100 (QR364) per barrel by 2020. This will provide fiscal respite for oil-exporting countries in the MENA region. However, MENA exports to Europe will not improve in the short-term, reflecting the uneven recovery of European economies and reduced demand owing to the eurozone debt crisis. The share of exports to Europe is expected to show a decelerating trend. Economies in the MENA region are set to recover strongly owing to the rebound in exports in 2010, with annual real GDP growth being forecast to reach 4.4 percent, up from 2.3 percent in 2009. In particular, Qatar (the world’s largest LNG producer) is forecast to grow by 18.5 percent in 2010, among the highest real GDP growth rates in the world during the year. Commenting on the impact of currency war on the Middle East, Omar Baroud, head of Economic Research at Alpha Fx Capital says, “Emerging markets have been caught in the middle of a seemingly intractable dispute over exchange rates and capital flows between the US and China. Most countries in Asia are moving in the direction of capital controls, and the Middle East is soon to follow.” At present the new ‘Cold War’ conflict takes an economic form. But other consequences are certain to follow.

ON THE PULSE

Sustainable desert farming has long been a dream of engineers and scientists across the Middle East, with little in the way of progress. Today, however, a technology with the potential to change not just the regionâ&#x20AC;&#x2122;s economies, but the regional way of life, is in its infancy in both Abu Dhabi and Qatar. Edward Jameson reports

Salicornia: This simple-looking herb could hold the key to the greening of sections of desert across the Middle East.

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“T

his seawater-fed technology could be introduced in up to 50 sites worldwide, which have the most arid 40,000 kilometres of desert sea-coasts. Many such coastlines occur in both wealthy freshwater-starved oil-producing countries and in some of the world’s poorest nations.” The above quote, from a letter written to the editor of the Londonbased Financial Times on June 16, 2007, painted a picture of a world in which it would be possible to green the deserts, to slow the pace of global warming and to increase energy security in some of the world’s poorest nations. It also presented the possibility of a world less susceptible to oil price spikes, of a land less exposed to rising sea levels and of nations with less disparity between the rich and the poor. It sounds like the stuff of fiction, but steps have been taken towards such radical changes in the planet’s arid, desert landscapes. Further, steps are being taken as you are reading this, in two of the Middle East’s most forwardthinking states: Abu Dhabi and Qatar. The “sea-water fed technology” referred to in the letter written more than three years ago, which is today a burgeoning practice laden with potential, makes use of the planet’s virtually infinite supply of seawater to irrigate farms that ultimately produce biofuels in coastal desert areas. The novel approach has been pioneered by Doctor Carl Hodges, a fellow of both the American Association for the Advancement of Science and the World Academy of Art and Science. Since January of this year, Hodges has also acted as a special advisor to the sustainable bioenergy research project (SBRP), a collaborative effort being led by Abu Dhabi’s Masdar Institute, and backed by aerospace giant Boeing, petrochemicals major UOP Honeywell, and Abu Dhabi’s own Etihad Airways. The idea involves an aquaculture farming system, irrigated by saltwater, to produce mangrove forests and salicornia, a herb that thrives in salty water. Experimental salicornia fields have also emerged in Saudi Arabia and Eritrea. The herb was first identified as a potential source of biofuel by Hodges’ Seawater Foundation project, which then went on to cultivate it on a large scale for biofuel production in Mexico, but commercialscale end-users and fuel producers had shown little interest – until Masdar put its considerable weight and influence behind the scheme.

Qatar Airways chief executive Akbar Al Baker hopes to point the way to carbon-neutral growth.

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The Masdar-led team is aiming to have a two square-kilometre pilotfarm operational within five years. Both mangrove and salicornia can be harvested sustainably and used to generate clean energy, aviation biofuels and other products, according to the team behind Masdar’s SBRP. The closed-loop system converts the effluent, or run-off, from the aquaculture process into an affordable, nutrient-rich fertiliser. “Developing low-cost, non-petroleum fertilisers is a key to achieving reductions in carbon emissions from any biofuel source,” the SBRP team adds. The Doha perspective On the peninsula, the potential benefits of producing biofuel from saltwater in the middle of the desert are not lost. Qatar Science and Technology Park, Qatar Petroleum and Qatar Airways form the triumvirate that is leading the charge to sustainable fuel production. Working alongside Seattle’s Verno Systems, the group has formed the Qatar Advanced Biofuel Platform (QABP). Through the project it intends to develop not just an engineering solution, but a practicable biofuel investment strategy – no small ambition in one of the world’s most arid climates. The project actually preceded the Masdar scheme by a week, in terms of its official announcement, though neither is in competition with the other beyond the natural commercial market forces that are driving each project. The Qatar-based consortium comes with good pedigree: Thirteen months ago Qatar Airways conducted the world’s first commercial flight powered by a gas-to-liquid fuel blend, a process which involves the production of aviation-standard gasoline from liquid natural gas, which is in no small supply beneath the sands and waters of Qatar, the state having the third largest known natural gas reserves on earth. The move to full biofuel production is seen as the next step in the process by the consortium: “By entering into the production and supply of bio jet fuels, we will be able to get closer and closer to the much talked-about carbon neutral growth,” said Qatar Airways chief executive, Akbar Al Baker. The study that preceded the establishment of the scheme looked at all available bio-feed stocks that would not affect the food or fresh water supply chain in Qatar, alongside the viability of existing and future production technologies. Likely feedstocks included jatropha, camelina, algae and, again, salicornia. Oil price exposure With aviation emerging as one of the prime industries with the capacity to spearhead both the United Arab Emirates’ and Qatar’s economic diversification plans, the opportunity to free itself from the oil price-hook could not have come at a more vital time for the region. Biofuels hold immense potential for the aviation industry, hence the involvement of Etihad in the Masdar project, and Qatar Airways in the Doha scheme. Neither airline is so deeply involved in what is a fledgling industry for nothing, and though each would no doubt have you believe, each would not be involved if there was not the opportunity for some form of financial reward should the project succeed. For generations, the aviation industry has found itself at the mercy of oil prices, and it has been dangerously exposed to ‘oil events’ and accompanying price spikes. Prior to the onset of the financial crisis, dramatic spikes were recorded in fuel prices worldwide, shortly after oil hit the eyewatering US$148 (QR538) per barrel mark on the back of unchecked

ON THE PULSE

Biofuels have the potential to free major fuel consumers, such as airlines, from the threat of oil price spikes.

speculation on global crude markets and deep-set, ingrained commodities market manipulation. Looking ahead, oil is widely expected once again to break the psychologically important US$100 (QR364) per barrel mark. Respected investment bank Goldman Sachs recently lowered its oil price forecast for 2011 by 9.1 percent, but this still brought price predictions in at US$100 (QR364) per barrel. The bank cited economic concerns in the coming year for the mark down. “Although prices are expected to rebound slightly from August 2010, the [economic] worries in Europe and in China will put downward pressure on the price of oil,” the bank says. This markdown may come as light relief to the aviation sector, but forecasts based on macroeconomic movements rarely ring true – economists, they say, are there to make weather forecasters look good. Yet the link itself between oil prices and the health of the aviation industry could not be clearer. Earlier this year, in the wake of a colder-than-average winter in the Northern hemisphere, jet fuel prices stood at more than double where they were just 12 months earlier as a direct result of resurgent oil demand. The Centre for Asia Pacific Aviation called it “an ominous sign for the industry”, and with global crude prices continuing to creep upwards, an alternative, albeit one that is currently years from commercial scale market-readiness, would be a breath of fresh air for the aviation sector. Mass-scale biofuel production within the Middle East region would allow the national carriers such as Qatar Airways and Etihad Airways to operate free from the excessive profit-driven environment of global commodities markets, ultimately putting more money in the hands of visitors to the region, and in turn boosting the coffers of Middle East businesses and the wider economies – there is truly a lot to be said for sustainability. The sustainable dream Both the Abu Dhabi- and Qatar-based projects have the potential to be models of sustainability and joined-up thinking, in both the piecing

together of disparate elements and processes, and the harsh climates that can support the project’s application. Firstly, as Masdar Institute associate professor Scott Kennedy explains, the Masdar-led project is a “much more commercially ready process” that could result in multiple co-products, including oil from the salicornia; leftover seed for animal feed; salicornia straw that can be combusted and used for electricity generation; fish that are capable of breeding in an aquaculture environment; while carbon will be sequestered, or stored, in the desert-based biomass. If such a product could be developed to be practicable on a commercial scale, there would be beneficiaries far beyond the region’s airlines, and even beyond the regional economy: the potential for societies in arid geographic location across the Middle East and beyond is immense. With less reliance on crude oil for transport purposes and power generation, fossil fuel demand would crash, supply would suddenly prove far more ample, and energy security for millions across the globe would be vastly improved. There may be a short-term sting in the tail for the world’s major oil producing regions – states such as Abu Dhabi included – but this would be far outweighed by the benefits inherent in a shift to a sustainable source of fuel, and the long-term economic boost that such a shift would bring. One of the problems plaguing the mass-production of biofuel worldwide is the competition for land and the displacement of food crops by plants intended for biofuel production, a switch which leads inevitably to food price rises. Yet in the world’s arid climates, barely any food crops are capable of survival, and so the risk of inadvertently triggering a spike in global food prices is non-existent. The hydrocarbon industries have been lucrative for the Middle East region for many years, but they are not sustainable over the long-term; whereas biofuel produced in the desert, and irrigated by saltwater, is the very definition of sustainability. Not just for the national airlines, but for the wider economy as a whole, and for the communities of the region. TheEDGE

GREEN BUSINESS

The push for (sustainable)

biofuels

GREEN BUSINESS

Sam Pickering believes that Qatar would only benefit from introducing biofuels in its drive for a more carbon neutral economy.

eveloping methods to reduce Qatarâ&#x20AC;&#x2122;s carbon footprint has been the main theme of this column for some time. As such, we have shown that keeping ahead of the worldâ&#x20AC;&#x2122;s drive to reduce climate change is not only achievable for Qatar, but a potential source of income as well. Like other forms of alternative energy being developed, the use of and economic arguments for producing biofuels in this country are huge. With an eye to the sources of biofuels being developed, their production and use in industry could be another means for Qatar to reduce its carbon footprint, increase its revenue, and promote itself as a forward-thinking and innovative economy. Like our exploration of the growth in use of electric cars, the consumption of biofuels to power our cars has some very positive connotations. Biofuel refers to any solid, liquid or gas field, which is derived from organic matter that can be replenished in a short time. The matter is then processed into liquid fuel, which can then be used in place of petrol and diesel. There are a number of sources for biofuel and types of methods to process the material into fuel alternatives. The three most commonly used are plants that produce oil, sugar crops and wood by-products. Oil palm, jatropha, soybean and algae all produce oil, which, once processed, can be combined with diesel to produce biodiesel. Likewise, sugar crops, or starch, are processed to produce ethanol, while the by-products of timber farming can be converted into methanol, ethanol and woodgas. All biofuels are diluted with fossil fuels to produce a consumer friendly source of energy. Combined biofuels are already available to motorists throughout the world. The most common is E10 fuel, which is a mixture of 10 percent ethanol and 90 percent petroleum. Other combinations and formulas are being developed all the time and include the recent launch of E100, ethanol and petroleum with up to four percent water. In Europe the most popular biofuel is biodiesel, which is readily available and can be used in any diesel engine when mixed with mineral diesel, which is produced from oils and fats. TheEDGE

GREEN BUSINESS

“The production and use of biofuels will help Qatar reduce its carbon footprint, increase its income revenues, and promote itself as a forward-thinking and innovative economy.” As with all alternative energy sources, using biofuels will help reduce our carbon footprint. However, it can be a costly alternative as the land needed to grow and harvest the materials has its own premium, while the processing plants needed to convert materials into fuel are also large and expensive to build. As Qatar is a comparatively small landmass, the most feasible way the country can develop its support of biofuels is through processing plants, and by making biofuel alternatives readily available and competitive to standard petrol and diesel. The benefits of biofuel to the environment are unquestionable. Through Life Cycle Analysis, it has been shown that first generation biofuels save 60 percent of carbon emissions compared to their fossil fuel cousins, while second generation biofuels save up to 80 percent. Such significant environmental benefits are likely to soon see governments incentivise the consumer with tax concessions on biofuel alternatives to make them more cost effective. Biofuels have other advantages in addition to their benefits to tackle climate change. As many developing countries have the comparative advantage in landmass, the production of crops to make biofuels has the social benefit of creating employment in the developing world. Historically, the production of sugarcane has been in less-developed countries, which are now benefitting from the cane by-product to sell as a source of biofuel. It is important to note, however, that, like most alternatives, there are disadvantages to consider. The concerns expressed by many environmentalists are related to the problem of converting land to produce crops for biofuels. They argue that increased and intensive farming will reduce habitats for animals and wild plants. It is well documented that many rainforests are being sacrificed in lieu of oil plantations. Likewise, across the globe, food prices are on the rise – mainly caused by overpopulation. Some believe that the lucrative

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advantages to producing biofuels have encouraged farmers to change their crops. The resultant inflationary pressure on food prices, due to a lack of agricultural land earmarked for food production, might affect as many as 100 million people within the developing world. This is proven through studies, which show that many first generation biofuels are not sustainable due to their knock-on effect on the cost of food. The production of non-sustainable biofuels has been criticised in reports by the United Nations, the Intergovernmental Panel on Climate Change and many other environmental and social groups. As a result many governments have switched their support towards sustainable biofuels, and alternatives such as hydrogen and compressed air. During 2008, the Roundtable on Sustainable Biofuels, an international initiative that brings together farmers, companies, governments and scientists, developed a series of principles and criteria for sustainable biofuels production. That same year, the roundtable released Version Zero of its proposed sustainability standards. Keeping abreast of the arguments for sources of, and cost of, biofuels is important to Qatar. Maintaining an interest in the reduction of climate change and showing an innovative, forward-thinking approach to alternative energy sources is fundamental to Qatar’s image as a developed and internationally open economy. Biofuels are not going to be a suitable source of energy in the near future, but over time, the demand for biofuel across the globe might make it a lucrative export product for diesel and petrol giants already based in Qatar. Understanding and developing the means to process and combine renewable fuels with standard fossil fuel products, might just be a new and profitable market for Qatar to explore.

ENTREPRENEUR

FUTURE FRANCHISE Maryam Al Beshri is the general manager of local corporate team building company Biz-Events, which recently launched in Qatar under international licence. Al Beshri spoke to Miles Masterson about what motivated her to bring this new concept here â&#x20AC;&#x201C; and the challenges, disadvantages and advantages of setting up this kind of franchise in the country. ENTREPRENEUR PROFILE Name: Maryam Al Beshri Qualifications: Bachelor of Fine Arts and Events Management Certificate Company: Biz-Events Qatar (franchise start up); Creative Careers Position: Co-Founder and General Manager Staff: Seven permanent/part-time staff Sector: Corporate team building Phone: +974 4410 1850 Email: maryam.albeshri@biz-events.com Website: www.biz-events.com

ENTREPRENEUR

iz-Events is a division of Creative Careers, a start-up co-founded by Maryam Al Beshri and her husband Fahd Ibrahim Jumna, who is also the team-building venture’s managing partner and strategic adviser. The reason they are bringing the concept of team building to Qatar, says Al Beshri, is because while the business environment here is highly developed on the surface, with extensive technological infrastructure and ubiquitous gleaming high-rise offices, the personal and interpersonal development of much of the workforce arguably still has a long way to go. Al Beshri feels the kind of team building exercises that BizEvents undertakes are the best way to promote a new approach to facilitating communication and motivation, and to increase this kind of knowledge in Qatar’s private and public sectors. “The foundation of any organisation is its people, and so this is our focus,” says Al Beshri, who explains that while this kind information is widely available on the Internet, or often expounded upon ad nauseam at corporate conferences and in PowerPoint presentations, it often does not resonate effectively with its intended audience. Tactile team building exercises, where participants have to, for example, compete to build a race-ready Formula One car out of cardboard, she says, are a much more productive way to achieve this goal. “You will always remember something you have done with your hands,” furthers Al Beshri. “You can do a lot of courses that talk about communication and time management, but the real challenge is when they give you only two hours to build a car and then race and drive it. To me, this will stick in your mind far more.” OPPORTUNITY KNOCKS Holding a Bachelor of Fine Arts degree from Virginia Commonwealth University Qatar and a qualification certificate in events management, over the past six years Al Beshri’s career has evolved through design, marketing and events management positions in various local companies. However, she has always aspired to run her own enterprise. While at a women’s business forum in Qatar, Al Beshri was presented with the opportunity she had been looking for. “I met Hazel Jackson, who is the chief executive officer (CEO) of Biz-Group,” Al Beshri says. “I was attending a session on employment resources and finance where she was a speaker and I raised the issue to the audience that I have the courage to start a business, but I need an innovative idea. I said I want to do something that deals with event management, because I have the passion and the kind of personality for it. Jackson said she would talk to me after the session and it was very successful, so much so that we got to the point that we are now launching Biz-Events in Qatar.” While Biz-Events has hosted about 20 satellite events in the country in the past under the auspices of its Dubai office (Biz-Events’ activities are operated under licence from United Kingdom corporate team building company, Catalyst), this is the first firm of its kind to be based here. So setting up a licensee for an international company and defining an industry wholly

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unfamiliar to the necessary authorities, were the first two major challenges Al Beshri had to negotiate. Fortunately, she had the experience and support of her family to rely on. Her grandfather, father and husband have all set up franchises in Qatar. Al Beshri, who funded the new venture with her own savings, and also through further investment from her husband and family, says their insight proved invaluable during the Qatar business licence application process, which can be protracted and complicated at the best of times. “Something like team building is quite new to Qatar,” she explains. “So when we applied for a trading licence and company registration they struggled to categorise us. Are we a training type of business? Are we a consultancy? So that was the challenge, to create an understanding about what team building is. But we got there in the end.” THE FRANCHISE ADVANTAGE The obvious disadvantages of launching a franchise are that it usually means that you must pay an initial licence fee to the main company, as Al Beshri did, and that you have to share all future profits with them. It also means you are bound by the company’s corporate structure and guidelines, and often need to consult with a head office or main regional branch, even when it comes to making small, hyper local decisions. The above could make for a convincing argument for rather starting an independent venture, especially for those where capital, time and the necessary skills and/or resources are already taken care of, or are not immediate concerns. However, Al Beshri says it was precisely because the concept of team building is so fresh in Qatar that they chose to do so through an experienced franchise such as Biz-Events, in order to meet the rapidly rising demand for it in the country, at the level they aspired to deliver.

“You can do a lot of courses that talk about communication and time management, but the real challenge is when they give you only two hours to build a car and then race and drive it. To me, this will stick in your mind far more.”

ENTREPRENEUR

It was because the concept of team building is so fresh in Qatar that Al Beshri chose to do so through an experienced franchise such as Biz-Events, in order to meet the rapidly rising demand for it in the country. “We wanted to bring something with a high standard; that also includes the experience of the global company Catalyst, which is a bonus, instead of us trying to bring the activities ourselves,” continues Al Beshri. She adds that when you consider the already existing international reputation and the vast clientlist a franchise arrangement such as this provides, as well as the resources and staff support, the positives far outweigh the negatives. A further advantage was that through its office in Dubai, BizEvents had already discerned which of its activities, mostly originally devised for Western companies, were suitable for the Middle East and further altered some of these to suit the regional market. “We are adapting these for companies who want to have one-day team building activities for males and then the next day for females,” Al Beshri cites an example. “It all depends on the client’s needs. If they are okay with a mixed workplace, we ensure that the activities they require – although they are fun and incorporate interacting – are not against the local culture.” MARKET FUTURE Apart from utilising online media extensively in their marketing strategy, to introduce Biz-Events Qatar’s operations in Doha, they collaborated with Qatar networking event Back2Business. Apart from regular networking, Biz-Events was provided with a time slot to feature their “innovative networking” in the form of ‘Beatswork’ drumming sessions (see sidebar). “This is unlike exchanging business cards and saying a few lines that you don’t remember,” says Al Beshri. “They were all speaking and networking…and from that day we received a lot of inquiries and feedback.” Al Beshri says her next two primary areas of attention will be in staffing the company with Qatari nationals to better serve the local market, and to also convince locally owned companies, especially government ministries, to embrace the concept of team building. To achieve these overlapping aims, Al Beshri plans to train stay-at-home Qatari moms and enlist them part time. “I don’t need them to stay for eight hours per day in the office, they are needed to support and facilitate at the events and event management. A lot of them they have the qualifications and the passion to do something, but they can’t leave their kids all day.” It is this kind of empowerment of the local workforce and spreading of the merits of team building that most motivates Al Beshri, and indeed forms the basis of the mission statements of both Biz-Events Qatar and Creative Careers.

The husband and wife duo founded the company, says Al Beshri, to indirectly support the aims of Qatar 2030, and Biz-Events is merely what she hopes will be the first of many such initiatives they will introduce to the country. “My greatest inspiration is what the Qatar government is doing to create a knowledge-based society in the country,” explains Al Beshri. “I wanted to start a business that can really help to achieve that vision. Our main objective is to bring to Qatar the kind of international expertise that will empower and enrich organisations and will really benefit people.” WHAT IS… TEAM BUILDING? Team building is specially designed corporate exercises, where staff are given a series of tasks and encouraged to work together on a personal level. Team building companies such as Biz-Events find out the particular needs of their clients and tailor-make a solution, incorporating these activities. These include ‘Beatswork’ (utilising drums and other samba instruments), ‘Kon Tiki’, ‘F1’ or ‘Chariot Challenges’ (where participants construct a vehicle or boat from cardboard and race it) or the aptly named ‘Big Picture’, where small teams of participants craft sections of canvas that are eventually joined together (and often used by the companies, who put them in their foyers or make small prints of them). Courses are typically a day in duration, although as many companies do not have the flexibility to send all their staff, very often these activities can be combined with existing corporate events, where teams – from 12 to more than 5000 participants, ranging from company heads to interns – can interact, learn and bond. “All the activities are there to enhance the communication and collaboration and energy, while bringing fun to the team – we make them all share one goal,” says Biz-Event Qatar’s general manager, Maryam Al Beshri. “Regional feedback shows a 94 percent satisfaction rate and 50 percent repeat business.”

MARYAM AL BESHRI’S FRANCHISE ENTREPRENEUR TIP

When it comes to starting up a franchise, Biz-Events Qatar’s Maryam Al Beshri underlines the need to pick the right company, one is that geared towards supporting every aspect of your new venture and, most importantly, has the human resources to do so. “If they don’t have a powerful staff, this could be a major disadvantage,” she says.

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SPECIAL FEATURE

Auctioning and investing in ‘Islamic art’ Post-economic meltdown, buying art is increasingly being seen as a lucrative alternative to traditional means of financial returns. This has coincided with the global rise in interest in so-called ‘Islamic art’ and in auctions, galleries and museums in the Middle East. Miles Masterson investigates these trends, art auctioneering, and whether buying works of art is indeed a wise investment.

The Whirling Dervishes. The pre-sale estimate of this 1929 painting by Egyptian Mahmoud Said, from the Farsi Collection, and which went to auction late last month, was more than US$300,000 (QR1 million). Image courtesy of Christie’s.

t is no surprise that great art pieces, also termed ‘museum quality work’, whether they are classical or contemporary, can fetch incredibly high amounts. It is also equally true that these pieces generally increase in value in the long-term. To the casual observer this might indicate that purchasing art could be wise in the current economic climate, or at least, to consider as an avenue to diversify one’s portfolio. Though private sales occur frequently around the world, much of the level of quality art in question is sold at public auction, which has gained a strong presence in the Middle East. In the past decade, regular sales have been conducted in the region by reputable international houses such as Sotheby’s, Christie’s, Bonham’s and Philips. Many have achieved record prices, some exceeding GBP1 million (QR 5.7 million) for classical antique pieces. Twentieth century, modern and contemporary works from the Middle East can also earn hundreds of thousands of dollars. Christie’s auctioneers have sold more than US$160 million (QR583 million) worth of art alone in the region in the past five years, proving that interest in ‘Islamic art’ and the power of the local art world is a potent force.

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ART FROM THE ISLAMIC WORLD Nevertheless, it is necessary to make an important distinction regarding the term ‘Islamic art’, which is often used to denote the spectrum of classical and modern work from the Arab world. Edward Gibbs, director for Sotheby’s London and head of department of Middle East and India, is unequivocal that art from the area – which in the Islamic sense technically stretches from Morocco to Pakistan, India, Indonesia and even China – must be described accurately. Though he agrees that the term ‘Islamic art’ from this vast geographic stretch can be applicable to both classical art (which dates from the seventh century), and contemporary art of an Islamic religious persuasion, Gibbs points out that much of the work erroneously referred to as ‘Islamic Art’ is in fact secular, and some is created by neither Arab or Muslim artists, but also other faiths and ethnic groups. “It is a very broad category…which is why we use the general term, ‘art from the Islamic world,’” he says. However you choose to term it, there has always been interest and trade in the region’s art across the global art community. Great collections of classical and contemporary art are housed in both private collections and museums worldwide, featuring a wide range of types of art, including paintings, sculptures, ceramics, textiles and jewellery. Thanks to the buying power of wealthy regional connoisseurs, many of whom take great pride in the region’s artistic history, such as the Egyptian Sheikh Said Farsi, and even though some reside in the United States (US) or Europe, many great works are now returning to, or remaining in the region. There have also been an increasing number of exhibitions and auctions of art in the Middle East and a sharp rise in demand and prices gained for contemporary works. This has coincided with an increase in museums and art galleries, from less than 10 in 2005, to around 60 now in Dubai alone.

UNDER THE HAMMER Considering the above, it is surprising to learn that the first auction of contemporary Middle Eastern art was only held in 1999, hosted by Sotheby’s in London which, says Gibbs, ostensibly brought Middle Eastern art to the attention of a much wider global audience than ever before. “Our aim has been to build a sustainable growth within the market, which has a global following and collector base,” he adds. In 2006, Christie’s held the first Middle East sale of contemporary art in Dubai. Eminent auctioneer and regional art authority Jussi Pylkannen, president of Christie’s Middle East and Europe, recalls how this came to be following his first visit a decade ago to Iran, where there is a long tradition of quality Persian art. Pylkannen returned to Europe suitably impressed by the standard. “I thought that it was curious that these artists were not represented in museum collections and contemporary collections worldwide,” he recalls. “So we had an exhibition in London of Iranian art eight years ago, and it was incredibly well-received.” Though, says Pylkannen, contemporary Iranian art has been the “backbone” of Christie’s’ sales since then, and still accounts for 50 percent of the market, the growth of interest in contemporary art from the broader region has spurred unprecedented interaction between Middle Eastern artists, both young and those into their 60s and 70s. Pylkannen explains that these auctions became a place for these artists to interact and compare their work side-by-side, an unintended positive byproduct of the auctions, which has further inspired their creativity. Nevertheless, Pylkannen admits that from the outset Christie’s were initially wary of how Western-style auctions would be received in the region. They were unsure whether local collectors would be comfortable competing with one another in the public forum of an auction room, particularly when up against

important government or royal figures. As it emerged, their fears were unfounded. “We had between 800 and 1000 people turn up for the sales,” says Pylkannen. “And if you are in a room like that there is only one buyer for each piece, it creates a fantastic atmosphere when they compete.” “The auction culture has been embraced,” concurs Sotheby’s Gibbs. “It has become fashionable and they enjoy it, they enjoy the adrenaline drive and it is a big kick participating, your pulse starts to race, and you get sweaty palms and it is fabulous when you are successful in bidding on something.” APPORTIONING VALUE Prior to an auction, all of the artworks are appraised by the house’s experts and given a ‘pre-sale estimate’ price, determined by a complex process, before they are put on display for pre-sale exhibition or viewing. “We put estimates on works of art that reflect our view of the quality, but also historical evidence,” explains Pylkannen, who describes how a print in a selection made by Picasso, for example, would be measured against previous sales in kind. Occasionally though, due to the fact that very rare truly magnificent classical works rarely appear on the market, the final bid might exceed all expectations. The record breaking sale of an Ottoman dagger, which he in fact dropped the hammer on (see sidebar), adds Gibbs, is a case of a such an unanticipated huge price being reached. “It was estimated at up to GBP80,000 (QR457,000), but sold for 15 times that. That is a prime example of how art will be fought over and sell for multiples,” informs Gibbs. “But then you have the middle of the market where there is more of a supply, and then to come back to the modern and contemporary art,” Gibbs explains the dictates of supply and demand on the value of art. “Obviously if the artist has died then there will be limited supply, but if the artist is living then the supply is ongoing.” TheEDGE

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The kind the of art, whether it is made from material such as gold, and the name of the artist that created it also play a role. This is particularly relevant with museum quality classical Islamic calligraphy, because at one time the great calligraphers, who signed their work, were highly revered. The person who mentored the artist is also applicable to

valuing classical, modern and contemporary calligraphic art, as well as paintings and many other art forms. Of course, unlike the works that appear at auctions, most of the art by lesser-known artists that is sold at galleries is not valued by in the main by name or previous sales, but by the technique and subjective quality of

Untitled. This work (currently valued at QR40,000) by Doha-born fine art painter Salman Al Malik, who is one of Qatar’s ‘big four‘ top-selling artists. Local artists regularly achieve high prices at auctions, and their work is in much demand through both public sales and galleries. Image courtesy Al Markhiya Gallery, Doha.

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the work, as well as the level of negotiations between the artists and the gallery curators. However, for those whose work is invited for sale at auctions, the mere fact their work is being presented for public bidding also raises the price. Heather Alnuweiri, of the Al Markhiya Gallery in Doha, explains how this includes a group of Qatari artists known as the ‘big four’ – Ali Hassan, Faraj Daham, Salman Al Malik and Yousef Ahmad – all of whom are now able to regularly achieve enviable amounts at sales for their creative output. Value and demand, Alnuweiri adds, is being further spurred by the attention given to some of these artists by notable regional art aficionados, such as Qatar’s Sheikh Hassan bin Mohammed Al Thani. “It helps when you have people who are important collectors buying their art, because it increases their profile,” says Alnuweiri. ART AS AN INVESTMENT While most art gains in value over time, art experts all agree that capital appreciation is rarely what drives the buying of quality art. “I wouldn’t want to encourage a lot of investors suddenly rushing in thinking they are going to make a lot of money,” warns Edward Gibbs. “I would say that is the wrong approach, you have to be passionate about it.” Gibbs advises new buyers to first learn more about this highly refined genre. “You need some knowledge to really appreciate what you are looking at and what you are buying. It is quite a difficult process and it is not something that you can leap into and understand overnight.” Pylkannen also explains how many families and individuals, such as Sheikh Farsi, grew up surrounded by a tradition of collecting and many have been buying art for generations to collect and fill their homes around the world. Though Pylkannen agrees most of these families mainly purchase great art to savour,

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as well to build up collections – be it by a certain artist, from a certain era or of a certain genre – he nevertheless feels that financial investment is still a consideration for many. “You don’t get much pleasure out of owning stocks and shares [which] can go up and down,” Pylkannen says, equating art to buying property in Park Avenue in New York. “Some artworks can rise and fall in value, but if you buy masterpieces…they are only going to get more expensive, it is just a question of by how much.” Considering the above, one would imagine that these collectors would want to hang onto their pieces, but, says Pylkannen, the contrary is often true. Though he says, some might sell individual works to pay for their offspring’s university tuition for example, many collectors build up works and then sell them to start again in another area, or pass them on to other collectors, such as Said Farsi does. “Anyone who buys a collection has only got their lifetime in which to enjoy it and consequently they will have to sell it,” explains Pylkannen. “Sheikh Farsi, for example, who is in his late 70s, from his perspective, he has owned and enjoyed it and is very pragmatic about it. He says now it is for the next generation to include it in their own collection.” Nevertheless, critics of the auction process argue that auctioneers can provide overly high estimates to ‘get the material through the door’, that many private buyers do not favour auctions, and that some works may very well end up unsold at auction. Citing expert personal service, among other factors, the auctioneers understandably disagree. “There is a certain comfort and confidence that comes from purchasing from a reputable company,” counters Gibbs, who adds that this includes a guarantee of authenticity provided by the auction house that the art is not a fake, a fact especially pertinent to classical art. “You have the assurance that there are no problems or issues with what you are buying, and there will be no nasty surprises

La Foule. Painted in 1987 by celebrated Lebanese artist Paul Guiragossian, for the October 2010 Christie’s auction in Dubai, the pre-sale estimate of this oil on canvas was more than US$100,000 (QR364,000). Image courtesy Christie’s. you might, for instance, get if you bought something privately,” he says. “On the open market there is great transparency about what you are paying,” echoes Pylkannen. “You know when you come to re-offer it in the future there will more or less be the same levels of enthusiasm…driven by competition, which is very real.”

LOOKING TO THE FUTURE What is also clear for the Middle East is that auctions have created excitement around art hailing from the region – and in step with their agenda to grow the market by educating, and inspiring both new and established buyers – there has never been a better time to purchase or invest in art here. TheEDGE

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RECORD BREAKERS Some examples of record-breaking prices for artworks and artists achieved from Islamic world in recent years: GBP1 million (QR5.7 million) – For an Ottoman dagger from the reign of Sultan Suleyman, Sotheby’s, London, 2004. US$1 million (QR3.8 million) – For Iranian Farhad Moshiri’s painting Love, Bonham’s, Dubai, 2008. US$2.8 million (QR10.2 million) – For Iranian Parviz Tanavoli’s sculpture The Wall, Christie’s, Dubai, 2008. US$2.4 million (QR8.7 million) – For Egyptian Mahmoud Said’s Les Chadoufs painting, Christie’s, Dubai , 2010. US$662,500 (QR2.4 million) – For Egyptian Ahmed Moustafa’s diptych Remembrance and Gratitude, Christie’s, Dubai, 2009. AUCTIONEERING ONLINE Like all aspects of the modern world, the auctioneering process has been considerably altered by the Internet. For a start, prospective buyers can register online and look at all the items for sale on their computer without having to attend the actual viewing. And though traditionally buyers have always been able to purchase goods through an agent by telephone – whether to remain anonymous or because they were in a different country – and log onto the auction houses to find out information, now they can also actually bid for and buy items online. “The Internet is hugely important for us,” says Edward Gibbs, “particularly for reaching out to new clients and providing a portal for new collectors to transact with Sotheby’s…the sales are transmitted live on the website and you can participate from the comfort of your own home.” Jussi Pylkannen of Christie’s, which also provide live online bidding, is equally enthusiastic about the phenomenon. “It has been enormous, about 25 to 30 percent of our clients engage with us online.” Christie’s, he adds also have a special iPhone app, “so you can now follow a sale from anywhere in the world,” says Pylkannen.

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Love. From his Jars series, the pre-sale estimate of this painting by Iranian artist Farhad Moshiri, for a recent Christie’s auction in Dubai, was up to US$250,000 (QR910,000). In 2008, a separate painting Esghg (also Love) by Moshiri achieved a record a sale price of more than US$1 million (QR 3.64 million).

“The increasing number of exhibitions and auctions of art in the Middle East has resulted in a sharp rise in demand and prices for contemporary works.” Thanks to the rising desire from both Qatari collectors and expatriates for reasonably priced gallery offerings, local artists and even artistic photographers have become more able to earn a living. The demand from the increasing number of hotels in Doha, most of which commission or purchase works for their establishments from well-known and obscure artists, and from mushrooming museums, which procure content from a variety of sources, including auctions, has also added to the growth of art in the region.

“The market is going in one direction in value,” closes Pylkannen. “The artists coming through are outstanding, and the number of collectors becoming engaged in the field is growing…it is a very interesting moment, because this is it is not like any other cultural community we have ever seen. There is a huge passion to show the softer side of the Middle East, whether it is in arts, calligraphy, theatre, design or architecture. There is a great tradition here.”

BUSINESS VIEW REAL ESTATE

This Perfect

Life

By Edd Brookes

Images courtesy of United Development Company.

BUSINESS VIEW REAL ESTATE

his month, there is something that I want to share with you. Something that even I was quite surprised by. To avoid keeping you in suspense a moment longer, my life-changing moment has been… moving into The Pearl. Like any other buyer, my main concern about moving in was – especially with the extended delay from the original handover date of June 2008 – whether the thought of living there had lost some of its appeal. In all honesty, this has not been the case at all and I absolutely love it. It is a wonderful feeling to be able to have breakfast on your balcony terrace overlooking the marina at Porto Arabia, or at the upcoming Qanat Quartier, and to realise, “This is actually mine!” The handover process itself was relatively informal and simple. Having paid the service charge for six months in advance, completed several forms for parking permits and owner’s passes, and choosing the appropriate satellite package, I was presented with a giftwrapped box, inside which were the keys to my brand-new apartment. In terms of finishes, the completed building has more than surpassed my expectations, from the attention to detail in the décor and furnishings, to the helpfulness of the tower manager. I dreaded moving furniture in, but was delighted by how helpful The Land were in ensuring the various deliveries from The Centre reached my apartment and were assembled. Obviously in any new building there are going to be the odd snags, but these were all attended to as soon as I reported them. At the time of writing, nine of the apartments were occupied, with the owners of the remaining approximately 150 apartments moving in during the next month. It does create a strange feeling which is probably similar to that experienced by the Jack Torrance character in the vast, empty hotel, in the movie, The Shining – but I am sure that the feeling will dissipate as more fellow residents arrive! One of the best aspects of living on The Pearl is being able to wander down to the beautiful La Croisette and enjoy a meal at one

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of the growing number of eateries, and then walk back home. As is widely known, most of the restaurants have been granted licences to serve beer and wine, and the excellent Mexican restaurant has a tequila licence. There is also something inherently pleasant about driving to and from the island, passing the beautifully manicured lawns, flowerbeds and water features. It is a credit to the vision of Qatar and surely must be shortlisted as one of the most desirable residential locations regionally, if not globally.

The range of shopping is constantly improving and nestled amongst the highend designer shops – which I have so far avoided – are pharmacies, banks and a whole plethora of coffee shops. There are also a number of watersport options, such as wakeboarding, and coastal cruises, all which depart from the marina. The Pearl is unique when compared to similar developments elsewhere within the Gulf Cooperation Council. The most important difference is that, while the vast majority of

BUSINESS VIEW REAL ESTATE

buyers of, for example, property at The Palm Jumeirah, are investors or ‘flippers’ with less than 26 percent being owner-occupiers, 67 percent of purchasers of The Pearl properties are owner-occupiers. This ensures a far stronger base in respect of price stability than other contemporary developments. In terms of investment yields, these obviously reflect the purchase price paid and the income (or rent) achieved, or the estimated rental value. Pricing on The Pearl did suffer from readjustments during 2009 and, while all apartments have slightly different locations, views and tower amenities, prices dropped from a high of QR21,000 per metre squared (pm²) to QR13,750 pm² . Rental expectations have similarly dropped and a typical two-bedroom, unfurnished apartment can now be rented at between QR13,000 and QR14,500 per month, as opposed to the levels of QR16,000 to QR18,000 that were anticipated in 2008. This has a positive effect on yield growth. If we consider that a typical twobedroom apartment might be 170 square metres in size, gross yields have risen from six percent to seven percent. Naturally one would anticipate investors offering apartments for rent on the basis of an inclusive rent, and therefore service charges, repairs and renewals will lead to yields softening. However, The Pearl is still a very attractive option – more so when considering the limited amount of property stock that expatriates may purchase. While I agree that investment deals typically reflect between nine and 12 percent with regards to both residential and commercial property, when considering yields in, for example, the residential sector in United Kingdom, one could normally expect four to six percent. This makes The Pearl an interesting investment. There are a number of opportunities to lease property rather than purchase, and those on shorter term contracts will be less inclined to consider a purchase. However, from my (slightly!) biased point of view, whether buying or leasing, The Pearl Qatar is simply the best place to live in Doha. TheEDGE

SPECIAL REPORT

Qatar:

New rules for Islamic banking By Greg Harris Images courtesy of Fadi Benni

Qatar National Bank (QNB), which had planned to open new dedicated Islamic branches.

New regulations for Islamic banking in Qatar released by the Central Bank in late August will change the way conventional banks offer Shari’ah-compliant services and likely boost the performance of banks that focus solely on such services. The new regulations, made public on August 29, prohibit conventional banks from allocating more than 10 percent of issued capital to Islamic banking operations and from opening additional branches for Islamic banking. There is also a limit on mudaraba (profit-sharing) and musharaka (joint ventures) to five percent of a bank’s total Islamic operations. The message seems to be that banks can either focus on conventional or Shari’ah-compliant banking, but not both. The new rules come into effect immediately, however, banks have until the end of 2011 to fully comply. The estimated 15 to 20 percent annual growth rate of Islamic services has encouraged conventional banks to open Shari’ah-compliant windows in recent years and the new rules will therefore have a significant impact on their growth. Islamic finance has been an important driver in attracting new customers. Islamic assets among the country’s banks grew at an average of 54.3 percent between 2003 and 2010, compared to 37.8 percent in conventional assets over the same period, according to MEED.

The regulations will most directly affect the leading conventional banks for whom Islamic financing has recently constituted a key driver of growth and profits, and those close to the limits established by the Central Bank will likely have to increase deposits elsewhere. Some leading players such as Qatar National Bank (QNB), which had planned to open new dedicated Islamic branches that had already been approved, are waiting for further clarification from the Central Bank as to how to proceed. “We’ve received notice from the Central Bank to wind down our operations,” Louis Scotto, the head of retail banking at Doha Bank, told local media. “They have almost stopped our Islamic business.” Banks that specialise in Islamic finance, however, are set to reap the rewards of the Central Bank’s ruling. Shares in Qatar Islamic Bank (QIB), Qatar International Islamic Bank (QIIB) and Masraf Al Rayan have climbed five percent since the ruling was released. QIB has been doing very well of late: in September, it was the first Qatari financial institution to launch an international sukuk, or Shari’ah-compliant bond, which was oversubscribed eight times, with demand reaching US$6 billion (QR2.18 trillion). The issue will likely further strengthen QIB’s growth in Islamic finance. The bank also posted net profits of US$249 million (QR907

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million) during the first nine months of 2010. Total assets through September reached US$12.3 billion (QR44.8 billion) compared to US$9.77 billion (QR35.6 billion) for the first nine months of 2009. This growth was reflected by a net profit increase at the end of the third quarter, reaching US$115.3 million (QR420 million) compared to US$109 million (QR397 million) in 2009, an increase of six percent. The bank’s assets stood at US$4.99 billion (QR18.2 billion) at end-September compared to US$4.06 billion (QR14.8 billion) at the same time last year, a growth rate of 23 percent. Total deposits stood at US$3.35 billion (QR12.2 billion) up 32 percent from US$2.5 billion (QR9.2 billion) at end-September 2009. In announcing the results on its website, the bank said it would continue to focus on its Qatar operations, where it sees plenty of room for growth, with an increasing focus on risk management. Masraf Al Rayan announced that its third-quarter 2010 results included net profit of US$164.5 million (QR601 million) gained mainly from core banking activities. Financing activities saw growth of 118 percent compared to the same period last year, and total operating income increased by 14.6 percent. Total assets reached US$5.85 billion (QR21.3 billion), an increase of 60.7 percent more than the US$3.65 billion (QR13.28 billion) from the same period of 2009. Customer deposits reached US$4.18 billion (QR15.24 billion) compared to US$2.1 billion (QR7.65 billion)

Shares in Qatar Islamic Bank have climbed five percent since the Central Bank’s ruling was released.

in third-quarter 2009, a rise of 99.3 percent. Hussain Al Abdulla, the bank’s chairman and managing director, attributed the bank’s growth to a prudent credit and risks policy. Continued growth is expected for Qatar’s Islamic banks, though the outlook is less clear for its conventional banks. “If you’re only doing conventional banking, you’re at a severe disadvantage,” Scotto said.

While that may be true in the short-term, the limits on conventional banks may spur them to increase product offerings in other areas and will likely increase competition among institutions that offer only Shari’ah-compliant services. Though the new regulations put a dampener on competition between conventional and Islamic banks, it may encourage growth within each segment. TheEDGE

BRAND BEAT

Art

versus

Design

By Charlotte Stubbs

cross an array of design platforms and disciplines, designers often ask themselves whether they are artists or designers. Design is a tool for business improvement in every organisation, leading us to ask the question: do we need to embrace design or art? There has long been an argument among creative types as to whether they are an ‘artist’ or a ‘designer’, or whether they have the ability to be both. Some argue that unlike art, design is always contextual. They also point out that a key distinction between design and art is the measurement and definition of success, where design offers the ability to solve a problem, and art is instead seen as the production of one’s own creative perspective. Creative Action Design defines creativity as the ability to produce original ideas of value. While art does not demand a solution as its result, both art and design have the ability to change an audience’s emotions and perceptions to particular products, services, brands and fashions, making both valuable and essential. For this reason, it is important to embrace the strengths of both disciplines. Successful business is reliant on the ability to successfully communicate ‘why’. Simon Sinek, in his technology, entertainment and design (TED) talk, ‘How Great Leaders Inspire Action’, states that he has codified the pattern of success into a simplified three-step

theory. Coined the ‘Golden Circle’, Sinek demonstrates the theory in three progressive stages: What, How and Why? He supports his theory by challenging his audience to consider the following: “Every single person, every organisation on the planet knows ‘what’ they do. Some know ‘how’ they do it. But very few organisations know ‘why’ they do what they do. And by ‘why’, I do not mean to make a profit. That is a result. By ‘why’ I mean your purpose, what is your cause, what is your belief? Why does your organisation exist?” This is where creativity becomes necessary. As an integral business tool, creativity can be used to create, develop and communicate the core message of an organisation. Communicating such messages creatively assists organisations with brand penetration, ensuring that consumers understand the real fabric behind the brand, and makes them more likely to want to associate with it. The success of design hinges on its ability to resolve a problem by altering the

audience’s perception and emotions, in most cases towards a specific product or brand. Joshua Porter of Bokardo argues that designers create works which function so “the person uses the design”, whereas art is the “appreciation of beauty and life”. To Porter, this is the key differentiator between those who consider themselves an ‘artist’ or a ‘designer’. Ten designers can bring 10 different solutions to a single brief, each unique in not only the initial idea, but also in the execution of that idea. Artists, meanwhile, are more likely to interpret the brief in their own way, without as much consideration for the solution and whether it effectively challenges the problem. While art’s goal can be to make a statement or challenge, design aims to communicate by presenting information in the most concise manner. The art of good design lies within its ability to be invisible; the success of art is the ability to change the world you live in – and both are vital. In this modern age of 360-degree media communication, brands have to

A high premium is being put on creative, innovative thinking that gives an all-important advantage in the marketplace.

BRAND BEAT

fight an increasingly hard battle to be seen and to survive. As such they have to be more innovative in the way they express their offerings and values. This has led to a high premium being put on creative, innovative thinking that gives that allimportant advantage in the marketplace. It has also led to design embracing art as a method of communication and developing

relationships with people on a deeper and more meaningful level. The case for art being used as a powerful marketing tool can be seen through the recent work of art mural of Kobe Bryant painted in the Nike Vault in the United States. By using an artist, Nike effectively created an art exhibition, which resulted in a huge viral campaign for the brand. The related advertising

campaign was launched on television, using the collaboration of artists and designers to make it a success. Without each one, the message would not have been as effective. Adidas also embraced creativity recently when it commissioned two emerging African artists, Paul Kasemwana and Espoir Kennedy, to create paintings daily throughout the World Cup for its ‘Live Quest’ series, celebrating key moments from the games. Adidas embraced creativity to bring art into the world of sport in a way that excites its target audience, adds another dimension to the Adidas brand, and accentuates its involvement in the recent World Cup. Collaborations between the art and design worlds to promote brands is a recent phenomenon, ensuring that art takes its place within design in the mainstream world, and helps brands add that cutting-edge impact that they are always on the lookout for. Brands need to embrace artists and designers to create something special, powerful, emotive and unique. This innovative stance will help brands stand out and be successful. Strategy, structure and guidelines for creativity are also important, but overconstraining the creativity of designers and artists – while it may occasionally be successful in the short term – will not lead to the deep relationships a brand needs to create with its audience in order to survive long-term. This is the fundamental reason why brands use creative agencies – they need people who can ‘think outside the box’. Within an organisation, a sterile atmosphere can develop. Where brilliance is needed, external flashes of creativity and genius are required, and those people who can action both the designer and the artist within themselves are most likely to be able to meet these challenges. While the ‘artist versus designer’ debate rages on, it is clear that each have their strengths and benefits, and enjoy their own place in our creative world. Creative agencies that can blend the best of both to offer real innovative solutions are premium for any brand. Offering artistic expression and return on investment at the same time is a challenging needle to thread, but when done well, it will bring benefits that will be reaped by a brand for many years, leading to long, deep and real relationships with their markets. TheEDGE

BALANCE SHEET

DOWN TO BUSINESS:

TAX LAW By Ahmed Hussain

he Qatar landscape has changed rapidly over the last couple of years as an influx of foreign investment has gripped the country. Along with this, have come a number of areas in which Qatar law has changed quite substantially. Here we explore some of the key changes that have taken place, in particular the introduction of a new tax law, as well as the various structures available in Qatar through which to conduct business.

foreign companies established in Qatar that had significant tax exposures at the old tax rate.

New Qatar tax law On January 1st, 2010, Tax Law No. 21 of 2009 came into force, effectively repealing the old Tax Law No.11 of 1993. The new tax law has been designed to promote foreign investment and increase the international competitiveness of Qatar. The key changes in this new law have been the change of the tax rate to a flat 10 percent, the introduction of withholding tax, as well as new taxpayer registration and notification requirements.

Withholding tax The new withholding tax system applies to payments made to non-residents with respect to activities (services undertaken in Qatar) not connected with a permanent establishment in Qatar. The withholding tax rates are as follows: • Five percent of the gross amount of royalties and technical fees, including fees paid for technical, professional, consulting services, performed wholly or partly in Qatar. This includes fees paid to engineers, specialists, technicians, and consultants in technical and professional fields. Such fees exclude those paid to doctors and professors, unless such fees were paid for consulting services, • Seven percent of the gross amount of interest (currently suspended), commissions, brokerage fees, directors’ fees, attendance fees, and any other payment for services carried out wholly or partly in Qatar.

10 percent flat tax rate The new 10 percent flat rate replaces the progressive tax scales that had a top tax rate of 35 percent, and, like the old law, targets foreign-owned entities. The new rate may not apply to certain entities operating in the petroleum sector, for which their prevailing or new agreements with the State of Qatar may apply a rate of at least 35 percent. Overall though, this reduction will benefit larger

Registration and notification Every taxpayer who carries out an activity or derives a taxable income must register with the Qatar Tax Department, and submit an application to the department for a tax card within thirty days from the commencement of the activity. Taxable income is determined on the basis of the gross income after subtracting allowable deductions and losses.

The new tax law states that an annual tax shall be imposed on the taxpayer’s taxable income derived from sources in the State during the preceding tax year. The scope of the new tax law will cover: • Gross income derived from an activity carried out in Qatar, • Gross income derived from contracts wholly or partly performed in Qatar, • Gross income from real estate situated in Qatar, including the sale of shares in companies or partnerships, the assets of which consist mainly of real estate situated in Qatar, • Gross income from shares in companies resident in Qatar or listed on its stock markets, • Consideration for services paid to head offices, branches, or related companies, • Interest on loans obtained in Qatar, • Gross income from the exploration, extraction or exploitation of natural resources situated in Qatar, • Gross income subject to tax in Qatar under a double taxation agreement. In addition, tax will be imposed on the following types of income: • Bank interest and returns realised outside Qatar provided that they are derived from amounts resulting from the activity of the taxpayer in Qatar, • Commissions due under agency, brokerage or commercial representation agreements

BALANCE SHEET

accrued outside Qatar in respect of activities carried out in Qatar. For business expenses to be allowable deductions for tax purposes, they must: • Be necessary to derive the gross income • Be incurred and supported by documentation, • Not increase the value of fixed assets used in the activity, and • Be related to the taxable year. Tax exemptions Notwithstanding other tax exemptions provided for under special laws, international agreements, or exemptions granted by the Tax Exemption Committee, the following types of income will be exempt from taxation: • Bank interest and returns due to natural persons other than those carrying out a taxable activity in the state, whether or not they are resident in the state, • Interest and returns on public treasury bonds, development bonds and public corporation bonds, • Capital gains on the disposal of real estate and securities derived by natural persons provided that the real estate and securities disposed of are not part of the assets of a taxable activity, • Dividends and other income from shares if the amounts distributed during a taxable year were taken from profits that were: - subject to the tax under this law; or - distributed by a company, the income of which is exempt from tax under this law or other laws, • Gross income from handcraft activities that do not use machines, provided that the gross income does not exceed QR100,000 per year, the average number of employees does not exceed three during the taxable year, and the activity is carried out in a single establishment, in accordance with the limits and conditions provided for in the executive regulations of this law. • Gross income from agricultural and fishing activities,

• Gross income of non-Qatari air and sea transport companies operating in the state, subject to reciprocity, • Gross income of Qatari natural persons resident in the state, including their shares in the profits of legal persons, • Gross income of legal persons resident in the state and wholly owned by Qatari nationals. Accounting period The new tax law provides that the accounting period of a taxpayer will be his taxable year. A taxable year is defined as a 12-month period beginning on January 1 and ending on December 31 of the same year. However, if prior approval is obtained from the Tax Department, and if certain conditions are met, the taxpayer may adopt a 12-month accounting period different from the taxable year, while ensuring that the period chosen is not less than six months or more than 18 months. If part of the accounting year is covered under the new law and part under the old law, the income will be pro-rated over both years. One return will be required to be filed in such cases. Transfer pricing/ tax avoidance Tax avoidance and transfer pricing issues have been addressed in the new tax law by highlighting the importance that transactions be conducted at arm’s length when dealing between related parties. The Tax Department can now, under the law, impose ‘market value’ on transactions where it deems a particular transaction is not incurred at ‘arm’s length’ between related parties, and can also take a substance-over-form approach in assessing the reasonableness of a transaction. Recordkeeping requirements The new tax law’s provisions require that the taxpayers must keep accounting records in accordance with the laws of Qatar, international accounting standards, and the provisions of the executive regulations of

the present law, unless prior approval from the Tax Department has been obtained. Such records must be kept for a period of 10 years. Tax structures in Qatar Qatar provides the opportunity to operate a business under various structures based on your commercial needs. The most widely used structures include; a branch of a foreign company, a limited liability company (LLC), and a local agency agreement. There are advantages and disadvantages to operating under these respective structures. Branch of a foreign company Advantages • 100 percent ownership by the company, • Performance of the entire project activity as an independent entity, • No minimum capital requirements, • Can obtain resident visas and employ staff in the name of the branch., • Allows importation of goods and equipment into Qatar under its own name, • May rent office space and staff accommodation, • Allows operation of bank accounts in Qatar and the remittance of funds abroad, • Ability to deal with all government ministries under its own name. Disadvantages • Branches will be taxable on 100 percent of its net profits, • Branches may only be established for contract or project-specific engagements, in other words, government or quasigovernment contracts. Limited Liability Company Advantages • No statutory requirements to distribute dividends to shareholders every year, • Shareholders’ liability will be limited to their shareholdings, • The profit sharing percentage can be different from the shareholding percentage, provided this is specifically noted in a contract signed by the shareholders, TheEDGE

BALANCE SHEET

• A shareholder who does not have the manager’s role in the LLC may represent another shareholder in the general assembly meeting, under a specific consent from the shareholder authorising the proxy, • It is not uncommon in Qatar for LLC companies with a 49 to 51 percent ownership structure to be wholly managed and controlled by the 49 percent foreign shareholder, by virtue of the terms of the shareholder’s agreement signed between the Qatari and the foreign shareholder, • Tax liability will be limited to the foreign shareholding percentage (maximum 49 percent). Under the new tax law, it is anticipated that the tax liability may potentially be limited to the party beneficially entitled to the profits. Disadvantages • At least 51 percent of the ownership must be held by Qatari shareholders, • The company may not be entitled to deduct head office overhead expenses, • The company is required to set up a legal reserve equal to 10 percent of its annual profits, or up to 50 percent of its share capital. However, since the minimum capital required for a LLC company is only QR200,000, the legal reserve transfers from profits could cease when the balance reaches QR100,000, being the 50 percent of the capital. Local agency agreement Advantages • 100 percent ownership by the company, • Contract with government or quasigovernment entities is not a prerequisite for this arrangement, • Not project-specific, • No minimum capital requirements, • Ability to obtain resident visas and employ staff through sponsorship of agent. Disadvantages • The principal will be taxable on 100 percent of its net profits.

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LEGAL INSIGHT

qatarâ&#x20AC;&#x2122;s new e-commerce law Nikk Bond and Hani Naja outline the details of Qatarâ&#x20AC;&#x2122;s new laws aimed at electronic transactions and E-commerce.

LEGAL INSIGHT

ith it becoming increasingly popular in the international business community to conclude transactions using email and electronic messages, the State of Qatar recognised a need to regulate these transactions. The Supreme Council of Information and Communication Technology (‘ictQATAR’), the state’s information and communication regulator, proposed the Law of Electronic Transactions and E-commerce, which was promulgated by decree into Law No. (16) of 2010 (the ‘E-commerce Law’) on August 19, 2010. The E-commerce Law regulates arrangements between persons who have agreed to conduct transactions using electronic communications. Such an agreement may be inferred by the positive behaviour of the parties. The E-commerce Law does not apply to papers, documents and transactions relating to family issues and personal status, and to in-kind dispositions relating to property, arrangements that must be in document form in accordance with the law and to negotiable commercial papers. Requirements for electronic transactions The E-commerce Law defines a ‘data message’ as: “Information that is created, sent, processed, received, stored to be displayed by one or more information systems or by electronic means of communication.” The consent, or partial acceptance, of the completion of a contract, or a transaction, can be expressed by sending a data message. The validity and the enforceability of contracts or transactions are unaffected by the fact that such contracts or transactions were or are concluded by one or more data messages. A data message is deemed issued if: • It is sent by the originator (a person – or someone on his behalf – who originates, sends or stores a data message),

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• It is sent by a person having authority to act on behalf of the originator, • The addressee (the person to whom the originator intended to send the data message) applies a valid application procedure to ensure that the data message has been issued by the originator, or • The data message received by the addressee results from the acts of a person, who lawfully managed to access a method used by the originator, to specify that the data message is released by the originator. On the other hand, a data message is deemed not issued by the originator if the addressee receives a notice from the originator that the data message has not been issued by the originator, or if the addressee knows, or should have known, that the data message was not issued by the originator. Once the data message is issued and received, the addressee may, in the context of the relationship between the addressee and the originator, rely on the data

message received from the originator, and act on that basis. However, the addressee may not rely on the data message when they know that it results from an error in the process of the telecommunication. Sending and receipt If the originator has stated that the data message is conditional on receipt of an acknowledgment of receipt, then it will not be considered sent from the originator until the acknowledgment receipt is received. Determining the dates of sending and receipt of an electronic message is of paramount importance in determining time limitations, timeframes and deadlines. Unless the originator and the addressee agree to determine the time of the sending of the data message, the time will be the same time as when the data enters into an information system outside the control of the originator.

LEGAL INSIGHT

When an electronic address is specified by the addressee for the receipt of data messages, the time of receipt of such messages will be the same as when the addressee has access to his email address. If the message is sent to an email address of the addressee other than the email address specified, the time of receipt will be: • The time when the addressee has access to such an email address, provided that the addressee knows that the data message has been sent to their email address, or, • The time the data message is retrieved by the addressee, whichever is sooner. Place of sending and receipt Knowing the locations of where data messages were sent from and received is important to determine applicable laws and competent jurisdictions. Unless otherwise agreed between the originator and the addressee, a data message will be deemed sent from the originator’s place of business and deemed to be received at the addressee’s place of business. If the originator or the addressee has more than one place of business, the place of business will be the place most relevant to the transaction, or the headquarters of the relevant party’s business. If the originator or the addressee has no place of business, the habitual residence of the relevant party will be deemed as his place of business. Effects and weight of electronic transactions The information contained in a data message will not lose its legal effect, validity and enforceability, just because it is in the form of a data message. If the law requires that any transaction must be in written form, or if the law imposes specific effects on the failure to do so, the document will be deemed as meeting such requirements if it is in the form of a data message, provided that it is practically accessible for reference.

If the law requires that a signature should be affixed to a paper, document or transaction, or if it imposes legal implications for not signing it, then a valid electronic signature will be deemed to fulfill such a requirement. When assessing the authentic evidence of the piece of information, paper or document that is in the form of a data message, the following is taken into consideration: • The procedures and conditions under which that data message was generated, stored or delivered, • The procedures and conditions under which the integrity of the paper, document or the information contained in the data message was maintained, and, • The procedures and conditions under which the originator of the data message was identified. Electronic signature An electronic signature is a set of numbers, symbols, letters, etcetera, used to uniquely identify the signatory. A signatory is the person, who has the legal right to access the information required to create an electronic signature. An electronic signature is deemed an authentic proof of signing if: • The information creating the signature is that of the signatory, not another person, • The information creating the signature at the time of signing is under the control of the signatory and not any other person, • It is possible to detect any change(s) applied to the electronic signature after the signature, • It is possible to detect any change to the information of the data message after the time of signature, if the purpose of the signature is to confirm the integrity of the information to which it relates. When creating an electronic signature, the signatory must avoid the unlawful use of information, enhance the electronic signature using the services of a certified service provider, and ensure the accuracy and competence of all material representations made by the signatory.

The party that relies on the electronic signature will bear the legal consequences of its failure to take reasonable steps to verify the fulfillment of the requirements prescribed above, or check the validity of the authentication certificate. An electronic signature is considered legally valid, regardless of the geographical location where it was created or used, or the geographic location of the signatory’s place of business. An electronic signature created or used outside Qatar will have the same legal effect it would have if it was created within the state, if it offers the same level of dependability required by this E-commerce Law. Consumer protection The E-commerce Law also provides for strict consumer protection regulations in respect of the providers of e-commerce services. This is an additional layer of protection to those offered by Qatar’s Consumer Protection Law No. (8) of 2008. Penalties ictQATAR, supported by Qatar, provides for severe penalties that can be coupled with other penalties provided for in any other Qatari law. Violating the E-commerce Law can lead to penalties ranging from fines of up to QR300,000 to imprisonment for up to two years. The E-commerce Law is widely considered to be a milestone for ictQATAR and another step forward in Qatar’s quest to modernise its way of doing business, and to demonstrate its openness to the international commercial community. We look forward to seeing this new legislation in practice.

Note: This article is of a general nature and should not be considered as legal advice. Any person or entity requiring legal advice should consult a lawyer. For information and queries please contact Nikk Bond (Nikk.Bond@dlapiper.com) or Hani Naja (hani.naja@dlapiper.com). TheEDGE

BUSINESS KNOW-HOW

Wassim Karkabi discovers that business’s great leaders hold one important trait that allows them to think innovatively and stay ahead of the curve.

f we stop to think about what defines a leader and what makes one leader stand out from another, we uncover a number of attributes that are worthwhile considering. One of the key attributes of outstanding leaders is their ability to make wise and sustainably sound business decisions. The need to make a decision comes from standing at a metaphorical fork in the road, and having to pick a path. In business, there may be a situation, or set of events, that pose two or more conflicting ideas, and one must be selected. Each offers its own pros and cons. Understanding how leaders think at this point – what goes on in their minds when they are faced with a number of conflicting ideas with which to resolve a problem – is likely to be an enlightening experience for those wanting to improve their leadership skills in the workplace.

Roger Martin, author of the book, The Opposable Mind, and the Harvard Business Review article, How Successful Leaders Think, says, “Brilliant leaders excel in integrative thinking. They can hold two opposing ideas in their minds at once. Then, rather than settling for choice A or B, they forge an innovative third way that contains elements of both, but improves on each.” This is the cornerstone of innovative thinking. A leader has the ability to build on two opposing ideas, release the tension between them, or use them to generate a completely unique idea. Let us consider this for a minute. A new idea, or innovation, is often nothing but the successful and effective combination of two or more already-existing ideas. If we look at today’s technological ‘innovations’ – from the Blackberry, to Apple’s iPhone and the iPad – the truth of this statement becomes glaringly obvious. TheEDGE

BUSINESS KNOW-HOW

THOUGHTS FROM GREAT LEADERS ON BUSINESS “What should exist? To me, that’s the most exciting question imaginable. What do we need that we don’t have? How can we realise our potential?” Paul Allen, co-founder of Microsoft. “You shouldn’t focus on why you can’t do something, which is what most people do. You should focus on why perhaps you can, and be one of the exceptions.” Steve Case, founder of America Online (AOL). “The leader needs to create an environment in which people can analyse the situation and develop a good response.” Bill Gates, co-founder of Microsoft.

The Boolean advantage Fast forward to an age dominated by the Internet. If you have used Google or any search engine, you will be familiar with a particular way of searching called the Boolean search. This allows you to use a number of special commands and characters, better known as operators, to narrow your search, and better help you find what you need and want. Boolean searching is built on a method of symbolic logic developed by George Boole, a 19th century English mathematician. It allows us to broaden, or narrow down our thought process and search mission to reach the desired result. This methodology of logical thinking uses operators such as ‘and’, ‘or’, ‘not’, and other characters to generate the desired results. The ‘Boolean leader’ is one that uses and has mastered ‘Boolean logic’ and thought processes approaching decision-making, creative thinking, innovation, and even daily, mundane, operational decision-making.

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Such leaders are defined by the way they think about problems and their consequent solutions. A Boolean leader will seek unlikely ideas, consider a network of correlations and bonds between them, the external factors affecting the utilisation of these ideas, examine a situation from a distance by looking the big picture, and scrutinise how its various components and opposing elements affect one another. Most importantly, Boolean leaders refuse to accept the first set of options that a simple or obvious thought process produces. In today’s knowledge-based economy, individual innovative thinking and creative output powered by a systematic Boolean logic approach is what brought us Facebook, iPad, Blackberry and Google. Probably the most important underlying characteristic of a Boolean leader is their ability to think like a five-year-old, continuously asking one single question in both its positive and negative form: “Why?” and “Why not?”

“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” Sam Walton, founder of Wal-Mart. “Above all, good leaders are open. They go up, down, and around their organization to reach people. They don’t stick to the established channels. They’re informal. They’re straight with people. They make a religion out of being accessible. They never get bored telling their story.” Jack Welch, former chief executive officer of General Electric. “We are continually faced by great opportunities brilliantly disguised as insoluble problems.” Lee Iacocca, former chairman of Chrysler. “The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.” Rupert Murdoch, founder of News Corporation.

HEALTH AND SAFETY

Statistics, says Mark Kenyon, will only take a company so far when assessing its health and safety performance. For stakeholders, who require an accurate performance assessment, a proactive approach has to be implemented.

HEALTH AND SAFETY

“W

hat gets measured, gets done.” This is a maxim I heard years ago, and it has been attributed to a variety of people, from Peter Drucker and Tom Peters, to Edward Deming and Lord Kelvin. Yet determining your performance can present a dichotomy – if you do not measure it, then you cannot know if you are improving; on the other hand, if you become too hung up on metrics, you may lose track of measuring what really matters. In the United Kingdom (UK), the Health and Safety Executive (HSE) published a guidance document entitled Successful Health and Safety Management (HSG65), which outlined the framework of a health and safety management system long before the International Labour Organisation’s Occupational Safety and Health 2001 (ILO-OSH 2001) was published, or the Occupational Health and Safety Assessment Series 18001 (OHSAS 18001) became a British standard. The HSG65 model indicates that if an organisation is to ‘successfully manage’ health and safety, it must measure and review its health and safety performance. So, what does this mean and how do we do accurately measure performance? The problem with statistics Mark Twain popularised a saying that he attributed to former British Prime Minister, Benjamin Disraeli: “Lies, damn lies and statistics”. If indeed Disraeli was responsible for this often used quote, I am certain he was not disparaging the injury statistics used by many as their only metric in measuring their health and safety performance.

few people truly understand accident statistics, should a company publicise that it has achieved 10 million man-hours without a lost time accident? This is assumed to be a very good performance and it may well be, however, this perfectly illustrates Disraeli’s statement – that people can and have misinterpreted this statistic to mean 10 million hours without an accident. For this to be true, it would depend on the organisation’s meaning of the term ‘lost time accident’. It would also not take as long for a large organisation employing thousands of people to achieve 10 million man-hours as it would for one that has a few hundred employees. It is not suggested that such statistics are published with the intent to deceive, nor that they are untrue, merely that the general lack of understanding of this terminology leads to their misinterpretation. There is no internationally accepted definition of the term ‘lost time’ and different organisations use widely different definitions. In Occupational Safety and Health Administration (OSHA) parlance, lost time represents any loss of time from work as a result of an injury at work beyond the day or shift that it occurred. This could also be a misnomer though, since an accident that occurs at the very start of that day’s work and causes the employee to be offsite the following day is recorded as one day’s lost time, when it actually equates to two. Confusing it may be, but one thing remains clear – an accident occurred and someone was hurt at work. If we are to understand what an organisation’s accident statistics really mean, we have to understand what and how it was measured. Establishing measures for performance Using accident or ill health statistics as a metric represents a reactive approach to health and safety management and suffers widely from underreporting. If an accident is not reported and recorded it cannot appear in the statistics. Why then did the HSE suggest that we measure our health and safety performance and why is it a requirement of OHSAS 18001? Answering the question is easy – understanding the answer is not. If you fail to measure your performance it is impossible to determine how well you are doing. However, health and safety is not like running a marathon where there are world records, national records, Olympic records, etcetera. Where there are no such records for health and safety performance, organisations need to establish their own standards and targets. They should publish these annually (within the organisation) and determine the metrics that they will utilise to measure themselves against the stated or specified standards.

Where there are no records (to measure) health and safety performance, organisations need to establish their own standards and targets. It is not uncommon to read of companies stating that they have achieved, for example, 10 million man-hours without a lost time accident, but while these metrics may be factual, what do they really mean? And is this a measure of good health and safety performance? We measure performance to make improvements – actual, tangible improvements – in our accident, injury and ill health performance, but measurement and metrics will not achieve this alone. When considering what to measure, we must have a goal or a standard to attain. This is what HSG65 requires of organisations – establish goals and objectives for health and safety. However, since

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HEALTH AND SAFETY

Qatar labour law does not specify standards of heath and safety performance, and neither does the ILO or the HSE. In the United States (US), the Bureau of Labor Statistics specifies accident incidence rates for industry sectors and these are used as one of the measures in determining the insurance premium that an organisation is expected to pay, and to establish targets that it must meet in order to avail of cheaper premiums. HSG65 suggests that organisations should utilise both reactive and proactive measures in a bid to measure and determine their health and safety performance.

The role of active monitoring is very different. Active monitoring aims to avoid failures and to help improve an organisation’s health and safety performance by looking at the operations, systems, equipment and employees to ensure that either there are no failings, or that they are identified before they lead to accidents or incidents. Active monitoring gives an organisation feedback on its performance without the need for an accident, incident or case of ill health. This type of monitoring allows an organisation to measure its successes rather than merely respond to reported failures. It also allows shortfalls to be identified and addressed before accidents, incidents and ill health can occur. Active monitoring involves checking conditions, plants and systems to ascertain if performance is being maintained to the defined standards, using techniques such as safety inspections and safety audits. Active monitoring measures the effectiveness of an organisation’s protective and preventive systems against accidents, whereas reactive monitoring simply measures the number of times loss has resulted from a breach of the same systems.

Practical implementation of active monitoring Active monitoring can be carried out by a range of people, some of whom are third parties, including: • Operatives or workers, • Charge hands, foremen, supervisors, etcetera, • Managers, • Service engineers, • Insurance engineers, who are often used for A proactive approach - rather than a reactive one - is likely statutory examinations in the United Kingdom to prevent slip - ups in any organisation and United States, • Consultants or auditors, Reactive versus active monitoring • Customers, clients, etcetera. Reactive monitoring occurs when companies investigate ‘suspected’ A typical example of this active monitoring process can be found for failures in their health and safety management systems. Reactive measures equipment such as trucks and cranes. In many instances it is considered involve the reaction to something that has already happened, such as an accident, incident, near-miss or equipment failure, and once more, accident normal practice for daily safety checks of equipment such as forklift trucks to be carried out by drivers. It is also good practice for these reports statistics are the metric used. Once we have developed a recording to be checked regularly by the manager or supervisor responsible for the mechanism for accidents then we can utilise data manipulation to analyse area where the trucks are used. The role of this second check is to ensure and present an accurate picture. Common techniques include; that the daily checks are being made, not to repeat them. The trucks • Number of first aid treatments (injuries) that have occurred, would then be subject to a more detailed check and maintenance process • Accident frequency rate (AFR), from a third-party company contracted to maintain and service them. • Accident incidence rate (AIR). Furthermore, the trucks would also be subject to a third-party inspection Since this data could be interpreted as a record of failure to manage and certification at annual intervals. health and safety, organisations put a positive spin on the data and report, In conclusion, statistics are often easier to present, they satisfy for example, the number of days since a lost time accident, or the number of our desire for metrics, and many organisations do not have a mature million man-hours since a lost time accident. These statistics can be utilised enough occupational health and safety management system to allow to benchmark one company’s performance against another. them to specify objectives and targets for active monitoring. And A note of caution here though – benchmarking and the use of accident while they are not used with the intent to deceive, they are not an statistics relies entirely on honest reporting and comparable definitions of adequate measure of performance. the metrics, along with the methodologies used to manipulate the data. TheEDGE

INDUSTRY FOCUS ALTERNATIVE FUELS

Investing in a loW carbon FUEL FUTURE

Derek Atkinson discusses how new twists on old technologies can offer some solutions for producing environmentally friendly alternative fuels.

INDUSTRY FOCUS ALTERNATIVE FUELS

oncerns about global climate change, the need to reduce greenhouse gas (GHG) emissions and the drive for energy security have placed alternative fuels – particularly biofuels produced from various forms of waste – firmly in the spotlight. A 2007 life cycle analysis of alternative fuels commissioned by Toyota concluded that the two most promising alternative fuels in environmental terms are ethanol from sugarcane – already in widespread use in Brazil – and synthetic diesel from biomass, each of which, the report concludes, has the potential to reduce greenhouse gas emissions by 90 percent compared to gasoline derived from oil. These results were echoed in a study carried out by the European Environmental Agency, that concluded that synthetic liquid fuels derived from wood, reduce life cycle GHG emissions by 93 to 95 percent depending on whether the wood used was waste or farmed. Biofuels technologies based on fermentation, algal digestion, and catalytic conversion of sugars, are all under development. For example, companies including Denmark-based Novozymes, and the global company Codexis, are developing processes based on variations of the ancient process of fermentation. Others, such as United States (US)-based Virent – which is working with the oil major Shell to develop a plant that converts sugars into gasoline rather than ethanol – and US-based Synthetic Genomics – which is working with ExxonMobil on algal biofuels – are looking at newer technologies for biofuels production. However, each of these processes is designed for use with a specific form of biomass. Another promising technology attracting interest – the biomass to liquids (BTL) process – is based on the use of the tried and tested Fischer-Tropsch (FT) reaction, first developed in Germany in the 1920s and 1930s, to produce liquid fuel from coal. BTL can be used to produce biofuels from a very wide range of waste feedstocks, including agricultural, animal and municipal wastes, and ligno-cellulosic waste from trees. In addition, the fuels produced via BTL have a higher energy density than ethanol and can be substituted directly into existing fuel systems at up to 100 percent. They also burn cleaner than petroleumbased diesel and jet fuels, resulting in lower emissions of nitrogen oxides (NO) and harmful particulates. However, in spite of its obvious advantages, BTL cannot provide the answer to all alternative fuel issues – yet. Shrinking the hardware A major barrier to widespread introduction of BTL for the production of synthetic fuels from biomass lies in the size and design of the currently operating FT plants.

Microchannel reactor diagram courtesy of Oxford Catalysts Group.

Because biomass is not very dense – it takes approximately one tonne of biomass to produce one barrel of liquid fuel – it does not make environmental or economic sense to transport waste over long distances to centralised production facilities. For synthetic fuels based on biomass to become a realistic option, they will need to be produced on a distributed basis. This means the facilities must be relatively small, producing efficiently on the order of just 200 to 2000 barrels per day (bpd). The seven FT plants currently in operation or construction worldwide are designed to operate at production rates on the order of 30,000 to 140,000 bpd, and rely on the use of fixed-bed or slurry bed FT reactors, which cannot be scaled down effectively. Therefore, establishing BTL as a practical and economically feasible option for biofuels production will depend upon finding ways to intensify the BTL process. This, in turn, will require new types of FT reactors as well as improved FT catalysts. Much work in both these areas is already taking place, and some promising new reactor concepts, such as the FT microchannel reactors, developed by the US-based company, Velocys, a member of the United Kingdom (UK)-based Oxford Catalysts Group, have now reached the demonstration plant testing stage. Microchannel reactors take advantage of microchannel process technology, a developing field of chemical processing that exploits rapid reaction rates by minimising heat and mass transport limitations. This is achieved by reducing dimensions of the reactor systems. In microchannel reactors the key process steps are carried out in parallel arrays of microchannels within reactor modules. Each microchannel has a typical dimension in the range of 0.1 to 5 millimetres; the reactor modules have an overall diameter of just 1.5 metres. This modular structure is very flexible and offers many advantages when it comes to reducing the size and cost of the chemical processing hardware. It also results in higher throughput and conversion. In terms of productivity, microchannel FT reactors far outstrip their conventional cousins. TheEDGE

INDUSTRY FOCUS ALTERNATIVE FUELS

Removing the barriers to green growth In spite of the good progress in removing technical barriers, green energy solutions still need further investment to ensure that green energy plants become a reality. Finding the funds to develop green energy projects remains problematic. Although many oil majors, including as Shell, Exxon Mobil and BP, support some alternative energy projects, these are not among their a major activities, and do not fit in well with their business strategies. Big oil tends to work on the ‘big is beautiful’ principle; their success depends on taking large financial risks and undertaking big projects – with speedy, bespoke development, and high inherent costs – in the hope of achieving big profits. By and large green energy is by its nature small and distributed, the potential financial rewards

are well below what oil majors consider worthwhile. Although smaller oil companies may be interested in green energy projects, they generally do not have the resources available to fund these types of development. In theory banks and governments could provide the necessary finance. But here again, green energy – largely an unproven technology – does not fit in well with the typically risk-averse business strategies adopted by these organisations. One way to break this funding deadlock would be to improve the fiscal incentives and to establish an investment insurance fund to de-risk investments in green energy technologies to enable banks to get at least some of their investment back if demonstration and first operational plants do not work as intended. Governments themselves could also promote green energy by investing in small and medium sized enterprises (SMEs) that carry out green research and development (R&D) in order to make it easier for new technologies to come on to the market. Another way forward is for the SMEs themselves to attract oil industry investment by targeting at least some of their efforts towards coming up with solutions that in some way offer benefits to ‘big oil’. This is already happening. For example, the same FT-based technologies being developed for production of biofuels, are now attracting the interest of at least one oil major, Petrobras, as a way of tackling the problem of associated and stranded gas – gas reserves located far from existing pipeline infrastructure and markets. Stepping on the gas Associated gas and stranded gas are potentially abundant sources of energy that are often squandered. Rather than being transported to refineries for processing, stranded gas is often just

According to the World Bank 5.25 trillion cubic feet of associated gas – the equivalent of 27 percent of US gas consumption – was flared in 2004.

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INDUSTRY FOCUS ALTERNATIVE FUELS

left in the ground. Associated gas produced along with oil is frequently disposed of by flaring – a wasteful and environmentally unfriendly process that is increasing subject to regulation – or by re-injection back into the reservoir at considerable expense. According to the World Bank 5.25 trillion cubic feet (tcf) of associated gas – the equivalent of 27 percent of US gas consumption – was flared in 2004. A further 12.5 tcf of gas was re-injected. The reason? Cost-effective technologies for capturing this wasted resource offshore are not available. The technical and economic barriers to making use of associated and stranded gas are in many ways similar to those faced in the development of green energy via BTL. And so are the solutions. The currently available options for capturing stranded gas, which include liquifying or compressing the gas (LNG or CNG) then shipping it in specially designed tankers, have serious drawbacks, particularly in terms of cost. The economics dictate that new LNG projects are only viable for producing gas volumes greater than 500 thousand cubic feet per day (mcfd) over distances of 4200 kilometres (km) or more. Although CNG is a good option for transporting smaller volumes with throughputs as low as 100 million cubic feet/day (mcfd) over shorter distances, in the range of 1000 to 2500 km, it is too expensive to be used when reserves are more remote. However, thanks to advances in smallscale FT reactor technology, more flexible and economical options for capturing associated gas are on the horizon. Modular gas to liquids (GTL) facilities designed to convert handle-associated gas into a synthetic liquid crude could become a reality in just a few years. When combined with petroleum crude, the synthetic crude could then be transported along with the produced oil via existing tankers and pipelines, eliminating the need for a separate logistics system to transport the gas to market. Shrinking the hardware and scaling down the cost The GTL process involves two operations: steam methane reforming (SMR), to convert natural gas into a

CURRENTLY AVAILABLE OPTIONS FOR CAPTURING STRANDED GAS HAVE SERIOUS DRAWBACKS, PARTICULARLY IN TERMS OF COST. mixture of carbon monoxide (CO) and hydrogen (H2) known as syngas, followed by FT synthesis to convert the syngas into a liquid fuel. Conventional GTL technology is only economically viable for large-scale plants producing around 30,000 bpd of liquid fuel. But, as with BTL, by reducing the size and cost of the reaction hardware, while still maintaining sufficient capacity, small-scale GTL could become economically feasible. This, in turn, depends on finding ways to intensify the processes. Heat transfer properties play a limiting role in both SMR and FT, so adapting these reactions for use offshore depends on developing ways to shrink the chemical processing hardware in order to increase heat and mass transfer properties. This is the basic logic behind the approaches being taken by the two main players currently working to develop small-scale GTL systems, UK-based Compact GTL and US-based Velocys. In essence, both companies are developing modular solutions that combine SMR and FT and shrink the size of the hardware. In ‘standard’ SMR and FT processes the reactions are carried out in 2.5 to five centimetre (cm) diameter tubes, or channels. In the integrated two-stage system being developed by Compact GTL – which designed to incorporate modules weighing less than 25 tonnes and producing 200 bbl/day of liquids – the SMR and FT reactions are carried out in a series of mini-channels, 1 x 0.5 cm in diameter. In contrast the Velocys combined SMR/FT system for offshore GTL takes advantage of microchannel reactor technology to shrink the hardware and intensify the processes even further. On trial Both GTL technologies have now reached the trial stage. According to the Compact GTL website, a fully integrated pilot plant based at Wilton in Teeside, UK, has been in continuous operation since mid-2008, and a 20 bpd pilot plant is on track to be delivered to Petrobras for onshore testing in Brazil during the second half of 2010. The company has also completed a conceptual engineering study for Petrobras for a 2000 bpd commercial plant to be installed on an extended well test vessel. Meanwhile, Velocys recently entered into a joint demonstration testing agreement (JDTA) with offshore facility developers MODEC, the global engineering firm Toyo Engineering, the steel maker, Kobe, and Petrobras to build and operate a 5 to 10 bpd microchannel GTL demonstration plant at the Petrobras facility in Fortaleza, Brazil. This demonstration plant, which is designed to accelerate SMR by 200-fold and FT reactions by 10-to 15-fold, is expected to be up and running by 2011. These two developments provide an optimistic picture for the commercial development of small scale GTL. But will this be enough to entice more oil majors to invest in these newer greener technologies? Only time will tell. Derek Atkinson is a Business Development Director at the Oxford Catalysts Group; info@oxfordcatalysts.com Visit the website for more information: www.oxfordcatalysts.com TheEDGE

how-to guide

HOW-TO GET THE BEST OUT OF A BLOG

HOW-TO GUIDE

Corporate Blogging Best Practices By ProArticleBase

orporate blogging makes it possible for people within an organisation to communicate with one another by blogging and form communities around projects, products and other areas of common interest. Over the years, several best practices in corporate blogging have evolved. Corporate blogs are primarily of two kinds: internal and external. Internal blogs refer to blogs within the company that operate behind a firewall. Some businesses have only a single blog to update employees about the latest news and changes implemented. This is far easier to manage, control and ensure that the content adheres to corporate policies. Some enterprises allow employees to form blogs and share their ideas, though such practices are harder to control. Blogs improve communication, increase knowledge and clear doubts instantly and hence are necessary tools. External blogs are made available on the Internet and can be viewed by anyone. It allows company representatives to communicate with customers, allowing the company to make announcements, get reviews about its products, etcetera. Best Practices in Corporate Blogging • Creating an open, transparent and honest blog. The blog should give specific details as to who started it, what their position in the company is. Make sure the content is credible

The blog should be created carefully as it is primarily designed to retain existing customers, as well as develop interest in the products and recruit new customers. and that no attempt is made to hoodwink bloggers as that can severely damage the reputation of the firm when found out, • The blog should be created carefully as it is primarily designed to retain existing customers, as well as develop interest in the products and recruit new customers. It should develop a community of bloggers who actively participate in blogging, hence the content has to be written by someone experienced and knowledgeable, and they can include links of other blogs that relate to the product or subject of the blog by asking permission from the owners of those blogs, • The writing has to be consistent and the blog policies have to be enforced, • It is essential that businesses seek legal counsel to develop blogging policies such that information shared and posted in blogs can be informative without too much censorship as well as comply and conform

to the rules and other regulations that govern information exchange, • Keep updating the blog and make sure to stay committed to the blog, • When mistakes occur, make sure that instead of covering up and destroying the corporate image further, the company can quickly acknowledge a mistake was made and make amends, • Have adequate tact to deal with negative posts that will dispel doubts about the company or its products, try conversing with such bloggers asking their opinion how your product or services can be improved, • The blog must be designed to conform to the usability guidelines, • Have a clear idea about the purpose of the blog and have periodic checks to see if it is serving the purpose and if there are benefits. These are some of the best practices in corporate blogging.

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how-to guide

Benefits of Link Building for Bloggers Link popularity refers to the number of links pointing to your website from other websites on the Internet. Generally, search engines consider your website important and rank it high in search engine result pages (SERPs) if other websites link to your website. Link building improves the search engine ranking (SER) of your webpage if done in specific ways. Besides an improved SER, there are certain other benefits that your website derives from carrying out a link building campaign. In this article we list other benefits of link building apart from an improved SER. Link Popularity is usually viewed in isolation, and most people do not realise the complete benefits of a well-defined link building campaign. While improvement in SER for specific keywords is a very important objective of link building, it is not the only way a link building campaign can be beneficial to a website. Listed below are the seven benefits of link building: Anchor text Anchor text (AT) is the text that falls within a hyperlink leading to another page. The AT of incoming links plays a major role in your website’s ranking in the search engine result pages. AT is very important from a ranking point of view as your most important keywords are used in the links pointing to your website, which help in gaining rankings in SERPs. For wider keyword coverage, you can work with different link text options. It is important to have a number of combinations of anchor texts and associated link texts, so that the linking does not have a fixed pattern that the search engines can detect. This has become even more significant due to recent algorithm updates of major search engines. If you have more number of quality links pointing to your website, the keywords within your anchor text would benefit your website’s ranking greatly for those particular keywords. The web page of

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your site that the link is pointing to should also be optimised for that keyword(s) in order to properly influence rankings. PageRank PageRank is Google’s measure of importance assigned to a web page on a scale of one to 10. By undertaking a long-term link building campaign, you can boost your website’s PageRank and improve your website’s ranking significantly. Most other major search engines have adopted this logic in their own algorithms in some form or other, varying the importance they assign to this value in ranking websites in their search engine result pages. Search engines consider your website more important if more links point to your website. Direct Traffic Link building also benefits you by way of getting direct traffic to your website. Incoming links from other websites would surely pay high dividends, as users are likely to click on that link and visit your website, therefore bringing you direct traffic. The links placed on relevant pages would enhance the amount of relevant traffic to your website. A well planned linking popularity building campaign can also help you target your potential customer market and, therefore, increase the amount of valuable traffic to your site and thus even help improve your sales to some extent. Deep Indexing Another important benefit of link building is that a webpage embedded deep in your website too stands good chance of being indexed by the search engines. An external link leading to a page embedded deep in your site would help that webpage get indexed by the search engines, which would have otherwise taken a very long time (up to three to four months). While indexing a page, search engines would also index the links leading from that page even if they are embedded

very deep in your site structure. Search engines, while indexing that particular page, would also learn about the other links within your website and move on to index other pages too. Indexing Dynamic Pages Many of the search engines used to find it difficult to index the dynamic pages. With links pointing to dynamic pages the search engines would index those dynamic pages too. Optimising dynamic pages is little tricky, but you can have your dynamic pages rank well for various keywords with the help of link building techniques. A perfect match of only incoming links and keywords in the AT can do wonders to optimise the organic ranking of the dynamic pages in your site. Wider Search Engine Coverage Link building gives your website wider search engine coverage. In many search engines you might have not submitted your website, but in due course of time, the search engines will identify and pick up links to your website from other websites they recognise and index your site. This includes some important paid search engines (such as MSN, Askjeeves) that you may not have submitted your website to them. All search engines do not list your website for free, but would pick a link to your website from other websites they recognise, and eventually list your website in their result pages. Leading Competition Link building would also mean that your website stays ahead of your competition for your targeted keywords. The more the number of only incoming links pointing to your web pages, the higher it gets ranked in the search engine result pages. Using your targeted keyword phrases in the links text would ensure a good ranking for your targeted keywords in the SERPs.

HEAVY EQUIPMENT Strong & Reliable

Whether it's the size of our equipment or the size of our ambition, Jaidah's Heavy Equipment Division makes big promises and delivers on them. From earth moving equipment and trucks to power generators and utilities, we've got it covered. Jaidah Heavy Equipment (HED) is a division of Qatar's prestigious Jaidah Motors & Trading Company and is committed to providing the ď&#x192;&#x17E;nest equipment and service to the country's industrial sector.

P.O.Box 150 | Doha | Qatar Main Showroom: +974 4463 8804 | Fax: +974 4460 2440 Heavy Equipment Parts: +974 4460 0408 Heavy Equipment Service: +974 4463 8866 E-mail: heavyequipment@jaidah.com.qa www.jaidah.com.qa

TECH TOOLS

TECH

FOR EXECS

Make a busy life easier with these top-choice executive tech’ tools. SMALLER IS BETTER

The Libretto W100 is the smallest high-performance laptop Toshiba has created. About the size of a paperback book, it combines the complete Windows 7 computing experience, with an intuitive touch interface on two screen panels. Create and manage content on the dual 17.8-centimetre displays and move it between screens with your fingers. Use the screens independently – surfing the Internet on one and checking your email on the other – or together. Not only a notebook computer, the Libretto is also a media player and e-reader, and can be used in both portrait and landscape modes. Powered by an Intel Premium processor, the Libretto W100 weighs around 819 grams and offers a built-in web camera and microphone. Available in Qatar for QR4999. www.toshiba.com

BERRY SMART

For anyone with professional commitments requiring them to travel around the globe, the Blackberry is an indispensable way to keep in touch with the office and family back home. The new Blackberry Bold 9700 smartphone is supported by networks all over the world. With a 3.2 megapixel camera and 3G capabilities, you will be able to instant message or chat in real-time at no extra cost using Blackberry Messenger or Google Talk, among others, post a message or photos directly to Facebook, or tweet on Twitter. Useful applications – many of them free – will keep you up-to-date on news, finance, weather, sports, flight schedules and local attractions. Users will be able to open and edit attachments in different file formats, with the high-resolution wide screen making any time on the Blackberry effortless. Available in the Middle East. Price unavailable at time of going to press. www.blackberry.com

LIGHT AND EASY

The new range of Samsung multifunction printers incorporates a number of one-touch features, making them faster and easier to use – ideal for any home or small office. The three new series – CLP, CLX and SCX – do not compromise on quality, convenience, design or efficiency. The CLX series enjoys advanced features packed into the most compact of bodies, making it the smallest on the market. The CLX-3185FW colour laser printer offers printing speeds of up to 16 pages per minute (ppm) in black and white, and four ppm in colour. It also houses a unique one touch Wifi setting, automatically configuring the printer and wireless network for quick and secure use without the hassle of passwords. The CLP series includes the CLP-325W, which incorporates a navigation key ring, where users can navigate printing options quickly and easily. Meanwhile, the SCX series is designed for personal users, or individual office users, with the SCX3205W and SCX-4623FW featuring wireless functionality, access to a multi-user network and to a multitude of other products. Available in the Middle East from QR770 for the SCX-3205W to QR1783 for the CLX model. www.samsung.com

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LIFE AND STYLE

TOOLS FOR LIVING

Product Of The Month

THE SECRET IS IN THE SIZE Tired of lugging a too-large digital camcorder around? The new Canon Legria FS306 series is all set to change that. For aspiring filmmakers, ‘YouTubers’, bloggers and anyone who likes to keep the electronica in their life small and handy, the new camcorder will make it incredibly easy to capture any special moment. Small enough to fit into a handbag, it is a terrific travel companion. Each model in the series weighs just 225 grams. Yet despite their small size, these camcorders benefit from a number of advanced imaging features, including a genuine Canon video lens and Digic DV II processor, offering the highest possible video quality. The series also features a variety of features designed to make shooting easier, such as the Quick Start and Pre Rec functions. Additionally, a choice of 11 different shooting modes allows you to capture terrific footage, whatever the conditions. Available in the Middle East for QR1999. www.canon-me.com

A TASTE OF BRITISH LUXURY Burberry, the luxury brand with a distinctive British sensibility, is reinforcing its modern style credentials with the launch of its iPad covers. With an elegantly subdued design, the case protects the device against scratches and dust. The chocolate leather design (pictured) is ideal for those who are looking for a style that is understated. It features a Burberry logo on the front as well as a zip-around closure on three sides with a large leather zip pull. The interior flap offers extra storage space for any important papers. Burberry offers several iPad covers, including one in the famous Burberry check print, Haymarket. Available in the Middle East for approximately QR1420 (for the chocolate leather version) and QR1365 (for the Haymarket check version). www.burberry.com

THE PERFECT GOLF COMPANION As the weather cools down, now is the time to hit the links. Callaway, one of the world’s most respected golf brands, brings you the Diablo Edge Hybrid stand bag, with its XtraTraction2 base with stabilising stand system. It has a 24-centimetre top with integrated handle and 11-way divider. Twelve pockets include a molded, waterproof, fleece-lined valuables pocket, a fleece-lined rangefinder pocket, a full-length apparel pocket and an insulated fluid storage compartment. Extras include vibration-dampening cart pads, a Chevron ball marker and Chevron towel ring, and a rain hood. Weighing in at just over three kilograms, the Diablo Edge is the perfect companion for a fine day’s golfing. Available in the Middle East for approximately QR787. www.callawaygolf.com TheEDGE

HEALTH AND FITNESS

WORK PLACE WELL BEING

This month Thomas Woolf asks the important question that all employers need to ask themselves: Are our working environments undermining employee performance?

HEALTH AND FITNESS

‘Sick building syndrome’ is an expression, which was coined to define a situation where a place of work has been found to cause various ailments and illnesses characterised by headaches, respiratory problems and skin irritations. The syndrome is thought to be caused by indoor pollutants, microorganisms or inadequate ventilation. However, ‘sick building syndrome’ is not limited to airborne issues. Indeed the fabric of a building, its layout, deficiency of ergonomic planning when allocating workstations, or simply insufficient breakout areas and quiet spaces to work effectively are all contributors. It is no surprise, therefore, that the syndrome tends to be associated more these days with office environments rather than with factories or heavy industrial plants. THE SYMPTOMS In the very simplest of terms, building occupants are known to complain of: • Headaches, • Eye, nose or throat irritation, • Dry cough, • Dry or itchy skin, • Dizziness and nausea, • Fatigue, • Sensitivity to odours. While the above could all, in theory, be the effect of a multitude of other conditions, for ‘sick building syndrome’ to exist, most sufferers should experience a relief from their symptoms within a short period of leaving the building. POTENTIAL CAUSES Contributing factors can often relate to the design of the built environment and may include combinations of some or all of the following: • Indoor air pollution (for example, cigarette smoke), • Artificial fragrance such as dryer sheets, • Poor or inappropriate lighting (including absence of, or only, limited access to natural sunlight), • Harsh heating, ventilation, or air conditioning, • Inferior acoustics, • Poorly designed furnishings, furniture and equipment (for example, computer monitors, photocopiers etcetera), • Substandard ergonomics, such as inappropriate chairs, • Chemical or biological contamination. To the owner or occupier of a ‘sick building’, the symptoms may include high levels of employee sickness and increased absenteeism, lower productivity, lower job satisfaction and higher levels of staff turnover. WHAT IS THE SOLUTION? Solutions to ‘sick building syndrome’ usually include a combination of the following measures: • If the pollutant source is easily identified, then immediate removal or modification is required, • Heating, air conditioning and ventilation systems should be kept clean

Did you know? The Gourmet House is now open at The Kempinski Residences and Suites located in the West Bay. We stumbled upon this wonderful little deli, and it really does offer the most fantastic range of produce. From organic and gluten-free ingredients, which are often hard to find in Doha, to freshly baked bread from the in-house German baker. We were particularly impressed by the oil-free dressing from Ozganics and the organic Scottish smoked salmon. and regularly maintained. They should also be replaced or modified if other environmental issues come into play, • Smoking should be banned or, at the very least, restricted to a place well away from those who do not wish to be affected by cigarette fumes. Where smoking indoors is permitted, extractors should be used to direct the smoke outside the building, • Ensuring access to natural sunlight and opening windows for ventilation helps building occupants to feel a level of ‘control’ over their internal environment, • Regular cleaning of soft furnishings to avoid the build-up of dust and dust mites, • Eliminating or relocating, wherever possible, sources of pollution to where there are fewer people. For example, the removal of gas heaters or photocopiers from busy work areas, • Canteens or kitchens should be kept clean with food and drink remains regularly disposed of. Of course, there are some sceptics, who debunk the existence of ‘sick building syndrome’. Nevertheless, basic hygiene and cleanliness seem to be at the root of eliminating most of the triggers for those who complain about it. It is impossible to remove all pollutants that cause building-related illnesses, but with adequate, well-maintained ventilation and the removal of obvious sources of pollution, the risks can be drastically reduced. TheEDGE

HEALTH AND FITNESS

THE BARE MINIMUM Frederick Herzberg is one of the most widely acclaimed theorists on motivation in the workplace and his Dual Structure Theory is still taught in the top business schools around the world. Herzberg vehemently argued that employees must be prevented from being dissatisfied by their working environment (for example, hygiene factors) before they could be stimulated by a series of motivational factors such as achievement, recognition, responsibility and opportunities for growth. Herzberg would lead us to believe that without an excellent working environment as a basic minimum, we are unable to arrive at a point where employers can even begin to obtain the most from their employees. Conversely, it is clear that those employers, who provide an incredible working environment that provides a ‘clean, safe working environment’ as a minimum, and which empowers employees to think and act, will develop a significant advantage over the competition. This has been highlighted in numerous studies of employers such as Nike, Google, Facebook, Skype and Innocent Drinks to name but a few. For example, Googleplex, Google’s United States headquarters has a diverse range of facilities from free laundry rooms and small swimming pools, to gymnasiums and multiple sand volleyball courts. Employees even have access to 18 subsidised cafeterias. These companies offer some of the lowest rates of pay against industry benchmarks yet they have some of the highest rates of retention and employee satisfaction. Ultimately any business’s primary objective should be to maximise stakeholder value, not just profitability. A focus on profitability will often lead to trying to cut costs, or compromising on standards in order to increase shareholder returns. Such costs will almost invariably impact upon an organisation’s operations behind the scenes so as not to impact upon customer perception. However, this myopia will almost always lead to greater attrition, poorer levels of productivity and a reduction in employee satisfaction. It is, therefore, clear that creating a healthy working environment not only provides the necessary platform for employees to perform, but it has a clear tangible impact upon the bottom line. Which brings us on to the psychological impact that a workplace can have on an individual, or a collection of employees, as well as productivity. If not addressed effectively, people can encounter an array of emotionally led symptoms that are broadly aligned in the word ‘stress’. Stress can be caused by many different symptoms such as irritability, anxiety, moodiness and lack of focus. Severe stress can even manifest itself as physical symptoms such musculoskeletal disorders and can result in tight, tense and aching muscles, back pain, exhaustion, high blood pressure and even stomach ulcers. Overcoming stress and creating a healthier state of mind while at work is crucial. The first step is to remove the cause of the mental stress, but this is easier said than done and it is advisable for anyone, who is under severe stress, to firstly seek the support of a sympathetic colleague or mentor and work collaboratively to eradicate the problem. It is important to understand that stress is not a sign of weakness, and have the courage to address the problem is a true signal of strength. We at TheEDGE are always battling against tight deadlines in order to get this publication ready on time. So here are three key steps to ensuring

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Did you know? Kinnarps Project Solutions, is the leading provider of optimal office interior design and fit out solutions in Qatar and across the Middle East. They focus is on creating healthy, engaging workplace solutions that provide the platform on which employees can flourish. www.kpsworld.com/Doha that the body and mind are in the best possible health to withstand the rigours of daily working life: NUTRITION: What you eat during the day is a crucial factor directly related to the prevention of stress. Careful planning of your daily dietary intake can reduce the levels of stress you are prone to and reduce fatigue, headaches and irritability. Ensuring you have breakfast and lunch dramatically increases energy levels and reduces the impact stressful situations will have on your body. Drinking plenty of water and eating fresh fruit throughout the day will boost your metabolism, increase your efficiency and dramatically improve your work energy levels. REST: Ensuring you have the opportunity to rest and recharge your batteries is essential. In this day and age, a lot is expected from a day’s work and all too often we expect to be able to push our bodies to the limit, and do more than we actually can. Rest is vital and taking it is not a sign of weakness but a sure indication that we are at our limit and need time to relax and recharge. Finding a place that enables you to do this, such as the beach or simply somewhere that you can walk away from feeling refreshed. PHYSICAL ACTIVITY: Perhaps the most important of all the steps. The saying ‘A fit body, leads to a healthy mind’ is perfectly apt. Try and complete at least five periods of activity each week. This should comprise a mix of cardiovascular, stretching and conditioning exercises and, where possible, try and engage in some team-based sporting activities. If nothing exists locally then team up with your colleagues and start something new. It may be a Friday cricket team, Monday night beach football, or simply a running club along the Corniche. Whatever your passion, get up and get to it.

LIFE AND STYLE

MAD ABOUT

Australia’s second most populous city and the capital of Victoria offers up a feast of diverse cultures, cuisines, laidback beach living and a vibrant city centre. Welcome to Melbourne, the cultural capital of Australia. By Megan Masterson

W St Kilda’s famed Luna Park is a must for the Melbourne visitor.

hile many tourists to this vast and beautiful country immediately head for Sydney, they would do well to give Melbourne a look-in as well. Thanks to the Victorian gold rush this was once the world’s richest city, and today, its riches are far more varied. In 1885, a visiting English journalist coined the phrase, “Marvellous Melbourne”, a moniker that has stayed with the city into the present day and is still used by residents. And with good reason. Voted one of the world’s most “liveable cities” by the Economist Intelligence Unit, Melbourne is a vibrant, attractive and easygoing place to visit, hosting some of the world’s top events, such as the Australian Grand Prix, the Melbourne Cup, the Australian Open Tennis Championships, and the Aussie Rules Grand Final, which takes place every September.

Laid out in an orderly grid network, it is easy to find your way around. The compact city centre is located at the estuary of the Yarra River, with the rest of Melbourne laid out on a large natural bay known as Port Phillip. The Yarra River, with its Victorian bridges, separates the city from the Southbank developments and the parklands that surround the Royal Botanic Gardens. Known for its historic and attractive lanes and arcades, the city centre contains a variety of shops and cafes, and a visit to the Eureka Tower’s observation deck in Southbank offers up incredible views of the city. Getting around is straightforward. Although it is a city best discovered on foot, yellow cabs are ubiquitous, and a ride across town costs about AU$10 (QR35). The more adventurous visitor, however, should take advantage of the fact that Melbourne has the world’s largest tram

LIFE AND STYLE

network, and simply hop onto a burgundycoloured ciy circuit tram for a free tour of the city centre. Melbourne is a city of terrific cultural opportunities. The Australian Ballet is based here, and it is the second home of Opera Australia. Notable theatres include the Victorian Arts Centre, Sidney Myer Music Bowl, the Melbourne Recital Centre, Her Majesty’s Theatre and the Australian Centre for Contemporary Art. A terrific starting point is the cultural precinct, clustered around the very modern Federation Square. With its innovative architecture and cutting-edge art galleries, it has become the cultural heart of the city, a town square where visitors and residents gather to eat, mingle and enjoy a range of entertainment. Stop by the Australian Centre for the Moving Image and the Australian Racing Museum, as well as the National Gallery of Victoria, Australia’s oldest public art gallery and home to the world’s largest collection of Australian art. If shopping is your thing, the place to spend your tourist cash is at the Bourke Street pedestrian mall. The best clothing retailers can be found at the top of Collins Street, along Chapel Street, and for those with a taste for international designer labels, Greville Street should be a top destination. If you feel like Lady Luck is smiling on you, pop in at the Crown Entertainment Complex, which accommodates the largest casino in the southern hemisphere. For the ‘foodie’, this is a city at the top of its restaurant game. Arabian mezze can be found at Mecca Bah in the trendy Docklands development, and beachfront eateries in St Kilda offer top-notch seafood. For a unique experience, book a table on the Colonial Tramcar, a restaurant that trundles around the city, while you enjoy dinner in antique-panelled carriages. Meanwhile, adventurous diners are able to satisfy their curiosity and order grilled kangaroo at the famous Walter’s Wine Bar. This is a city that is both sophisticated and suburban, so your day could start with a luxurious hot air balloon ride including a

sunrise breakfast, and end with a familyfriendly trip to the iconic Luna Park funfair in St Kilda. Every November, Melbourne comes alive with the Melbourne Cup – the race that stops the nation. The carnival is held when roses are in full bloom and they are draped along the final straight to the race’s

finish line. The races, the fashion, the parades, the glamour and the parties have elevated the carnival to its reputation as one of the best and most colourful in the world. This month, the Melbourne Cup Carnival is as good a reason as any to visit the refined, sophisticated, and avant-garde city, marvellous Melbourne.

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EVENTS AND CONFERENCES

NOVEMBER 1 – 4 ENVIRONMENTAL MANAGEMENT AND TECHNOLOGIES, MIDDLE EAST, CONFERENCE AND EXHIBITION Zara Expo and Grand Hyatt, Amman, Jordan

This is one of the most influential trade shows focused on the environment and eco-friendly technologies in the Arab world. Known as EMTme, the conference and exhibition will provide a forum for industry leaders and manufacturers from all over the world. The exhibition will feature the latest environmentally friendly products, developments, technologies and services, across four major sectors: water, waste, clean energy and air pollution and emission control.

www.emtme.com

NOVEMBER 3 – 4

NOVEMBER 21 – 24 THE BIG FIVE INTERNATIONAL BUILDING AND CONSTRUCTION SHOW Dubai International Exhibition Centre, Dubai, United Arab Emirates

With a conference, training programme and workshop sessions, the Big Five Show is the premier event for professionals in the construction industry. The conference will focus on emerging construction markets, maintaining growth and client satisfaction in today’s challenging environment, resolving disputes, investigating partnerships and managing price fluctuations and lowering construction costs. This event is a must-attend for anyone involved in building and construction.

www.thebig5exhibition.com

NOVEMBER 21 – 24

TMT FINANCE AND INVESTMENT ASIA 2010 Grand Hyatt, Singapore

PRIVATE EQUITY WORLD MENA 2010 Shangri-La Hotel, Dubai, United Arab Emirates

www.tmtfinance.com/asia

www.terrapinn.com/2010/pemena/

Encompassing the worlds of telecommunication, media and technology, this conference brings together financiers, investors and advisers, under the banner, ‘The Search for Next Generation Growth Strategies and Smart Financing’. Join the forum to discuss and debate the latest opportunities in mergers and acquisitions, growth strategies, debt and equity financing, infrastructure investment, technology innovation, mobile applications, consumer devices, and much more. This two-day event offers ample networking opportunities and is the premier conference for financial planning and strategy.

NOVEMBER 15 – 18 Aspire4Sport Congress and Exhibition Aspire Dome, Doha, Qatar

Aspire4Sport is an international conference for professionals in the sport industry. The event aims to bring the sporting world together for four days of business, debate and entertainment. Participants, representatives, suppliers and broadcasters from all major sports will gather under the Aspire Dome to demonstrate and discuss the many collective issues facing the future of sport. Forums with a focus on such issues will be discussed by leading personalities and decision makers from across the wide spectrum of sport.

http://www.aspire4sport.com

In 2009, this event attracted over 250 attendees with over 80 expert speakers, 90 percent of whom were based in the Middle East North Africa region. Established as a platform for private equity and venture capital networking, partnerships, knowledge transfer and expert insight, this event provides the opportunity to meet key decision makers, investors and regional partners. Interactive panel discussions and case study presentations will enable attendees to recognise high growth potential, and discover how to capitalise on new markets while managing risk and asset value.

NOVEMBER 23 – 25 SECOND ANNUAL CORPORATE COMMUNICATIONS CONFERENCE, AWARDS AND WORKSHOP Crowne Plaza Hotel, Manama, Bahrain

This business event is aimed at corporate communications, public relations and marketing professionals. The conference event will be held over two days from November 23rd, followed by a practical workshop on November 25th on social media marketing. Conference topics include innovation, advertising, brand strategy and return on investment. Share experiences, network, engage in active discussions and learn from the best in the industry.

www.ccgulf.com

FUN-PACKED FAMILY EVENT

Football fans in Qatar are in for a treat this month with Brazil and Argentina going head-to-head in a friendly in Doha on November 17. The match will be played as part of the Aspire4Sport Conference and Exhibition (as mentioned above). Forming part of the ‘special events’ surrounding the match, Go Sport at Villagio will be hosting a fun-packed family day, with face painting, special merchandise and more. Where: Go Sport Villagio Mall. When: November 17. What time: All day.

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CONSTRUCTION AND TENDERS

QATAR PROJECTS UPDATE has started commercial production of cables at its new plant in Mesaieed Industrial City. The plant, Nexans’ first manufacturing plant in a Gulf Cooperating Council country, employs more than a hundred people and is expected to generate business worth more than US$100 million (QR363 million) by 2011. QICC will be focused on the manufacture of low, medium and low-end high voltage power cables for energy infrastructure and building projects, as well as special cables for the oil and gas industry.

NEW POWER PLANT FOR QATAR Qatar is due a new power plant, with Qatar Electricity and Water (Kahramaa) announcing plans to build a new electricity plant to meet rising demand. The proposed plant will “be able to supply likely between 3000 and 5000 megawatts, or three to four years’ requirement”, Kahramaa’s managing director, Fahad Al Mohannadi said. Work on the plant is expected to begin by 2013. SAUDI ARABIA INVESTS IN THE FUTURE Saudi Arabia has committed to invest US$385 billion (QR1.3 trillion) in infrastructure, health and education. The kingdom’s Ninth Five-Year Development Plan will increase spending by 67 percent over the next five years. The plan allocates funds to build 25 new colleges of technology, 28 higher technical institutes and 50 industrial training institutes. It also aims to extend the capacity of public universities to 1.7 million students. The healthcare sector will see investment as well, with the creation of 117 new hospitals and 750 primary healthcare centres. On the infrastructure front, the plan will double the present capacity of desalination plants from 1.05 billion to 2.07 billion cubic metres. TAYLOR WOODROW LAUNCHES IN QATAR British construction giant, Taylor Woodrow International, has entered into a partnership with Fahed Agencies to establish Taylor Woodrow International Qatar. Taylor Woodrow is well known in the Middle East, having worked on projects such as the Madinat Qaboos port in Oman and Port Rashid in the United Arab Emirates. The new venture will be supported by its United Kingdom base and will undertake work across the spectrum, from airports and civil engineering infrastructure, to commercial buildings and health- and education-related projects. QICC BEGINS COMMERCIAL PRODUCTION The Qatar International Cable Company (QICC), a joint venture between Nexans, Special Projects Company, and Al Neama Industrial Company,

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QATAR’S CONSTRUCTION MARKET REBOUNDS Qatar’s infrastructure sector is set to rebound, backed by a US$32 billion (QR116 billion) budget boost. With 30 percent of the 2010/11 fiscal budget earmarked for infrastructure projects and QR407 billion of planned projects, the Qatari construction market is positioned for strong growth. Development expenditure is expected to rise by 15 percent to QR43.5 billion, while QR35.5 billion has been allocated to infrastructure projects such as roads and utilities. A further QR25.9 billion will be spent on healthcare and education, including the construction of new schools and hospitals. QATARGAS TO SUPPLY GAS TO CANADA In a new deal signed between Qatargas and Repsol Energy Canada, Qatar will supply liquefied natural gas (LNG) to Canada. Initially the supply will be for three years, beginning with the first LNG delivery from Qatargas 3 project, Train 6. The deal will involve Q-Max deliveries. Qatargas’ Q-Max LNG carriers are capable of delivering 266,000 cubic metres of LNG during a single voyage, making them the biggest LNG carriers in the world. QATAR’S NUCLEAR ENERGY STUDY RESULTS OUT SOON Results from feasibility studies on Qatar’s nuclear energy plan will be released by the end of 2010. The study investigates whether nuclear power will be necessary for the country, or whether it will be a collective project with other Gulf countries, and is being conducted by Kahramaa and the Ministry of Environment. Kahramaa stated that Qatar’s electricity consumption has increased at an average rate of 10.5 percent in the last 10 years. During the same period, demand for water increased by 264 percent, and production capacity for potable desalinated water is expected to increase 24 percent from the current level by the end of 2012. FOUR QATAR BEACHES TO BE DEVELOPED After complaints were lodged about the shortage of leisure spots in Qatar – with many nationals and expatriates leaving the country during the summer months because of it – the Ministry of Municipality and Urban Planning announced plans to develop four Qatar family beaches, a first-of-its-kind initiative for the country. Facilities will be built in Al Wakra; Simaisma – 40 kilometres north of Doha; Fuwayrit – 80 kilometres north of Doha and Al Kharaji. The new family beaches will offer necessary facilities, including cafeterias, restaurants and resting sheds. Also provided for will be security posts, and ambulance and rescue services.

CONSTRUCTION AND TENDERS

QATAR TENDERS BUILDING MODIFICATIONS AND ADDITIONS Description: Modifications to existing schools around Doha, including construction, completion and maintenance, and electrical and plumbing installations. Closing date: November 2 Client: Public Works Authority Phone: +974 4495 000 Fax: +974 4495 0777 Email: info@ashghal.gov.qa Website: www.ashghal.gov.qa Tender no: PWA/GTC/003/10-11/R1 Bid bond: QR400,000 Tender documents can be obtained from: Contract Affairs, Public Works Authority, Doha. EDUCATIONAL CONSULTANCY SERVICES Description: Provide academic services and support to Qatari students in the United States and United Kingdom including registration, admission, placement testing, monitoring of performance and selection of suitable courses. Closing date: November 7 Client: Qatar Petroleum Phone: +974 4440 2000 Fax: +974 4483 1125 Email: contracts.services@qp.com.qa Website: www.qp.com.qa Tender no: GT10109900 Bid bond: QR500,000 Tender documents can be obtained from: Register with the Contracts or Materials Departments at www.qp.com.qa to obtain tender documents. SUPPLY OF CEMENTING AND ACIDISATION EQUIPMENT Description: Supply personnel, supervision, equipment, chemical consumables, tools, and related services for cementing and rig-based acidisation equipment. Closing date: November 7 Client: Qatar Petroleum Phone: +974 4440 2000 Fax: +974 4483 1125 Email: contracts.services@qp.com.qa Website: www.qp.com.qa Tender no: GT10109600 Bid bond: QR970,000 Tender documents can be obtained from: Register with the Contracts or Materials

Departments at www.qp.com.qa to obtain tender documents. EXTENSION OF MOSQUE Description: Construction of extension to mosque and all related installation including electrical, fire alarm system and telecommunications. Closing date: November 7 Client: Qatar Petroleum Phone: +974 4440 2000 Fax: +974 4483 1125 Email: contracts.services@qp.com.qa Website: www.qp.com.qa Tender no: LT10108800 Bid bond: QR100,000 Tender documents can be obtained from: Register with the Contracts or Materials Departments at www.qp.com.qa to obtain tender documents. CALIBRATION OF INSTRUMENTS Description: Calibration of laboratory instruments on a call-off basis including identification of defects, servicing, onsite and offsite repairs, for a duration of three years. Closing date: November 8 Client: Qatar Petroleum Phone: +974 4440 2000 Fax: +974 4483 1125 Email: contracts.services@qp.com.qa Website: www.qp.com.qa Tender no: ST10105300 Bid bond: QR35,000 Tender documents can be obtained from: Register with the Contracts or Materials Departments at www.qp.com.qa to obtain tender documents. CONSTRUCTION OF KINDERGARTENS Description: Construction and maintenance of nine new kindergartens around Doha. Closing date: November 9 Client: Public Works Authority Phone: +974 4495 000 Fax: +974 4495 0777 Email: info@ashghal.gov.qa Website: www.ashghal.gov.qa Tender no: PWA/GTC/037/10-11 Bid bond: QR6 million Tender documents can be obtained from: Contract Affairs, Public Works Authority, Doha.

REFURBISHING AND UPGRADING PUMPING STATIONS Description: The refurbishment and upgrading works for various pumping stations. Closing date: November 9 Client: Public Works Authority Phone: +974 4495 000 Fax: +974 4495 0777 Email: info@ashghal.gov.qa Website: www.ashghal.gov.qa Tender no: PWA/GTC/027/10-11 Bid bond: QR4 million Tender documents can be obtained from: Contract Affairs, Public Works Authority, Doha. MAINTENANCE WORKS OF NONSHUTDOWN EQUIPMENT Description: Maintenance works of static equipment, valves and related pipe-works, including spading, despading, insulation removal and/or replacement, inerting, cleaning, mechanical works, testing and scaffolding. Closing date: November 21 Client: Qatar Petroleum Phone: +974 4440 2000 Fax: +974 4483 1125 Email: contracts.services@qp.com.qa Website: www.qp.com.qa Tender no: GT10110000 Bid bond: QR400,000 Tender documents can be obtained from: Register with the Contracts or Materials Departments at www.qp.com.qa to obtain tender documents.

ECOLOGICAL SURVEY OF MARINE ENVIRONMENT Description: Ecological survey at Halul Island, to assess environmental impact of oil and gas industry on the marine environment. Closing date: November 28 Client: Qatar Petroleum Phone: +974 4440 2000 Fax: +974 4483 1125 Email: contracts.services@qp.com.qa Website: www.qp.com.qa Tender no: LT10108900 Bid bond: QR40,000 Tender documents can be obtained from: Register with the Contracts or Materials departments at www.qp.com.qa to obtain tender documents. TheEDGE

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