The Edge - Apr 2011 (Issue 21) by Firefly Communications

CONTENTS

w w w. t h e e d g e - m e . c o m

APRIL 2011

CONTENTS ON THE COVER

Big projects, small projects and megaprojects. Buildings, roads, sewerage plants, apartment blocks and even new cities. Qatar was poised for a construction boom even before the 2022 announcement. Rachel Morris talks to industry players about what the growth means for Qatar business. (Page 44). Photo by Herbert Villadelrey.

FINANCE & ECONOMICS .24. market watch

Dheeraj Shahdadpuri on stock exchange mergers in the GCC.

.27. Inside edge

The economic importance of SMEs.

.30. special report

ictQatar and Arabic domain names.

.32. balance sheet

Why your company is not exempt from the threat of fraud.

.35. Economic barometer

A Marshall Plan for the GCC?

FEatures .40. in the spotlight

Jamie Stewart outlines how the ‘New Arab Spring’ will impact the global economy.

.50. Business Interview

iHorizons’ Mohamad Takriti talks to Miles Masterson about being ahead of the information technology curve.

.54. on the pulse

Edward Jameson asks whether the rise of Asian economies will impact Qatar’s long-term LNG exports.

KNOWLEDGE & EXPERTISE

.60. innovation culture

i360’s Kamal Hassan illustrates how to implement an innovation culture.

.62. small business know-how Apply for a business loan.

.65. legal insight

Qatar’s health and safety laws.

.68. marketing & design

Opportunities in mobile marketing.

50 TheEDGE

CONTENTS

DEFYING GRAVITY we only move upwards

BUSINESS INSIGHT

.71. Business Insight Interviews

In-depth interviews with Mohannad El Khairy from Zawya, and Nitin Bakshi on the lessons to be learned from Japan.

72 REGULARS

Industrial Area St. No: 24 Tel: +974 4463 8777 | Fax: +974 4460 4286 Al Khor Tel: +974 4421 8601 | Fax: +974 4417 0351 P.O.Box 150, Doha, Qatar E-mail: isd@jaidah.com.qa www.jaidah.com.qa

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.06. .07. .08. .14. .16. .18. .20. .77. .80.

from the editor Contributors News Etcetera Doha Diary Middle East Matters Country Focus Thinkerâ&#x20AC;&#x2122;s Corner Life & Style 10 Things

FROM THE EDITOR

from Publications director Mohamed Jaidah m.jaidah@firefly-me.com MANAGING editor Miles Masterson m.masterson@firefly-me.com +974 66080447 COPY EDITOR Megan Masterson 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 Rita El Khoury r.khoury@firefly-me.com +974 33685817 Marketing administrator/ DISTRIBUTION & SUBSCRIPTIONs Azqa Haroon a.haroon@firefly-me.com +974 55692471 Creative director Roula Zinati Ayoub Art Direction Lara Nakhlé Design Coordination Charbel Najem Designers Rena Chehayber Rana Cheikha Sarah Jabari Teja Jaganjac Finaliser Michael Logaring Photographer Herbert Villadelrey

History books will certainly describe the beginning of 2011 as ‘tumultuous’. From the floods in Australia, to the wave of uprisings throughout the Arab world, to the earthquakes in New Zealand and Japan, there has been no ‘slow news day’ for months. Apart from the devastating human toll in brutal deaths, and literally hundreds of thousands of people being displaced and their lives disrupted, the financial toll of these events is far less emotionally relevant or immediately tangible. Arguably though, it is just as significant. The World Bank recently warned the economic cost of Japan’s earthquake, tsunami and nuclear meltdown alone could reach US$235 billion (QR855 billion). Indeed, with many parts of the world still reeling from similar natural disasters and the economies of most countries yet to fully recover from the economic downturn, the last thing anyone needs is devastation or social unrest on the scale we have seen recently. The Middle East has of course also had its share of disruption. In this issue’s Economic Barometer (page 35), Karim Nakhle focuses on the ‘Marshall Plan’ assistance by the GCC for the Gulf coalition’s two most troubled countries, Oman and Bahrain. Then in April’s In The Spotlight (page 40), Jamie Stewart takes a broad look the causes and economic effects of the ‘Jasmine Revolution’ and ‘Arab Awakening’, or as we have termed it, ‘The New Arab Spring’. On a more positive note however, and closer to home, our cover story (page 44) is comprehensive overview of Qatar’s burgeoning construction sector by Rachel Morris, as building now begins in earnest to prepare for the World Cup 2022; and in On The Pulse (page 54), we look at Qatar’s future potential LNG exports to Asia, Japan’s disaster notwithstanding.

This issue, among other content, we also feature the local entrepreneurial success story embodied in Mohamad Takriti, CEO of Qatari IT company, iHorizons (page 50). Finally, Kamal Hassan of i360 introduces us to ‘Innovation Culture’ in the first of a new series of articles (page 60). Arguably, the subject is highly relevant to business owners striving to make sense of the abovementioned current political upheaval and natural disasters, and the resultant economic demands that these situations are creating in the region and world. On this point, we are also planning an exciting web-based initiative to run alongside this series, so watch this space. As always, thanks for the support. Miles Masterson, Managing Editor

About TheEDGE: TheEDGE is an ambitious business magazine targeting professionals operating within Qatar’s multi-sector business landscape. Printed monthly, TheEDGE was launched in July 2009 to fill the market void and to provide the business community with insight into the latest business trends and market developments. TheEDGE is distributed 11 times yearly to a readership base of more than 7500 professionals, providing advertisers with the needed additional reach and frequency to their most important and affluent audience. TheEDGE is an authoritative business resource serving both large and small business operators.

Firefly Communications PO Box 11596, Doha , Qatar Tel: +974 44340360 Fax: +974 44340359 www.firefly-me.com

E ZIN GA

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printed by Ali Bin Ali Printing Press, Doha, Qatar

the editor

MA CYC LE TH IS

TheEDGE is printed monthly © 2011 Firefly Communications. All material strictly copyright and all rights reserved. Reproduction in whole or in part, without the prior written permission of Firefly Communications, is strictly forbidden. All content is believed to be factual at the time of publication. Views expressed by contributors are their own derived opinions and not necessarily endorsed by TheEDGE or Firefly Communications. No responsibility or liability is accepted by the editorial staff or the publishers for any loss occasioned to any individual or company, legal or physical, acting or refraining from action as a result of any statement, fact, figure, expression of opinion or belief contained in TheEDGE. The publisher (Firefly Communications) does not officially endorse any advertising or advertorial content for third party products. Photography/image credits and copyright, where not specifically stated, are that of Shutterstock and/or iStock Photo.

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CONTRIBUTORS

The

Usual

All contributors to TheEDGE are well-regarded leaders in their respective industries. If you are interested in joining the esteemed panel of contributors, please contact the editor, Miles Masterson at m.masterson@firefly-me.com

Suspects... P.24 Dheeraj Shahdadpuri Analyst Dubai, UAE

p.27 Phil Strange Chief Financial Officer Dun and Bradstreet South Asia Middle East Doha, Qatar

p.30 Greg Harris Editorial Manager Oxford Business Group Doha, Qatar

P.32 Wayne Fergusson Director, Advisory Services KPMG Doha, Qatar

p.35 KARIM NAKHLE Senior Business Strategist Doha, Qatar

p.40 jamie stewart International Correspondent London, United Kingdom

p.44 RACHEL MORRIS Journalist Middle East and North Africa Region Doha, Qatar

p.54 edward jameson Senior Business Journalist Middle East and North Africa Region London, United Kingdom

p.60 KAMAL HASSAN President and CEO Innovation 360 Institute Dubai, UAE

p.62 CHRISTINE CHISHOLM Lead Instructor, Banking College of the North Atlantic-Qatar Doha, Qatar

P.65 JULIE TUCK Senior Associate, Construction Law SNR Denton Doha, Qatar

p.65 Hannah kennett Associate, Employment Law SNR Denton Doha, Qatar

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NEWS Etcetera

NEWs Etcetera JAPAN’s economic FUTURE

With three horrifying calamities striking Japan within a short space of time, the economic damage of the earthquake, tsunami and nuclear crisis is being assessed. The Japanese government estimates that the cost of repairing earthquake damage to homes, commercial buildings and infrastructure could be as much as US$300 billion (QR1.7 trillion). Yet, this would not be interpreted as a blow to the gross domestic product (GDP), which measures economic activity rather than changes in the stock of capital. In fact, reconstruction spending could actually boost the GDP. Julian Jessop of Capital Economics, told the Wall Street Journal that “This would not of course mean that the country is any better off, even in narrow economic terms; lost assets have simply been replaced and productive potential is no higher than before. But it does mean that this [QR1.7 trillion] should be seen as a potential positive for the official GDP rather than a negative”. The International Monetary Fund (IMF) believes that Japan’s economy is strong enough to afford the cost of rebuilding, and no long-term impact is anticipated. “Despite the

extensive damage,” said Ken Kang, the IMF’s Asia Pacific chief, “we are of the view that the economic costs are manageable.” The issues facing the Japanese auto industry are serious though, with many Japanese automakers facing supply disruptions – from damaged parts plants and rolling blackouts, to shipping issues. Confirms Kang, “The uncertainties from the nuclear situation and the power interruptions could weigh on the recovery by disrupting production across the country, and by weighing on corporate and household sentiment.” The rest of the world will be affected by the Japanese disaster through four broad channels, say Joachim Fels and Spyros Andreopoulos of Morgan Stanley: “trade in goods and services; capital flows; financial market contagion, and commodity prices…Our overall assessment is that the Japan shock will not derail the global recovery because: The global economy was in a relatively robust condition when the Japan disaster hit; transmission through the four channels is likely to be relatively limited; and monetary and fiscal policymakers around the world are likely to provide more support for their economies if the spillover from Japan turns out to be more severe.”

EXTRAORDINARY LEADERSHIP SUMMIT 2011 The Extraordinary Leadership Summit 2011 is to be held at the Doha Sheraton from May 17 to 18. As developing effective, capable leaders has become an essential aspect of any successful and competitive organisation, dedicated efforts towards developing more leaders on all levels has the potential of conferring incredible advantages to local firms. Among the speakers at the summit will be Dr Joseph Folkman, as well as Dr Jack Zenger. In 2001, Folkman and Zenger collaborated on a large-scale research study that resulted in the acclaimed

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Hung Tran, deputy managing director of the Institute of International Finance (IIF), pointed out the indirect effect of Japan’s disaster on oil prices. The IIF’s market monitoring group warned that Japan might cause investors to factor in a higher ‘uncertainty premium’, driving up the price of oil and other assets. “We were going to have a nuclear renaissance,” said Uri Dadush, an economist at the Carnegie Endowment for International Peace and former director of international trade for the World Bank. “If this stops the nuclear renaissance, then there’s going to be an increase in demand for alternatives. Oil is one of them.”

book, The Extraordinary Leader: Turning Good Managers into Great Leaders (McGraw Hill, 2002). Featuring a fresh, data-driven approach to leadership development, the summit’s programme – which includes a preassessment 360-degree survey, a two-day training workshop, action plan-setting sessions and a post-assessment 360-degree survey – is proven and practical. For more information, contact: +974 3381 9854/+974 6653 6088, visit http://b-conn.net/el-summit or see the advertisement in this issue.

NEWS Etcetera

QIPCO INVESTS IN UK HORSE RACING QIPCO, a private investment firm owned by members of Qatar’s royal family, has signed a multimillion-pound sponsorship deal with the British Champions Series (BCS). The two-year agreement gives QIPCO exclusive naming rights for the series and full partnership rights for the new British Champions Day race at Ascot, the richest event staged in British racing history with a purse of GBP3 million (QR17 million). HE Sheikh Hamad bin Adbullah Al Thani, chief executive officer of QIPCO, said the deal will help boost the investment firm’s global profile: “Through Qatar Bloodstock, which owns the stallion Makfi, we already have an interest in the British racing and breeding industry. It’s a business that we also have a passion for.” Karl Oliver, chief executive of BSC, confirmed, “Qatar is demonstrating its ambition on the world stage”, and said the deal reflects a new and substantial investment into British horse racing.

GOING TO THE HORSES: QIPCO has announced a multimillion-pound sponsorship deal with the British Champions Series.

2011 MULTAQA HAILED A SUCCESS The 2011 MultaQa Qatar Conference, held in mid-March in Doha, concluded having attracted more than 300 global and regional professionals from the reinsurance industry and risk management professionals. Organised by the Qatar Financial Centre Authority (QFCA) and Global Reinsurance, the 2011 conference provided a detailed schedule including keynote speeches, presentations, and panel sessions. The conference delivered plenary sessions from keynote speakers: HE Yousuf Hussain Kamal, Minister of Finance and Economy of the State of Qatar; Abdulrahman Ahmed Al Shaibi, managing director and board member of the QFC Authority; Graham White, deputy chairman, Lloyds of London; and conference chairman Dr Kai-Uwe Schanz, chairman and principal partner, Dr Schanz, Alms & Company. The conference also featured two evening receptions for all delegates, providing excellent wider networking opportunities. In his keynote speech, the minister of finance and economy, HE Yousef Hussain Kamal underlined the continuing strength of the economy and the support for this sector. “The government is providing all support to the QFC to realise its goal of becoming a hub for insurance, re-insurance and asset management,” he said. Akshay Randeva, director of strategic development at the QFC Authority, summarised the MultaQa 2011 conference in his closing remarks, saying, “We have been able to discuss how the region’s strong macroeconomic position against the prevailing global backdrop, the attractive growth fundamentals of the Gulf Cooperation Council (GCC) insurance market itself and the opportunities directly related to the enormous infrastructure and other capital investment programmes underway or planned in Qatar and across the GCC all provide exciting opportunities for both local and international insurance market participants. “The QFCA’s inaugural research into the GCC reinsurance market, the GCC Reinsurance Barometer which we launched [at the conference], testifies to these opportunities.”

BARWA BANK INTRODUCES NEW CONCEPT BRANCH Barwa Bank, Qatar’s newest Shari’ah-compliant banking service provider, announced in late-March its new concept branch that will be open to customers in Doha in the near future to promote easy banking. The new branch was designed by CREA International, a world-renowned design company from Milan in Italy, and is the result of major efforts by Barwa Bank to simplify its banking procedures. Customers in the new branch will feel the difference from the very beginning, as the branch is set to feature a state-of-the-art paperless queuing system, and specially designed touchscreens that allow staff to complete banking transactions together with customers in an efficient manner. The concept branch design supports fully paperless transactions, which are the future aim for Barwa Bank once all regulatory permissions are in place. However, at the first phase of operation, the branch will have almost 50 percent paperless workflow, which will contribute greatly to the overall experience of customer service. ”In the age of iPads, touchscreens and eco-friendly technologies, we wanted a work environment that combines all of that and takes our customers to a new era of innovative banking services,” said Hussein Fakhri, head of marketing communications at Barwa Bank. TheEDGE

NEWS Etcetera

events calendar 10-11

6th Annual World Takaful Conference (Dubai)

10-12

Private Equity International (Dubai)

10-14

Qatar Career Fair (Doha)

11-13

Saudi International Petrochemical Equipment and Technology (Riyadh)

12-13

1st Annual Middle East Islamic Banking Conference (Dubai)

Corporate Social Responsibility (Beirut)

16-18

ICT in Education (Doha)

Alternative Investment Strategies (Doha)

“We contacted Qatar and thankfully they agreed to take all the oil that we wish to export and market this oil for us.”

17-19

Ali Tarhouni, Libyan rebel official in charge of economic, financial and oil matters, quoted in a Gulf Times AFP report.

“Prime London property is seen by international buyers as a ‘gold standard’ asset, according to Savills. It noted a shift of buyer nationality to the Middle East and Russia, from the more mainstream European investor buyers that dominated last year.”

Map Middle East (Doha)

Construction Week Qatar Conference (Doha)

8th Leading CEOs Summit (Dubai)

21-23

Money Expo Dubai (Dubai)

30 to May 2

9th World Conference on Sport and The Environment (Doha)

May 2-5

Project Qatar (Doha)

David Leduc, chief investment officer for active fixed income at American fund manager, Standish, tells the Financial Times.

NEWS in quotes

april

“It is absolutely inevitable that Portugal is going to have to get bailed out. Spain is definitely next in line, but people are distinguishing more among the peripheral economies…so I wouldn’t expect it to be the next domino to fall.”

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From a report on FT.com entitled ‘London houses prices get Mideast crisis boost’, purporting that unrest in the region has seen demand for property in the United Kingdom from rich investors spike dramatically.

NEWS Etcetera

PIC of the month

ROYAL WEDDING FEVER Happy campers pose during a photocall to promote the Big Royal Wedding Sleepover at ‘Camp Royale’ on Clapham Common in London, England.

The ‘Pop Up’ campsite will cater for up to 10,500 people between April 28 and May 1 to coincide with the weekend of the royal wedding on April 29, 2011. (Photo by Dan Kitwood/Getty Images)

NEWS in numbers 198,000Catalogues ,000 Al Futtaim Group and Qatar Islamic Bank recently announced that construction on the Doha Festival City project is set to begin within weeks. The 433,847-square-metre facility will include entertainment, retail, hospitality and commercial outlets, and will be home to the long-awaited, much-anticipated first IKEA store in Doha. IKEA, a privately-held Swedish company and the world’s largest furniture retailer, designs and sells ready-to-assemble furniture, appliances and home accessories.

Started when its founder, Ingvar Kamprad, was just 17, the group has approximately 123,000 employees across the world, generating annual sales of around EUR21.5 billion (QR110 billion). The top sales countries are Germany (16 percent), the United States (11 percent), France (10 percent), the United Kingdom (seven percent) and Italy (seven percent). Generating a sizeable chunk of those sales is IKEA’s famous annual catalogue, first published in 1951, and now the main marketing tool of the retailer, consuming 70 percent of the company’s annual marketing budget. The catalogue is produced by IKEA Communications in Sweden, where the company operates the largest photo studio in northern Europe at 8000 square metres in size. Approximately 198 million catalogues are printed every year on chlorine-free paper.

www.ikea.com

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NEWS Etcetera

www.zawya.com What is it? Headquarted in the United Arab Emirates, Zawya (pronounced Za-wee-ya, Arabic for ‘angle’) sells itself as a business intelligence platform focusing on the Middle East and North Africa. Why should you log on? Sign up for this membership-driven website, which contains detailed profiles on top Middle Eastern companies, exclusive Dow Jones live news and an online network for professionals, among other features.

WORD OF THE MONTH

WEB watch

www.oilprice-net What is it? Claiming to be the number one oil price source, this site certainly seems to live up to that statement with up-to-the-minute details on oil prices and other related information. Why should you log on? If crude oil and commodity prices are at allimportant to your working day, then this website should ostensibly be at the top of your bookmark list; it also features industry job listings and a sign-up newsletter service.

www.executivenewswire.com What is it? Billed as “executive news for corporate leaders”, this is executive search company Stanton Chase’s Middle East portal for all matters concerning C-suite and directorship level business executives. Why should you log on? Though essentially a mouthpiece serving Stanton Chase, this website also offers a wide variety of news, advice and information, including a recent company talent survey, and international business news.

‘SYCOPHANT’

Like last month’s word, ‘diaspora’, April’s word, ‘sycophant’, is also Greek in origin and is another of former obscurity gaining popularity in the English language, particularly the media. Defined as a noun by the Collins Dictionary as “someone who uses flattery to win favour from people with power or influence” – through, one would speculate, cringeworthy boardroom behaviour– it is applicable in both the business and social sense. An example of usage would be: “Brown-Nose is such a yes-man, he thinks his schmoozing with the CEO is going to get him a promotion; little does he know the boss thinks he’s a total sycophant.”

CARTOON corner

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Best rate in Qatar

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% profit rate for the first year of financing % life Takaful fees months grace period years free Charge Card

Auto Finance Personal Finance

DOHA DIARY

heats up

hroughout the year, never is there a more definite change in Qatar’s air than there is in March. After several months of mild – even cold – evenings, the heat begins to return. Personally, summer begins for me when I have to change my early morning routine from ‘power walking’ to swimming, an infinitely cooler option. Running parallel to the increasing heat is the manner in which the residential market is starting to significantly warm up. A flatlining period of 18 months officially ended in the fourth quarter of last year. Since then prices have slowly but steadily been increasing, rising from an average base of QR11,000 per square metre (/m2) to QR12,250/m2. While capital values are on the increase, so too are rents. Let us look at the example of The Pearl-Qatar, where the last three months have witnessed average rents increasing from QR75/m2 per month in December 2010, to more than QR81/m2 per month in March 2011. This naturally differs according to apartment type and size, but we are now able to talk in terms of quantifiable demand, as opposed to the ‘hope demand’ of just six months ago. The recent implementation of the reduction in loan-to-value ratios by Qatar Central Bank from 90 percent to 70 percent, will no doubt have an effect on slowing demand, although it is worth noting that prices have reduced by up to 45 percent

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It’s getting very warm in Qatar’s residential property market, and Edd Brookes advises potential buyers to get a move-on if they expect to reap the financial rewards. since 2008, and so this will go some way to reducing the net effect. Certainly since the celebrated December 2, 2010, decision by FIFA, there has been a noticeable increase in enquiries from expatriates in purchasing residential property. If Qatar follows the same demand curve experienced in South Africa, we expect demand for residential properties to be purchased by expatriates to remain strong, certainly for the next 10 years. By 2022, all major infrastructure developments will have been completed, and demand is likely to continue to expand on the back of the general economic diversification of Qatar. But the most significant demand driver is, of course, population growth. When I arrived in Qatar in 2005, the population numbered a little over 720,000. A mere six years later, the country’s population is more than 1.7 million. This rapid increase is due to the recruitment of personnel by Qatar’s expanding businesses. The population is dominated by males, who account for 75.5 percent, employed to work mainly in the oil and gas, construction and manufacturing industries. Qatar’s population is expected to keep growing, which is outlined in three realistic scenarios for population growth in the country in the next nine years: • Scenario one predicts that the population in Qatar will increase at a rate of three percent per annum, with the population reaching 2.3 million by 2020.

• Scenario two predicts that the population in Qatar will increase at a rate of seven percent per annum, reaching 3.3 million by 2020. • Scenario three forecasts that the population will grow at a rate of 10 percent per annum, reaching 4.4 million by 2020. To coincide with the publication of the 2010 Census in October last year, the Qatar Statistics Authority (QSA) forecast that the population would reach 2.5 million by 2020, which equates to an average population growth rate of four percent per annum. But the forecast was made prior to the announcement of Qatar’s successful World Cup bid, and while no formal prediction has been made since, the QSA recently forecast that the population could reach four million by 2020, with growth at nine percent per annum. This is due to the proposed additional government spending, likely to reach US$64 billion (QR233 billion) on infrastructure and projects to facilitate the World Cup. This substantial investment will create more jobs, which will, in turn, ensure significant demand for residential accommodation in Qatar. While no one can accurately predict the course of future property cycles, this much is certain – all factors point to a rising market over the medium term, and potential purchasers looking for evidence that the market has bottomed-out should make their next move quickly, because it has!

MIDDLE EAST MATTERS

by me

hile recent news has been dominated by the revolutions and protests throughout the region, during the coverage, there emerged a secondary story that is of particular importance for anyone doing business in the Gulf Cooperation Council (GCC). In a personal telephone call, King Abdullah of the Kingdom of Saudi Arabia (KSA) told United States president, Barack Obama, not to humiliate Egypt’s Hosni Mubarak during the revolution. As America’s closest ally in the Gulf, the KSA made it clear that the Mubarak was to be allowed to resign with dignity. This tough line from Riyadh was driven by the concern that Western governments are sometimes too eager to shove friends and allies aside when opportunities present themselves. Is standing by an ally leader, even when things have gone awry, a strategic decision, or is this simply the right thing to do in an ‘honour and shame’ culture? Sociologists have recognised that three social exchanges have existed since the earliest of times – the concepts of fear, shame and guilt. They are the building blocks of society and each holds differing importance, depending on the cultural makeup of a society. The West (where most modern management practices are from) predominantly operates from the basis

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In a part of the world where honour defines the behaviour of leaders and ordinary people, Dr Tommy Weir recommends that Western expatriates undergo a fundamental shift in the attitude and approach in order to adapt and thrive. of ‘guilt and innocence’, in other words, something is either right or wrong. Guilt and innocence is such an integral part of Western society and in the practice of religion, that many Westerners often cannot imagine a world where ‘right versus wrong’ isn’t the accepted basic underlying principle. It is the yardstick with which to measure someone’s actions, and almost every major issue the West confronts involves an aspect of deciding whether something is right or wrong. The pulls and demands of these two diametrically opposed forces dictate much of Western human behaviour. However, not everyone in the world operates within this paradigm. In Arab society, there is a hierarchy of loyalties based on the closeness of kinship that runs from the nuclear family through the lineage, the tribe, and even to an entire ally base. Disputes are settled, interests are pursued, and justice and order are maintained according to ‘honour and shame’. A widely quoted Bedouin saying perfectly illustrates the depth of loyalty in the culture: “Me against my brother, my brothers and me against my cousins, then my cousins and me against strangers”. Arabs and Arab society thus operate from the distinctive dimension of honour and shame, where the underlying principle is that there is an honourable and a dishonourable way of doing things, and in the Middle East, there are hundreds of

nuances that communicate messages about shame and honour. Wherever you go, you represent your family and tribe (or loyalties). If you behave shamefully, the family or tribe is affected. Guilt is a personal feeling, but shame is about the impact on the group. In such a culture, individuals behave honourably, and in doing so, uphold the honour of the family or group. Today this code is as prevalent in boardrooms across the region as it is in personal interaction. It affects not only the way individuals act, but as evidenced in King Abdullah’s remarks to President Obama, it also the affects the actions of entire nations. The two contrasting worldviews of the West and the Arab world are seen clashing in boardrooms across the GCC, often accounting for the uncharacteristically short tenures of imported chief executive officers, expatriate confusion in certain situations, and arguments over what or who is right or wrong. From the Mubarak example, however, it becomes clear that the key to doing business in the region is to lead from a position of ‘honour and shame’, rather than one of ‘guilt and innocence’. How can your leadership be characterised? Another old saying, “When in Rome, do as the Romans do”, should form the essence of your approach. Here, in the Middle East, that is to let your actions to be governed by honour.

v COUNTRY FOCUS

ietnam Poised for growtH

Vietnam could very well be the sleeping tiger of the South East Asian economy. And, according to Vietnam’s envoy to Qatar, Phung The Long, the country looks set to capitalise on its enormous potential. He spoke to RACHEL MORRIS about the growing relationship between Qatar and Vietnam.

any still harbour images of Vietnam as a country of war. But for modern Vietnam, the reality is very different. The country set about reinventing itself in the 1990s as a tourist haven. Today, more than five million travellers from around the world come to Vietnam to experience the food, history and hospitality that the country and its people have become known for. But during this time, Vietnam has also undergone an economic transformation. After years of political and economic isolation following the war, in 1986, the Vietnamese government instituted economic and political reforms and began a path towards international reintegration. The results have been phenomenal. Last year Vietnam’s economy grew 7.5 percent, making it a bright shining light in Asia amid the post-recession gloom.

Countries such as Qatar are seeing the potential of Vietnam, with its fertile agricultural land and growing population. While the two countries developed diplomatic ties as far back as 1993, it wasn’t until recently that trade between them took off. “In 2009 the total trade volume between the two countries was US$125 million (QR455 million),” says the ambassador. “That is double the figure of 2008 and four times the figure from 2007. That is a good beginning but it doesn’t reflect the true nature of the relationship. Bilateral trade relations between Qatar and Vietnam have significantly improved over the last three years.” Vietnam has been very much on the radar of Qatar’s leadership with the prime minister, HE Sheikh Hamad bin Jabor bin Jassim Al Thani, visiting twice, most recently in 2009.

COUNTRY FOCUS

That trip, which included a high-level delegation of Qatari businesspeople, included the signing of a number of multi-milliondollar investment agreements between the two countries, including a deal to build a seaport and a logistics centre in Hai Phong port city and a deal to build a petrochemical refinery in the Middle East. While Ambassador The Long reveals that “Vietnam is very much in the deficit” when it comes to trade between the two countries, among the goods shipped from Vietnam to Qatar are fish and seafood, furniture, electronics, computer parts, gems and shoes. “From Qatar we import fertiliser and petrochemical products,” he says. Petroleum products are among the country’s main import items and this is where Vietnam is looking to one of the world’s petrochemical giants, Qatar, for assistance – including advice and direct investment. After the crippling effects of the second Indochina War between 1954 and 1975 and the austerity measures taken by the government to recover, Vietnam’s new and vibrant economy has undergone great growth in the last 15 years. With a population of 86 million, according to a forecast in December 2005 by Goldman Sachs, the Vietnamese economy will become the 17th largest economy in the world with nominal gross domestic product (GDP) of US$436 billion (QR1.6 trillion) and nominal GDP per capita of US$4357 (QR15,800) by 2025. According to a forecast by PricewaterhouseCoopers in 2008, Vietnam may be the fastest growing of emerging economies by 2025, with a potential growth rate of almost 10 percent per annum in real dollar terms that could push it up to around 70 percent of the size of the United Kingdom economy by 2050. “The last three to five years has been one of rapid growth and development (for Vietnam),” says The Long. With farmers making up more than 80 percent of the country’s workforce, the country is heavily dependent on agriculture. Vietnam is one of world’s richest agricultural regions and is the second-largest (after Thailand) exporter worldwide and the world’s seventh-largest consumer of rice. Both Qatar and other countries, including Saudi Arabia, have seen the potential of this sector. The ambassador reveals that the Qatarigovernment-owned Hassad Foods is looking to invest in rice production in Vietnam, a scheme that would see the rice exported back to Qatar and sold under the company’s name to consumers. “The government of Vietnam is ready to co-operate with Qatar on the issue of food security,” The Long confirms. “Most of the investment and interest in Vietnam comes of Qatari government owned companies and entities.” He lists big names including Qatar Holding, Qatari Diar and Barwa as players showing interest in Vietnam. “The Qatar investment Authority has sent a delegation to Vietnam to study opportunities in real estate and industry.” One company already seriously eyeing Vietnam is Qatar Petroleum’s international arm, Qatar Petroleum International (QPI). QPI and Japan’s Itochu Corp will join Thailand’s Siam Cement to build a petrochemical complex in Vietnam. QPI expects the plant to use Qatari liquefied petroleum gas (LPG) to produce chemicals including popypropylene for auto, footwear and

plastic industries from 2015. To prepare for its project in Vietnam, QPI has begun preliminary negotiations with the state-owned Vietnam Oil and Gas Group (PetroVietnam) and some companies in Thailand. Yet, for all the positive signs of a robust relationship between the countries, the ambassador laments the lack of tourism from Qatar to Vietnam. “From Qatar in 2010 there were only 600 visitors,” he says, a tiny percentage of that country’s five million visitors a year. A bright spot that may change this is Qatar Airways’ 11 flights a week to both Hanoi and Ho Chi Minh City in the country’s south. Qatar’s Vietnamese population is just 1600, many of whom are labourers, but there is a growing number of professionals.

“In 2009 the total trade volume between [Qatar and Vietnam] was US$125 million (QR455 million)…That is double the figure of 2008 and four times the figure from 2007.” “Three years ago there were 8000 Vietnamese living in Qatar, now we have less than 2000,” the ambassador reveals. He attributes this to the completion of several key projects utilising workers from Vietnam, as well as difficulties in “acclimatising”. “The weather conditions and environment here is very different to that in Vietnam,” he says. “It is also a different culture and this has been an issue.” He also says that many Vietnamese skilled and semi-skilled workers, who might have travelled abroad for opportunities, are staying at home. “The main reason is that living standards in Vietnam have improved.” Ambassador The Long will continue to focus on four key areas for growth of trade and relations between the two countries – finance and investment; power and agriculture; labour and commercial dealings. “The two countries have established a US$500 million (QR1.8 billion) joint investment fund,” he says. It was announced in January that Oman would be investing billions of dollars into Vietnam’s stock exchange, oil and gas industries and industrial zones. The deal came about after a joint agreement with Vietnam to boost capital investment between the two countries and a pledge to raise capital in the Vietnam-Oman Investment Joint Stock Company from US$100 million (QR364 million) to US$1 billion (QR3.6 billion). Meanwhile, Qatar continues to set the pace on Middle East investments in Vietnam. Negotiations are continuing on several big investment projects such as a hi-tech zone in Vietnam’s Khanh Hoa province and high level ministerial teams from the country have scheduled another visit to Qatar in the not-too-distant future to investigate future exports of LNG to their country. “We are looking forward to a great deal of co-operation between the two countries,” closes the ambassador. TheEDGE

THINKER’S CORNER

Trust and emotional health in conflict zones By Steve Crabtree and Magali Rheault

t is relatively easy to quantify the costs of long-term violent conflict using measures such as numbers of casualties and damage to physical infrastructure. However, the less tangible effects may be overlooked, even if they are similarly debilitating to job creation and economic growth. The emotional toll of longstanding conflict is one such effect, as is the loss of social capital. Results from Gallup’s 2010 surveys across Arab League member states support the idea that young adults in societies rattled by such conflict are unusually likely to experience negative emotions in their day-to-

day lives, and unlikely to trust those they do not know very well. Iraq and the Palestinian Territories are examples of societies influenced by violence within their borders. Iraq saw intense conflict between the country’s Sunni and Shia sects between 2006 and 2008, which only exacerbated the effects of the war between coalition forces and the country’s Sunni insurgency. In 2006, civil war between the Territories’ two main political parties, Fatah and Hamas, compounded Palestinians’ chronic conflict with Israel. Palestinians commonly use the Arabic term, ‘Wakseh’, which means failure

and humiliation via a self-inflicted wound, to describe the trauma of this conflict. The emotional health of young people in each society is among the poorest in the Arab countries surveyed. In particular, young populations in Iraq and the Palestinian Territories are among the most likely of those surveyed to say they experienced sadness and depression during a lot of the previous day. Low levels of emotional health may dampen young people’s optimism and the resolve needed to pursue innovative solutions to social and economic problems by creating new private-sector initiatives. Conversely, it may contribute to the tendency among young people to seek secure government jobs, rather than consider positions in the private sector. Security and social trust Researchers have found that extended periods of violent conflict can disrupt community ties and cooperative networks – in other words, the ‘fabric’ of society – particularly when residents have endured conflict between social or political groups rather than, or in addition to, conflict with external enemies. The result is often a loss of social trust – the willingness to put one’s faith in relative strangers. Such trust makes transactions more efficient, because it reduces the need for formal contract enforcement. What’s more, successful business owners may rely on the ability to trust individuals outside of their family network to expand their operations. Job growth may be restricted when businesses are unwilling to hire anyone with whom they have no familial or personal connections. Similarly, the reluctance to trust others in different social groups may limit the extent to which businesses can expand their customer bases. Fear plays an important role in reducing opportunities for community members to interact in ways that promote social trust. Young people in Iraq and the Palestinian Territories are less likely than those in most other Arab countries surveyed to say they feel safe walking alone at night in their communities. In fact, Iraq is the only country in which fewer than half of young people (39 percent) say they feel safe.

THINKER’S CORNER

Do you feel safe walking alone at night in the city or area where you live? Percentage “yes” among respondents aged 15 to 29 in each country/territory

The weak sense of personal security among young Iraqis and Palestinians does not seem to be the result of high crime rates. In neither country is young people’s likelihood to say they had been victims of assault or theft in the past year significantly greater than the median among all Arab countries surveyed. This finding suggests these young people are wary of a different threat – most likely the possibility that they will join the thousands of civilian casualties among both populations that have resulted from combat and terror attacks in recent years. Young people in both populations are also particularly unlikely to agree with the idea that, generally speaking, most people can be trusted. Across young populations in 19 Arab countries and territories, the median that say people can be trusted is 18 percent, ranging from 58 percent in Morocco to seven percent in Lebanon. However, young Iraqis and Palestinians fall well below the regional median on this measure. Twelve percent of young Iraqis say people can be trusted, while 80 percent say

that you have to be careful in dealing with people. Young Palestinians are about 10 times as likely to say you have to careful in dealing with people as they are to say people can generally be trusted – 89 percent versus nine percent, respectively. The idea that low social trust can be bad for entrepreneurship and private-sector development is supported by the finding that young Iraqis and Palestinians are also among the least likely in the region to say prospective business owners can trust their assets and property to be safe. Implications In addition to rebuilding roads, schools, and other forms of crucial infrastructure, leaders in areas affected by long-term conflict must consider strategies for rebuilding confidence and trust among citizens. These factors also contribute to the basis for a thriving economy. Such strategies include first elevating the sense of safety and security within communities. Promoting closer relationships

If someone wants to start a business in [this country], can they trust their assets and property to be safe? Percentage “yes” among respondents aged 15 to 29 in each country/territory

between local police and residents through ‘community policing’ techniques may be an important component of improving perceptions about safety. Such an approach may boost residents’ confidence in the competence of the police and give residents a role in their own security. However, job creation also relies in part on the rebuilding of social networks that allow business owners to establish a good reputation with the community, and provide them with channels for recruiting qualified employees and reaching out to customers. For example, promoting local chambers of commerce and industry may help establish a sense of community among local business owners and lower the perceived risk of owning a business, especially for members of such organisations. Survey methods Results from the Palestinian Territories are based on face-to-face interviews with 860 young adults, aged 15 to 29, conducted in February 2010 and July through August 2010. Results from Iraq are based on face-toface interviews with 753 young adults, aged 15 to 29, conducted in February 2010 and September through October 2010. For results based on these total samples of young adults, one can say with 95 percent confidence that the maximum margin of sampling error is approximately four percentage points. The margin of error reflects the influence of data weighting. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

This 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. TheEDGE

FINANCE & ECONOMICS

Market Watch • Inside Edge • Special Report • Balance Sheet • Economic barometer

Market Merger Mania (P.24)

Consolidation among the world’s major stock exchanges is not a new story, writes Dubai-based market analyst Dheeraj Shahdadpuri, who reports on the recent integration of the United Arab Emirates exchanges, and examines the pros and cons of what similar mergers could mean for the rest of the GCC.

ALSO IN THIS SECTION: • Inside Edge: Dun and Bradstreet’s Phil Strange discusses the economic importance of SMEs and examines what the regional research data means for Qatar and the GCC. (P.27). • Special Report: Oxford Business Group’s Greg Harris reports on ictQatar’s recent adoption of Arabic website domain names. (P.30). • Balance Sheet: Wayne Fergusson of KPMG explains why, even in good times, organisations in Qatar must be aware of company fraud and take preventative measures.(P.32) • Economic Barometer: Echoing the ‘Marshall Plan’ method to assist struggling economies, the GCC has a similar plan for Bahrain and Oman, reports Karim Nahkle. (P.35).

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MARKET WATCH

MARKET MERGER

MANIA The current global recession has changed the landscape of financial industry dramatically. Among other evolutions, international stock market consolidation is becoming a popular new mantra to gain scales, writes Dheeraj Shahdadpuri, who examines the pros and cons of what such mergers could mean for Gulf Cooperation Council (GCC) stock markets.

MARKET WATCH

rom the good times of easy-flowing money to extremely cautious days, the industry has been to two polar opposites within a short span of the past five years. For global stock exchanges, this period has been nothing short of a rollercoaster ride. When global economic activity was at its peak between 2006 and the first half of 2008, stock exchanges saw their fortunes change overnight on heightened participation by both institutional and retail investors. Expanding economic activity across the globe meant easy availability of margin financing to investors, which pushed risk appetite to unprecedented levels. The rush to make easy money boosted demand for a number of risky and often-complicated financial products and resulted in what is famously known as a coordinated global bull rally. No matter whether the limits of fundamental investments were breached or not, the cash flow that this bull rally generated for stock market operators was tremendous. But, these windfall gains were short-lived for bourses world over. When the recession began taking hold of the global economy, most international benchmark indices witnessed sharp correction within months, as investors preferred to stay in cash rather than invest in risky assets. For this reason, both volumes and value on stock exchanges around the world plummeted. Between the last quarter of 2008 and first half of 2009, the situation remained grim for stock exchanges, as uncertainty over the fate of the global economy kept a large chunk of investors away from a number of financial products, such as equity, derivatives and commodities. The situation for international bourses only started improving during the second half of 2009 when the so-called ‘green shoots’ of recovery began to emerge. A stark REALITY Although stock exchanges world over would fear a repeat of an economic crisis of this magnitude, the recession has nevertheless been a reality check for a number of industry players. A stock market trading platform requires huge investment in a few resources, with technology and manpower as the main focus. As the trading activity in a number of financial products improved substantially during the last decade, the need to upgrade technology grew in tandem. Today, we are well past those days when trading used to take place on a floor where brokers representing two different investors used to meet and decide on the volume and price of the transaction. The business of stock market investment has changed radically with the advancement in technology, as now the Internet has more or less completely replaced the conventional ways of trading. Furthermore, as the base of investors has increased world over, stock exchanges, and subsequently the brokerage service providers, have invested enormously in improving their infrastructure, which now enables the execution of trades virtually instantaneously. With such huge investments made in various resources, a stock exchange must strive to bring down its cost on a per transaction basis.

For this reason, stock exchanges have realised that the most viable option to address this, is to bring consolidation within the industry, which will help in increasing revenues without impacting the fixed proportion of the total cost much. But cost is not the only consideration that has engendered the idea of consolidation. The need to diversify the investors’ base is another factor driving the need to become a regionally integrated player in the financial field. Traditionally, stock exchanges have catered to the investment need specific to a region or a country where it is incorporated. But limiting business focus to only a single economic boundary brings with itself inherited risk of depending on only one source of revenue. The cash flow generation capability can suffer severely in case the economic situation of the country faces turbulence, and hence it is in favour for a stock exchange to expand its operations into different economies, which can provide it with some sort of financial cushion in adverse circumstances. mega MERGER MANIA The consolidation among the world’s major exchanges is not a new story. Exchanges face growing pressure to provide faster execution of trades, and access to more markets and more products. Over the past five years, we have seen some mega mergers and acquisitions taking place, which have changed the dynamics of the industry. In the United States, The New York Stock Exchange (NYSE) bought Euronext, the Nasdaq merged with the OMX Group and the Chicago Mercantile Exchange merged with Chicago Board of Trade, which subsequently bought New York Mercantile Exchange in 2008. Then there was the very recent merger of London Stock Exchange with Canada’s TMX Group. The firm’s real strength after this merger stemmed from its position as one of the largest international platforms for mining companies, as some of the major companies from this sector in the world are listed on LSE, where mining and energy interests account for more than 30 percent of the companies on the benchmark FTSE 100 index, while the TSX boasts of several big gold companies. Joining the merger mania across the Atlantic is the recently announced proposed merger of NYSE Euronext and Deutsche Börse, which is expected to result in savings of US$400 million (QR1.4 billion) and give the merged entity a trading value of around US$20 trillion (QR73 trillion) in a year. A PAN-GCC EXCHANGE? In the midst of mega mergers gripping the industry elsewhere around the world, many have highlighted the need for a similar type of consolidation within the Gulf Cooperation Council (GCC) region, including of course, Doha’s Qatar Exchange. The economic activity in the six nation regional bloc has increased substantially during the last decade on soaring hydrocarbon revenues, which have been prudently applied to other parts of the collective economy to attract foreign investments. The most significant TheEDGE

MARKET WATCH

recipient of this money has been the infrastructure sector, which, along with other sectors such as trade, tourism and transportation, has experienced massive growth in the recent past. But the fact is that, despite some huge investments in various sectors, hydrocarbon exports are still the main source of revenue for the regional governments. Apart from this, the capital markets have also not yet fully developed in the region as compared to other parts of the world. The capital raising requirements are still being traditionally met through bank financing, and the idea of raising money through Initial Public Offerings is something that has not yet matured. Due to these factors, the size of stock bourses in the region has stayed relatively small both in terms of the number of companies listed and the trading volumes. A GCC-wide stock market merger would definitely benefit all market participants. The main benefit could come by way of increased international investments, as many international portfolio mandates require money to be allocated only on the basis of the market capitalisation of an exchange. Despite these obvious plus factors, the idea looks a little premature at this point as the economic integration within the GCC is still in its early stages. Before committing to anything, the economic decision-making power needs to be centralised and both fiscal and monetary policy integration should be aimed for. Without these initiatives, even if a single GCC stock exchange is formed, it will not be able to fully reflect the combined state of the GCC economies and their outlook. However, this idea could reap good results in the near future as authorities are already working towards increasing the economic cooperation within the region, by unifying their currencies. UAE EXCHANGE INTEGRATION Although the creation of a pan-GCC stock exchange may not be a salient proposal at this juncture, the merging of the Abu Dhabi and Dubai stock markets may be just the right thing for the United Arab Emirates (UAE), as market liquidity is still very low as compared to the pre-crisis levels. Last year, we saw first step taken towards integrating the stock exchanges within the country, when Dubai Financial Market acquired a 100 percent stake in the newlyformed NASDAQ Dubai. Authorities are said to be taking further steps by exploring the viability of merging Abu Dhabi Exchange and Dubai Financial Market. The deal is expected to create huge benefits for both the exchanges in terms of cost efficiencies, and a unified strategy could also help the entity in attaining international ties for launching new products such as the Exchange Traded Funds and derivatives, which could attract substantial investor interest elsewhere around the world. The deal is a win-win situation for the ailing brokerage industry, which is not only experiencing ultra-low volumes, but also bears extra costs for offering services from two different exchanges in the UAE. From investorsâ&#x20AC;&#x2122; point of view, a combined UAE stock exchange will be a true reflection of the countryâ&#x20AC;&#x2122;s outlook as a whole rather than that of an individual emirate

TheEDGE

A GCC-wide stock market merger would definitely benefit all participants... by way of increased international investments, as many international portfolio mandates require money to be allocated on the basis of the market capitalisation of an exchange. If the deal goes through, we might eventually see a more robust stock exchange, which could very well help in developing broader capital markets in the country. Going forward, we can expect increased institutional participation to assist in creating liquidity and assist in accelerating economic development. Its success could also be an interesting indicator for how a more regional merger proposition could play out.

INSIDE EDGE

SMALL

IS THE

NEW

BIG

Small business is now ‘Big Business’, says Phil Strange, who examines new research on the subject from a GCC perspective, and draws some conclusions of the future potential of entrepreneurism and small to medium enterprise in the region.

ecent research by Dun & Bradstreet shows that small to medium enterprises (SMEs) contribute more than 60 percent of employment in high-income countries, and about 50 percent of the gross domestic product (GDP). Similarly, in emerging markets, SMEs play an important role, although their contribution to these economies has been relatively lower for a variety of systemic reasons. In the Gulf Cooperation Council (GCC) region, oil revenues have of course traditionally been a leading contributor to GDP. Consequently, the role for SMEs has been relatively limited. While no precise statistics are available (due to a general lack of research about SMEs in the region), as per estimates from Dun & Bradstreet, the contribution of SMEs to GDP in GCC countries is between 15 and 40 percent. However, most GCC governments have embarked on a programme of economic diversification and a greater role for private sector in economic growth. GCC governments have also identified the promotion of SMEs as a key instrument of economic diversification and for furthering increased participation of GCC nationals in the private sector. In its National Vision 2030, for example, the Qatari government has recognised the need to diversify the economy and to promote the SME sector, as it is widely recognised that the SME contribution to Qatar’s GDP is currently relatively low (estimated at around 10 percent). Furthermore, much of the private sector/SME activity is focused on lower-value added activities like trading and retail. With its focus on building a knowledge-based private sector, Qatar is looking to enable development of new enterprises through creation of an environment conducive to entrepreneurism.

GCC SME CHALLENGES SMEs in the GCC region as a whole face multiple challenges. While these are generally similar to those faced by SMEs globally, the economic and regulatory environment in GCC region tends to make some more acute. One of the key challenges is access to finance. During a survey by Dun & Bradstreet in Qatar, for example, 38 percent of SMEs expressed that credit limits provided by banks were not sufficient and 40 percent said that banks require unreasonably high collateral for extending credit to SMEs. Furthermore, until recently, there have been limited avenues for innovative SMEs to access venture capital. Some of the other challenges that SMEs in the region face are:

• Lack of clarity in regulatory environment: While most GCC economies have an overall liberal economic regulatory regime, there remain areas of concern. Regulations pertaining to insolvency, intellectual property, enforcement of contracts, ownership and succession need to be clarified and strengthened for SMEs to grow in the region. • Lack of access to information and advice: Entrepreneurs in the GCC do not have access to precise market information owing to relatively less developed statistics in the region. This often prevents entrepreneurs in the GCC from making scientific choices about business and investments. GCC GOVERNMENT INITIATIVES The governments in the GCC region have increasingly demonstrated a greater focus on the SME sector in last few years. The initiatives Ease of Doing Business

2010 Rank

2011 Rank

Bahrain

Kuwait

Oman

Qatar

Saudi Arabia

UAE

INSIDE EDGE

Country

SME-related initiatives, country-by-country

UAE

Institutions such as Mohammed Bin Rashid Establishment for SME Development (MBRE) and Khalifa Fund for Enterprise Development (KFED) have been championing the cause of SME development in UAE. The Ministry of Economy has announced the SME sector to be a priority and is in the process of releasing a new draft law for SMEs. The government recently reduced the minimum capital requirements for start-ups to register a new business.

KSa

Saudi Industrial Development Fund (SIDF) is a government-promoted agency, with capital outlay of SAR20 billion (QR19.4 billion), tasked to provide financing support to industrial firms in Saudi Arabia through the credit guarantee model. Chambers of commerce in the key economic regions within the Kingdom also offer advisory and networking support to SMEs.

Qatar

Government has recently announced the set-up of a new entity called Enterprise Qatar, which would support and develop the SME sector in Qatar. Enterprise Qatar will serve as a gateway between innovative companies and the financial and business support they need to succeed. It will incorporate three key strategic principles of partnership, public purpose, performance and value.

Bahrain

Tamkeen (erstwhile Labour Fund) provides funding support to new entrepreneurs as well as existing SMEs. A key focus for Tamkeen is Bahrainisation of the private sector. Tamkeen runs various programmes to address specific needs of SME development – the objectives include enhancing market access, export promotion, technology adoption, business process improvement etcetera.

Kuwait

No single SME focused authority. However, some commercial banks and government-backed funds provide financing assistance to SMEs. Kuwait Small Projects Development Company provides funding support for new ventures.

Oman

Ministry of Commerce and Industry has a designated Directorate for SMEs. Some of the SME focus initiatives operating in Oman include: the Sanad Programme, Intilaaqah, Business Diagnostic Centre, PEIE Innovation Centre and funding support from Oman Development Bank.

adopted by governments include setting up of SME focused development institutions, regulatory improvements to encourage exports and to increase international ‘Ease of Doing Business’ rankings. Within the GCC, Qatar stands behind the Kingdom of Saudi Arabia (KSA), the United Arab Emirates (UAE) and Bahrain in terms of Ease of Doing Business (IFC Report 2011). In terms of Ease of Getting Credit, Qatar has a relatively low global rank of 138 versus 46 and 72 for KSA and UAE respectively. This suggests that Qatar needs to accelerate its reform agenda for business in order to emerge as a preferred location for entrepreneurship and enterprise. SME DEVELOPMENT IN THE GCC From the multiple government initiatives in place for the sector, it is clear that the SME sector is a priority for development across the region. However, the efficacy and adequacy of these initiatives will only be visible in the long-term. That said, there exist a number of areas in which progress needs to be made, failing which many of these initiatives may not realise their full potential: • Developing a standardised SME definition: One of the major challenges in ensuring productive development of the SME sector is the sheer lack of data relating to the sector in GCC. Most countries in the GCC do not have a formal definition of SMEs that is commonly accepted by government, financial institutions, statistical agencies and development institutions.

TheEDGE

• Developing detailed SME Statistics: Statistical agencies in the GCC countries do not regularly publish detailed SME statistics – in terms of their contribution to GDP, employment and exports. Without formal, regularly published statistics, it is difficult for SME development institutions to monitor the impact of their respective policies and programmes. • Encouraging ‘good value’ SMEs: Even as the SME has become a talking point in the region, it needs to be highlighted that having a greater number of SMEs itself may not constitute ‘progress’ or ‘development’. In fact, some economists argue that large enterprises may generate greater value-added per employee than ‘a typical SME’. The key word being the ‘typical SME’ as historically, SMEs in the GCC have focused on sectors resulting in a large base of unskilled workers and low employee productivity. With the economic policy of governments in the GCC (especially in Qatar and UAE), focused on the agenda of nationalisation and knowledge economy, it is imperative that SME programmes must encourage innovation and productivity. • Are entrepreneurs born or are they made? Even as there are no clear answers globally to this classical debate, in the GCC economies, there is evidently little choice but to believe that entrepreneurs are made. Most GCC economies have rapidly growing populations and a national population dominated by the under-25 age group. Consequently, governments must look to encourage and foster entrepreneurship – especially among

INSIDE EDGE

nationals. Currently, government and oil and gas sectors, and lately banking, have been the employers of choice for national youth in the Gulf region, including Qatar. Availability of better choices, lack of awareness and training and perceived higher risks of entrepreneurship have been strong deterrents for GCC national youth to start new enterprise, so there is a crucial need to find local solutions consistent with local social, cultural, and economic considerations. SME Challenges (Qatar) Others 7%

Access to Finance 15% Difficulties with Regulation 7%

Lack of Demand 20%

Getting Skilled Workers 6%

Increasing Competition 45% Source: D&B Research

â&#x20AC;˘ Competitiveness: Historically, GCC economies have been import-dependent for a range of goods and services, thereby local SMEs have focused only on trading, retail and low-end manufacturing sectors. In a bid to increase the role of SMEs, governments in the GCC have to enhance competitiveness of local industry from a regional as well as global perspective. Boosting the competitiveness of local SMEs in emerging/higher value-added sectors like manufacturing, tourism, information technology, media, healthcare, and green technologies should be a priority. â&#x20AC;˘ Improving access to finance: This is an issue commonly highlighted and forms a part of the agenda for most SME-focused development institutions % of Small Firms Reporting High Financing Constraints

Probability of Obtaining a Bank Loan for a Small Firm

49% 40% 28% 27%

Without Credit Bureau

With Credit Bureau

Without Credit Bureau

With Credit Bureau

in the GCC. However, most of the solutions have focused on a direct intervention approach, where government agencies have set up funds for financing SMEs directly or through credit guarantee schemes. However, these mechanisms do not address the core structural issue of the information asymmetry that exists between banks and the SMEs. To address this issue, governments must look to develop a robust and comprehensive financial information infrastructure â&#x20AC;&#x201C; covering credit bureaus, rating agencies, asset registries, trade payment bureaus, financial reporting norms and accounting and auditing standards (Qatar Central Bank recently announced the set-up of a Credit Bureau that will ultimately help improve availability of credit to individuals, SMEs and corporate). FUTURE SUCCESS While progress has been made in this area in most GCC countries, actual implementation of such institutions and systems has been protracted due to the complexities related to the involvement of multiple stakeholders. In the GCC, the process could benefit if a roadmap for such financial infrastructures is laid out in the national economic agenda. Economies may also benefit through enhanced regional co-operation in this arena, by enhancing better sharing of information and experiences. The SME development agenda is designed to yield economic diversification over the long-term and the government priority for SMEs must be seen as natural. However, there is a need to link these initiatives to specific short-term and long-term targets. One of the crucial acid tests will be whether fledgling SMEs in the GCC could grow to be the Microsofts, Hondas or Apples of tomorrow. Only time will tell.

GCC governments have embarked on a programme of economic diversification and a greater role for the private sector in economic growth. (They) have also identified the promotion of SMEs as a key instrument of economic diversification. TheEDGE

SPECIAL REPORT

Qatar: adopts arabic domain names By Greg Harris

Qatar is pushing forward to become one of the first countries to offer non-Latin language scripts in domain names, to help accelerate the development of e-commerce environments throughout the Arabic-speaking world. In February, the Supreme Council of Information and Communication Technology (ictQATAR) announced that its website had become the first to use a Qatar-specific domain name in Arabic, with more Arabic domains set to be soon available for government entities and registered trademark holders. “[The] delegation of Qatar internet domains to ictQATAR brings us one step closer to being able to offer our domains in Arabic language,

TheEDGE

and is the first step in implementing the recently issued e-transactions law,” said Dr Hessa Al Jaber, ictQATAR’s secretary-general. Passed last August, the e-transactions law is Qatar’s first comprehensive attempt to deal with the rules concerning e-commerce, as well as the penalties for breaking them online. The law was drafted by ictQATAR to “foster a safe and reliable environment for companies that utilise the internet as their primary modus operandi”. The law, modelled on similar United Nations and European Union directives, includes provisions on e-mail privacy, the security of consumer information with regard to online shopping and the legalisation of e-signatures. The implementation of Qatar-specific Arabic domain names is expected to boost business confidence in the e-trading platform established by the legislation. “We are extremely pleased to welcome Qatar to be among the first countries to acquire a toplevel domain in Arabic,” said Rod Beckstrom, the president and chief executive officer of the Internet Corporation for Assigned Names and Numbers (ICANN). “It’s our hope that this will increase internet access not just for the citizens of Qatar but, for all Arabic-speaking internet users around the world.” In May last year, ICANN picked Egypt, the Kingdom of Saudi Arabia and the United Arab Emirates as the first three countries able to use country-code specific top-level domains, allowing addresses for regional websites to be in local language characters – Qatar was one of the 21 nations that lodged a fast-track application to join the service. “Introducing other languages like Arabic, Cyrillic and Chinese to the internet addressing system is the biggest change since the establishment of the internet 40 years ago,”

said Saleh Al Kuwari, the chief technical manager for the regulatory authority at ictQATAR. “The launch of the Qatar Arabic domain ‘.qatar’ and the establishment of a new ‘.qa’ domain registry will be landmarks in ictQATAR’s work towards developing Qatar’s local internet community and enhancing an effective Qatari online presence.” In the Middle East, Qatar consistently ranks in the top three for basic information and communication technology (ICT) indicators, such as a PC ownership and subscription levels, and the value of the industry locally is estimated to reach over US$620 million (QR2.2 billion) by 2013. However, many domestic micro-enterprises – firms with fewer than 10 employees – have been slower in adopting the new technology, a delay often put down to a focus on retail segments, rather than e-business infrastructure, web presence, e-government services or e-finance. Improving the e-commerce environment has been a key aspect of ictQATAR’s mandate since its formation in 2004 as the regulator of the emerging sector. It is hoped that the e-transactions law will give the agency adequate judicial backing to exercise full control over all aspects of online trading — from the licensing of businesses, to directing the means by which business is conducted electronically. With the use of Arabic online expanding and Qatar’s ICT sector developing rapidly, the addition of Qatar-specific domain names is expected to have a major impact on the streamlining of e-services and e-commerce, with this likely to pay handsome dividends for the country going forward.

Greg Harris is the editorial manager at Oxford Business Group.

BALANCE SHEET

The Fight Against Fraud IMPLEMENTING PROACTIVE STEPS OR COUNTING THE LOSSES LATER

Although the perception is that the occurance of fraud in Qatar is somewhat limited compared to the rest of the world, Wayne Fergusson recommends that a proactive approach to fraud risk management should be adopted, thereby protecting your organisation should it occur.

BALANCE SHEET

ES PR E/ IV NT CE IN

RTU

SUR

he general attitude towards fraud in the Gulf is either, ‘It doesn’t happen here’, or ‘This risk is addressed by our auditors’. Although incidents of fraud may be somewhat limited in Qatar compared to other countries, syndicates are likely to exploit emerging economies, particularly where one or more events with significant financial implications are due to take place, as in Qatar. In considering whether your organisation is vulnerable to the risk of fraud, let us first understand what ‘fraud’ means. Simply defined, it is unlawful and intentional misrepresentation resulting in potential or actual prejudice. The Association of Certified Fraud Examiners refers to the those factors that motivate fraudulent behaviour as the ‘Fraud Triangle’: There is no quick fix to prevent fraud. A holistic approach in addressing motivators, prevention, detection and response, is imperative. Too often, companies invest in initiatives in isolation, resulting in ineffectiveness and a false sense of security.

ATTITUDE / RATIONALISATION

Incentive / Pressure – Financial commitments, addictions or habits that become unmanageable Opportunity – Exploitation of control weaknesses and/or ineffective management oversight Attitude / Rationalisation – Perpetrators justify their actions by rationalising their behaviour Prevention Prevention initiatives include: • Processes: Screening and employment practices relating to new personnel and due diligence over prospective business partners; • Policies: The Code of Ethics provides a clear guideline to stakeholders of ethical standards and policies outlining the expected behaviour within the workplace or in dealing with the company; • Procedures: Authorisation, accountability and oversight of processes; • Systems: Data mining may highlight ineffective processes, as well as incomplete or inaccurate data;

• Education and training: Too often, employees do not know what to look for and when they do have reason to be suspicious, they do not know how to respond. Performing fraud risk assessments and prioritising remedial action with a fraud risk profile is imperative in managing the risk of one or more events. The results of the fraud risk assessment should be incorporated with enterprise risk management and internal audit plans. Likewise, these broader risk management initiatives should include an adequate review of fraud risk within the organisation. Detection Research indicates that most frauds are detected by accident and by personnel from within the organisation. The key is knowing what to look out for and/or recognising the common indicators of unethical activity. According to the 2009 KPMG Overseas Bribery and Corruption Survey: “In the difficult current economic climate, competition for contracts is increasingly fierce and margins are being squeezed across sectors. The drive to achieve and maintain that competitive edge could tempt those within businesses to push the boundaries of acceptable behaviour, significantly raising their entity’s exposure”. Examples of common indicators of unethical activity may include the following: out of the ordinary lifestyle; changes in behaviour; inadequate vetting of business partners; employee alienation and an ineffective exit; inadequate exception reporting; unsupervised late working and/or leave not taken; overreliance on agents or third parties; and quality of segregation of duties. It should be noted that the above are only indicators and may not necessarily mean that, for example, additional funds or a change in lifestyle are from an illicit source. Caution should therefore be exercised in responding to these indicators. Employees and other stakeholders including suppliers and customers are often the first to suspect an irregularity, and they should be provided with a mechanism to communicate any concerns or suspicious activity. Article 29.4 of the Qatar Financial Markets Authority Corporate Governance Code states: “The Board shall adopt a mechanism enabling company employees to report to the Board suspicious behaviour, where such behaviour is unethical, illegal, or detrimental to the Company. The Board shall ensure that the employee addressing the Board shall be afforded confidentiality and protected from any harm or negative reaction by other employees or the employee’s superiors”. The effectiveness of whistle-blowing mechanisms is dependant on the level of comfort that stakeholders have over its confidentiality, the anonymity of their identity and the manner in which management communicates their commitment to taking the information received seriously. These imperatives should be formalised and communicated through a ‘whistle-blowing’ policy. Another initiative considered useful in detecting unethical activity is data analytics, where powerful analytical tools are used to sift through thousands of records held on a database, thereby TheEDGE

BALANCE SHEET

identifying fields of commonality or trends of transaction activity, and other suspicious links that would normally not be recognised by the naked eye. Examples of identified irregularities using analytics tests include: • Duplicate transactions; • Splitting of orders to keep within predefined thresholds; • Employee and supplier master files reflecting the same bank account details; • Related parties identified through common interests in multiple bidding companies; • Invoices dated after the date of purchase orders; and • Common address fields between multiple supplier companies. In addition to the analytical tests, a review of contract disputes and supplier and/or customer complaints may prove useful in identifying one or more trends worth investigating further. Response Just as companies have disaster recovery plans in place to protect their information technology systems, so too should they formulate an applicable fraud response plan, providing management with prioritised steps in responding to one or more actions of unethical activity. The fraud response plan, encompassing the legal and investigation strategy, should include the following: • Parties responsible for the management and investigation of fraud; • Formulation of a steering or investigation committee; • Involvement of representatives from Internal Audit (it is critical that the opportunity that contributed to the fraud being perpetrated be identified to ‘stop the bleed’); • Consider performing a preliminary investigation, possibly with the assistance of Internal Audit; • Preservation of assets, including contacting the bank; • Securing the evidence, including physical documentation and data held on the information technology system; • Human resources and legal considerations, including searching and suspending suspects; • Terminating access to both the physical building and the information technology environment; • Alignment of the investigation and legal strategy with consultation with experts; • Interviewing suspects; • Disciplinary action and subsequent criminal procedure; • Process for handling communication with the press, regulators, and employees, as well as customer and supplier enquiries; • Notifying insurers; and • Understanding what went wrong and more importantly, the implementation of appropriate remedial steps, updating policies and communicating the outcome of any action, which could possibly act as a deterrent. The main objective of the response phase is to ensure that the organisation is successful in its action and able to recover any loss incurred.

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“The drive to achieve and maintain that competitive edge could tempt those within businesses to push the boundaries.” – 2009 KPMG Overseas Bribery and Corruption Survey Wayne Fergusson is director and head of forensic services for KPMG in Qatar and Bahrain and specialises in advising clients in fraud prevention, detection and response. The information contained in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. Is your organisation’s fraud risk management strategy adequate? 1. Is there a Code of Ethics and has the Code been communicated adequately? 2. Are fraud risks adequately communicated through formalised training programmes? 3. Are fraud risks considered in the Internal Audit plan? 4. Has a fraud risk profile been developed for the organisation? 5. Are indicators of unethical activity prevalent and have adequate steps been taken to discreetly address these? 6. Is there an adequate level of segregation of duties? 7. Do employees and other stakeholders have a mechanism to communicate concerns or suspicions and, if so, is there a ‘whistle-blowing’ policy that confirms confidentiality and anonymity, as well as management’s commitment that information received will be taken seriously? 8. Are appropriate analytics tests performed over data held on the database/s? 9. Is an appropriate fraud response plan in place? 10. Have remedial steps been implemented following one or more previous incidents of unethical activity? If you answered any of the above in the negative, you may want to consider talking to a specialist.

ECONOMIC BAROMETER

A BLUEPRINT FOR THE GULF

How a ‘Gulf Marshall Plan’ to inject cash into the GCC’s two most troubled countries and weakest economies, Bahrain and Oman, might assist them – and, as some believe, will perhaps also buy some time for the reigning monarchies of the region.

ECONOMIC BAROMETER

Political instability has never been greater across the Middle East and North Africa (MENA). But the motivation for the unrest and revolutionary fervour that is gripping many Arab countries, much of it driven by the youth, is not purely ideological. Economic issues – such as unemployment and low wages – plague the potential of a generation in the region. Karim Nakhle looks at the crises within Qatar’s neighbour states Bahrain and Oman, and the pros and cons of the recent GCC-generated ‘Marshall Plan’ intended to improve conditions in these countries.

ixty-three years ago United States (US) Secretary of State George Marshall called for American involvement in restoring the economic infrastructure in Europe. That call was developed into the multi-billion dollar Economic Cooperation Act of 1948, also known as ‘The Marshall Plan’, which was credited with restoring European economic productivity and political stability following the devastation of World War Two. The Gulf Cooperation Council (GCC) is now calling for a similar action to fund a major economic recovery project in Bahrain and Oman, which will include measures to improve the economic and social conditions in the two countries, the poorest members of the sixnation regional bloc. GCC finance ministers met in Riyadh last month and made a grand announcement in the shape of a US$20 billion (QR73 billion) aid package to Bahrain and Oman. Although the GCC has not been devastated by a world war, it has been diagnosed with many similar symptoms as Europe in the late 1940s. The financial boost is seen as pivotal for Bahrain and Oman, whose concurrent protests have brought the unrest that has thrown the Arab world into unprecedented turmoil, to the Gulf. Nevertheless, the question begs: Will the injection of billions of dollars be enough to put the economies of Oman and Bahrain back on track and satisfy people’s demands? Maybe not, but if one was to play devil’s advocate, one could argue that, yes, supporting those economies is critical to their short-term stability – but also that the real motivation is the long-term survival of monarchies on the Arabian Peninsula, which are threatened by the widespread calls for demonstrations, mostly focusing largely on greater accountability by the rulers and a more direct political participation in government by the people. Of course, it will be as expensive as it was for the US 60 years ago for the GCC to implement its version of a Marshall Plan today, if not more so. But, Oman and Bahrain aside, the remaining GCC states of Kuwait, Qatar, the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE), together hold an estimated US$ 1.35 trillion (QR 5 trillion) in surplus assets amassed in the past few years from hydrocarbon revenues, so the cost of the reforms plan is just one drop extracted from the GCC ocean of cash. Whilst the GCC’s US$20 billion (QR73 billion) Marshall aid programme aims at boosting economic and social conditions,

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and living standards in Bahrain and Oman over the next 10 years, ostensibly the hope is that such a move will buy these states time to consider how they will deal with broader calls for political reforms. Accordingly, the US$10 billion (QR36.5 billion) allocated to each country will go towards upgrading of their infrastructure and public services, as well as providing housing to the needy, upgrading existing housing, and more importantly creating job opportunities for the unemployed youths both locally and regionally. This will be enhanced by giving priority to Omani and Bahraini jobseekers in the remaining four GCC nations, hence lowering the ever-rising unemployment figures in these countries (estimated at six percent in Bahrain and eight percent in Oman in 2010). The concept of a ‘Gulf Marshall Plan’ will inevitably face contemporary criticism and hurdles, similar to the ongoing vociferous debate in Europe as to which nation’s taxpayers have to pick up the bill for the budget blunders of others. Granted, in the Gulf it is the oil wealth rather than the taxpayer, but the argument is the same. Youth unemployment and stagnant political reform are among the common threads that toppled the regimes in Tunisia, Egypt and potentially Libya, and continue to drive protests across the Arab world, especially in Yemen, Algeria and lately Morocco and Syria. Unemployed Saudi youths would not openly welcome lavish assistance funds being sent to neighbouring countries, and will surely retaliate in some form or another…and the jury is still out on Saudi Arabia’s US$36 billion (QR131 billion) financial support package. A similar reform has been suggested in Kuwait and is due to take place as soon as possible. Qatar and the UAE are slightly unique in their respective demographics, and hence have far lesser concerns. Though it is improbable that a detailed breakdown of a ‘Gulf Marshall Plan’ will be made public, the GCC, as a union, should at least ensure that the reforms its members put on the table also spur political reform and ultimately stability. Otherwise it will be difficult for investors, and everybody else, to envisage how much it will really achieve in the long-term. Gulf nations are crucial to world energy supplies and their security supplies are also important to every nation, especially the US and much of the G20. Since 50 percent of world energy supplies transit through the Gulf, it is a region that the US, the North Atlantic Treaty Organisation (NATO) and the world are willing to support and protect, at any cost.

ECONOMIC BAROMETER

GCC finance ministers met in Riyadh last month and made a grand announcement: a US$20 billion (QR73 billion) ‘Marshall Plan’ aid package to Bahrain and Oman. BAHRAIN IN PERSPECTIVE Bahrain’s US$10 Billion (36.5 billion) Gulf Development Program ‘Marshall’ grant should help finance a new programme of reforms. The money would run alongside the national budget, doubling capital expenditure and be placed under the oversight of parliament and the donor countries. Key spending priorities will be on programs that add value and benefit Bahraini society in the long term and on projects that help fill opportunity gaps where they exist. Bahrain has already announced plans to build 50,000 homes at a cost of at least two billion dinars (QR19 billion). King Hamad ordered new hires in several government institutions, including 20,000 jobs in his ministry, and a handing out of about US$2600 (QR9500) to every family. But judging by recent developments – monetary incentives, economic reforms, a national dialogue on deep-rooted political and constitutional reforms – promises of a better future have not proven effective yet, as the situation is escalating on a daily basis, with more protest, further demands, and even higher political tensions. The situation escalated further during March, despite the Marshall Plan initiative, when Saudi Arabia and its GCC partner, the UAE, deployed 1000 troops, 500 security personnel and armoured troop carriers across the 25-mile King Fahd Causeway to Bahrain to shore up their fellow monarchy, enraging protestors, and the Bahraini population. Several thousand protesters descended on the Saudi embassy to demonstrate their opposition to the intervention, as Bahrainis are concerned that their tiny island could become a proxy battleground for a wider standoff between the Sunni-ruled Gulf Arab countries, all US allies, and Shi’ite-ruled Iran. Indeed, the Iranian Foreign Ministry referred to the foreign military deployment in Bahrain as “unacceptable” and the Bahraini king recalled his ambassador from Tehran in response. The following

Politicians and economists who are well informed about the Gulf’s politics will immediately see the similarity between the newly proposed GCC Marshall plan and the ‘White Revolution’ as it was known, initiated by the Shah of Iran (which was, in fact the first Marshall-inspired plan in this part of the world). The reform program was built especially to strengthen those classes that supported the traditional system. The Shah advertised the White Revolution as a step towards modernisation, but there is little doubt that the Shah also had political motives: the ‘White Revolution’ (a name attributed to the fact it was bloodless) was a way for him to legitimise the Pahlavi dynasty. The bulk of the programme was aimed at Iran’s peasantry, a class the Shah hoped to gain as an ally to thwart the threat of the increasingly hostile middle class, and preserve traditional power patterns. The White Revolution helped the Shah build some short-term socio-economic stability in his country, but could not create sufficient mass support for his regime and failed miserably on the longer run. The White Revolution then gave way to the black robes of Ayatollah Khomeini’s followers. The rest, as they say, is history… day the Bahraini government declared a three-month state of emergency and authorised the military “to take necessary steps to restore national security.” On March 16, government security forces staged a violent crackdown against protesters in the nation’s capital, with tanks, armoured personnel carriers and helicopters, killing at least two people and injuring hundreds. OMAN IN PERSPECTIVE Oman is larger than Bahrain, and although not an Organisation of Oil Producing Countries (OPEC) member, it still produces almost 900,000 barrels per day. Together with Iran, it also oversees the crucial waterway of the Gulf, the Strait of Hormouz, which is the route for an estimated 40 percent of the world’s oil tanker traffic. The Sultanate of Oman has been receiving its fair share of Arab ‘Che Guevara-style’ uprisings since late February, as part of the wave of 2011 rebellions against rulers and monarchs that are not capable of responding to the employment demands of the population. In line with the recently suggested Marshall Plan, Sultan Qaboos ordered 50,000 new civil service jobs and offered a monthly stipend of US$390 (QR1420) for jobseekers. The Sultan also issued a royal decree granting legislative and regulatory powers to the Council of Oman, which is made up of elected members of the Majlis Ashura, and Majlis Adawala, who are appointed by the Sultan. The Sultan ordered a 100 per cent increase in welfare payments for families who fall under the Social Security Act. He also replaced the Inspector-General of Police and Customs, meeting one of the key demands of the protesters. But despite the political and economic measures to calm protesters, the protests and sit-ins, variable in number as they may be, continue unabated at the time of writing.

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IN THE SPOTLIGHT

THE NEW

ARAB SPRING

MANAMA, BAHRAIN, FEBRUARY 19, 2011: A demonstrator holds a flower in front of a barbed wire fence as anti-government protestors re-occupied the Pearl roundabout on February 19, 2011 in Manama, Bahrain. (Photo by John Moore/Getty Images)

IN THE SPOTLIGHT

State control has been exercised over the flow of news in information across the Arab world for decades. But with the rise of social media has come the separation of citizens from government – and with it the latest incarnation of the so-called ‘Arab Spring’ and a step-change in global economics. Jamie Stewart reports

n the last day of January 2011, the price for a barrel of crude oil on global energy markets burst through the US$100 (QR364) mark for the first time in two years. The bullish reaction was a response fuelled by fear and speculation in what had quickly evolved into a febrile trading environment. And the reason for that fear and speculation? The ongoing events of the socalled ‘New Arab Spring’*. Unemployed Tunisian fruitseller Mohammed Bouazizi set himself ablaze on December 17, 2010, sparking a wave of unrest across Tunisia with economic discontentment at its core. Just 28 days later, Zine Al Abidine Ben Ali, then-ruler of the north African nation, stepped down amid what some described as an unprecedented wave of street protests. The success of the Tunisia demonstrations lit a series of fuses across the Arab world; fuses that led – and in some cases could still be leading – to political revolution. The true repercussions on the global economy of the Arab world’s push for an end to disenfranchisement, with the impact on oil prices at the forefront, will not be known for some time – possibly for years. But one question that can be answered today is: why now? Why, in the Spring of 2011, did the urge for increased political freedoms across Arab nations transpose * ‘The Arab Spring was a media phrase coined in 2005 to denote the potential domino effect the United States (US) invading Iraq would have on the rest of the Middle East. Since the US-lead push for democracy in that country has largely stalled since then, the term has been revived by the recent revolutions and uprisings in the region, prompting TheEDGE to redefine it rather as a ‘New’ Arab Spring.

from a series of disconnected voices into coordinated action on the part of so many? “The wave of insurrection that broke out in December was sudden but not totally unexpected; the signs of discontent were there for anyone to see and they had been developing for more than a decade,” says Middle East author and political analyst Brian Whitaker. “The process began in the 1990s when the arrival of satellite television, and especially Al Jazeera, opened the first serious cracks in regimes’ monopoly on ideas and information. That accelerated later with the explosion of the Internet,” Whitaker says. MEDIA MATTERS Demographics have also played a large part. According to Whitaker, a desire

for large families in Arab countries has caused a ‘youth bulge’ in the Middle East and North Africa (MENA) region. The proportion of people aged below 15, he says, is often two or more times what it is in many rich western countries. Therefore, as the population across the Arab world has evolved to become progressively younger, the governments that rule them have largely remained the same, in family name as well as outlook. That is not to say that such governments have performed the task of ruling poorly, indeed, the opposite is often true. But history is littered with examples of institutions that have refused to evolve with the people that they represent, leading to the very future of that institution coming under threat.

CAIRO, EGYPT, FEBRUARY 04, 2011: A shop in Tahrir Square is spraypainted with the word ‘Facebook’ after the government shut off Internet access in Egypt. (Photo by Peter Macdiarmid/Getty Images)

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IN THE SPOTLIGHT

The rise of satellite TV, led by Doha-based broadcaster Al Jazeera, alongside the rise of social media, provided the new, young, educated Arab population with a voice. But the scale of revolutionary action remained so limited for so long that a feeling of hopelessness emerged, as Whitaker calls it, “a feeling that nothing was ever going to change. But,” he says, “in Tunisia last December, the dam finally burst, altering the picture dramatically”. FIRST CAME EGYPT Following the successful ousting of Ben Ali, the people of Egypt were gripped by the revolutionary fervour, and global energy markets were in turn gripped by the reemergence of geopolitical risk premium. Until this point, the ‘New Arab Spring’ had in many minds been a spirited, youth-led push for political freedoms. But as unrest escalated in Libya and oil crashed through the three-figure ceiling, governments and national treasuries began to sit up and pay attention. Although physical supply of oil from Arab countries into the global market has not yet been substantially impinged upon by the events of the New Arab Spring, the impact on prices may still force an unsustainable spike, according to Chatham House senior energy fellow professor Paul Stevens. “If future oil demand has any hope of being met, significant investment must take place to develop Middle East and North African oil reserves, much of which will be required from international oil companies,” Stevens says. “There has to be questions, however, over their willingness to invest faced with such political uncertainty. This could mean that an impending oil supply crunch, with crucial implications for oil price levels, [which] could come sooner rather than later.” The ramifications on the global economy, should such a spike transpire, are potentially huge. With much of the world still reeling from the fallout of the 2008 financial crisis, including harsh budgetary deficit-cutting measures on the part of many governments around the world, few, if any, national economies will be immune from a further upwards push in global energy prices. The 2008 global recession was preceded by a spike in oil prices to US$147 (QR535)

TheEDGE

RAS LANUF, LIBYA, MARCH 11, 2011: A Libyan rebel pauses from fighting government forces as a damaged oil facility burns in the background in Ras Lanuf, Libya. (Photo: Getty Images)

per barrel. At the time of writing, Brent front month crude – the global benchmark contract for crude markets – was trading a little under US$113 (QR412) per barrel. So there is still some way to go before the peak of 2008 is reached, but the prospects, according to some experts, are not looking good for the world. “If our work is correct then we think that the price may actually go past the 2008 level in this particular business cycle,” Saxena Wealth Management chief, Puru Saxena, told a United States (US)-based television channel in mid-March, an assertion that made international headlines. LIBYA ET AL Alongside outbreaks of civil unrest in Yemen, Bahrain and Oman, the next Arab citizenry to express its will to revolt through action rather than words was that of Libya. Discontent reared its head– and at the time of writing is still raging – on a scale that Libya’s ruler of 42 years, Muammar Gadaffi, had never before experienced. As if to underline the role of social media in the global economy-changing events, one of Gadaffi’s first steps as unrest began to manifest among the people of Libya was to caution them to cut their use of social networking website Facebook.

And the role of Al Jazeera was again thrust to the fore, this time by a memorable editorial in the internationally respected New York Times: “While Al Jamahiriya, the Libyan state-owned television channel, was broadcasting non-stop patriotic songs, poetry recitations and rowdy rallies supporting the Libyan leader, Al Jazeera was showing images of angry Libyan demonstrators throwing shoes at a giant street screen carrying live pictures of Colonel Qaddafi’s speech,” it said. The escalating conflict that followed, which took the life an Al Jazeera reporter and has taken Libya to the brink of civil war, pushed the oil price up to a high for the year to the middle of March – US$116 (QR422) per barrel – as Libyan production faltered. The Organisation of Oil Exporting Countries responded to the decline in Libyan output by considering a hike in production for the first time in more than two years. Prices fell further as a result of the devastating earthquake and resulting tsunami that struck Japan on March 11, as the nation’s demand and need for imports was cut. But still, oil remains far in excess of what economies across the globe would consider a sustainable level.

IN THE SPOTLIGHT

REACTION IN THE GULF Within some Gulf Cooperation Council (GCC) member countries, the short-term reaction to the momentum built up by the New Arab Spring was driven, much like the reaction on the trading floors of global energy markets, by fear and speculation: fear that ‘contagion’ may see the revolutionary spirit reach GCC citizens; and speculation that pre-emptive moves would be sufficient to placate the masses. Immediately after his return to Riyadh from the US, where he was receiving medical care, the Kingdom of Saudi Arabia’s (KSA) King Abdullah bin Abdul Aziz unveiled a social benefits package worth QR132 billion. A day of protest in pursuit of political freedoms, scheduled for early March, subsequently failed to materialise. The successful quelling, in sharp contrast to the tactics employed by the regime in Libya, was greeted with some relief by global energy markets. KSA sits atop the world’s largest oil reserves, and is the world’s most important crude exporting nation.

University of California economics professor, James Hamilton, believes, however, that any threat to global supply may stem from outside the GCC, should the revolutionary momentum of the Arab Spring move beyond Libya and the Gulf. “The bigger worry for oil markets would be that the process may yet spill over into other key oil-producing countries. Iraq will be a huge factor in determining medium-term growth in world oil production, and Iran is twice as important as Iraq in terms of current production,” Hamilton says. Still, the last word – as is so often the case when it comes to oil – concerns KSA. “Should we see the temporary cessation of Saudi production, it would be an event without historical parallel,” Hamilton adds. The New Arab Spring, aided by social media and objective reporting by Al Jazeera, has built a momentum all of its own. Whether this ceases at the Libyan border remains to be seen. But the region’s leaders – and the global marketplace – will be watching closely in the coming months.

MANAMA, BAHRAIN, FEBRUARY 20: With most schools closed, teachers join anti-government protesters at the Pearl roundabout in Manama, Bahrain. Protesters filled the square for another day, as the government and oppostion leaders engaged in talks to resolve the weeklong uprising. (Photo Getty Images)

RANDOM CONSPIRACIES As is often the case with events that define the course of history – the moon landing, the September 11 terrorist attacks, countless coups and assassinations – the conspiracy theorists have had their say regarding the New Arab Spring. Here are the finest and most talked about: Conspiracy One: Saudibook? KSA’s King Abdullah bid QR550 billion to buy social media giant Facebook: Like all best theories, this was shrouded in justifiable ‘fact’. Gaining control of Facebook would have allowed the leader to extend state control beyond traditional forms of centralised media. According to the reports, Facebook owner Mark Zuckerberg met in person with King Abdullah, allowing the King to express his concern over the forming of pages that promoted revolt in Libya and Egypt, and to seek assurance that the same would not happen with regards to KSA. The report was eventually traced to the humour section of a news website. Conspiracy Two: Uncle Sam Wants... Your Oil The Libyan revolt was engineered as a pretext for a western invasion of Libya: Perhaps not as far-fetched as it as first sounds in light of recent developments – the precedent being many people’s opinions of the reasons behind the second Iraq invasion and the reason behind much of the US’s alliances with Gulf states. With Libya sitting on major oil reserves, and leader Muammar Gadaffi having a history of conflict with western powers, there could clearly be a reason to seek ‘regime change’, the theorists would have you believe. But the chief proponent of this particular conspiracy? None other than Cuban leader Fidel Castro, who has for years shared a close political and ideological bond with the Libyan leader.

NEW YORK, US, MARCH 02, 2011: Financial professionals sweat in the oil options pit during afternoon trading at the New York Mercantile Exchange. Crude oil jumped to over a US$100 (QR364) a barrel amid reports of new fighting between government supporters and rebel fighters in Libya, an important OPEC-member country. (Photo by Chris Hondros/Getty Images)

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Much has been written about Qatar’s economy and its recordbreaking growth. But this growth is fuelling an unprecedented construction boom which is seeing some of the region’s – if not the world’s – biggest projects currently underway in this tiny peninsula. And that was before Qatar won the rights to host the 2022 FIFA World Cup. Rachel Morris looks at what is underway, what is on the drawing board and what it all means for Qatar’s business climate.

verywhere you look in Qatar, something is under construction. Big projects, small projects and megaprojects. Buildings, roads, sewerage plants, apartment blocks and even new cities. And this is only the beginning. Construction industry insiders believe that much of the main building activities will kick off between 2012 and 2013, especially the infrastructure and sporting facilities needed for the World Cup and beyond. Which means there is more construction and disruption ahead for Doha’s already besieged residents. But for investors and construction companies eyeing Qatar, the opportunities appear boundless. On paper, the numbers are astounding and almost unbelievable. Qatar’s current and future construction projects are fuelled by a period of record growth. In 2009, building and construction contributed US$7.1 billion (QR25.78 billion) or 7.2 percent of the overall gross domestic product (GDP) of Qatar. Government infrastructure investment plans for the future are massive. A whopping 36.9 percent of the 2010/2011 fiscal budget (QR43.5 billion) has been allocated for major capital projects, with infrastructure set to account for the majority of this at QR35.5 billion. And the country’s comfortable fiscal position will enable it to continue allocating large sums to the infrastructure sector in the future. Qatar’s glowing economic growth potential is backed by its leadership. In an address given by the minister of finance and economy, HE Yousuf Hussein Kamal, on behalf of the prime minister and foreign minister, HE Sheikh Hamad bin Jassim bin Jabor Al Thani, on March 3, he told delegates attending a meeting of the Institute of International Finance in New Delhi that Qatar’s GDP would increase by at least 18 percent in 2011. The International Monetary Fund is even more upbeat, forecasting that TheEDGE

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Qatar’s economy will grow by 18.6 percent this year, on top of the 16 percent expansion in real GDP in 2010. To date, the State of Qatar’s investment in construction is worth almost US$100 billion (QR364 billion) in planned investments over the next 12 years. An estimated 40 percent of Qatar’s state budgets are dedicated to infrastructure expansion projects, including rail, air and road links. This amounts to more than US$66 billion (QR240 billion)worth of infrastructure projects funded by the government alone. Coming to a skyline near you The roll call of construction projects – both government-sponsored and privately funded – underway within the state reads like a billionaire’s shopping list. Currently under construction is the US$9 billion (QR32.7 billion) New Doha International Airport (which was slated to open two years ago), as well as the US$14 billion (QR50.9 billion) Lusail City development which will transform the area to the north of Doha into a thriving second city. Lusail, which has been a ‘slow burn’ for developers Qatari Diar, when complete will accommodate 190,000 residents, offer a workplace for 170,000, and welcome 90,000 visitors. It is Qatar’s largest single residential development project. Also under construction is the US$7 billion (QR25 billion) deepwater Doha Port, scheduled to open in 2014. The new port will cover an area measuring 20 square kilometres and is to be located between Al Wakra and Mesaieed Industrial City. The container-handling capacity of the new port after the completion of the first phase will be two million, which is to be upgraded to six million. And then there is the US$17 billion (QR61.9 billion) rail network to the link the country and the Gulf Cooperation Council (GCC) region to the new airport, as well as the 12 stadiums

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expected to host the biggest sporting event in the world in 2022. The construction of a fully integrated railway system in the nation of Qatar is set to begin at any time and will result in the creation of over 7000 new jobs. Qatari Diar’s managing director, Al Saad, who is also chairman of the newly created Qatar Railways Company, stated that this undertaking would be one of the largest of its kind throughout the Middle East, if not the world. Al Saad expressed an eagerness to get started on the work of establishing this cutting-edge integrated network of railways as soon as possible, but did not mention a specific date for completion. Further, in February, Qatar’s Public Works Authority, also known as Ashghal, awarded a contract to United States-based group, KBR, to project manage the design and construction of 30 major roads around the capital of Doha. KBR will help deliver 30 expressway projects over five years, as part of Qatar’s US$20 billion (QR72.8 billion) roads building programme designed to improve traffic flow, and reduce congestion, travel times and environmental impact. However, in a detailed analysis of the impact of Qatar’s World Cup success on the country, the Middle East Economic Digest estimates that projects, not included in the above estimates, and worth as much as US$60 billion (QR218 billion), initially on the drawing board, have now been given the green light post-2022 announcement. These include a US$4 billion (QR14.5 billion) stadium building programme that will see the construction of nine new eco-friendly and air-conditioned football stadiums and the expansion of three existing stadiums. The stadium programme includes the construction of the 86,000-seat Losail Stadium, which will host the tournament’s opening and final matches and be the showcase for the event. Other projects believed to be in the pipeline include: Al Wakrah Stadium, Al Khor Stadium, Education City Stadium, Sports City Stadium, Al Shamal Stadium, Doha Port Stadium, Qatar University Stadium and Umm Sal Stadium. The troubled Qatar-Bahrain Causeway, sometimes referred to as the ‘Friendship Bridge’, said to be worth US$4 billion (QR14.5 billion), is also back on the agenda after the 2022 announcement and a thawing in occasionally-frosty relations between the two countries. The longest single extension bridge in the world, the project was put on the backburner for 18 months because of political wrangling. Another project finally moving ahead after several delays is that of The Heart of Doha, a project by Qatar Foundation partner, Dohaland. Renamed ‘Musheireb’, the mixed-use development has been designed to reinvigorate the ‘heart’ of the city which fell into disrepair when much of the business community moved to the West Bay district. The project has been beset by problems, including key architectural contractor, Aedas, terminating their contracting in late-2010. Once completed, Musheireb will feature 226 buildings in total, including a national archive, theatre and museum, hotels and heritage quarter. The project has a projected population of 27,637 and the entire scheme is estimated to be completed by 2016. This list does not even include the myriad of towers and smaller projects currently underway in Doha and throughout the country.

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Behind the scenes What does this mean to players already in the market? Tony Saadie, executive general manager, Qatar, of Al Habtoor Leighton Group, told TheEDGE that the industry and the government needs to be stringent with its selection criteria for construction companies and project managers. “In many ways the playing field for construction companies remains the same. A number of the projects announced for the World Cup 2022 are not new, but ones that were already planned,” he reveals. “Due to the recent World Cup announcement, these projects will now be prioritised and put out to tender. “It is essential that only experienced contractors who are already established in Qatar are appointed to construct the critical World Cup infrastructure, as well as the supporting infrastructure.” Al Habtoor Leighton, which has been operating in Qatar since 2005 and has 1200 full-time local staff, is behind some of the country’s most high-profile projects. But, says Saadie, the ‘boom’ has not yet begun. “World Cup 2022 is acting as the catalyst for the realisation of many previously planned projects, particularly in the infrastructure sector. The ‘boom’ has not happened yet, although there is a definite upturn in activity on expressions of interest and pre-qualifications.” Among Al Habtoor Leighton’s projects is the Duhail and Umm Qarn Reservoirs project for Qatar General Electricity and Water Corporation, for the development of new and independent water infrastructure facilities, including six concrete reservoirs, a pump house, associated buildings, roadworks and landscaping, as well as a 17-kilometre water transmission pipeline. The company is also working on Qatar Foundation’s Al Shaqab Equestrian Academy at Education City. “We operate in both the building and civil/infrastructure markets and believe the latter market will have more of a focus for us over the next 10 years in Qatar,” Saadie states. “We are awaiting outcomes of tenders submitted for a number of building and infrastructure projects. Currently we are tendering a major expressway project in Doha, a

One area of exploration remains partnerships between the public and private sectors, highlighted by the Ministry for Busines and Trade as a way forward for Qatar.

large shopping mall and office complex, building works and a water reservoir project. Current pre-qualifications or expressions of interest underway are for major building projects, a retail facility, stormwater outfall, expressway and rail projects.” The industry is certainly seeing interest and activity from existing and new players. Arab United Construction (Arcon) has been at work in Qatar since 1991. General manager, Medhat Radwan, recently said that companies operating in the country have seen significant changes: “The most important change witnessed by the construction sector is in the increase in budgets allotted to projects.” Both Radwan and Saadie admit there are challenges facing the local construction industry. “The size of current investments and projects in Qatar is huge and is taking place simultaneously, so there is a big demand for building materials, some of which are available in Qatar and others that must be imported,” Radwan says. Recurrent rise in prices is also a problem, but the government addressed this problem recently and decided to freeze the prices of some building materials for the coming three years. “Availability of staff and labour resources from our available pool in the Gulf and internationally is a great asset for us,” Saadi states. “Current supply capacity in Qatar for aggregates, cement and steel may need to be reviewed to ensure no supply-side bottlenecks occur.” An industry upsurges Ahmad Jassim Al Jolo, chairman of the Qatar Society of Engineers, confirms the overall impression that construction in Qatar is on the upsurge. “There will undoubtedly be enormous international interest in Qatar projects as a result of FIFA’s decision. Things will start to move by the middle of next year (2012), but we need to start with initial planning now,” he warns. “It’s a challenge, but a very encouraging one.” Even feeder industries are experiencing a surge. Project Qatar 2011, the annual exhibition and gathering for the construction TheEDGE

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industry in the country, reports that in contrast to last year’s event, 2011 will see more exhibitors than ever, an almost 70 percent increase in the number of companies and organisations taking part, with approximately 1700 already signed up. This growth is expected to impact the number of international and Qatarbased visitors to Project Qatar. “This is the biggest Project Qatar we have ever undertaken both in size and numbers of exhibitors,” says a spokesperson from IFP Qatar, the organisers of the event. “We had more than 32,000 visitors in 2010 and we expect to increase that number in 2011 significantly. This event continues to grow in size as the construction boom in Qatar and the GCC speeds up ahead of the 2022 World Cup, and as completion dates for major infrastructure projects loom.” Meanwhile, delivery and timing of these megaprojects is under the microscope. Several projects that have been under construction for several years are starting to come online. The most significant of these, both strategically and symbolically, is the New Doha International Airport. The airport, already behind schedule, sits on more than 20 square kilometres of reclaimed land, and will be inaugurated on Qatar’s National Day, December 18, this year. Qatar Civil Aviation Authority chairman and managing director, Abdulaziz Al Noaimi, said in February that about 80 percent of the project had already been completed, including the state-of-the-art Emiri Terminal. Exercising caution One area of exploration remains partnerships between the public and private sectors, known as PPPs. The Ministry for Business and Trade has highlighted this as a way forward for Qatar and has established a specialised unit to explore opportunities. Al Habtoor Leighton has experience in such partnerships through its Australian arm. “PPP is a mature concept in Australia and Europe and this model of project delivery has a long history in these markets and will take some time before being implemented here,” Saadi says. “This region has a more traditional approach to project delivery and I believe the way forward here would be to incorporate early contractor involvement in projects, particularly those that are technically challenging and require a short development and construction cycle.” But there are some who believe that Qatar’s building boom isn’t all it promises to be. Business Monitor International, in its report, Qatar Infrastructure Report Q4 2010, warned: “…a note of caution must be sounded considering the volatile nature of the construction industry, and the ability for relatively small projects to have a substantial impact on growth, or the cancellation or postponing of a contract on a contraction.” With the government and international agencies alike predicting GDP to expand by almost 20 percent this year, and a budget surplus in the double-digit billions, Qatar’s economy is set to outstrip almost all others, the world over, in 2011.

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“It’s essential that only contractors who are already established in Qatar are appointed to construct the critical World Cup infrastructure.” – Tony Saadie Just about the only cloud on the horizon is the return of demanddriven inflation, though even this concern seems likely to dissipate in the face of sustained growth. According to Deputy Prime Minister HE Abdullah bin Hamad Al Attiyah, Qatar has been witnessing a boom for the last 10 years in terms of growth and prosperity and it is up to the country’s leadership to ensure these projects are managed and developed wisely and prudently. A SUSTAINABLE FUTURE With the building and construction boom replicated across the region, the need for sustainable and green building solutions has never been stronger. The Qatar National Vision 2030 lays out the need for sustainable development in Qatar that seeks to meet the needs of the present generation without compromising the ability of future generations to meet their needs. Qatar is creating new regulations to implement green building concepts in the country, the Minister of Municipality and Urban Planning HE Abdul Rahman bin Khalifa bin Abdul Aziz Al Thani said in March, stating that all future developments would be judged and approved according to their adherence to environmental standards. “The climate change data is clear – we are in a global environmental crisis, and building design and operations must be a key part of the response,” says Barwa and Qatari Diar Research Institute founder and managing director, Dr Yousef Al Horr. Companies are taking note. “Al Habtoor Leighton adheres to an environmental policy that ensures it complies with all relevant environmental laws and regulations, takes all practicable steps to prevent pollution in its activities, and conserves resources through the efficient use of energy and materials. We are certified to ISO14001:2004,” says Tony Saadie, executive general manager, Qatar, of Al Habtoor Leighton Group. “We are aware of the impact that our work can have on the environment, and as such, environmental management forms an important element of our project management and reporting systems.”

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AHEAD OF THE CURVE Head of one of the first and most successful Middle East information technology (IT) companies, Qatar-based iHorizons’ visionary entrepreneur, founder and chief executive officer Mohamad Takriti, explains to TheEDGE’s Miles Masterson how his company has prospered over the past decade and discusses their future plans.

n the early 1990s the world was a different place, and nowhere was this more obvious than in the realm of IT. Twenty years ago, instant communication and computing concepts that have revolutionized global commerce – such as electronic mail (e-mail), Skype and video conferencing, let alone now-standardmodern business tools such as company websites or cloud computing – were mostly still in the realm of science fiction. Indeed, information technology or ‘IT’ was – even from as early the 1970s – chiefly the domain of select academia and military networks, or an elite fringe of computer hardware and software developers. It was something largely unheard of by a generation of regular business owners, who were still adapting to the evolution of early office personal computers (PCs), networks and intranets. However, by 1995 the ‘World Wide Web’, which would soon be referred to generically as ‘the web’ or ‘the Internet’, had morphed, from its previous exclusive inaccessibility, to potential widespread use for everyone who had access to a suitable computer, first generation browser software (such as Microsoft’s ‘Netscape’) and a reliable telephone line. It would take some years before the true potential of these simultaneously rising phenomena would be absorbed into modern society and businesses, especially outside of the world’s more established economies. Even in the West, sceptical or ignorant business owners chose, mostly to their disadvantage, to ignore it. Nevertheless, the output of early 1980s IT companies such as Sinclair, Microsoft and Apple aside, it was during the mid- to late1990s that a small number of new IT entrepreneurs around the world recognised the rapidly rising potential and increasingly availability of the web and its merging with affordable computers. These visionaries began to leverage this potential in start-ups that – at least for those that survived the first dotcom bust circa 2000 – would later be far ahead of the curve. OVER THE iHORIZON Here in the Middle East, one of these was Mohamad Takriti, who in 1996 founded iHorizons – of which he is currently chief executive officer (CEO) – in Qatar. Born, raised and schooled in Doha, Takiriti, 47, had obtained a degree in Mechanical Engineering at Qatar

University, and gone on to continue his post-graduate studies in the United States (US), obtaining a Bachelor’s in robotics and Masters in 3D graphics at the University of Texas and a PhD candidacy at the University of Arizona. Though he did not hail from a business-orientated family background, throughout his studies during the 1980s (which he mostly paid for himself) the ambitious young Takriti’s vision for his own career was that he would one day start and run his own firm. “I did not want to be an employee,” he says. “I would rather think of what I would like to do and then build an organisation around that.” Nevertheless Takriti’s advice to would-be entrepreneurs is to first work for someone else before they embark on launching their own company and build up a decent reserve of capital beforehand. This is exactly what he did when he returned to Qatar from the US in 1990, taking what Takriti calls a “day job” working in the Ministry of Municipal Affairs in their new computer centre. Of course, it comes as no surprise that though Takriti’s academic background is based in engineering (which he says helped him to build a systematic structured way of thinking), his passion has always been in electronics and computing. He recalls how he became self-educated when it came to IT and took his first course in programming in 1982 in the US on an Apple Macintosh.

When the World Wide Web began to spread globally, iHorizons’ founder Mohamad Takriti realised that this would one day have a wide reach.

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ENTREPRENEUR PROFILE Name: Mohamad Takriti Qualifications: MS Mechanical Engineering; PhD candidacy Company: iHorizons Sector: Information Technology (IT) Position: Chief executive officer (CEO) Staff: More than 100 Phone: + 974 4432 2269 Email: takriti@ihorizons.com Website: www.ihorizons.com

“I spent so many nights programming, writing games and writing applications, so it was a personal hobby,” adds Takriti, who soon afterwards obtained his first Sinclair ‘Spectrum’ computer. “[But] all along I was focusing all my studies on how we can use computer technology to develop mechanical engineering...how we can use computers to automate and speed up processes that were done manually.” THE INTERNET IS BORN Even while he was at college, it was clear to Takriti that IT would be important in the future, and this would be the most obvious area start his own business. Moreover, before the concept of the Internet was born, Takriti already had some experience of it. This was primarily TheEDGE

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through university networks and CompuServe, one of the world’s first online service providers (which was initially a private network and later bought out by early US Internet service provider giant, AOL). “My thoughts and ideas were taking shape gradually,” explains Takriti, “but when the web was introduced I decided this is where my business area would be, so I obtained some training on a few Internet technologies. I think the main reason was that when I was contemplating a few ideas for businesses...I was looking at how this can be taken to mass market, back to businesses or individuals. [But] there were many obstacles – it was relatively expensive and the learning curve was steep.” However, when the web began to spread globally, Takriti realised that this would be the way forward. “All you needed was a web browser on a cheap PC,” he says, “so it was clear to me that this is going to have a wide reach, because it is inexpensive and it is easy to use and is connecting everything together. So myself, and a couple of my friends who decided to be business partners, felt that this would be a good entry point to the market.” Takriti recounts though that perhaps this might have been ambitious and premature. To put this into context, he describes how even now, in 2011, many businesses remain reluctant to thoroughly utilise IT and the Internet to their maximum potential for commercial activity and must continually be educated and enlightened to this end. In the 1990s, in the fledgling Internet environment, compounded by limited connectivity through international phone lines (the few servers and service providers that were available at the time were in Europe or the US), this was a situation magnified tenfold. “Fairly naively I would say, we went to large organisations and we said, ‘You need to be on the Internet”, and they said ‘What is the Internet?’” tells Takriti. Nevertheless, they managed to convince a few local companies and government institutions that this new technology would give them global reach and enhance their business effectiveness. “We successfully signed a few contracts with government organisations, example the Ministry of Foreign Affairs here in Qatar, which we believe was the first ministry to be on the Internet,” adds Takriti modestly. “We also signed up a couple of newspapers, who were first the first Arabic newspapers to exist on the web; so we had many firsts and consequently we have won many awards.”

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OVERCOMING OBSTACLES Nonetheless, Takriti also soberly recounts how over the years being a wholly owned and Qatari-based company could also be a disadvantage. There is a perception and mistrust to this day in the marketplace, he says, that local companies must be agents or representatives of Western or Asian IT companies. “When we go and visit organisations, many people look at us at in a marginalised way,” he furthers. “It does not make sense to them that a Qatari company or a regional company actually develops and implements and manages these technologies.” While Takriti feels it is unfortunate that many IT companies in the Middle East are indeed agents, dealers or resellers of said overseas IT products or services, he concedes why this might be lucrative. “It is a much higher risk to invest in developing your own technology than representing an international vendor and re-selling the technology; you can do that with minimum overhead, minimum risk.” The negatives though, at least for Takriti, outweigh the positives. “We call those ‘box pushers’,” he says candidly. “But what have you added in terms of value? Minimum. That is why the margins are very low in those businesses and the added value is really minimum. Whereas we act as an agent for our client to develop a strategy to benefit from computer technology, [to] develop the proper applications or integrate a number of applications together and create a turnkey solution.” Moreover, adds Takriti, thanks to the Qatar 2030 vision and emphasis on diversification into, among other fields, IT in Doha and in particular the efforts of the Qatar Science and Technology Park, the country is developing a reputation for innovation in this sector, and the concept of a Qatari IT company is becoming far more accepted at home and in other countries. HIGH PROFILE CLIENTS Understandably Mohamad Takriti is pleased with how iHorizons has overcome such perceptions, endured in the market, contributed to the growth of IT in Qatar, and obtained major contracts from clients such as Qatar Petroleum, Al Jazeera and Qtel. Indeed, the latter recently announced a noteworthy strategic alliance with iHorizons. While, explains Takriti, some large organisations do take care of their IT and web-based needs internally, increasingly, as companies seek to reduce their employee ‘head count’ the trend is moving towards them outsourcing this requirement to companies such as iHorizons. “Many organisations locally and globally are realising that you cannot do everything, you need to focus on your core and then outsource the non-core functions to specialised companies,” Takriti says. “There are excellent companies who provide hardware and infrastructure solutions,” he furthers. “What we provide is more of what we call business systems solutions, where we look at what type of business our client does and then help automate the processes. So it is an ‘e-business solution’, that is basically a software system and a database system, that is most likely web-enabled, that helps the customer do business better.” When it comes to companies of the ilk of Al Jazeera though, this produces a massive responsibility for iHorizons as they cannot afford to

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be offline for even one second. “Al Jazeera’s Arabic website is the largest Arabic website in the whole world [and the] largest in terms of security breach attempts every day...and our security staff are analysing that 24/7 and protecting the site,” explains Takriti. “It is very mission critical.” An area that can be troublesome for many businesses is retaining quality employees, which is always a particular challenge for the IT sector, where staff turnover is traditionally higher than the average. This is of course vital to create and deliver the kind of abovementioned technical service and security iHorizon’s clientele demand. Therefore, iHorizons have identified human resources as a priority, and developed strategies and programmes to attract and keep high-calibre individuals. Indeed, says Takriti, out of all the positive attributes of his business, it is his employees who are of the most value to him. “It is about staff and the quality of people and about what you are doing in your environment to retain people, because these are intellectual workers, and if all they are doing is using their mind to produce money for you, they have to be comfortable and satisfied...you have to share your achievements with them and congratulate them on what they are doing and celebrate successes.” A SUSTAINABLE BUSINESS It is testament to the efficiency of the way iHorizons has been run as a business over the past decade and half that it has endured and prospered. However, when questioned about achievements, Takriti stresses that maintaining the longevity of the business is paramount, and downplays the numerous accolades the company has won. “I think the first thing is being able to sustain or self-sustain an IT company for 15 years is an achievement by itself, and being nicely profitable, not in debt and not getting financial support from outside the company, because IT is high-risk and many companies have gone boom and bust,” he expands. Thanks to their success so far, iHorizons is now able to invest in a programme of regional expansion, including Jordan, the United Arab Emirates and most recently, opening an office in Riyadh, in the Kingdom of Saudi Arabia. Moreover, apart from its ever-growing high profile client list, Takriti adds that their long-term partnerships with companies such as Microsoft (iHorizons has been nominated as one their top five business partners globally), Google, Oracle and German IT company, SAP – who are involved in oil and gas sector, and with whom they developed groundbreaking Arabic software – are also deeply satisfying to him. AN Eye ON THE FUTURE Another vitally important aspect of business for any IT company is naturally keeping abreast with associated trends. Just as Takriti predicted the importance of the web in the early 1990s, this mindset of forward thinking and identifying what technological innovations are going to light up the future pervades, his company to this day. “There are things that come and go and there are things that really start slow, but they become very strong trends,” he furthers, citing social media as a prime example of a phenomenon that not many firms initially took seriously as a formal business tool, but is now an essential factor in marketing to and communicating with one’s target

The development of applications or ‘apps’ is another IT area where iHorizons is concentrating, and not just for mobile phones or handheld devices, but also new generation televisions. audience. iHorizons now advises their clients on strategies in how to use social media tools, including Facebook and Twitter, effectively. Two further trends that Takriti has identified as emerging are ‘Wikis’ and mobile/handheld technologies. “We spotted this trend with Wikipedia content,” explains Takriti. “Huge, collaborative content that is created by thousands and millions of people…so we are we are embedding it in our technology solutions.” On the highly portable mobile and handheld technology, Takriti is even more optimistic. “We are absolutely focusing on that,” he says emphatically. “We see that mobile technologies and wireless technologies will become an extremely important factor in business and communications in media...We think this is an important trend and everybody should take it very seriously and we are advising our clients on that.” Closely related to the above is the development of applications or ‘apps’, another IT area iHorizons is concentrating on, and not just for mobile phones or handheld devices. In fact, their strategy is to assist their clients in developing apps that are available on a variety of platforms, for example, a telecom company, who might have an iPad app, an iPhone app, a Google Android app and a desktop app. Another area where these applications are also being developed, reveals Takriti, is on new generation televisions (TVs). “We believe that you know you cannot ignore any single medium, you have to cater for the desktop, web experience, we are catering for the small mobile device and the bigger iPad device and the home TV device. Therefore when we talk to our clients, we say, we are not talking about a website or an app; we are talking about a delivery platform. It is a platform that delivers your content information to 10 different mediums and in the future there will be 20 mediums. “When you develop technology,” closes Takriti, “you cannot come up with a narrow-minded view of what tools we have today. We have to be open to invented platforms and not-yet-invented platforms. We have to cater for these newer emerging technologies.” TheEDGE

ON THE PULSE

LNG IN THE

BALANCE

The rise of Asian economies has had a dramatic impact on Qatarâ&#x20AC;&#x2122;s long-term gas export plans. Does the recent Qatargas deal with European energy giant Centrica indicate that 2014 could be the year when Asia truly rises to the forefront from Dohaâ&#x20AC;&#x2122;s perspective? Edward Jameson investigates On the 24th of February 2011, just one day after the contract between Qatargas and European energy giant Centrica was signed, for the first time a total of six tanker vessels were pictured at Ras Laffan Port in Qatar loading LNG for export to various destinations around the world. (Photo courtesy Ras Laffan.)

ON THE PULSE

n the 23rd of February 2011, Doha-headquartered gas industry leader Qatargas agreed a three-year contract to supply Centrica, one of the biggest energy companies in Western Europe and North America, with 2.4 million tonnes per annum (mtpa) of liquefied natural gas (LNG). The fuel will be shipped from the northern Qatari peninsula to the southeast corner of the United Kingdom (UK), the world’s third largest consumer of natural gas. The first delivery under the mammoth QR11.8 billion deal is expected in June of this year. “This deal represents the establishment of a new relationship with Centrica, and further underlines Qatargas’ commitment to the UK as one of our key gas markets,” said Qatargas chief executive officer, HE Khalid bin Khalifa Al Thani. Indeed, the agreement provides both counterparties with a vital facet of their respective developmental agendas. For Qatar, the income will further swell the coffers as it continues to reinvest its hydrocarbon riyals in schemes to diversify the national economy; for the UK, the steady stream of LNG will provide some level of energy security as the nation seeks to further its transition to a low-carbon economy. “The relationship between Qatar, the world’s leading LNG exporter, and the UK connects supplier and consumer nations,” Centrica chief executive Sam Laidlaw put it. In 2010 Qatar supplied the UK with 15 percent of its total gas demand. By 2025 LNG is expected to account for around 50 percent of UK total supply. Yet despite the financial scope of the deal, the limited three-year time scale can be viewed as a further indication of the shifting LNG landscape, as viewed from Doha. The UK and Western Europe no longer feature at the forefront of Qatar’s long-term outlook. In fact, it seems, over the coming decades, Qatar’s great LNG tankers will be heading east, rather than west. THE RISE OF ASIA Prior to the 2008-09 economic downturn, the global business of LNG in Qatar revolved around the state’s strategic target of dividing its long-term sales equally between North America, Europe and Asia. Qatar’s production ramped up considerably, showing a rise in exports of 16 percent according to data service, Global LNG Information, the largest rise among the major gas exporting nations. The downturn, however, swept the rug from beneath Qatar’s welllaid plans, turning global equilibrium on its head. The state’s two major producers, Qatargas and RasGas, have both since indicated that they will look to reallocate some of their sales – ones which had nominally been contracted to markets in Europe and the United States (US) – to higherpriced markets in China, India and other emerging Asian markets. According to RBI energy analyst, Ben Wetherall, around 11 mtpa, or more than four times the volume of the Qatar/UK supply deal, could be diverted from the Atlantic basin (Europe and North America) to Asia. “The rise in the global oil price over the one hundred dollars per barrel mark, coupled with the continued economic recovery in Asia, is likely to reinforce the belief that strong demand growth in India and China will bring about a tightening of the market sooner than expected,” Wetherall has said. TheEDGE

ON THE PULSE

The drilling rig of Cuadrilla Resources explores the Bowland shale for gas, four miles from Blackpool on January 17, 2011 in Blackpool, England. The rig is the first in the UK boring exploration holes 4000 feet deep to see if it is economically viable to extract the reported substantial natural gas from the shale deposits beneath the Lancashire coastline. Some analysts believe the resource could dramatically alter the global energy landscape, whilst others are equally sceptical. (Image Getty/Gallo Images.)

SHALE GAS – A GLOBAL GAME CHANGER? With Qatar likely to look east to underpin its future economic diversification and growth, whether from 2014 or beyond, one further factor must be considered that it likely to play a defining role in the geographical shift: shale gas production. Much has been written on the subject, with some commentators maintaining that the sub-sector has the potential to transform the global energy landscape over the coming decades. Others, however, disagree. THE CASE FOR SHALE Over the past 10 years advanced drilling techniques have allowed access to large volumes of shale gas that were previously uneconomical to produce, with the United States (US) leading the shale gas revolution. “The production of natural gas from shale formations has rejuvenated the natural gas industry in the US,” says the EIA. From 1998 through to 2007, imports of natural gas into the US accounted for a relatively stable 16 percent of consumption. But in 2008, this figure was cut to 13 percent, because production of shale gas was ramped up. And this had little to do with demand – in 2008, according to the EIA, consumption rose year on year, a factor that would normally always drive an increase in imports. Into 2009, the figure remained at 13 percent.

TheEDGE

The new supply has exerted immense downward pressure on US gas prices so as to cause a complete disconnect between home and Eurasian markets. Should the disconnect continue, the likelihood of Qatar seeking out higher paying customers in the Asian markets increases dramatically, which will result in the shift from west to east accelerating over the coming decade. THE CASE AGAINST SHALE Despite the rise of what many refer to as the ‘shale gas revolution’ the industry has a way to go if the resource is to prove itself a cheap and sustainable energy source on a global basis. Respected UK-based thinktank, Chatham House, points to environmental concerns, high depletion rates and fears that US circumstances may be impossible to replicate elsewhere. The organisation also highlights another serious potential problem. Existing levels of investor confidence – or lack thereof – will reduce investment in future gas supplies to lower levels than would have happened had the ‘shale gas revolution’ had not hit the headlines. “If shale gas fails to deliver on current expectations, then in 10 years or so, gas supplies could face serious constraints,” Chatham House senior research fellow Paul Stephens said. A fact that could raise European prices – and thrust western markets back toward Doha.

ON THE PULSE

China’s oil demand hit a record high in 2010, and is forecast to grow by an additional five to six percent in 2011, according to the country’s largest refiner, Sinopec Corp. But the ongoing civil unrest across the Middle East, and the geopolitical risk premium that has ridden roughshod over oil markets as a result, has caused many to affirm that crude prices are unsustainable at the US$100-plus (QR364) per barrel mark. This means that countries such as China will look to other fuels where possible for heating and power generation – such as LNG. THE 2014 DEAL Qatar has 14 LNG production Trains in operation, seven each under Qatargas and RasGas. The most recent Train – QatarGas’ Train 7 – began production in February this year, and saw Qatar achieve its goal of supplying 77 mtpa of LNG globally. This has been described by the US Energy Information Administration (EIA) as a “monumental cycle of LNG infrastructure expansion”. Given Doha’s relatively low cost of production, it enjoys the luxury of being able to wait for the global gas market to tighten before ramping up production and making the final calls on whether its spot cargoes – shipments that are not under contract and can therefore head to where the best price is available – should be heading east or west. Qatargas’ 2014 supply deal with Centrica suggests that the Qatari giant sees 2014 as being the date when flows of LNG from the peninsula will begin to move from the US and Europe to Asia. But in 2009, the most recent year for which figures are available, the shift from the west to the east was already evident, with Japan, South Korea, and India accounting for 57 percent of Qatar LNG exports. European markets, including the UK, accounted for 33 percent, with most of the remaining 10 percent heading to North America. The short-, medium- and even long-term repercussions on demand, due to the March 2011 natural disasters in Japan on the aggregate Asian demand remain to be seen. Nevertheless, the overall trend indicates that within three years LNG exports to this region should even further exceed those moving west. The 2014 date falls broadly in line with the assessment of global financial services giant Credit Suisse. The firm’s Southeast Asia

Centrica CEO Sam Laidlaw is confident that the deal between his company and Qatargas will strengthen the relationship between Qatar, the world’s leading LNG supplier, and gas-guzzling consumers in the United Kingdom and other European nations. (Photo courtesy Centrica.)

Pundits affirm that crude prices are unsustainable at the US$100-plus (QR364) per barrel mark. This means that countries such as China will look to other fuels – such as LNG. mining, oil and gas head Alberto Migliucci told a conference in Seoul, South Korea at the end of February, that Asia would consume two thirds of worldwide LNG supplies by 2015, up from its current level of around 50 percent. “From 2013, the LNG market is expected to become a sellers’ market,” Migliucci said, which will come as music to the ears of the world’s biggest seller of LNG – Qatar. AUSTRALASIAN INFLUENCE Despite Doha’s enviable position, however, it is not inevitable that the established and emerging Asian economies will turn to Qatar for supply. Buyers in the Asian markets could choose to turn to the swathe of Australian projects that are scheduled to come online from 2014 to 2020. The country’s national commodities forecaster, the Australian Bureau of Agricultural and Resource Economics and Sciences, said in March that Australia’s LNG exports are set to increase to 41 mtpa by 2015 or 2016, an increase of 126 percent compared with 2010/11. At present, around 55 percent of worldwide LNG capacity under construction is located in Australia. And India itself has only just begun to exploit the potential of its own as-yet untapped deepwater LNG reserves. The country has for some time been courting the interest of the globe’s energy majors through the awarding of new exploration licenses. The fruits of this policy were evident in late February when energy giant BP signed a huge US$7.2 billion (QR26 billion) deal, allowing it to access India’s oil and gas sector for the first time. In addition to the Australian and Indian initiatives, China’s state-owned companies are also pursuing their own alternative fuel supply avenues. The race to supply Asia in 2014, therefore, is far from over. A fact that, analysts say, is the underlying reason behind the relatively short-term deals that Qatargas is hammering out with the likes of Centrica. “The short-term nature of the deal is in itself indicative of the current uncertainty in energy markets,” Wetherall said. “It would be unwise to try and predict exactly how the scenario will have changed by 2014.” But one thing is virtually certain: for Qatar, west will no longer be best. TheEDGE

KNOWLEDGE & EXPERTISE Small Business know-how • innovation culture • legal insight • Marketing and Design

INNOVATION CULTURE (P.60) Innovation is the newest catchphrase to be bandied about in the global business lexicon. But what does innovation really mean and how does a company implement an Innovation Culture? Kamal Hassan, president and CEO of Middle East innovation consultants, i360, explains.

ALSO IN THIS SECTION: •

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Small Business Know-How: Christine Chisholm, Lead Instructor, Banking, at College of the North Atlantic-Qatar outlines what entrepreneurs and small business owners need to consider when applying for a bank loan. (P.62). Legal Insight: With a return to boom times for Qatar’s construction industry, employers and employees alike

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need to be aware of the governing health and safety laws, write SNR Denton’s Julie Tuck and Hannah Kennett. (P.65). Marketing and Design: Mobile phones are a commonly owned device used for far more than merely making phone calls and mobile marketing has fast become one of the most effective tools in an advertising campaign, writes Charles Vincent. (P.68).

INNOVATION CULTURE

INNOVATION CULTURE Today, innovation defines competitive advantage, drives strategy, and is a fundamental prerequisite for growth. Tomorrow, innovation will be the only practical source of competitive advantage, will dictate strategy, and determine whether an organisation will grow or die. Whether you work in government or the private sector, a culture of innovation is vital to the success of your organisation, writes i360’s Kamal Hassan in the first of a new TheEDGE series on Innovation Culture.

culture of innovation is not a destination, it’s a journey. Like any great adventure, you can make a plan and study a map to see how others do it. But how you overcome the challenges and unforeseen difficulties of the journey – and what your ultimate destination looks like – will be unique to your organisation. If you study some of the most consistently innovative companies in the world – Google, Apple, GE, 3M, Virgin Atlantic – each one has a different type of innovation culture it has developed over time that works best for the type of challenges it faces. IDEA MARKETPLACE CULTURE Google and 3M, for example, place a high value on employee idea generation. Employees are hired not only for their skills, but also for their creativity and passion. Company managers enable and reward new ideas and experimentation, and leaders don’t mind taking a ‘back seat’ to let employees steer the ship. This egalitarian, open-minded atmosphere can be called an ‘Idea Marketplace’ innovation culture. Of course, idea generation without idea management is not productive. That’s why the ‘Idea Marketplace’ innovation culture needs limits – well-defined boundaries and clear metrics for success. Not every idea will be actionable, so companies need a system with documented and consistent scoring models to determine which ones will move ahead. Many start-ups and small companies develop an ‘Idea Marketplace’ culture naturally, and it works well for them. Larger established organisations can deploy this type

INNOVATION CULTURE

of culture by adopting better idea generation tools that encourage employee contribution, and exploring more risky innovation projects outside their core competencies. VISIONARY LEADER CULTURE Another type of innovation culture relies on the brilliance and charisma of a senior executive. This is the ‘Visionary Leader’ culture at companies like Apple, Microsoft and Virgin Atlantic. Everyone knows that Apple is synonymous with Steve Jobs, the company’s founder and current chief executive officer (CEO). Even though Jobs left Apple for 10 years, he was mainly responsible for getting the company back on top after a terrible performance in the 1990s. His uncanny ability to understand what customers want months or years down the road makes him the primary source of innovative ideas at Apple. In this type of innovation culture, employee creativity is valued, but less in the realm of idea generation and more to fulfil the leader’s ideas (for example, creative problem-solving). Everyone works together to execute the leader’s strategy, which requires synchronisation and loyalty at every level. SYSTEMATIC INNOVATION CULTURE A third type of innovation culture seen today is the ‘Systematic Innovation’ approach. Where companies like Google and Apple tend toward opposite ends of the leadership spectrum, the Systematic Innovation culture at GE, Nokia and Procter and Gamble demonstrate that it is possible to balance traditional leadership and employee contributions. Here, innovation is a rigorous process that engages everyone in the organisation for specific tasks. There are innovation teams in charge of managing and developing ideas. There are champions who are accountable to produce results. Ideas are tested using systematic innovation methods such as the TRIZ theory of inventing problem solving and ‘design for six sigma’ (DFSS). Company performance is measured using innovation metrics like ‘return on innovation investment (R2I) and change of behaviour. Unlike the visionary leader culture, executives in this culture are not usually the source of breakthrough innovation ideas – although they drive the organisation to innovate

at the level needed to achieve growth. And unlike the idea marketplace culture, employees aren’t encouraged to go off and experiment with their own ideas. Instead, ideas are developed systematically in support of the strategic vision, without the vision specifics being mandated. “Make something great” is the unspoken message. This gives managers and employees room to experiment, even to fail, during the front end of innovation – but only within a mandated timeframe. A culture of Systematic Innovation works well in established organisations; start-ups don’t tend to have the discipline for such a calculated approach, nor the resources for a diversified portfolio. However, for organisations that don’t have a visionary leader or aren’t able to capitalise on an idea marketplace culture, a Systematic Innovation culture is a practical and attainable goal. MIDDLE EAST INNOVATION CULTURE In the Middle East we also have several types of innovation culture. There is the culture of ‘Record Breaking Innovation’, supported by the many significant government-led initiatives designed to foster innovation on a large scale. This culture typically results in the type of innovations that make headlines – Qatar’s plan for hosting the 2022 World Cup is a perfect example – but not often in the less dramatic type of everyday innovation that any business or government organisation can employ to add value. On the other hand, many people in the Middle East equate innovation with invention. This ‘Eureka!’ innovation culture is rooted in the notion of an individual who has an “Aha!” moment of inspiration that leads to invention. However, innovation and invention are not the same. The electric light bulb, for example, is one of Thomas Edison’s bestknown inventions. But even Edison realised that the light bulb would be of no value unless electricity was available in every home. Thus, the innovation was not the light bulb itself, but the electrical grid later designed to make the lightbulb a useful invention for people. Finally, we have the ‘Imported Innovation’ culture, which relies primarily on the innovation of others that we reuse and resell. Where some societies and organisations struggle with the

‘it is not made here’ mentality, much of the Middle East has the opposite problem. If it’s not made, tested, proven and sold elsewhere, we tend to distrust it. In this regard, we have created a culture of apathy that can afford to buy innovation elsewhere. THE FIRST STEP It is important to understand the type of innovation culture that works for market leaders outside the Middle East, as well as how the unique challenges here affect our regional innovation strategies. None of these examples are meant to generalise or oversimplify the complexity of innovation, only to illustrate how diverse approaches can still lead to a successful outcome. Ultimately you must develop a culture that fits your organisation and its challenges. Also remember that creating a culture of innovation is a committed journey – you can’t do it overnight.

Kamal Hassan is the president and chief executive officer of Middle East innovation culture company, Innovation360. Basic Steps Towards Innovation Culture • Challenge tradition, collective assumptions, mindsets and outdated ways of doing business. • Eliminate silos, counter-productive politics and territoriality. • Raise the bar for trust, communication, teamwork, experimentation and the willingness to learn from mistakes. • Understand the difference between incremental innovation and breakthrough innovation, and determine which type of innovation will sustain your growth. • Stop relying on imported innovation and start developing the creative problem-solving capacities of local employees. • Set aside financial resources for strategic innovation deployment and leadership development.

TheEDGE

Small Business KNow-How

APPLYING FOR SMALL BUSINESS FINANCING In the still-rippling wake of the credit crunch, tightened credit markets and mounting losses from bad loans have resulted in lenders becoming increasingly diligent about credit risk management. As lenders recover from past losses and face increased regulatory pressure for more prudent lending practices, entrepreneurs and small medium businesses (SMEs) are likely to face a more rigorous application process in order to prove themselves credit-worthy. The good news is that in a time of economic recovery, interest rates are relatively low, and the cost of credit will eat up a smaller percentage of the bottom line, says Christine Chisholm, who offers some sage advice to would-be borrowers.

Small Business KNow-How

WHO TO TALK TO Indeed, despite widespread fears and media hyperbole to the contrary, banks are still lending. It is still their main revenue source, and they will always need to make good quality loans. In the lending business there will always be risk. It is your job to give the lender the confidence that you are an acceptable risk and that they will get their money back. By understanding the lending process and thinking like a lender, you will be better prepared and increase your chances for approval. Before presenting your financing proposal, you must decide whom you want to present it to. Banks are the most common source of business financing. Even if you are considering an alternative source of finance, such as an equity partner, or government sponsored lending programme, the evaluation process will be similar. Remember, you are the customer. Be a wise consumer and research the market to determine which financing programs may be available to you. Familiarise yourself with the lending products offered by various lenders to find those best suited to your needs. Shop around and compare rates. Small business credit is a growth area for Qatar, particularly with the opportunities that will be brought about by the World Cup in 2022. A number of new initiatives in the country are expanding the financing options. According to their February 26, 2010 press release, “The Qatar Development Bank has established the Al Dhameen Indirect Lending Program to offer a range of financing solutions to viable SMEs. The program is designed to improve access to financing for SMEs by guaranteeing part of the financing extended by commercial banks. The program guarantees up to 75 per cent of outstanding principal to a maximum value of QR8 million for existing SMEs; and 85 per cent of outstanding principal to a maximum of QR10 million for new SMEs or start-up companies.” Find out more about the programme and participating lenders at: www.qdb.com.qa/aldhameen.html Enterprise Qatar, opened in early-2011, is also set to provide new financing support for small businesses in Qatar.

If you decide to pursue bank financing, the bank that you deal with personally may be the best place to start. They will take comfort in the fact that you already have an established relationship. They will have a vested interest in retaining you as a customer and expanding on your banking relationship. Shopping around to two or three banks may increase your chances of success and potentially save you time if you are not successful with your first bank. A referral or introduction to a commercial lender may also save time and give you an advantage with the lender. When dealing with your own bank, ask your personal banker for a referral to the bank’s commercial department. If you decide to approach other banks, use your network to introduce you to potential lenders. PREPARING TO PRESENT Applying for financing is a professional business activity. It should be approached with no less seriousness than if you were applying for a job, or pitching your product to a potential customer. You are representing your business and selling it as a ‘good risk’ to your lender. Like you, lenders are busy professionals so respect their time by making an appointment and being punctual. Appearances are an important part of any first impression and your dress, grooming and conduct should be in keeping with the business environment. WHEN TO APPLY Because of the more detailed due diligence involved with adjudicating a business loan, understand that it’s going to take more time than a personal loan. How much more time depends on several factors such as the size and complexity of the request, the quality of your proposal, and your lender’s schedule. You may need to meet with your lender several times to provide additional information, answer questions, and complete the required loan documentation, or possibly even to revise your request. Time will be on your side if you are prepared by starting the process well in advance of your need for financing. If you have already ordered a new piece of equipment before you figured out how you will pay for it, or you’re running

short on working capital and you have to pay a supplier by the end of the week, you could be in trouble. Lack of planning will only make you look unprepared and unprofessional. A cash flow shortfall caused by failing to secure financing in time has been the demise of many a small business. Don’t let it happen to you, plan ahead. WHAT TO INCLUDE Your opportunity to meet a lender face-to-face might happen before or after you submit a written proposal. In either case, have your written proposal ready before you approach the lender. As with any business document, your financing proposal should be professionally presented and organised. Include all of the relevant information that your lender will need to make an informed decision, but do not try to dazzle them with unnecessary charts, data, or irrelevant information. One of the first things your lender will want to know is how much money you need and exactly how you will use it. Be very specific about your purpose for borrowing, and provide applicable documents to back it up. For example, if you are purchasing a piece of equipment, include a copy of the quote from your supplier. Most lenders will expect you to contribute a portion of the required funds from your own resources or from the retained earnings in your business. This demonstrates your commitment to the business and your willingness to assume a portion of the risk. Few lenders will be willing to contribute 100 percent of the financing needs, and this is particularly so with start-up businesses. THE BUSINESS PLAN An essential component of your financing proposal is your detailed business plan. The next issue of TheEDGE will cover the topic in more detail, but at this stage the most important aspect to realise is that this is even more critical for a start-up business with no history of operations, or profitability. Your business plan tells the story of your business, how it works, and why you will succeed. Include a profile of your company, your products and services, your customer TheEDGE

Small Business KNow-How

base, and key suppliers. Include information about your industry, your competitors, and your competitive advantages. Describe how you market your products and services. Your business plan should also provide information about key employees, including you. Highlight your background and experience and how it fits with the business. Your financial statements are a critical element of your business plan. If you are a going concern, the lender will want to see recent financial statements for the past two to three fiscal years and year-to-date results for the current year. This includes a Balance Sheet, Income Statement and Cash Flow Statement. For a start-up, provide at least two years of forecasted financial statements. Include any assumptions and be prepared to discuss why your projections are realistic. The lender will want to see a complete schedule of start-up costs for a new business and your plan for financing it. Know your numbers inside out, and be prepared to answer any questions. Your financials should include a personal net worth statement and a listing of any other income sources. When it comes to small business, you are the business and the credit assessment will include a review of your personal and business financial status.

It is the entrepreneur’s job to give the lender the confidence that you are an acceptable risk and that they will get their money back. By understanding the lending process and thinking like a lender, you will be better prepared and increase your chances for approval. WHAT DO LENDERS LOOK FOR? The bottom line for your lender is if they feel they will get their money back they grant you a loan. When adjudicating your application, the lender will assess whether your business is viable and if you will be successful enough to generate adequate cash flow and profitability to repay the loan. The ABC’s of credit decisions really comes down to the ‘Five Cs’ of credit (see box). This is a set of lending criteria used by lenders around the world for decades and common industry practice in Qatar. Thelma Tajirian is Director, Access to Finance at Silatech, who has been seconded to the Ministry of Business and Trade to work with Enterprise Qatar. Tajirian says that “[The banks] will

THE ‘FIVE CS’ OF CREDIT Character: Character refers to your sincerity in the borrowing process and your commitment, both to your business and to repaying the loan. Having a clear purpose and required amount is the first step. The lender will assess your reputation and that of your company. They will look at your existing personal and business relationships with the bank and if you have handled them in a satisfactory manner, meeting previous borrowing obligations. Character is the most intangible and difficult to measure of the five C’s. However, it may be the most important. The impression made throughout the application process will influence the lender’s assessment of your character. Capacity: This C is all about your ability to repay the loan. The lender will review your financial statements to ensure that your business can afford the credit that you are asking for. A general guideline for debt service coverage (how many riyals of profit do you have for every riyal of debt payments) is about 1.2 to 1. Capital: Your lender will want to ensure that your business is adequately capitalised. They will expect that you have contributed equity from your personal resources and that you are retaining a reasonable amount of your earnings within the business. They will look at your existing level of debt in comparison to your capital base. If leverage is too high, the

TheEDGE

continue to follow the ‘Five Cs’ of Credit and minimum risk assessment criteria as outlined by the Qatar Central Bank to underwrite loans to keep a sound banking system in Qatar.” In summary, despite increasing focus on the SME sector, today’s lending environment may be more challenging for the small business customer than in the past. But with the right planning and preparation, you will be ready to make a winning presentation to your lender and be one step closer to an approved business loan.

Christine Chisholm is an instructor with the Centre for Banking and Financial Studies at the College of the North Atlantic-Qatar.

lender may not be comfortable with the risk. A debt to equity ratio is generally accepted at a maximum of two to three times. Part of the capital assessment may include a review of your personal net worth. This will show the lender whether you have the ability to contribute additional capital to your business if needed and that you have a back-up source of repayment. Conditions: The lender will analyse the environment in which your business is operating. They will want to know about the market for your product or service, and what type of competitive environment you are operating in. Are there any challenges or opportunities facing your industry and how will expected changes in the general economy impact your sales in the future? Collateral: In the risk-averse, post- financial crisis lending environment, lenders may be more inclined to ask for collateral security for a loan. Think about what assets you have and are willing to pledge as collateral, possibly including your personal assets. Be prepared to sign personal guarantees to support your business loan. Just remember, even the best collateral will not transform a bad loan into a good one. Banks do not want to spend time or money liquidating security. Collateral is a back-up plan to support a sound lending decision.

LEGAL INSIGHT

Qatar’s Health and Safety Laws

LEGAL INSIGHT

As Qatar ramps up its construction efforts ahead of the 2022 World Cup, Julie Tuck and Hannah Kennett outline the health and safety laws governing employers and protect employees

ealth and safety law affects everyone. Industries such as the construction sector have higher than average accident rates with the inherent risks of working on building sites. So high-risk working environments, such as working at height or with potentially dangerous machinery, require the construction industry to take health and safety at work particularly seriously. This aspect of the construction industry is now receiving increased focus in Qatar as the sector expands to meet the 2022 World Cup goal. But health and safety at work affects every employer and every employee in their everyday lives, not only those in high-risk industries. Most jurisdictions have legislation and rules in place to protect employees in the workplace; Qatar is no exception. The overarching legislation on health and safety at work in Qatar is in Law No.14 of 2004, known as the ‘Labour Law’*. Further detailed health and safety regulations are set out in a series of ministerial decisions. This is a wide area of law and this article summarises some of the key points to be aware of as both an employer and an employee in any industry or sector. Labour Law The Labour Law governs the relationship between an employer and its employees and sets out the minimum requirements they may expect to receive from each other. These minimum entitlements cannot be contracted out of or varied, unless the variation is more beneficial to the employee. Part 10 of the Labour Law addresses employees’ safety, vocational health and social care and consists of eight articles. Among other matters, Part 10 requires an employer to: • Provide its employees with information such as the precautionary measures in

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place to protect employees from workrelated injury or disease, • Inform employees at the start of their employment about any hazards that may arise during their employment and what measures employees should take to avoid those hazards, and • Provide employees with first aid facilities and carry out regular medical check ups if the employees are at risk of contracting vocational diseases. Employers should note that some obligations under the Labour Law differ depending on the number of employees they employ. For example, an employer with five to 25 employees is only obliged to provide a medical first aid box, whereas an employer with more than 100 employees should have a full-time nurse. Ministerial Decisions Several ministerial decisions relating to employees’ health and safety have been issued under the overarching Labour Law. These cover subjects such as: how employees’ work should be organised; the types of work which may continue without rest breaks; employees who are not eligible to receive payment for any overtime worked; and specifications and conditions relating to employees’ accommodation. Particularly relevant to the construction industry is Ministerial Decision No.20 of

2005 (Measures to Protect Workers and Visitors Against Occupational Hazards). This ministerial decision sets out the employer’s general obligation to ensure that its workplace is safe for employees and anyone visiting the premises, and that there are safe systems for work in place. Labour Inspections The Labour Law also provides that employers’ premises may be inspected by work inspectors from the Labour Department. These inspectors are law enforcement officers with the power to impose the obligations under the Labour Law and ministerial decisions. Briefly, their authority includes: • Entering the workplace at any time during working hours, without prior notice, to inspect an employer’s books or files to ensure the employer is complying with the law, • Taking samples of materials used and inspecting machinery to see employees are protected from hazards, • Inspecting employees’ accommodation to ensure compliance with required health standards, and • Making inquiries of the employer, its representative or employees (either individually or with a witness present) about implementing health and safety law. If an employer has a visit from an

If a breach of the Labour Law results in a death or injury and the circumstances justify a legal action, then the more severe penalty is likely to be applied instead of the Labour Law penalty.

LEGAL INSIGHT

Health and safety at work affects every employer and employee, not only those in high-risk industries. inspector, it must cooperate with the inspector by providing information and documentation and attending meetings if requested. If an inspector finds an employer has breached the law, then he should: • Consult with the employer and provide guidance to deal with the contravention, • Give notice to the employer requiring them to deal with the contravention, giving details of the breach and the period for remedy (this may range from two weeks to one month, depending on the number/nature of violations and number of employees involved), and • Prepare a record of the violation for the Labour Department so it may consider whether to take further action against the employer. Employees’ Obligations Most obligations in the Labour Law and the associated ministerial decisions fall upon employers. However, they do specify certain obligations for employees as well. In respect of health and safety, an employee must: • Not do anything to damage any equipment which the employer has supplied to protect its employees’ health and safety, • Use or wear any protection or uniform provided to protect him/her at work, and • Follow the employer’s instructions aimed at protecting the employee from workplace injuries and diseases. If an employee fails to comply with his/her obligations, then the Labour Law requires the employer to enforce the obligations and discipline the relevant employee. The Labour Department therefore, does not generally enforce health and safety laws against employees directly and relies upon employers to ensure their employees meet their respective legal obligations.

Employers should note however, if it has 10 or more employees, then before it can discipline an employee, it must first have a disciplinary policy and procedure in place (approved by the Labour Department). The particular offence to be enforced must be set out clearly in the disciplinary policy and procedure. Penalties for Breach of the Labour Law and Ministerial Decisions The list of penalties for non-compliance with the health and safety law are set out at the end of the Labour Law and may take the form of a fine and/or imprisonment for up to one month. The level of fine varies between QR2000 and QR6000 depending on the obligation breached. This may seem a relatively trivial amount, but the fine will be multiplied by the number of employees affected by the violations. Imprisonment may apply to the most serious offences, but depends (among other things) on whether the employer is a ‘natural person’ or a corporate entity. Interestingly, the statutory penalties only apply to breaches of the Labour Law and not specifically to breached of duties in ministerial decisions. However, if a breach of the more detailed rules in the ministerial decisions did occur, then it would almost certainly amount to a breach of the more general rules laid down in the Labour Law in any event. The Labour Law penalties are without prejudice to the more severe penalties that may apply under any other Qatari law. So if, for example, a breach of the Labour Law results in a death or injury and the circumstances justify a legal action with more severe consequences (possibly a criminal offence under Law No.11 of 2004, ‘The Penal Code’) then the more severe

penalty is likely to be applied instead of the Labour Law penalty. Finally, it is worth noting that although not all duties under the Labour Law attract a specific penalty for a breach, but if following an inspection either: • The employer fails to take measures required by an inspector, or • The inspector believes there is an imminent threat to the employees’ health and safety. Then regardless of whether the matter amounts to an offence to which a specific penalty applies, it may be referred directly to the Minister of Labour. The Minister may then order the partial or complete closure of the employer’s site, or order that it stop one or more of its machines from working until the source of the risk is removed. The employer must continue to pay employees’ wages in full during the period of closure or suspension. Conclusion Protecting health and safety, whether in the workplace or anywhere else, is a matter for everyone. Health and safety at work is taken seriously in Qatar and there are laws in place to show this. The laws in Qatar may not yet be as developed and as detailed as in some other jurisdictions, but they set out: the standards to be achieved; an inspection regime to enforce these; and a range of penalties to be applied if a breach is held. Ultimately only people, and not laws, can save lives. As Qatar’s construction sector continues to accelerate over the next few years, it is everyone’s responsibility to ensure that Qatar can deliver a 2022 World Cup with a world-class health and safety record. * An unofficial English translation of the Labour Law can be found on the internet, but only the Arabic original law has any binding capacity under Qatar law. 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 more information and enquiries please contact Julie Tuck (julie.tuck@snrdenton.com) or Hannah Kennett (hannah.kennett@snrdenton.com) TheEDGE

Marketing & Design

Making the most of mobile

Mobile marketing has fast become one of the most effective tools in an advertising campaign, moving millions of consumers to become customers. Charles Vincent explores the channelâ&#x20AC;&#x2122;s branding and sales opportunities.

Marketing & Design

obile phones are a commonly owned device used for far more than merely making phone calls. Today, the mobile phone offers the user the opportunity to work and play away from the office and home, be it sending and receiving e-mails, browsing the Internet or playing games. And business is reaping the financial rewards. In fact, auction website, eBay, recently announced that it receives 94 bids via mobile devices worldwide every minute, while the site’s revenue from mobile sales has increased by 300 percent, to reach US$2 billion (QR7.2 billion). Says Clare Gilmartin, vice president of eBay Europe, “It’s staggering to think that US$2 billion worth of sales has been generated through a platform that didn’t exist three years ago.” According to the online retailer, the German and United Kingdom (UK) markets represent nearly a third of its global mobile sales. In fact, from the UK, on one day alone – December 12, 2010 – eBay generated GBP3.3 million (QR19.5 million) from mobile sales. Indeed, the growth in such revenues follows the development of mobile apps for the iPhone, Android, Blackberry and Windows Mobile 7, which have been downloaded over 30 million times. eBay’s mobile sales facts • Every second, a purchase is made through eBay’s mobile apps. • Three to four Ferraris are purchased every month through its mobile apps. • Thirteen pieces of clothing, pairs of shoes or accessories are sold every minute through its mobile apps. • 2010’s most expensive holiday purchases included diamond jewellery, designer handbags and luxury watches.

“Mobile is clearly becoming a new way people shop,” agrees John Donahoe, president and chief executive officer of eBay. “[eBay has] nearly tripled growth merchandise value (GMV) year-over-year…with strong holiday shopping momentum in the fourth quarter. In 2011, we expect mobile GMV to double to US$4 billion (QR14.5 billion).” Now marketers and developers are finding innovative and unprecedented channels in which to personalise offers and advertisements for consumers using mobile phones. The Internet ushered in an era of personalised advertising, based on criteria such as gender, country, language and the user’s choice of website. Marketers are able to define not only the location of the user, but the time and day of the click action, while Facebook has added depth to this with data such as the user’s name, friends and age. This has led to more accurate campaigns, where the target audience has been clearly defined and communicated with. In a world where accountability and return on investment (ROI) are critical, advertisers utilising these channels and new technologies are no longer subject to the expensive wastage that is crippling mass media. Mobile channels for advertisers By the same logic, the mobile phone – with its interactivity and geo-localisation – offers the same precise results for advertising and marketing campaigns. There are many options available to those looking to, for example, build awareness, increase sales or entrench brand loyalty. And while your brand may have a terrific website, it will ultimately be useless in taking the next step towards reaching potential customers, unless it is mobile compatible.

Mobile website advertising: The same concept as that of internet banner advertisements, but optimised for mobile websites. In-apps advertising: From audio and video, to in-ad downloads and coupons, brands such as Unilever, General Electric and L’Oréal are using in-apps advertising to create engaging experiences with consumers. Apple, for example, offers iAd, a mobile advertising network that allows advertisers to reach millions of iPhone and iPad users. Ad rich media advertisements are highly interactive, and, according to apple. com, users spend an average of one minute with them. Quick Response (QR) codes: This is a matrix barcode – consisting of black modules arranged in a square pattern on a white background – that is readable by camera phones, and, when snapped by the user, provides information, leads to a specific web page or enables the user to download materials. QR codes have been integrated into both traditional and interactive campaigns, and appear in print campaigns, on buses and billboards, in guerilla marketing campaigns and e-mail marketing, on in-store displays, event ticketing, business cards, and couponing, to name a few. They allow marketers to measure response to campaigns, allowing for a easier return on investment (ROI) calculation, and helping to justify marketing budget spend. TheEDGE

Marketing & Design

Grabbing the consumer’s attention using mobile technology is one thing, but translating that into actual sales is something else. Innovative examples of where QR codes are used • QR codes can be found on the front-lawn For Sale signs in real estate. Prospective buyers scan the code with their mobile phones and receive all the listing information, including photographs. • Throughout an issue of the Sports Illustrated Swimsuit Edition, QR codes offer exclusive video footage of its models. • In the music industry, acts such as Dave Matthews Band offer QR codes that grant access to free music videos and the opportunity to sign up for mobile fan clubs. An example of a QR code, now commonly used by marketers in mobile campaigns.

Augmented Reality (AR): Technology that is a live direct or indirect view of a physical, real-world environment whose elements are augmented by computer-generated sensory input. To remove the ‘geek speak’, one is most likely to have seen this while watching sports, for example, in swimming telecasts, where a line is often added across the lanes to indicate the position of the current record holder as the race proceeds, allowing viewers to compare the current race to best performance. In mobile marketing, AR has been successfully adopted by IKEA, who wanted to help consumers visualise how their new IKEA PS range would fit into their homes. The Portable Interior Planner application includes images of furniture from the line. The customer selects the piece they are interested in, clicks on ‘Take A Picture’, and then aims the camera at the area of their room where the furniture might be placed. An image of the room appears on the phone screen, along with the selected IKEA furniture, which can be scaled larger or smaller to make it better fit the scene.

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The customer can then take an image of the scene, and either save it or MMS it from within the application. Interestingly, although IKEA made the application available to customers through in-store posters and online, the retailer also installed Bluetooth pillars in certain stores which would periodically send out signals to nearby phones inviting the subscriber to download the application. Turning ads into sales Grabbing the consumer’s attention and making your brand relevant with mobile technology is one thing, but translating that into actual sales is something else. Mobile marketing has been able to give the market and user the information they require, enabling them to make a decision, yet any such campaign must make the purchase itself quick and simple to execute. With near field communication (NFC), developers think they have the answer. NFC is a technology that not only permits the user to interact with other devices and advertising billboards, it will also soon allow quick payments that are up to now still the domain of cash and credit cards. NFC mobile loyalty schemes will give millions of shoppers access to coupons and promotional discounts without the need for the actual coupons that have to be cut out of magazines and newspapers. An NFC screen would display a coupon, that would then be downloaded and instantly used by the shopper via their mobile phone. NFC has the capacity to influence buyer behaviour and purchases, and improve brand recognition. A Harris Interactive survey found that one-third of those who utilise these marketing alerts, are proactively attuned to those brands that use the alerts. Further, 27 percent of users said that these companies have helped them to make their purchasing decisions. In turn, by analysing NFC-influenced purchases, retailers will be able to monitor consumer ‘pulls’ – those offers and messages that resonate best with shoppers and move them to action – and this data will help them develop better marketing strategies away from the intrusive campaigns of the past, ultimately leaving the consumer in control.

Charles Vincent is the digital media director at Firefly Communications and can be reached at c.vincent@firefly-me.com

BUSINESS INSIGHT in the aftermath (P.72)

With Japan still recovering from its earthquake and tsunami, and the nuclear situation remaining critical, the rest of world and global economy is both reeling in shock, while reconsidering nuclear power as a viable energy alternative. London-based academic and risk management expert, Nitin Bakshi, discusses the subject of disaster management, and what lessons authorities other countries, and indeed companies, might take from the aftermath.

Displaced earthquake victims line up for a meal in late March in an evacuation centre in Kesennuma, Japan. Two weeks after the magnitude nine earthquake and resultant tsunami wrecked many Japanese towns and cities, and while the threat of nuclear fallout remains, local authorities still struggled to get basic commodities such as food and water to the countryâ&#x20AC;&#x2122;s beleaguered citizens. (Photo by Paula Bronstein/Getty Images).

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Many small and medium enterprises (SMEs) struggle to survive in the market, most going under in their first year of business. Rachel Morris talked to Mohannad El Khairy the head of communication strategy at UAE-based business

information provider, Zawya, on a recent visit to Qatar about the importance of market intelligence for SMEs and overcoming the culture of fear of failure prevalent in the region. (P.74)

BUSINESS INSIGHT

Disaster Preparation

Lessons for governments and companies in the aftermath of Japan’s triple disaster crisis Nitin Bakshi is an assistant professor of management science and operations at London Business School in the United Kingdom. Bakshi’s research focuses on management of disruption risk in operations and supply-chain management, which he says, can also play a large role in helping post-disaster aid reach victims more effectively. Miles Masterson talked to Bakshi about the subject, and what lessons authorities and companies in other countries, might learn in the aftermath in Japan. Do you think the Japanese could have been better prepared? Their buildings withstood the earthquakes, but they have admitted they were not prepared for the tsunami and this is why the nuclear problem followed? There are bound to be losses to life and property when dealing with catastrophes of the magnitude and scale of the recent earthquake and subsequent tsunami. The key is to keep the damage to a minimum. As of March 28th, 2011, nearly 10,800 people are reported killed and 16,000 are still missing. The number living in temporary shelters stands at around 190,000. The last major earthquake to strike Japan was the Kobe earthquake in 1995, which resulted in the death of nearly 6,000 people and injured about 26,000. Due to Japan’s long history of earthquakes it is better prepared than most societies to deal with this sort of calamity. The resilience of their building structures is one such form of preparedness. They have put in place huge seawalls along the coast to offer protection from tsunamis, and also marked out escape routes. Besides preparedness before the event, the other dimension to loss mitigation involves recovery actions initiated during and after the event. No matter how well prepared, any society is bound to question whether there was room for improvement in the response – and surely there will be. Learning from past lessons to do better in future is fundamental to the process of dealing with catastrophic events.

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On a more positive not, what do think they got right? The early warning system that had been put in place for earthquakes, and is the first of its kind in the world, gave about a 60-second heads-up, which allowed people to take emergency cover. This seems to have prevented a significantly worse casualty count than what it is today. The Japanese people have been very disciplined and dignified in their conduct since the disaster unfolded. Full credit to them on this account since panic can only exacerbate the situation. This was, of course, possible mainly because of the regular earthquake and tsunami drills that Japanese people are familiar with. In the aftermath of such catastrophes, it is crucial that basic societal infrastructure is restored quickly. These are the kind of challenges that the Japanese administration is dealing with presently. While all of the focus right now should be on effective execution of recovery strategies, there will be an opportunity to assess performance and learn lessons, once the dust settles. Holding people accountable for their duties and responsibilities is central to the performance of any economic or social system. This would of course be the situation with the nuclear plants, which they did not and perhaps could not have predicted? While the jury is still out on the quality of the overall response from the Japanese

administration, there are certain troubling signs emanating from the situation unfolding at Fukushima Daiichi – the nuclear power plant that is at the centre of much adverse attention. Some reports suggest that there may have been a violation of safety standards in the past, which made the plant more vulnerable to damage in case of a natural disaster. If this is indeed the case, then clearly it is an example of poor preparation from the administration, which has exposed the Japanese people and their neighbouring nations to grave danger from nuclear contamination. The Japanese people and some of the world media have also criticised the Japanese authorities for downplaying the seriousness of the fallout potential? There is a sense that more could have been done by way of transparency with regard to the prior conditions at Fukushima Daiichi, in particular, and with regard to sharing any bad news, in general. Greater transparency will help coordinate a better response to any future challenges of a similar nature, although we all hope that such a need will not arise any time soon. Hence, while it is impossible to forecast exactly what impact a major earthquake will have, there are steps that can be taken to reduce the resulting destruction. In the wake of the current crisis at the nuclear power plant, there are concerns of the nature that you suggest. The current confusion

BUSINESS INSIGHT

surrounding the initial report by the plant’s operator Tokyo Electric Power Company (TEPCO) that radiation levels at the plant were 10 million times higher than normal before revising that figure down to 100,000 times, has only heightened these concerns. When it comes to cataclysmic events, there is always a trade-off between being completely transparent about potential fallouts, and triggering panic. It is my view that invariably sharing information can only help as long as it is disseminated in a sensible fashion. We do entrust our policymakers to make a judicious choice in resolving this trade-off. However, in keeping with the spirit of public accountability, it is critical that these choices and decisions are reviewed in a transparent fashion at an appropriate time. A complicating feature of the current crisis is that there are also concerns about spread of nuclear contamination to other nations. Neighbouring nations have a legitimate right to be fully informed about how the situation is evolving. The Japanese administration must do all it can to address this requirement. How seriously do multinational companies, many of which you have previously said, operate at any across a number of disaster prone countries, take the threat of industrial or natural disasters and how prepared are they really? The idea of being prepared for disasters and ensure continued operations during adverse circumstances is not new to the industry. Such ideas have been around in various guises, such as ‘business continuity planning’ (BCP) and supply chain risk management. However, all firms are certainly not at the same level of performance in this regard. Amongst those in the chemical process industry, DuPont stands out on account of their systematic tracking of near-misses (disasters that nearly happened) and taking corresponding corrective measures. Cisco has developed an elaborate risk management framework to deal with disruptions to its procurement and manufacturing processes, and Wal-Mart has been given kudos for the performance of its supply chain in the face of hurricanes striking the east coast of the United States (US). This contrasts starkly with notable failures such as that of Union Carbide, which was in charge of the pesticide plant in Bhopal, India in 1984 when the poisonous methyl-isocyanate gas

“There is an increasing awareness that public-private partnerships (PPPs) are the way to tackle major catastrophes effectively. In order to make these partnerships successful it is imperative that the administration plays the role of a coordinator and facilitator effectively.” was tragically leaked into the surrounding atmosphere killing thousands of people. More recently, the 2010 oil spill on the US Gulf coast was caused due to mismanagement by BP and a number of other firms who worked as contractors for BP. A famous example involving a disruption to international supply chains is that of a major microchip supplier (located in Albuquerque, US) to Nokia and Ericsson being disrupted by a fire at its facilities in 2000. This disruption induced dramatically different responses from the two firms. While Nokia was prompt in its response and took immediate remedial steps to restore lost production capability, Ericsson, on the other hand, was lethargic in its response. By the time the crisis played out, Ericsson had incurred a cost of US$400 million (QR1.4 billion) in lost sales and ceded a major chunk of the mobile handset market-share to Nokia. You are also a proponent of the public and private sectors preparing for and working together more effectively on incidents of natural disaster, and use the example of retail supply chains to get provisions of people in stricken countries or regions. How seriously around the world is this option being taken, and what are the obstacles to leveraging these private means for disaster management internationally? There is an increasing awareness that publicprivate partnerships (PPPs) are the way to tackle major catastrophes effectively. For instance, the Federal Emergency Management Agency (FEMA) in the US is a major proponent of this kind of thinking. In order to make these partnerships successful it is imperative that the administration plays the role of a coordinator and facilitator effectively. Firms will not be acting unilaterally in times of crisis. There needs to be a coordinated response in which each participant is clearly aware of the expectations from them. Good communication and effective leadership are

key roles that administrators have to deliver on, if these partnerships are to bear fruit. In fact, a less obvious benefit is that valuable expertise developed by disaster management agencies of the government can help improve BCP in firms and help them manage their internal disruptions better. You’ve said that companies should look seriously at this from corporate social responsibility (CSR) perspective and that they should get involved as a civic duty. Some capitalists might believe this should the responsibility of officials and nongovernmental organisations? The idea of being involved in supporting the community they operate in is consistent with the objectives of private sector firms, since it helps build a stronger brand and inculcates brand loyalty. Small wonder that many sensible firms have adopted CSR so enthusiastically. This certainly does not absolve the administration of its responsibility to its people. As I explained, they still need to play a pivotal role in coordinating the disaster response, and finally the buck stops with the administration. What should companies big and small and indeed governments around the world do to ensure they are better prepared to deal with all kinds of disasters? The various strategies to deal with disasters can be classified under risk Assessment, risk mitigation and recovery. These roughly (but not strictly) correspond chronologically to the before, during and after of an adverse event. The causal event, geographical location, specifics of the local culture and landscape, etcetera, will have different implications for the appropriate preparation for a disaster. However, the basic principles of identifying where the risks lie, monitoring them closely, and taking appropriate measures to either prevent the disruption or recovery quickly from it, remain largely unchanged. TheEDGE

BUSINESS INSIGHT

Small And Medium Enterprise

Knowledge is power Small and medium enterprises (SMEs) and their development have been identified as a key component in Qatar’s drive to establish a vibrant, diversified and self-sufficient economy. But many SMEs struggle to survive in the market. Rachel Morris talked to Mohannad El Khairy, the head of communication strategy at UAE-based business information provider, Zawya, on a recent visit to Qatar about the importance of market intelligence for SMEs and overcoming a culture of a fear of failure. It is said that from small things, big things grow. In the case of the small and medium enterprise (SME) sector, Qatar hopes it will develop to become the engine room of the country’s ‘new’ economy. Qatar’s National Vision 2030 has singled out development of the SME sector to help drive the push towards diversification away from oil and gas dependence. It has even established a government agency, Enterprise Qatar (EQ), to support and incubate SME development in the country. Similar moves are also afoot in the United Arab Emirates (UAE) and Saudi Arabia. Although the sector, which tends to be technology and industry heavy especially in the Middle East, has potential, development remains slow and at the mercy of other economic and non-economic forces, according to Mohannad El Khairy from Dubai-based market intelligence company, Zawya. “We believe that SMEs are significant drivers of the Middle East economy; they are also the most exposed to several risks and downturns in the economy as we have witnessed lately,” according to El Khairy. “They not only need visibility but also access to the latest and most comprehensive market intelligence to remain competitive. SMEs and start-ups are hungry to find innovative ways to promote their products and services and gain more exposure in their respective markets.” According to the International Monetary Fund, SMEs can range in size from a single employee to 500 employees, grossing between US$23,000 (QR84,000) and US$2 million (QR7.28 million) annually. Recent studies show that SMEs account for more than 95 percent of firms, 60 to 70 percent of employment, and 55 percent of gross domestic product (GDP) in OECD economies. Already in the Middle East, SMEs are a force to be reckoned with in the economy. According to data compiled by Enterprise Qatar, SMEs constitute more than 70 percent of the businesses in the Gulf, and therefore have a decisive say in the local economy. This sector also accounts for 30 percent of GDP and contributes to 71 percent employment in the region.

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BUSINESS INSIGHT

In Qatar’s designated industrial zone alone, investment by SMEs has topped out at QR3.5 billion and there are more applicants than available space. Meanwhile in recognition of the emergence of SMEs, Dubai’s agency to promote the sector has launched the SME 100, the first ever ranking of the emirate’s fastest growing and emerging SMEs. El Khairy says the latest research done by his company Zawya suggests that most of the Gulf Cooperation Council (GCC) population is under the age of 25, a big portion of which is the below 15 years of age. This poses big issues for governments who need to look at employment and education options for a population that is growing younger and more demanding. “The Middle East and North Africa (MENA) region will need to create more than 100 million jobs over the next 10 years. Governments and large corporations simply will not be able to supply all of that demand, so it’s going to be up to SMEs to supply that demand. Qatar and the UAE can lead in this space,” he says. “The rapidly expanding young population of the GCC, of which Qatar and the UAE are members, will be a wave of entry into the country’s future employment market. This is where SMEs can play a huge role for the economy.” But, El Khairy adds, there are many structural barriers to Middle East SMEs truly flourishing including access to finance and information. He says government support for SME development in countries like Qatar needs to work with other key elements including training and knowledge transfer. El Khairy says unlike other parts of the world, the SME sector in the Middle East benefits from a sustained government focus but they need to do more and be more creative. “SMEs in the GCC lack structural support. Many initiatives are taking place to support SMEs on a financial level, but the challenge they face involve accessing the right market intelligence, the latest online technologies as well as developing strategic business development capabilities and the right HR structure to grow effectively. “ “When governments support SMEs, they are investing in their country’s future. The financial contribution governments are making is obviously a big plus. Around US$5 billion (QR18 billion) has been set aside by governments to be invested in the MENA SME segment. But it’s not all. Governments can encourage SMEs by creating forums, inspiring the youth and instilling the right entrepreneurial values in society.” It is no secret that many small and medium businesses fail within the first year of operation for a variety of reasons – cash flow, market

El Khairy says the latest research done by his company Zawya suggests that most of the Gulf Cooperation Council (GCC) population is under the age of 25, a big portion of which is the below 15 years of age. This poses big issues for governments, who need to look at employment and education options. forces, economic downturns, lack of experience. In the West, this is commonplace and seen as ‘a rite of passage’ for many entrepreneurs, even the biggest and brashest. But this particular issue says El Khairy, present interesting cultural issues, especially in the Arab world. “You know, the Arab world is particularly afraid of failure; it’s culturally frowned upon. Governments can take the lead and change that perception, to help build societies where failure is indeed celebrated, because of the incredible amount of knowledge gained in the entrepreneurial process. The good news is that they’re already doing this.” While many banks including the Qatar Development Bank, Mashreq Bank, Qatar National Bank and Doha Bank have stepped up to offer financing options for budding SME entrepreneurs, it is in the area of access to information, training and market intelligence that further support is needed. In March, Enterprise Qatar launched the SME Evolution Programme, a free web-based training programme for SMEs in the country. Over a period of six months, it will go through two phases. In the first phase, it will provide four live full-day workshops, as well as more than 48 seminars. The workshops deliver key relevant business subjects by industry experts via seminars in both Arabic and English. The programme is free for all SMEs in Qatar. The workshops and webinars will be delivered by leading industry experts and top professors from international universities including Harvard University, Carnegie Mellon University in Qatar and American University of Beirut. The web-based training programme will help SMEs network with their peers throughout the Middle East and gain support from each other as well as from other mentors. Companies like Zawya and courier and logistics company Aramex have, like their colleagues in the financial services industry, recognise that SMEs need specific tools and work to develop new technologies and platforms directed at the sector.

According to El Khairy, Zawya saw a need for SMEs in the GCC and Middle East to gain access to market information, as well as find new ways to generate business leads, so they developed the ‘C-me’, an online platform aimed at this sector. Zawya offers business information to a subscriber customer base of around 750,000 across the region. Its range of unique content and tools includes company profiles, timely aggregated news such as the Zawya-Dow Jones newswire and leading industry and asset class research. “C-me is a free self-service tool which will allow SMEs to easily build their company profile on Zawya and increase their visibility to generate new business leads. It will enable them to quickly connect to their clients and suppliers. Zawya’s audience of highly soughtafter professionals is a very attractive channel for SMEs to tap into. Zawya’s C-me will enable SMEs to be seen by more than 750,000 professionals across the region.” Zawya is a supporter of the Enterprise Qatar SME Evolution Program and El Khairy says it is really through initiatives like this that governments can, in partnership with private enterprise address the research and business development needs of SMEs in an online capacity. Zawya experts in IT, marketing and business development will share their know-how during the programme’s webinars and other tutorials. El Khairy says SMEs need education and information on how to use technology and online tools more effectively in their businesses rather than just “technology for technology’s sake”. “From knowing how to maximise their online visibility with Google and Zawya with products like Adwords and C-me, to adopting cloud computing and CRM software to better run communication and business development efforts, to enabling their logistical requirements with Aramex’s online programme, technology is no longer an option,” El Khairy says. “Rather, it is the foundation on which SMEs can scale their efforts into tangible, positive results.” TheEDGE

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LIFE & STYLE A private bolthole (P.78)

Spend your summer vacation in your own luxurious villa on a private island in the Seychelles...

A 24-hour certified butler, your own island buggy, an infinity pool, jacuzzi, dining pavillion and a terrace with views that go on forever... Fregate Island Private is a mouse click away.

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TRAVEL

Private island paradise Escape the maddening summer masses and relax with an absolute guarantee of privacy.

magine the luxury and exclusivity of your own villa on a private tropical island. Fregate Island Private in the Seychelles offers exactly this – a slice of paradise with only 16 villas and one presidential villa, a mere 20-minute helicopter ride from the capital, Mahé. Thirteen one-bedroom villas each accommodate two adults and two children, and feature their own sun terrace, infinity pool and dining pavillion. Two twobedroom villas each sleep four adults and two children, and offer residents an outdoor shower, jacuzzi, and infinity pool. All villas

have wireless internet services, a personal island buggy for exploring, air-conditioning, television, and a 24-hour certified private butler. The Presidential Villa Banyan Hill is accessible only by private path. From its vantage point, the residence has tremendous views over the ocean, beaches, marina and the rest of the tropical island. It has three separate villas, each sleeping two people, and boasts dedicated butlers as well as a chef. Make the most of the island’s restaurants, or, for a more personal, bespoke experience, the island’s staff will set up a treehouse picnic or cater your very own barbecue on the beach.

Fregate is where you go to get away from it all. Spend an afternoon at the awardwinning Rock Spa, or, if you’re more active, take a kayak, yacht or catamaran out for an excursion. Scuba diving is also on the activities agenda, as is hiking the shaded paths that lead throughout the island. Alternatively, we can’t imagine anything better than settling in by the pool for an afternoon of great food, wonderful company and the sheer bliss of complete privacy. For more information, visit www.fregate.com or reserve your villa at reservations@fregate.com

Mauritius: An ideal holiday for the entire family Mauritius continues to tick all the fantasy tropical vacation boxes, and Villa Tiara – nestled on the secluded beach of Poste Lafayette – is ideally suited to larger families looking for their own private resort complete with 24-hour personalised service. This five-bedroomed beachfront villa has a private, heated pool, jacuzzi, wi-fi, beach services, and even 24hour security guards. Every bedroom is en-suite and includes its own plasma

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television. Tiara’s sister villa, Villa Almira, offers a further three bedrooms and can be used as a guest villa or pad for your teenagers. www.villasdemaitre.com

LIFESTYLE

When dinner’s a big deal If you entertain clients and seal deals over meals, take heed of our indispensable guide for ensuring a signed contract with the final coffee.

1. You’re the host, so everything falls to you. Extend an invitation to dinner at least one week in advance, and at least three days ahead of time for a breakfast or lunch. 2. Do your research. Call your guest’s secretary and find out what their favourite food is, and whether they have any food allergies or preferred restaurants. 3. A week before the meeting, make two reservations – one for that night, and another for the big business meeting. At your first dinner, tip the waiter well, and tell him how important your next meal there will be. Compliment his service and let him know you would prefer him as your waiter when you return. 4. Try to arrange to pay the bill beforehand. On the day of the meeting, arrive early, check any last-minute details (if the table isn’t suitable, request another) and hand over your credit card (a tip in advance never hurts). It’s best if the bill doesn’t come to the table, but if it’s unavoidable, check it briefly and send it off with your credit card.

5. Arrange a ‘stay-away’ code with the waiter, such as smoothing your jacket sleeve. This will give you 15 uninterrupted minutes to close the deal. 6. Give your guest the best seat – the one with a view, not facing the restrooms or kitchen. 7. Sit directly across from the decision maker and pay attention to your body language. Do not slump or lean back, both of which show disinterest or superiority. 8. Avoid ordering food that is messy and complicated to eat, and mind your manners. Don’t chew with your mouth open, don’t reach across the table, don’t speak with your mouth full, and don’t blurt out your order before everyone else. 9. As the host, you determine when you discuss business. Start with light conversation, which makes it easy to break off when the waiter appears to take your order and will put your guest at ease. At lunch, you can begin as soon as the order has been taken. At dinner – a more social occasion – wait until the main course is over before getting down to details. At breakfast, get to the point quickly.

Doha’s top 5 spots

Our recommendations for the best venues for business meals in Doha: • Maison du Caviar (in the W Hotel) – a three-course meal in 30 minutes and at a reasonable price makes this a very popular local spot. The capellini pasta with caviar is the signature dish to order. • JW’s Steakhouse (Marriott Hotel) – from its deep leather sofas and bookshelves, to old-fashioned wood panelling and terrific cigar selection, you’ll feel like you’re in a gentleman’s club. That the food is brilliant is a given. • The Market (W Hotel) – offers a relaxed environment with a great lunch menu, including a unique truffle pizza that is the talk of the town. • Maze (The Pearl) – this highly recommended spot is ideal for lunch or dinner, and we’ve heard the Wagyu beef burger is sublime. • Spice Market (W Hotel) – Asian fusion cuisine that does the job in impressing even the most jaded palate. Try the black pepper shrimp or red duck curry.

Apple launches iPad 2 Apple’s new iPad 2 features an entirely new design that is thinner, faster and lighter, while still maintaining its 24cm screen. Now with FaceTime, two cameras and 10 hours of battery life, this one is likely to sell out as soon as it hits Qatar’s stores. www.apple.com

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TEN THINGS

10 business disasters We all know about Enron and BP, but here are some of the lesser-known business disasters afflicting brands both big and small. Consider yourself warned. RATNER’S JEWELLERS The former chief executive officer of Ratners Jewellers, Gerald Ratner, joked about the bad quality of his company’s products at an Institute of Directors speech, describing them as “cheaper than a prawn sandwich from Marks & Spencer, but probably wouldn’t last as long”. Within weeks, the company was devalued by QR2.9 billion. BETAMAX Betamax launched in 1975, a year before competitor, VHS. It was an expensive, overly complicated video format, with tapes that only lasted 60 minutes (not many movies only last an hour). VHS, meanwhile, offered tapes that could record two hours on standard play, and four hours on long play, promptly ensuring that Betamax was soon extinct. FASHION CAFÉ Fashion Café’s concept of supermodel endorsements and hamburgers and fries served by skinny models, didn’t work. The chain, advertised by Elle Macpherson, Claudia Schiffer and Naomi Campbell, and owned by Tommaso Buti, was sold four times over and the victim of numerous financial irregularities. Buti was charged with fraud, sued for millions, the supermodels fell out with each other, and Fashion Café closed its doors. HOOVER In 1992, Hoover launched the most misguided, ill-researched sales campaign ever, promising free flights with every purchase of QR596 worth of Hoover products. Consumers quickly realised the flights were worth more than the vacuum cleaners, and Hoover ended up with over 200,000 applicants and a final bill of QR298 million. The company was soon sold to an Italian firm.

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BOO.COM At one stage, Internet sportswear company, boo.com, was valued at QR1.5 billion. Its founders, Ernst Malmsten, a former poetry critic, and Kasja Leander, a former model, raised QR596 million from Bernard Arnault, the Benetton family, Goldman Sachs and JP Morgan. But they chose to travel first class to meetings instead of using e-mail, and treated staff to daily deliveries of organic food and drink. Unsurprisingly, the company collapsed in 2000 with debts of QR1 billion. COCA-COLA Despite the success of Coca-Cola’s water, Dasani, in the United States, the product’s launch in the United Kingdom (UK) did not go as well, despite a QR77 million launch. First it emerged that the Dasani factory used tap water as their source. Then Thames Water mentioned that it charged far less for the same product. Finally, samples showed that the water contained bromate – a carcinogen – at levels more than double the limit allowed by the European Union. Dasani was soon pulled from the UK market. WAL-MART After a blogger noted that Wal-Mart was selling T-shirts bearing Nazi iconography, the company was left scrambling to salvage its reputation. Unfortunately the civil rights leader hired to improve its public image, made racist comments in an interview. Talking to the Los Angeles Sentinel, Andrew Young said that Wal-Mart should replace the small neighbourhood stores, as “…the people who have been overcharging us…I think they’ve ripped off their communities enough. First it was the Jews, then it was the Koreans and now it’s the Arabs.” Young, a former US representative at the United Nations,

apologised for the comments, only to resign from Wal-Mart an hour later. ARTHUR ANDERSEN Arthur Andersen, once considered one of the ‘big five’ and most trusted certified public accountant firms in the world, was badly affected by the Enron implosion. It soon became clear that not only had the firm not blown the whistle on Enron, it had hidden it. Rather than representing the investors, Arthur Andersen had joined the bad guys and the brand became associated with criminal behaviour, eventually driving it out of business. SLOGAN BLOOPERS Now that business has gone global, it is more important than ever to ensure your slogan translates across a multitude of languages and cultures. Those that didn’t do their homework? Coors’ slogan, “Turn it loose” translated into Spanish as “Suffer from diaorrhea”. Chicken magnate, Frank Perdue’s line, “It takes a tough man to make a tender chicken”, also translated into Spanish as, “It takes a sexually stimulated man to make a chicken affectionate”. Pepsi once marketed itself in China with, “Pepsi brings you back to life”, which in Chinese meant, “Pepsi brings your ancestors back from the grave”. Clairol introduced its curling iron, the Mist Stick, to Germany, but the product’s name was German slang for manure. TITANIC The Titanic was a marketing success. Touted as absolutely unsinkable, the ship captured the public’s imagination as one of the most luxurious vessels to ever sail the seas. Then it struck an iceberg, sinking only a few hours later – destroying its core marketing message on its very first journey.