The Edge - Mar 2011 (Issue 20)

CONTENTS

March 2011

CONTENTS ON THE COVER: An Egyptian protestor raises his hand, fingers in the

universal sign for victory, during the February 2011 Cairo uprising that overthrew the Mubarak government, a symbolic gesture that also alludes to the unfortunate cost the road to freedom will have on the country’s economy. (Gallo/Getty Images).

www.theedge-me.com FINANCE & ECONOMICS

FEatures

.26. market watch

.44. in the spotlight

.28. Inside edge

.48. BUSINESS INTERVIEW

.32. special report

.52. on the pulse

Matthias Catón reports on the recent World Economic Forum Annual Meeting in Davos.

Phil Strange speculates on the Qatar’s impending 2011-12 Budget.

Is ‘cyberwar’ the go-to conflict of the future? Mark van Dijk finds out.

Maersk Qatar’s managing director, Lewis Affleck, discusses the Shaheen oil field.

Greg Harris is optimistic about Qatar’s retail sector in 2011.

.34. balance sheet

Edward Jameson looks the options the Qatar Investment Authority might consider in 2011.

Mark Lindley looks at the introduction of Value Added Tax and Goods and Services Tax to the GCC.

.38. COVER STORY: economic barometer

Karim Nakhle counts the cost of Egypt’s ‘Revolution 2.0’.

38

KNOWLEDGE & EXPERTISE .58. BUSINESS KNOW-HOW

Lauren Maas of Virginia Commonwealth University in Qatar looks at why design is critical to business.

.60. LEGAL INSIGHT

Arbitration should form part of all legal agreements, advises Ray O’Connor.

.62. how-to guide

TheEDGE examines hurdles for foreigners starting a new venture in Qatar.

.65. BRAND BEAT

Charlotte Stubbs takes a look at the branding opportunities of 2022.

TheEDGE

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CONTENTS

70

BUSINESS INSIGHT .69. Business Insight Interviews

• Dr. Sami Al Faraj on Iran’s threat to regional stability.

• Akshay Rendeva on the reinsurance industry.

• Bill Zada on catered office services.

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REGULARS .06. .07. .08. .14. .16. .18. .20. .22. .78. .80.

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from the editor Contributors News Etcetera Doha Diary Middle East Matters Country Focus Thinker’s Corner Opinion 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 megan.masterson@firefly-me.com +974 55348748 REGIONAL SALES DIRECTOR Julia Toon j.toon@firefly-me.com +974 66880228 SENIOR SALES manager Emma Land e.land@firefly-me.com +974 33197446 Marketing administrator/ DISTRIBUTION & SUBSCRIPTIONs Azqa Haroon a.haroon@firefly-me.com +974 55692471 Creative director Roula Zinati Ayoub Art Direction Lara Nakhlé Design Coordination Charbel Najem Designers Rena Chehayber Rana Cheikha Sarah Jabari Finaliser Michael Logaring Photographer Herbert Villadelrey

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Since the historic announcement on December 2, 2010, we have tried not to over saturate TheEDGE with reporting on Qatar’s 2022 Fifa World Cup bid victory.

However, in this issue – which by design, focuses to a degree on speculating on the economic climate ahead for the country and region for the next year – avoiding mention of it has naturally been impossible.

That 2022 will have an impact on the Qatar Budget 2011-12 (page 28), the local retail sector (page 32), the machinations of the Qatar Investment Authority (page 52), as well as practically every facet of business in the country – including developing the technology to cool our stadiums in 2022, lest we forget (page 22) – for years to come, is certain.

More uncertain though, will be the economic long-term impact of the wave of popular uprisings that have swept the Middle East in the last couple of months. On page 38, we examine the cost of the pro-democracy movement to Egypt, and potentially the region and beyond.

Staying on topic, respected regional academic, Dr. Sami Al Faraj, head of the Center for Strategic Studies in Kuwait, in an enlightening Business Insight on page 70, broaches the enigma that is Iran and the challenge that dealing with this volatile state poses to the fragile equilibrium of the Gulf, both politically and financially.

However, these are not the only topics in the region or world bearing inclusion in this edition of TheEDGE. The forthcoming introduction of Value Added Tax to the Gulf Cooperation Council (page 34) and the ongoing global threat of cyberwar (page 44) are but two bearing scrutiny.

In the energy sector, contributor Rachel Morris managed to secure an interesting

exclusive interview with Maersk Qatar managing director, Lewis Affleck, regarding their rarely publicised activities in the challenging Shaheen oil field, north of Qatar (page 48).

So, while there is no doubt the topic of 2022, and the financial impact of the political unrest across the MENA region are sure to reappear in various guises in future issues of TheEDGE, we will continue to strive to bring to you further engaging content from the local and international world of commerce.

After all, life and business is not all about football and politics – though some might of course argue otherwise.

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 12 times yearly to a readership base of more than 7500 professionals, providing advertisers with the needed additional reach and frequency to their most important 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

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printed by Ali Bin Ali Printing Press, Doha, Qatar

the editor

MA CYC LE TH IS

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

TheEDGE

CONTRIBUTORS

The

Usual

Suspects...

P.22 MARTIN Á PORTA Chief Executive Officer Siemens WLL Doha, Qatar

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 MARK LINDLEY Senior Tax Manager KPMG Doha, Qatar

p.38 KARIM NAKHLE Senior Business Strategist Doha, Qatar

p.44 MARK VAN DIJK Journalist Cape Town, South Africa

p.48 RACHEL MORRIS Journalist Middle East and North Africa Region Doha, Qatar

p.52 EDWARD JAMESON Senior Business Journalist Middle East and North Africa Region London, United Kingdom

p.60 RAY O’CONNOR Senior Legal Consultant DLA Piper Doha, Qatar

p.62 ARLIN FRIESEN Entrepreneurial Mentor College of the North Atlantic Doha, Qatar

P.65 CHARLOTTE STUBBS Client Services Creative Action Design 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

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NEWS Etcetera

NEWs Etcetera Islamic Banking Edict Stuns Financial Sector Qatar’s Central Bank (QCB) shocked the country’s financial community last month when it announced all conventional banks in Qatar must close their Islamic banking operations by the end of 2011.

The new ruling, which was been describe as “extreme” and “abrupt” by analysts, came seemingly out of nowhere and stunned the 18 banks operating in the country, many of QCB EDICT: Qatar bank IBQ is one of the many banks affected by the Qatar Central Bank’s recent edict on the closure of their Islamic which have successful Islamic and banking operations. newly established offshoot operations.

The banks affected by the decision include Qatar National Bank, Commercial Bank of Qatar, Doha Bank, IBQ, HSBC, Ahli Bank and Alkhaliji. Between them, they have 16 branches dedicated to Islamic banking services.

There are three dedicated Islamic banks operating in Qatar – Masraf Al Rayan, Qatar International Islamic Bank and Qatar Islamic Bank.

The QCB argued that with tailored Islamic banking regulations and capital adequacy regimes about to be introduced – which are based on guidelines by the Malaysia-based Islamic Financial Services Board, an industry standards body – it would be “very difficult” for commercial banks with mixed operations to follow both these and conventional banking rules without problems.

HSBC Amanah, part of banking giant HSBC, received the formal go-ahead for its Islamic branch in Doha just seven months ago.

In a statement, HSBC Amanah said it was “communicating with the Qatar Central Bank to seek clarification on the issue” and to “seek a workable solution” to the impasse.

Meanwhile Doha Bank said it was “not surprised” by the new ruling and said it did not stop them from investing in Islamic funds.

The loss of the Islamic banking franchise is credit negative for Qatari conventional banks, which derive 10 to 15 percent of their yearly earnings from the lucrative Shari’ah-compliant banking.

“Conventional banks will lose between eight to 16 per cent of their deposit base, total assets, and profits. The biggest impact will be on Qatar National Bank,” said ratings agency Moody’s in a commentary.

“Islamic banks should benefit from the new directive given that the segregation of Islamic and conventional banking will provide access to a larger pool of customers, strengthen their franchise dynamics in Qatar as fewer institutions will be competing for the same business and potentially provide greater bargaining power with customers, resulting in better profit margins.”

The QCB looks set to meet with the country’s banks this month and rumours are circulating that the banks have collaborated to ask for an extension on the deadline. – Rachel Morris

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Barwa records QR1,405 million profits for 2010 In late-February, the Barwa Group, one of Qatar’s global leading investment and real estate companies, announced net profits of QR1,4 million for the period January to December 2010, an 84 percent increase over the QR766 million net profit for the corresponding period in 2009.

These results reflect Barwa’s continuing growth and its ability to achieve increasing returns for its shareholders.

In 2010, earnings per share reached QR4.06, compared to QR2.92 per share during 2009, a 39 percent increase. This was despite an increase in the company’s shareholding capital, through the acquisition of Qatar Real Estate Investment Company (Al Aqaria).

The company’s total assets reached QR74 billion, a 111 percent increase over QR35 billion as at 31 December 2009. Further, total revenues increased to QR8 billion, compared to QR3 billion in 2009. Increased revenues from rents and services and profit on the sale of properties and projects and sale of Barwa’s stake in a subsidiary, along with other exceptional returns resulted in Barwa being exempt from some commitments, leading to this increase in net profits during 2010.

The acquisition of Al Aqaria – completed in May 2010 – positively contributed to net profits by QR509 million. In addition, the acquisition of 60 percent of Barwa Al Khor, led to gains amounting to QR2.2 billion. Barwa Bank also acquired First Leasing and First Finance, which led to increased revenues as well as to net profits, and also contributed to an increase in the overall asset base of the company.

NEWS Etcetera

Libya Unrest to Spike Oil Price At the time of writing erstwhile Libyan leader Muammer Gadaffi railed in defiance against the pro-democracy protestors in his country and throughout the world, and the exodus of foreign nationals continued unabated. As the country’s economy essentially ground to a halt, fears of a freeze in production and exports and the sharp spike in the global price of oil, emanated across international markets.

By February, with the cost of oil per barrel reaching close to US$120 (QR437) per barrel, some pundits estimated that this shortage scenario could well create a situation last seen during the Gulf War, when the oil price reached US$220 (QR801) a barrel or when the cost per barrel almost topped US$150 (QR546) in 2008.

If this were to transpire, demand could also place pressure on OPEC’s spare capacity and the repercussions for the Middle East and, indeed, international financial stability could be far-reaching.

International Movie Starts Shooting In Qatar ‘DOHAWOOD’: Shooting began in Qatar in February on Black Gold. The film, starring Hollywood actor Antonio Banderas, is the first major production to be filmed on Qatari soil. (Image: David Koskas/Quinta).

EXODUS: Thousands of expatriates, including these Chinese nationals, fled Libya, leaving the economy at a standstill and prompting fears of a sharp rise in the price of oil.

(Gallo/Getty Images).

International Movie Starts Shooting In Qatar Filming of the epic feature film, Black Gold, began in Qatar in February.

The movie, one of the biggest projects to be made about the Arab world, stars Antonio Banderas, Freida Pinto, Tahar Rahim, Mark Strong, Riz Ahmed and Liya Kebede.

French filmmaker, Jean-Jacques Annaud, will helm the US$55 million (QR200 million) epic. Principle photography wrapped in Tunisia on October 18 last year on budget and on schedule despite the final few days of filming taking place against the unfolding revolution.

Filming then moved to Qatar to the desert dunes of Mesaieed, where all the battle scenes will be shot. Black Gold is the first major, international project to shoot in the country and tells the story of the rivalry between two Emirs in Arabia in the 1930s, just as oil is being discovered, and the rise of a young leader who unites the various tribes of the desert kingdoms.

Warner Bros and Universal Pictures International will distribute the film worldwide on a multi-territory basis, an unprecedented feat for a film about the Arab world. The filming of the movie is also a major boon for the fledgling film and production industry in Qatar.

Qatar Salaries Rise by Seven Percent A recently published study by GulfTalent.com has highlighted the rising prominence of Qatar as a destination for professionals. According to the data, fast-rising salaries, falling cost of living, growing employment opportunities and an improving international brand, which was boosted by the country’s successful bid to host the 2022 World Cup, have driven this trend.

Based on an analysis of vacancies advertised by employers and recruitment agencies on the website, job opportunities in Qatar have grown from eight percent of all Gulf Cooperation Council (GCC) vacancies in 2008 to 16 percent in 2010.

The findings were published in GulfTalent.com’s sixth annual review of labour market trends entitled Employment and Salary Trends in the Gulf 2010-2011 and were based on a survey of 32,000 professionals and 1400 companies across the six Gulf states.

Among these countries, Qatar and Saudi Arabia had the highest pay rises in 2010 at 6.8 percent and 6.7 percent respectively. Oman was in third place with 6.4 percent, followed by Kuwait at 5.7 percent.

GulfTalent.com’s survey of mobility intentions found that, while the United Arab Emirates remain the most attractive destination for professionals, favoured by 49 percent of GCC-based expatriates, Qatar is closing in fast, with a 44 percent following, and concludes that Qatar could become the Gulf’s most popular destination for professional expatriates in the future.

Errata In the Gallup/Silatech table featured in the Young Arabs’ Access to the Internet article on page 21 of the February edition of TheEDGE magazine, there are two errors. ‘Low-income countries’ on the left should read ‘High-income countries’, and on the right of the table ‘Middle-income countries’ should read ‘Low-income countries’.

TheEDGE apologises for any inconvenience caused to Gallup, Silatech and our readership.

TheEDGE

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NEWS Etcetera

events calendar 6-9

Road Planning Design and Construction Middle East (Doha)

7-10

Hedge Funds World Middle East (Dubai)

8

A New Wiki World (Doha)

12-14

Sixth Al Jazeera Forum (Doha)

13-16

Education Design and Construction (Doha)

14-15

MultaQa Reinsurance and Risk Management Conference (Doha)

15-17

Abu Dhabi Media Summit (Abu Dhabi)

16-17

Qatar Alternative Energy Investors Summit (Doha)

21-23

Builders International Gathering (Muscat)

21-24

Gastech (Amsterdam)

22-24

Global Oil Refining Technology Forum (Doha)

28-30

Arabia Construction Week (Abu Dhabi)

28-30

Offshore Arabia (Dubai)

30-31

Strategic Hydrocarbon Management (Istanbul)

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Qatar’s Prime Minister and Foreign Minister, HE Sheikh Hamad bin Jassem bin Jabor Al Thani, quoted in Qatar’s Peninsula newspaper in late February in reaction to Libyan leader Muammar Gaddafi’s criticism of Qatar and Doha-based Al Jazeera news channel.

“WE will ask the people what THEY want.”

His Highness, The Emir of Qatar, Sheikh Hamad bin Khalifa Al Thani said in an Associated Press report regarding the possibility of the 2022 World Cup being held in the winter months rather than the heat of summer, after talks with British prime minister, David Cameron, in Doha in February.

NEWS in quotes

MARCH

“We have a free press and we pursue a policy of non-interference in the media.

Qatar is extremely pained by what is going on in Libya. We are with its people who are suffering. Qatar’s stand is clear and it should not be taken as interfering in its internal affairs. Libya is an important country and is of concern to everybody. We do not seek to isolate it.”

“Last time there was damage to (Christchurch's business district), it was nowhere near as widespread as it is now.

Frankly it looks like a scene out of a horror movie. So we know from a numerical sense that 15 percent of the New Zealand economy has now stopped.”

New Zealand prime minister, John Key, told Agence France Press when reacting to questions regarding the financial impact of the February earthquake on the country.

NEWS Etcetera

PIC of the month

Never too old Former Jaguar test driver Norman Lewis (L) and former world champion racing driver John Surtees celebrate the 50th anniversary of the Jaguar E-type car outside London’s Design Museum in February in London, England. The iconic Jaguar E-type was manufactured from 1961

till 1974 and is considered by many to be one of the most beautiful cars of all time. One of the first E-types off the production line will go on display outside London’s Design Museum to celebrate the car’s half-century. (Photo by Oli Scarff/Getty Images).

NEWS in numbers

100,000

Cubic Metres

With the increasing global demand for energy and cost effective solutions, floating production, storage and offloading vessels (FPSOs) are currently at the cutting edge of innovation and research in the gas industry.

The diversification of liquid natural gas (LNG) concepts will be explored in depth at the 25th Gastech Conference and Exhibition in Amsterdam, from March 21 to 24. Gastech 2011 will spotlight innovations in LNG production and delivery, reflecting the changes the industry has experienced in its evolution and looking toward the future.

In particular, Gastech will address the not-too-distant prospect of the launch of LNG FPSOs. An LNG FPSO vessel, complete with onboard LNG processing and export facilities, will have the capacity to store around 100,000 cubic metres of LNG while awaiting export tankers for offloading, making it a flexible and viable development solution for a number of different offshore field situations, especially in deepwater and remote areas.

Hosted by Shell, Gastech 2011 will explore new technologies, projects and case studies in this sector, and provide an overview of developments in the gas industry. Industry experts will present research and recommendations from previous project execution and operation experience, invaluable to the future of FPSOs and LNG production.

www.gastech.co.uk TheEDGE

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NEWS Etcetera

‘Diaspora’

www.global-islamic-finance.com What is it? This website is ostensibly a large scale blog, comprising a vast amount of news and information on Islamic banking, compiled by its editor, Malaysian Islamic investment and financial consultant Ahmad Sanusi Husain.

Why should you log on? The website, which was launched in February 2011, could prove a valuable resource for all matters pertaining to Islamic finance, particularly for South East Asian countries such as Malaysia and Indonesia.

WORD OF THE MONTH

WEB watch

www.mena.org.eg What is it? This is the online portal for the Middle East News Agency, which according to the website, was established in 1955 as a joint stock company owned by Egyptian press establishments, and now has many news services, including this one.

Why should you log on? This is a seemingly endless resource for political and financial news on the region, particularly its recent headline-making home country of Egypt, and features subscriber services in both Arabic and English.

www.thedohadebates.com What is it? As its name suggests, this is the official home page of the Qatar-based controversial and outspoken BBC World News programme, The Doha Debates, chaired by award-winning correspondent, Tim Sebastian.

Why should you log on? The site contains everything you need to know about the programme, including information about past, overseas and special debates, photos, research and polls, and the opportunity to register for tickets to attend.

With origins in the Greek language, this word, essentially meaning ‘scattered’ or ‘dispersed’, has risen in popular usage, especially in the media of late, to denote any people or nation, particularly those displaced by political unrest and/ or living in exile from their home country. Its prominence is currently topical and relevant in light of the recent protests in the MENA region, where many Arabs living in the West have expressed solidarity with their compatriots back home.

Example: “The Libyan diaspora across Europe are united in their condemnation of Gadaffi’s regime.”

CARTOON corner

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Open air excitement.

Opening Hours: Saturday to Thursday: 8:00 am to 12:00 noon and 4:00 pm to 8:00 pm Jaidah Flyover Showroom | Khalifa Road Showroom | Landmark Showroom | Al Khor Showroom Toll Free Hotline: 8000 100 | For Sales Inquiry Call: +974 4401 6061

DOHA DIARY

location,

location

Real estate columnist, Edd Brookes takes a closer look at the factors deciding corporate relocation and location decisions in the Middle East, and measures Qatar’s competitiveness.

A

lthough the United States’ unemployment rates and the inflationary potential of the United Kingdom economy are both concerning, as we edge further into the new year (the Year of the Rabbit, if you are Chinese), the global economy appears to be moving in the right direction.

There would be very few of us who would disagree that Doha has provided a welcoming shelter during unstable times.

In fact, recently published data reveals that Qatar has performed very well in terms of global competitiveness and from a real estate perspective.

Multinationals looking to expand regional operations in the Middle East often choose a single regional base where the majority of staff is housed, with a smaller network of offices feeding in to that central hub. Let us look more closely at office space in the region, comparing location choices based on prime office rent, space utilisation standards per workstation, and total occupancy cost per work station.

Space utilisation standards per work station is defined as the net internal area divided by the number of planned workstations for which the space is intended.

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Total occupancy cost is defined as the average total cost of leasing prime net usable space. It includes rent and outgoings, such as maintenance costs, normally borne by the occupier. It excludes fit-out costs and leasing incentives such as rent-free periods.

Recent data shows a dramatic change in total occupancy costs over the period of 2009 to 2010, with Dubai accounting for the greatest change, with a reduction of 34 percent – not that surprising when one considers the impact of the global recession on Dubai’s real estate and financial services industries, two sectors that play a large role in its economy.

These findings positioned Dubai as one of the 10 fastest declining markets worldwide in 2009. Nevertheless, Dubai remains the most expensive location in the Middle East and Africa for occupying office space.

The next largest change documented by the data was seen in Doha, where occupancy costs reduced by 24 percent over the same period.

Both Bahrain and Abu Dhabi saw reductions in total office costs by 23 percent and 18 percent respectively, while the average Middle East reduction was recorded at 13 percent.

Dubai tops the list as the most expensive location in terms of total occupancy costs per work station, with an average annual cost of US$14,500 (QR52,795) per annum, with Doha in third place behind Abu Dhabi, at US$12,850 (QR46,786) per annum, and ahead of the Middle East average of US$9250 (QR33,679) per annum.

The competition in the region for regional and global occupiers includes other factors such as tax regimes, quality of life for expatriates, and political stability.

In terms of The World Bank Group’s Ease of Doing Business, the Kingdom of Saudi Arabia (KSA) leads the Middle East, ranking 13th globally and followed by Bahrain (20), the United Arab Emirates (UAE) (34), with Qatar at 39th.

However, according to the World Economic Forum’s 2009 Global Competitiveness rankings, Qatar leads the Middle East region, ranking at 22 globally (up from 26 in 2008), followed by the UAE at 23 and the KSA and Bahrain at 28 and 38 respectively.

While Doha is not necessarily the cheapest location from an occupancy cost point of view, it is certainly less expensive than some of its neighbours, and certainly ranks highly when considering competiveness.

With further economic diversification anticipated over the coming years, as well as a high-profile role in international politics, Qatar looks set to punch above its weight for the foreseeable future, and will no doubt continue to attract world-class global operations to set up shop, sooner rather than later.

MIDDLE EAST MATTERS

Shifting

sands

A break at a friend’s farm in the Qatar desert shows Dr Tommy Weir that this harsh and unforgiving landscape holds invaluable lessons for the business executive.

W

hy is the desert so important in the Arabian Peninsula?

An integral part of local life since humanity’s beginnings, it has been home for thousands of years. But as important as it has been for generations of life, does the desert hold business lessons for the modernday executive?

Over the past few years, I have observed the behaviour and actions of the Gulf Cooperation Council’s political and business leaders – men and women who have achieved unrivalled feats – and I wonder: What gave the leaders of Qatar the global leadership gravitas to win the hosting rights of the 2022 World Cup? Where did the vision come from to grow desert villages into world-class cities? How did the region’s leaders find the insight to build unrivalled investment portfolios beyond oil? The answer is clearly… the desert.

I recently returned from spending the weekend with a Qatari family at their farm in the desert, and the connection between lessons of the desert and those determining business success became clear.

The desert has shaped – and continues to

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shape – leader behaviour in four key areas: adaptability, acceptance, resourcefulness and wisdom.

Adaptability Every day is different in the desert.

The shifting sands constantly create new landscapes, and the movement of the sun so changes temperatures that one is either trying to avoid scorching heat or lighting a fire to warm up. Life in the desert forces the inhabitants to adapt to their surroundings in order to survive.

Acceptance Because life in the desert’s harsh landscape is beyond one’s control, it is wise to accept the rhythm of the sands and move in concert with it. Even the best plans change and evolve as the unexpected happens. Accept what comes and make the best of it.

Resourcefulness Just as life in the desert requires one to find and maximise available resources to meet the needs of the moment, modern business can be hostile, even deadly, for those who are not resourceful or prepared.

Life in the desert has been traditionally

nomadic, and even though this behaviour is increasingly rare in industrialised countries, it illustrates the need for hunting and gathering.

Wisdom For most of my life, I believed that wisdom was reserved for the ‘older’ generations, and when a young person is described as having ‘wisdom beyond their years’, it reiterates the idea that wisdom is a characteristic of our parents’ and grandparents’ generations. But is this true? Why is it that the older generations have wisdom? Is it experience? Not exactly. Wisdom comes from reflection on experiences. The practice of regularly going into the desert is traditionally how wisdom was built in the region, as one would use the isolation as the best opportunity for reflection. In business, the lesson is that wisdom can be built if you regularly take time to reflect on the experiences of your busy and active life.

For my part, I am a city boy, and although I was excited about my break in the desert, I was also anxious, not knowing what to expect. Yet experiencing this integral part of the region’s history was vital in discovering the true impact of the desert. Heading back into the city, I realised that this new perspective on the landscape was a powerful breakthrough. The desert – with its shifting sands, harsh demands and near-endless solitude – teaches us to focus on what is important.

S COUNTRY FOCUS

As relations between South Africa and Qatar continue to grow, high on the list of discussions will no doubt be the lessons the African nation, the strongest economy on the continent, learned from hosting the World Cup in 2010. (Gallo/Getty Images).

OUTH AFRICA QATAR’S IMPROVING RELATIONS WITH AFRICA’S POWERHOUSE ECONOMY

Qatar can learn a lot from the experience of 2010 football World Cup hosts South Africa. But, according to South African Ambassador to Qatar, Dr. Vincent T. Zulu, the focus for both countries in the coming year will be mutual investments and growing an already strong relationship. By RACHEL MORRIS

“W

e are focusing on increasing investments,” Dr Zulu says. “South Africa is not a poor country, but we have an issue in the distribution of wealth. Qatari investments in South Africa are not so [widespread] right now, but they can and will be improved.”

Dr. Zulu, a former educator and education minister of his South African state, says there could always be more dealings and

discussions between the two countries, something he will work hard to enact in the coming 12 months.

“We are working hard to bring more Qatari investments to South Africa,” he says. “Another major area of interest is natural gas of which Qatar is a major world supplier. I’m working hard to get Qatar to sell gas to South Africa.”

The South African government, is keen to encourage foreign direct investment into South Africa, and offers a range of taxation and other

COUNTRY FOCUS

incentives in order to entice international investors. Among South Africa’s strengths as a destination of choice for investors are the size of its economy, the efficiency of its financial markets, good business practices and its innovative nature.

South Africa and Qatar already enjoy good bilateral relations dating back to 1994, when the country was officially freed from the social and economic shackles of apartheid, and have strengthened over the years.

Indeed, His Highness, the Emir of Qatar, Sheikh Hamad bin Khalifah Al Thani, remains one of few heads of state of a Gulf nation to have visited South Africa.

The Qatar Investment Authority (QIA) has invested US$400 million (QR1.45 billion) in an investment fund, the PME Infrastructure Management Limited Fund. The fund is investing in infrastructure across the African continent and is concentrating on the sectors of transportation, communication and energy. According to the Qatari government, South Africa is the biggest beneficiary of this fund, which is considered to be the first and primary investment by the Qatar Investment Authority in South Africa.

Dr. Zulu says South Africa’s increasingly diversifying economy is a potentially big lure for Qatari companies. Like Qatar, South Africa has realised that the key to transforming an economy from one not reliant on non-renewable resources, lies rather in building an economy that is knowledge-based instead.

“South Africa is quite big on science and technology, on ICT,” he says. “The Qataris are very much interested in this area. They are also interested in renewable energy, which is an area South Africa is moving ahead in.”

Several large-scale solar power facilities are under development in Africa including projects in South Africa. Dr. Zulu feels the way forward is to show Qatari companies and organisations the value of investing in South Africa. He says fears about security and riots are not a deterrent to potential investors.

“Most of the unrest is because of poor service delivery, they’re about water, electricity and jobs,” he explains.

There is small but notable South African investment in Qatar.

South African companies were involved in building Khalifah stadium for the 2006 Asian Games and various other construction projects across the country.

But the biggest investment involves the partnership between South African chemical and energy giant, SASOL, and Qatar Petroleum on the Oryx gas-to-liquids (GTL) project. Sasol and QP entered into a US$900 million (QR3.3 billion) joint venture to build a facility and the plant was inaugurated in June 2006, by then-South African minister of minerals and energy, Bulelwa Sonjica. Oryx GTL is the world’s first commercial scale GTL plant outside of South Africa. Located at Ras Laffan Industrial City, it produces 34,000 barrels a day.

“We are very proud of that achievement,” says the ambassador. But Qatar is also a home to one of South Africa’s greatest international success stories, the Nando’s fast food franchise, which has four lucrative outlets in Qatar and is looking to expand further.

“The manager of the Nando’s City Centre outlet told me that in terms of turnover, it is the biggest Nando’s outlet in the world,” Dr Zulu adds.

He reveals that Qatari companies have been interested in the fertility of South Africa’s farmland, given the fragility of Qatar’s own food supplies. Hassad Foods, an arm of the QIA, has ostensibly been in negotiations to buy cultivated farmland in the country.

“Qatar is very interested in food security. There have been talks about securing farmland for future food security for Qatar,” the ambassador confirms.

One area he has been working hard to manifest is importing South Africa’s famous food into Qatar, notably its sought-after poultry and meat products.

South Africa’s increasingly diversifying economy is a potentially big lure for Qatari companies. Like Qatar, South Africa has realised that the key to transforming an economy from one not reliant on nonrenewable resources, lies rather in building an economy that is knowledgebased instead.

“South Africa is very famous for its meat,” Dr Zulu says. “There have been concerns raised about the products, but I am confident we can change these perceptions.”

The ambassador sees potential in exchange of ideas about education, while the Qatar Chamber of Commerce and Industry also dispatched a delegation to South Africa in 2010 to investigate potential investment in the fields of energy, petroleum, technology, automobiles, food and construction.

There are around 2600 registered South Africans living in Qatar. They work mainly in professional jobs including engineers, teachers, bankers and nurses.

Qatar Airways has been running services to the country for more than six years, and the airline currently operates 11 services a week to South Africa, including daily flights to Johannesburg, with four of the services flying onwards to Cape Town.

After three years in Qatar, Dr Zulu has another 12 months to run on his posting and he is looking forward to facilitating more high-level visits and trade negotiations between Qatar and South Africa.

“The Qataris can learn a lot from the South African experience of hosting the World Cup in 2010,” he adds. “We hope to have more talks and delegations between the two countries to share this knowledge.”

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THINKER’S CORNER

the next

entrepreneurs

By Lydia Saad and Mohamed Younis

A

cross the Middle East and North Africa (MENA) region, the potential for entrepreneurial activity among adults aged 18 to 29 is far greater among men than women.

Young men in the Arab League countries and regions surveyed for the November 2010 Silatech Index, are nearly twice as likely as young women to say they ever thought about starting their own business, 40 percent versus 23 percent. Additionally, 19 percent of young men, compared with 11 percent of young women, say they plan to start their own business in the next 12 months (see Figure 1).

All

Men

Women

Ever thought about starting own business

31%

40%

23%

Plan to start own business in next 12 months

15%

19%

11%

Figure 1: Entrepreneurial aspirations of young adults in MENA. These figures are averages across the MENA region. However, Gallup finds somewhat higher interest in entrepreneurship among

women in low-income countries than in medium- and high-income countries. As a result, women account for nearly half (49 percent) of aspiring entrepreneurs in low-income countries, versus those in highincome (35 percent) and medium-income (32 percent) countries.

Gender differences in entrepreneurial interest are not unexpected, as they closely align with broader gender/work patterns as highlighted in previous Silatech Index data. Across the region, women are less likely to be in the workforce than men – about half of young women (52 percent) are neither employed nor in school, compared with 23 percent of young men.

Notably, nine percent of these non-working women plan to start their own businesses in the next year. That compares with 18 percent of women who are employed full-time and 24 percent of those women employed part-time.

Men

Women

Employed full-time

24%

18%

Employed part-time

27%

24%

Not in workforce/not student

21%

9%

Student

12%

8%

Figure 2: The young men and women of MENA who are planning to start a business in the next year, classified by work status

THINKER’S CORNER

By contrast, there is little difference in the intention to start a business among young men of different work situations. Men aged 18 to 29 years who are not currently working are almost as likely as those working, either full- or part-time, to say they plan to start a business – 21 percent versus 24 percent and 27 percent, respectively (see Figure 2).

Regardless of gender, relatively few young adults who are currently in school have plans to start a business within the coming year. However, whether that reflects the reality that many students may still be in school for another year, or that they lack an interest in entrepreneurship as a career option is unclear.

A key finding in the data is that working young men and women are broadly similar in their degree of interest in starting a business. This signals that while certain factors may divert or discourage young women from fully participating in the workforce (the percentage of women working in the Arab League is the lowest worldwide), those who do work have nearly as much entrepreneurial spirit as their male counterparts.

(27 percent), which is somewhat greater than the percentages of young men with less education. However, the rate is still fairly high (20 percent) among men with no secondary education.

Relatively few young women at every level of education – between 10 percent and 12 percent – plan to start a business (see Figure 3). One might assume that a high proportion of young women of all educational backgrounds are heavily oriented toward domestic roles – marriage and motherhood – rather than work. Yet such cultural orientations, particularly attitudes regarding women in the workplace, often vary greatly from

necessity versus opportunity Regardless of gender, a majority of young Arabs who plan to start a business within the next year appear to fall within the necessity-driven rather than opportunity-driven category of entrepreneurs. This is based on a categorised approach to examining entrepreneurs included in the latest Silatech Index report. This approach, developed by Gallup senior researchers, classifies those who say they plan to start a business within the next year into two categories – opportunity- versus necessity-driven entrepreneurs. Those who say they plan to start a business within the next year and also report living comfortably on present income fall within the opportunity-based category, while those who express varying degrees of difficulty in getting by on their present income fall into the necessity-driven category.

Roughly eight in 10 young men (82 percent) as was well as young women (79 percent) who say they plan to start a business in the next 12 months, also say they are not living comfortably on their present income and thus, are necessity-driven entrepreneurs.

Beyond these overall figures, Gallup finds that among aspiring entrepreneurs, young men who work full-time are more likely than women who work full-time to be necessity-driven, 83 percent versus 74 percent.

The same is true among unemployed aspiring entrepreneurs (those who are not in school). About nine in 10 young men in this group (91 percent) are necessity-driven compared with 83 percent of young women. By contrast, part-time employed young men who desire to start a business are less likely than part-time employed young women to be necessity-driven (65 percent versus 93 percent).

Figure 3: The young men and women in MENA planning to start a business in the next year, categorised by education.

education and entrepreneurship The relationship between education and entrepreneurship for both young men and women are different from those seen for employment.

More than one-quarter of young men who have completed at least four years of college say they plan to start a business in the next year

Men

Women

Completed elementary or less

20%

12%

Some secondary education

17%

10%

Completed four years+ beyond high school

29%

11%

country to country within the region. In some parts of MENA, reverse gender gaps (where young women significantly outnumber their male counterparts on college campuses) may increase not only the number of women in the formal employment market, but also encourage more young women to view starting their own business as an appealing career option.

Implications Across MENA, young men are much more likely than young women to say they plan to start their own business in the next 12 months.

However, college-educated men, whether working full-time or unemployed, appear to be more receptive to launching their own business than young men without a college degree.

Among women, those who are currently working – particularly those working part-time and seeking a greater income – represent the brightest entrepreneurial prospects.

Gender differences in employment and entrepreneurial intentions may not be unique to MENA. However, increased female college enrollment and regional initiatives that aim to give young women the necessary skills to launch their own business are new developments, potentially enabling young Arab women to have a larger role in the workforce and business ownership.

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.

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OPINION

Martin Ă Porta dissects the energy demands of hosting the 2022 World Cup, and concludes that Qatar could create a future of environmentally friendly global sports events.

OPINION

T

he announcement of Qatar’s successful bid to host the 2022 World Cup brought much controversy, with discussions firmly centred on the extreme weather the nation faces in its summer months. Temperatures in Qatar in June – when the tournament will take place – easily reach upwards of 40 degrees Celsius, conditions that will certainly impact not only on the physical exertion of the players, but also on the hundreds of thousands of fans who will descend on the country to follow their teams.

Questions have been asked about where the games will be played and what measures will be taken to ensure that players and fans are kept comfortable in the sweltering heat.

At one point, it was touted that the tournament should be moved to the cooler winter months, an option roundly dismissed by Qatari sports ministers and dignitaries from the international soccer fraternity as being too disruptive to major domestic leagues.

The necessity of keeping stadiums and fan areas cool is a tall order at a time when the country’s energy consumption is already at its seasonal peak. Yet authorities view this as an opportunity to invest in renewable energy that harnesses technology.

In fact, Qatar’s commitment to tackling this challenge will have extremely positive global connotations for advancing the products and solutions that utilise renewable energy resources and reduce carbon footprints, not only in the sporting world, but also a variety of other sectors.

So many ways to stay green New state-of-the-art stadiums will be built in Lusail, Al Khor, Al Shamal and Al Wakrah, while the existing infrastructure of the stadiums in Al Rayyan and Al Gharafa will be upgraded to meet capacity and cooling requirements.

The stadiums could be cooled by solar power, which can be used to power a defined area like a stadium cooling system, as well as all other auxiliary systems, with the resulting cool air pumped throughout the stadium, particularly on the pitch and spectator areas.

Alternatively, solar-heated/super-heated water/steam, which transfers its energy to the cooling system in the stadium, can efficiently produce cool air.

Eventually, at a later stage, other buildings could be connected to this network, increasing the longevity of the solar plant beyond the World Cup event when demand for cooling stadiums will significantly lessen.

Utilising solar power to control the climate of all stadiums will result in a neutral carbon balance. The stadiums could utilise photovoltaic solar panels, which generate electric power by using solar cells to convert energy from the sun into electricity.

During matches, power will be drawn from the electricity grid, which would be offset by the energy generated by the solar panels during the day. This translates into net gains as less power is being used than generated.

Alternatively, regionalised Concentrated Solar Power (CSP) plants can be installed to provide clean energy to the grid, used for the power requirements of the stadium and surrounding infrastructure. These CSP

plants can also be used for water production, either as a clean energy source or for steam production in desalination plants.

Major sports events such as soccer matches usually require a huge power supply for a short, defined period, which can easily reach the range of hundreds of megawatts.

Yet, with the help of intelligent grid and building systems, this consumption can be reduced by up to 20 percent. If the remaining energy requirement is supplied through renewable energy sources such as solar and wind, it would be possible to achieve a carbon-neutral operation for these sports facilities. In combination with eco-friendly transportation and lighting systems, this is an important contribution that Qatar can make toward achieving international climate protection goals.

By combining intelligent building systems with a smart power grid supplied with renewable energy sources, large-scale events can be made more environmentally friendly.

A positive knock-on effect This would also enable the generally growing demand for energy in the Middle East region to be met in an efficient and carbon-neutral way.

The solar energy available in the Middle East – which, according to a report by the Electrical Engineering Department at King Saud University, equates to 3000 to 3500 hours of sunshine per year, with more than 5.0 kilowatts per square metre of solar energy per day – can be used effectively to generate power for large-scale events.

Concentrated solar power plants can feed electricity to the general grid and produce steam for air conditioning and drinking water supply in nearby cities or event venues. This technology can be supplemented with photovoltaic systems installed on the roofs of parking shades and other buildings connected with the stadiums.

Once installed, the technology for supplying power to sports venues can be used to develop further eco-friendly urban infrastructure.

This is a huge advantage for any rapidly-growing city with a strong commitment to environmentally-friendly energy solutions.

Today more than 40 percent of the world’s energy consumption stems from buildings. Of that amount, 85 percent is used for cooling and heating systems, and 15 percent for lighting and other electrical applications. The technology to reduce emissions and increase efficiencies with the use of renewable energy sources is available.

Qatar, along with the rest of the Gulf Cooperation Council, is committed to reducing the use of natural fossil fuels by using such renewable energy sources. Photovoltaic and CSPower-based solutions can significantly support this commitment.

The next 10 years will be hugely significant in terms of the global energy debate, as we expect renewable energy sources to reach wholesale parity with traditional resources during this time.

With the amount of investment and development reported in Qatar, and indeed across the whole of the Middle East North Africa region over the next decade, the region will have a crucial part to play in enhancing and developing current and future ways in which we generate and consume energy.

Martin à Porta is the chief executive officer of Siemens, WLL, Qatar.

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23

FINANCE & ECONOMICS

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

EGYPT: COUNTING THE COST OF REVOLUTION (P.38)

The recent demonstrations and popular uprising in Egypt have meant high costs for the country’s economy. Karim Nakhle looks at the ongoing economic impact of this ‘Revolution 2.0’ on Egypt, the Middle East and the rest of the world.

A visitor watches a nearly empty light and sound show at the Giza pyramids on February 15, in Egypt. The country’s economy has taken a huge hit after foreign tourists fled during Egypt’s uprising. Some 15 million tourists visited Egypt in 2010 and the tourism industry supports up to 10 percent of the Egyptian population. (Gallo/Getty Images).

ALSO IN THIS SECTION: • • • •

Market Watch: Matthias Catón reports back on the recent World Economic Forum Annual Meeting in Davos. (P.26).

Inside Edge: Dun and Bradstreet’s Phil Strange examines trends in past Qatari budgets and speculates on what we might expect from the 2011-2012 Qatar Budget. (P.28).

Special Report: Oxford Business Group’s Greg Harris forecasts that Qatar’s retail sector is set for a surge and stores can expect a spike in sales this year. (P.32).

Balance Sheet: Mark Lindley of KPMG takes a look at the imminent introduction of Value Added Tax (VAT) and Goods and Services Tax (GST) to the GCC. (P.34).

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MARKET WATCH

connected world

What the world’s leaders discussed in Davos Matthias Catón highlights the big discussions and themes that prevailed at the World Economic Forum Annual Meeting in Davos.

MARKET WATCH

T

he theme of the recent Annual Meeting of the World Economic Forum (WEF) in Davos was “Shared Norms for the New Reality”. But if there had been an unofficial motto, it would have been: everything is connected. More than ever before, people blogged, tweeted and filmed.

This complemented the WEF’s own numerous social media activities, and made the meeting – once criticised by some for being a closed and secluded affair – a truly interactive global summit.

But the sense of connection far exceeded that between the participants and their gadgets. The general mood was one of a more interdependent world. Risks and opportunities, the East and the West, business and the public sector, the rich and the poor – all suddenly seem to be connected.

This is the “new reality” that the theme referred to.

The biggest risks There was a lot of talk about so-called ‘fat tails’, catastrophic events with an unusually high likelihood. These include terrorism, natural and man-made disasters, currency wars and cybercrime. Global interdependence means the repercussions of these potential events will be much broader. Technology, particularly Internet communication, paradoxically both increases risks and helps mitigate them. The fact that everything is connected makes it easier to launch wide-spreading attacks, yet it is also easier and faster to share comprehensive information about threats and their solutions.

Internet communication enables faster change, as could be seen in Tunisia and Egypt, where events were unfolding live as participants gathered in Davos. The ease with which data can be spread – including classified information such as the one shared on the Wikileaks platform – makes transparency the only option. This will require faster decisionmaking by governments and businesses.

More (and less) government, please Part of the new reality is also that there are simultaneous demands for more government action and for a stronger role to be played by business.

One of the biggest fears voiced in Davos was that governments would be unable to achieve results on a number of macroeconomic challenges, most notably monetary imbalances that result in unsustainable flows of ‘hot money’ into emerging countries, and the threat of increased trade protectionism.

Ian Bremmer and Nouriel Roubini coined the term ‘G Zero’, a world in which no country is willing or able to lead.

The demand for more government action contrasted with other areas, where an almost complete disillusion with public policy led to a strong preference for market solutions. This was most obvious in the area of sustainability. United Nations Secretary-General Ban Ki-moon framed the concern, saying, “We need a revolution. We need a revolutionary change, revolutionary action. We need a free market revolution for global sustainability.”

For the world to be able to stop climate change, there seemed to be wide consensus that the private sector would have to play a key role, and that the task of governments would primarily be to set clear incentives and reliable rules for corporations.

In a session on water, food and energy, for example, panellists emphasised that having a market price for water would encourage more sustainable use of this finite resource and improve efficiency without relying on heavy regulation and controls.

Better global cooperation There was a widespread belief that most problems can only be solved by encouraging different players to work together. This also holds true for international cooperation.

Last year, the WEF presented the proposals of its Global Redesign Initiative, a broad collaborative endeavour that produced ideas on how to enhance global cooperation and global governance. Many of the topics were again hotly discussed in the different sessions.

Whereas almost everybody seemed to agree on the need to involve, for example, non-governmental organisations to solve global challenges, people struggled to find clear answers on which organisation should have a say on which issue.

The difference between macro and micro Despite all the connectedness, there was an interesting divergence between a general concern for how things were going, and a very positive outlook as far as personal perspectives were concerned.

As the WEF’s chairman, Klaus Schwab, stated in his opening address, the world is seeing macro-level pessimism combined with micro-level optimism. A lot of people, for example, expressed concern over future conflict between an increasingly more assertive China and the West over natural resources, while at the same time stressing the great business opportunities they were seeing for their companies in China and other emerging markets.

Part of this may be due to different time horizons people apply: longer when talking about broad trends, shorter when referring to personal opportunities.

The new reality One might get the impression that our world is more confusing than ever. Most issues are interconnected, while at the same time, people come to oddly different conclusions, depending on whether they talk about specific opportunities for their companies or general developments.

Yet this is the new reality we live in – a world that is more complex, more fluid and more interdependent than ever before. A world in which stability is not a value in itself anymore, and those who try to maintain it at any cost may end up with more instability instead.

This makes things messy, but also offers us opportunities to solve longstanding global challenges. This is indeed the new reality. Now we just have to agree on shared norms.

Matthias Catón is associate director for the Global Redesign Initiative at the World Economic Forum in Geneva. He is writing in his personal capacity and the views expressed here do not necessarily reflect those of the World Economic Forum and its members. He can be reached at matthias.caton@weforum.org or through his website at www.caton.de TheEDGE

27

INSIDE EDGE

IN

SUPPORT OF

DIVERSIFICATION

2011

$$

The Qatar Financial Year 2011-2012 Budget will, in all likelihood, continue current initiatives to support economic diversification in the country, writes Phil Strange, who makes predictions for this year’s budget based on historical data.

D

etails of the 2011-12 budget are due for imminent release, and should be expected to continue along the lines laid out by the 2030 Qatar National Vision and the June 2010 QR365 billion infrastructure spend plan.

These initiatives are aimed at providing the infrastructure and financial stimulus in order to facilitate a diversification of the economy away from its reliance on oil and gas; underpinned by strong social and environmental development. To predict the likely content and size of the revenue and spend components of the budget, we can refer to recent history.

At the budget for the financial year (FY) 2010-11, published at the end of March 2010, the state of Qatar presented a record budget. It was significantly marked by a near 25 percent rise in public expenditure upwards to the level of QR117.90 billion.

Out of the total expenditure, 37 percent or QR43.5 billion was marked for capital expenses, which in turn had an 82 percent component

INSIDE EDGE

dedicated to infrastructure. The second biggest outlay was on education at QR17.3 billion, which accounted for a sizable 15 percent of aggregate expenditure.

A HISTORY of SURPLUS In the FY 2009-10, Qatar witnessed a record budget surplus of QR46.3 billion. The encouraging quarterly data experienced in 201011 demonstrated that the economy delivered more than the government’s expectations. The first quarter (Q1) 2010 gross domestic product (GDP) at QR102.5 billion was 22.7 percent higher than the Q1 2009 GDP, but displayed slower growth compared to the preceding quarter, up by a marginal 1.8 percent. In the second quarter (Q2), total GDP fell 4.1 percent from the first quarter to QR98.4 billion, but was up 20.4 percent from the comparable period in the previous year. But the third quarter (Q3) 2010 set up the buoyant tone as GDP grew at an impressive 13.1 percent to QR111.3 billion as compared to Q2 2010, while year-on-year growth stood at 21.1 percent.

The growth in the third quarter was primarily attributed to a 28 percent surge in liquefied natural gas (LNG) and a 22 percent rise in natural gas liquids production. The manufacturing sector contributed significantly with 15 percent growth, while the finance, insurance, real estate and business services sector contributed to Q3 growth with an 11.3 percent quarter-on-quarter (q-o-q) growth.

The mining and quarrying sector, which includes the oil and gas industry, continued to dominate GDP proportions with an estimated GDP figure of QR58.76 billion accounting for more than 52 percent of aggregate GDP for the third quarter of 2010; being 36.2 percent higher than the comparable period’s amount of QR43.13 billion in the previous year.

The non-oil sector GDP was led by the finance, insurance, real estate and business services, and the manufacturing sectors, which account for 11 percent and 8 percent of the total GDP. The former’s third quarter GDP stood at QR12.26 billion representing a rise of 17 percent over the previous year’s comparable figure of QR10.51 billion, while the latter’s quarterly GDP amounted to QR8.58 billion being three percent more than the Q3 2009 figure of QR8.29 billion.

LOOKING FORWARD The 2009-10 and 2010-11 budget history demonstrates the financial muscle of the oiland gas-based economy and the government’s commitment to higher levels of spending to meet its objectives. Looking forward, the expectations of higher revenue, fuelled by rising gas production and rising oil and gas prices, will definitely help the Qatari government in presenting an expansionary budget for FY 2011-12, which will be presented in March 2011.

According to the Qatar National Vision 2030, the government is committed to diversifying the economic base for sustained non-hydrocarbon sector growth. This requires investment in infrastructure, effective provision of public services and the offering of financial and non-financial support mechanisms. Considering the fact that a large number of infrastructure projects are already committed to, the government is likely to present a substantially larger spend budget than the current one.

The State of Qatar should be able to leverage on the growth in LNG output, which has seen robust growth in the past few years.

From QR19.8 billion in 2004, revenue from LNG grew at a remarkable pace to reach QR58.8 billion in 2008.

The income came from the sale of 30.4 million tonnes of LNG that year and was further augmented to 44 million tonnes in 2009. For the first time, in 2009, the LNG contribution to Qatar’s GDP replaced oil’s contribution to the GDP in the number one position. The output, which further received a boost in Q2 2010, is on track to reach 77 million tonnes by 2011-end from current investment projects.

Real GDP will show high growth in 2011 due to the completion of these expansion projects, after which the real growth rate will slow down until 2015 as no new significant projects are planned or due for completion during that period.

The government might consider initiating new projects to boost gas production further, after the moratorium on new gas export agreements ends in 2013. This depends, to some extent, on the demand prevailing in the market.

But effects of this to real GDP will kick in only after the completion of these projects, which tend to be multi-year initiatives.

Dun & Bradstreet’s Business Optimism Index which surveys and tracks short term business leader sentiment in Qatar, has mirrored the positive economic statistics, showing a steady growth in confidence since the late-2008 global recession hit (see graphs 1 and 2 overleaf).

Any reading of the index above zero represents the business community anticipating an expansion in their activity levels in the coming quarter versus the prior quarter. This is another piece of empirical data supporting the fact that the government’s commitment to expansion and diversification of the economy is credible and being absorbed and acted on by the business community.

PREDICTING REVENUE GROWTH According to the International Monetary Fund (IMF), the Qatar government’s revenue for the fiscal year 2009-10 amounted to QR154.67 billion and total expenditure amounted to QR102.23 billion, which implies a budget surplus of QR52.44 billion.

These numbers all show a rise from the previous year levels; in 2009, the government

History demonstrates the financial muscle of the oil-and gas-based economy and the government’s commitment to higher levels of spending to meet its objectives.

TheEDGE

29

INSIDE EDGE

revenue aggregated to QR140.99 billion and total expenditure stood at QR96.03 billion, which resulted in a surplus of QR44.96 billion.

IMF estimates state that in the fiscal year 2010-11, total government revenue will grow to QR169 billion, while expenditure will aggregate to QR113.58 billion. But going forward, the pace of growth in revenues will be slower as compared to the pace of growth in expenditure.

For instance, in fiscal year 2011-12, government expenditure, according to IMF estimates, is expected to jump to QR134.19 billion and further to QR156.97 billion in the next year. On the other hand, government revenue will rise to QR175.32 billion and QR185.67 billion over the same period. Qatar has traditionally resorted to funding from the credit markets to finance developmental projects; however credit availability is not a primary concern as the government can tap into its surplus and/or sovereign wealth fund, the Qatar Investment Authority, to keep projects on track for want of funds.

It is unlikely that there will be any shocks in the forthcoming budget announcement for FY 2011-12. An increase in spend of 13 to 17 percent is consistent with the commitment to the 2030 National Vision and the previously announced QR365 billion long-term infrastructure investment plans.

Indeed, the confidence that a double digit spend increase will be announced for 2011-12 may be drawn from the past.

Despite a fragile global economic scenario in FY 2008-9, the Qatar government pushed ahead with its expenditure on infrastructure projects. Capital expenditures committed then have led to the Qatari economy being in the midst of this large expansive phase expected to continue until 2015. The country is developing a comprehensive rail network with an expenditure outlay of US$25 billion (QR90 billion). Also, a new international airport is being built for which US$11 billion (QR40 billion) has been earmarked and it is expected to be operational by National Day in December 2011.

In addition to this a new deepwater seaport is being developed at a cost of US$5.5 billion (QR19 billion), and a budget of US$20 billion (QR73 billion) has been sanctioned for new roads. Also the successful bidding for the 2022 World Cup will see significant expenditures on infrastructure related to stadiums, hotels and other associated activities. Qatar has outlined an estimated expenditure of US$3 billion (QR11 billion) in building and renovating the stadiums for 2022. A metro system is being planned to connect all the World Cup venues.

It will be interesting to see if the delayed Qatar Bahrain causeway, first seriously proposed in 2001, but subject to start delays, forms a part of the expenditure budget. staying the course in 2011-12 Qatar is expected to maintain the pace of capital expenditures in sectors such as transport, health and education as it aims to fortify the four pillars of social, human, economic and environmental development, under the Qatar National Vision 2030.

Qatar has an additional advantage of returns from its foreign assets, which can be of help in the event of a weakening in oil prices.

In conclusion, the FY 2011-12 budget is expected to stay the course and keep the current initiatives rolling. A double digit spend increase is expected, which should further stimulate private sector investment and fuel the economic boom the country is experiencing.

30

TheEDGE

SPECIAL REPORT

Qatar:

RETAIL set for a surge

By Greg Harris

Qatar’s retail sector appears well-placed for solid growth in the next few years, with the economy expected to gain further momentum as a result of the government’s investment programme and the feel-good factor leading up to the 2022 FIFA World Cup. The International Monetary Fund forecasts an expansion in Qatar’s gross domestic product (GDP) of up to 18 percent this year, and with per capita GDP the highest in the world, at more than US$86,000 (QR313,000) a year, Qataris are in a strong position to spend.

Local retailers should be buoyed by a groundswell of consumer confidence accompanying the continuing increase in discretionary spending power.

According to the latest quarterly consumer confidence survey conducted by website, Bayt.com, in conjunction with research specialists YouGov Siraj, Qatar’s consumers are increasingly positive in their outlook, a confidence that is expected to be translated

into higher spending at the country’s shops.

The study found that 55 percent of Qatari respondents felt the local economy would be even stronger in a year’s time, with just one in 10 believing it will worsen in 2011. Some 50 percent believe their financial position will improve this year, and 52 percent are confident the employment market will strengthen during the next 12 months.

Simlarly, the MasterCard Worldwide Index of Consumer Confidence, issued in December 2010, found that Qatari consumers were among the most positive in the region, ranking second for the first half of 2011, behind the Kingdom of Saudi Arabia. Qatar’s overall rating on the index of 83.6 was well above the regional average of 71.6.

The survey also found that there was an across-the-board increase in consumer confidence, with all five indicators covered pointing to an improvement in sentiment, with the quality-of-life index up from 57.5

six months before, to just under 90. The survey showed similar trends for confidence regarding regular income and employment opportunities, the former rising from 47.1 to 86.4 and the latter up to 92.1 from 85.5, all solid portents of higher spending.

The expected jump in demand is feeding growth in shopping supply, with a steep rise in retail space in the past year. According to a report released by property consultancy, Colliers International, at the end of 2010, the total gross leasable area (GLA) available to the retail sector in Doha topped 630,000 square metres, up by 30 percent since 2009.

Colliers estimates that GLA will increase to 760,000 square metres by the end of 2012, going some way to address one of the few problems Qatar’s retailers face, with the increased floor space on offer expected to push down rental prices. At around US$660 (QR2400) per square metre a year, they are currently some of the highest in the region, despite an eight percent reduction in 2010.

Rental costs could start to climb again as the World Cup nears. Qatar’s retail, hospitality and tourism sectors have been given a taste of what to expect in 2022, when they enjoyed a boom in January thanks to visiting supporters of the 16 teams of the Asian Cup. However, as successive sides were knocked out, the number of foreign sports fans staying in Qatar’s hotels and shopping in its malls and boutiques dwindled.

Though there will undoubtedly be some deflation for the sector following the World Cup, this should not be too extreme, as the expected expansion of the domestic economy and population growth should soak up the increased retail capacity and keep the tills ringing long after the final whistle in 2022.

Greg Harris is the editorial manager at Oxford Business Group.

BALANCE SHEET

A new

revenue

Mark Lindley takes a closer look at what the introduction of ValueAdded Tax (VAT) or Goods and Services Tax (GST) will mean for the Middle East.

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lobally, even before the onset of the financial downturn, indirect taxes such as Value-Added Tax (VAT) or Goods and Services Tax (GST) had steadily been extending their influence as an increasingly important source of government revenues.

Driven by stagnant economies and falling direct tax rates, more countries than ever are embracing VAT as a key component of their tax policies.

Several factors have led to the growing popularity of VAT. Indirect taxes, chargeable on the consumption of goods and services, are significantly less prone to fluctuation than corporate profits or personal incomes.

They provide a more secure tax base for governments, running a smaller risk of impeding the economy, and they are simpler to collect than direct taxes, usually payable as transactions occur. Furthermore, they are actively promoted by bodies such as the European Union (EU), International Monetary Fund (IMF) and Organisation for Economic Cooperation and Development (OECD) to help eliminate economic distortions.

As more governments worldwide have become convinced of the virtues of indirect taxes, Gulf Cooperation Council (GCC) states have watched with interest. Bighitters have set a powerful precedent – the two most populous countries in the world, China and India, are both implementing new VAT systems. Even the USA, the third most populous country and home to the world’s largest economy, has opened dialogue about the possibility of introducing VAT, despite potential bureaucratic problems of harmonising federal and state taxes.

As KPMG International’s Corporate and Indirect Tax survey shows, GSTs are well-

BALANCE SHEET

established in non-GCC Middle East and Southeast Asia (MESA) countries and have been plotting a comparatively consistent course, currently led by Pakistan’s 16 percent rate.

No significant rate adjustments are predicted in the near future, although streamlining of exemption categories could emerge as one possible solution to tax avoidance and cumbersome administration. In Bangladesh, for example, which has a basic VAT level of 15 percent, reduced rates operate between zero percent and nine percent across a number of industries, from advertising and engineering to security and auditing. And in Egypt, which has a basic rate of 10 percent, variances exist across the spectrum, from the export of goods (zero percent) to high-powered cars (45 percent).

Sri Lanka actually bucked the trend by registering a small cut from 15 percent to 12 percent as from 2009, but it retained zero percent exemptions for the export of certain goods and passenger transportation, and a higher 20 percent rate on luxury items such as liquor, electronic and vehicles.

The prominence of GSTs within non-GCC countries contrasts starkly with the picture in the Gulf region, where countries historically have not operated indirect tax systems. However, in a break with tradition, and in a move that recognises their growing relevance on the global economic stage, all GCC member states plan to introduce VAT by no later than the end of 2013.

Despite varying levels of initial resistance, there is now general acceptance of the potential long-term benefits – making individual states less dependent on oil proceeds, compensating for customs income jeopardised by free trade agreements, and recouping some of the revenues sacrificed by the lowering of corporate taxes.

A deadline approaches GCC workshops have indicated that an initial VAT rate of no more than five percent will be introduced, markedly lower than in areas such as Europe (where rates average closer to 20

Influence Change Analyse Market Impacts

Prepare well for local Tax audits

Consider Automation

Managing Global Indirect Tax Reforms

Decide: In-source or outsource compliance

Future Proof Contracts

Turn accumulated Knowledge and Experience into value

percent), significantly undercutting rates in China (17 percent) and India (12.5 percent), achieving closer parity with those of Japan (five percent) and Singapore (seven percent).

KPMG member firms’ tax specialists acknowledge that a consistent VAT rate across all GCC states would be helpful for multinational corporations planning an entry into the region. But such cohesion might prove difficult to accomplish, since the power to set and collect taxes goes to the very heart of sovereignty.

Even in the EU, a relatively mature economy, wide rate divergences still exist despite numerous attempts to harmonise tax regimes. The situation may prove to be especially complex in the United Arab Emirates, where the interests of seven emirates must be balanced.

Once the VAT framework is in place within the GCC, governments are expected to adjust the rate as required to respond to changing revenue needs. Such a flexible approach to VAT has many global precedents. In the United Kingdom (UK), for example, the last two years have seen VAT fall from 17.5 percent to 15 percent, then rise back to 17.5 percent – with another increase to 20 percent already introduced from January 2011.

Meanwhile, other countries with established VAT systems, such as Spain, Greece, Finland, Poland, Romania, New Zealand and Portugal, have already confirmed their plans to increase VAT/GST rates.

With the various GCC countries at differing stages of readiness for the introduction of VAT, it appears less than certain that the 2013 deadline will be achieved.

The challenges of setting up a transactionbased tax, with new types of collection data and management, must not be underestimated.

GCC states will be permitted to introduce VAT systems individually if they are ready to proceed before the 2013 deadline, and a staggered adoption seems an ever-more likely scenario given the contrasting levels of progress so far.

Preparing for the future As the world emerges from the most severe recession in decades, the desire of governments globally to rebalance their books and guard against future downturns has rarely been stronger. Across the MESA TheEDGE

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BALANCE SHEET

region, all eyes are on taxation as a key component of the drive to create strong and stable economies.

The traditional image of the Middle East as a tax-friendly region for companies has rarely seemed more outdated. Although corporate tax rates have fallen precipitously over the past decade, stricter enforcement of collection regulations is likely to become a recurring motif in the near future.

Accompanying these new direct tax policies is a fundamental shift towards indirect taxes such as VAT. As a result, businesses must prepare to factor in new pricing structures for both the purchase of materials and the sale of goods.

The imminent adoption of VAT signifies that the GCC states are on the cusp of their biggest taxation reconfiguration in a generation – more of a revolution than an evolution. Several question marks remain.

Will a harmonious system be achieved? Will it succeed in generating new revenues without stifling economies?

Legislators would be wise to examine the models of some mature global tax systems, noting the positives and the pitfalls while making appropriate adjustments for the unique features of the GCC’s requirements.

The greatest VAT hurdle facing many states might prove to be making the system as user-friendly as possible. The obligation to comply falls upon individual businesses, therefore electronic filing will need to be introduced to ensure maximum compliance.

Countries across the MESA region, whether new-adopters or long-term adherents of VAT, might wish to note a recent study by the European Commission estimated that EU members lose an estimated USD$150 billion (QR546 billion) annually to fraud – or about 12 percent of total VAT revenues.

What can global businesses do about the shift to indirect tax?

For businesses preparing for the introduction of VAT, the primary focus in adapting to this morphing tax landscape should be on buffering against the risks while identifying opportunities to create value.

Effectively dealing with indirect tax can boost the bottom line of a business by

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Once the VAT framework is in place within the GCC, governments are expected to adjust the rate as required to respond to changing revenue needs. enhancing cash flow, reducing the amount of unrecovered VAT and cutting the resultant costs of bureaucracy.

Similarly, reducing the total costs of compliance and implementing tax-efficient supply chain management can deliver real competitive advantage.

In practice, managing the new global risks and opportunities is a massive challenge but can be achieved by forward-thinking businesses through a structured approach to key issues, such as: • influencing indirect tax reforms as they are occurring, • analysing market impacts and responding accordingly, • utilising new technologies to increase automation, • future proofing contracts, • deciding whether to in-source or outsource new compliance obligations, • turning accumulated corporate knowledge into value in new markets, • understanding local cultures and tax environments.

A time to act The importance of VAT/GST globally is unlikely to diminish any time soon as more countries come to rely on it as a stable source of tax revenue.

Other features of the global shift towards indirect tax in the future are likely to include the use of VAT/GST, and other duties, as a tool in the global drive towards a more sustainable, low carbon economy, as well as supporting economic growth in the developing world.

Better use of new technologies and process improvement are also expected to play a key role, facilitating a more effective, real-time management of the tax.

All of this points to a clear message that real, long-term change is happening and will impact global organisations in many different ways. Only businesses that proactively respond to the new landscape can expect to effectively manage the new indirect tax risks and be well placed to capitalise on the new opportunities that emerge. The time to act is now.

ECONOMIC BAROMETER

Special Cover Story

COUNTING COUNTING COUNTING COUNTING COUNTING

THE CO$T FOR EGYPT AND ITS ‘REVOLUTION 2.0’

Anti-government medical school students and professors march though downtown Cairo in early February. In conjunction with other strike action and similar popular protests, hundreds of doctors, lawyers and other professionals banded together with the aim of ousting the Mubarak regime. (Gallo/Getty Images).

ECONOMIC BAROMETER

Freedom, of course, should have no price. Unfortunately, the Tahrir (Liberation) Square demonstrations in Egypt have meant high costs for the country’s economy during its disruptive revolution and potentially far beyond. Karim Nakhle looks at the ongoing economic impact of this ‘Revolution 2.0’ on Egypt, the Middle East and the rest of the world.

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hen the recent social unrest first began in Tunisia, many regional pundits claimed the regime of the country’s long-time despot, President Ben Ali, would crush it and survive. When he abruptly fled the country and the unrest subsequently spread to Egypt, many of the same experts then said Egypt was not Tunisia and that the country’s strongman, Hosni Mubarak, who had been ruling for three decades, would squash this one too. Naturally, the events of the first two months of 2011 turned every expectation on its head and have led even the most seasoned observers to wonder where many nations of the region are heading, both politically and socially – and what long-term effects these changes will have on the economic stability of the Arab world and internationally.

POWER TO THE PEOPLE Since the new millennium, a rapid pace of structural reforms, including progressive fiscal and monetary policies, privatisation and new business legislations, have helped Egypt to move towards a more market-oriented economy and prompted increased foreign investment.

These reforms and policies have strengthened macroeconomic annual growth results, which averaged five percent annually. However, the government largely failed to share the wealth equitably and consequently the benefits of growth failed to trickle down to improve economic conditions for the broader population, while at the same time boosting further the growing problem of unemployment and underemployment among Egyptian youth under the age of 30 years.

It is thus no coincidence that it is largely this age group that mobilised the demonstrations and popular revolt in early January and early February.

The message sent to the ruling political elite were crystal clear: reforms and policies are never good enough if the common people do not feel their positive impact directly on their daily lives, and are worse if they only improve the lives of a selected few – especially the ones that are close to the regime and condescendingly dismiss the needs of rest of the population as insignificant.

In Egypt, this was clearly the case, as recent research shows that overall about 44.4 percent of the Egyptian population are in the range of ‘extreme poor’ to ‘near poor’ (as per World Bank standards). These are specifically: • 21 percent of the Egyptian population is ‘near poor’, meaning that about 14.6 million Egyptians can merely obtain their basic food requirements in addition to some basic services.

• 19.6 percent of the Egyptian population is ‘poor’, meaning

that about 13.6 million Egyptians (one out of every five) has consumption expenditure below the poverty line and cannot therefore obtain their basic food and non-food needs.

• 3.8 percent of the Egyptian population are ‘extreme poor’, meaning that about 2.6 million of the Egyptian poor cannot obtain their basic food requirements even if they spent all their expenditure on food.

Poverty, poor living conditions, rising prices, social exclusion, economic stagnation, and widespread unemployment, accompanied by a drastic financial situation, political repression, anger over corruption, suspected rigging in recent elections, constitutional manipulation, cronyism, personal enrichment among the political elite, and appointment of a successor to the dictator, were all drivers of the unrest and rebellion. Indeed all of the above are surely good enough factors, citizens faced with such challenges would argue, to topple any regime, no matter how tough, authoritarian or dictatorial it may be – regardless of the consequences.

Egypt’s final catalyst was when their fellow Arabs in Tunisia successfully overthrew their autocratic ruler, Zine Al Abidine Ben Ali, with a popular uprising on January 14 2011. Anger among the general Egyptian populace was further fuelled by dozens of deaths at the hands of the security forces, while protesters’ voices were heard, motivated and communicated thanks to online social media, mobile phones and the presence of independent news broadcasters at the scene, despite the Egyptian authorities’ attempts to thwart all of the above.

Two Cairo men stand outside shuttered up shops, closed as a result of the Egyptian revolution, the economic repercussions of which are yet to be fully determined. (Gallo/Getty Images).

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ECONOMIC BAROMETER

Special Cover Story

A television screen shows images of the unrest in Egypt, while traders work on the floor of the New York Stock Exchange (NYSE) at the end of the trading day on January 28, 2011. As investor fears of the protests in Egypt spread through the region, U.S. stocks fell with the Dow Jones industrial average (INDU) losing 179 points. (Gallo/Getty Images).

ECONOMIC IMPACT Despite the resultant jubilation, there is no doubt that nearly three weeks of protests have partially damaged Egypt’s economy, and impacted the regional and global economies – in such obvious areas as oil prices, tourism, commodities and investments.

World oil prices climbed from US$75 (QR275) a barrel to US$104 (QR380) a barrel in just 10 days, as the Egyptian protests threatened to stall the shipments of crude oil along the Suez Canal and the SuezMediterranean pipeline.

Egypt currently produces close to 700,000 barrels a day, which roughly makes up one percent of the global oil output. Any shortfall in Egypt’s ability to produce oil in the short run would be easily met by the members of the OPEC countries and have little impact on global oil production.

However, Egypt controls the Suez Canal and the SuezMediterranean pipeline, which saw close to two million barrels of oil being shipped every day. Both the Suez Canal and the SuezMediterranean pipeline oversee 2.5 percent to four percent of the global oil and gas shipments. As such, if oil traffic had been clogged in a manner as in 1956 or after the 1967 Israeli war, the results could have been devastating on the world economy.

The Suez Canal and the pipeline are so important that the only alternative for ships would be the longer route around South Africa’s Cape of Good Hope. The costs for using the alternative route would add 9600 kilometres to the vessel’s journey, almost doubling the cost of transportation. Such is the importance of the Suez Canal that crude oil prices could have reached US$200 (QR730) a barrel if the Egyptian crisis led to the closure of the Canal. This would easily have surpassed the earlier peak of US$147 (QR540) a barrel reached in 2008, which could have led to another global recession with catastrophic results.

Furthermore, Egypt produces substantial volumes – two trillion cubic feet to be exact – of natural gas annually, and is home to the largest refining sector in Africa and consequently also exports the refined product.

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The Suez Canal provides a further vital transport link for all sorts of cargo; some eight percent of the world’s traded goods pass through the canal, which has been a vital conduit for trade and a connecting point between the Middle East and Asia since it opened in 1869, and it earned Egypt revenues of US$4.77 billion (QR17.4 billion) in 2010.

But apart from hydrocarbon sector and importance of the Suez conduits, there is also another major economic implication to consider, as Egypt’s tourism sector has been paralysed by the political unrest. Tourism accounted for six percent of the gross domestic product of the country in 2010 and employed 12 percent of the Egyptian workforce, also attracting foreign direct investment (FDI) worth US$7 billion (QR26 billion) out of Egypt’s US$11 billion (QR40 billion) total FDI in 2010.

In addition there was another US$3 billion (Q 11 billion) outlay from Europe, and, as investor confidence in the Egyptian tourism sector was very high, so was the forecast of spend by visitors to the US$14 million (QR51 million) by the end 2011. Unfortunately for the industry, Egypt is still in the middle of its peak tourist season, which usually lasts until June, but airlines and travellers are shunning it as the destination, and the sector lost US$1 billion (QR3.64 billion) during the period of the protests. The prolonged political uncertainty could have a destructive impact on tourism earnings this year, and the receipts could easily retract to pre-2004 levels of less than US$5.5 billion (QR20 billion).

MARKET EFFECT Due to the protests, banks and financial markets in Egypt had to close for days, and many factories in the major cities shutdown.

The Cairo Stock Exchange halted trading on the first week of the protest after plummeting 10.5 percent. The market has lost an estimated US$12 billion (QR44 billion). Egypt’s losses are huge; they have yet to be assessed but even now it is pretty obvious that they will substantially exceed the country’s losses during the world financial crisis.

Despite the resultant jubilation, there is no doubt that nearly three weeks of protests have partially damaged the Egyptian economy and impacted the region and world.

ECONOMIC BAROMETER

Special Cover Story An anti-government protester photographs a portrait of Saif Ullah Mustafa, who was killed during the uprising in Tahrir Square on February 7, 2011 in Egypt. For weeks, thousands of demonstrators were mostly mobilised by digital and social media. (Gallo/Getty Images).

The Revolution sparked by social media Every successful revolution in history has required a spark to ignite it.

By most accounts, it appears that Egypt received that spark online – through Facebook, Twitter, other social network sites and mobile phone calls and text messaging, which paved the way for a few brave young men to organise protests and mobilise demonstrators against the entrenched Mubarak regime.

The internet, social networks, and text messages have emerged to form the most effective media in the history of the world in the spread of democracy and in the ability of democratic-minded activists to get organised.

Indeed, if you look at the statistics on internet penetration in Egypt, as well as the number of mobile phone subscriptions per 100 people, and the percentage of population under age 30, some intriguing evidence stands out: Internet access in Egypt is barely 20 percent, much less than Tunisia or Iran. Mobile phone usage is far higher, at about 40 percent. And World stocks also fell drastically as the growing tensions in Egypt started. Asian stocks were on course for their biggest loss in nine months and European shares were down. United States stock index futures also fell, and so did the stock markets throughout the Middle East. In just 18 days of the political unrest, Egypt is estimated to have lost US$6 billion (QR22 billion) as a result of the crisis – on average US$310 million (QR1 billion) a day. And that is just the direct cost; the overall indirect cost is estimated to be in excess US$50 billion (QR182 billion).

In the post-Mubarak era, the Egyptian economy will face major challenges to stabilise, let alone expand. The country will probably

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that number has skyrocketed in recent years, from barely six percent in 2003. Egypt is also a very young and urban society. About 37 percent of the population is under 30 (compared to 30 percent in Tunisia and 33 percent in Iran). These elements – a rising level of connectivity combined with an exploding population of young people facing declining economic prospects since the global recession began a few years ago – are probably the most critical underlying factors explaining Egypt’s situation.

The Egyptian example has already electrified public opinion throughout a region where democracy is underdeveloped and similar set of ills – autocracy, corruption, unemployment, and the dignity deficit – are widespread. Concerns that unrest could spread across the Middle East have been well-founded. From Libya, Morrocco and Bahrain, to Yemen, Jordan and Algeria, many governments seem to be sitting on political volcanoes. Who could be next?

In the words of one Egyptian online activist: “Ask Facebook”. witness a cut in its economic growth in the fiscal year ending June 2011 to about two percent (the growth estimate for 2011 was previously 5.3 percent) and Egypt’s budget deficit this year could reach 12.3 percent, way up from an earlier estimate of 8.2 percent.

The impending period of reconsolidation and eventually normalisation of Egypt’s economic environment may yet one day provide its working class with entrepreneurial opportunities and a path from poverty towards the financial independence they so clearly strive for. But it seems, in the short term at least, the debt incurred for gaining that freedom might be exceptionally high.

IN THE SPOTLIGHT

Click, click…

Boom!

THE GLOBAL THREAT

OF CYBERWAR

IN THE SPOTLIGHT

Governments and companies across the world are facing a new kind of warfare. The enemy is unseen, the damage is immense, and the usual rules of war simply do not apply. Welcome to the era of cyber warfare.

By Mark van Dijk

I

magine a world in which your business can be crippled by computer operators working for your rivals; a world where your corporate website can be wiped off the Web by a malicious hacker operating from a laptop on the other side of the world. Imagine a world in which an entire country can be brought to a standstill by the mere push of a button; a world where the opening shots of a cross-border war are not fired by tanks or guns, but by Denial-of-Service (DOS) attacks which bring your computer networks crashing to a halt.

Imagine a world in which stock exchanges, water supplies, telephone networks and electrical services can be shut down by stateless terrorists, or by politicallymotivated pranksters, or even by governments waging war against their own people.

This is no science fiction. This is reality.

Just last month, in the midst of violent anti-government demonstrations in Egypt, the government of beleaguered President Hosni Mubarak blocked access within its borders to the online social media sites, Twitter and Facebook. Then the entire Internet (with the exception of the national stock exchange) was shut down, with Egypt’s online traffic dropping by a massive 90 percent. As protests spread, cellphone networks were shut down and the Cairo bureau of Qatar-based broadcaster Al-Jazeera was taken off the air. Almost overnight, Egypt had wiped itself off the world’s online map.

And if a country – or, for that matter, a business – can do that to itself, imagine the catastrophic damage an enemy might inflict. With so much of the world’s infrastructure now controlled via the Internet, it stands to reason that whoever controls your Internet security also controls you.

Senators Joseph Lieberman and Susan Collins introduced a bill to the United States (US) Senate in 2010 that aims to increase cyberspace security and give the president a “kill switch” which would shut off the Internet. In an amendment to the bill, the maximum time for which the president could control the Internet was reduced from an “indefinite” period to 120 days, with any extension requiring approval by Congress. (Gallo/Getty Images)

No wonder, then, that in the 21st century, secret battles are being fought in cyberspace.

“Cyber war is already here,” James Lewis of the United States Center for Strategic and International Studies told United Kingdom (UK) newspaper, The Guardian. “We are in the same place as we were after the invention of the aeroplane. It was inevitable someone would work out how to use planes to drop bombs.

Militaries will now have a cyber-war capability.”

Strengthening the defence In March last year the United States Senate’s Sergeant at Arms reported that the American government’s computer systems were coming under cyber attack an average of 1.8 billion times a month. In June, United States (US) senators, Joe Lieberman, Susan Collins and Thomas Carper, responded by introducing a bipartisan bill which, if signed into law, would grant the US president emergency powers over parts of the Internet.

“For all of its ‘user-friendly’ allure, the Internet can also be a dangerous place with electronic pipelines that run directly into everything, from our personal bank accounts to key infrastructure to government and industrial secrets,” Lieberman told a media conference. “Our economic security, national security and public safety are now all at risk from new kinds of enemies – cyber-warriors, cyberspies, cyber-terrorists and cyber-criminals.”

The proposed Protecting Cyberspace as a National Asset Act of 2010 followed earlier draft proposals which would authorise the White House to “declare a cyber security emergency” and “order the disconnection” of certain networks or websites. These proposals have been met with a storm of resistance, with critics denouncing the idea of an all-encompassing online ‘kill switch’. But the old rules of war, where opponents fought hand-to-hand under pre-arranged terms, do not apply in cyberspace.

“Your first problem is that it is trivially easy to disguise the source of a cyber attack,” Professor Peter Sommer of the London School of Economics’ Information Systems and Innovation Group recently told The Wall Street Journal. “I can’t see any foreseeable future in which that isn’t going to be the case. With the botnet, which is one of the classic means of attacking, you get hundreds of thousands of wholly innocent computers appearing to attack you.”

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IN THE SPOTLIGHT

Fighting against cyber attacks, just like combating terrorism, can often be as futile as boxing against smoke: the enemy is unseen, unknown and unreachable.

With the enemy hidden behind firewalls and proxy servers, the target of a cyber attack often will not know where the attack originated, or what its motives were.

A peaceful demonstration held in support of Gary McKinnon in 2008. McKinnon, said to be the most dangerous hacker of all time, hacked into United States Army, Navy, Air Force, Department of Defense, Pentagon and NASA computers over a 13-month period in an effort to find out what the government knew about unidentified flying objects and aliens. McKinnon apparently deleted critical files which shut down the US Army’s Military District of Washington’s network for 24 hours, and deleted US Navy Weapons logs, rendering the naval base’s network inoperable after the September 11 attacks. He was extradited to the United States, although David Cameron has renewed talks with Barack Obama to have him sent back to the United Kingdom. (Gallo/Getty Images)

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Secret cyber wars?

The assumption, often, is that cyber attacks – like those committed on Visa, MasterCard, Amazon and even Senator Lieberman’s website during the recent Wikileaks controversy – are merely acts of virtual vandalism perpetrated by anonymous online hacker-activists (‘hacktivists’). But, behind the façade of global diplomatic civility, and behind the blood and thunder of isolated open hostility, an unseen theatre of secret cyber wars is unfolding between the world’s most powerful players.

As John Bumgarner, research director for security technology at the US Cyber Consequences Unit, told the BBC, “There are things out there that right now that exist that the general public really doesn’t know about – stealthy type technologies that can be embedded into systems that can run that you’ll never see.”

Consider Stuxnet. Last July, this Windows-based worm virus hit 30,000 computers in Iran, including the country’s nuclear facilities in Natanz and Bushehr.

Although the virus spread indiscriminately, infecting computers from India and Indonesia, to the US and United Kingdom, its malware was specifically designed to target Siemens systems configured to control and monitor specific industrial processes. Iranian authorities insist that it is no coincidence that those Iranian nuclear facilities operate using those exact Siemens systems.

“An electronic war has been launched against Iran,” the country’s director of Information Technology Council of the Ministry of Industries and Mines, Mahmoud Liaii, told reporters. “This computer worm is designed to transfer data about production lines from our industrial plants to locations outside Iran.”

Meanwhile, European digital security company, Kaspersky Labs, was convinced that the Stuxnet attack was not the work of any amateur hacker, and that it could only have been conducted “with nation-state support”.

“Stuxnet is a working and fearsome prototype of a cyberweapon that will lead to the creation of a new arms race in the world,” it said in a statement released after the attack.

When the Reuters news agency asked software security company, Symantec, whether a country could have been behind Stuxnet, senior director of Security Response, Kevin Hogan, replied, “We cannot rule out the possibility. Largely based on the resources, organisation and in-depth knowledge

IN THE SPOTLIGHT

Qatar has emerged as one of the Middle East’s most advanced nations when it comes to protection against cyber attacks. across several fields, it would have to be a state or a non-state actor with access to those kinds of systems.”

Qatar’s security measures Aware of the ever-changing dangers to Qatar’s information communications technology, Minister of State for Internal Affairs, HE Sheikh Abdullah bin Nasser bin Khalifa Al Thani and US Homeland Security Secretary Janet Napolitano signed a bilateral security accord on January 2 this year, which included new efforts at improving cyber security.

“This agreement will help us expand collaboration with Qatar in order to better protect the citizens of both nations against the evolving threats we face,” Napolitano said.

Qatar, meanwhile, has emerged as one of the Middle East’s most advanced nations when it comes to protection against cyber attacks. In 2008, Dr Hessa Al Jaber, Secretary General of The Supreme Council of Information and Communication Technology ictQATAR told the International Technology Union (ITU) Regional Workshop on Frameworks for Cybersecurity and Critical Information Infrastructure Protection: “This issue of cyber security is of pressing urgency to every nation. As ICT becomes more and more integral in our lives, our businesses, homes, schools, and hospitals become increasingly vulnerable. The interruption of fundamental services can be enormously disruptive. But the potential exists for worse.

“When disruptions occur maliciously, the results can be potentially lifethreatening. Imagine that without notice, you are suddenly unable to buy bread, or petrol, as happened to our friends in Estonia. This incident served as a wake-up call to governments everywhere, demonstrating the need to improve the security and reliability of our critical information infrastructure.”

With cyber attacks becoming more prevalent and more a part of the general theatre of war, a US-Russian ICT security think thank called EastWest met last month to draw up the rules of engagement – cyber war’s “Geneva Convention”, so to speak – for this new kind of warfare.

It is a noble goal, but it is also hopelessly naïve to expect fair play from the world’s cyber warriors. Real-world rules simply don’t apply in the digital world, and the whole point of cyber attacks is that they are unexpected, unseen and fundamentally unfair – and the lines between military and civilian targets are blurred to the point of invisibility.

Governments are spying on businesses’ computer systems, businesses are attacking hackers, hackers are shutting down websites, and in the midst of all this, governments are waging secret cyber wars against each other.

And as businesses look to their governments for protection, both sides are facing the horrible realisation that those governments are not even adequately equipped to protect themselves in this strange new kind of warfare.

It is, after all, a type of warfare which has no bullets, no bombs and no real battlefields… and one which has no rules.

CYBER ATTACKS: A BRIEF HISTORY Governments, terrorists, hackers… anybody can enter the cyber war arena.

1982 American teenagers calling themselves The 414s break into 60 private security systems, using cheap personal computers and simple hacking techniques.

1994 Using his work laptop after hours, Russian hacker Vladimir Levin orchestrates the robbery of US$10 million (QR36 million) from the online accounts of Citibank.

1997 An anonymous 15-year-old Croatian breaks into the computer system of the US Air Force base in Guam.

1998 Two Chinese hackers are sentenced to death for breaking into a bank computer network and stealing CNY260,000 (QR143,000).

2005 Hacker Cameron Lacroix is arrested after hacking into the smartphone of American socialite, Paris Hilton.

2007 Russia launches a cyber war on Estonia, attacking the computer systems of Estonian banks, media and government offices.

2008 On the eve of war in South Ossettia, several Georgian government sites are shut down by Denial-of-Service (DoS) attacks. Suspicion is on the Russian government.

2009 A Chinese cyber spy network called Ghostnet taps into the private documents of governments and private organisations in more than 100 countries.

2009 Following a copyright scandal, Amazon hacks into the e-reader tablet computers of its own customers to delete thousands of copies of George Orwell’s dystopian novel 1984.

2009 China launches Operation Aurora, a cyber attack on 20 international companies, including Google.

Computer security analysts McAfee call it “the highest profile attack of its kind”.

2010 Indian and Pakistani hackers trade cyber attacks on each others’ governments.

2010 Iranian nuclear facilities are targeted by the Stuxnet worm virus.

2010 Whistleblower website Wikileaks is hit by a DoS attack just before it publishes secret diplomatic cables.

The hacktivist group Anonymous then launches Operation Payback, shutting down websites of individuals, governments and corporations perceived to be enemies of Wikileaks.

2011 Egypt shuts down Internet services across the country amid violent anti-government protests.

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Business Interview

IMPOSSIBL

In an exclusive interview with TheEDGE, Maersk Oil Qatar managing director, Lewis Affleck, discusses his company’s success in the Al Shaheen oil field and their future plans in Qatar.

Business Interview

Just 80 kilometres off the coast of Qatar lies one of the most complex and challenging oil and gas projects ever undertaken in the history of the industry.

Yet it is also one of the least known. However, thanks to the partnership between Maersk Oil and Qatar Petroleum, the Al Shaheen field has gone from a ‘lost’ opportunity to one of the most lucrative oil and gas sites in the world.

Rachel Morris exclusively interviewed new Maersk Oil Qatar managing director, Lewis Affleck, as this huge project moves into a new phase of maximising the newfound oil production from this once-abandoned field.

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ewis Affleck has only been in the Maersk Oil Qatar hot seat for just short of six months, but already he is looking to the future.

“We (Maersk) have been here for 20 years next year and the Al Shaheen field will continue to produce economically 20-odd years into the future. And we believe we have the technology, ability and skills to maximise the hydrocarbon recovery for a mutual benefit,” he says from his office in the Maersk Oil Qatar headquarters, just off the Corniche in Doha.

TAMING AL SHAHEEN For the uninitiated, Al Shaheen is a production oil and gas field off the north-east coast of Qatar in the Gulf, 180 kilometres north of Doha.

The oil field lies over the North Gas Field, the largest gas field in the world. The field is operated by Maersk Oil Qatar under a production-sharing agreement with Qatar Petroleum, on behalf of the State of Qatar.

It was also, until around 10 years ago, written off as an unproductive, essentially useless field because of the nature of the seabed and its ‘tight’ layers, which made conventional “straight up and down” drilling impossible and even counterproductive.

Enter Maersk, with its experience in the equally challenging, yet more treacherous, North Sea, and its promise to “make the impossible possible” after other companies had tried and failed.

Affleck’s arrival in Doha came at a critical time for the Danish giant and its partnership with Qatar Petroleum, having completed one of the most complex operations in oil and gas industry history to make the Al Shaheen field profitable.

The Al Shaheen field is comprised of thin, tight layers, some less than two metres deep in places, which made drilling difficult and extraction even harder.

“It’s a complex reservoir. Where the oil is located is extremely complex,” Affleck explains. “It’s actually in the rock; the oil is contained in the pores of the rock. Imagine a sponge. Part of the problem with Al Shaheen is that the pores are very tight, which makes it difficult to extract from, and people didn’t think it would be able to produce.”

Maersk came to the table in 1992 with its experience in the similarly tight, porous and complex reservoirs of the North Sea.

Until around 10 years ago, Al Shaheen was written off as an unproductive, essentially useless field because of the nature of the seabed and its ‘tight’ layers, which made conventional drilling impossible and even counterproductive.

So confident was the leadership in their ability to wring oil from this troublesome field that the first auctioning of oil from the field began in 1994.

“It (Al Shaheen) was discovered in the 1960s and at that point people were looking for highly productive reservoirs. It’s only been in the last 15 years, particularly in the last five, that these ultra-tight reservoirs have been discovered to be able to produce,” Affleck says. “Maersk had brought in its expertise from the North Sea and Denmark where it excelled in these ultra-tight reservoirs and horizontal well drilling.”

UTILISING TECHNOLOGY Maersk’s expertise comes from its technology – more specifically its trademark horizontal drilling techniques which allows them to drill along a reservoir rather than straight into it, which can cause instability in seabeds with thin layers.

In 2008 Maersk achieved a world record of sorts, drilling the world’s longest well at the time, at more than 12.3 kilometres long as TheEDGE

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Maersk’s expertise comes from its technology – more specifically its trademark horizontal drilling techniques which allows them to drill along a reservoir rather than straight into it.

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part of the Al Shaheen Field Development Plan, which is also known in the industry as FDP 2005.

“We saw an opportunity for development,” says Affleck who worked in the United Kingdom and Kazakhstan for other large oil and gas companies, before leading Maersk into this new phase of development in Qatar.

The US$6.3 (QR40 billion) investment in Al Shaheen resulted in, during the project phase, the installation of 15 new oil platforms, more than 300 kilometres of pipeline and 160 individual wells. The last of the platforms were completed in mid-2010.

In another feat, the convoluted operation continued to be ‘online’ almost 100 percent of the time. More than six million work hours were completed without an injury stopping work. This was during a time period (between 2005 and 2010) of soaring costs and an economic downturn.

“I think if you look at the project industry generally during that time, there was US$147 (QR535) per barrel oil prices. There were massive challenges on projects and globally, projects were doubling and tripling in price,” says Affleck.

“This project was a turnkey project, meaning it had to be delivered on time and on budget. What it means is that you have to be very clear on what the success factors are.”

The results were stunning in anybody’s language with the multi-billion riyal project delivered as required on time and on budget. Today Al Shaheen is Qatar’s largest offshore oil reservoir and in 2010 delivered one billion barrels of oil – from a field that was originally slated to produce no more than 50,000 barrels a day. It now accounts for around 300,000 barrels per day and its production is responsible for a whopping one-third of Qatar’s total oil production in any given year.

Putting that in perspective, according to the CIA World Factbook, Qatar’s proven oil reserves stand at an estimated 25.41 billion barrels as of 2010, making it the 12th largest oil-producing nation in the world.

“We’ve got a big delivery focus at Maersk. We produced a billion barrels of oil from something others thought was uneconomical,” Affleck says. “That delivery aspect is great for a country like Qatar; you are bringing in a company that has project expertise to a complex situation. I think a lot of people are envious of the project delivery capabilities.”

The project was not without its challenges including managing the mobilisation of nearly 2600 staff from 46 nationalities, many without English skills, as well as various ‘surprises’ thrown up by the technical process itself.

“The project had its subsurface challenges. When you manage a business like this you are managing risk, and with a project like this, there is a lot of subsurface risk.

“It was a huge infrastructure project, almost doubling everything that was offshore at that time. It’s a very large, thin field. We’ve had to drill down and then along. It’s essentially rock deposited over millions of years, you [have to] apply technology to reduce the risk.”

Business Interview

According to Affleck, Maersk’s deputy managing director, Sheikh Faisal Al Thani, has been instrumental in making Maersk the “company of choice in Qatar for Qataris”.

With the initial phase wrapping up, Maersk sees itself as a long term partner with Qatar Petroleum and is looking to move out of the so-called ‘project phase’ and into opportunities to further develop this lucrative field, including its so-far-unexamined outer reaches which could yield more oil. This involves the development of new technologies and new systems.

“Now we have a process of evaluating,” says Affleck. “We are looking at the next stage of development. That is working out how much is left, which areas still need to be explored. The opportunities are huge. There is still a lot of potential. We are looking at stepping out further into the flank areas, the extremities and also into new zones within the field.”

FURTHER OPPORTUNITIES “I think there will be a suite of opportunities within Al Shaheen,” he adds, “which will include including the existing development which is under a water flood. What happens, if you can imagine, rock contains oil in the pores and it contains gas in the oil. You flood the reservoir with water which helps sweep the oil out of the reservoir and we are doing that extensively.”

Also on the agenda is developing new technologies to enhance recovery in a sustainable manner. Later this year Maersk will open its first dedicated research and development centre at Qatar Science and Technology Park (QSTP).

The US$100 million (QR364 million) Maersk Oil Research and Technology Centre at QSTP (MO-RTC) will focus on developing

enhanced oil recovery techniques and discovering new technologies, especially for Al Shaheen. The commitment is for 10 years.

“We are also looking at enhanced oil recovery, which is using a hydrocarbon gas to sweep the oil out of the reservoir,” Affleck says.

“Oil tends to be thick and cling to rock. Gas makes it flow easier.”

The research centre will be launched in the summer of 2011 and will be one of the biggest projects of its kind in the world. Affleck says this is is part of Maersk’s commitment to the Qatar National Vision 2030 and its drive to reduce the country’s reliance on hydrocarbons and develop a knowledge-based economy in the future.

It is also part of Maersk’s drive to embody knowledge transfer within Qatar. Currently Maersk has one of the best Qatarisation records of any private company in Qatar, with 25 percent of the workforce Qatari. Of that, nearly 50 percent are in the technical fields.

Maersk runs a successful programme which sees Qatari employees work on the company’s overseas projects to gain experience that they can bring back to Qatar and apply locally.

“We are positioning ourselves to be the employer of choice in Qatar for Qataris,” Affleck says. “Knowledge transfer is the key for us.”

That effort, he adds, has been led by the company’s deputy managing director, Sheikh Faisal Al Thani.

“We are working on a legacy now, on the transfer of knowledge.

Looking at how we can build the industry generally creates a sustainable industry.”

Oil production is one of the most environmentally risky and intensive industries in the world. Last year’s Deepwater Horizon disaster was both an environmental calamity and a public relations disaster for BP, the operators of the platform off the United States coast. Maersk sees, as part of its commitment to corporate social responsibility and in particular the environment, the imperative to make action speak louder than policies.

“One of the big polluters was (gas) flaring. Last year with the help of Qatar Petroleum, we reduced the flaring to virtually zero, and I think that is a first, certainly for the Middle East region,” Affleck says.

“Now we are looking at reducing our footprint even further by producing no ‘water overboard’. You produce the oil, it comes with water, and the water contains oil. And you reduce the quantity of oil according to world standards and a proportion is dumped back into the sea. This year we will be reinjecting all this water.”

Affleck is the first to admit that the Danish company has benefitted greatly from this long-term partnership with Qatar.

“The two big operations (for Maersk) are in Denmark offshore and in Qatar. This operation (in Qatar) accounts for around 40 percent of production.

“The oil production that has come out of Al Shaheen has been key in the development of Qatar. The good thing is that Qatar seems very keen on long term relationships and so are we.”

Also on the agenda in the not-too-distant future are collaborations with Qatar Petroleum’s overseas arm, Qatar Petroleum International.

“We’re always interested in other opportunities and we are looking at partnering with QPI,” says Affleck, but he won’t elaborate on that just yet. “One of our core values at Maersk is humbleness,” he concludes.

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ON THE PULSE

LOOKING INWARD: The right to host the 2022 World Cup has brought with it an accelerated and self-imposed deadline for Qatari domestic development. Following last month’s sovereign wealth article, Edward Jameson speculates about the potential impact of FIFA’s decision on the Qatar Investment Authority’s 2011 plans abroad and especially at home.

The Qatar Investment Authority seems set to slow down on its international expansion this year and should focus on investment within the Qatar itself as the country begins preparing for the World Cup in 11 years’ time.

ON THE PULSE

L

ate last year, His Highness the Emir of Qatar, Sheikh Hamad bin Khalifa Al Thani granted a rare interview in Doha to the Financial Times. “We wanted to ask the extent to which you feel the weight of history on your shoulders,” the newspaper inquired of the Emir. “The country has a limited time with which to make use of the natural hydrocarbon resources, and therefore a heavy responsibility lies on you to achieve this.”

The Emir did not hesitate in his response. “This is what I felt right from the start when I assumed authority of running the country,” he said, “and we started thinking of investing for the future and making sure that the coming generations would be guaranteed their standard of living.”

The fact that Qatar has a limited time in which to ensure its liquefied natural gas (LNG) export income is invested in such a way as to give rise to a number of sustainable economic sectors is nothing new – the Emir’s sentiment has been echoed by many economists.

“The energy can’t last forever; either it runs out, or the world turns to something else,” explains Dr Christopher Davidson, an expert in Gulf politics and economics. “They have the resources to do it

His Highness, the Emir of Qatar, Sheikh Hamad bin Khalifa Al Thani said in a rare interview with the Financial Times late last year that a lot of money would have to be invested internally in the country should they be successful in their 2022 World Cup bid, a statement that will now be honoured in a myriad of ways.

right now. It’s up to them – in this blink of an eye – to make nonhydrocarbon economies.”

It was into this socioeconomic framework that the Qatar Investment Authority (QIA) was established in 2005, its mandate to strengthen the country’s economy by diversifying into new asset classes. The QIA is the sovereign wealth fund (SWF) of Qatar. Like many SWFs worldwide, it was established as a vehicle to manage and invest the immense wealth that was flowing into the country’s coffers as a result of the state’s energy exports.

As was reported in TheEDGE last month, the value of the QIA has been estimated by the independent Sovereign Wealth Fund Institute (SWFI) at QR309 billion, with other estimates pushing the figure up to QR364 billion, making the QIA the 12th largest SWF in the world, and the fourth-largest in the Middle East, behind those of Abu Dhabi, Saudi Arabia and Kuwait.

The QIA has been particularly active in Europe since the onset of the financial crisis in 2008, and as this magazine also reported in February, has TheEDGE

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most recently made no bones over its desire to forge extensive economic ties with Germany, the continent’s most heavyweight economy.

THE QIA: EQUITY AND UBIQUITY “It’s interesting. I’ve actually come to see how active the QIA has been indirectly,” explains Dr Ashby Monk, co-director of the University of Oxford’s SWF Project. “A large proportion of the information requests we receive from the private sector – and we do field quite a lot of queries from asset managers and business leaders looking for information on SWFs – are about the QIA. “The widespread interest in the QIA,” Monk continues, “likely reflects its status as a global investor. The QIA seems to be everywhere right now.” Indeed, the fund’s list of deals and strategic investments includes United Kingdom (UK)-based real estate and flagship retail stores; German manufacturing firms; South American finance institutions; and United States (US) entertainment giants, to name but a few. The list is a long and impressive one, particularly when you consider that the QIA was established just six years ago.

So is there a link between the vivacity of the funds movements, and the urgency of Qatar’s economic diversification plans? The answer is a resounding yes. The Emir made this clear during his Financial Times interview. “We plan to save money for future generations, to make sure that we secure their futures, through education, healthcare, culture, museums and sports. We plan to ensure that the standard of living can continue as it is. We are investing everywhere,” he said.

Securing the future of an entire state is no small task, and the movements of the fund as it strives for this goal are difficult to foresee in terms of specifics, although a number of indicators are in place. The overarching mission of the QIA offers a certain insight into the likely strategic direction that the fund will take over the coming 12 months and beyond.

Qatar’s securing of the right to host the 2022 World Cup, however, will have drastically altered the fund’s outlook, although the investments made now will continue to provide some form of financial return even after the largest sporting event on the planet has been and gone. Therefore, although the necessity for domestic investment over the next decade has spiked greatly as a result of the World Cup decision, the QIA is by no means ready to lock away its chequebook just yet.

WHERE, AND WHAT, NEXT? Many SWFs operate in relative secrecy, particularly across the Middle East, in part due to the often close link between state-controlled and rulingfamily protected wealth, although the Emir of Qatar pointed out that, as a wealthy family, the Al Thanis run their own private investment vehicle that is completely separate and independent from the QIA. Steps have been taken towards improving the transparency of the QIA, although critics point out that more could be done. The fund is a signatory to the Santiago Principles, a set of 24 voluntary guidelines that were proposed in 2008 by the International Monetary Fund and the International Working Group of Sovereign Wealth Funds (see sidebar).

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Among the principles was the proposal that “an annual report and accompanying financial statements on the SWF’s operations and performance should be prepared in a timely fashion and in accordance with recognised international or national accounting standards in a consistent manner”. The QIA is yet to publish its first annual report.

And so assumptions regarding its outlook must be based on the fund’s strategic mandate.

However, some clues do exist. The SWFI publishes a quarterly consensus demand meter, intended to indicate what SWFs will be demanding in the coming three quarters. The most recent data published (see chart) covers the period through to the end of September this year.

According to the institute’s methodology, SWFs including the QIA will be in the market primarily for energy infrastructure assets and core retail real estate – two areas in which the QIA has been extremely active in recent months, with retail purchases in London and a huge energy infrastructure deal with Greece that was on the table last year, before talks collapsed. All of which would appear to point to the accuracy of the institute’s assertions.

In terms of geography, the Emir gave further clues. He indicated Doha’s increased interest in China, India, Taiwan and Japan. As far as figures are concerned, bankers who have sought to do deals with the QIA have said that the fund is looking to invest up to US$20 billion (QR73 billion) annually for the foreseeable future, in a bid to secure its long-term goals.

Although this represents a quarter of the fund’s recognised value – a huge sum – the Emir did not deny that such a figure was in the sights of the QIA, adding that QR73 billion would be “a good sum”.

THE IMPACT OF 2022 Just as it looked as though concrete forecasts may be made regarding the QIA’s direction in the coming few years, along came a game changer: the 2022 World Cup. “If we could win the bid to host the World Cup 2022, that would mean that a lot of money has to be invested inside the country,” the Emir said prophetically.

The International Bank of Qatar (IBQ) expects government investment from World Cup-related infrastructure deals alone to reach QR100 billion.

“Qatari banks are well capitalised, liquid and ready to finance projects and developments,” IBQ managing director, George Nasra, told a construction conference in Doha in February.

“Qatar is poised to set a historic global growth benchmark,” Nasra continued, “with investments topping QR364 billion in infrastructure, real estate and other non-energy sectors, that are set to fuel-charge the country’s expansion schemes.”

All of which means that, even for a country with the annual income of Qatar, there may not be a huge amount of cash remaining for expensive foreign asset purchases, when so much needs to be held in reserve to ensure the successful staging of the World Cup. Indeed, the process is already well underway.

Last month Dubai-based investment bank, Shuaa Capital, said that the QIA had injected QR5.5billion into Qatar’s banks to “reinforce the capital cushion”, because the nation’s upcoming growth challenges “now have a 2022 deadline”.

ON THE PULSE

Even for a country with the annual income of Qatar, there may not be a huge amount of cash remaining for expensive foreign asset purchases, when so much needs to be held in reserve to ensure the successful staging of the World Cup. SWF Consensus Demand Meter (until end of September 2011) 9 8 7 6

“Qatari banks are well capitalised, liquid and ready to finance projects and developments,” IBQ managing director George Nasra told a construction conference in Doha in early February. (Getty/Gallo Images)

5 4 3 2 1

Equities - Europe

Private Real Estate Debt

Cash

Equities - China

Sovereign Debt - Europe

Hedge Funds

Agro - Industrial Companies nd Assets

Equities - United States

Real Estate - Core Office

Gold

Natural Resrource PIPE’s

Real Estate - Core Retail

0

Infrastructure - Energy Assets

THE SANTIAGO PRINCIPLES Established in 2008 by the International Monetary Fund and the International Working Group of Sovereign Wealth Funds, the Santiago Principles comprise of 24 voluntary guidelines intended to improve the transparency of SWFs. They include such measures such as a clearly defined and publically disclosed policy framework (which the QIA abides by), and the timely production and publication of an annual report (which the QIA has not yet abided by).

If applied, the principles would go a long way to combating criticism of SWFs. “The opacity of SWFs has been a key focus of Western critics who fear politically driven investment decisions by largely autocratic states,” says co-director of the University of Oxford’s SWF Project, Dr Ashby Monk.

Twenty-three nations have signed up to the principles, including Qatar, United Arab Emirates, Kuwait, Bahrain and Iran. Saudi Arabia is not a signatory. The principles can be viewed in full at the International Working Group of Sovereign Wealth Funds’ website: www.iwg-swf.org

And this is only the beginning. The QIA rose to the forefront of the SWF landscape in recent years with its extreme vivacity and aggressive international investment strategy. Its penchant for splashing the cash looks unlikely to stop, although its investments look set to carry a decidedly more domestic flavour this year.

However, the QIA looks likely to regain its status among the world’s most active internationally-focused SWFs thereafter. As the Emir explained, the QIA is about securing the future for the generations to come, and he does indeed feel “the weight of history on his shoulders” – a history that will extend way beyond the 2022 World Cup. TheEDGE

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KNOWLEDGE & EXPERTISE Business know-how • how-to guide • legal insight • brand beat

Qatar Start-Ups (P.62) Considering Qatar’s robust and rapidly expanding economy, the country’s winning bid to host the 2022 World Cup, and growing support from officialdom, there may be no better time to start a business in the country. In this issue’s How-To Guide, TheEDGE takes a look at what hurdles foreigners wishing to start a new venture in Qatar should expect and indeed plan for.

ALSO IN THIS SECTION: •

Business Know-How: Lauren Maas of Virginia Commonwealth University in Qatar looks at how critical a fresh approach to design is to the success of modern business, and reveals how a new generation of Arab designers is being trained to seek innovative solutions to these challenges. (P.58).

•

•

Legal Insight: Contractual and other disputes are a factor in any business relationship, so arbitration must be an important factor of any legal agreement, advises DLA Piper’s Ray O’Connor. (P.60).

Brand Beat: Charlotte Stubbs takes a look at opportunities the 2022 World Cup presents to companies in Qatar, from both the perspective of sport sponsorship and in exporting domestic brands to the wider world. (P.65).

BUSINESS KNOW-HOW

A design for life

Today’s design graduates are actively seeking to be meaningful and innovative in business. Lauren Maas discovers an inspiring new generation of designers trained to seek innovative business solutions.

D

ue to the booming nature of industry in the Gulf, there is an increasing desire for fresh perspectives and creative approaches in all areas of business.

This desire is being met by the growing ranks of young designers emerging from the region’s universities and joining the professional sphere. At the root of their education are the tenets of ‘design thinking’, which uphold both the practicality of meeting a community’s needs and the inventiveness required to create and plan for a better future.

A designer’s methods hold lessons that can be applied to all aspects of industry, from ideation and production, to sales and

marketing. Design thinking blends with and breaks through traditional business models to provide a platform for intelligent, sustainable, and holistic growth.

Design thinking in the knowledge-based economy With an eye to Qatar’s National Vision 2030 of a knowledge-based economy, the role of the designer in domestic industry is becoming more valuable.

Projects and organisations as varied as Barwa, Qatari Diar, and Qatar Museums Authority, employ both local and expatriate designers to create unique paradigms for approaching new business strategies. By focusing

BUSINESS KNOW-HOW

on the needs of the community, the designers act as a vital link between the businesses and the consumers they aim to serve.

But what is design thinking? It is a way of problem-solving that champions process and collaborative group thought over the traditional supply-demand model of industrial economy.

By exploring a number of avenues for gathering data and finding solutions, designers test out creative answers to old and new questions.

In a world where competition is stiff, the demand for fresh products and multiple approaches for delivering them is key. This is where the creative mission of design thinking can be tremendously influential to business.

Says author, Robert Verganti, “Designdriven innovations do not come from the market: they create new markets. They don’t push new technologies; they push radically new meanings. Think of game changes like Nintendo’s Wii or Apple’s iPod.” Design thinking provides society with goods and services that are at once entirely unexpected, yet completely necessary.

Bowman Heiden, director of innovation at Qatar Science and Technology Park (QSTP), echoes Verganti’s thoughts.

QSTP is dedicated to cultivating improved research methods and technological advancements that will further the expectations of Qatar’s National Vision 2030. In the interest of promoting the unification of design thought

Tasmeem 2011 co-chairs, Muneera Spence and Pornprapha Phatanateacha.

with business goals, Heiden says, “In this new world of knowledge-based business, the generalist who is capable of holistic design thinking is indispensible. However, this is not sufficient, as the fundamental building blocks of innovation have changed as well. What is now needed are persons who can see both the forest and trees, and understand that what is not seen is likely the most important.”

A school for change The game changers, the generalists, the visionaries, those who are capable of seeing both “the forest and the trees” are the region’s young designers, trained to maximise the power of their field’s broad reach and ubiquity.

Frequently adept in a multitude of specialised disciplines, from film and fashion, to advertising and architecture, designers find themselves capable of lending their skills to a variety of emergent businesses.

At the forefront of diversified education for young designers is Virginia Commonwealth University in Qatar (VCUQatar). VCUQatar was the first university partner invited to join the Qatar Foundation in 1998.

In 2010, VCUQatar expanded to include a visual arts curriculum and the first Master of Fine Arts in Design Studies degree in the region.

Today, VCUQatar graduates are active in design and creative industries, pursuing a wide range of professions at prestigious Qatari institutions such as the Emiri Diwan, Museum of Islamic Art, Qatari Diar, Ministry of Foreign Affairs, Qatar National Hotels, Qatar Tourism Authority, Al-Jazeera Children’s Channel and the Social Development Center.

A conference to connect Young designers need the opportunity to apply their fledgling skills, mentors to look to, communities to serve and problems to solve. In order to meet these needs, VCUQatar hosts the biennial design conference, Tasmeem, with the aim of exposing students to the design world and introducing outside designers to the changing cultural and economic landscape of the Gulf.

In the interests of fostering this exchange, and creating stronger connections between practical design and design theory, Tasmeem gathers those in the fields of graphic, interior

Recyclable furniture as created by a VCUQatar interior design student.

and fashion design, to discuss critical issues and engage with others.

The next conference will take place March 21st to 24th, 2011, at VCUQatar, and is titled Synapse: Designer as Link. It is interdisciplinary and collaborative, aiming to forge connections between students, creative problem solvers, local community members, community stakeholders and VCUQatar.

Tasmeem 2011 will feature student-driven teams investigating the role of design as a way to find solutions, tackle community issues, and address concerns of the future.

Previous speakers and workshop facilitators include Bowman Heiden of QSTP, Tom Kelley, general manager of esteemed American design and innovation consultancy, IDEO, Alexander Osterwalder, expert on the topic of business model design, and Natalie Jerimejenko, director of the xDesign Environmental Health Clinic in New York, among others.

Pornprapha Phatanateacha, VCUQatar assistant professor in graphic design, and cocreator of the Designer as Link concept, sums up the goals of the conference and the mission of regional design: “Our aim is to connect the tenants of design thinking to the needs of the professional world. The Tasmeem conference, in particular, is focused on promoting the activity of the designer at the front end of business innovations.”

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LEGAL INSIGHT

Arbitration of disputes

Ray O’Connor takes a closer look at the arbitration factors that need to be considered by companies before the contract is signed.

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n the wake of Qatar’s successful bid for the 2022 FIFA World Cup, the number and scale of infrastructure projects in Qatar is expected to rise sharply and steadily over the next decade, culminating in an infrastructure boom worth billions of dollars.

Three things that are fairly certain with all that activity is that: (a) there will be claims, (b) there will be disputes, and (c) those disputes will involve very large sums of money.

Against this backdrop, the importance of having sound, robust and well considered dispute resolution provisions should be obvious – especially to anyone who has been involved in expensive and protracted court or arbitral proceedings. In practice however, it is fair to say that all too often, dispute resolution provisions are last to be negotiated before the deal is signed, and so can become rushed or neglected.

International arbitration In contracts between parties of different nationalities, international arbitration in a neutral venue is fairly common. As well as

being perceived as a neutral venue and therefore a ‘level playing field’, in practice, these countries or venues are often chosen for their convenience for experts and witnesses, and the suitability of the legal frameworks in such countries. London and Paris are good examples of common European centres for arbitration.

Pursuant to Decree No.29 of 2003, Qatar is a member of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (“New York Convention”). Subject to certain defences, the New York Convention requires the courts of member states to give effect to arbitration agreements and to recognise and enforce arbitral awards made in other member states.

There are currently 144 member states around the world, so a valid international award gives significant reach to a creditor looking to enforce its award, particularly where assets are located in different countries.

Domestic arbitration in Qatar While international arbitration has its advantages, it may not always be appropriate

– for example, the location may not be convenient or cost effective, particularly if the project, evidence and assets to be enforced against are located in Qatar.

In such circumstances, domestic arbitration in Qatar may be worth considering in lieu of court proceedings. Although not exhaustive, some of the potential advantages with arbitration, when compared with court proceedings in Qatar are as follows: • Subject to the comments below, arbitration is generally a private process which parties can keep confidential (including the fact of the dispute and its outcome), rather than a public process with a public record of the proceedings.

• Arbitration can be quicker, cheaper and less time consuming than litigation in the courts if it is managed effectively.

• Arbitration allows the parties the flexibility to choose their arbitrator (who may be an expert in a certain field or with a certain background) and agree their own procedures in advance.

• Arbitration is a consensual process that

LEGAL INSIGHT

tends to be less adversarial and less formal than litigation in the courts. If managed well, there is a better chance that the parties can successfully do business in the future, once the dispute is resolved.

Considerations for drafting a domestic arbitration clause in Qatar While there is no separate arbitration law in Qatar, Law No.13 of 1990, Chapter 13 of the Civil and Commercial Procedure Law (“Civil Procedure Law”) contains specific laws relating to arbitration that should be considered. There are many factors to consider when drafting arbitration clauses generally (which are beyond the scope of this article), but there are some subtleties to be aware of when considering arbitration clauses for a domestic arbitration in Qatar.

Some of these are considered here, but this is by no means an exhaustive list (note that article numbers refer to those in the Civil Procedure Law): • Law of Contract: Unless the parties agree otherwise, the laws of Qatar will automatically apply if the parties choose Qatar to be the seat of arbitration. Accordingly, it is critical that parties include a choice of law clause specifying which laws will apply to the contract (this may of course be Qatari law).

• Right of appeal: Article 205 allows an aggrieved party to appeal the arbitrator’s award and have the issue retried before the court.

There are strict and very tight time limits for this appeal process to commence (15 days from lodging the award at the court). This right to appeal on the merits of the award applies unless the parties have explicitly excluded rights of appeal. Clearly an appeal on the merits could dramatically increase costs and time, so it is critical that parties expressly agree to exclude this right if they wish to avoid the potential for disputes to be retried in court.

Unless the parties agree otherwise, the laws of Qatar will automatically apply if Qatar is the seat of arbitration.

• Number of arbitrators: Parties should consider whether a single arbitrator or a panel of three arbitrators will constitute the arbitration panel. If the parties have adopted institutional rules, the relevant institution may select the appropriate number, but this should be checked. Article 193 requires the number of arbitrators to be odd or the arbitration will be void.

• Time limits: If no time limit is specified in the relevant arbitration clause, the law provides for a time limit of three months from the appointment for the arbitrators to make their award (Article 197). If the parties do not agree to an extension and the award is late, either party

Arbitration is a generally private process, and can be quicker, cheaper, less time-consuming and less adversarial than litigation. may make an application to the originally competent court (in other words, Qatari court) and ask the court to either decide the issue itself or set a new date. Parties might wish to consider extending this period.

• Confidentiality: The Civil Procedure Law contains no requirement for confidentiality, so this should be included in the arbitration agreement.

• Written agreement and scope of arbitration: Article 190 requires the arbitration agreement to be verified in writing, so an oral agreement will not suffice. In practice, only matters that are incapable of resolution by conciliation between the parties (for example, criminal matters) are beyond the scope of resolution by an arbitration agreement. As a result, arbitration is open to a wide range of subject matters. Article 207 allows a party to apply to the court to render an award void if it contravenes public policy or morals.

• Other matters: The Civil Procedure Law is written in Arabic and there is no official English translation, making the arbitration rules less accessible and certain for the parties.

Parties should recognise that no two commercial agreements are exactly the same, so arbitration provisions should be considered on a case-by-case basis depending on all the circumstances.

It should also be considered alongside other options, for example, escalation of dispute provisions, referrals to experts, etcetera. There are also many institutional rules that may be appropriate to adopt (for example, the United Nations Commission on International Trade Law, or Qatar International Centre for Conciliation & Arbitration. The Qatar Financial Centre even has its own regulations dealing with arbitration if it is the seat of arbitration).

This is all outside the scope of this article but whatever route is chosen, the above considerations should be borne in mind.

What is clear from experience drafting and advising in relation to disputes, is that it is much quicker and cheaper to agree a sensible dispute resolution at the outset when the parties are negotiating terms, than it is to try and agree a different and more sensible approach when the parties are in dispute.

Note: This article is of a general nature and should not be considered as legal advice. Any person or entity requiring legal advice should consult a lawyer.

For information and enquiries, please contact Ray O’Connor (ray.o’connor@dlapiper.com).

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PREPARING FOR BUSINESS IN QATAR

Considering Qatar’s rapidly expanding economy, the country winning the bid to host the 2022 World Cup, and growing support from officialdom, for the SME sector there may be no better time to start a business in the country. Arlin Friesen and TheEDGE take a look at what foreigners wishing to start a new venture in Qatar can expect.

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or Qatari citizens, many government programmes and initiatives, such as nascent umbrella body Enterprise Qatar (EQ), as well as those by many other organisations and educational institutions, are being developed as an opportunity to foster and enhance this economic activity, which has been recognised as necessary for the sustained future financial growth of the country and duly encouraged.

Yet this activity is not limited to nationals and there are many opportunities and advantages of doing business in the country for the non-national entrepreneur, the benefits of which in some cases include some degree of exemption from customs duty and certain taxes. While this article will not go into the minutiae of all of the detailed legal requirements or taxation pros and cons, it will strive to cover some of the areas of concern in brief for those considering starting a business in Qatar in the near future.

PREPARATION AND PATIENCE In any country, the process of starting a business can often be onerous and daunting, from the countless forms that must be completed, to the many visits to the appropriate government departments. There are a number of considerations that must be weighed prior

to opening your business’ doors, but budding expatriate entrepreneurs need to be patient through the process, particularly those not used to the pace and style of business in the region as compared to Europe or the United States (US), for example.

Allow yourself plenty of time to research, investigate and plan your business prior to even registering your start-up. While there are many legal firms and associated specialists that can aid in starting a business and will handle much of the paperwork, it is most important that you, the potential business owner or partner, understand the realities of starting a new venture in Qatar and/or the Gulf Cooperation Council (GCC) nations and investigate every detail as best you can.

Indeed, the concept, definition and registration machinations of small medium businesses (SMEs) and entrepreneurship are currently being redefined and refined in Qatar.

There are a number of policy changes mooted or taking place on different levels, and when

applying to register your new business, you need to be certain your information is 100 percent up-to-date. Online research alone will never suffice, as much of this can be dated, so this is where the initial outlay for the very best legal advice and other forms of counsel is a wise investment.

In addition to formal legal advice, professional ‘facilitators’ are also available to carry out many of the associated registration formalities, and can prove invaluable for Arabic translations, obtain all the required permits, driving licenses and telephone, power and water connections, etcetera, saving you time and money in the long run.

OWNERSHIP AND PARTNERSHIPS One such facilitator recently informed TheEDGE that from the day following the 2022 announcement, the volume of queries from overseas regarding opening businesses in Qatar increased tenfold. With this increase in competition from foreign companies, it is again to the best prepared that might go the potential spoils.

However, entrepreneurs resident outside Qatar and those rushing in who think they might have an excellent idea that will help them make a fortune in the country, need to remember that a partnership with a Qatari citizen – who is required to hold a majority stake of at least 51 percent in the business – is usually standard.

There are some industries and sectors where exceptions to this rule exist, including

STARTING A BUSINESS IN QATAR: ONLINE RESOURCES Enterprise Qatar www.qsme.net Qatar Investment Promotion Department www.investinqatar.com.qa Qatar Statistics Authority www.qsa.gov.qa Ministry of Labour www.mol.gov.qa/english/Pages/default.aspx Qatar Government ‘Hukoomi’ Website www.gov.qa Pro Partnership www.pro-partnership.com

HOW-TO GUIDE

information technology, education, tourism and energy and mining, to name but a few referred to by various knowledgeable sources.

Logically, depending on what the nature of your business is and what your expectations are in terms of equity and profit sharing, this is an area you should carefully consider and investigate beforehand, as the integrity and reliability of your local partner will have a massive influence on your potential success.

Again, depending on the sector you are entering and the kind of enterprise, there are a number of forms of business ownership and types of company vehicles available to foreign investors. These include various kinds of partnerships, but one of the most common forms

of business registration for foreign owners is the Limited Liability Company (LLC), although this is subject to certain conditions and restrictions.

In the past a minimum capital of QR200, 000 has been required to form an LLC (with said local partner for foreigners).

However, ostensibly to encourage grassroots entrepreneurism and truly small enterprise in the form of individuals working from home or one-man (or -woman) operations such as consultants, EQ is working towards influencing government policy in lowering this relatively high financial barrier to entry.

In main their focus is on local entrepreneurs, but expatriates may be included in this programme, so watch this space.

STAFFING In an era where high calibre staff is crucial to success, one of the greatest challenges for all SMEs is securing qualified labour as they grow. In Qatar, this issue can sometimes be complex. Fortunately, the Ministry of Labour provides a labour quota, which is basically a breakdown of the type and citizenship of the labour force a company is permitted to bring into the country.

Once a Commercial Registration (CR) has been finalised, the manager of the company, who will then sponsor him or her, needs to at the very least become a Qatari resident.

For any staff, which will also, under current requirements, have to be sponsored by the TheEDGE

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company, employment contracts must be in Arabic and approved by the relevant officials.

The company will have to obtain residence and visa permits for their ongoing expatriate staff. Many contracts include provisions for housing, utilities, medical, schooling, transportation and annual flights home, among others.

Of course, any entrepreneur or SME owner worth their mettle will have drawn up a competitive business plan that will include these potential future staff requirements. The most prudent will factor in all costs associated with the above, as well as cater for the fact that searching for expatriate labour overseas can often involve extra costs, such as the use of employment agencies and flying potential candidates in for interviews. future factors to consider For those inexperienced in doing business in the Middle East, there are many other considerations when planning to start a firm in the region, the nuances of operating a concern in each different country notwithstanding.

As far as taxation is concerned, the introduction of Value Added Tax in the GCC by 2013 is set to radically alter the region’s business environment, and moreover a stricter approach to corporate taxation and new rulings are set to come into effect in the coming years. This again is where expert local counsel is invaluable and indeed downright necessary.

The day following the 2022 announcement, the volume of queries from overseas regarding opening businesses in Qatar increased tenfold.

With this increase in competition from foreign investment and companies, it will be to the best prepared that will go the potential spoils.

Research and planning when it comes to copyright registration, marketing your enterprise through various media, right down to choosing a premises and furniture, etcetera, are also equally important. Some on the outside may feel that certain elements of these lack the sophistication apparent in other parts of the world, but the truth is that there are international standard options available to those who are savvy enough to know where to look for them, and while not guaranteed by any means, success is more likely to follow those who do their homework and adapt to the local landscape the most effectively from the beginning.

QATAR’s SME SECTOR: looking up From the Qatar Vision 2030 planning document, through to the Ministry of Business and Trade, to Enterprise Qatar,

Foreign investors need to remember that a partnership with a Qatari citizen – who is required to hold a majority stake of at least 51 percent in the concern – is usually standard, so this is an area that should be carefully investigated beforehand as the integrity and reliability of your local partner will have a massive influence on your potential success.

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SMEs are set to benefit from the increased support of these entities in the coming years.

Samer R. Frangieh, a business development specialist with EQ, says that EQ and the Ministry of Business and Trade are working to make it much simpler for SMEs to start up and conduct business in Qatar.

They are currently developing initiatives that will support, develop and grow the SME sector ‘ecosystem’ in Qatar by working on ways to reduce start-up capital requirements, speed up registration processes, provide bundled support models where companies will have access to training, incubators, and reduced start up costs.

As these unfold, TheEDGE will do its best to communicate them to its readers.

As new entrepreneurs navigate through the start-up world they should seek professional advice and guidance, but most importantly, they must remember that the final decisions are theirs.

Like anywhere, this process can be simultaneously complex, rewarding and frustrating, but with the proper support and guidance, business owners can enjoy the benefits (and the profits) of owning a business in the thriving economic environment that is modern Qatar.

Arlin Friesen is an entrepreneurial mentor at the College of the North Atlantic-Qatar. Select parts from this article were corroborated from an article by Jane Ashford, then-general manager of Links in Qatar, from a previous issue of TheEDGE. For more information please refer to TheEDGE Vol 1. Issue 7, February 2010, p63.

BRAND BEAT

G o ing global

How to use sports to extend your brand and business beyond Qatar.

By Charlotte Stubbs

BRAND BEAT

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ith Qatar’s World Cup bid success, the world has been given a wake-up call to this small Gulf state making waves in the business world.

The repercussions of 2022 for businesses in Qatar and the creative services industry must be given urgent consideration.

Challenges and opportunities will emerge as the rest of the world turns their attention in this direction. Now is the opportunity for Qatar’s brands to expand their appeal to a larger target audience within the Arab region and on a global scale.

The World Cup bid demonstrated the power of a strong brand, and was a great example of using high impact and exciting visuals to express the values of the Qatari bid. The billboard hoardings, the flags around Doha, the exhibition stands displayed in many countries, and the television commercials all emanating the ‘2022’ brand unified communication, and may well have played its part in showing just how serious a bid this was.

The Qatar 2022 bid is a great example of how a brand extends far further than just a visual representation or ‘pretty logo’. The scale, intelligent marketing and branding of the bid itself created a national patriotism, international dialogue and ultimately an identity, which exceeded the standards of what a FIFA World Cup nation is.

Indeed, online publication, DinarStandard, considered the bid “a master class in brand positioning: turn your weaknesses into strengths. The absence of a football pedigree spells a new market.”

Paired with a string of high-profile football stars, the bid message was summarised by French football legend, Zinedine Zidane, who concluded, “Football belongs to everyone”. Who better to build a World Cup of the future?

This clearly illustrates the benefit of investing in design and marketing in creating a strong brand identity for your own organisation or brand.

Angus McLachlan, designer at Creative Action Design, says that “brands in sport have now become global trendsetters in

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using creative design to make the most of the extremely competitive sponsorship opportunities available, and to best position themselves within today’s elite competitions.

“Sporting fan bases align themselves with their idol’s brands regardless of the product or service being promoted. The fan base associates with the identity of a brand, with the sporting success of the sporting hero, and is proud to reciprocate the support that the brand has invested in the sport.”

Advertising to a global audience Forbes magazine lists the FIFA World Cup as the third most valuable sporting event behind the American Superbowl and Summer Olympics for brands. In 2010, Forbes reported that the event enjoys revenue of over US$100 million (QR364 million) per event day, added to an audience of 603 million tuning in to watch the 2010 World Cup final.

Advertising linked to such a large-scale sporting event is dominated by large, global brands competing to get their message across to the audience in the most visual, clever and design-led way they can.

The Superbowl in the United States, for example, has created a culture of some of the most innovative advertisements vying for the “best Superbowl ad” crown. These advertising slots – reaching more than 110 million viewers across more than 300 countries – are the most expensive in the entire calendar year.

Television ratings giant, Nielsen, reports that more people tune in on Superbowl Super Sunday to watch the advertisements than see the game itself. In fact, the survey showed that 51 percent of the 25,000-plus household respondents said they enjoyed the advertisements more than the action on the field.

A good brand image advertised during a great sporting event such as Superbowl Super Sunday guarantees increased brand awareness, with viewers associating with the brand as one that ‘understands’ them and connects directly with them through a common interest.

As both sport and many brands are very aspirational, they are naturally a good fit, with

brands taking advantage of the shared values to create a synergy effect. This synergy means that the combined effect of promoting the brand and the sport together is of higher value than the brand on its own.

If you are a brand looking to capitalise on the World Cup coming to Qatar, and the likely increase in sports teams, events and personalities that will head this way, it is important to remember that the brand ‘fit’ is vital – both brand and event/team/personality need to enhance each other and to add value, and the value must work both ways in order to be successful.

Sports branding must be highly creative – standing out in a crowded market is difficult and can be an expensive mistake if it is not executed properly.

A new market The news that the World Cup is coming to Qatar will also mean that established global brands will be looking this way in their own expansion plans – a new market for them to infiltrate and they will hope to dominate. Well-known global brands have an advantage because they often have huge brand equity built up by their experience and high brand recognition.

While this can seem daunting, the population of Qatar will grow as well and so the size of the market here will increase.

If anything, this influx of both people and competition presents opportunities and will push boundaries in terms of the creative offerings that local businesses can and should be bringing to the market. Let us take a closer look at two brands that are already in Qatar and are highly linked to the sporting world – Nike and Red Bull, both of which have comprehensive and systematic brand strategies.

Nike continues to be at the forefront of sporting success, a feat that is by no means an easily obtainable position. When an athlete dons the Nike logo, he is equipped with the best, because Nike is positioned as the best. It is this positioning and consumer psychology that sees Nike continue its stake in the top of Forbes’ Top 10 Most Valuable Sports Business Brands, valued at over US$10 billion (QR36 billion).

BRAND BEAT

The power of Nike is a culmination of marketing genius, research and development, and its consistent brand identity, ‘Just do it’.

Red Bull holds a different position in sports marketing. Where Nike sets to target the individual with a performance-based product, Red Bull positions its brand as a mental advantage acquired only by those that consume its energy drink.

The Red Bull brand – which claims to increase performance and concentration – paired with an aggressive international marketing campaign and alignment with extreme sport, targets the supporter who aspires to push boundaries.

For Qatari businesses looking to expand their brands outside of the local market there are a number of lessons to take into consideration.

The first is to consider your brand values and tone of voice. Are your brand values relevant only to the local market? Or will they be translated as effectively in the regional market?

A good first step is to expand regionally.

Expanding into an area where the customs and values of the market may be similar to the local market allows you to use brand imagery and marketing collateral without much need for change.

A step into a market that is radically different to the local one in terms of the audience’s socio-economic factors, the competitive environment and the marketing and advertising vehicles available, requires much more thought.

Informed decisions need to be made about how the brand will be positioned in the new marketplace in order to be successful. Think about the unique selling points of your business or brand, and how well (or otherwise) these will translate into different markets.

Are the brand values that are admired and treasured locally the same ones that your intended target audience will embrace? How is the competition positioned relative to what you intend to do? And will your key brand message be conveyed accurately when it is translated into a different language?

Airlines are often one of the first brands to ‘go international’, usually because of the very nature of the service they provide. They are the country’s flag carriers, and so the experience

The Red Bull brand, with its alignment with extreme sport, targets the supporter who aspires to push boundaries. that a customer has with them often leads to the first impressions of a country, and this is likely to have an impact on their perception of other brands they encounter from the same country.

More people will be visiting Qatar in the run up to the World Cup, and it is likely that they may well stop over for a few days while transiting through the country. This is a prime opportunity to showcase your business and

brand to this ‘global audience’ while they are right here in Qatar.

Take this opportunity to ‘wow’ them and ensure that every touchpoint they have with your brand is a positive and consistent one.

It is very likely that they will have brand recognition next time they visit, and, by the time 2022 arrives, that they will have become a loyal customer!

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Business Insight The Waiting Game (P.70)

Doctor Sami Al Faraj, head of the Center for Strategic Studies in Kuwait, expounds to Rachel Morris on what he feels is the urgent economic and political threat that a nuclear Iran poses to the region, as well as other topical issues relating to the recent wave of Internet-inspired civil protests in the Arab world.

Dr Al Faraj says that resistance to Iran’s aggressive policies have been brewing since 2008. In this file image from December 2009, Iranian expatriates in Berlin, Germany, wave pre-revolutionary Iranian flags in protest against their crackdown against anti-government demonstrators in Tehran. (Gallo/Getty Images).

ALSO IN THIS SECTION: •

Regional Insurance Opportunities: Akshay Randeva, director of strategic development, Qatar Financial Centre Authority, reveals how at the MultaQa insurance conference in Doha in mid-March, the opportunities and potential of this industry and strategies for growth in Qatar and the region will be discussed in earnest. (P.72)

•

Office Centres and Services: Bill Zada, managing director of Global Business Centre in Doha, offers insight into his company’s operations, which include providing office space, real and virtual, to companies, as well as services to facilitate the inception and growth of local and foreign small and mid-size businesses in Qatar. (P.74).

BUSINESS INSIGHT

The Iran Threat

The waiting game Dr Sami Al Faraj, head of Kuwait-based Center for Strategic Studies, believes it is

just a matter of time before Iran become a serious threat and concern – economically and politically – for Gulf states like Qatar. As he tells Rachel Morris, the time has come to stop treating Iran like the elephant in the room that no one acknowledges.

“Iran’s nuclear programme impacts upon us in many different ways. When I say ‘us’, I mean all of the GCC,” Dr Sami Al Faraj told TheEDGE on a visit to Doha. “We have a very different view than the rest of the world”.

Dr Al Faraj knows what he is talking about.

More specifically, he knows Iran better than any academic or policymaker in the Gulf Cooperation Council (GCC) region.

As an academic and policymaker, he participates in Kuwait’s contingency planning for the Iranian nuclear crisis and the situation in Iraq, and also contributes to the quarterly strategic assessment of Kuwait. He is the head of the thinktank, the Kuwait Center for Strategic Studies, which he established in 1997 as the first private consulting centre on strategic issues in the Gulf region.

While the world and the media’s attention is focused on the ‘people power’ revolutions in Tunisia and Egypt, and their tsunami-like effect across the region, including similar unrest in Algeria, Yemen, Libya and even Bahrain, Iran continues to sit like the elephant in the room.

According to Al Faraj, Iran’s posturing and the very real threat of the country’s claims that it can and will produce weapons grade uranium, will have an enormous effect on the political and economic climate in the GCC in coming years.

“The Iranians, in a sense, have returned to their position of two years ago. There is no progress,” he says. “They have not changed.

But sanctions have started to hurt the Iranian population, not the regime. In the past, people who argued against sanctions remind us…[that] these sanctions were successful in hurting the population. In South Africa it hurt the blacks, in North Korea the people are suffering a famine.”

Al Faraj says the Ahmedinejad regime thrives in a “climate of war” and gains strength from it.

“The Iranian regime is willing to sacrifice the Iranian people in order to show that they

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are solid against the sanctions,” he explains.

“This situation, this attitude – like the way that they clamp down on opposition groups inside Iran with the Balushis and the Kurds – all these actions give the indication that this regime can only survive in a climate of war.

“And this regime will take it to the end.

Their only measure of success is to actually produce the nuclear weapon they say they are capable of creating. The only way that they can prove to their population that the sacrifices from the sanctions are worth it is to produce a bomb. [Another measure] is to carry the nation to war.

“Either end result is not good for us. Now Saddam Hussein has gone away, Iran has gone crazy.”

Al Faraj warns that the threat to the GCC region is also economic, and could have a knock-on effect on the current and future foreign investment and partnerships in the region that are essential to the viability of many nations, including the state of Qatar and his homeland Kuwait.

“If I were an investor looking at this market,” he reflects, “I would be looking at this (Iran) situation very, very seriously before making a decision to commit. It is something that you would need to give serious thought to before making a decision.

“In 2010 stock markets in the Gulf region started talking about the ‘Iranian Factor’. Actually the gold markets started talking about Iran and its effect in 2008. I would take a serious look at this situation, because the more stubborn the Iranians are, the more we have a situation where people become pessimistic about the future, and this has a knock-on effect.”

Referring to Iran’s nuclear programme, he reminds, “There are many questions that Iran until now has not answered.”

However, GCC powerbrokers – including Qatar – realise the strategic, and ultimately economic, importance of keeping dialogue with Iran open and cordial, believes Al Faraj. Better to keep Iran friendly and inside the tent rather than hostile and outside causing more trouble.

“But the GCC continues to talk to the GCC in economic terms – to talk to the sensible ones.

This is very important. You can’t ignore it.”

Al Faraj also serves as an advisor to the GCC and is a consultant to the Kuwaiti government and to parliamentary organisations, private corporations, and government agencies throughout the Gulf region. He has advised Kuwait’s Office of the Prime Minister, the Ministry of Foreign Affairs, and the National Security Bureau on crisis management issues relating to the country.

One scenario that very much concerns him is the possibility of a nuclear accident emanating

“The thing that scares us about Bushehr is that the Iranians refuse to allow officials in to inspect it. There is no independent confirmation that it is safe. They keep on saying, ‘Believe us’...The only way (the regime) can prove to their population that the sacrifices from sanctions are worth it, is to produce a bomb.” from Iran. This, he believes, is a very real scenario and began with the opening of the centrepiece of Iran’s nuclear strategy, the Russian-built Bushehr nuclear reactor. Iran has repeatedly refused plant inspection requests from the United Nations body, the International Atomic Energy Agency (IAEA), to ensure compliance with international standards.

Russia’s support of Iran’s reactor began in the 1990s, coinciding with the period when the Russian economy was waning. According to the Iran-Russia agreement, Moscow will provide Tehran with nuclear fuel under the supervision of the IAEA. Kuwait, the closest Arab country to the Iranian city of Bushehr, has expressed concern over possible nuclear reactor leaks. Al Faraj says the threat to water supplies as a result of the region’s dependence on coastal desalination plants, is very real.

“We (the GCC) are in a position where a nuclear accident and the radiation leak that follows could pollute the region. Man-made disasters are plentiful in Iran. They happen more often than expected and that we know of,” he warns. “This is a contract with the Russians, and the Russians don’t inspire confidence in these matters with their past history, for example, Chernobyl. Any pollution coming from Bushehr will go into the waters of the Gulf.”

Al Faraj says the GCC region is crucial to the world energy supply security and foreign workers’ remittances that contribute to the economies of so many countries. “If we talk about procedures, the thing that scares us about Bushehr is that the Iranians refuse to allow officials in to inspect it.

There is no independent confirmation that it is safe. They keep on saying, ‘Believe us’.”

Those anticipating a rapid and “conventional” war against Iran, Al Faraj continues, will be “waiting a long time”. He predicts a “traditional” kind of military action, involving ground troops and other kinds of “familiar” tactics, some time in 2014.

“I think that if you think about war in the

conventional logic, that is mobilisation… then war is not there yet…If you talk about it as electronic warfare, as intelligence warfare against Iran by other countries, then it has already started. If you are waiting to see people in khaki in tanks attacking Iran, then it is not yet. That is some time off.”

A long-time observer and advisor on regional Arab politics and policy, Al Faraj is not surprised by the instability and revolutionary fervour sweeping the Arab world in 2011, resulting in regime changes in Tunisia and Egypt, and bringing uprisings in Bahrain, Yemen, Libya and Algeria.

He believes it was a “matter of time” these events took hold in countries such as Tunisia, Egypt and Yemen, because of clampdown on the internet and access to other forms of communication. He says that many regimes in the Arab world are “tribal”, where the “sword” traditionally quelled uprisings, and these leaders do not understand the oftenviolent implications of restricting modern communications, especially among young people who are already disenfranchised because of unemployment and poverty.

“There are people who rare deprived of jobs, they have no other recourse than to go to the Internet and raise their grievances,” he explains. “You clamp down on the Internet, on Facebook or on other types of communication, then they will go to the streets to vent their anger. It is the only response they have when you take these things away from them.

“They use Facebook because they can go to an Internet café and use it for one charge and access the internet easily. In traditional Arab culture these social networks, they are used for other means – for love, for talking to each other and communicating. You restrict that and there is a problem. Now they use them to air their grievances. That is one factor related to the younger generation and how attached they are to the Internet.”

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BUSINESS INSIGHT

Insurance And Reinsurance

Regional insurance sector to be highlighted at MultaQa Conference in Doha in March

Entering its fifth year in 2011 and taking place from March 14 to 15, MultaQa is Qatar’s only insurance and reinsurance conference. According to Qatar Financial Centre Authority’s (QFCA) director of strategic development, Akshay Randeva, who spoke to Miles Masterson, this year the event will feature strategic discussions between local and global industry players. “We have had an unsurpassed interest,” says Randeva.

“I think the main questions we are going to look at are: what are the prospects for the region’s insurance industry; and is it ready for the growth?” policies or contracts, in which case the insurer can seek reinsurance to either reduce exposure to a particular risk, or release capital for other uses. If a risk is too big, the insurer might not be able to fully cover this risk, in which case it will also seek to pass on or cede a portion of the premiums to a reinsurer. These reinsurers are basically global players and they diversify their book by buying little pieces of insurance all over the world.

Insurance is very local, reinsurance is very global.

Can you briefly explain the concepts of reinsurance and risk management?

Risk management is where it starts. Whether you are a corporate or an individual, you have to assess the risks you are facing. For an individual it could be a car accident, a disease or death. For each of these instances we try to quantify the risk and determine how best to mitigate this risk. If we are unable to mitigate this risk, and if this event – however unlikely – does occur, is there is some way of paying third parties to hold this risk for me? This is the basic principle behind insurance.

From risk management, you move onto insurance and from insurance you move onto reinsurance.

Reinsurance is basically how insurance companies buy insurance…even insurers need to diversify their own capital base and manage their own risks. There may be instances where insurers realise they are overexposed to a particular risk, or are better able to use tied up capital in other

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How is this reinsurance formulated?

There are two basic ways, ‘facultative’ and ‘treaty’-based. Facultative is probably the way most understand it, on a policy-by-policy, caseby-case basis. Here is my policy, this is my risk, and you underwrite it and pass some of it on to a reinsurer. Treaty is agreeing certain conditions in a contract, and any risk that falls in those conditions is passed on to reinsurers. But treaty could be handled in two ways. You can have something called ‘quota share’, which is when a reinsurer says whatever claims you pay, I will pay five percent. Alternatively, it could be what is called an ‘excess of loss’, which is actually the insurance company buying further insurance, where the reinsurer says as long the risk is below US$10 million (QR3.6 million), there is no claim, but if it goes above that I will pay 30 percent, or all of it, for example. They are basically protecting the insurance company from excess exposure to claims of a certain amount in any single year.

What are general misconceptions regarding this sector?

Insurance is generally not bought, it is sold.

The reason for that is that you are trying to purchase insurance against events that are unwelcome and unlikely and there can also be a fundamental misconception that it is unnecessary.

You have these cases where people have been buying insurance for a long time and nothing goes wrong…if a corporate starts thinking like this and refrains from purchasing insurance, it places the company, employees, suppliers and customers at risk. For example, a gas company might have an unblemished safety record, and then you have a BP kind of a case, and suddenly you are hit with US$30 billion (QR109 billion) worth of damages and that can have a serious impact on you as a company, on your counter parties and on the economy. So insurance is also a way to allow firms to put aside less capital to cover for the probability of these risks occurring.

How does it work from that point on?

Any line of business can be reinsured.

From motor insurance to large single risks.

Generally, large risks are sold through facultative contracts, so if a new project is to commence like the Qatar rail project, that will have to be independently assessed, risk managed and then possibly reinsured. Motor or health insurance, where you know that a certain percentage is going to be paid out in claims, is generally reinsured through treaty contracts.

BUSINESS INSIGHT

How do insurance and reinsurance companies obtain returns on their investment?

Insurance profits are driven in two ways.

One is a technical profit, which is the difference between premiums obtained and claims paid out. This is down to how well the insurance firm is able to assess the risks involved and negotiate contracts. The second of part of it is that you pay your premiums today, but claims are only paid out in the future (if and when the event occurs), so, in the interim, there are funds that need to be managed. These funds can and are invested in the equity and bond markets, and contribute to insurers’ profits. Therefore insurance and reinsurance firms pay a very important part in any economy by providing it with a constant flow of capital. However, these investments are closely monitored by supervisors to ensure they are safe and insurers will be able to pay out any claims that may occur. The assets of the global insurance industry are about US$23 trillion (QR384 trillion) that is being invested globally and they are among the largest players in the capital market as investors, along with pension funds.

Where does Qatar fit into the world and region’s reinsurance sector?

What we find interesting is that almost half of the premium insurers earn within this region and Qatar specifically, are ceded out to overseas reinsurers. The QFC believes that for a capital-rich region, over time, as underwriting standards and risk analysis improves, less premiums will be ceded to international reinsurers, creating pools of capital within the region, sufficient to ensure that a larger part of this risk remains here. We are hoping to engage with local industry so we can reach this increased retention of premiums.

What is the current comparison of the scope of the industry here currently compared with the rest of the world?

Insurance penetration [as part of the gross domestic product] for the GCC region is around 0.6 to 0.7 percent. In the developed world we are looking at about six or seven percent, which is a massive difference. Therefore that creates a feeling that the fundamentals for growth in this region are very strong. There is still significant scope to further grow this sector. There is a lot of insurance that can be sold.

What are the reasons for this do you think?

In life insurance, there [might be] cultural reasons for the tiny market size; however, this has

Reinsurers are basically global players and they diversify their book by buying little pieces of insurance all over the world. Insurance is very local, reinsurance is very global. In essence, insurers insure the market and reinsurers insure insurers. been addressed with Takaful, which is Shari’ah compliant. In the larger non-life sector, we are beginning to see signs of a maturing market. If you look at the Western world, the vast majority of premiums are life [about 70 percent] but if you look at the region, the vast majority is non-life, about 94 percent…so there is a huge dichotomy there and this is another reason we believe there is so much room for growth for insurance and reinsurance here.

What is the nature of the insurance and reinsurance companies based in Qatar?

As of now the vast majority of insurance written in Qatar is done by local firms, which are performing extremely well. In fact, Qatar Insurance Company (QIC) has set up a reinsurance firm within the QFC called ‘Q-Re’ to develop its reinsurance division. However, going forward we do believe that growth is going to happen both internally, as well as the entrance of large global reinsurance players, as the region takes its rightful place in the world economy.

On that note, MultaQa has a reputation of being a premier event in this industry?

MultaQa started about five years back. It was a brainchild of my predecessor Fetooh Al Zayani, who has been in the industry in the region for the last 35 years. This is a flagship event for the QFCA, and has developed into one of the region’s leading non-commercial insurance events. Participation is by limited invitation only, in order to enable an atmosphere conducive to a slightly more high level strategic discussion around the trends that the global industry is seeing, and how they interact with what is happening in the regional and local industry…including what are the strategic issues that we think are going to set the pace for growth ahead. This year we are going to have HE the Minister of Finance, Yousef Hussain Kamal delivering the keynote speech…and Graham White who is the deputy chairman of Lloyds, who will provide a very interesting take on how Lloyds is one of the largest reinsurers in

the region and how they see it evolving over the next few years. We are [also] expecting to see a broad range of high level CEOs on the panels.

The industry seems to have been dominated by companies in developed markets until now, do you see this changing soon?

Like everything else, the emerging markets are going to see a number of new, much bigger players. You have GIC in India, you have the Chinese reinsurance firm, ACR, for example The GCC itself is also part of this?

I would expand that to the MENA region, which is among the fastest growing insurance markets in the world and there are immense opportunities that exist in the region. The last panel on the conference is about how we put this together to create successful businesses in this space. There are many challenges in this and I think amongst the ones that will be definitely covered would be how we can create and encourage the right talent to support this growing industry without relying on an expatriate workforce. The second is the fragmented regulatory environment of the region and how that translates to firms.

Are there any other outcomes or results you hope to see at the event?

The QFCA intends on releasing its ‘reinsurance barometer’ at MultaQa. In this part of the world there is no neutral study, where somebody surveys the industry to understand what the trends are in the industry itself, in terms of pricing, etcetera.

It is like a business optimism index for reinsurers, in which we have an opportunity to ask prominent industry participants what they believe are the major trends in the region, so we can further bring to light both the opportunities and risks that are expected going forward for large classes of business.

We expect that to be semi-annual, starting from this MultaQa. TheEDGE

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BUSINESS INSIGHT

Office Centre Services

Providing business with affordable real and virtual office space and administrative services in Qatar As the economy of Qatar continues to grow at a rapid rate, the need and indeed opportunity; for companies who facilitate foreign enterprises to get up and running in the country, as well as to provide them with affordable office space and administrative services, will rise too. Global Business Centre (GBC), based across the road from the new Doha International Arrivals Terminal, performs both of these services and more, and is one such company figuratively and literally positioned to take advantage of these Qatar boom times. Miles Masterson spoke to managing director Bill Zada about this business sector.

Can you explain the fundamental principle behind your business concept?

We set up everything for a new company.

The intricate way of doing business here in Qatar – the concept of sponsorship and licensing [etcetera] – is very unfamiliar to Western companies. We want to make it simple. No complications. We want to offer a place for a new company [and to] serve this

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particular need at the starting stage, for a company who wants to set up, but does not know anything about Qatar.

We will be their eyes, their ears, and their mouth, especially with the language barrier.

We offer at least seven different languages, from German to Italian to Spanish to Greek, Arabic, French and English.

We make it so cost effective to set up a business, where a company has not started generated income yet…until the point where they grow and generate income and then might need a bigger office or to take the next step.

We also provide somebody who will do due diligence. This company might have an idea or a plan that we seriously believe is feasible. We have a company which does our feasibility studies and if it passes muster we will set up meetings with them and we will direct them to categorised investors.

We have investors interested in different sectors, all serious and big investors.

So from sponsorship solutions, potential investors for joint ventures or a permanent partnerships, we set up stages where people want to start a company, they will get all the steps from A to Z.

So GBC is much more than just renting out real or virtual office space?

It is much more. This is an office with a spirit, with an engine.

For a company that is just starting and renting two workstations or an office, in the beginning they do not need full-time bookkeeping or a secretarial service.

They do not need to hire the public relations person to do their procedure in governmental bodies, and so we offer all those services at competitive prices…in a fast and efficient way. Now the other part, a company who is coming for the first time to Qatar, they are going to need to look for a good sponsor, they might need a partner.

Is there a lot of demand for your services?

The only problem we have right now is we do not have a whole lot of space and after three months of operation, we are at 80 percent capacity…From that point, we are starting a second Global Business Centre.

The same facilities, the same professionalism etcetera, in order to meet the huge demand.

But let me point something out, although we are a public company, but we also reserve the right to be selective about the clients we would like to serve.

Why is that?

Basically we like to check up on new foreign companies…to know if they are

BUSINESS INSIGHT

reputable. There are companies that specialise in this kind of background check in Europe and the United States.

We also make sure this information is affiliated by our embassies, by foreign ministries, just to make sure that we are not getting bogus information.

If those companies are looking for proposals and looking for investors here, that scrutiny will be three times more intensive than for just renting.

We like to provide an environment for our important clients, to cater to and maintain a certain prestigious image.

Are there any specific sectors or industries that tend to use your facilities the most?

Actually no. We try not to have all the same type of businesses here; we try to be selective. We have a training company, a water purification company and an IT solution company. We have human resources. We have an interior design company...this place is designed to be an interactive community.

If you have a diversified sector of clients, then you are giving your client the opportunity inside the business sector, to engage other companies in profitable business. Being here, you might have a client who is next door and you see him every day… so the trust established. It is an informal environment in which we encourage tenants to get to know each other and do business with each other…chances that might not exist if you are renting in a normal office.

“Global Business Centre is designed to be an interactive community. If you have a diversified sector of clients, then you are giving your client opportunities to engage other companies in profitable business, which might not exist if they the rented normal office space.” we are actively involved in promoting, facilitating servicing smaller companies, mid-size companies, companies that will be important part of the growth of Qatar.

What about the virtual aspect, where a company has no physical presence in the country, but they want to have an address and phone number, etcetera?

Basically we provide all those basic needs and with unified communication systems powered by Cisco.

Wth our latest technology we are able to provide an IP telephone for an individual and answer their call, forward their messages, provide a mail box after working hours [both] if you are outside or inside Qatar. If you are outside Qatar, we will function as your backup and your virtual office and if you are here and active we will provide that reception service, we will follow up on your messages, screen your callers…we are very flexible.

Do you have many local companies, or are they all international or a mix?

Right now we are seeing a trend of local entrepreneurs trying to set up different businesses or engaging foreign companies to set up partnerships. So we have local entrepreneurs, joint ventures, and then we have foreign companies who want to be on their own, or they are looking for only sponsorship solutions.

Are all services outsourced or are they provided in-house?

No, all those services are in-house. We have a media company which will do your printing, designing, presentation, animation, website design, we have an accounting service which will provide bookkeeping services. We have a driver and a car if you need someone to be picked from the airport, or we have connection with certain hotel groups to get you the best rate… we are not in business to kill our clients with high prices. We try to provide the best services at a reasonable price.

Is assisting entrepreneurs and SMEs, something your company is active in, it seems like a natural fit?

Actually that is exactly what we do. We actively help small and midsize companies, those companies that do not require a whole lot of staff or a whole lot of space.

We do have some bigger companies involved in some huge projects…but

What are the advantages for businesses using your facilities and services?

The first advantage is that you can start immediately. [The minimal time] to set up an office with the least amount of personalisation takes you about six weeks after renting [and] if you are doing some expensive personalisation to that office to fit your needs, you might need two to three months.

In the Global Business Centre, we provide a ready-to-go office…and basically 10 minutes after signing a contract, you are sailing in the business sea of Qatar.

The other advantage is the cost. Renting a bigger space might seem cheaper, because you will have more space with less money, but in a bigger space, you have to have the services of cleaning, utilities, an office boy, you need to pay for a receptionist, you need to pay for your Internet, you have to have furniture for your reception area and meeting room. If you start adding and factoring all those services that you will get for free here, you will see you save up to 60 percent…we offer all of those [services] and you pay only when you need them.

Some of them you do not pay, but some services like doing your governmental procedures or visas, you will pay for when you need them, based on your individual needs.

So you create packages for each individual client’s needs?

Yes, exactly. Somebody might to use our secretary more than the others. Some might use that service once a week for data entry for a couple of hours, [but] somebody else might want to use it every week, four times a day for two hours, so we will provide different packages to be reasonable.

And then we have other amenities; beautifully designed and equipped state-ofthe-art meeting rooms, reception area, a lounge area; clean and hygienic bathrooms. We are our client’s partner, but without sharing their profit.

Our clients do not have to worry about anything but making money for themselves.

Is there still a lot of demand for the virtual offices?

Actually, the demand for the virtual office was higher before Qatar winning the hosting of the World Cup, but after hosting, the trend is [now] turning to one of establishing a physical presence.

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LIFE & STYLE FROM RUSSIA, WITH LOVE (P.78)

Why Moscow offers the best of Russia’s incredible past and promising present.

ALSO IN THIS SECTION: • •

Fantasy golf: If you want VIP access to the Masters, or help from Tiger’s coach, this is where to get it. (P.78).

The ultimate business wardrobe: Build your wardrobe and dress to impress, with invaluable sartorial advice from Salam Stores. (P.79).

•

10 office personality types: Face up to The Bully, get Mr Misery to stop complaining, and avoid the sting of The Gossip. Our indispensable guide leads the way. (P.80).

TRAVEL

Reinventing Russia

STAY: It’s worth it to stay at a hotel in a great location. The Royal Meridien Hotel National offers Kremlin views and easy access to Red Square and St Basil’s Cathedral. The hotel also offers transport from the airport (highly recommended), and an extravagant breakfast buffet, including blinis and salmon.

EAT: Vogue Café, where locals feast on Western cuisine, or Godunov, where tourists dine on Russian fare. If you’re a foodie, head for the historic food store, Eliseev’s Gastronome, and make sure you book a table for dinner at Café Pushkin. Other terrific options include Turandot for baroque splendour, and the Savoy Hotel.

From Ivan the Terrible and the Romanovs, to Communism and the Cold War, can any country boast as rich a history as Russia? Watch now as Moscow transforms itself into a 21st century city.

I

n grey streets, fringed by Socialistera buildings and former state stores, Moscow has reinvented itself.

Purged of its past and now transformed into a global hotspot, Moscow’s buildings are filled with Italian furniture, French chefs, European haute couture and celebrities like Naomi Campbell, Christina Aguilera, Shakira and the Black Eyed Peas.

Few cities have shed such history, and Moscow, the former global headquarters

of Communism and Cold-War politics, is today home to a diverse, energetic population, including as many billionaires as you can shake a sickle at.

There are certainly two Moscows however, and the ancient city has always been an attraction for history buffs. The Kremlin is a must-see, while churches and monuments remember fallen heroes and legendary battles. The remains of the Soviet state are all over the city, but they are being transformed – warehouses

The Ultimate Golf Experiences Xclusive Golf provides truly exceptional bespoke golfing experiences. Whether you want to play the world’s top private courses with a golfing star, enjoy a lesson with a famous instructor or gain entry into one of the world’s most prestigious tournaments, Xclusive Golf has the connections to make it happen. Some of the offers available include a day with Hank Haney, Tiger Woods’ former coach (Woods won six of his major titles with Haney), and luxury VIP packages to next year’s Masters. Xclusive Golf also invites private and secure online bids for one-off exceptional experiences. www.xclusivegolf.com

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DO: Have an English-speaking guide meet you at your hotel and walk you through a personal tour of the Kremlin, as well as the Museum of Contemporary Russian History.

Be sure to visit Lenin’s Tomb on Red Square, where the chemically preserved body of the former leader has been on display for more than 80 years. Top off your stay with an evening at the Bolshoi Ballet. and abandoned factories have been turned into art galleries, chi-chi coffee shops and nightclubs offering VIP US$20,000 (QR73,000) boxes.

This Moscow glitters with diamonds and welcomes you with white gloves.

Whichever version of the city you choose to enjoy, there is no doubt that Moscow has something for everyone.

LIFESTYLE

The Ultimate Business Wardrobe Salam Stores makes its recommendations for those sartorialists looking to ensure they are never out of style.

3. Alter the length of a sleeve, so that a halfinch of shirt cuff shows.

4. If the pants are an inch too tight or too large in the waist, a tailor can usually fix them. More than an inch and you’re wasting money.

Salam Stores offers clientele a free tailoring service.

So many styles...

1. The two-button suit looks good on everyone.

2. A centre vent at the back of the jacket is both modern and traditional. “Side vents are very European,” says Verdity, “and they add shape to your suit.”

All about collars 1. A button-down collar works well with medium-width ties and is the least dressy.

Recommended: Polo by Ralph Lauren.

2. A wide-cut collar pairs well with a mediumto-wide tie. Recommended: Givenchy.

3. A straight-point collar tucks nicely into high-cut three-button suits and looks perfect with narrow-to-skinny ties. Recommended: Versace Collection.

The five suits you must have: The grey suit: Versatile enough to go with just about any shirt and be worn to any business occasion, the grey suit is elegant and always appropriate. Maher Ardity, salesman in the Men’s Section of Salam Stores, recommends dark and light grey suits that will look sharp with a white, light blue or pink shirt.

Recommended: Canali.

The black suit: A staple in any business wardrobe, choose one that is cut slim.

Recommended: Hugo Boss.

The pin-striped navy suit: A cool classic that is best anchored with a solid shirt.

Recommended: Paul Smith.

The khaki cotton suit: Lighten up in summer.

Ardity recommends pairing this suit with a solid shirt and dark tie for the office. Recommended: Versace Collection.

The navy suit: This safe, classic choice lends itself well to almost any shirt-and-tie combination, but for maximum elegance, pair it with a white shirt, dark solid tie and pocket square. Recommended: Hugo Boss.

Tips for the best fit: 1. The suit’s shoulders should hug yours – no protruding shoulder pads. If the suit doesn’t fit in the shoulders, it’s not going to fit anywhere else.

2. You should be able to easily button the jacket without it straining.

Other wardrobe must-haves: 1. You can’t have too many blue, white or blueand-white striped shirts – they work with everything. Build on these versatile basics, along with a selection of modern ties, and you’ll be able to mix and match for endless variations. Salam Stores will personally recommend the best selection of shirts and ties to match your wardrobe style.

2. The wrong pair of shoes can wipe out all your hard work. Look for slim black lace-ups (Versace Collection makes a great pair), brown lace-ups (Boss by Hugo Boss), and loafers, preferably by Moschino, which will look perfect in summer with a khaki suit.

3. Over-the-calf ribbed socks so you don’t show any leg when seated. Match the colour of your socks to your suit, not your shoes.

4. Cufflinks, which you’ll need when wearing a dressier French cuff shirt.

5. A cotton pocket square, but wear yours square, not puffy or multi-peaked.

6. A watch, especially a classic style by Gianfranco Ferre, Iceberg and Guess.

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TEN THINGS

The 10 office types

If you work with your company’s version of The Office’s cringe-worthy David Brent or knowit-all nerd, Dwight Schrute, here are some pointers for maintaining your sanity in the most professional manner.

The Talking Head He contributes little or nothing to projects, but takes it upon himself to talk on the team’s behalf at meetings, usually skewing facts. He is adept at taking credit for others’ work, so is usually the first to be promoted.

How to deal with him: Do some extra work or perform a separate task. Your boss will eventually notice and The Talking Head will not be able to take the glory.

THE ALL-KNOWING I.T. GUY He knows how to find the crucial presentation you thought you deleted, and won’t mention to anyone that you had actually minimised it. He is the indispensable superhero of the office, but he does not realise it. Yet. How to deal with him: No ‘dealing’ necessary, but as he is used to being spoken to mostly about problems, make an effort to make small talk that is not about the network.

The Ego Monster He is right. He’s always right. He is the smartest person the room, and likely considers himself over-qualified for his position. His ideas are the best and the only ones that

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count. Ironically, he is the one most likely to talk about ‘team work’.

How to deal with him: The most difficult personality; management will likely see this behaviour resourceful. Ask your boss to him to have a quiet chat with The Ego Monster.

The Baby To say the emotionally draining Baby is negative is an understatement. He whines, complains, has difficulty getting perspective and thinks that no one thinks he is important.

How to deal with him: Start off by listening, then steer the conversation toward the facts, which are often less negative than he thinks.

The Bully The Bully only feels good when he is putting others down. His weapons of choice?

Intimidation and hostility. With the exception of his boss, everyone is fair game.

How to deal with him: Bullies become malicious if confronted. But you have to set your boundary with him early on. Address him by name to maintain control, state your position and resist temptation to argue. You will not win, but you will draw the line.

Mr Please-Like-Me The Mr Please-Like-Me may be nice, but at work, he may over-commit himself, volunteering for too much work, because he is simply unable to say ‘No’.

How to deal with him: Limit what you ask of him, you will inevitably be disappointed when he misses an all-important deadline.

Mr Passive Aggressive Who is that undermining your authority and using sarcasm (often disguised as a joke) to indirectly criticise you? Mr Passive Aggressive takes potshots at personalities in a devious manner, so beware.

How to deal with him: Turn his attention to the issues and let him know you won’t put up with sniping. Mr Passive Aggressive prefers not to be confrontational.

The Gossip This co-worker cannot keep his ears out of anyone’s business, whether it’s work-related or personal. Although a nuisance, The Gossip wants to be accepted by everyone and thinks revealing info about others will please everyone.

How to deal with him: It’s best to keep your thoughts to yourself around The Gossip, and reveal only information you would not mind hearing repeated. If The Gossip tells you someone else’s secrets, listen, but do not repeat to anyone else.

Mr Misery This is one unpleasant person. Mr Misery hates his job. His diatribe against the company is vicious, never-ending and laced with profanity. When you ask Mr Misery why he does not leave, this merely sets off another chain of complaints.

How to deal with him: Stay positive but realistic. Delay discussing solutions that will be dismissed whenever you bring them up.

You No matter your work environment, there will always be one co-worker that you do not like, and another that simply will not like you. Just as in a neighbourhood, or high school, people fill different roles in an organisation. However challenging or negative their behaviour may be, do not take it personally.