The Edge - May 2011 (Issue 22) by Firefly Communications

CONTENTS

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

MAY 2011

CONTENTS ON THE COVER

After the Japanese disaster at Fukushima, declining public support for nuclear energy has led governments the world over to reconsider their plans for atomic power development. Edward Jameson questions whether this is merely a kneejerk reaction, political manoeuvring or a sensible precaution. (Page 40).

FINANCE & ECONOMICS .26. market watch

Global and market analysis by Dheeraj Shahdadpuri.

.28. Inside edge

The economic downsides of the Middle East’s political unrest.

.32. special report

Qatar develops its education policy.

.34. balance sheet

The challenge of complexity.

.36. Economic barometer

The phenomenal rise of China.

FEatures .44. feature story

Rachel Morris investigates the franchise business model and sees it thriving in Qatar.

.48. on the pulse

Diversify and prosper is the best policy regarding hydrocarbon resources, says Andrew Jamieson.

.52. special focus

Qatar aims to become a hub for asset management. Yousuf Al Jaida takes a closer look.

KNOWLEDGE & EXPERTISE

.56. innovation culture

i360’s Kamal Hassan believes that even the public sector can innovate.

.58. small business know-how

Is a business plan truly necessary?

.62. marketing & design Choosing the right brand name.

.64. legal insight

‘Proxy’ partnerships in Qatar.

48 TheEDGE

CONTENTS

DEFYING GRAVITY we only move upwards

BUSINESS INSIGHT

.69. Business Insight Interviews

In-depth interviews with Gaby Salome of THE One, Haya Mashood of Standard Chartered and Dr Joe Folkman.

69 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

TheEDGE

.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 Sarah Jabari Teja Jaganjac Finaliser Michael Logaring Photographer Herbert Villadelrey

In late March 2011, the Qatar General Secretariat for Development Planning released the Qatar National Development Strategy (QND) 2011-2016. This comprehensive document was prepared “to set a path towards achieving the goals of Qatar National Vision 2030 (QNV 2030)”, as quoted in the foreword by HH Tamim bin Hamad Al Thani, heir apparent and head of the Supreme Oversight Committee for implementing QNV 2030. The QND Strategy 2011-2016 understandably covers important social matters, such as education, health and road safety, to name but three, as well as aiming for an overall harmonious society. Predictably – given the nature of this small country as one of considerable financial strength and diplomatic influence regionally and internationally – budgetary and economic factors also feature heavily. The source of these integrated aims is of course in part at the core of QNV 2030. This is namely diversification from over-reliance on hydrocarbon rents to a more robust, continually growing economy thriving in many sectors. Among others, the aims are to create gainful employment for all Qatari citizens, support a thriving expatriate population and continue to contribute positively to, shape and promote regional and international business, research, diplomacy and Arabic culture. Much has been spoken and written of how the State of Qatar plans to affect (and, as recent gross domestic product figures attest, is currently successfully implementing) this diversification strategy. However, arguably for the first time since the release of QNV 2030 two-and-a-half years ago, there is now in the public

domain a wide-ranging short-term road map as to how this might be achieved. Apart from the underlying emphasis on a solid societal foundation, the insight and commitment this document presents is reassuring. This is exemplified by the realistic approach taken in estimating how income from hydrocarbons might fund many of the ambitious goals outlined, as well as urgency in working towards true diversification aims, while bearing environmental concerns in mind. As such, the QND Strategy 2011-2016, downloadable in full from www.gsdp.gov. qa, is an important reference tool for anyone currently working in – or planning on soon entering – the Qatari business landscape. 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

SE PLEA

OUT YOU R

CT PA

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.

TheEDGE

CONTRIBUTORS

featured contributor p.56 KAMAL HASSAN Kamal Hassan is president and CEO of Innovation 360, a Dubai-based innovation advisory group that works with private and public entities worldwide. Kamal advises, mentors and trains clients on their business and innovation transformation, strategy to execution and follow-up, and on how to become more competitive using business model innovation.

p.36 KARIM NAKHLE Senior Business Strategist Doha, Qatar

P.52 Yousuf Al Jaida Director, Strategic Development Asset Management and Banking QFCA Doha, Qatar

p.22 MARTIN Ă PORTA Chief Executive Officer Siemens WLL Doha, Qatar

p.22 Adrian K. Wood Head of Renewable Energy Middle East Siemens Dubai, United Arab Emirates

P.26 Dheeraj Shahdadpuri Analyst Dubai, UAE

p.28 Phil Strange Chief Financial Officer Dun and Bradstreet South Asia Middle East Doha, Qatar

p.32 Greg Harris Editorial Manager Oxford Business Group Doha, Qatar

P.34 Richard Kohinga Director, Head of Markets KPMG Doha, Qatar

p.40 edward jameson Senior Business Journalist Middle East and North Africa Region London, United Kingdom

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

P.48 Andrew Jamieson Non-executive Director Oxford Catalysts Group London, United Kingdom

P.58 Curtis Avery Entrepreneurial Mentor College of the North Atlantic Doha, Qatar

P.64 Fouad El Haddad Senior Associate, Corporate and Commercial Law Clyde & Co. Doha, Qatar

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

TheEDGE

NEWS Etcetera

NEWs Etcetera Qatar takes the stage For one of the smallest countries in the world, Qatar has certainly proven itself to be a key player and ally for the world’s superpowers. With its stance in support of the Libyan resistance and as the only Arab country to assist NATO’s bombing campaign against the regime, His Highness Sheikh Hamad bin Khalifah Al Thani was welcomed last month at the White House. United States (US) president, Barack Obama, said the coalition acting to keep Libyan leader Muammar Gaddafi from attacking his people would have been impossible without the support of the Gulf nation of Qatar. “We would not have been able, I think, to shape the kind of broad-based international coalition that includes not only our NATO members but also includes Arab states, without the Emir’s leadership,” Obama told reporters after a meeting in the Oval Office with the Emir. “He is motivated by a belief that the Libyan people should have the rights and freedoms of all people.” Meanwhile, officials in Doha confirmed that the Gulf state is supplying anti-tank weapons to Libyan rebels in Benghazi as part of its strategy

of working to overthrow the Gaddafi regime. The US and United Kingdom (UK) also backed Qatar’s efforts to market Libyan oil on behalf of rebels trying to oust the regime. Reports suggest Qatar was instrumental in marketing one million barrels of Libyan crude. The Emir’s visit to the White House coincided with a meeting in Qatar of the United Nations

Barwa’s new leadership Amid a recent company-wide restructure that saw 12 percent of the workforce laid off, Barwa’s real estate subsidiary, Barwa Real Estate, has announced the appointment of a chief executive officer (CEO). Barwa Real Estate, one of the leading real estate and investment companies in Qatar, announced last month that its Board of Directors, headed by Hitmi bin Ali Al Hitmi, has appointed Abdulla bin Abdulaziz Turki Al Subai’i as acting Group CEO.

TheEDGE

(UN) Contact Group on Libya involving the UK, France and other key states. UN chief, Ban Ki-moon, has warned that as many as 3.6 million people, or more than half of Libya’s population, could need humanitarian aid. He said approximately 490,000 people – almost half a million people – have left the country since the crisis began.

The resolution and appointment was approved by majority of the board members. According to sources, the company shake-up is an attempt to streamline Barwa and its operations across its subsidiaries. Meanwhile, Barwa Real Estate announced that the first phase of Barwa Commercial Avenue, which will be the largest retail and commercial project of its kind in Qatar, is scheduled to be completed by the middle of next year.

NEWS Etcetera

Building the future Project Qatar 2011 is one of the region’s leading construction events and the largest exhibition in Qatar will be held in Doha, May 3 to 5. The leading international trade exhibition for construction technology, building materials, equipment and environmental technology will showcase more than 1700 regional and international exhibitors. At the centre of the event will be an 11,000-square-metre tent to be used as part of the exhibition space. This tent will account for a massive 62 percent increase in space allocated for the exhibition, and will be the largest tent ever erected in the Middle East. “We had more than 32,000 visitors in 2010 and we expect to increase that number in 2011 significantly,” said George Ayache from IFP Qatar, organisers of the event. “This event continues to grow in size as the construction boom in Qatar and the Gulf Cooperation Council speeds up ahead of the 2022 World Cup and as completion dates for major infrastructure projects loom.”

Powering research General Electric (GE) last month officially inaugurated its U$S50 million (QR182 million) Advanced Technology and Research Centre at the Qatar Science and Technology Park (QSTP). The facility, the first of its kind outside the United States, has been brought to Qatar to support the strong expansion witnessed in the region’s aviation market. The 20,000-square-metre centre was opened by deputy prime minister and chairman of the Emiri Diwan, HE Abdullah bin Hamad Al Attiyah, at a ceremony attended by local officials, including QSTP executive chairman, Tidu Maini, and Qatar Airways’ chief executive officer, Akbar Al Baker. The centre’s opening takes GE’s investment in Qatar to over US$100 million (QR364 million) as the company has already been working in partnership with a number of organisations to develop new technology in recent years. Among its developments is a medical device used for diagnosing breast cancer, which has been accepted in 14 hospitals throughout Europe and the US following successful trials, and will be trialled at Hamad Medical Corporation later this year. Murdoch in F1 bid? News Corp is in the early stages of seeking to form a consortium that will acquire control of Formula One (F1) motor racing, according to Arabian Business. The news was first reported by Sky News in the United Kingdom, which is owned by Rupert Murdoch’s News Corp, but News Corp’s spokesperson has declined to comment. Reports indicate that the company has yet had no contact with F1’s current owner, private equity firm, CVC, regarding the bid.

A SMILE A DAY: A new HSBC poll has rated Qatar – along with the United Arab Emirates, Saudi Arabia and Bahrain –as one of the world’s friendliest nations.

Qatar among world’s friendliest According to a poll conducted by United Kingdom (UK)-based HSBC, Qatar, Bahrain, the United Arab Emirates (UAE) and Saudi Arabia, are among the 25 friendliest nations in the world. Bahrain topped the rankings at number 13, followed by the UAE in 23rd, and then Saudi Arabia and Qatar at 24 and 25 respectively. Overall, Canada took the top spot for the world’s most accommodating nation, followed by Bermuda, South Africa and the United States. To complete their poll, HSBC surveyed over 4000 expatriates in more than 100 countries, asking them to rate their host countries on economics, raising children and overall experience. Other factors considered included ability to befriend locals, success in learning the local language, capacity for integrating into the community and ease of adapting to the new culture.

ALL THE RIGHT MOVES: Rupert Murdoch’s News Corp is considering moving into Formula One. (Getty/Gallo Images)

TheEDGE

NEWS Etcetera

events calendar 3-5

Project Qatar (Doha)

3-6

Arabian Travel Market (Dubai)

9-11

Aluminum Dubai

9-11

Interiors UAE (Dubai)

14-16

WEPower 2011 (Damman, Saudi Arabia)

16-18

Middle East Communications (Abu Dhabi)

United States president, Barack Obama, on the occasion of a visit to the White House by the Emir, His Highness Sheikh Hamad bin Khalifah Al Thani

“Qatar’s stability and resilience stands out despite recent regional political turbulence and global economic fragility. This is further evidenced by March’s positive corporate earnings announcements made to the Qatar Exchange.”

17-19

Qatar Financial Centre’s acting CEO, Shashank Srivastava, on the effect of Middle Eastern unrest on Qatar’s economy.

23-25

“We do not want to be hasty. Any reforms have to be based on maintaining internal stability.”

The Office Exhibition (Dubai)

MECOM (Abu Dhabi)

24-26

QITCOM 2011 Conference and Exhibition (Doha)

29-31

Gulf Environment Forum (Jeddah)

May 31-June2

The Airport Show (Dubai)

“We are in constant development. Within the coming couple of years, we plan to open stores in Asia...in the States...and in Moscow.” Lebanese fashion designer, Elie Saab, who is reportedly considering an IPO.

“We would not have been able to shape the kind of broad-based international coalition that includes not only our NATO members and also includes Arab states without the Emir’s leadership.”

NEWS in quotes

MAY

TheEDGE

Syrian president, Bashar Al Assad, in an address to the nation in which he announced the end of 50 years of emergency rule.

NEWS Etcetera

PIC of the month

Britain basks A man relaxes in a deckchair at St Ives in Cornwall. The United Kingdom enjoyed terrific weather this past month, with temperatures reaching upwards of 25 degrees Celsius. The combination of

bank holidays and Easter breaks have meant more people taking additional days off work to enjoy the beginning of the British summer. (Getty/Gallo Images).

NEWS in numbers

4000

delegates

Every three years the World Petroleum Congress is held in one of the over 60 member countries of the World Petroleum Council. In 2011, Qatar will be the first country to host the Congress in the Middle East, a recognition of the stature the country has in the industry. The 20th World Petroleum Congress will be held over five days from December 4 to 8, 2011, at the Qatar National Convention Centre (QNCC) at Education City. It will be the largest event Qatar has hosted and the inaugural event for the state-of-the-art QNCC. Known as the â&#x20AC;&#x153;Olympics of the oil and gas industryâ&#x20AC;?, the World Petroleum Congress will be attended by a global oil and gas audience and other

stakeholders such as governments, other industry sectors, non-governmental organisations and international institutions. The 2011 event is hosted by the countryâ&#x20AC;&#x2122;s oil and gas giant, Qatar Petroleum. More than 4000 delegates, 600 media and 550 presenters and speakers will participate in a programme that covers all aspects of the industry, from technological advances in upstream and downstream operations, to the role of natural gas, renewable and complementary energy, the management of the industry and its social, economic and environmental impact. Already organisers have received a record-breaking number of submissions after its international call for papers. So far 2000 submissions from more than 455 companies and 178 institutions involved in training and research in the oil and gas field in 65 countries have responded to the call.

www.20wpc.com

TheEDGE

NEWS Etcetera

www.digitalqatar.net/ Qatar is positioning itself as a leader in the global information technology landscape. To spread the word about new developments and trends, the Supreme Council for Information Technology (ictQATAR) has set up a blog. Digital Qatar is a blog for technology enthusiasts and looks at issues including assistive technologies, latest news and views and anything of interest to the ICT industry.

WORD OF THE MONTH

WEB watch

www.storify.com Ever been frustrated with the easy-come-easy-go nature of Twitter and Facebook? Want to tell a story in more than 140 characters? Storify is an attempt to bring back ‘storytelling’ and allows users to easily drag and drop elements from social media into one story. Users can take a photo from Flickr, pair it with some Tweets, include some Facebook commentary and then wrap it all about with a video from YouTube. This ‘story’ can then be shared on Twitter or Facebook, or embedded in your website or blog.

www.arabdigitalexpression.com/en The Arab Digital Expression Foundation is a platform for youth from the Arab region to use digital tools and new media to express them in an open and constructive environment. Working on the principle that Arab youth need to be contributors to technology, not just users and consumers, the foundation is run by journalists, and since 2007, has trained 160 young people from Tunisia, Morocco, Lebanon, Egypt, Palestine, Sudan, Yemen and Syria in digital arts based on open-source technology.

‘Pariah’

The word ‘pariah’, came into English from the Tamil word, ‘paraiyar’, which is a name for a caste. It literally means “(hereditary) drummer” and comes from the word ‘parai’, the name of a drum used at certain festivals. Because the drummers were considered among the lowest in the former caste system of India, the word has taken on the general meaning of an outcast. The word is first recorded in English in 1613. Its use in English is believed to be thanks to the long period of British rule in India. An example of its usage would be: “Once a revolutionary hero and friend of the West, Gaddafi has again become an international pariah”.

CARTOON corner

TheEDGE

DOHA DIARY

OF i

QUAL

Population growth will always be the main driver of real estate, both in office space, and the developments to house office workers. But, says Edd Brookes, the New Doha Port will also have a major influence on the Qatar market.

t is astonishing to think that when I first came to Qatar in 2005, the population was around 740,000 people. In 2011 that has now grown by 980,000 people to its current level of some 1.7 million. Moreover, as Qatar diversifies its economy away from reliance on oil and gas, we can expect this trend to continue. Apart from the implications to the real estate market, there is the obvious fact that, despite intentions to reduce Qatar’s dependency on imported goods and perishables, Doha is going to have to dramatically increase its imports to satisfy growing domestic demand. This is where the New Doha Port (NDP), currently under construction approximately 30 kilometres south of New Doha International Airport, and due to open in 2015, comes in. While less in the public spotlight than the airport, the project is just as important for Qatar’s growth – perhaps more so. The current port, originally built in 1954 and located off the Corniche, has been expanded over the years to try and keep pace with the country’s growth. It has 12 berths and can handle ships of up to 300 metres in length, with drafts as deep as 12 metres, and

TheEDGE

space for up to 4000 containers, including a walk-in freezer with a capacity of 500 tons. However, as soon as Doha started expanding rapidly during the 1970s and 1980s, it was clear that the old port’s days were numbered, as more and more containers had to lumber through the heart of the city towards the industrial area. Come 2022, the existing port will be in the location of the Doha Port Stadium, though even before the FIFA announcement, plans for the NDP were well underway. But how will the NDP compare to its long-serving incumbent? Firstly, the largest construction aspect is the excavation of the port basin and construction of the huge breakwater and quay. The basin itself will require the removal of a staggering 60 million cubic metres of material and rock. The quay walls will total 10 kilometres in length and the project will occupy a site area of some 20 square kilometres. NDP will provide a draft of 17 metres and the adjoining container terminal will have a capacity to handle two million units a year, rising to a potential six million in the future. A cruise terminal will also be incorporated into the scheme, which will be connected to

the Qatar Rail System with a specific track for transport freight. The NDP will undoubtedly act as a major catalyst in opening up the areas south of Al Wakrah. Even now, some 15,000 new residential units are under construction in the area between the NDP and Wakrah, and land prices have witnessed some modest increases of up to 15 percent over the past year. Rents in the area are on average 35 percent lower than similar properties in Doha. Over the coming years more residents will be drawn there not just because of the employment opportunities at the port and other facilities (the main power production and desalination plants for the country are located nearby), but also because of the lower rents and lack of congestion. When this is considered, along with the Al Wakrah Master Plan, the area is a potentially attractive location. Recently I was discussing this with a Qatari friend whose family originates from close to Wakrah and he reminded me that this was historically the capital of Qatar, so it is only right that the area receive some muchneeded attention, of which the NDP is, of course, an integral component.

MIDDLE EAST MATTERS

‘WE’

colleague recently shared with me that since the arrival of their new chief executive officer from a country outside the region, his organisation has hired 15 senior managers from this same country. Hearing this made me wonder: How risky is it to only hire people who are like ‘me’ or ‘we’? The idea of ‘cronyism’ – showing partiality to long-standing friends by appointing them to positions of authority regardless of their qualification – is not a new practice, unique to the Gulf Cooperation Council (GCC), nor is it limited to the private sector. Just consider the Bush administration for evidence of this happening at the highest-level elsewhere in the world. Nor is it strictly confined to employment. ‘Crony capitalism’ describes when a business depends on close relationships between businesspeople and officials. This favouritism is then exhibited in the distribution of permits, government contracts, etcetera. The practice in the GCC is a bit different than classic Bush-esque cronyism but the elements remain true – partiality to likeness rather than deciding purely on capability. In this region it is obvious that managers give partiality to people who they think are

TheEDGE

Dr. Tommy Weir ponders the effects and risks of organisations in the GCC adopting practices that smack of cronyism and a hiring culture of ‘I like you, because you are like we’. most like them. And I am not referring to nationalisation. The hiring and promoting of people based upon ‘I like you because you are like we’ is arguably much more widespread outside of the nationalist camps. Of course, it natural human inclination to like being with people who are most like us. But if this is such a common practice, why is it risky? The obvious reason is that the modernday GCC is the dictionary definition of multiculturalism, including more nationalities in its workforce and population than the United Nations has member countries. In any monocultural workforce, cronyism or favouritism is a risky practice, but here the risks are much more obvious. The core risk is in not having a holistic insight into the market, as a diverse customer base begs for such diversity to be reflected in the workforce. Moreover, while it may be true that, on the surface and in the short-term, it might be easier to work with people who are most like ‘we’ – as it is believed that they have quicker understanding of how the manager thinks, acceptance of his/her behaviour and get ‘inside’ jokes – it is not a sustainable practice. In the longer term this kind of separation also alienates the rest of the workforce, which in the GCC is well more than the majority.

It is also not much fun being an outsider. Employees want to work in an environment where people from diverse backgrounds are welcome and can, and do, succeed. But, there are views in the region that if you do not belong to a particular group (in other words, the favoured one) your opportunities are much more limited. Since the workforce here is also very young, this favouritism (or in some cases, merely perceived favouritism) works against building loyalty in the workplace. Employees want to be treated fairly regardless of their background, with promotions that are based on merit and performance. Finally, it is highly demotivating to watch someone hold a position for which he or she is inadequate. I am of the view that employees want to be a part of a winning team and to work with high-calibre colleagues. When they question the ability of their peers and make biased judgments related to cronyism, it lowers the productivity of the whole team. National or cultural favouritism is an understandable human trait. But business leaders, who perceive this practice to be advantageous, and openly encourage and/ or espouse it, are in actuality creating friction on a daily basis, and it will be to the detriment of their business and ultimately, their bottom line.

P COUNTRY FOCUS

OLITICALLY

PoLISHED

With Poland assuming presidency of the European Union (EU) later this year, the Eastern bloc country is also strengthening political and economic ties with Qatar. Poland’s ambassador to Qatar, Robert Rostek, tells TheEDGE that these relations are set to be enhanced at the highest levels in coming months. Rachel Morris reports

hen world and regional powers met in Qatar last month to discuss the crisis in Libya, there was an unexpected party at the table – Poland, as represented by foreign minister, Radoslaw Sikorski. In the second half of 2011, Poland will step into the EU presidency, giving it a seat at the table for this significant event and a voice in what would happen going forward. According to Poland’s ambassador to Qatar, Robert Rostek, this is a sign that his country is coming of age, made all the more significant as Poland is the only country from Eastern Europe represented. It comes at a time when relations with Qatar look set to reach an all-time high.

COUNTRY FOCUS

This “open future” involves the 2009 agreement between the two countries for Qatar to supply liquefied natural (LNG) to Poland. This agreement will come to fruition in 2014 when Poland opens its first LNG terminal. Poland will receive the LNG at a terminal under construction at Swinoujscie, one of its ports. Polish gas monopoly, PGNiG, signed an agreement with Qatargas Operating Company for LNG supplies starting when the terminal is opened. The agreement spans 20 years and sees around one million tonnes of LNG delivered to Poland, and Europe’s doorstep each year. “It is also important because this facility will be ‘in and out’ allowing us to import and export gas,” says the ambassador, referring to Poland’s massive reserves of shale gas, estimated to last for 380 years. Poland has been labelled ‘Europe’s Qatar’ because of its massive supplies of shale gas. Shale gas has become an increasingly important source of natural gas in the United States over the past decade, and interest has spread to potential gas shales in Canada, Europe, Asia, and Australia. Politically this gas terminal is also important. “This is a major step for Poland and we are looking to move away from dependence on Russia,” says Rostek. “It is important to the security of our gas supply.” The issue of Poland’s gas supply diversification intensified after the row between Ukraine and Russia over prices, which resulted in reduced gas deliveries to some eastern and southern European states. And Poland sees itself moving beyond minor player status on the world stage. “The LNG terminal is a key element of a set of investments and economic, financial and political projects which are aimed at establishing Poland’s and Europe’s energy security,” Polish prime minister, Donald Tusk, said in March this year. “…the long-term contract with Qatar and the infrastructure, investments in gas pipelines and interconnectors, as well as the increasingly intensive and promising search of shale gas, we can believe that during the next three, 13, or even 30 years, Poland will not be a gas giant, but a country secure in terms of gas supplies.” the prime minister said. The Emir’s summer visit is another in a long line of interaction between the two states. In 2011 alone both Poland’s foreign minister as well as the head of the country’s central bank visited Qatar on significant missions. Economically, Poland is a quiet success story. After emerging from the Communist era, and in the wake of the Solidarity trade union revolution led by the charismatic Lech Walesa in the 1980s, the economy of Poland is now the sixth largest in the European Union. It is also one of the fastest growing economies in central Europe, with a yearly growth rate of more than six percent before the 2008 to 2009 global economic crises. It is the only member country of the European Union to have avoided a decline in gross domestic product (GDP), meaning that in 2009, Poland created the most GDP growth in the EU. It has also become a successful investment haven. One of the main reasons investors tend to choose Poland is its location at the very heart of continental Europe, part of the Trans European road network and its easy access to 250 million consumers within a radius of 1000 kilometres. Poland is also a significant local market of 38 million consumers driving 10 percent annual retail market growth.

According to a recent Ernst & Young report, Poland ranks seventh in the world in terms of investment attractiveness and, in a report by the Organisation for Economic Cooperation and Development (OECD) released in 2004, Poland is one of the hardest working nations in Europe. Back in the Middle East, Rostek also hints at a major Polish company moving into Qatar in the wake of the FIFA 2022 announcement. “In 2012 Poland will host the European Football Championships and one of the companies involved in building several of the stadiums for this event has been approached to assist in preparations for 2022,” he reveals, declining to name the company concerned. There are also ongoing discussions between the two countries about Poland’s fertile and lucrative economic sector. Agriculture employs 14.8 percent of the workforce in Poland. “Qatar has signalled that food security is a major goal,” Rostek says.

“In early summer this year, His Highness the Emir of Qatar, Sheikh Hamad bin Khalifa Al Thani, will make an official visit to Poland,” the ambassador reveals. On this visit, the Emir and political leaders in Poland are expected to sign a raft of agreements and joint partnerships that will boost trade and co-operation between the two nations. In March this year, HE Sheikh Abdullah bin Saud Al Thani, governor of Qatar Central Bank (QCB), and Marek Belka, president of the National Bank of Poland (NBP) signed a Memorandum of Understanding (MoU) between the two central banks. The MoU aims at strengthening the bilateral cooperation between QCB and NBP in the areas of exchange of information relating to financial system stability and development, as well as financial market systems and payment systems performance and development. The ambassador, one of the youngest in Qatar, has been in his post for nearly five years. A fluent Arabic speaker, this next 12 months will be his last in Qatar. Rostek says he is especially proud of the cultural ties established between the two countries. With just 330 Poles living in Qatar, most are in the professional arena – engineers, accountants – his work involves mostly political, cultural and economic concerns. “Political relations between Qatar and Poland are excellent,” he says. “There is room for more to happen between the two countries and we are working on that.” TheEDGE

THINKER’S CORNER

Young Arab

men and women differ in their likelihood likelihood to to

emigrate

By Sofia Kluch and Jessica Stutzman

here is little difference between young men’s and women’s desires to move to another country permanently in most regions of the world. Young Arabs are unique in that they live in the only region where there is a significant difference between young men’s and young women’s desires to migrate permanently to another country. According to Gallup’s findings, millions of young people worldwide would move away from their countries permanently if they had the opportunity. Analyses from the Silatech Index suggest that this holds true for young people aged 15 to 29 from countries in the Arab League. This finding highlights a distinct gender gap between young men and women in this region, with young men (41 percent) having a greater desire to emigrate than young women (26 percent).

The role of education The gender divide is most evident among elementary-educated young men (44 percent) and women (24 percent), but it also holds among secondary-educated young men and women in Arab League countries. It is when examining young Arabs with a higher-level education (four years past high school or a college degree) that the gender disparity fades. Among young men and women who have completed four years of education beyond high school and/or received a four-year college degree, there is no gender gap in migration – the two groups are statistically equal. Though there are similarities in migration desires among young Arabs with a higher-level education in this region, young men and women in the area do not

necessarily desire to relocate permanently to the same destinations. Preferred destinations Education plays an important role in where potential emigrants would like to go. Young, highly educated women are more likely than their male counterparts to desire to emigrate to countries within the Arab League. Half of young educated women (52 percent) prefer to move within the Arab League, compared with 29 percent of highly educated young Arab men. Twenty-four percent of highly educated young women cite Saudi Arabia as their desired destination and another 13 percent name the United Arab Emirates. When comparing all possible countries, young Arabs are most likely to want to go to France, the United States, and Saudi Arabia. While young men and women express similar desires to emigrate to France and the United States, in comparison, a significantly larger proportion of young Arab women are more likely to identify Saudi Arabia as a destination of choice. Even amid those young Arabs who are less educated, Saudi Arabia attracts a disproportionate number of potential emigrants. Half of young Arabs with an elementary education who desire to emigrate express a desire to move to Saudi Arabia. Saudi Arabia appears to stand alone in that it attracts more young women than men from the region, and a wide group of potential emigrants including highly educated women, as well as those from the opposite end of the education spectrum. In spite of highly educated women expressing an inclination to emigrate within the Arab League, a significant number of young men and women would like to move permanently to another region. Economic factors The data highlights the need for countries in the Arab League to explore what will keep young men and women at home and reduce brain drain in the region. The answer, perhaps not surprisingly, differs for young men and women depending on the current economic state of their home countries. For this analysis, countries across the Arab League were classified into three groups (high-, medium-, and low-income) based on gross

THINKER’S CORNER

Percentage Who Would Like To Move Permanently To Another Country 50%

44%

30%

41%

39%

40%

28%

24%

32%

Men Women

20% 10% Elementary

Secondary

domestic product (GDP) per capita estimates from the International Monetary Fund. Young men in the low-GDP country groups who rate living conditions as good or excellent are more likely to want to stay in their home country. Among the low-GDP group, being employed full-time and having helped a stranger are both associated with young men preferring to stay in their home country. Though not found in the low-GDP group, having Internet access in one’s community is a predictor for young men in the medium-GDP group to want to stay in their home countries. Young women, however, focus on the economy. Women from medium-GDP countries who are employed part-time are more likely than young women not employed part-time to want to stay in their home countries. Among the low-GDP countries, young women who believe that now is a good time to find a job and those who rate economic conditions as good or excellent are more likely to want to stay than young women who say the opposite. As such, economic opportunities and a sense of connection to one’s community are crucial to motivate young Arabs to use their talents in their home countries. Implications While emigration is not something to fear, taking steps to engage a country’s brightest encourages talent and resources to continue to filter back into domestic economies. Although young men are more likely than young women to desire to emigrate, in highly educated groups and within highGDP countries this gender gap disappears.

College

This confirms that it is more of an economic decision than a political or cultural choice. Half of college-educated women who desire to emigrate would like to do so to another Arab League country; roughly three in 10 highly educated men would like stay in the Arab League. Engaging and maximising on the talents of young, educated Arabs in their home countries will be paramount to the continued economic growth and social development of the region. The keys to motivating young people to stay in their home countries are increasing economic opportunities, economic integration into their societies, and higher levels of civic engagement with their communities. Meeting the needs of these young people is an important step in each society reaping the benefits of the skills and talents inherent in their young citizens.

Arab League

European Union

Survey Methods Results are based on face-to-face interviews with 8434 young adults, aged 15 to 29, conducted in August through November 2010. Results for those desiring to move permanently to another country are based on a subset of 2605 young people from the overall respondent group. For results based on the total sample of young adults, one can say with 95 percent confidence that the maximum margin of sampling error is approximately three 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.

US/Canada

Other Country

Women-College degree

52 %

20%

27%

Men-College degree

29 %

39%

27%

Women-Secondary education

37 %

38%

22%

Men-Secondary education

36%

18%

10%

Women-Elementary education

40 %

36%

13%

11%

Men-Elementary education

33 %

49%

Women-All levels

39 %

36%

19%

Men-All levels

34 %

42%

17%

20%

40%

60%

14%

80%

100%

TheEDGE

Opinion

Qatar

moving in the

green direction? Martin Ă Porta and Adrian K.Wood evaluate the renewable energy options available to Qatar.

t present there are a number of forms of alternative energy options available, ranging from solar and wind, to hydro and tidal. Some have been in commercial operation for many years and are considered proven technology. Is Qatar actively using some of these technologies for power generation? Not yet. Is it developing a clear framework for renewable energy power generation for the future? Most likely, but little can be seen of this. The Qatar Science and Technology Park is definitely moving in the right direction. However, one application does not mean a development. On the other hand, some of these technologies are not suitable for the country.

OPINION

Evaluating Qatar’s options Qatar is blessed with sunshine, so solar energy production is likely to be most suitable. Whether this is through Concentrated Solar Power (CSP) by using reflective mirrors or Photovoltaic (PV) depends upon the type of sunshine. CSP requires direct sunlight, so if there is high humidity or a lot of fine dust in the air, then PV is more suitable. Only satellite and site data can determine the best technology. According to the German Aerospace Agency, in their report, Concentrating Solar Power for the Mediterranean Region issued in 2005, while not one of the highest in the Middle East North Africa (MENA) region, they calculated that Qatar still has at least 400 Gigawatts of CSP generation capacity. Qatar does have some wind, but it’s very limited. Even for the larger turbines, which offer the best efficiency, local wind speeds are on the low side. Tidal and hydro energy are not options either, due to the lack of strong tidal areas or presence of lakes or fresh inland water. Why even bother? Most of the options listed above seem ill-suited to the local conditions, so why should Qatar even bother looking at alternative energy? The answer lies in supply. Alternative energy is readily available, continuous and sustainable, and Qatar offers an advantageous geography and climate for solar energy. It is felt that MENA has the potential to produce up to 45 percent of the world’s total energy potential from renewable energy sources. Renewable energy solutions also help to address MENA’s environmental problems – the region has the second highest air pollution levels in the world, behind only Asia – and as particulate matter counts 50 percent higher than the world average, MENA has the worst emissions per capita. Qatar is unfortunately not spared, but alternative energy sources would help to significantly reverse this reality. In addition, renewable energy could generate extra domestic value. If renewable energy replaces oil and/or gas used for domestic power generation, the oil and gas surpluses could then be used for more profitable downstream applications, thus increasing the gross domestic product (GDP). Furthermore, renewable energy could increase export value. If renewable energy is used for power generation, it would free up more oil and gas for export to countries that need these fuels and are prepared to pay increasing prices. Renewable energy could drive economic diversification and job creation, which in today’s political situation is very important. Oil and gas in the Gulf Cooperation Council accounts for approximately 47 percent of GDP, but only one percent of employment, so consequently addressing the alternative energy market can significantly increase both skilled and unskilled jobs. Finally, once we reach wholesale parity, sometimes known as grid parity (this is when the cost for power produced from renewable energy is the same as that for oil-based generation), we will have a cost advantage over oil. The local reality With so many advantages, why is Qatar not moving ‘full steam ahead’? In conventional Levelised Cost of Electricity models, we have not yet reached wholesale parity, and therefore, subsidies are still required for alternative energy. However, certain wind farms are now in operation without tariffs, for example in New Zealand. Renewable energy is also not ‘dispatchable’, meaning that the power it generates is dependent on the availability of the energy source – if there is no sun or wind, then there is no power generated. National grid operators do not like fluctuating power generation. In the future, smart grids will minimise or handle this issue. Energy storage is being developed and commercial or utility scale storage should be available in a few years. However, in the meantime, the grid must handle the fluctuations or use renewable energy for ‘peaking’ or daytime requirements. For those of us in MENA, water is just as precious as oil. There has been considerable discussion over whether CSP can be used for desalination plants. The steam from CSP can

MENA has the second highest air pollution levels and the worst emissions per capita in the world. be used in the desalination process, but this would require the CSP plant to be close to the coast, leading to issues of land scarcity and higher land prices. On the other hand, a CSP or PV plant located further inland could well supply power to the grid, under optimal conditions, which could be used to power the desalination plant. This topic will no doubt be subject to much further discussion! At the moment, there are many assessments and feasibility studies being undertaken by the GCC countries, most of them looking at the same technical and operational issues – what a shame that the GCC does not pool their research findings and resources for the common good of the region, and work towards setting up respective alternative energy frameworks. While Qatar is extremely pioneering in its approach to the 2022 World Cup’s use of green energy as the major energy generator for its stadiums, the country seems quiet on driving renewable energy forward or implementing a legislative framework and a tariff or power purchase structure. However, thanks to the clear end-goal of 2022, Qatar has an excellent chance to change this, and become pro-active.

Martin à Porta is the chief executive officer of Siemens, WLL, Qatar, and Adrian K.Wood is head of Renewable Energy – Middle East, Siemens. TheEDGE

FINANCE & ECONOMICS

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

Rise of the Chinese Economic Dragon (P.36)

Karim Nakhle takes a look at the ascendance of the financial might of the Asian nation. China recently superceded Japan as the second largest economy in the world, and as it nears the Year of the Dragon in 2012, is making its economic influence felt across the world, including the Americas, Europe, Africa and the Middle East.

ALSO IN THIS SECTION: • Market Watch: The economic outlook has turned positive, writes Dheeraj Shahdadpuri in a quarterly round-up of global market performances. (P.26). • Inside Edge: Dun and Bradstreet’s Phil Strange opines that the rise in the oil price must be weighed against the downsides of regional unrest. (P.28). • Special Report: Oxford Business Group’s Greg Harris reports that Qatar has lifted the standard of basic education but more needs to be done. (P.32). • Balance Sheet: Richard Kohinga of KPMG explores how businesses facing increasing complexities are tackling the challenges and opportunities. (P.34).

Brought to you by:

MARKET WATCH

Risk appetite

returns

In the first of a new series of quarterly global and regional market analysis round-ups, Dheeraj Shahdadpuri takes a look behind internationally improving liquidity and notes how the continuing political uncertainty in the Middle East is somewhat thwarting regional market growth.

he global economic outlook has turned positive in the last few months on increasing signs that the recovery currently underway is sustainable, as many nations have started witnessing improved liquidity in their financial system. Although last year saw a near collapse of the Euro on heightened debt crisis, the European Central Bank’s (ECB) intervention contained the contagion from spreading. The creation of nearly a US$1 trillion (QR3.6 trillion) European Financial Stability Facility has succeeded in calming the nerves of investors who were expecting the debt crisis to stall the fragile global economic recovery. The Federal Reserve embarked on its second round of monetary measures – popularly known as Quantitative Easing (QE2) – under which treasury securities worth US$600 billion (QR2.1 trillion) are being bought from the market until the middle of this year. The QE2 is aimed at increasing cash available to financial institutions, which, in turn, will encourage them to ease their lending restrictions and assist in kickstarting the stalled investment cycle.

gaining steam on improving consumer sentiment, which is improving outlook for many businesses. Recent signs of economic recovery are so convincing that several economists and analysts have even raised concerns that the Federal Reserve should look at discontinuing the QE2 prematurely as a massive dose of liquidity can bring price pressure in the economy. Whatever the situation, the recent developments on the global economic front have given impetus to investors to continue their bullish stance. Leading this trend is the US benchmark index, Dow Jones Industrial Average, which crossed the 12,000 psychological mark for the first time after a two-and-a-half year hiatus in February this year, and has gained 6.4 percent in the first quarter. It is evident that investors are becoming increasingly comfortable with the economic outlook of the US and foresee that the unemployment rate, currently hovering around 8.8 percent, will start declining. Robust manufacturing and service sector activity has further boosted investment rationale, and has compelled international investors to book profit in emerging markets and reallocate some of their funds to the US.

The United States on the upswing The results of the Federal Reserve’s extraordinary measure has been encouraging. The United States’ (US) gross domestic product (GDP) grew by 3.1 percent in the fourth quarter of 2010. During the recent Federal Open Market Committee meeting, Federal Reserve chairman, Ben Bernanke, revealed that the US’ economic recovery is

Europe and Asia In the Euro area, Germany’s Deutscher Aktien Index (DAX) has also been enjoying a good run since the second half of last year, as currency weakness had earlier enhanced the exports competitiveness of the country. This, in turn, pushed production levels of the manufacturing sector higher and helped the country grow at a healthy rate.

MARKET WATCH

However, the DAX has witnessed consolidation in the first quarter with marginal gains of 1.8 percent. The stock index of France, the second largest Euro economy, closed the quarter with decent gains of 4.8 percent. In Asia, the Chinese stock market (up 4.3 percent in first quarter) has been witnessing consolidation in the last few quarters on account of monetary tightening measures adopted by the country’s Central Bank to tame inflation, which has the potential of disrupting economic growth in the near-future. In April, the Central Bank raised its benchmark interest rates for the fourth time since last October and investors anticipate that policymakers may increase the rates a few more times this year to contain spiralling price rises. The performance of the Indian stock market has been similar, where the Central Bank has raised interest rates since the beginning of last year to control inflation. The benchmark index, SENSEX, which attracted substantial interest from foreign investors soon after the Euro debt crisis, has experienced a partial trend reversal as the country’s Central Bank has so far failed to fully tackle spiralling price rise. The index witnessed correction of nearly 15 percent from its recent peak in February, but with bargain-hunting kicking in, the benchmark index ended the quarter with loss of only 5.2 percent. The other Asian giant, Japan, is at present going through a rough patch despite the Central Bank’s two stimulus packages worth around US$72 billion (QR2.4 trillion) in total last year, and a separate US$61 billion (QR222 billion) asset buyback programme, which aims to directly create liquidity in the financial system. The main culprit is the strengthening of yen that has impacted the export competitiveness of the country. The recent massive natural disasters have further hampered the short-term economic outlook, but the massive reconstruction work that is required to be undertaken to rebuild the infrastructure, can probably jumpstart to the ailing economy. The Japanese stock market witnessed extreme volatility during the quarter as the disaster triggered panic selling, taking the index down to around 8600 within a couple of days from 10,200 levels. But buying interest soon returned to the market as investors flocked to take advantage of the price correction, and the market ended the quarter with loss of only 4.6 percent. The GCC On the one hand where most global indices have given decent returns in the past few months, Gulf Cooperation Council (GCC) bourses are facing tough conditions on account of the political unrest in a number of countries in the broader Middle East region. Investors have resorted to withdrawing money, causing the combined market capitalisation of the six bourses to decline by US$24 billion (QR87 billion) to US$712 billion (QR2.5 trillion) in the first quarter of the current year.

The Kuwait stock exchange, which plummeted to a six-year low, is the biggest loser for the quarter with returns of -9.5 percent. This is followed by Muscat Securities Market, which ended 8.7 percent down with major selling witnessed on the banking and investments subsector, which declined 16.8 percent during the same period. Both United Arab Emirates stock exchanges also came under selling pressure from investors as Dubai Financial Market and Abu Dhabi Exchange ended the quarter down by 4.6 percent and 4.2 percent respectively. The biggest Arab bourse, Saudi Stock Exchange, ended the quarter on a flat note with a marginal loss of 0.9 percent. Surging oil prices overshadowed the regional unrest and investors flocked in to take advantage of the oversold market by taking position in heavyweight petrochemical stock, SABIC. Qatar Stock Exchange After posting massive returns of 24.7 percent last year, the performance of Qatar Stock Exchange also came under slight pressure due to regional political uncertainty during the first quarter, as the benchmark index ended 2.6 percent down. The banking and finance sector closed 2.2 percent down, although shares of Masraf Al Rayan gained 16.7 percent on account of the bank announcing distribution of 38.9 percent dividends. Both the service and insurance sectors lost 3.7 percent, whereas the industrial sector lost a marginal one percent for the quarter. The shares of Industries Qatar ended on a flat note despite the company announcing a 15 percent increase in 2010 profits and distribution of 55 percent cash dividends. By the end of first quarter, the market capitalisation of the Qatar Exchange stood at QR423.6 billion, with a 0.2 percent year-to-date decline. Despite a lull in first-quarter performance of the Qatar Stock Exchange, the country is set for another robust year in terms of economic activity. Qatar’s GDP is expected to grow 15.7 percent in 2011. In the medium term, the outlook for the country appears positive, and the same upbeat sentiments are expected to be felt on the Qatar Stock Exchange. 01 - 2011 performance

-9.50 %

Kuwait Stock Exchange

-8.70 %

MuscAt Stock Market -4.60 %

DUBAI FINANCIAL MARKET

-4.20 %

abu dhabi exchange -2.60 %

Qatar stock exchange -0.90 %

saudi stock exchange

-0.50 % -10%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

bahrain stock exchange -0%

TheEDGE

INSIDE EDGE

An end to

growth? The political concerns afflicting the Arab world these past few months have thrown up challenges beyond the political realm. While the increases in the oil price will benefit the oil- and gas-producing nations, this will soon be outweighed by the downsides of political unrest, warns Phil Strange.

hat is happening in the Arab world – starting in Tunisia, then Egypt, Libya, Bahrain, Syria, Yemen and Saudi Arabia – will not just have political ramifications, but will also impact the economics of the whole region including the Gulf Cooperation Council (GCC) nations. The geopolitical worries have been instrumental in increasing the risk premium of the region. On the positive side, this has had an impact on the mainstay of the six GCC economies, namely oil prices soaring to near two-year highs as investors move into oil based on concerns over supply being disrupted by the regional issues. But even a spike in oil prices should cause the GCC countries to ponder if this is a good thing in itself. In fact, beyond the GCC nations, most of the global economies are taking cognisance of the events in the region and believe they have far-reaching impact potential. To put things in perspective, European crude supplies have been affected due to the Libyan unrest, and emerging economies such as Brazil and India, already facing high inflationary trends, will be put on the back foot if fuel prices rise further, potentially denting domestic growth. Further, developing countries that provide the expatriate working community to the Arab world are facing remittance-related issues, especially in cases where the unrest has reached higher proportions,.

Repercussions for all Since GCC countries are oil exporters, rising crude oil prices is not a negative for these economies, but in the event of widespread regional unrest, crude oil transportation may be affected. In addition, since all the GCC economies import almost their entire food and other requirements, they are at a high risk of importing inflation given the domestic currencies’ peg to the United States (US) dollar (less so for Kuwait which pegs the dinar against a basket of currencies). If inflationary risks around the globe are stoked by higher crude oil prices, Middle Eastern countries will not remain isolated and there is a high probability of domestic inflationary trends and a double dip recession. The recent events have led to increased perceptions of risk repricing for the region as a whole. Assets in the region are perceived to be more risky now, which could lead to a higher risk premium and hence a diminution in demand, as risk-averse investors will seek to reduce exposure to Middle Eastern assets in their portfolios. According to a report from the Arab Monetary Fund (AMF), 16 Arab bourses, including the GCC stock markets, witnessed close to US$140 billion (QR509 billion) erosion in market capitalisation in the five weeks after the Egyptian unrest began in January. If we look at the seven GCC indices, aggregate market capitalisation slipped from US$786.54 billion (QR2.8 trillion) as at January 27, to US$670.21 billion (QR2.4 trillion) as at March 3, representing wealth erosion of US$116.33 billion (QR422 billion), brought about as foreign investors turned net sellers. The AMF also said that in 2010, Arab markets had seen a slow recovery in initial public offering (IPO) activity from the lows of 2009, and subdued investor interest at the beginning of 2011 will act as a roadblock in the path of normal IPO activity. Similar to the equity market, the regional debt market also runs the risk of being impacted, as investor appetite for debt issuances from the region might be affected. The change in risk perception is reflected in the prices of credit default swaps (CDS), which represent the cost of default protection. According to data from Credit Market Analysis (CMA), Saudi Arabia witnessed a sharp rise in CDS price from 75 basis points (bps) in January – before news of Egypt trickled in – to 143 basis points at the

INSIDE EDGE

Geopolitical unrest has had increasingly large effects on the regionâ&#x20AC;&#x2122;s tourism industry. The postponed Bahrain Grand Prix could mean a US$700 million (QR2.5 billion) loss for country, should the event be cancelled. (Getty/Gallo Images)

beginning of March. In fact, for the first time since 2009, CDS price for Saudi Arabia exceeded that for Abu Dhabi and Qatar. Another area of concern is the possible downgrading of sovereign ratings. Foreign investors follow ratings reports and adjust their investment patterns in response to ratings upgrades or downgrades. After a lull in 2009, 2010 had seen an uptick in corporate merger and acquisition activity in the Middle East and North Africa (MENA) region. According to a report by Ernst & Young, Egypt, Jordan and Saudi Arabia hosted most of the corporate action in the previous year, but the ongoing situation in the region will act as a dampener on the optimism that was building up on this front in 2010. As regional stock markets try to increase the level of foreign interest in their bourses, and governments attempt to attract public private partnerships and encourage foreign direct investment, the current political situation will restrict their success. The stabilisation of the markets so painfully achieved since the 2008 onset of global recession, could be lost very quickly under current circumstances. Another impact will be on the tourism sector. While many countries in the Middle East remain immune to the troubles there will be a tendency to avoid the region in favour of perceived safer holiday destinations. According to Hotelier Middle East, Bahrain

is already facing cruise season cancellations estimated to cause a loss of around 50,000 tourists and US$5 million (QR18 million) in tourism spending. The Bahrain Grand Prix, which has been postponed for the time being, if cancelled indefinitely, could lead to a US$700 million (QR2.5 billion) loss for Bahrain. Hotels, agents and tour operators will end up losing sizeable amounts in the case of the event being cancelled. One more impact on tourism could emanate from high crude prices, which could make air travel costlier, thus negatively impacting international air travel for leisure as well as business purposes. Reducing the threat Although, it is not possible to calculate the exact impact that the MENA crisis will have on the GCC economies, it is plausible to say that the effect will remain for some time and will be of a significant nature. In hindsight, the political unrest in the region has social and economic concerns at its root. High inflation and unemployment coupled with social discontent concerning corruption and disparity in wealth distribution were the primary props for the political instability. The GCC countries have taken steps in the right direction at the macro and micro levels. At the macro level, the countries have aimed TheEDGE

INSIDE EDGE

REGION

GCC

Non GCC

COUNTRY

SOURCE

LATEST AVAILABLE YEAR

GDP (Billion)

GDP Per Capita

GDP Per Capita Excluding Oil & Gas

Bahrain

Central Bank of Bahrain

Year 2009

19.32

14.86

17,404

13,386

Kuwait

Central Bank of Kuwait

Year 2009

109.48

60.18

31,416

17,268

Oman

Central Bank of Oman

Year 2009

46.87

28.88

17,358

10,695

Qatar

Qatar Statistical Authority

Year 2010

128.59

56.95

77,002

34,102

Saudi Arabia

Saudi Arabian Monetary Agency

Year 2009

375.76

193.36

14,811

7,622

UAE

National Bureau of Statistics

Year 2008

254.57

160.80

53,424

33,746

Egypt

Central Bank of Egypt

FY 2009-10

208.28

178.27

2,677

2,291

Yemen

IMF

Year 2010

30.02

21.01

1,273

891

Syria

IMF

Year 2010

59.60

47.68

2,825

2,260

Libya

World Bank

Year 2009

62.36

46.77

12,062

9,047

Tunisia

National Institute of Statistics - Tunisia

Year 2010

44.28

41.49

4,197

3,933

to keep up with the economic base diversification efforts, which have opened up new opportunities for nationals. Saudi Arabia has revealed socio-economic benefits to the tune of US$91 billion (QR331 billion) to Saudi nationals in the form of welfare benefits, wage rises and bonuses, along with expenditure on housing and medical facilities. This plan comes close on the heels of a US$37 billion (QR134 billion) plan that was presented in February. Indeed the majority of the GCC nations have announced major infrastructure and job creation schemes in recent years, aiming to offer better opportunities for nationals in economies that are being stimulated by government spend to diversify at a fast pace. The table above shows that political unrest has been seen most in countries with the lowest gross domestic product (GDP) per capita. The non-GCC MENA countries in the table have GDP per capita lower than the GCC countries. If you remove estimates of the GDP generated from the oil sector and re-calculate GDP per capita, the GCC nations of Saudi Arabia and Oman fall into the GDP range of those MENA countries experiencing political unrest.

Egypt, Jordan and Saudi Arabia hosted most of the corporate merger and acquisition action in 2010, but the ongoing situation in the region will act as a dampener on the optimism. 30

US$ GDP excluding Oil & Gas (Billion)

TheEDGE

This demonstrates that the GCC markets should not be complacent about the potential for contagion, and they are certainly being proactive about managing the risk by recycling oil revenues into non-oil sectors and infrastructure investment. In early April, while launching a US$1 billion (QR3.6 billion) investment fund for infrastructure projects, Shamshad Akhtar, World Bank Group vice president for the Middle East and North Africa said, â&#x20AC;&#x153;The Arab spring has demonstrated that people want better public services and a cleaner urban environment, and that means more efficient, better-designed infrastructure services.â&#x20AC;? The fund will be raised through the World Bank, International Finance Corporation and the Islamic Development Bank, and is another indication of the economic response needed to quell the political unrest in the region. In the current scenario, the most critical step for the GCC countries is to improve their risk perception as broader regional sentiments are outweighing the prevalent fundamental strengths. The six countries are committed to a wider economic foundation that has translated into requisite budgetary allocations by leveraging on the oil income. Capital expenditures, competitive business opportunities and infrastructure development are some of the steps that have the potential to support economic growth in the bloc. The governments should remain vigilant about the knock-on effects of rising crude oil prices, especially food inflation, by considering options to broaden the supply sources and potentially also develop capacities within the MENA region. The GCC countries have advanced significantly in recent years in putting the region on the economic map for sectors outside of oil. They have announced significant infrastructure spend to improve the work and quality of life opportunities of nationals. They are beginning to make non-oil sectors attractive to foreign investors and have secured international funding. It is their need now to ensure that the international community and their own population are aware of these facts and ensure that broader MENA issues do not undermine progress. In this way, the local populations will be reassured that their aspirations are being taken seriously and the international community can again de-risk their view of the region.

SPECIAL REPORT

Qatar: Developing Education By Greg Harris Qatar has achieved significant results in lifting the standard of basic education. Literacy rates for adults aged between 15 and 24 years are now up to 99.8 percent for females, and 99.4 percent for males, and enrollment levels at primary and secondary schools are also close to 100 percent. However, more needs to be done to assist young Qataris to transition to either higher education or the workforce. According to Hamda Al Sulaiti, the director of the Evaluation Institute of the Supreme Education Council (SEC), the government agency charged with directing the nation’s education policy, two of the greatest challenges facing Qatar’s education system are meeting the needs of the labour market and managing the rising number of new students annually. These challenges require continual developmental work with a stronger emphasis on the principles of educational initiative, the promotion of scientific research and application, and the development of professionals in the educational field, Al Sulaiti said at a meeting to discuss the implementation of the education development goals in early April. Qatar moved a step closer to meeting these goals on March 28, when the government launched its National Development Strategy (NDS) 2011-16, the first of a series of fiveyear plans aimed at achieving the aims of the Qatar National Vision 2030 (QNV 2030). In both the NDS and the QNV 2030, excellence in the provision of educational services is one of the overarching themes. The central goal is the development of a modern and effective education network that will ensure universal access to high-quality learning for students, starting from kindergarten through to their graduation from secondary school. The NDS also sets out the need to create

TheEDGE

opportunities to develop talents outside the standard curriculum by opening specialised schools and maximising the use of information and communication technology wherever possible. In his introduction to the NDS, HH Sheikh Tamim bin Hamad Al Thani, Qatar’s crown prince and heir apparent, said that the strategy would work towards creating a balance between Arab culture and modernity while preserving the country’s values and traditions. Investments in key sectors such as education are crucial to achieving these goals. “The national strategy deepens our commitment to increasing the wellbeing of all Qatari citizens and lays out a carefully designed programme to continue providing the best education, healthcare, social protection and employment opportunities in a prosperous, stable and secure society that nurtures its members and preserves and protects family cohesion,” he said. Qatar’s rapid economic growth has given rise to new challenges and the NDS aims to take a more integrated approach to the development of all sectors of the economy, Sheikh Tamim added. Among the objectives set by the NDS are to increase the number of Qataris who complete university studies and to recalibrate academic programmes so that they optimise talent and capabilities. To help achieve its targets, state agencies are to conduct studies on workforce needs and assess the gap between education output and requirements. Efforts are also underway to encourage students to take up courses that will

ensure this gap is closed, part of the NDS’s policy of aligning higher education with the needs of a modern economy. The strategy foresees reforms to the primary and secondary education system to better prepare graduates for higher education and eliminate the need for students to take foundation courses. To meet these objectives, the State of Qatar revealed its 2011/12 budget at the end of March, with education a major beneficiary. The budget, which came into effect on April 1, foresees a 12 percent increase in outlays for education, with the total allocation for the system rising to US$5.3 billion (QR19 billion), up from the US$4.7 billion (QR17 billion) under the previous budget. While it will take time for the full effect of this increased funding to be felt, and for the policies set out in the NDS to have an impact, higher standards and a sharper focus for Qatar’s education system should result in a streamlined learning process, and one better adapted to the needs of the nation’s ever-changing economy.

Greg Harris is the editorial manager at Oxford Business Group.

BALANCE SHEET

Confronting

complexity Richard Kohinga explores how businesses facing increasing complexities are tackling the challenges and opportunities.

oday’s business world is far more global and interconnected than it has ever been. While Western economies are being buffeted by financial stress and economic contraction, and developing economies are realising booming opportunities and rapid growth, they are not doing so in isolation. Our economic and financial inter-dependency is undeniable and a key driver in reconfiguring the global economy and financial landscape. At a recent workshop in Hong Kong, I was struck by the uniformity of the conversations between business leaders from around the world, reflecting the borderless nature of information exchange in the 21st century. It seems no matter where we reside, we access the same information and management approaches, and, as a consequence, find ourselves discussing the same issues and opportunities. One such issue is complexity. As businesses grow and connect they become increasingly complex. They improve processes and operating models, open new markets, identify new customers, but they also create volumes of new data that must be managed, supported and secured. They execute more transactions, operate across more borders and, as a result, are forced to deal with a forever-changing global regulatory environment that adds layers of risk management and compliance issues to their operating models.

The pace of change is extraordinary and has accelerated the rise of complexity as a force business must increasingly reckon with. Earlier this year, KPMG conducted research to gain insight into the impact of complexity on businesses around the world and how they were responding. The study, Confronting Complexity: How business globally is taking on the challenges and opportunities, revealed that 70 percent of executives believe increasing ‘complexity’ – caused by regulatory compliance, information management, government oversight, changing operating models, speed of innovation, tax policy and other factors – is among their company’s biggest challenges. More than 90 percent of senior executives said their organisation’s success depends on managing today’s complex business issues, primarily the regulatory landscape and information management, but less than half believe the actions they are taking to manage complexity have been very effective. Many, however, believe complexity can create new opportunities for their businesses, including gaining competitive advantage, creating better strategies, expanding into new markets and improving efficiencies. KPMG’s research indicates that although complexity places increasing pressures on organisations, opportunities do exist for those who can turn potential hurdles to their competitive advantage. Some of the top-line findings of the global study also suggest that: • Complexity is global – reaching across both mature and developing markets, as well as across industry sectors. • Complexity is increasing – three-quarters of the respondents say complexity has increased for their organisations over the past two years, and a majority expect things to become even more complicated in the coming two years. • Complexity is not static – about half of respondents expect the causes of complexity to shift over the next two years, and a majority say their companies will need to take different or additional actions to manage complexity.

BALANCE SHEET

• Increased risk is the greatest challenge presented by complexity, along with increased costs and the need for new skills. taking action Our research shows that business is taking significant actions to address complexity, particularly in the areas of information management, business organisation and human resources. The most effective actions taken, according to the research, have been improving information management, business reorganisation, investing in new countries or geographies, and conducting mergers or acquisitions. According to KPMG in Qatar’s information technology advisory partner, Jeroen Menting, business needs the ability to manage

simply, continually streamline, not create internal bureaucracy, and be good at executing. “We find that organisations are most successful when they keep their business models simple and don’t create more complexity of their own with the actions they are taking.” Regulation and technology Regulation is identified in the research as the leading cause of complexity globally, cited by almost three-quarters of executives surveyed. The research reveals one of the driving issues with regulation to be global inconsistency; in fact, close to 90 percent of respondents say governments should work together to make the global regulatory environment less complex. The research also shows technology to be a critical issue, both as a cause of complexity and a key solution. Information management is the second-most identified cause of complexity in the survey, as well as the top focus for businesses in addressing complexity. Speed of innovation is also shown to be a growing cause of complexity, particularly in developing economies. Complexity in our region While intuitively it might seem that the mature Western economies have experienced the greatest increase in complexity, in fact the developing economies are equally impacted, according to the research. More than half of developing market executives expect a significant increase in complexity over the next two years, slightly more than their mature market counterparts. In some ways this makes sense too: emerging economies are growing faster than Western economies and organisations, large and small, are dealing with rapid transformation in regulation, infrastructure and technology. Emerging economies like Qatar usually need to draw on the involvement of international companies to help build infrastructure, establish industry, and provide human capital – resulting in innumerable variations in systems and processes. a critical need for new skills The need for new skills to manage complexity is a key challenge for business according to the research, identified by more than threequarters of executives globally. Not surprisingly, the need for new skills to address complexity most impacts the technology sector, where more than 80 percent say it is a top challenge. Geographically, the need for new skills is shown to be particularly acute in Brazil, China and Japan, where 90 percent of executives surveyed identify it as a critical challenge. The need for new skills reflects the challenges businesses are facing in addressing complexity and leveraging it to their advantage. There are many drivers of complexity and organisations need to be agile, adopting specific strategies with the right talent and resources to respond.

Richard Kohinga is a director and head of marketing and sales for KPMG in Qatar and Bahrain. TheEDGE

ECONOMIC BAROMETER

THE ECONOMIC RISE OF THE

CHINESE DRAGON

According to the Chinese Zodiac, 2011 is the ‘Year of the Rabbit’. In China at least, it is believed that this year will bring new opportunities, diplomatic success and financial reward. But, writes Karim Nakhle, the real rewards for this economic powerhouse will come from 2012, the ‘Year of the Dragon’, onwards.

rom the 1970s the economy of China has evolved from a closed, centrally planned system, to a comparatively more open one that has exerted much influence on the world ever since. In July 2005, China revalued its currency by 2.1 percent against the US dollar and moved to an exchange rate system that references a basket of currencies, often to the ire of nations such as the United States (US). As of November 2010, China also owned 32 percent of the total of US$2.8 trillion (QR10 trillion) in US Treasury bills, bonds and notes held by foreigners. China does this to support

the value of the dollar and pegs its currency lower than the dollar to keep its export prices competitive. In effect, China is America’s largest banker, giving it immense leverage. For example, China threatens to sell part of its holdings whenever the US pressures it to raise the yuan’s value. Indeed, Barack Obama’s administration has been pressuring China to allow its currency to strengthen at a faster rate, but has not stated directly that the Asian nation is manipulating its currency. Analysts said that if the White House was to do so, it would likely give Congress the ability to pass protectionist legislation aimed at slowing Chinese imports into the US. China is also battling a domestic issue: inflation, which it needs to keep within an average of four percent this year. To achieve this, China has raised interest rates three times and bank reserve requirements six times since October 2010, and more increases are expected. Chinese consumer prices rose 4.9 percent in 2011 from a year earlier. According to a scoop by the Financial Times, China’s state planning agency has even told consumer giant Unilever to delay its plans to raise its prices in April, as the government pursues its battle against rising inflation. Unilever said it had chosen to comply with the request, according to the report.

ECONOMIC BAROMETER

A DRIVER OF GLOBAL GROWTH? In 2009, the global economic downturn reduced foreign demand for Chinese exports for the first time in many years, but China rebounded quickly, outperforming all other major economies in 2010 with a gross domestic product (GDP) growth of around 10 percent (7.8 percent from domestic demand, with the remaining 2.2 percent contributed by net trade), compared to the global average of 3.9 percent. By September 2010, China became the second-largest economy in the world after the US, and the world’s largest exporter. China ships 20 percent of its exports to the US, which created a US$252 billion (QR917 billion) trade deficit in 2010. It has also increased its trade with Hong Kong to 12 percent and Japan to eight percent. China’s economy is set to grow at 8.7 percent in 2011 and 8.4 percent in 2012, according to the latest report by the World Bank. CHINa’S QUEST FOR ENERGY After the discovery of Daqing oil field, 600 miles northeast of Beijing, from 1962 China produced enough oil to keep the nation self-sufficient. But since the initiation of its economic reforms, China became a net importer of oil and, in 2003, with a daily demand of 5.5 million barrels per day, surpassed Japan to become the second largest international oil consumer after the US. While China has boosted its own domestic production, demand is outpacing domestic supply. By 2020, China might produce 3.65 million barrels per day but will likely require more than twice that to meet its needs. While Chinese scholars suggest that oil imports will account for 60 percent of Chinese energy needs, the International Energy Agency believes that the figure could be higher. Accordingly, the Chinese government is encouraging its trade with African and Middle Eastern nations, mostly investing in their infrastructure in return for oil. While the Middle East accounted for less than 40 percent of China’s oil imports before 1994, since 1996 this has risen to over half. Iran and Saudi Arabia exports together now represent almost two-thirds of China’s Middle East oil imports.

THE NEW SILK ROAD The economies of China and the Middle East are expanding fast, resulting of late an resurgence in trade and investment beyond hydrocarbons, which some have termed Renaissance of the Silk Road. The Middle East is the largest exporter of oil. China will soon take over from the US as the world’s biggest oil importer; a simple equation that doesn’t need an economist to demonstrate that it makes perfect sense. Already, this is prompting cooperation, especially as China and the Middle East have experienced investment protectionism from the US and Europe, where they would traditionally spend their money. Trade between the two regions has doubled to US$140 billion (QR510 billion) since 2000. Banks are predicting that Gulf Cooperation Council (GCC) states will invest as much as US$300 billion (QR1 trillion) in Asia, mainly China, over the next five years. Chinese companies have also become more active in the Middle East, especially in the infrastructure sector, winning US$4.6 billion (QR17 million) worth of the construction deals in the GCC alone in 2009. Trade between China and the United Arab Emirates (UAE) in particular – China’s largest partner in the region, with bilateral trade reaching US$18 billion (QR66 billion) in 2010 – has witnessed phenomenal growth, since the UAE is seen as the hub for China to trade to the Middle East and the GCC countries. Yet the extent of the country’s energy demands has also compelled China to push into new markets, and particularly Africa and Latin American countries. China now receives about one-third of its oil imports from Africa, 13 percent of the continent’s total exports in 2010 (by contrast, for example the US purchased 33 percent of that year’s exports from Africa). With most of the world’s oil suppliers, investors, and sovereign wealth funds heading or looking East, China’s growing influence as the Asian powerhouse and second largest economy in the world will surely dominate the years of the Rabbit, Dragon and indeed, increasingly, for many years to come. CHINA AND THE MIDDLE EAST The governments, private investors and sovereign wealth funds of Middle Eastern countries such as Qatar, the Kingdom of Saudi Arabia, United Arab Emirates and Kuwait alike have all been looking into Chinese banking, real estate, manufacturing, energy, petrochemicals and infrastructure. For example, Borouge, majority-owned by Abu Dhabi National Oil Company, opened a plant in Shanghai worth US$1 billion (QR3.6 billion) in 2010 to produce polypropylene compounds used in the auto industry. Dubai International Capital increased its assets from US$1.5 billion (QR5.5 billion) to US$3 billion (QR10 billion) in China. Istithmar, the branch of Dubai World in charge of asset management, set up an office in Shanghai in 2008, after completing its first China investment in July of that year – US$50 million (QR182 million) for a 10 percent stake in Hans Energy, a Hong Kong-listed oil and gas logistics company in Guangdong. Qatar Investment Authority (QIA) invested significantly in financial institutions and consumeroriented export companies in Asia, with a focus on China. QIA was one of the largest investors, in the Industrial and Commercial Bank of China’s record-breaking initial public offering (IPO), buying US$205.5 million (QR746 million) in shares. In 2008, QIA signed onto a plan with Singapore’s Keppel Corporation to invest in a 30-square-kilometre eco-city in Tianjin, meant to serve as a model for sustainable development in other Chinese cities. Since then Qatar has been a strategic investor in the Chinese markets, especially in real estate projects. The Kuwait Investment Authority has doubled its investments in Asia in the past five years and is now the largest foreign investor in the Industrial and Commercial Bank of China, having bought US$720 million (QR2.6 billion) worth of shares during the IPO. KIA also has a 15 percent stake in the Kuwait China Investment Company, created in 2005, which manages US$350 million (QR1.3 billion) in assets, and is looking at real estate in China’s second-tier cities as part of its effort to further build the sovereign wealth fund.

TheEDGE

Pitching for PhilanthroPy Plus flagship global community investment programme. It’s a very good example of how a large international company can use its structure and relationships to leverage its own donations: we match funds raised dollar for dollar. Years ago we decided to take a proactive approach on some of the key issues that affect people across our footprint in Asia, Africa and the Middle East. We’ve built a portfolio of country and global community investment programmes, of which SiB is the most wide-spread.

hen it comes to tackling the dire challenges facing communities around the world, large companies can contribute more by making good use of their global networks and contacts, argues David Godwin, CEO of Standard Chartered Qatar. Hundreds of millions of people around the world live in poverty, lacking food and healthcare or suffering the effects of environmental degradation and climate change. Most of today’s large corporations know that ignoring these challenges is not an option; the sustained performance of a business is linked intrinsically to the health and prosperity of the societies in which it works. The most obvious response would be to set aside a portion of annual profits for charity, and most large corporations do, including Standard

Chartered. But the point is we can do more. By enlisting our many thousand employees and our networks of business partners and clients, we can extend our reach, raise more money and make that money go a lot further. We can also use our profile and influence to give publicity to critical issues and help others to become involved. Each year on World Health Day, Standard Chartered asks brokers working globally for our Financial Markets business to donate the day’s fees to Seeing is Believing (SiB), our

Visual impairment impacts the health and quality of life of millions with the cost of lost productivity estimated at USD200 billion annually. Yet four out of five of the 39 million blind people across the world suffer from conditions that could be prevented or treated. Around 90 per cent of this avoidable blindness occurs in the developing world, and many of our markets in Asia, Africa and the Middle East are affected by it. In 2003, we marked our 150th anniversary with a simple initiative to raise enough money for 28,000 cataract operations. The response from our staff, business partners and markets was overwhelming. Since 2003, our staff and supporters have raised USD16 million for SiB. This amount has been matched dollar for dollar by Standard Chartered to reach a total of USD32 million so far. We’re bankers, not eye care experts, so we work with a strong, specialist partner, the International Agency for the Prevention of Blindness (IAPB). Bluntly put, we supply the fundraising power of our more than 85,000 staff and direct funds from our own profits along with the profile of our brand, while IAPB provides eye care expertise and works with international eye care NGOs to deliver the programme on the ground.

We also work together on promoting VISION 2020, the global campaign to eliminate avoidable blindness, coordinated by IAPB and the World Health Organization. The impact of SiB is clear: since 2003, the programme has reached 23 million people, helped fund 2.78 million sight-saving cataract operations and facilitated the distribution of medicine to treat Vitamin A deficiency and river blindness for 3.37 million people. Meanwhile, the projects we’ve supported have helped move eye care up the public healthcare agenda in countries such as South Africa, Ghana and Pakistan. In Pakistan, for example, a project has now been planned to integrate eye care into health screening at schools. We know we can do even more and continually look for ways to maximise the impact of our programmes or make more use of our core business for contributing to communities. It’s not all about fundraising; it’s also about giving our time and specialist skills. Living with HIV, our workplace HIV and AIDS education programme, deliberately doesn’t have a fundraising element. Founded in 1999, this sets out to spread the word on one of the greatest challenges

to global health, a disease affecting more than 33 million people. Since 2007, our more than 1,000 dedicated staff volunteers, known as HIV Champions – together with our partners across the public, private and NGO sectors – have educated more than 1.6 million people on HIV and AIDS. By providing a range of free education tools, we’ve enlisted 82 other organisations to conduct their own training, many of them clients and suppliers of Standard Chartered who might not otherwise have had the chance to become involved. Ultimately, we’ll consider ourselves successful when our intervention is no longer needed. In India, the 40 vision centers we’ve established through SiB have become on average 80 per cent self-sustaining within the first two years. SiB has also funded training for over 50,000 healthcare workers who will be able to help their communities long into the future. Living with HIV, too, has helped to develop local capabilities. In Nigeria, for example, our employee HIV champions have trained over 1,000 healthcare workers, who have gone on to educate a total of 350,000 people. It’s not just people and societies that benefit when companies take

Thought Leadership: Community Investment a proactive approach to investing in communities. For businesses, it’s a great way of building closer relationships with key stakeholders, including clients, governments and regulators. And it gives staff the opportunity to become involved, raising funds and volunteering in the community. It’s also a strong recruitment and retention tool. Today’s employees care about more than pay and benefits; they want to work for businesses that contribute to the development of the societies where they work, as well as making money for their shareholders. No one organisation or government can tackle the world’s pressing environmental, social and economic challenges alone. The contribution of business is increasingly vital, and the list of reasons for becoming involved will only get longer, compounded by rapid population growth, urbanisation, the shift in economic power from the West to the East, increasing commodity prices and growing environmental stress in most regions of the world. For Standard Chartered, community investment is not a separate, ‘nice to have’ activity, but integral to our strategy and part of our brand promise to be Here for good. We’re very clear that it makes good business sense to help increase long-term economic activity in the communities where we live and work. The ‘sweet spot’ is where we can find opportunities to do something with substantial sustainable positive impact on people and economies whilst making money for our shareholders.

IN THE SPOTLIGHT

Special Cover Story

THE GREAT

NUCLEAR DEBATE

IN THE SPOTLIGHT

Following Japan’s ongoing nuclear tragedy, declining international public support has forced governments the world over to revisit their plans for atomic power development, slowing this energy sector’s recent global renaissance considerably. But is such a turnabout a kneejerk reaction, a necessary precaution, or political manoeuvring? And how will the Middle East be affected? Edward Jameson revisits the great nuclear debate

rior to March 2011, throughout the world nuclear power was experiencing somewhat of a comeback. National governments were rapidly advancing plans for clean, efficient, centralised power generation. Nuclear technology, though initially expensive, was seen as a means of fuelling long-term economic growth, with the added plus of low carbon emissions. Above all, the nuclear industry appeared to have proved those against it – the ‘greens’ and other doubters who claimed it was a dangerous, volatile and expensive mistake – completely wrong. Indeed, on the other side of the ‘against’ debate, the pro-nuclear contingent pointed to France, the world’s most nuclear-reliant nation, where for decades incumbent generator Electricité de France (EDF) has operated a complement of 58 reactors without serious incident. They also pointed to the United States (US), which, as the world’s largest producer of nuclear power, operates 104 reactors and has not recorded a serious incident for more than 30 years. And they pointed to Japan where, in 2011, a total of 50 reactors were providing almost a third of the country’s electricity. The industry had recovered from the considerable and justifiably negative press the twin spectres of Three Mile Island and Chernobyl had precipitated a few decades ago, and broad public opinion was once again moving in favour of nuclear energy. In the Middle East, the United Arab Emirates’ (UAE) plans for nuclear power were well underway, while in Saudi Arabia, Qatar and Kuwait, the topic was being seriously considered at the very highest levels of government. And then, on March 11, 40 kilometres northeast of Tokyo, the fifth-largest earthquake the world had seen for more than

100 years, followed by a catastrophic tsunami, wreaked devastation on the landscape, and the global nuclear debate was again thrown into sharp focus. BEHIND JAPAN’S MELTDOWN The giant 4.7 gigawatt (GW) Fukushima Daiichi nuclear power plant had been one of the largest in the world, until recently supplying Japan with six percent of its consumed electricity. When the earthquake struck, all six reactors on the site shut down automatically. The tremors knocked out the reactors’ external power supply, but the plant was designed to withstand such an impact, as Massachusetts Institute of Technology research scientist Dr Josef Oehmen explains.

“The reactor includes backup power systems to keep the coolant pumps working. “For the first hour,” he continues, “the first set of multiple emergency diesel power generators started and provided the electricity that was needed. However, when the tsunami arrived – a very rare and larger than anticipated wave – it flooded the diesel generators, causing them to fail.” When these generators failed, the reactor operators switched to emergency battery power. The batteries were designed as one of the backup systems to provide power for cooling the core for eight hours, which they did, but after this, the batteries ran out. “At this time people started talking about the possibility of core meltdown,” Oehmen adds.

An anti-nuclear activist wearing a gas mask protests together with other activists in front of the Neckarwestheim nuclear power plant in March 2011 in Germany. Anti-nuclear activists worldwide have been claiming their call for an end to nuclear power is all the more vital given the current catastrophe at the tsunami-damaged Fukushima facility in Japan. (Photo by Thomas Niedermueller/Getty Images)

TheEDGE

IN THE SPOTLIGHT

Special Cover Story

Will the sun soon set on nuclear energy? Though some pundits are predicting the decommissioning of older nuclear power plants, such as this one in Neckarwestheim, Germany, and a moratorium on the building of new plants worldwide, others are adamant that civilian atomic power plants are the world’s most efficient and clean energy source. The debate, brought into sharp focus by the Japanese tragedy, continues. (Photo by Thomas Niedermueller/Getty Images)

At the time of writing, external power has been restored across Fukushima Daiichi. The International Atomic Energy Agency’s most recent update states that, “the situation remains very serious but there are early signs of recovery in some functions.” However, and more to the point, the severity of the situation has also been raised to ‘Level 7’, the maximum on the international scale that has only ever been applied once before: to the 1986 Chernobyl disaster. A NOT-SO-CLEAR REACTION In the immediate aftermath of Fukushima, the pendulum of international public opinion with regards to energy policy swung fiercely back in favour of the anti-nuclear activists. Henry Sokolski, executive director of the US-based Nonproliferation Policy Education Center (NPEC), sums up the change in sentiment: “The prevailing presumption underpinning most assessments of nuclear power’s future was that civilian nuclear power’s massive global expansion was an irresistible energy security and environmental imperative that our government and other nuclear supplier states had to support,” he says. “Now none of this seems so clear.”

TheEDGE

Across the globe, populations reacted in kind to the Japanese situation. In the world’s largest nuclear power producer, the US, the number of people in favour of the construction of new nuclear plants on domestic soil fell to 43 percent, compared with 50 percent against, according to a poll conducted by national news channel CBS News. Prior to Fukushima, 58 percent of Americans were in favour. In France, where nuclear accounts for over 75 percent of consumed power, a poll found that 57 percent were in favour of dropping nuclear energy, despite the gaping lack of an alternative and the potential hundreds of billions of Euros that it would cost to ensure national energy security without nuclear power. In the United Kingdom (UK), a national survey revealed that support for nuclear had plunged from 47 percent in 2010 to just 35 percent, while opposition had risen from 19 percent to 28 percent. The reaction from national governments mirrored this paradigm change. The government of China, which only days earlier had approved a five-year economic plan that targeted 40 GW of new nuclear power by 2015 – around 45 reactors – to add to its existing 11 GW of installed

capacity, announced it was to review its sprawling proposals. The European Union (EU) was more proactive still, ordering member states to conduct ‘stress tests’ on all existing reactors at its behest, designed to underpin the safety of some of the continent’s aging atomic plants. Germany became the first nation to invoke concrete policy changes as a result of Fukushima when chancellor Angela Merkel reversed a decision to extend the lives of the country’s oldest nuclear reactors for at least three months. The German federal government had passed this decision only five months beforehand. And across the world, the story was the same: from Russia to India, from the UK to the US and the UAE, atomic energy policy reviews were announced, as the anti-nuclear lobby gathered pace in what had quickly evolved into a febrile decision-making environment. MIDDLE EAST IMPACT The concerns, however, have been far from one way. Many have voiced the opinion that the reactions from national governments have been politically motivated, designed to appease voters, as opposed to vital measures to account for advances in knowledge and safety in the atomic energy arena. The Middle East nations could do well to adopt a ‘wait and see’ approach. Among the Gulf Cooperation Council (GCC) nations, only the UAE has gone as far as laying the foundations of a civilian nuclear construction programme. The Federal Authority for Nuclear Regulation (FANR) is responsible for overseeing the UAE’s plans, whilst the Emirates Nuclear Energy Corporation (ENEC) will build, own and operate the country’s plants. At the end of March the FANR asked ENEC to provide a plan explaining how the company would apply any lessons learned from the Fukushima incident. “We understand that ENEC has been following the developments since the tsunami struck Japan and is considering whether there are any implications for its planned units,” said FANR director general, Dr William Travers. Elsewhere in the region, atomic programmes are at too early a stage for

IN THE SPOTLIGHT

Fukushima to exert any physical pressure, which can only be positive for countries such as Qatar, in which like elsewhere the nuclear power debate continues to rage. Only time will tell how global opinion will be shaped by the events still unfolding in the Far East. In the longer term, and in the physical sense, much will depend on a complex amalgamation of economic necessity and political will. In the short-term, however, the only concern of the energy industry, whether in favour of or against atomic power, should be with the wellbeing of the people of Japan, as the country continues to come to terms with what has become a terrible, lasting tragedy.

A warning sign for radiation is seen on a fence in front of a field housing remnants of highly radiated machinery and transportation vehicles used for rescue operations during the 1986 catastrophe near the village of Rosoha in Chernobyl, Ukraine. The Japanese Fukushima catastrophe, 25 years later, was recently upgraded to the same level of nuclear disaster, highlighting the need for tighter regulation of atomic power worldwide. (Photo by Daniel Berehulak/Getty Images)

CHERNOBYL AND THREE MILE ISLAND Fukushima has the dubious distinction of being the third site to join an elite club of global nuclear installation meltdown disasters: Chernobyl: On 26 April 1986, during the early hours of the morning, one of four reactors at the Chernobyl nuclear power plant, in the Ukraine, exploded. Radioactive materials were released into the atmosphere, contaminating huge swathes of Russia and Europe. The incident slowed the expansion of nuclear power indefinitely, and the aftermath was to ripple down the years, with dispute still open concerning the number of people that will eventually die as a result of the tragic incident. Three Mile Island: On March 29 1979, a mechanical or electrical failure at Unit 2 of the Three Mile Island atomic power plant in Pennsylvania, US, caused a partial meltdown of the reactor core. The meltdown, which happened because steam generators were prevented from removing heat, is to this day the most serious in US commercial nuclear operating history. Mercifully, only very small releases of radioactivity were ever recorded off-site, the US Nuclear Regulatory Commission says. The accident caused the US atomic power watchdog to overhaul safety across the nation’s nuclear plants in much the same way Fukushima is causing the entire world to do so in 2011. IS THE GCC DISASTER-PREPARED? Despite the Fukushima power plant being constructed to what were the highest possible safety standards, the twin natural disasters that struck Japan devastated the six reactors, proving that there are some events, which simply cannot be insured against. But countries can try. So what is the likelihood of such a disaster striking in the Middle East? And is the region prepared? The biggest risk is posed by a tsunami, according to Eduard Reinhardt, professor of geography and earth sciences at Canada’s McMaster University. A 2009 peer reviewed journal article by Reinhardt revealed evidence of a tsunami that struck the east coast of Oman as recently as 1945 – and experts have not ruled out the theory that the same could happen again. However, it must be stated that the risk of natural disasters across the Middle East region is comparatively very low. According to the US Geological Survey, the world’s foremost authority on earthquakes, Qatar has never suffered a significant earthquake. The Emirate sits at the centre of the Arabian tectonic plate, which is slowly moving northeast towards the Eurasian plate. The plates meet over Iran, Afghanistan and Pakistan. Around two to three minor earthquakes are recorded in this broad area as a result of the tectonic shifts. In the most harsh, cold financial terms therefore, with the sanctity of human life aside, the cost of being prepared for a host of natural disasters in a country such as Qatar would almost definitely be greater than the cost of the state ever having to deal with the aftermath of one, regardless of its level of preparedness. Earthquakes aside, some point to less shocking, but on occasion equally tragic, occurrences. The January floods that struck Jeddah, Saudi Arabia, cost the lives of ten people and injured at least 114. Nevertheless, such disasters – though small in comparison to Japan – can also have a significant financial impact and it would serve all regional enterprises to revise their preparedness for the very worst, however unlikely. “Companies only react after disaster and the cost of not being prepared is high, sometimes terminal,” security giant Symantec Corporation said in February, after conducting a study into disaster preparedness among Middle East private sector businesses.

TheEDGE

FEATURE Story

take a

Bite

FEATURE Story

Whether it’s fast food or a manufacturer, franchising is flourishing in the Middle East to the tune of billions of riyals a year. Qatar is one of the countries on the radar of franchisers in the United States, Europe and even South Africa, all looking for new markets and growth potential. With the small and medium enterprise sector identified as the future engine room of Qatar’s economy, Rachel Morris looks at the franchising sector in Qatar and its future.

ook on any street corner or in any shopping mall in Qatar and you will be confronted with some of the biggest brands in the world – McDonalds, KFC, Subway, The Gap, Starbucks – all of them franchises. And the market continues to grow, as new entrants from India, Asia, Africa, Australia and even Canada, selling everything from elevators and edible arrangements, to fitness centres and coffee, investigate Qatar’s remarkable growth and individual spending power. The Middle East franchising market, currently valued at US$30 billion (QR109 billion), is growing at 27 percent annually, and the region presents unparalleled opportunities for growth because of the presence of a large number of high net worth individuals and multi-ethnic populations with high disposable incomes. With approximately 70 percent of retail businesses in the Middle East operating as franchises, the franchising sector has boomed across the region over the past 30 years. Early indications predict that the annual growth of Middle East franchising sector will again be seen around 25 percent in 2011, back to the levels of the pre-recession excesses of 2008. Fast food and retail segments, particularly fashion, account for over 60 percent of the total market, with approximately 80 percent of the franchise brands of American origin or French origin. More recently, Asian brands, particularly from Malaysia and India, have been making inroads, while Spanish brands have also started to arrive, spurred by the success of fashion brand, Zara.

African success story Qatar, with its young and cashed-up population, is emerging as a potential growth market for franchisers and those looking to capitalise on the dizzying combination of big brand names and an untapped market. The franchisee market is dominated by a small number of players who run multiple brand franchises known as franchise conglomerates, with some having as many as 50 to 55 brands in each of their portfolios. Big names behind the even bigger names include Al Fardan and Al Mana. “Qatar is a mirror of what is happening worldwide – franchising as a concept is a growing global success. Factors such as a tried and tested model, technical expertise and support and being part of a global trend all play an important role,” says Nandos Qatar’s general manager, Francois Rousseau. Nando’s is one of those success stories. The South African restaurant chain, selling unique grilled Portuguese-style chicken and salads, moved into Qatar several years ago and now has four lucrative outlets. So successful is the brand here that the City Centre branch has one of the company’s highest turnovers in the world, and another four outlets are on the drawing board. Like other franchises, Nando’s draws on the business model and expertise of the parent company and adapts them to meet the demands of the local market. Explains Rousseau, “The stores are successful and provide a favourable operating profit margin. The fact that we are developing new stores reflects the faith we have in the brand and franchise model,” he says. Referring to the influence of the parent company, Rousseau says, “Our investor parent company is very involved with regular board meetings and strategy sessions. Nando’s as the brand company is also very involved and has a regional appointed support team who do regular country visits. The brand operates a sophisticated support structure, each lead by a designated team that covers store design, marketing, logistics, finance, training, operations, food safety and research and development. The key to success is support and open communications.”

Early indications predict that the annual growth of Middle East franchising sector will be around 25 percent in 2011, back to the levels of the prerecession excesses of 2008. TheEDGE

FEATURE Story

He says the company’s franchise model is flexible depending on the market and other variables. “The model varies depending on which scale the franchisee has entered into an agreement. There could be a single store franchisee (typically in the Australian market) or a regional/country master license franchisee which is typical of the Middle East/Gulf Cooperation Council (GCC),” he explains. “The model applicable to Qatar is a master franchise license which allows the licensee the rights to develop the market in accordance with an agreed development schedule over an agreed period of time. The agreement is legally binding and protects the interests of both franchisor and franchisee. “In addition, the model will provide for a territorial license fee, store development fees, marketing contributions and royalties payable on sales. Often the master franchisee has the rights to sub-franchise if they so choose.” Aspects of franchising Nando’s is a relatively new player on the block. But the biggest franchise name in the Middle East region is Subway. The company has 215 outlets regionally, with 94 outlets in the United Arab Emirates (UAE), Kuwait with 40 outlets, Saudi Arabia with 37 outlets, Qatar with 15 outlets, Jordan with 10 outlets, Bahrain with 10 outlets, Oman with seven outlets, Egypt with four and Lebanon with three outlets. “One of the keys to success in franchise operations in Qatar is to use a local franchisee versus a regional master franchisee expanding to Qatar,” says the US Commercial Office in its Doing Business in Qatar guide. “Some Qatari entities have a strong interest in investing in this business, given the ease of readymade business plans offered by franchises. A local sponsor is required to establish a franchise business.” Currently, Qatar has no special rules or regulations governing either licensing or franchising operations. Moreover, there are no restrictions on the payment of fees and royalties.

TheEDGE

“Nando’s operates a sophisticated support structure, covering store design, marketing, logistics, finance, training, operations, food safety and research and development.” Firms interested in licensing or franchising their operations in Qatar, however, should identify local agents who have experience and market knowledge. The restrictions and precautions that apply in the case of appointing local agents for products and services also apply in franchising. It’s not as simple as finding a partner or business model and setting up shop. Like anywhere, many variables are at work. “Many factors impact on the franchise model,” explains Rousseau. “Rentals in the GCC have a potentially higher impact than in other markets. This is mainly due to the mechanisms surrounding the payment of rent, factors such as ‘key money’ and having to book locations way in advance due to the ever-developing market. Inconsistent mall opening dates and the fact that malls often open slowly with shops coming on line, rather than the US or European big bang openings, also impact on models. This usually implies a delay in mall maturity. Other factors that impact the model are visa availability, transportation costs, import clearing timelines, and the availability of equipment and skilled manpower or resources associated with the outlet construction.

FEATURE Story

The franchisee market is dominated by a small number of players who run multiple brand franchises known as franchise conglomerates, with some having as many as 50 to 55 brands in each of their portfolios. Small country, big brands It’s not just fast food and retail that has seen franchising action. Perhaps the biggest and best known bank in Qatar, HSBC is also a franchise. And one of the most recent franchises to move into country is US-based fitness club, Anytime Fitness, who has partnered with the Al Muftah Group, the private company behind Burger King and Arby’s, among others. The fitness company is a big player in the lucrative health club market. Founded just 10 years ago, Anytime Fitness now has 1500 clubs worldwide, including 1400 US locations and is poised to expand into Qatar. Partnerships like that between Anytime Fitness and Al Muftah are a leap not just for the company buying the licence, but also for the franchisee. “The Al Muftah Group is very well established and is doing a lot of American-based franchising,” said Mark Daly, national media director at Anytime Fitness. “We trust their judgment and experience. They will make the decision on where to expand (in the Middle East). Qatar is extremely stable. We are not concerned about opening clubs in Qatar. This is a very attractive market.” One of the biggest players in the regional franchising market is Kuwait’s M.H Alshaya Co, which controls not just some of the best known food and restaurants in the Middle East, but also clothing outlets. Alshaya currently manages over 55 international brands and owns and operates 2000 outlets in 15 countries across the Middle East, North Africa, Russia, central and eastern Europe and Turkey, employing approximately 20,000 people from over 80 different nationalities. Diversified across seven retail sectors – fashion and footwear, health and beauty, food service, optics, pharmacy, office supplies

and home furnishings – brands currently managed and operated by the company include H&M, American Eagle Outfitters, Mothercare, Debenhams, Boots, Starbucks, Topshop, PF Chang’s, Pottery Barn, Pottery Barn Kids, Payless Shoes, Pinkberry, Office Depot, The Body Shop, Claire’s, Le Pain Quotidien and Vision Express. “We plan to do an average of 250 stores every year,” executive chairman, Mohammed Alshaya, said recently. “The business is going to grow and expand into 17 countries.” Franchising, however, is at the heart of the business, and aside from its two recent US deals with Payless and Office Depot in 2010, the chief executive officer has also confirmed that it will open a Harvey Nichols in the final phase of Kuwait’s The Avenues mall in spring/summer 2011, and also new big name outlets in Qatar later in 2011. “We have shown that the size and scale matter,” says Alshaya. “We started by approaching international retailers who we believe have the potential to grow, diversify and expand geographically. Most of our deals have come through opportunities. We look for retailers that we believe have a sound basis and where there is not too much adaptation required to the local markets.” Much has been written about Qatar’s future growth and it’s not just the construction companies and hotels that are rubbing their hands with excitement in the afterglow of the 2022 announcement. “We believe there are many opportunities over the coming years,” says Rousseau of Nando’s. “The Pearl Qatar development remains an obvious franchise choice, however the new developments along the North Road, together with the developments associated with the run-up to 2022, all provide ample potential for any expanding franchise. TheEDGE

ON THE PULSE

When it comes to making the most of hydrocarbon resources, diversify and prosper is the best policy, argues Andrew Jamieson.

atar is blessed with huge hydrocarbon resources. After Russia and Iran, its gas resources are the third most abundant in the world. And even better, much of the gas is concentrated just off Qatar’s northeast coast in the North Field, a field contiguous with the Iranian South Pars field. Together these fields constitute the single largest reservoir of non-associated gas – gas not associated with oil production – on the planet. The North Field alone is estimated to contain more than 900 trillion standard cubic feet of recoverable reserves. And because it is located in relatively shallow water in the Gulf, the development of the field was relatively straightforward. But getting the gas out of the ground is one thing. Moving it to the markets where it is needed is quite another. Two of the most popular gas transport options are pipelines, and liquifying the gas to produce liquefied natural gas (LNG), which can be shipped by sea in specially designed tankers. The choice of which option to select is largely down to basic economics. The cost of building and maintaining pipelines is dependent on the terrain. It costs a lot to build a pipeline that has to travel over mountains, for instance. When pipelines have to cross over several countries to reach their destination, geopolitics can also come into play. But where markets are fairly local – say, less than 2000 kilometres away – pipelines are often used. For example, pipeline gas now travels from Qatar to Dubai. Pipelines are also considered to be a good option when the gas reserves are located far from any seaport. Russia, for instance, relies on pipelines that travel over thousands of kilometres to transport gas from its vast onshore fields in Siberia, to markets in western Europe, because its main marine exits are a long way north of the Arctic circle, where ports are often ice-bound in the winter. Like pipelines, the LNG option also requires significant capital investment, both to liquify the gas and to transport the product

to markets. LNG plants consist of one or more LNG trains – or production lines – where impurities are removed and the purified gas is condensed into a liquid by cooling it to temperatures lower than minus 160°C. Qatar began establishing LNG production in the early 1990s to tap the gas from the North Field. LNG production in Qatar is now handled by two companies, RasGas and Qatargas. RasGas, established in 1973, operates seven LNG trains, including two mega trains, along with a dedicated fleet of 27 LNG carriers. Qatargas was originally formed in 1984 to operate three LNG trains. Its subsidiary, Qatargas Operating Company Limited, established in 2005 to form joint ventures with a number of foreign hydrocarbon companies, now operates a total of seven trains and a fleet of 42 LNG carriers. Qatar began exporting LNG from the North Field in 1997. Today it is the world’s biggest producer of LNG – and a major force in the world of hydrocarbon. In December 2010, Qatar celebrated achieving an LNG production capacity of 77 million tonnes per annum. However, although LNG provides a convenient way to transport gas, the energy density of LNG is only 60 percent that of diesel and 70 percent that of petrol (gasoline). To take full advantage of the hydrocarbon market, diversification is important. Selling gas alone – even vast quantities of gas – is not the only way forward. The big potential for market growth is in oil products where oil-related pricing can be achieved. Diversify and prosper This is why another transport and process option, gas to liquids (GTL), offers a such an attractive prospect for the Qatar hydrocarbons industry. Like LNG, GTL ‘densifies’ the energy to make it cheaper to transport.

Keeping the options

ON THE PULSE

OPEN TheEDGE

ON THE PULSE

In principle, GTL products can be transported via existing petroleum infrastructure. But the main advantage of the GTL process is that it produces a synthetic crude oil that can be processed to make premium hydrocarbon products. These include very high quality waxes, high quality base oils for lubrication, a petrochemical feedstock that is used to make plastics, and normal paraffin, which is used to produce detergents. It can also be used to produce cleaner burning diesel and kerosene. Unlike conventional brown liquid diesel, the diesel produced from synthetic crude is highly paraffinic and very clear. It has a higher cetane number, giving better performance with low aromatic and sulphur content, and its excellent combustion properties means that it commands a premium price. For Qatar, GTL has a lot to offer. It provides a way to diversify the use of Qatar’s abundant gas resources while at the same time producing higher value petroleum products. This helps to explain why Qatar is now home to two new GTL plants, the Sasol Oryx plant, which began operation in 2007, and the Pearl plant, the largest GTL project in the world. A joint development by Qatar Petroleum and Shell, Pearl is now in the commissioning phase, and is expected to start up in 2011. It is designed to produce 144,000 barrels per day (bbl/d) of GTL product, as well as 150,000 bbl/d of associated gas liquids. In total, Pearl is expected to process about three billion barrels-of-oilequivalent over its lifetime. But like all major projects, development of the Oryx and Pearl plants has not been entirely plain sailing, and the capital costs associated with these huge plants are very high. The Pearl development costs, for example, are estimated to range from US$18 billion (QR65 billion) to US$19 billion (QR69 billion). In addition, the demand for cleaner fuels is leading to an increased global interest in GTL production. As a result, the GTL industry in Qatar could be joined by new production from countries such as Nigeria, where a consortium led by Chevron is constructing a large GTL plant, and Australia, which has large gas reserves to exploit. Further competition could also come from the United States (US), where huge shale gas resources are causing radical changes in the

US gas scene, leading to dramatic falls in LNG imports and massive redundancy of LNG import terminal capacity. Small might be beautiful With these developments in mind, what is the best way forward for expanding Qatar’s gas production industry? One answer could be to think small and consider the potential advantages of technologies such as microchannel reactors. Microchannel technology is a developing field of chemical processing that intensifies chemical reactions by reducing the dimensions of the reactor systems. In microchannel reactors the key process steps are carried out in parallel arrays of microchannels, each with typical dimensions in the range of 0.1 to 5 millimetres. It also improves performance by minimising heat and mass transport limitations – factors that limit the performance of conventional GTL reactors. The capacity of microchannel reactor systems can be increased by simply ‘numbering up’, or adding additional reactors. This modular structure makes microchannel reactor systems very flexible, and offers many advantages when it comes to reducing the size and cost of the chemical processing hardware. It also allows for easy expansion of facilities. For example, rather than having to make the huge capital investment to install heavy equipment from day one, operators could build a new GTL plant in a modular way, by starting small and then increasing capacity as and when needed. Microchannel reactors could also prove useful for debottlenecking or for improving the efficiency of conventional plants and increasing the production of high value products. For instance, a microchannel reactor could be added to an existing reactor section to increase its productivity, or even to take its place so repairs can be carried out without losing production. Small-scale GTL plants using microchannel reactors could also be the answer for capturing the value from streams of gas that are either too small or too remote to be captured and processed by conventional means. While they may not be the answer in every processing situation, compared to conventional large-scale GTL plants, microchannel reactors offer many new possible ways to exploit stranded hydrocarbon resources or flared gas. Staying ahead of the game In an ever-changing energy market, it is important to be able to respond flexibly to market conditions. Success requires access to a wide range of processing options. Small-scale GTL using microchannel reactors is a strong contender because it offers a relatively inexpensive, quick and flexible way of incorporating GTL into the energy mix. It could well become the next big thing in clean fuels technology.

Dr Andrew Jamieson, OBE, worked for Royal Dutch Shell from 1974 to 2009, most recently as executive vice president, Gas and Projects, and as a member of Shell’s Gas and Power Executive Committee. While at Shell he was involved in the Pearl project. He is now a non-executive director of the Oxford Catalysts Group.

TheEDGE

ON THE PULSE

The North Field The North Field, which extends into the Gulf from the northeast coast of Qatar, is the world’s largest single non-associated gas field, or field that produces natural gas from a reservoir that contains only gas, rather than gas and oil. Discovered in 1971, the North Field contains more than 900 trillion cubic feet of gas, equivalent to around 15 percent of worldwide gas resources. GTL – How it works The GTL process involves two operations: steam methane reforming (SMR), to convert natural gas into a mixture of carbon monoxide (CO) and hydrogen (H2) known as syngas, followed by Fischer-Tropsch (FT) synthesis to convert the syngas into a liquid fuel. In SMR, the methane gas is mixed with steam and passed over a catalyst to produce a syngas consisting of hydrogen (H2) and carbon monoxide (CO). The reaction is highly endothermic, so requires the input of heat. This can be generated by the combustion of the excess H2. The syngas, is then converted into various forms of liquid hydrocarbons via the exothermic (heat producing) Fischer-Tropsch (FT) process, using a catalyst at elevated temperatures. The two conventional reactor types currently used for FT processes are fixed bed and slurry bed reactors. Shell’s Pearl plant relies on fixed bed

reactors. In contrast, the Sasol plant uses a proprietary technology based on a liquid slurry bed reactor. Both reactor types have their drawbacks. The performance of fixed bed reactors is limited by heat transfer – a particular drawback for FT applications, because FT synthesis is exothermic (heatgenerating) and strongly affected by temperature. In slurry bed reactors performance is limited by mass transfer. While the liquid slurry is quite efficient at heat removal, the liquid film surrounding the catalyst blocks the reactants (H2 and CO) from quickly reaching the catalytic sites. This problem with mass transfer limits their performance. The use of microchannel reactors would help to overcome these limits. Local Natural Gas

Gas Recycle Steam

STEAM REFORMING

CO/H2

FISCHER TROPSCH

Products

SYNTHETIC CRUDE

H2O

Air Natural Gas

GTL Flow Diagram

All illustrations courtesy of the Oxford Catalysts Group.

TheEDGE

SPECIAL FOCUS

Gro the asset

Qatar strengthens its case to become a pre-eminent hub for asset management. Yousuf Al Jaida explains.

SPECIAL FOCUS

wing A

lthough in its infancy by global standards, the Gulf Cooperation Council (GCC) fund industry is entering an exciting expansion phase fuelled by strong liquidity and robust economic fundamentals, a growing breadth and depth of investible assets, and the region’s continued development of regulatory regimes and financial infrastructure. According to Markaz, total GCC/Middle East North Africa (MENA) Equity Assets Under Management (AUM) stood at US$12.5 billion (QR43 billion) at the end of 2010 and, although Qatar currently represents a small proportion of the GCC funds industry relative to its gross domestic product (GDP), this is rapidly changing.

Strong fundamentals Qatar boasts one of the world’s most dynamic and fastest growing economies, forecast by the International Monetary Fund to have grown 16 percent in real terms in 2010 to reach a nominal GDP of US$126.5 billion (QR460 billion). This year the economy is set to grow another 18.6 percent in real terms to reach a nominal GDP of US$157.9 billion (QR575 billion). In addition, the sheer scale of Qatar’s public and private infrastructure and industrial investment programmes, expected to total more than US$140 billion (QR510 billion) over the next five years, is creating huge opportunities for the asset management industry. At 37 percent, the country continues to enjoy one of the highest savings rates in the region, making it one of the most promising markets for wealth management in the Middle East. Qatar’s onshore High Net Worth Individual (HNWI) wealth amounted to some US$25 billion (QR91 billion) in 2009, reflecting the deep pool of HNWI wealth and strong surplus liquidity available in the GCC region. This is creating huge opportunities for local asset managers and has caused international institutions to enhance their local presence. According to Data Monitor, Qatar is unsurprisingly one of the most attractive HNWI markets in the Middle East, offering high potential for international managers to develop onshore products for their clients, as well as offer investors access to a wide range of offshore products. Growing breadth and depth of investible assets The FIFA World Cup in 2022 is expected to provide Qatari and international asset management firms with even more investment opportunities. Moody’s puts accelerated government expenditure on related construction, transport and infrastructure spend at US$57

billion (QR207 billion) over the next ten years, while Bank of America Merrill Lynch estimates a figure closer to US$65 billion (QR236 billion) for the preparations. Qatar is also increasingly being viewed as an ideal base for regional expansion by asset managers seeking to increase their exposure to MENA. There are opportunities to allocate capital with the rapidly growing equity and debt markets in Qatar and the broader region. The Qatar stock market, with 42 listed companies, rose nearly 25 percent in 2010, making it the best performing market among all the GCC and Middle Eastern exchanges last year. The market for bonds and sukuks has also increased substantially, with nearly US$3.5 billion (QR12.7 billion) of issues from Qatar in 2010, which met with huge investor demand. World class infrastructure The Qatar Exchange (QE) is working hard in terms of improving the Qatari market’s liquidity, accessibility and efficiency. Last year, the QE successfully implemented New York Stock Exchange Euronext’s state of the art Universal Trading Platform and, in March this year, announced the adoption of Delivery Versus Payment rules to improve the clearing and settlement process and better serve investors. The QE also has plans to introduce bond and sukuk trading in the second quarter of this year and, in terms of the equity market, has signalled that it is considering implementing short-selling and derivatives trading equity market reforms in 2011. These are all-important developments that are in line with efforts to lead Qatar’s accession from frontier to emerging market status in the highly-regarded Morgan Stanley Capital Index (MSCI) rankings. Currently MSCI classifies all of the Gulf markets as frontier (apart from Saudi Arabia, which is not categorised), so the enhanced focus from global investors that MSCI emerging market status brings,

Qatar is one of the most promising markets for wealth management and represents a major opportunity for fund managers to provide quality service to local investors. TheEDGE

SPECIAL FOCUS

would be a huge boost for Qatar’s asset management industry. The MSCI decision on Qatar’s market status is expected in June. An expanding financial services sector The development of Qatar as a regional hub for asset management is uniquely supported by the Qatar Financial Centre (QFC), set up by the Government of Qatar in 2005 in line with the diversification goals of the State of Qatar’s National Vision for 2030. The Qatar Financial Centre Authority (QFC Authority), the commercial arm of the QFC, is responsible for leading the expansion of Qatar’s financial services sector and is focusing on the creation of a global business hub for three core markets, with Asset Management being one of these, alongside Reinsurance and Captive Insurance. This targeted three-hub strategy seeks to leverage Qatar’s unique strengths and development opportunities providing access to emerging market returns at developed market risk. Since its inception, the QFC Authority has issued over 135 licences to firms looking to be based in Qatar while providing ongoing industry support and representation well beyond initial licensing. The QFC Authority has been working on multiple levels to develop Qatar’s asset management business. All types and categories of Collective Investment Funds are permitted within the QFC, for example, mutual funds, private equity funds, hedge funds, Islamic funds, technology funds, feeder funds, property funds, fund of funds and umbrella funds are all permissible. Robust regulations and friendly tax regime Within the last year, the QFC has taken initiatives to accelerate the development of the asset management industry both at a retail and institutional level. For example, in December 2010, the QFC Regulatory Authority announced revised rules to allow authorised firms to operate foreign funds and for foreign funds to be sold to domestic retail customers. Through the QFC, Qatar also offers asset management firms an onshore trading environment with a robust legal structure based on English common law, a strong principles-based regulatory structure, low tax with tax exemption for Collective Investment Funds, and capital gains and Special Purpose Vehicles and allows 100 percent foreign ownership and repatriation of all profits. Crucially, there are also no restrictions for QFC institutions on dealing in any currency. So what are the benefits? For Qatar-based international institutions, there is the opportunity to manage funds that are domiciled outside of Qatar, allowing companies the flexibility to choose the jurisdiction that is most appropriate for their investment purposes. Local firms will be able to expand the choice of investments available to the local retail market, with QFC-registered companies being able to offer foreign funds to investors in Qatar. In addition, following the introduction of the new tax regime last year, Qatar now has one of the friendliest tax regimes in the world. The regime has been designed to create an attractive and internationally competitive fiscal environment for the conduct of business activities. QFC-registered companies are subject to a 10

TheEDGE

percent corporation tax to be charged on all locally-sourced profits. This low rate of tax is an attractive proposition for both local firms with international ambitions and multinational firms thinking of establishing a presence in Qatar. Additionally QFC-registered firms benefit from the extensive network of double taxation treaties that exist between Qatar and other countries including the United Kingdom (UK), France, Switzerland, India, Russia, Malaysia and Singapore, as well as inclusion in any future taxation treaties to be negotiated by the Government of Qatar. Since 2005, the QFC has enjoyed considerable success in attracting a number of major international players to take up licenses. These include AXA Investment Managers (a UK ‘multi-expert’ investment management company), Credit Suisse (one of the world’s largest wealth managers), Barclays Capital (the investment banking division of Barclays Bank, the Industrial and Commercial Bank of China (ICBC), and Deutsche Bank (one of the world’s leading financial services providers). Local players include QNB Capital (the corporate finance arm of Qatar National Bank), Qatar First Investment Bank (Qatar’s first non-affiliated, Shari’ah-compliant investment bank) and QInvest (Qatar’s leading investment bank). Furthermore it was recently announced that the next MENA Investment Management Forum, a flagship conference for the asset management industry, is coming to Doha in October this year, further recognition that Qatar is becoming the regional centre for the asset management industry.

Although Qatar currently represents a small proportion of the GCC funds industry relative to its GDP, this is rapidly changing. From small steps to large strides Following its infancy, the current potential for Qatar’s growing asset management hub is huge. The outlook is extremely bright, with an economy growing at an exceptional rate in comparison to other regions globally. High levels of institutional and retail wealth, an increasing breadth and depth of investible assets, as well as the QFC Authority’s commitment to develop Qatar as a pre-eminent hub for asset management within a world-class regulatory regime, all ensure that the amount of current and future capital that requires professional management in Qatar will continue to grow.

KNOWLEDGE & EXPERTISE innovation culture •small business know-how • marketing and design • legal insight

PUBLIC SECTOR INNOVATION (P.56) While ‘government innovation’ might be viewed by some as an oxymoron, Kamal Hassan, president and CEO of Middle East innovation consultants i360, puts forward that implementing innovation is as important in the public sector as the private – perhaps more so in order to counter the inertia often present in these large and bureaucratic administrative institutions.

ALSO IN THIS SECTION: • • •

Small Business Know-How: Curtis Avery examines the traditional view that preparing a business plan is a necessary entrepreneurial first step. (P.58). Marketing and Design: Roula Zinati Ayoub on creating the right name for a new brand. (P.62). Legal Insight: Fouad El Haddad of DLA Piper discusses what expatriates and locals need to consider when entering into partnerships with each other. (P.64).

Brought to you by:

INNOVATION CULTURE

Government

Innovation an oxymoron?

People would argue that governments anywhere in the world do not have many incentives to overcome inertia. With no profit motive, no threat of organisational failure and an often deeply entrenched noninnovative culture, there is simply no pressure for government to innovate. I360â&#x20AC;&#x2122;s Kamal Hassan shows that this need not be the case.

INNOVATION CULTURE

he basic definition of innovation is ‘to challenge the status quo and constantly promote change’. However, a stable, monopolistic environment doesn’t tend to lead to innovative behaviour, and can increase its bias to inertia over time – actively preventing innovation to maintain the status quo. We’ve seen this time and again in both the commercial and public sectors. However, innovation is becoming a core attribute required by public sector organisations to merely keep up with the rate of change in society and develop new ways to deliver services, fulfill public needs, and become catalysts for economic growth. Constant change can be uncomfortable for people used to stable environments, but if we can harness it to drive innovation in policy development, service delivery and in how we organise and operate the instrumentality of government, it may uncover major benefits and economic growth opportunities. To explore this issue, we asked those questions that are in the minds of many people interested in public sector innovation. Can governments innovate? Governments can innovate, but they do it differently. So the question is not can governments innovate, but how should they go about it? First off, it is more complex for governments to innovate because of the unique challenges they face. There are more diverse problems to address, a wider range of impact, rewards and risk, and more stakeholders who can support, or more likely, resist the changes proposed. In addition, the implementation of government innovation projects are typically longer-term, as are the project benefits. Because of these inherent complexities, governments need to spend more time than a for-profit organisation would on breaking down complexity in order to tackle innovation. Governments can use complexity as a reason to not innovate or to not change. But public sector organisations can also go wrong by jumping into innovation without a careful assessment of the culture and the change process.

Too many organisations desire fancy tools (or invent their own) for innovation without thinking about who will use them, implement them, consume them and eventually bring them to life. The first step should be to understand the organisational culture in order to choose the innovation tools that work best in a public sector environment. Assessing the environment Start by understanding the existing culture, then adding innovation tools that fit the cultural style. Look at how people currently innovate in the organisation – what stimulates them to innovate? What prior experience did they have with change? How are innovative ideas evaluated and rewarded? How does the organisation interact and innovate with external stakeholders such as suppliers, citizens and partners? We have to map out the implicit elements of the environment to understand the relationship between systems and processes and people. What drives innovation ? Innovation is a focus area that should be integrated with the organisation’s overall strategy. In fact, we would say that no effective strategy can succeed without some form of innovation. Even if the innovation is limited, without it a strategy will not create value, competitiveness, profit or quality. Innovation should be a natural extension of strategy. We are faced with the belief that strategies are no more than plans on paper, which is not correct, and if this is how they are treated, the organisation will not innovate or grow. In fact, this is where many organisations go wrong. We have become victims of traditional planning methods disguised as strategy and innovation, leading those who participate into eventually losing confidence in the process, people and the leadership who drive it. integrating organisational strategy and innovation Strategic planning is technically advanced planning, which is not strategy but is a part of strategy. Strategic planning is made up of three elements: strategy, planning and

policy, all of which are closely integrated but completely exclusive in nature. Many organisations are unable to link all three effectively, let alone add innovation into the process. The best way to approach strategic planning is to understand the role of each component. Planning is essentially the allocation, assignment and movement of resources. Strategy, meanwhile, then gives the plan foresight and insight, and policy adds control to make sure the plan is executed consistently. Innovation provides the methodology and tools to answer the ‘who, what and how’ in the strategy. 1) Who are your customers, and what are their insights and outcome expectations from using your service? 2) What do you offer your customers in alignment with their outcome expectations? 3) How will you achieve the objectives you have set with your plan with innovative channels? The ‘who, what and how’ should push the organisation out of its comfort zone and will require innovation and creativity to realise. Finally, there is often an over-emphasis on the hard side of innovation, such as systems, processes and other technical aspects. What tends to be missing is the soft side – culture, leadership and values. This is where we see the real challenge for public sector organisations. Many organisations are entrenched in technicalities that may sometimes lead to results, but don’t often include a long-term strategy for innovation at all levels. We need more cultures like that seen at Google, one that focuses on creating an environment that allows people to think and create. This type of culture retains valuable people and helps them grow with the organisation. We also need strategy and innovation to be integrated at all levels. This alignment between culture, strategy, innovation and people is how the organisation will profit, grow and succeed.

Kamal Hassan is the president and chief executive officer of Middle East innovation culture company, Innovation360. TheEDGE

Small Business KNow-How

The Busine A Necessity or Waste of Time?

Small Business KNow-How

ss Plan

The traditional view has always been that preparing a business plan is a first step in starting a business and most business schools teach this approach. However, many experts are now challenging the conventional wisdom that a business plan is essential for your start-up. Entrepreneurial mentor Curtis Avery examines the pros and cons of both points of view, as well as some alternatives.

ost small business associations and entrepreneurship support centres provide free or low-cost resources to support entrepreneurs in preparing their business plans. You can find all kinds of information about the business planning process at libraries or online, so there is no shortage of readily accessible information to this effect. Nevertheless, many successful entrepreneurs have started their businesses without a formal business plan. Take Mohamad Takriti for example, founder and chief executive officer (CEO) of iHorizons, a software development company in Qatar (whom TheEDGE featured in last month’s Business Interview). Takriti started his business 15 years ago without a formal business plan. This does not mean he didn’t put thought into the business model before starting the business. In fact, he grappled with his business concept for more than 10 years before deciding on a particular entry strategy. Obviously, with or without a formal business plan, you still need to do due diligence in investigating your market and formulating your strategy.

Nevertheless, it is only in the last four or five years that Takriti introduced formal business planning to the business. He has since found many benefits from doing so, including, he says: • Getting agreement between stakeholders on important targets and objectives, and how to achieve them • Better communication of those objectives to staff • Proper measurement of achievements throughout the year and identification of corrective actions to be taken • Tying together of lower level objectives with high-level targets BUSINESS CONCEPT

Business Idea Product Portfolio

Business Model Client Portfolio

• Making responsibilities for achieving objectives clear to everybody. These are definite benefits for an established company but what about for a new start-up? In addition to these benefits, the business plan serves as a catalyst to investigate the market, determine business feasibility and develop the business model. It also serves as a communication device for obtaining external seed capital and financing for the business. A recent report from the Office of Advocacy of the United States (US) Small Business Administration cited the Panal Study of Entrepreneurial Dynamics, a national study of more than 800 nascent entrepreneurs, and stated that those who completed a business plan were far more likely to start a business [than those who did not], and those who completed written plans were likely to engage in more start-up activities than those whose plans were unwritten. This is a compelling argument for writing a business plan, but what if writing a business plan seems like a daunting task to you? VIABLE ALTERNATIVES? Indeed, as an entrepreneurial mentor, I regularly meet with students and professionals interested in starting businesses. When I introduce the business plan concept and outline the many components that must be written, I usually get a sense they become overwhelmed. Moreover writing a business plan is a challenging task when writing in one’s first language, let alone a second or third language. I recently travelled to the United Arab Emirates and Oman to meet with CLIENT RELATIONS

Network Marketing Sales

Communications & PR

Market Position

Branding Management Accounting

Ownergroup & Board Employees Business Processes Partnership ORGANISATION

Legal Issues

Financing Production Management IT Systems Facilities

OPERATIONS

Small Business KNow-How

other entrepreneurial mentors and trainers, to share ideas on what works and does not work when coaching Gulf citizens in the process of starting businesses. A representative from a major entrepreneurship support centre in Dubai told me that they do not even mention the words ‘business plan’ any more, as it dissuades many of their clients. Instead, they prefer to use mini execution plans, which break up the start-up effort into manageable chunks, rolled out in sequential stages. The Startup Company offers a similar approach to guiding and training entrepreneurs called The Startup Wheel. The Startup Wheel, as illustrated, is a visual tool that divides required task areas into four main categories: Business Concept, Client Relations, Organisation and Operations. More than 80 worksheets have been developed to guide entrepreneurs through the various tasks necessary to start and run a business. David Madié, founder of Startup Company, developed this approach as a means of replacing the traditional business plan approach to starting businesses. According to Madié, business plans are a “waste of time”. He points out that the time spent on writing a formal business plan could be better spent taking action and starting the business. “The traditional business plan is based on long term projections of three to five years,” he says, “while start-ups need to focus on shortterm projections of three to five months or possibly even three to five weeks.” Business plans soon become irrelevant and shelved as entrepreneurs identify new opportunities and more effective ways of pursuing them. The Startup Wheel is a more action-oriented approach that tends to energise entrepreneurs rather than demoralise them. Bolette Blaedel, founder and CEO of bObles, a designer of multifunctional furniture says that “being designers, the special appeal of the Startup Wheel to us has been the orderly way to break down any challenge into smaller steps, (that are) easy to take action on right away. Our creativity would die in the process

TheEDGE

The business plan serves as a catalyst to investigate the market, determine business feasibility and develop the business model. It also serves as a communication device for obtaining financing for the business. According to research, those who complete written plans are more likely to engage in more start-up activities than those who do not. of making long business plans for many years ahead, but we still need an action plan to lead us to the goal.” A study conducted in 2006 by William Bygrave, professor emeritus at Babson College, would seem to support Madié’s case regarding business plans. Bygrave studied a group of Babson College alumni who later became entrepreneurs. Interestingly, he could not find a difference in the level of success between those who did a business plan before starting their business, and those who did not. THE FINANCE CAVEAT The Startup Wheel may be a viable option for those-self financing their business, but what about those who require additional financing? Will they not have to submit a business plan to potential creditors or investors? Madié defends his approach by saying that by showing the completed and relevant Startup Wheel, worksheets, or by actually obtaining customer orders in the process of doing the worksheets, an entrepreneur can prove his credit/ investment worthiness. An example of a worksheet activity that addresses what the relevant sections of the business plan could be, instead of writing up a market segmentation report in a business plan, to ask 10 potential customers 10 questions each about their needs and your product. Nevertheless, Deepthie Yatiyawela, head of small and medium enterprise

(SME) lending at Doha Bank, says that if you want to obtain financing, “a business plan is a must, as it can help both the business owner and the lender to better understand various aspects of the proposed business to gauge whether the estimates/ assumptions mentioned therein are realistic. Furthermore, instead of writing a detailed plan in the form of theory, it will be ideal for a business plan to cover the aspects in terms of practical/actionable points”. If such a business plan is a must, then Madié suggests doing a “mini-business plan, the smaller the better”. Completing the Startup Wheel worksheets can help form the basis from which to develop a realistic business plan. At the College of the North Atlantic-Qatar Entrepreneurship Centre, we have had some success in using a hybrid approach, where practical worksheets are initially completed by trainees, forming a basis from which to develop their business plan. I use training materials from NxLevel, a company based in the US. I have found that students are much more likely to complete the practical worksheets than to write the sections of the business plan. Doing the worksheets alone though may be enough to get the business going in some cases. But regardless of the approach you take to starting a business, there are some key factors that creditors and investors are looking for. What’s more important than the document itself is the research and strategic thinking behind it. A beautiful looking business plan

Small Business KNow-How

PORTER’S FIVE FORCES INDUSTRY ANALYSIS MODEL The Five Forces as illustrated right include: Potential for Entry, Threat of Substitute Products, Power of Suppliers, Power of Buyers and Rivalry among Organisations. Threat of New Entrants will be low if barriers to entry are high and vice versa. Barriers can include high capital costs or economies of scale requirements, patent protection, technological know-how or limited government licensing. Are you able to enter the industry and compete? If so, what is preventing a barrage of other potential competitors from entering as well? What other products or technologies exist or are being developed that could replace or be a substitute for your product? Who has the power, you or your suppliers? The more suppliers you have to choose from,

the better your bargaining power and ability to shift to another supplier should one go out of business or raise its prices. Are you serving one or two very large customers or many smaller ones? If your buyers/customers are few and have many other suppliers to choose from, then they have the power. If you supply some unique item your buyers really need and others cannot supply, then you may have the power. What is the nature of competition in your industry? Are competitors aggressive? Do they compete by lowering prices and/or using extensive advertising? How can you maintain a sustainable competitive advantage in the industry? Using this model will help you to determine if the industry is one you want to be in. If so, knowing the dynamics of the industry will greatly improve your chances of surviving and succeeding in it.

According to David Madié, founder of Startup Company, business plans are a waste of time. He points out that the time spent on writing a formal business plan could be better spent taking action, as business plans soon become irrelevant and sit on a shelf, as entrepreneurs identify new opportunities and more effective ways of pursuing them. has little value if the research, thought and substance behind it are weak and inaccurate. Deepthie Yatiyawela gives the following banker’s advice: “Be wary of those selling business plans or offering to prepare a plan for you. They will almost always make the plan look feasible, whether it is or not”. Remember it is you that has everything to lose, not them. You must understand your market and understand the financial projections you provide. • Be conservative with your projections and include ‘what if’ scenarios”. Electronic spreadsheets and business planning

software can help automate the process but make sure you enter realistic estimates and make sure you understand the various financial statements, financial ratios, break-even analysis, etcetera, that these tools generate • Include information on the quality of the management team and have a succession plan in place should any key person fall ill or leave the organisation • Understand the industry that you are in or are planning to enter. Yatiyawela uses Harvard professor, Michael Porter’s Five Forces Model (see box-out) to help him

THE FIVE FORCES MODEL Potential for Entry

Power of Buyer

Rivalry Among Organisations

Power of Supplier

Substitute Products

determine the relative attractiveness of a client’s industry and any inherent risks. You might want to consider it yourself when analysing your industry. Conclusion When planning your business start-up it is important that you find an approach that works for you. Whether you prepare a formal business plan, use worksheets or simply just start the business, you need to do your due diligence in investigating your market, determining business feasibility and preparing an entry strategy and implementation plan. There are no short cuts when it comes to this. Being prepared will greatly improve your chances of success. Only hard work and good management will be essential for making the business a success. Persistence, passion and a positive attitude will take you a long way in fulfilling your business and personal goals.

Curtis Avery is an entrepreneurial mentor at the College of the North Atlantic - Qatar (CNA-Q), which is licensed to provide Startup Wheel training and mentoring in Qatar. TheEDGE

Marketing & Design

What’s in a name? When creating a brand, selecting its name – or number – may be one of the most important decisions you are likely to make. Roula Zinati Ayoub investigates how brands exert their influence, express their personalities and entrench themselves in our psyche through just their name.

s your brand’s name harming your chances at making sales in Australia? Does it fly in Peru, but flop in Pretoria? Choosing the right name for your brand does more than merely identify it. It speaks of personality, the quality the consumer or client can expect, the essence of your company. A brand name sets your company, products and services apart from your competitors, and provides a ‘umbrella’ under which extensions, divisions and subsidiaries can be a cohesive family. The phonetics of it The sound of a brandname has been proven to be as important as the name itself. The elements of sound itself can create certain reactions – the sound of a word can be soft, hard, weak, soft, or even light or dark. For example, ‘o’, as in ‘omega’, or ‘a’ as in ‘America’ both sound large, thanks to the size of the voicebox and widening of the mouth to produce these vowels. In contrast, ‘e’ as in ‘teeny’ sounds small. For this reason, the phonetic components of a brand name carry significance, and studies have proven that companies with brand names containing ‘plosives’ are historically more successful. A ‘plosive’ is a ‘p’, ‘k’ or ‘t’ sound that causes you to build up pressure in your mouth to forcefully pronounce the sound – Kodak, Prozac, or Coca Cola, for example. Prozac, in fact, is a particularly good brand name for several reasons. Phonetically, it starts with a ‘plosive’, and with the ‘z’, you build up force for the final ‘ac’. Great names also roll off the tongue with ease. They are usually short, and may contain alliteration or balance vowels and consonants throughout. Some of the world’s greatest brands have no obvious meaning, but they are harmonious, or musical, to the ear – Amazon, Toyota and Seven-Eleven are examples of such names.

The case for (or against) a number While most brands are names, there are those that identify themselves instead with numbers. Yes, names are evocative and rich in meaning, but so are numbers. For example, thirteen and 666 are considered unlucky in predominantly Christian countries, while 888 sounds like ‘good fortune’ in Chinese. So although numbers can be used for brand names – Australia’s Channel 10 and the United Kingdom’s Channel Four are both associated with youth positioning, while 46664 (pronounced ‘four, double six, six four’ and not ‘four, triple six, four’) is the name of Nelson Mandela’s high-profile charity organisation – marketers must ensure that the number has no negative connotations. On the downside, numbers are difficult to own, so while there is a mobile phone brand called 3, there is also the BMX 3-series. This is not a problem when the two parent companies are operating in different spheres or are clearly focused on different target audiences, but what happens when the brand owner wants to move into a different sector? Also, numbers don’t immediately express their proposition or product, which may necessitate greater time, effort or expenditure by brand owners wishing to build associations with the brand. The emotional factor The first time a consumer hears your product’s name, the immediate response will not be neutral. Whether you choose words or numbers, no matter the language, culture or country, there is always an emotional connotation. The key for the modern marketer is to ensure that nothing becomes lost in translation. Or mistranslation.

Roula Zinati Ayoub is the creative director at Firefly Communications and can be reached at r.ayoub@firefly-me.com

LEGAL INSIGHT

USER: PSWD:

w / / : p t t h

‘Proxy’ businesses *******The risks

As Qatari authorities clamp down on ‘proxy businesses’, Fouad El Haddad discusses what expatriates and locals need to consider when entering into partnerships with each other.

he Qatari press recently reported that, in a major crackdown on businesses run by non-Qataris in the name of Qatari licenceholders, known as ‘proxy businesses’, the ‘Proxy Business Monitoring Committee’ has referred eight such cases to Public Prosecution for legal action. This month, we are concerned primarily with the Proxy Law No (25) of 2004 (the Proxy Law) and the restrictions on doing business in Qatar. The Proxy Law The Proxy Law was passed in Qatar on July 13, 2004, and directed the Ministry of Business and Trade (formerly known as Ministry of Economy and Commerce) to constitute the ‘Proxy Business Monitoring Committee’ (the Committee) which is a body armed with judicial powers to crack down on businesses run by non-Qataris in the name of Qataris. The Proxy Law makes it clear that a non-Qatari is not allowed to practise any commercial, economic or professional activity unless authorised by relevant laws (Article 1). The Proxy Law further states that any individual or company is forbidden by law to enable an unauthorised person and allow him to use the name of an establishment or a commercial licence to practise a commercial, economic or professional activity (Article 2). Pursuant to the Proxy Law: • the Committee is authorised to entertain complaints regarding a business which exists in violation of the Proxy Law and, after examining the seriousness of the charges levelled by a complainant, may refer the matter to the Public Prosecution for legal action

. w w w • the members of the Committee have the right to conduct raids on shops, storage facilities and other premises where a ‘proxy’ business is suspected of being carried out and check records and documents • violations could be subsequently referred to court, which may order confiscation of assets and cancellation of the commercial licence of a business found to be operating in violation of the Proxy Law, and • the two parties involved in a ‘proxy’ business (both Qataris and non-Qataris) may be asked to pay any statutory fees and taxes that may have been paid and levied had they been properly registered and licensed to carry on abusiness in Qatar. Penalties The Proxy Law specifies a jail term of not more than one year, and a fine of not less than QR20,000 and not more than QR500,000, or any one of the above. The Proxy Law applies to both Qataris and non-Qataris who hold business licences. Neither are allowed to ‘unlawfully rent out’ their licences to any other third party. The Monitoring committee The Committee’s head, Mr Sufian Al Muraghi has pointed out that it is basically the fault of the Qataris that they give away their trade licences on a ‘rent-basis’ to non-Qataris. Mr Al Muraghi further advised “that this is not only illegal but also highly dangerous because an expatriate using the ‘rented’ licences can make huge profits in a short period, can open bank accounts and deposit huge sums and may use these sums for money laundering or to fund terror”. Divisions of Qatari entities This was historically the most common form of proxy businesses in Qatar and would be crystallised by: • establishing a division of an existing Qatari entity • the division trading under the brand name of the foreign investor, and • the Qatari entity being the sole owner of the division. Although some foreign investors may be

carrying out business activities in Qatar under a division of a Qatari company/entity, it is worth pointing out that operating as such is unlawful and in breach of the Proxy Law, the Foreign Investment Law No (13) of 2000 as amended (the Foreign Investment Law) and the Income Tax Law No (21) of 2009 (the Tax Law). The general rule under the Foreign Investment Law is that non-Qataris, whether natural or juristic persons, may invest in all sectors of the national economy, except in banks, commercial agency rights and trading in real estate, only through the medium of a company incorporated in Qatar in which one or more Qatari persons and/or wholly owned Qatari entities hold not less than 51 percent of the share capital. Doing Business in Qatar Foreign investors (personal or corporate) wishing to conduct business in Qatar are subject to certain restrictions imposed by Qatari Law. Primarily those restrictions are found in: • the Foreign Investment Law; • the Proxy Law; and • the Commercial Companies Law (Law No.5 of 2002 as amended). Looked at collectively, these laws prohibit foreigners from conducting business in Qatar unless they do so by way of certain approved vehicles. Subject to a few limited exceptions, the most common vehicles available to foreigners are through establishment as a Qatar branch office of a foreign company (branch), or the incorporation of a Qatari limited liability company (LLC). Branch • A foreign company wishing to operate in Qatar may be able to open a branch if its presence in Qatar is required to perform a specific contract that relates to a project that ‘facilitates the performance of a public service or utility’. Generally speaking, if a foreign company has a contract with a Qatari government entity or quasi government entity, this is likely to be regarded as being a contract that ‘facilitates the performance of a public service or utility’. • One major advantage of a branch is that the involvement of a Qatari partner is not required. One disadvantage is that the

LEGAL INSIGHT

foreign company registered as a branch is only entitled to perform the contract in respect of which it is registered and its registration will lapse on completion of that contract, unless extended by reason of the contract being extended in time or because a new contract is entered. LLC This the most common vehicle used by foreigner investors wishing to do business in Qatar. • An LLC may be established on the basis of a 49 percent foreign shareholding and a 51 percent Qatari shareholding. This shareholding does not, however, necessarily reflect the profit distributions which may be affected by the contribution of each party, the management of the LLC, knowledge and know-how. Since 2007, the Ministry of Business and Trade has been approving Articles of Association with a 51/49 interest, however providing for up to a 97/3 profit distribution • The LLC provides a permanent presence in Qatar through which all contracts entered into to perform services in Qatar should be capable of being performed. The benefit of establishing an LLC is that the LLC can conduct any kind of business in Qatar that falls within the scope of its objects in the Articles of Association. This means it can contract for business with any entity and is not limited to the performance of one contract, as a branch would be. Conclusion Finally, we are aware that some foreign investors that are still operating under a division of a Qatari entity have adjusted or are in the process of adjusting their operations in Qatar. Most of them are using the LLC model and keeping same commercial arrangements with their Qatari partners. It would be prudent for those who have not adjusted or restructured their Qatari operations as yet seriously to consider this at the earliest before it is too late.

NOTE: For further information contact Fouad El Haddad or David Salt at fouad.haddad@ clydeco.com.qa or david.salt@clydeco.com.qa . TheEDGE

SUBSCRIPTION

SUBSCRIPTION FORM 2011 TheEDGE is Qatar’s dedicated monthly business magazine.

TheEDGE incorporates a mix of industry news and analysis, in depth features, special interviews with key business decision makers, economic insight and market activity reports, and tips for how you can improve your day-to-day business operations. TheEDGE is delivered straight to the door of the targeted business community. To ensure you keep up-to-date, with what is happening in Qatar’s business landscape, fill in the subscription form (below) to receive TheEDGE on a monthly basis. Subscription is FREE (in Qatar). Forms are to be addressed to the Subscriptions Department at: TheEDGE Subscriptions Department Firefly Communications 11th Floor, Jaidah Tower PO Box 11596 Doha, Qatar

Last Name : First Name: Address: Company: Designation: PO Box: Area Code: City: Country: Tel: Email: Date and Signature: 68

TheEDGE

BUSINESS INSIGHT Extraordinary Leadership (P.74)

World-renowned human resources researcher and author Dr Joseph Folkman, of United States-based consultancy Zenger Folkman will be in Doha to host the Extraordinary Leadership Summit, from May 17 to 18, 2011. TheEDGE spoke to Dr Folkman about why good leadership is essential to the success of organisations, what makes a great leader, and his company’s unique scientific approach to assessing and advising managers and company heads on how they can improve their leadership skills.

ALSO IN THIS SECTION: •

Improving business potential through social investment: Retail chain THE One was recently voted one of the United Arab Emirates’ top 10 employers and is well known for its devotion to its staff and corporate social responsibility. The company’s Qatar operations manager, Gaby Salome, further explains the importance of THE One’s socially responsible investment strategies (P.70).

•

Reaching out to female entrepreneurs: Standard Chartered recently introduced the Resource Centre, a valuable source of information and inspiration for female entrepreneurs in the Middle East and Asia. Haya Mashood discusses the challenges facing female entrepreneurs, and how the Resource Centre will help pave the way for them to achieve professional success. (P.72).

BUSINESS INSIGHT

Social investment

Improving business potential through community involvement Although there are many companies in the Middle East embarking on corporate social responsibility (CSR) programmes, firms that truly embrace the concept to the level of furniture retailers THE One are rare. The chain, which has stores across the region, was recently voted one of the top places to work* in the United Arab Emirates (UAE) and has a number of local and international upliftment projects – including in Qatar. Miles Masterson talked to country operations manager Gabriel Salome to find out more. Why is THE One focused on so many aspects of CSR? THE One’s core purpose is to ‘Change the World Together’. This is not just a line we use in our ads and public relations. It is the fundamental reason for our company’s existence. Anyone can sell a sofa, but if you want to make a real difference in the lives of people and the world, you need to make it a priority and it needs to make business sense, as we can only continue doing good as long as we remain successful. That’s also why we don’t like the phrase Corporate Social Responsibility. We prefer to call it Socially Responsible Investment (SRI) instead – as all our initiatives (from ethical sourcing and hiring challenged employees, to local volunteering and building schools in Kenya) are investments in the future. Let’s start with the challenged employees. What are the real benefits to your company in hiring them? We have seen that our challenged employees have a truly positive influence on everyone around them. They make people realise that nothing is impossible or too difficult to accomplish. In addition we have noticed that colleagues and customers dealing with our challenged employees, become ‘nicer’ human beings, as they feel they are doing something good. The amazing thing is that they are not only ‘nicer’ to the individuals in question, but also to each other, becoming more careful in their actions as well as with what they say and how they say it. They become more sensitive

TheEDGE

and compassionate towards each other and more accepting of people as they are. It’s about the feel-good factor and all parties have everything to gain. There’s an Emiri decree in Qatar where it states that two percent of the company task force should be made up of challenged employees. At THE One our target is five percent by 2012. In Qatar we are running at 4.7 percent and I am sure we will achieve five percent before the end of the year. Why do you think more companies do not adopt it? As for why more companies do not employ challenged individuals, I think they are often seen as unable to function in, or contribute meaningfully to, a ‘normal’ working environment. We aim to continue to fight this misconception as we believe and have seen that these individuals have a tremendous amount to offer and add a whole new dimension to the working environment, inspiring colleagues and customers alike. By the way, I hate the word ‘disabled’ since they are not, they are simply more challenged and extra care is needed. Can you tell us a bit more about how you involve your staff in volunteer programmes on company time and how they benefit your business? Firstly we looked at when the busiest times were in the store and then scheduled staff for volunteering programmes during these times. So it is a strategy, which all companies need

BUSINESS INSIGHT

to have. The result is that contrary to it being counterproductive, having your staff away from work and paying them for doing good is very productive. It’s about finding meaning in a material world and is a fantastic motivator. Who needs employees working for them just to get paid at the end of the month? Where is the productivity in this? We need people who believe in our cause, are proud of their company and strive for the company’s success. That is why we are one of the top 10 companies to work for in the UAE and we attract staff of a certain mindset who want to work at our company because of this. Can you tell us about the nature of the company’s projects? We focus on local volunteering, where each store has the freedom to choose which causes they wish to support to benefit its local community. Firstly there is our Big Idea: global education through THE Onederworld – our sustainable village community programme. The big idea is a One-on-One Store-Village adoption programme where each of our stores will eventually support one village and work with the villagers on holistic community. We are focusing on neglected regions in the world where our employees come from or our manufacturers are based. We are placing special emphasis on areas where there is a high incidence of child labour, exploitation of children and minimal opportunities for girls. We consult with and involve the local community and get their full participation in implementing a three to five year plan towards self-sufficiency. In conjunction with Free The Children (www. freethechildren.com), we kicked off our THE Onederworld programme with the Pimbiniet community in Kenya in August 2008 and are happy to report that the sixth classroom of a brand new school was completed in June 2010, with three more planned for this year. In addition we are funding mobile clinics, the construction of a library, school kitchen and the development of a water system. Our goal is to successfully run 99 stores by the year 2020, so we can support as many villages, and in doing so, inspire more companies to move in the direction of becoming social enterprises. THE One is also dedicated to preserving the environment? We only deal with manufacturers who commit to not using wood from rainforests. One of our major suppliers only uses ‘Verification of Legal Origin’ certified wood, meaning it comes from

“We have seen that our challenged employees have a positive influence on everyone. They make people realise that nothing is impossible or too difficult to accomplish. In addition we have noticed that colleagues and customers dealing with our challenged employees, become ‘nicer’ human beings.” managed forests/plantations and not from illegal logging. Independently audited by TÜV Rheinland, documentation of each piece of wood ensures that it can be tracked back to its source. Besides introducing energy-saving bulbs, eco-friendly candle ranges, as well as products made from recycled glass, iron, tyres and now even wood, we have rethought our ‘Pack and Wrap’ to help save the world from plastic bags. We replaced all our old plastic and paper bags with 100 percent degradable plastic bags, which start disintegrating six months after production, eventually vanishing into thin air – all thanks to an additive known as d2w, which is included at the time of manufacture. We put a price on them to give them a value and encourage our customers to buy as few as possible and reuse them until they disintegrate. We also offer our shoppers two other alternatives to regular shopping bags. You can either help us reuse our boxes by taking home your purchases in them, free of charge, or invest in one of our eco-chic fabric bags. How does all of this activity improve your bottom line? Is it something that is tangible?? All our SRI initiatives are growing the company and our bottom line. That’s the beauty of it all. Companies without real values will not only lose their staff but also their customers. In today’s world the best talent, as well as customers, want to work for and shop at a company that cares. It’s about creating shared value for our people, communities and the planet. Does marketing come into motivating any of these programmes? It is not a publicity stunt and we certainly don’t advertise it. Sure, we publicise some of our SRI initiatives, which we feel people may find interesting, but we are socially responsible in our investment. We are doing so many more things that improve society, create awareness and help to create a better world, while at the same time it’s an investment on our part, where we use our

own resources to promote it. In the end it’s a win-win situation. The company was featured in Gulf Business magazine as one of the best places to work in the UAE. What sets working at your company apart from its competitors ? Like I said before, we have staff that believes in our cause of Changing the World Together. Our people are the soul of THE One and our first priority is to take extra special care of them. Add to this the satisfaction you get from making a real difference in the world as part of your daily job and you have a recipe for success. How do your stores differ, if at all, from those say in the UAE or elsewhere in the Gulf, perhaps in terms of product or service? Product and service, we are all the same. We do face some restrictions depending on the country you are working from, but this is normal and you need to adapt for what’s best. Qatar is great place when it comes to the support of education and helping others, and this is exactly what we do at THE One. That’s why we have a strong and a successful relationship with the ROTA (Reach Out To Asia) programme. Where do you see THE One heading in the coming years, both in a SRI sense and as a business? And where do you see furniture retail in general going? For the SRI, it’s a priority for us and it will keep on growing and reaching out and helping the community as much as we can. The furniture business definitely is going to play a huge part in Qatar and we are more than ready for it.

* THE One was ranked sixth on the list of the United Arab Emirates’ top 10 employers following the region’s first ever workplace survey conducted by The Great Place to Work Institute – a global research and management consultancy that recognises the best workplaces in more than 45 countries. TheEDGE

BUSINESS INSIGHT

Women in business

Standard Chartered reaches out to female entrepreneurs as investing in small groups of women has a ripple effect on hundreds of women, and on social and economic progress. For example, women reinvest 90 percent of their income in their families and communities.

Standard Chartered introduces the Resource Centre, a valuable source of education, information and inspiration for female entrepreneurs in the Middle East and Asia. Miles Masterson spoke to head of corporate affairs, Haya Mashood, about the challenges facing female entrepreneurs, and how the Resource Centre will help pave the way for them to achieve professional success. 72

TheEDGE

Broadly, what motivated Standard Chartered to reach out specifically to female entrepreneurs and small and medium enterprise (SME) owners in the Middle East and Asia? Today there are more women-run businesses operating in the global economy than ever before. Forty to fifty percent of businesses in developing markets are owned by women. Yet too often, women are still overlooked customers. At Standard Chartered, we believe it makes business sense to support women’s entrepreneurial activities. Financial education is often highlighted as a particular challenge for women seeking to start and grow a business. We are investing in women’s financial literacy because we understand that they will help drive economic growth in the community,

What individual and/or collective needs or weaknesses – perceived or real – might these female SME owners face or have that are not issues for male entrepreneurs, especially those in the Arab world? I think it is less ‘weaknesses’ but rather a whole host of challenges and obstacles which bar women from entrepreneurial development: • On a global level, women have limited access to loans. One major factor is that women are very often unable to provide collateral (as they own less than one percent of property in the world) • In some countries, there are significantly lower rates of education for women and girls • Women-owned enterprises are usually smaller in scale, resulting in more difficulties around access to credit/capital • Finally, there is research that suggests there is a higher tendency for women to let their fear of failure and lesser confidence or ambition stop them from taking their businesses to the next level. What strengths or advantages might women have that have not yet been adequately capitalised upon by female entrepreneurs, again especially in the Arab world? Research shows that women are often better at servicing their financial obligations. They are also more likely to seek and rely on professional financial and investment advice than are men, and are more likely to stay with the same adviser if a good rapport and comfort level is developed. The fact that women tend to be goaloriented, whereas men are more transaction cost-oriented, can be a strength.

BUSINESS INSIGHT

Women typically need less initial resources and are able to launch on a smaller scale. Furthermore, women’s successes are often spread throughout the community, benefiting multiple groups of people. How does the Resource Centre plan to address these needs, break stereotypes and develop these strengths? Women rarely have access to advice that has been targeted to their particular needs. Our Resource Centre offers practical information as well as tools that have been specifically designed for women entrepreneurs, around topics such as influence and negotiation, marketing to female consumers and the right reasons for scaling up ones’ business. There is also an interactive page whereby users can share feedback or comment regarding the Resource Centre, including their key challenges and interests. Users can also share business tips and best practices. One of the steps that we have taken to break gendered stereotypes has been through our Goal programme, a community investment initiative which uses sport and life skills education – including modules on financial literacy – to transform the lives of disadvantaged girls and young women in India, Bangladesh, Nigeria and Jordan. Goal currently aims to reach 100,000 girls over the next four years. The programme has resulted in a positive impact on girls’ knowledge, changing attitudes (which in turn are impacting four to five family members per participant), and we estimate that for each participant, awareness around the value of girls has reached approximately 50 more individuals. By investing in girls upstream – before outcomes like early marriage, childbirth or dropping out of school occur – it’s possible to change their futures. Standard Chartered mentions role models and features four success stories on its website. Will applicants have direct access to these role models and be able to communicate directly with them? If so, how will this work? The four women (all of whom are Standard Chartered SME customers) featured in the videos come from different backgrounds, regions of the world and fields of industry. They share their unique stories, talk about their successes, the challenges they faced and provide insights into their inspiring stories.

“One of the steps that we have taken to break gendered stereotypes has been through our Goal programme, a community investment initiative which uses sport and life skills education – including modules on financial literacy – to transform the lives of disadvantaged girls and young women in India, Bangladesh, Nigeria and Jordan.” Certainly women from all different walks of life and areas of business can relate to their stories and benefit from their advice and experiences. So while users won’t be able to directly reach out to these female role models in the videos, their stories are designed to provide inspiration. Instead, what the site does offer is that any woman who registers on the website has the opportunity to contact an SME specialist. Will the entire process be virtual or will there be any direct personal contact? And will there be ongoing support and involvement once the candidate completes the modules? In many markets, we hold events such as roundtable breakfasts with our clients and customers, and one of the recurring themes is financial literacy. Also, in some countries, customers are invited to come together, network, learn and are often mentored through business planning workshops, networking events, and mentorship opportunities that are organised for women entrepreneurs and female clients. What motivated the fact that the Resource Centre will be available in nine languages, including Arabic? What are the advantages of this? The website’s translation to nine languages has multiplied our impact and increased our influence. Based on the bank’s presence in key markets and the world’s most widely spoken languages, the website is now available in: English, traditional Chinese, modern Chinese, Korean, Thai, Bahasa, Bengali, Hindi, and now Arabic. This way we can ensure that we are reaching more women across our global network. Will there be any emphasis placed on growth in certain sectors, such as information technology or media, or will

any business idea be welcome, even if it is in an already heavily traded sector? As you can see in the videos on the Resource Centre website, we support entrepreneurs from very different industries – education, the beauty industry, the chemical industry, jewellery and retail. Our SME banking services offer solutions that address individual customers’ specific business needs. Will the Resource Centre work in conjunction with local or regional small business initiatives, initiatives at education institutions or in the public and/or private sector? Many external stakeholders, including government officials and agencies, have expressed interest in our approach towards women’s financial literacy and inclusion. For example, in Indonesia, the website was launched by the Minister of Women’s Empowerment. We are taking into consideration the approach in Qatar. Finally, are there any important points you would like to stress, especially when it comes to promoting women in SMEs in Qatar? I’d like to mention that female entrepreneurship is an increasingly salient part of the economic makeup of many countries and is a key contributor to economic growth. Therefore I’d like to re-emphasise the importance of financial education, as it is a key factor in driving women’s economic empowerment. To drive this, we announced a Clinton Global Initiative commitment in 2008 to provide financial literacy training to at least 5000 women across Asia, ranging from basic financial knowledge to SME capacity building. Women in Qatar are becoming increasingly savvy when it comes to running their own finances, and we therefore expect increasing numbers of women here to use the knowledge being made available to them to their advantage. TheEDGE

BUSINESS INSIGHT

Human Resources

Using unique methods to assess leadership qualities to enhance effectiveness Doctor Joseph Folkman, of United States human resources consultancy, Zenger Folkman, has a Masters degree in Organisational Behaviour and a PhD in Organisational Psychology. He is also a psychometrician, which is the measurement of psychological attributes to determine vocational suitability. Dr Folkman, who specialises in the analysis of business leaders, is also a worldrenowned speaker and author, having co-authored among others The Extraordinary Leader with his business partner, Dr Jack Zenger. Dr Folkman will be in Doha to host the Extraordinary Leadership Summit, to be held from May 17 to 18. Miles Masterson spoke to him about how his unique approach to assessing leadership skills includes finding â&#x20AC;&#x2DC;the fatal flawâ&#x20AC;&#x2122;, and finds out more about his field and the event itself. 74

TheEDGE

BUSINESS INSIGHT

Before we talk about your methods and the Doha Extraordinary Leadership Summit, can you answer a simple question: Are leaders born or made? Is great leadership something that is inherent or is it something that can be taught and/or refined? I think they can be made. When we look at the studies that try to predict success in life and school or grades, there is almost zero correlation. There is very low predictability, and you’ll find very smart people who do not really do well in life, because they lack certain important skills. Now, here is the key: great leaders are different, they are unique. There is no mould, but the factor that really makes a leader great, is they do a few things well, and it is figuring to create that differentiation, how to create that uniqueness in yourself and it is sort of a combination. This is where your born stuff comes in; we do have some natural inclinations and tendencies. We all have them and you have got to do everything at a kind of a minimal level. For instance, if you are dishonest, or if you cannot deliver results at a reasonable rate or if you cannot be reasonable at treating people decently, you are going to fail. But you earn that sort of minimum level, where there is sort of a bar, we would say if you are not there, you have got to fix it and, by the way, you can learn to do that. People can achieve leadership at first in very different ways. It is about what they do well that really makes a difference, unless they have what we call a ‘fatal flaw’. A fatal flaw is a severe weakness; it is such a glaring weakness that it gets in the way of any of the strengths or anything you do well. So we do find in a population of leaders that about 30 percent have this. This when we say you need to fix that, this is going to hurt you. The good news is that they can fix it. Typically they do not turn it into a profound strength, but they do move it from terrible to okay. In short, how does the 360-feedback process to assess business leadership flaws that you have come up with, work? The 360-feedback is a process where you get feedback from your boss, and your peers, through direct reports and others from surveys, typically about 15 surveys from different folks. People who have worked with you at the same level and others, maybe second level of direct reports, just other people they interact with. We can use that data to provide this person feedback.

“Great leaders are different, they are unique. There is no mould, but the factor that really makes a leader great is they do a few things well, and it is figuring to create that differentiation, how to create that uniqueness, that is key.” And what we find is, that when people do get that range of assessments from people who would know them very well, that using that aggregate date from that assessment, we can predict outcomes. It is true, if we look at any one individual, we would get an assessment from, that we cannot predict the outcome. Any one measure is not predictive, but the consensus is and it is very powerful. At the personal level, one of the things that happens is, that when you give people this 360-feedback, we have found their own ability to predict their strengths and weaknesses is very poor. So inevitably there may be bad feedback, and it is a bit of a surprise. Sometimes it is a positive shot in the arm. Some leaders are pretty good, some are okay, but some have downsides, and a couple of people on the seminars have the fatal flaw. They had some real negative data and we counsel them on fixing it. We try to get people to acknowledge that feedback is their friend and we ask them, what is worse than getting feedback and knowing some things that are hard to accept? Not knowing. Is all the information gathered confidential? It is…the respondent cannot tell who is saying what. The important thing is the message, not who said it. If I were to comment, oftentimes people feel like they can identify who said that. Our research tell us that yes, they can about 50 percent of the time. The problem is they are wrong 50 percent of the time. We always say, look you do not know who said it and it is crazy to try and do that. What you really are interested in, this feedback that is here, let us use it to better ourselves. Now, 90 percent of our clients give this feedback through an individual and their information, the company never sees it, it is their personal information, 90 percent of our clients do it that way. 10 percent of our clients actually utilise that information or give it to the leader’s manager who will see it and they use it as part of their performance management process. If done

correctly that can work, but in 90 percent of the cases that information is only given through the person and used as a good opportunity, and there is no downside to it. On that point, how badly do some leaders typically react when you provide them with their assessments by others, especially those with a fatal flaw? Do some react negatively? Some do, and there is process where the first reaction people often have is shock, and then they go to anger and anxiety, and oftentimes they go into rationalisation and even rejection. But what we are saying to these people is, you might get in that mode of saying this isn’t true, but these perceptions of you – whether you are a great leader or not – it is what other people think. It does not matter whether you say you are great, other people do not see it. In terms of leadership, guess what? You are not. You have to manage those perceptions and the perceptions are real; and by the way, here is the rub in all of that, those perceptions predict outcomes. We know that bad leaders have a higher staff turnover, lower customer satisfaction, lower profitability, and lower levels of engagement by their employees. Good leaders are better and great leaders make a real difference. One of the ways we have changed the mindset in terms of acceptance, is that we tried change how people look at this. In the past whenever we gave 360-feedback, we would point out people’s weaknesses, we would say, look fix this stuff that is wrong. We started to understand it was the strengths of people that really made a difference. When we looked at great leaders, we found they did few things well, but they were not perfect. When we think about typical notions of development, I remember my first performance review, when the boss came in the office and he started saying nice things about me and I am thinking, this is going to be good, I am having fun here. But then I heard that word ‘but’ and then what was next was the bad news. TheEDGE

BUSINESS INSIGHT

When I left his office, I was determined to focus on the things that were wrong. When I talk to people about that experience, I say, how many of you have had that experience? Everybody’s hand goes up. Apart from those with who need to fix their fatal flaws, which on a video on your website, Dr Zenger calls reaching or returning to ‘Ground Zero’, how does the process work for the rest? Your statistics state that about two-thirds of those surveyed do not necessarily have fatal flaws, but rather weaknesses, and that as you say, it is far more productive for them to rather work on their strengths through individual personal development goals? The feedback is helpful, but what we felt it that oftentimes people do not do much with it. So we have got a process to help them to really take it and utilise it and do something with it, and there are two things are important here. One is the focus on building strengths and the second is that we have a unique technology of how to build these strengths; it is a different approach. We have material we give people, a development path of how to get better at something they are already good at…and we find that majority of leaders that we put through this development experience are significantly better when we come back and we assess their effectiveness. Now not everybody is, and there is no magic in just giving the feedback, the magic comes when you do something with it, [and] people do not do anything that generally makes it worse in the follow-up evaluation, if people focus. What we ask them to do, is to find one dimension to build on, to work on and the reason we do that is because everybody is very busy, everybody has more to do than they can do. Do you help to identify that one thing? We have a process to identify that…one of the logics we use to find it is finding for you that on thing that you want to work on. At the end of the day, people change stuff they care about. Dr Zenger also mentions the fun factor in his video. He said is not as much fun working on a fault or a flaw as it is to improve a strength and there is also more satisfaction and reward in this approach? Well, when we looked at a study we did about the people who worked on these things, they improved twice as much as people who work on improving their weaknesses. Now

TheEDGE

“We know that bad leaders have a higher staff turnover, lower customer satisfaction, lower profitability, and lower levels of engagement by their employees. Good leaders are better and great leaders make a real difference.” you can ask why is that? Because it is fun, they enjoyed it and they wanted to do it. You can fix stuff you don’t like, it is just hard work. We say to people, you do not need to be perfect. You can’t have any fatal flaws, but beyond that, leaders come in different shapes and sizes. In any organisation you need of a variety of people who can contribute and add value in a different ways. It is great to have a driver, a resultsorientated person, but it is also great to have a visionary, and it is wonderful to have a wonderful people-orientated enhancer, who people love to be around and builds teams. And often we get mixtures of people who aren’t good at every one of those things, but are good at one of them, and it can be of value to company to help those leaders and balance their downsides to get pretty good leaders. What can attendees to your Extraordinary Leadership in Doha in May expect? How does the whole process work? We are going to give people the opportunity to get their own feedback from their direct reports, from their boss and their peers. We are going to encourage people to get a broad range of people, do not just trace the people because then they understand it, we just give the feedback to them, it is their feedback and I am not going to share with anybody else. So it is their learning experience. They will get an e-mail and be asked to select a group of respondents to give them feedback. We recommend around 15 to 20; your boss or bosses, and then your peers, people who you work with on a daily basis, who you collaborate with…others could be customers [or] second level direct reports. And then you fill out a survey on yourself. In the survey there are 49 items that assess your leadership effectiveness. The questions are very straightforward, there is nothing difficult about the questions because they deal with really fundamental things. For instance, is a role model who sets a good example for his work group? Many people seek after his or her opinion? Has the ability to anticipate and respond quickly to problems? Is trusted to use good judgment

and do everything possible to achieve goals? Has a definite sense of direction and purpose? Balances getting results with a concern for the needs of others? Then you offer this feedback to them in the workshop part, how does that work? In the workshop, we are going to give them some insights. The first insight we are going to give them is around the difference between good and great. You are going to start off with the assumption that these people are good and the challenge is: can you be a great leader? The next insight we are going to give them is the way to go from good to great is to build your strengths. Then we are going to give them their feedback in the workshop, to sit down with them and have coaching experiences with them to make sure they understand the feedback. We are going to give them a way to prioritise and select what they should work on and by the time they leave the workshop, they are going to have the action plan started. So it is going to be fun. They will walk out of the workshop with a plan for how they are going to be a better leader. Is there any follow up process after that? Is this an ongoing exercise? Yes, there are three things that we will do. One is we will pair them in the workshop with another participant and ask them to follow up with each other. Sometimes these pairs end up calling each other for a year every month, they follow up with each other, and they just kind of support each other. The other thing we encourage and I think is a best practice, is when we do the workshop and then have continuing follow-ups with each person. I have a followup session next week with a leader who had come to an event in March. We will have an individual session next week where we will talk about his plan and how he is doing. Then I will call him again in three months, have another session, and call him again in another three months, etcetera. The reality is that we know it is not the workshop itself that creates the change, it is what happens afterwards.

LIFE & STYLE DO THE GRAND PRIX IN STYLE (P.78)

Sutton Images

The Monaco Grand Prix is the perfect event for some glitz and glamour, and you can be a VIP part of it all.

ALSO IN THIS SECTION: •

Buy the right watch: It may be the most important piece of jewellery you own other than your wedding ring. And in Qatar, your watch can be a terrific status symbol. But here is how to ensure your choice is top-notch, and not overthe-top. (P.79).

• •

Enter the Galaxy: Samsung adds to its Galaxy range with three new smartphones. (P.79). 10 tips for surviving a job interview: We have the 10 surefire tips guaranteed to prepare you, relax you and make you a frontrunner for that big corner office. (P.80).

TRAVEL

Formula 1’s glam factor

rom May 26 to 29, glitz and glamour will descend on Monaco for the Monaco Grand Prix. The Mediterranean setting – with its classic European architecture, high-end shopping and fine dining – sets the stylish and sophisticated tone for the excitement of Formula One racing. Considered one of the most demanding street tracks in the world, the Grand Prix is bound to be as dramatic as ever, and thanks to My Yacht F1, you could be perfectly positioned to watch the race from a luxury yacht, enjoying three days of fantastic hospitality.

TheEDGE

My Yacht Monaco, now in its sixth year, has attracted prestigious brand partners such as De Beers, Bombardier/ Learjet, Edmiston Yachts, Petrossian Caviar and Bugatti. Join them for a weekend that takes in all the glamour of the Grand Prix and high-living of the South of France. The weekend begins with an exclusive invitation-only party on board the 39-metre tri-deck, the Snowbird, offering a premium bar, gourmet food and dancing. Guests in previous years have included Prince Albert of Monaco, Lewis Hamilton, Jenson Button, Nigel Mansell, and Oscar-winning director, Steven Soderbergh.

Sutton Images

Rub shoulders with the elite of business, entertainment and sport as you watch the Monaco Grand Prix. In the morning, guests are taken from Monte Carlo’s Bay Hotel and Resort by high-speed motorboat, to the yacht, which is positioned for unobstructed views of the race track, for an all-day Grand Prix affair. VIP guests are also able to enjoy ‘hot laps’ of the closed Grand Prix circuit in a pace car, and high-speed runs outside of Monaco’s harbour in a racing boat. Priced at EUR8,500 (QR45,000) per person or EUR16,000 (QR85,000) per couple, this is truly an adventure for thrillseekers with a taste for the high life. For more information, visit www.paradizo.com

LIFESTYLE

It’s all on the wrist If you’re an executive in Doha, chances are you already have several watches to choose from. But how do you know if your watch style is the right style? Here is our short and sharp guide to watches.

The everyday watch

You’ll wear it with your suit, so it should look professional and sensible. What to buy: A watch with a date window or chronograph, with either a leather or metal band. Metal is generally more durable, but leather is discreet. Both, however, will lend you the right air of professionalism. What not to buy: A digital watch. Your client – or potential client – will likely feel their confidence in your ability recede as soon as they see it.

The weekend watch

Weekend equals casual, so look for anything durable, rugged and utilitarian that won’t look out of place next to a pair of jeans and paired with sunglasses. What to buy: A quartz watch which is often less expensive than mechanical choices. What not to buy: Gold. As much as you want to impress, a gold watch with your weekend look is just trying far too hard.

The anytime watch

The watch that goes with everything, from T-shirts to tuxedoes. It’s distinctive, timeless and very good-looking. What to buy: A watch with at least one feature that sets it apart. You want a watch that will last a lifetime, so invest in top quality craftsmanship. What not to buy: Anything too trendy. A mid-sized watch with a fairly basic design and colour scheme will never go out of style.

The bling watch

Unusual, extravagant and out for attention. Blow the budget on this one. What to buy: Show the world you’re serious with a watch in titanium, rose gold or platinum. This is the unique watch in your collection. What not to buy: Anything involving a beeping alarm or Disney character.

Tips for a good buy •

Titanium is expensive and exclusive, but it’s also corrosion-proof and all the rage.

• •

Black-cased watches are also currently in vogue, but stainless steel watches never go out of style. Mechanical movements are the preference of watch afficionadoes. They’re more complex than electronic models and have been credited with giving a watch ‘more soul’, which may account for the style’s return to favour. A quartz watch on the other hand, can be set and forget about, until the battery runs out.

The Galaxy family gets bigger

Samsung recently announced the expansion of the Samsung Galaxy family, launching thr Ace, Gio and mini, all smartphones catering to different lifestyles. The Ace is ideal for social young professionals, offering a premium experience with a 3.5-inch display and 800 megahertz (MHz) processor, voice search and ThinkFree document viewer. The Gio is a more timeless design with enhanced social networking capabilities and a 3.2inch display. The Samsung Galaxy mini embodies great performance in a compact body, offering Google voice actions and Quick Office document viewer, as well as a 600MHz processor. All models are now available in Qatar. www.samsung.com/ae/

TheEDGE

TEN THINGS

10 Interview survival tips Job interviews are treacherous experiences, and not many people head into them feeling supremely confident. Even the most qualified candidate is likely to be struck by last-minute nerves. Here is our survival guide. Prepare, prepare, prepare Research the company beforehand. Look at the website, find out about new products or partnerships, and, if you can, try to seek out ‘inside intelligence’.

Don’t lie Make sure everything on your resumé is true – even the dates you mention – because the stories of bigshot executives being caught fibbing about accomplishments or credentials are plentiful.

Know your audience Research the person who will be interviewing you, because they will be the one doing the hiring or making a recommendation to a higher-up.

Go in with questions Interviews always end with the interviewer asking if you have questions, and a genuinely engaged candidate will likely spur enough interest for a follow-up

interview. Good questions also show you have done your research. Dress up A good rule of thumb when deciding how to dress is to think about what a current employee at the company is likely to be wearing, then take it up a notch. Even the most casual interview or informal company merits some serious attire. Practice Google typical interview questions and practice responding to them in front of a mirror to gauge your facial expressions. Practicing helps you focus on your career goals and experience, and will hush some of the nerves before the big day. Running late? Don’t! Nothing is more crucial to your success at this point than to arrive on time. Yes, Doha’s traffic can lengthen a fiveminute trip into one that takes an hour, but build this into your preparation. Ideally, you should arrive 10 to 15 minutes early. At the very least, be on time. Make copies Always bring an extra copy or two of your resumé, kept in a plastic sleeve or envelope so that the edges don’t get tatty. Should the interviewer not have a copy, or need an extra one, you’ll score brownie points for being prepared. Keep it (relatively) short Do not dominate the interview with lengthy answers or excessive questions. Try to keep your responses to two minutes each, at the most. Your questions should be pointed, concise and relevant – and not about annual leave, salary offers or benefits in the first interview, unless the interviewer brings it up. Deep breaths Tell yourself that an interview is merely an informational conversation, nothing to necessarily be afraid of. You are interviewing the company as much as they are interviewing you. So take the pressure off with some deep breaths and try to relax.

TheEDGE