The Edge - Aug/Sep 2011 (Issue 25) by Firefly Communications

CONTENTS

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

AUG/SEPT 2011

CONTENTS ON THE COVER

The August/September 2011 Ramadan issue of TheEDGE is a threefold reason for celebration, commemoration and salutation. Not only is this issue our second birthday edition, it also serves to mark the 40th anniversary of the State of Qatar, as well as the annual month of fasting and reflection in the Muslim calendar. (Page 60)

FINANCE & ECONOMICS .28. market watch

Beyond the global downturn.

.30. Inside edge

Qatarâ&#x20AC;&#x2122;s retail sector heads for a boom.

.32. special report

Manufacturing and industrial sector.

.34. balance sheet

CEO fears, concerns and priorities.

.38. Economic barometer What influences the price of oil?

FEatures .44. special feature

Qatar celebrates 40 years of success.

.48. in the spotlight

Jamie Stewart on the after effects of the Arab Spring, six months later.

.52. business interview Mohamed Althaf of LuLu.

.56. on the pulse

Tackling food and water security.

.64. special focus

Issues to consider before moving to the cloud.

KNOWLEDGE & EXPERTISE

.68. innovation culture

Using online media and social networks to connect and innovate.

.70. business management The downsizing myth.

.72. small business know-how To hire or not to hire?

.74. Marketing & Design

Guidelines for an effective website.

.76. Legal insight

The legalities of Shariâ&#x20AC;&#x2122;ah finance.

44 TheEDGE

CONTENTS

buSINESS INSIGht

.79. bUSINESS INSIGhT INTErvIEwS

Kirk Martin on Qatar’s retail scene and the iconic The Pearl-Qatar, and Tom Farrell on Nokia’s future plans.

87 rEGuLArS

.08. .09. .10. .16. .18. .20. .22. .24. .85. .88.

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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 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 DESIGNEr Teja Jaganjac FINALISEr Michael Logaring PhOtOGrAPhEr Herbert Villadelrey

Ramadan is a time of fasting and reflection for members of the Islamic faith the world over, followed by feasting and celebration during Eid Al Fitr. However, in 2011 this meaningful period takes on added significance for all the citizens and residents of Qatar, as it coincides with this small Arab state’s 40th birthday. As our article commemorating the auspicious occasion on page 44 points out, ever since this small emirate secured independence from the protectorship of United Kingdom in 1971, fuelled by the discovery and prudent management of abundant hydrocarbon resources, its business and financial presence and balanced diplomatic influence have grown exponentially worldwide. This is of course manifest in a booming economy and record gross domestic product, but nowhere is it more immediately obvious than the securing of the Fifa 2022 World Cup. The ongoing scandals and accusations around the troubled football governing body aside, this is a massive accomplishment for the country and in many ways exemplifies the fortitude and ambition of its people. It is certainly something to look forward to, following Qatar’s 50th birthday celebrations in slightly more than 10 years. Coincidentally, the magazine that you are holding is also TheEDGE’s second birthday edition. While in the milestone lexicon this is not hugely remarkable, it is still an achievement we are immensely proud of. Accordingly, we have created this Ramadan double issue for both August and September 2011, in order to celebrate a special time for both this publication and the nation it calls home. By design, the issue also covers Islamic finance and Shari’ah banking,

two areas of a financial sector where Qatar is playing an ever-increasing role. This small but significant country has its fair share challenges, of course. Chief among them is securing adequate resources for food and water, as well as making sure that its national and expatriate communities are content and sufficiently employed, two topics which are also dealt with in this issue. But there is enough motivation, talent and resources here to overcome them, and Qatar’s future is as bright as a full desert moon. Here’s wishing a very happy birthday on September 3 to the State of Qatar from all at TheEDGE, and Ramadan Kareem to all our Muslim readers. See you in October. Miles Masterson, Managing Editor

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

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

E ZIN GA

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PrINtED by Ali Bin Ali Printing Press, Doha, Qatar

THE EDITOR

MA CYC LE TH IS

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

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CONTRIBUTORS

P.24 MARTIN Ă PORTA Chief Executive Officer Siemens WLL Doha, Qatar

P.28 Dheeraj Shahdadpuri Analyst Dubai, UAE

P.30 Manjeet Chhabra General Manager, Middle East Dun and Bradstreet Dubai, UAE

P.32 Matt Ghazarian Editorial Contributor Oxford Business Group Istanbul, Turkey

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

P. 38 Karim Nakhle Senior Business Strategist Doha, Qatar

P. 44 Rachel Morris Journalist Middle East and North Africa Region Doha, Qatar

P.56 Edward Jameson Senior Business Journalist Middle East and North Africa Region London, United Kingdom

P.64 steve bailey Regional Operations Director CommVault Dubai, UAE

P.68 Kamal Hassan President and CEO Innovation 360 Institute Dubai, UAE

P.70 Freek Vermeulen Associate Professor London Business School London, United Kingdom

P.72 Justin Williams Faculty, School of Business Studies, CNAQ Doha, Qatar

P.76 Charbel Neaman Associate Clyde & Co Doha, Qatar

P.76 David salt Partner Clyde & Co Doha, Qatar

featured contributor Jamie stewart Jamie Stewart has a Master of Arts in Journalism from Brunel University, London, United Kingdom. He worked in the Middle East for 18 months, while also producing a dissertation on economic prosperity and media freedom in the United Arab Emirates (UAE). His work on Qatar, the UAE, Afghanistan and the Gulf has since been published in the Middle East, Asia and Europe and he contributes regularly to the TheEDGE.

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NEWS ETCETERA

NEWS Etcetera rOtA ANNOuNCES QAtAr rAMADAN ACtIvItIES In late July Reach Out To Asia (ROTA) announced a series of volunteering activities that the organisation, along with its strategic partners, will hold in Qatar during the holy month of Ramadan. ROTA will offer volunteers and supporters opportunities to participate in community activities including iftars, art workshops, Garangaou celebrations and house renovations. In the build-up to Ramadan, ROTA distributed food items to scores of needy families in Doha, with generous support from Al Meera, the Qatari retail company, which donated all the items to the distribution campaign for free. “Ramadan is a month about selfless giving to those who need it the most,” explained Mr. Essa Al Mannai, ROTA’s director. “We hope that ROTA’s activities, along with our partners and volunteers, give a glimmer of hope to the underprivileged.” Iftars planned for the month include one at the Qatar Foundation for Elderly Care and another that will cater for a variety of community organisations that represent children with special needs. Both these iftars are sponsored by the Qatar First Investment Bank (QFIB). Another in the middle of Ramadan will be provided for the children of the Dhreima Qatar Orphan Foundation and sponsored by THE One furniture store. This joint activity will also include QFIB-sponsored Garangaou celebrations for the Dhreima orphans. For the third year running, two houses will also be renovated with the support of partner, THE One, who donated household furniture, and

financial sponsorship from the QFIB. Another highlight of ROTA’s Ramadan activities will be the Art Project. Hosted at the Virginia Commonwealth University Qatar and guided by up-and-coming young Qatari artists, ROTA volunteers will be engaging with children from community partners such as Best Buddies Qatar, Al Noor Institute for the Blind, Qatari Centre of Social Cultural for the Deaf, Hope Qatar, Qatar Society for Rehabilitation of Special Needs and the Qatar Paralympic Committee. For more information, please visit www.reachouttoasia.org.

MOODy’S rAtES 49 GCC bANKS The 49 Moody’s-rated banks across Gulf Cooperation Council (GCC) should continue to face structural asset-quality challenges and elevated event risks over the next credit cycle, stated the credit rating agency in a report recently. The principle factor that underpins these banks’ structural asset-quality challenges is the undiversified GCC economies dependence on oil and gas exports, magnifying the impact of economic cycles on the banks. This, continued Moody’s, is exacerbated by the dominant role of governments and large family-owned conglomerates, leading to large sector and single-borrower concentrations. Political event risk is another factor, as the regional unrest has already weakened the credit strength of banks domiciled in affected countries. Despite broad economic recovery in the region, Moody’s expects this situation to persist through the next cycle, but a key message of the report was also that, while structural asset-quality challenges will continue to limit GCC banks’ credit strength and constrain many of their standalone ratings, Moody’s believes the willingness of GCC governments to support their banks is positive.

MENA SMArtCArD SECtOr ON thE rISE The Middle East and North Africa (MENA) smart cards market will reach US$329 million (QR1.1 billion) by 2014, with the telecommunication sector accounting for 64.4 percent of all smart card sales, according to 2011 market research by firm Frost and Sullivan. The research agency further states that the strong demand for digital security is fuelling demand for smart cards both globally and in the region. It is projected that the global smart card market will post double-digit growth during 2011-2013, with the region growing at an annual growth rate (CAGR) of 10.8 percent. Eurosmart, the international not-for-profit association, based in Brussels, has reported that smart card shipments for telecommunications applications globally will grow to 4.5 billion units in 2011, up from four billion in 2010. The smart card sector across the MENA region is also witnessing increased interest from many governments, with national identity cards increasingly becoming mandatory for citizens, immigrants, and the expatriate community.

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ROTA’s Mohammed Abdula Saleh and Mohammed Salih announce the organisation’s Ramadan activities at a media roundtable held in late July.

NEWS ETCETERA

KhALID AL MuGhESIb APPOINtED ISS AMbASSADOr FOr QAtAr Khalid Al Mughesib, deputy chief executive officer (CEO) of Qatar Insurance Services (QIS) and board member of Qatarlyst, has been appointed as Ambassador for Qatar by the International Insurance Society (IIS). This is the first time the IIS has appointed an such an ambassador for Qatar and is a sign of Qatar’s emerging status as a leading hub for captives and reinsurance in the region. Al Mughesib joined QIS, a licensed QFC Authority firm, in April 2010 as deputy CEO. He previously worked for Qatar Petroleum and Al Koot Insurance and Reinsurance as energy insurance manager, and for Al Jasr Takaful as general manager. He brings more than 18 years of experience in local, regional and international insurance to his role. “We are delighted that Khalid should achieve this accolade, proof that his hard work and that of the QIS and Qatarlyst is being internationally recognised,” said James Sutherland, CEO of QIS,

QIS deputy CEO and Qatarlyst board member Khalid Al Mughesib has been appointed as ambassador for Qatar by the International Insurance Society (IIS), a first for the Gulf state.

INvEStMENt FOruM COMES tO QAtAr Under the auspices of the Qatar Financial Centre Authority (QFC Authority), the fifth annual Middle East and North Africa (MENA) Investment Management Forum will be held in Doha from 2 to 5 October 2011. This is the first time the conference has come to Qatar. Over the past four years the summit and convention has attracted leading financial and investment experts from firms operating across the GCC. It will offer Qatari financial service companies the opportunity to interact with their peers from across the region, to discuss the trends, opportunities and challenges facing the industry. “The MENA Investment Management Forum moving to Doha is recognition that Qatar is becoming the regional centre for the asset management industry,” commented Shashank Srivastava, acting CEO of the QFC Authority. INvEStMENt FOruM 10% DISCOuNt OFFEr TheEDGE readers can claim a 10 percent discount by quoting VIP code FKN2226EDGE when registering for the MENA Investment Management Forum. Book online: www.menaimf.com. For enquiries and bookings, contact the ICBI FundForum: Email: info@icbi.co.uk Tel: +44 (0) 20 7017 7200/Fax: +44 (0) 20 7017 7807

juLy IN rEvIEW

NEwS SNIPPETS frOm QATAr’S bUSINESS wOrld mAlAYSIA SECUrES GAS SUPPlY Late last month Qatargas signed a ‘Heads of Agreement’ (HOA) with Malaysia’s LNG company, Petronas to supply them with 1.5 million metric tonnes per year of LNG, believed to be for domestic use. The long term contract will supply the equivalent of five percent of Malaysia’s gas demand, which is reported to be growing at six percent a year. “It is the first time Qatargas has signed a HOA for supplying LNG to the South East Asian market,” Qatargas CEO HE Khalid bin Khalifa Al Thani said on the signing. “We are very pleased with this achievement as it represents the first longterm agreement for supplying LNG to one of the world’s fastest growing LNG markets.” Malaysia was the world’s second biggest exporter of LNG behind Qatar in 2009 but slipped into third place behind Indonesia in 2010. Dwindling output from the country’s ageing fields and rising domestic demand from its power plants eroded exports. Qatargas will supply the gas from the Qatargas 2 project to Malaysia’s first LNG receiving terminal, currently under construction in Malacca. UdC rEPOrT NET PrOfIT INCrEASE United Development Company (UDC), one of Qatar’s leading public shareholding companies, reported a net profit attributable to the owners of the company of QR346.8 million for the first half of 2011. Khalil Sholy, managing director and president of UDC, said the results reflect the steady performance by UDC and its subsidiaries. “UDC’s earnings per share reached QR2.16 for the first six months of 2011,” he added. “While reporting a gross profit of QR355.7 million compared to QR279.9 million for the same period last year. We are therefore confident that our strategic plans will continue to enhance the broad scope of UDC’s business activities.” JAIdAh GrOUP CONClUdES INTErN PrOGrAmmE Jaidah Group announced the completion of its recent internship programme with College of North Atlantic Qatar (CNA-Q) in early July. Three individuals from student body of CNA-Q were selected to undertake an internship at the group as part of its drive to attract, retain and develop the best young graduates. Representatives from Jaidah Group’s human resources (HR) department interviewed all suitable candidates, and the three students selected spent four weeks on the programme, one each in the marketing, accounts and HR departments. “CNA-Q students are particularly attractive to Jaidah due to their strong academic standing and eagerness to learn. For these reasons it’s highly likely that our internship programme will continue, and flourish,” said Jaidah Group HR manager, Elie Abdullah.

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NEWS ETCETERA

events calendar September 3

40th Anniversary of the State of Qatar

17-19

ecoQ (Qatar International Environmental Protection, Technology & Sustainable Energy Expo), Doha, Qatar

18-19

ProSafe Process Safety Integrity, Doha, Qatar

25-28

Construction Summit and Awards, Doha, Qatar

26-27

7th Annual World Islamic Funds and Capital Markets Conference, Manama, Bahrain

26-29

24th World LP Gas Forum, Doha, Qatar

October 1-2

Middle East Investments Summit, Dubai, UAE

2-5

MENA Investment Management Forum 2011, Doha, Qatar

5-8

International Furniture and Design Exhibition, Doha, Qatar

9-13

GITEX Technology Week, Dubai, UAE

Offshore Middle East, Doha, Qatar

25-29

Doha International Film Festival, Doha, Qatar

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American president, Barack Obama, calls for compromise in debt-ceiling talks. Obama warned House Speaker, John Boehner not to turn Americans into “collateral damage” with his proposal to impose US$1.2 trillion (QR4.3 trillion) in spending cuts. Obama depicted House Republicans as stubborn, small-minded and willing to risk default, higher interest rates and stock market volatility just to block higher taxes.

“Following the events since my suspension, it now seems impossible for them to say that they were wrong, although I wish they would have the courage to correct their mistake.” Former Asian football chief, Mohamed bin Hammam, states in his blog upon news that he has been banned for life from all football-related activities amid bribery claims.

DIrECt quotes

2011

“The American people may have voted for divided government, but they didn’t vote for a dysfunctional government.”

“I played dead. I lay there for at least an hour. It was completely quiet…I decided to get up. I had been lying on top of a dead body. Two dead bodies lay on me.” 23-year-old Norwegian, Prableen Kaur, of her experience when Anders Behring Breivik – dressed as a police officer – stalked and killed 91 people on the island of Utoya, after killing seven people with a car bomb in Oslo.

“His Highness The Emir has had this idea in mind for quite a while. They have started the discussions and the process.” An unnamed source with close ties to the Qatar government reveals that Qatar is launching a bid to stage the start of the annual Tour de France cycling race in 2014 or 2016.

NEWS ETCETERA

PIC of the month CALL OF thE FALCON

Taken on September 1, 1971, this archive image shows a Qatari falconer sitting with his prize birds. Today the sport remains popular in the Gulf state, with the best birds fetching thousands of riyals. (Image Christian Simon Pietri/Sygma/Corbis)

NEWS in numbers

10.8 million (US dollars) Christie’s International, the world’s leading art business, recently announced worldwide sales for the first half of 2011 of US$3.2 billion (QR11.6 billion), up by 15 percent on last year. Sales in the Middle East totalled US$10.8 million (QR39 million), an increase of 10 percent. Record sales in Hong Kong confirmed Asia as the fastest growing art market in the world, increasing on last year’s figure by 48 percent to a sales total of US$482.5 million (QR1.7 billion). The strength of the European market was illustrated by sales totalling US$1.3 billion (QR4.7 billion), with only the United States seeing a decrease in sales, down by 13 percent.

The strength and stability of the auction market is demonstrated by high sell-through rates at all price levels, with works priced between GBP500,000, or US$819,767 (QR2.9 million) and GBP1 million, or US$1.6 million (QR5.8 million), selling particularly well. Interestingly, while client registrations from Brazil, Russia, India and China (the BRIC countries) represent a small number overall, registrations from Brazil grew threefold. Buyers from China increased their spend in Christie’s furniture sales and Old Master paintings sales, and Middle Eastern buyers contributed to a significant increase in Christie’s overall jewels and watches sales globally. TheEDGE

NEWS ETCETERA

WEbSItE REVIEWS

httP://bLOGEONEtWOrK.OrG The official and highly useful blog of the worldwide Entrepreneurs Organisation (EO), this website identifies itself as “a one stop shop for all things entrepreneurial”. The website contains many useful articles and information for small business owners with pithy titles such as ‘Outsourcing the Niche’, ‘Bad Bosses Beware’ and ‘Death by Powerpoint’ and is a highly recommended resource for all things SME. WWW.QStP.OrG The Qatar Science and Technology Park’s (QSTP) website is obviously the go-to portal for information on the organisation and its activities as well as on conducting business in Qatar. It also contains useful information and links to associated partner entities such as Qatar-based educational facilities involved in research and other organisations such as Sidra Medical and Research Centre and the Qatar National Research Fund. WWW.uKtI.GOv.uK This is the official website of the United Kingdom (UK) Trade and Investment ministry. To access the Qatar-related page, click on the ‘Countries’ tab and then on the ‘Qatar’ link. Here you will find a wealth of information for companies wishing to do business in Qatar, including a general guide for UK businesses, business opportunities and updates in most business sectors.

tECh tErM oF THE MoNTH

DENIAL OF SErvICE (DOS) A denial-of-service (DoS) attack is an incident in which a user is deprived of the services of a resource they would normally expect to have. Although the motives for and targets of such an attack vary, it generally consists of a person (or persons) preventing a website or service from functioning efficiently or at all. A common method of attack involves saturating the target with external communications, so that it is unable to respond to legitimate traffic.

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WEb AND tECh NEWS MENA MObILE APPS tAKE OvEr trADItIONAL uSAGE The Middle East and North Africa (MENA) region’s smartphone users are beginning to move toward ‘mobile only’ content consumption, as mobile apps overtake traditional features of a mobile phone such as calls, email and messaging, it was revealed in a recent study by The Nielsen Company. The World Economic Forum’s latest Global Information Technology report puts the number of internet users in the United Arab Emirates for example, at 75 percent, with the number of broadband internet subscribers at only 15 percent. This significant difference between users and subscribers can be attributed to the mobile phone penetration rate of 232 percent, with the region’s consumers opting to use mobile internet as their connection of choice for consumption of content online. The past few years have seen an explosion in the use of mobile apps, and the outlook is set to increase even further from 10.7 billion downloads in 2010 to an estimated 182.7 billion in 2015, as forecast by global market intelligence firm, IDC. StANDArD ChArtErED DEvELOPS IPhONE APPS As one of the first and largest corporate banks to standardise on the iPhone, Standard Chartered Bank has developed more than a dozen in-house iPhone apps, which qualified employees can download from an internal app store, the Standard Chartered App Centre. These custom-built apps streamline internal processes, securely transmit financial data, improve communication between customers and banking staff, and even tap into back-end systems such as PeopleSoft and SharePoint for management approvals and collaboration. One example is the bank’s proprietary TradePort app, which enables trade finance relationship managers to securely perform or monitor trades on the go using their iPhones. Another valuable app is FX Rates, a real-time foreign exchange tool that shows Standard Chartered Bank’s own internal rates and ratios between currencies. “With FX Rates, a person in our trading room has up-to-date, holistic views of our exchange rates at any given time,” said Jan Verplancke, Standard Charter’s group chief information officer. SOCIAL MEDIA uSAGE ON thE rISE IN GuLF COMPANIES The last year has seen half of companies in the Gulf successfully use social networks, blogs, microblogs and forums to win new business, says a new global survey from human resources and consulting firm, Regus. The research also reveals that globally more firms are also using social media to connect and engage with existing customers than a year ago. Other key findings included: • Globally there has been a rise of seven percent of businesses successfully recruiting customers through social networks such as Facebook. • Fifty-two percent of businesses globally and 62 percent in the Gulf use websites such as Twitter and Weibo to engage existing customers. • Fifty-nine percent of Gulf firms encourage employees to join social networks like LinkedIn, Xing and Video, compared to 53 percent globally. • Two-fifths (39 percent) of companies globally and nearly a third in the Gulf (32 percent) devote up to 20 percent of their marketing budget to business social networking activity.

DOHA DIARY

THE HEAT

Our resident real estate expert Edd Brooks writes that after a mild spring, Qatar’s increasingly hot and humid weather is reflecting a similar rise in temperature in the property market.

fter what could be considered a very kind year so far temperature-wise, the mercury is finally rising in Doha. We had what must be the longest spring I can remember in my seven years in Qatar. With April and May being excellent evening barbeque weather, even the humidity seemed to behave itself. It might have been the effect of all the extra grass and tree planting, as the Public Works Authority continues their incredible transformation of barren areas, but so far 2011 has been comparatively glorious. But in many ways the heat is still on and looks like it will continue from now to the autumn months. Not just temperaturewise, but in terms of the ‘white heat’ of Qatar’s journey from an emerging market to long-term stability. The population of Doha continues to rise unabated and I’m sure I’m not the only one to notice the number of new company start-ups in a wide variety of sectors, including finance, manufacturing, scientific and even, dare I say it, real estate, bearing witness to the incredible diversification of the economy But I digress. During the last six months the resident population grew by some 200,000 people, of which over 68 percent came as skilled or managerial staff. When this is considered, it

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is no wonder that rents and property prices are back on the rise, ostensibly much to the relief of purchasers of apartments on The Pearl-Qatar and Zigzag Towers. A good case in point by way of example is Beach Tower. In a period of less than nine months, an occupancy level of 97 percent has been achieved – great news for landlords and for tenants, because without the obvious demand, expectations cannot be met. Not only have residential rents finally turned the corner, but since January residential property prices have also been on the rise – from our own index probably by only 1.7 to 2.5 percent over the last six months, but still great news. This has been brought about by firstly the increasing demand, but more importantly the availability of property finance. And although Qatar Central Bank announced a more rigorous personal loan and mortgage application process than previously, it has to be a positive sign to the wider economy that the whole personal finance system is being well regulated. This is bound to encourage more foreign direct investment with even more competitive interest rates. Apart from the obvious improvement in the property market, other aspects of the economy have been visibly growing too. New internationally recognised schools such as Sherbourne have been opening their beautiful campuses in Doha, Qatar Foundation continues its unrelenting expansion of sponsoring overseas universities and Qatar University is gearing up for it most diverse student intake after the summer break.

Qatar Airways is adding new planes and new destinations on a monthly basis, and via its well deserved “five star service”, promoting Qatar to a larger global audience than ever before. With the expanding passenger numbers using the airline, more and more travellers are taking advantage of the extended tourist stay stopover in Doha – great for the hotels, arts and culture. Road construction and improvements continue and Qatar Railways Development Company is due to start construction of the long-awaited metro and overland high-speed lines later this year. Catching a train for lunch 35 minutes away in Manama will one day no longer be a dream, it seems. New resorts and hotels, such as the much anticipated St Regis (Al Gasser Resort) by Starwood, due to open in November, the new Marriot Courtyard and Residences, and Hilton will further add choice for the traveller and greater restaurant and entertainment choices for residents alike. Lagoona Mall, situated below the Zigzag Towers is due to open later this year – another welcome addition to Doha’s growing shopping mall inventory and especially well located for West Bay and Pearl residents. Finally the first towers are starting to visibly emerge from the Marina District in Lusail, with floors being added on a weekly basis. Yes, a lot has been happening this year so far, but to quote the lyrics of Randy Bachman, “you ain’t seen nothing yet”. Edd Brookes is a director and head of valuation, Middle East, at DTZ in Doha.

MIDDLE EAST MATTERS

WORKFORCE

Should there be a call for Arabising the region’s workforce en masse? Dr Tommy Weir makes the case for such an ambitious notion.

et us consider the facts. The two most populous countries in the region, Egypt and Saudi Arabia, are facing threatening job shortages, with 42 percent and 47 percent respectively of the population being under the age of 19. In those two countries alone, more than 10 million people will enter the job market in the next four years. Across the whole of the Arab region more than 21 million people will be looking for a job during the same period. Yet, there is currently and arguably an over-dependence on expatriates in the private sector, especially in the Gulf employment markets. And the popularity of the expatriate lifestyle here is rising, with a recent survey revealing, for example, as many as 7.6 million British workers willing to move overseas, to areas like the Gulf to improve their prospects. The upshot is that Arab nationals are faced with unemployment, while outsiders are vying for jobs in their countries. The region is facing a collective issue in creating jobs for nationals, but each country is working to solve its job creation challenge in isolation. Would it not make more sense to focus on Arabising the entire regional workforce rather than on independent nationalisation efforts, comprehensively addressing the Middle East’s employment challenge?

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For example, instead of merely addressing the concern within the Kingdom, Qatar – and the other countries with very high expatriate dependence – could become a part of a solution neighbourhood. The focus should be on providing jobs first and foremost to people who do or are ready to call the region home. Emphasis should go to cross Arab border hiring and Arab employees need to demonstrate workplace wanderlust. I am, of course, aware of the implications of this proposal; so let’s explore what businesses and leaders need to do. With agreement, most experts might comment that the focus needs to be on building private sector skills across the region. Given the youth bulge and the fact that this region really is a first generation corporate society, it makes sense. But, this is not the first time the world had to meet these fundamentals. In the early 1900s, 90 percent of the workforce in North America was self-employed and the demographic balance was weighted towards a youth bulge not dissimilar to the abovementioned. Today, 90 percent are employees and the market is facing an aging population. So, while the youth bulge and first generation corporate society reality are new to this region, this is an example we can reference to see what businesses can do. First off, the private sector needs to take the lead. Education is important and there may be an attractiveness to abdicate responsibility to government programme, but the private sector needs to create the jobs and the programmes to build a local (regional)

workforce. While the governments can support the efforts to Arabise the workforce, it is up to the private sector to do it. For them to take the lead, three things must happen: Breaking the stereotypes – Some nationals feel they are not wanted in the private sector, and this sentiment likely has some merit. This region is rife with stereotypes on all sides of the employment equation. Instead of resting on the stereotypes as an excuse, attention needs to shift to solutions. Owning the responsibility – Simply stated, the private sector needs to take action for Arabising the workforce and put plans and programmes in place to deliver on it. Developing for private sector success – the traits of success: working independently, performance orientation, purpose of business, and alignment with organisational practices – do not come naturally. They have to be developed. While government programmes can be used for awareness, the skills, behaviour and patterns must be cultivated on the job by line managers and co-workers. The private sector needs to take the lead for leveraging opportunities in the region’s youth market while embracing equitable Arabisation. While there are skills that need to be built and organisational alignment that needs to take place, it is not an issue of poorer calibre of graduates in the Middle East. It is an issue of opportunity and responsibility. Dr. Tommy Weir is an authority on fastgrowth and emerging market leadership, and an advisor and author.

SUBSCRIPTION

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

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M COUNTRY FOCUS

ALAYSIA AND QATAR: A SHARED HERITAGE

With a shared Islamic heritage, Malaysia and Qatar have more in common than just their business interests. Rachel Morris met with new Malaysian Ambassador to Qatar, Ahmed Jazri bin Mohd Johar, who reveals that the two countries have deep economic and cultural ties.

or a newly arrived ambassador, Ahmed Jazri bin Mohd Johar has been busy. In two months he has clocked up dozens of programmes and engagements, many including visiting businessmen and high-level government delegations from his country. “It’s certainly been active,” he said. “There is a lot of interest in Qatar.” This schedule has included a visit in May by Malaysian prime minister, Najib Razak. “It was his inaugural visit to Qatar,” Jazri bin Mohd Johar explains, adding that HH the Emir Sheikh Hamad bin Khalifah al Thani and HE Sheikh Hamad bin Jassim bin Jabor Al Thani, prime minister of Qatar, have both visited Malaysia in the last 12 months. Other visitors include the governor of the Central Bank of Malaysia in June. This frenzy of activity was underscored by the recent announcement that Malaysian steelmaking company, Eversendai, had

secured a QR165 million contract with Qatar Petroleum. The contract involves works for Phase-4A of the Nakilat Shipyard at Ras Laffan. According to Mr Johar, this success could be just the tip of the iceberg for Malaysian companies seeking to enter the lucrative Qatar market. “There are some Malaysian companies bidding for projects here in Qatar,” he reveals. “They are in the prequalification stage. We have been advised to make sure all of our Malaysian companies are prequalified so they can bid for contracts like the New Doha Port. We have been working hard to get this in place. We have the expertise to participate in most of these big infrastructure projects.” Currently there are 10 Malaysian companies already operating in Qatar, mostly in the engineering and construction sector as well as oil and gas. “The one that has the largest contract here is WTC, they are constructing the new complex for the Ministry for the Interior,” says the ambassador. Other notable companies, he adds, include the UEM

COUNTRY FOCUS

Malaysia’s foreign policy is officially based on the key principle of neutrality and maintaining peaceful relations with all countries, which has reaped benefits worldwide. group, which delves into construction and hi-tech areas, as well as AKA Communications, an information technology (IT) provider. Also set up in Qatar is a steel fabrication and engineering firm from Malaysia. Beyond that, exceptions to the industrial rule in Doha include the new Malaysian Holiday Villa hotel and apartments on C-Ring Road and the Sri Kebabya Malaysian restaurant at Souq Waqif. There are around 5000 Malaysians living in Qatar according to recent figures from the Ministry for the Interior. “Most are working in the oil and gas sector with RasGas, Qatar Petroleum and with Malaysian companies,” Jazri bin Mohd Johar says. “Some are also working with Qatar University on research and development in their engineering programme.” Despite recent unrest, Malaysia is perceived to be one of the most stable economies in its home region, and in fact has proven to be an ‘Asian Tiger’ of the world economy and one with great staying power. Malaysia has had one of the best economic records in Asia, with gross domestic product, growing an average 6.5 percent from 1957 to 2005 – and it remains in the world’s top 30 largest economies. Meanwhile, Malaysia’s foreign policy is officially based on the key principle of neutrality and maintaining peaceful relations with all countries, regardless of their political system and this has reaped benefits with many friends across the world. A multi-ethnic and multi-religious society, the country’s 28 million strong population encompasses a Muslim majority and an ethnic Chinese population. “We have an abundance of almost everything. We are the second highest producer of rubber and palm oil,” states the ambassador, who adds that the country is a large exporter of electronic equipment, including air conditioners and televisions. Malaysia is also building a potentially lucrative medical tourism industry, which is also looking at the potential to export its expertise. “We have excellent medical facilities and services. A lot of people go over to Malaysia for their medical treatment. We get some from the Arab countries but more from Asia because of the high standard.” In an effort to diversify the economy and make Malaysia’s economy less dependent on exported goods, the government has pushed to increase tourism in Malaysia. As a result, tourism has become Malaysia’s third largest source of income from foreign exchange. This is something that

MALAYSIA AT A GLANCE Population: 28.5 million Currency: Malaysian Ringgit (RM) Gross domestic product (GDP) per capita: Most recent available figures show a GDP per capita of US$5151 per capita (QR18,750). Economy: Regarded as a ‘middle income’ country, Malaysia’s robust economy is growing at one of the fastest rates in the world. GDP Growth: Malaysia’s staged a strong recovery in 2010 and is expected to resume growth at pre-crisis rates. Near-term growth is expected at 5.3 percent for 2011 and 5.5 percent in 2012. Sources: worldbank.org; statistics.gov.my; tradingeconomics.com many Arab countries, including Qatar, have seen the potential for. While there are no figures for Qataris travelling to the country because no visa is required for them, the ambassador says that anecdotally the numbers are on the rise. Malaysia also has a vibrant oil and gas sector, something that the country and Qatar are looking to build on together. “One of the future projects which have been approved by our investment authority, is an investment in TG Ramunia in Johor [in the south of the country’s peninsula] where [Qatar] will be involved in building the liquid natural gas facilities,” says the ambassador. Further Qatari investment in Malaysia is strong and led by the Qatar Investment Authority (QIA), which owns a large chunk of the Kuala Lumpur-based Asian Finance Bank. Other investments are more eclectic, including luxury The Pavilion, one of the biggest malls in Kuala Lumpur catering to high-end shoppers. QIA owns a 49 percent stake in this. QIA has also pledged US$5 billion (QR18.2 billion) for the development of a large tract of land in the Malaysia that was formerly the main air force base into a residential and commercial area. Indeed, trade between the two countries is healthy and fuelled not only by major projects but a regular flow between the two countries, the ambassador reveals. “For last year we recorded a total trade of US$1.3 billion (QR4.7 billion) and in 2009 it was US$3 billion (QR11 billion). If you look at the trend for the last five years it has generally been around one billion,” he says. “It’s very healthy but I believe we can do much better.” Jazri bin Mohd Johar says his prime minister’s visit cemented relations between the two countries and set the scene for future cooperation. “I believe the visit by the prime minister has set the pace for what I have to do. We have to translate the warm relations between the two countries and the two leaderships into tangible cooperation. This is at all levels and in all sectors,” he says. “We have the expertise we can offer,” closes the ambassador. “This is going to be very competitive ground for business...What I need to do is to ensure that the Malaysian companies that intend to come to Qatar are aware of the rules and regulations as well as the culture, so that they are able to compete on the same level.” TheEDGE

THINKER’S CORNER

WEST BANK VS. GAZA

Young Palestinians’ Attitudes Brighten in the West Bank, Stagnate in Gaza Strip. While they are far from upbeat about the Palestinian Territories’ economic climate, young Palestinians in the West Bank are significantly less pessimistic than they were in 2009, according to the 2010 Silatech Index. At the same time, young Gazans generally maintained their more depressed economic views. Feelings of personal safety are up in both regions, but satisfaction with government efforts to fight corruption is down in the Gaza Strip while improved in the West Bank. By LYDIA SAAD

n an August 2009 New York Times op-ed titled ‘Green Shoots in Palestine’, columnist Thomas Friedman celebrated several economic and political advances in the West Bank that he felt show the way forward in the region. Friedman wrote that the pragmatic state-building approach of Palestinian Prime Minister Salam Fayyad was poised to deliver profound results – results already evident in the quick pace of business expansion – and projected seven percent economic growth for the West Bank in 2009. Those indicators of business expansion and growth – detailed in the 2009 Arab Development Report – may be resonating among young West Bank Palestinians, albeit on a relatively depressed scale compared to the rest of the Middle East and North Africa (MENA) . According to the 2010 Silatech Index, West Bank Palestinians aged 15 to 29 were less pessimistic than in 2009 about the Palestinian Territories’ economy and more satisfied with government efforts to fight corruption. The index highlights minimal improvement in the already-scarce optimism about the economy and job market; for instance, 17 percent of young West Bank Palestinians say it is a good time to find a job. However, the 17-percentage point decline, from 58 percent to 41 percent, in those believing the economy is getting worse, represents a meaningful improvement in their sense of economic wellbeing. If that can be maintained, the next step will be to further expand the view that the economy is improving. That measure rose eight percentage points in 2010, to a still-weak 31 percent. As the West Bank inches forward economically, the quality of life, more generally, may be improving. Nearly two-thirds of young West Bank Palestinians (64 percent) say they feel safe walking alone at night, up from 46 percent. And, perhaps given the relative calm in

Israeli/Palestinian military conflict in the West Bank since 2009, young West Bank Palestinians were less likely to say they experienced stress “yesterday” and more positive about the respect and opportunities given to children. CONFIDENCE IN GOVERNMENT ON CORRUPTION DECLINES IN GAZA STRIP The situation is very different in the Gaza Strip. Young adults’ attitudes about the economy are stagnant at depressed levels and they are less confident about government efforts to fight corruption. Perhaps as a result, young Gazans express an increased willingness to relocate to another city or another country for a job. Despite continued military clashes with Israel, the percentage saying they feel safe walking alone at night improved from 39 percent to 52 percent. However, optimism about prospects for children generally held steady or declined slightly, with no easing of self-reported feelings of stress the day before. SEPARATE TERRITORIES, SEPARATE EXPERIENCES Young adults living in the West Bank versus the Gaza Strip have had sharply different outlooks toward their lives and opportunities in recent years. As a result of the divergent trends, those gaps generally widened in 2010. The resulting picture is that young West Bank Palestinians are much more likely than their Gazan counterparts to say the country is a good place for entrepreneurs, to say the economy is getting better, their area is improving as a place to live, that if you work hard you can get ahead, that children can learn and grow, that they feel safe walking alone at night, and that business owners can be assured their assets and property are safe.

THINKER’S CORNER

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.

Key Trends in Attitudes of West Bank Young Adults, Aged 15 to 29

WEST BANK 2009

2010

percent

Government doing enough to fight corruption

+16

Economic conditions excellent/good

A good time to find a quality job

National economy staying the same

National economy getting better

National economy getting worse

-17

Change

Economic outlook

There is significant room for improvement in both regions on all of these important indicators, but particularly in the Gaza Strip. Perhaps the starkest example of this is that two-thirds (66 percent) of young Gazans say economic conditions are poor, compared with one-third (34 percent) of those in the West Bank. Similarly, 81 percent of young adults in Gaza compared with 41 percent in the West Bank say the economy is getting worse. IMPLICATIONS As difficult as economic circumstances are throughout the Palestinian Territories, they are worse for young adults in the Gaza Strip than in the West Bank. The Silatech Index makes it clear that the challenges for young Gazans transcend joblessness. Young adults living in the West Bank are no more likely than those living in Gaza to say they are satisfied with the number of quality jobs available. Barely one-quarter of both groups are satisfied on this score. Also, very few in either region – 17 percent in the West Bank and six percent in Gaza – say it is a good time to find a job. To this same point, 22 percent in the West Bank and 12 percent in Gaza say they worked full time in 2010, either for an employer or themselves. Nevertheless, despite these sobering statistics, 63 percent of young adults in the West Bank believe the city or area where they live is a good place for entrepreneurs forming new businesses, compared with 30 percent in Gaza. Nearly half of those in the West Bank say business owners can trust their assets and property to be safe, versus 26 percent in Gaza. And 41 percent in the West Bank believe the economy is getting worse compared with 81 percent who say the same in Gaza. Young Palestinians in the West Bank may lack employment, but in 2010 they sensed economic momentum – perhaps the same momentum that excites Friedman – and thus exhibited hope. If Palestinian leaders are able meet this hope with continued economic gains that lead to jobs, it could help transform how investors and the world community look at the Palestinian Territories, creating pressure for similar breakthroughs in Gaza.

This Silatech Index analysis is conducted by Gallup scientists and researchers pursuant to the Silatech-Gallup partnership. In addition to

Improved Quality of Life Perceptions Among West Bank Young Adults, Aged 15 to 29

2009

2010

percent

Change

Feel safe walking alone at night

+18

Children are respected

+15

Satisfied with educational system

+13

Children can learn and grow

+11

Experienced stress yesterday

-13

2009

2010

percent

Feel safe walking alone at night

Government doing enough to fight corruption

-15

Would relocate to another city for job

+12

Would relocate to another country for job

+16

National economy getting better

National economy staying the same

National economy getting worse

-2

Key Trends in Attitudes of Young Gazan Adults, Aged 18 to 29

Change +13

Economic outlook

2010: Major Gaps in Views of West Bank vs. Gaza Young Adults, Aged 18 to 29

West Bank

Gaza

percent

Good place for entrepreneurs to start a business

+33

National economy is getting better

+20

Gap

Business owners’ assets/property are safe

+19

Economic conditions are excellent/good

+19

Satisfied with educational system

+15

If work hard can get ahead

+13

Children can learn and grow

+12

Feel safe walking alone at night

+12

Government fights corruption

Experienced stress yesterday

-11 -29

Area where live is getting worse

Economic conditions are poor

-32

National economy is getting worse

-40

TheEDGE

opinion

KEEPING HEALTH close to HEART

Innovation is driving a sustainable healthcare infrastructure around the world and Qatar is no different. As part of the Qatar National Vision 2030 (QNV2030), the National Health Strategy 2011- 2016 has defined the long-term goals for the country, including reforms to its healthcare system. But the big question, asks Martin á Porta, is how this can best be managed and implemented?

he Qatar National Health Strategy (NHS) calls for a comprehensive sustainable healthcare infrastructure that boasts an integrated and therefore effective and affordable healthcare system, accessible to the entire population. A critical component within the human development pillar of the QNV2030, the NHS has proposed a number of reforms in an effort to reach its ultimate goal – a healthy and thriving population. The healthcare strategy document released by the NHS in April this year presented an analysis of the country’s current healthcare continuum, from which a number of critical recommendations have been made. Among others these include a special emphasis on key health areas including care and prevention

of cancer, an increase in hospital beds and accurate information for health sector planning. Coronary artery disease is also an important focus of these directives. The question is, how can this best be managed and implemented? PATIENT CARE IN QATAR The answers lie in a more integrated healthcare model that delivers effective patient, operational as well as financial outcomes. All three outcomes must be inextricably linked to achieve a truly sustainable healthcare model for a healthy and vibrant society. This in turn necessitates best practice across the entire continuum of care. Essentially what is required is world-class healthcare services that are dedicated to

providing expert, efficient healthcare in Qatar, which will also reduce expenditure on treatment sourced abroad. The nation is already well on its way to implementing healthcare reform with 35 healthcare projects in the pipeline. The Hamad Medical Corporation (HMC), the premier public healthcare provider in Doha, comprises a network of hospitals with specialised medical facilities and is leading the introduction of new best practice healthcare innovations. Mandated by the Ministry of Health in Qatar, under the guidance of the Supreme Council of Health, to pursue excellence in health, education and research, HMC is committed to ensuring the roll-out of high quality, world-class patient-centred care for all the people of Qatar.

opinion

New state-of-the-art technology now enables highly accurate diagnoses and treatment of cardiovascular disease that previously could only have been managed at medical centres abroad. THE HEART HOSPITAL The Heart Hospital owned by HMC represents the first hospital in the region with sophisticated robotic cardiovascular surgery. The new specialised cardiac facility has been in the making for more than six years. The aim of the hospital is to manage the country’s growing cardiovascular disease levels and eliminates the need for patients to travel abroad for treatment. The centre’s vision is to grow into a centre of excellence for cardiac treatment in Qatar, and represents a stand-alone medical facility integrating all cardiothoracic medical and surgical services into one building. The Heart Hospital, which began accepting patients in June, is the first hospital in the region to utilise robotic surgery technology. This new generation cardiac technology enables patients to benefit from a specialised suite of cardiac care equipment solutions, essentially supporting physicians to treat heart disease more efficiently. Treating patients more efficiently means faster care, faster treatment and increased operating efficiency, which enables healthcare providers to care for a wider population of patients. New best practice interventional cardiology procedures demand not only state of the art technology, but also optimised workflows. These will come from new equipment backed by efficient integrated information technology (IT) systems to provide physicians with patient data, as well as highly detailed diagnostic imaging. The Heart Hospital chose four Siemens Angio Suites, three of which include the Artis ‘zee biplane’ system. The fourth suite is equipped with the Artis ‘zeego’, a multi-axis system used in cardiovascular procedures, operated in the widely acclaimed new generation ‘hybrid’ (OR) environment. With the Artis ‘zeego’ technology surgeons can perform both pre- and postoperative imaging in the same room. This dual-purpose nature of the room is important

Selecting the right intervention for the right patient and vice versa is key to the success of cardiac treatment. Evolving standards of care are important in this process and hold potential for increasing quality of care. because it improves results in an impressive range of surgical applications and contributes toward increased facility capacity for minimally invasive treatment. These benefits all work together to produce faster, safer results for the patient. In traditional cardiac set-ups the patient would normally need pre-operative care in one room and then surgery in another room within the hospital. With a hybrid OR, greater patient comfort is achieved through reduced roomto-room transfer and movement within the hospital facility. LIFE-SAVING TECHNOLOGY Selecting the right intervention for the right patient and vice versa is key to the success of cardiac treatment. Evolving standards of care are important in this process and hold potential for increasing quality of care and quality of life in patients, while saving costs for the healthcare system. The reality is that new generation healthcare technology backed by optimum workflows, and intelligent IT patient record systems, saves lives. An illustration of this is best described in a typical cardiac patient case study that demonstrates the speed with which patients experiencing chest pain can be diagnosed and treated with a successful, potentially lifesaving outcome. A patient who has never had any symptoms of a heart issue before, for example, could begin to feel flu-like symptoms like nausea, sweating and dizziness. In a cardiac emergency case the patient would begin to feel extreme pain in

the chest. Typically this is when a patient realises that the situation is serious and the speed at which the next steps of care are taken can mean the difference between life and death. In such a scenario being able to access a dedicated cardiac emergency facility is vital to enable the cardiac team to perform an immediate electrocardiogram or ECG, followed by medication to thin the blood. A facility like the Heart Hospital would have the capability for immediate diagnosis and treatment in an emergency situation, when every minute may count. A sophisticated emergency room response system such as this, coupled with the cardiac capabilities of the Angio suite in a hybrid OR means that the patient is effectively diagnosed, prepared and successfully operated on in a much shorter time frame than in traditional cardiac care hospital environments. This scenario is best practice interventional cardiology, within an integrated programme, working at its best. The Heart Hospital is just one example of how new generation healthcare technology and workflow processes can deliver real, sustainable outcomes for patients. Continuous innovations in integrated healthcare solutions is the answer for keeping pace with the ever-changing healthcare landscape, an ever-increasing population and effectively treating rising cardiovascular disease. Fortunately for the people of Qatar, it is also in their future. Martin á Porta is the chief executive officer of Siemens, WLL, Qatar. TheEDGE

FINANCE & ECONOMICS

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

THE UBIQUITY OF OIL (P.38) Karim Nakhle looks at the regional influences that might have contributed to recent oil price increases, in addition to demand and supply, and the machinations of oil as commodity sector around the world, including trading, sentiment and politics.

ALSO IN THIS SECTION: • Market Watch: Despite current global market volatility affected by the situation in Europe, the US and Japan, Dheeraj Shahdadpuri remains optimistic (P.28). • Inside Edge: Record high per capita incomes and a thriving economy augur well for the Qatar’s retail sector, says Manjeet Chhabra (P.30). • Special Report: Matt Ghazarian discusses the potential of Qatar’s emerging manufacturing and industrial sectors to contribute to the state economy (P.32). • Balance Sheet: Richard Kohinga offers statistical feedback from a recent survey of regional and international CEO fears, concerns and priorities (P.34).

Brought to you by:

MARKET WATCH

GLOBAL ECONOMIC

SLOWDOWN After witnessing relatively strong growth during the end of last year and beginning of 2011, the global economy seems to have entered a soft territory as downside risks to recovery have increased in recent past, writes financial analyst Dheeraj Shahdadpuri, who, despite many caveats, nevertheless remains optimistic for future global growth. GREEK GRAVITAS While there are number of factors responsible for disruption in the pace of economic recovery, the most prominent is the debt crisis in the eurozone, where Greece is once again on the verge of defaulting on its debt obligations. It is a déjà vu situation for policymakers, who are battling to fill deep fiscal holes created by a number of peripheral economies in the bloc, which has lifted the overall euro area government debt levels to 85 percent of its gross domestic product (GDP). To avoid an embarrassing default on debt, Greece’s parliament approved austerity measures (amid wide social unrest), which enabled the nation to seek EUR12 billion (QR62 billion) aid payment under the last year’s bailout package. The latest in a series of austerity measures will focus on cutting government spending and raising tax revenues by EUR28 billion (QR144 billion), and raising as much as EUR50 billion (QR256 billion) over the next five years through asset sales. Undoubtedly, the measures are harsh especially in light of high unemployment in Greece, which requires continuous government support. In the short term, these measures will have a pronounced impact on the economic activity of the country, but are nevertheless necessary to restore fiscal balance, which, if left unattended, could bring further financial troubles. However, implementing recently approved austerity measures may not be enough for the country to avoid future financial shock. The financial conditions are so strained that the country is seeking a second bailout (which could amount EUR110 billion/QR567 billion), in order to avoid a default on debt maturing in coming few years. The biggest economies of the European bloc – Germany and France – have again shown commitment to support the ailing nation, but are looking to bear the cost of any further bailout money with private investors. This is based on the notion that it is unfair for taxpayers to bear the full cost of any such emergency programme. Until now, the details that have emerged are indicating that a large part of the debt

maturing could be either rolled over or private investors could reinvest the maturing amount in new bonds with medium term maturity. The recent set of events in Athens has clearly highlighted that further actions are required on the part of policymakers to consolidate the balance sheet of the nation, which otherwise remains vulnerable. The uncertainty over government finances has forced rating agencies to put the country on negative watch. According to rating agencies, even if the maturity of Greece’s debt is rolled over, the event would still be termed as equivalent of a default. And if sovereign ratings are revised downwards, it could additionally harm the banking industry of those nations exposed to the sovereign debt of Greece.

MARKET WATCH

Hence, with so much of financial drama currently surrounding Greece, until a permanent solution to contain this huge pile of debt is not reached, financial markets are expected to remain on edge. Elevated investor concerns will likely keep the cost of ‘issuing new debt’ and ‘insuring existing debt’ or credit default swap high. US RESERVE Apart from the eurozone’s debt saga, the expiry of the United States (US) Federal Reserve’s popular quantitative easing, also known as QE2, has further created some jitters among investors. The world’s largest economy is still not out of the woods, despite the Federal Reserve pumping a massive US$600 billion (QR2.1 trillion) in new money through this programme despite successfully lowering the cost of loans to consumers. Additionally, investors have become conscious to the fact that the nation has hit its debt ceiling and will require parliamentary approval before it can be raised. Failure to raise the limit, which at the time of writing had still not been secured, could mean that the government will fall short of covering its expenses, which in turn could disrupt market sentiment further. Apart from this, the recent set of economic indicators has also been discouraging and chances of the economic outlook turning hazy in the short term have increased. The Purchasing Managers Index (PMI) for the US manufacturing sector slipped to 55.3 in June, after peaking to a six-year-high reading of 61.4 in February this year. Along similar lines, the service sector PMI has also shown signs of losing some momentum as the index reading fell to 53.3 in June, compared to February’s all-time peak of 59.7. A reading of PMI below 50 indicates contraction of the sector activity. The job market on the other hand is also facing the heat of industrial and service activity. The unemployment rate for the month of June inched up to 9.2 percent as the US economy was only able to add 18,000 jobs. Apart from this, high energy prices have also been a factor in slowing the pace of economic activity, forcing many consumers to adjust their spending patterns, with no considerable improvement in their income levels in the recent past. Recent economic developments in advanced nations have given investors enough reason to book profits in equities and take cover in gold and government bonds. It could hardly be argued that the global

economic situation has once again become fragile due to renewed financial trouble in the eurozone and weak economic activity in the US. However, the state of affairs has still not turned ugly enough to trigger any panic alarms. Although the economic growth projections have been revised downwards, the current phase does looks transitory provided other peripheral eurozone economies do not suffer a fate similar to Greece, such as Italy. Indeed, commitment on the part of Europe’s policymakers to tackle Greece’s debt crisis is a sign that fundamentally strong countries will continue to take the lead in managing the situation in coordination with the IMF. The recent stress test results of European banks, which revealed that only EUR2.5 billion (QR13 billion) would be required to be raised by eight banks, should, to an extent, address fears of a severe downturn for the industry. In the US, the Federal Reserve has vowed to keep macroeconomic conditions accommodating and it will continue to buy treasuries with proceeds from the maturing debt it currently owns. Chairman Ben Bernanke has further revealed that if the economic outlook becomes bleak, the Federal Reserve could reveal further stimulus to sustain the recovery. Energy costs on the other hand have stabilised in recent past especially after the International Energy Agency took a landmark decision to release 60 million barrels of crude to the market. JAPANESE REcovery Furthermore, a small part of the current slowdown has also been caused by supply disruptions from Japan, which has forced manufacturers in many countries to either source materials at higher prices or scale back their production. But very recently there have been some encouraging signs of a turnaround in industrious Japan. In May, the factory output rose by 5.7 percent, which is in fact the highest in the past 60 years. This signals that the Japanese economy is finding its way back and the supply issues will be resolved. Japanese economic growth should lift the global GDP growth during the second half of current year. Apart from this, fundamental drivers of the global economic growth such as accommodating monetary and fiscal policies, pent-up demand for consumer durables and strong growth in emerging economies still remain in place and should continue to support recovery. TheEDGE

INSIDE EDGE

BUSINESS Expectations of a double-digit gross domestic product (GDP) growth and a rise in per capita income, culminating in higher disposable income, are perfect props to adorn the retailing stage. Qatar displays a right mix of these factors and a proliferative economic eco-system to engender confidence that the Qatari retail industry is set on a high growth trajectory, writes Manjeet Chhabra who crunched some impressive numbers to come to this deduction. RISING INCOME According to the International Monetary Fund’s (IMF) estimates, the Qatari economy is projected to grow to US$194 billion (QR707 billion) by the end of 2011 and it is further likely to swell to US$243 billion (QR885 billion) by 2016. During the same period, Qatar’s population, which stood at 1.7 million in 2010, is projected to grow by 4.6 percent to 2.17 million. Consequently, Qatar’s per capita income is estimated to rise to US$110,000 (QR400,000) compared to US$76,000 (QR277,000) in 2010. This will lead to Qatar occupying the second slot in the list of global highest per capita income countries, just behind Luxembourg. Qatar is also expected to maintain this position until 2016. A high per capita income essentially leads to more liquidity in the country, a higher inflow of foreign investment and a rise in purchasing power of the people. Rising disposable incomes are a boon for the retail industry, as people generally tend to spend more. But high liquidity and increasing purchasing power

will also mount inflationary pressures in the domestic economy. CONSUMER CONFIDENCE Complementing the economic aspects, are the non-economic attributes, which also hint at a promising scenario for the Qatar retail industry. According to the most recent (April 2011) quarterly consumer confidence survey of Bayt.com, in conjunction with YouGov Siraj, Qatar has witnessed a rise in the Consumer Confidence Index. On the other hand, the current geo-political tensions and a lull in the financial markets have negatively impacted the Propensity to Consume/Spend Index, which has declined significantly. But respondents in Qatar are increasingly positive in their outlook, which will ultimately translate into higher spending levels. Around fifty-four percent of the respondents believe that their family’s financial position will improve over a oneyear period and 65 percent said that the country’s economy would improve in the same period, while 75 percent are confident

that employment opportunities will remain the same or improve. An earlier survey, the MasterCard Worldwide Index of Consumer Confidence for H2 2010 disclosed that Qatari consumers are among the most optimistic in the region, as expectations for the subsequent half-year grew in line with the health of the economy. Qatar was ranked next only to Saudi Arabia on the index for the first half of 2011, while the overall index rating of 83.6 was comfortably above the regional average of 71.6. The survey reported that an increase in consumer confidence was witnessed across all the parameters contributing to the calculation of consumer confidence, as all five indicators covered by the study displayed a sharp improvement in sentiment. The quality-of-life index was up from 57.5 in the preceding six months to just under 90. The survey also showed similar trends for confidence regarding regular income and employment opportunities, with the former spiking from 47.1 to 86.4 and the latter up to 92.1 from 85.5, all significant hints pointing to higher spending. ORGANIsED RETAIL SPACE According to real estate company, DTZ, Qatar’s retailing industry has witnessed patterns of considerable growth in the recent past. The retailing landscape in Qatar is dominated by the organised sector, primarily in the form of shopping malls, which not only provide shopping facilities, but also act as

INSIDE EDGE

Rising disposable incomes are a boon for the retail industry, as people generally tend to spend more in a strong economy.

hubs of recreation, leisure and entertainment. As of the third quarter of 2010, organised retail aggregated to approximately 500,000 square metres (sqm) of Gross Leasable Area (GLA), which is spread across eight main shopping malls. Almost all of the shopping malls display a common tenant mix marked by a presence of major international brands. Most malls are witnessing near perfect occupancy levels and rental levels have moved northward from the QR110-140 per square metre (/sqm) per month level in 2006, to QR140-230/sqm per month level in the first half of 2010. Keeping the growing demand pattern in view, new retail developments currently underway are aiming to increase the stock of retail space. Retail space in Qatar is estimated to grow by approximately 45 percent, which amounts to nearly 230,000 sqm of GLA. This will also lead to an increase in per capita GLA from 0.6 sqm currently to approximately one sqm with the addition of retail GLA. Apart from this, there has been an uptrend in demand for convenience retail as more and more smaller stores aim to service at the local community level. In contrast to organised retail mall developments, the retail showroom market has not witnessed significant activity. Retail showrooms, which are preferred by sellers of large goods such as cars and furniture, have witnessed subdued activity. POSITIVE OUTLOOK In spite of the imminent additional supply to organised retailing GLA, demand is expected to remain strong and hence vacancy rates will tend to remain low, thus rentals are not expected to decline much. But the industry needs to guard against a situation of over-supply, which may result in overheating and a bubble in the retailing industry (primarily inflationary concerns). Though demand fundamentals continue to remain robust, overcrowding on the shelves may turn consumers off. Nevertheless, expectations of rising income levels in Qatar hint at a solid fundamental outlook for the organised retail market in the coming years. TheEDGE

SPECIAL REPORT

Qatar:

INDUSTRIAL INTENT

By Matt Ghazarian

atar was recently named the wealthiest nation in the world in terms of gross domestic product (GDP) per capita. However, with many of the oil and gas related projects nearing fruition, focus is turning to manufacturing and other non-hydrocarbons businesses and the role they will play in the local economy. In mid-June the United States (US) business magazine Global Finance reported that Qatar’s per capita annual GDP (based on purchasing power parity) amounted to just over US$90,000 (QR328,000), making it the wealthiest country in the world. This achievement caps a period of rapid economic expansion. In 2007 and 2008 real GDP growth exceeded 20 percent per year. In 2010 this figure amounted to 16.3 percent, and the economy is expected to increase by a further 20 percent this year, according to the International Monetary Fund (IMF). Indeed, the IMF has called Qatar “one of the fastest growing economies in the world”. Expansion is expected to continue into the future, albeit at a slower pace. The IMF has projected that GDP will increase by seven percent in 2012, followed by four percent in 2013. However, unlike in recent years, the non-hydrocarbons sector is expected to expand while projections show that oil-and-gas economic activity will stabilise. Samba Financial Group, a Saudi banking firm, noted this economic shift in a recent report. “A key factor in the medium-term projections is the recognition that the contribution from the hydrocarbons sector to growth will drop off dramatically as the 20-year gas-based investment

programme comes to an end and the last of the major projects come on stream in 2012,” the report stated. “This then leaves the nonhydrocarbons sector as the driver of future real GDP growth.” Much of this expansion will be led by the state-backed Industries Qatar (IQ), which controls most of the country’s petrochemicals and metal production capacity. In late April, IQ released its first quarter results, reporting revenues of QR4 billion. Net profits were QR2.1 billion, a 73 percent increase over the same period in 2010. These financial results came on the back of strong showings by its steel unit, along with improved earnings from its petrochemicals and fertiliser companies. According to Abdulrahman Ahmad Al Shaibi, the group’s chief coordinator, this performance “vindicate[d]” the company’s “volume-based, capital investment strategy”. With IQ committed to investing a further QR12 billion over the coming five years, it is expected to continue to lead the sector. However, smaller private manufacturing operations are being encouraged to play a larger role in the economy too. R. Seetharaman, the chief executive officer of Doha Bank, says that small and medium-sized enterprises (SMEs) in the manufacturing sector are strengthening the industry’s contribution to GDP, a strong indication that state economic diversification programmes are working. Government support for SMEs, which includes tax holidays, exemption from some customs duties, lower energy costs and access to credit, has been vital in accelerating industrial development, Seetharaman said in the Gulf Times on June 14. The role of smaller industrial businesses will likely be boosted by the move to establish a parallel stock market attached to the main Qatar Exchange. This would allow more SMEs to go public, giving them the opportunity to raise additional capital. According to Hashim Al Sayed, a Doha-based stock and financial analyst, the plan to set up a second-tier market would benefit the firms themselves and the national economy as a whole. “The country’s crucial economic diversification drive is expected to be bolstered with a junior stock market coming into existence,” he said in The Peninsula in late May, days after the announcement that studies would be conducted into setting up the parallel bourse. Although Qatar’s smaller manufacturers will likely never challenge the economic dominance of IQ, they will provide both an outlet for the entrepreneurial initiative that the government is trying to foster and generate employment opportunities while allowing them to flourish.

Matt Ghazarian is an editorial contributor at Oxford Business Group.

BALANCE SHEET

WHAT In early 2011, more than 1500 senior executives from 22 European and Middle Eastern countries participated in a major study on business priorities. The study provided some insight on the issues keeping top executives awake at night. Richard Kohinga analyses the study’s key findings, and compares the priorities of Qatar’s business leaders with those of their regional and European counterparts.

n July KPMG released the results of their business leader survey, which reveals some of the interesting variations in regional priorities and economic perspectives, and that while lifting business performance and cost optimisation are common priorities, there are some interesting regional variations as well. The survey, called Succeeding in a Changing World incorporated feedback from 1500 chief financial officers (CFOs) and chief executive officers (CEOs) across 22 European and Middle Eastern countries, including Qatar. Respondents were asked to identify their top priorities in 11 business areas or ‘themes’. The study also included country and industry sector overviews.

BALANCE SHEET

IS KEEPING EXECUTIVES

AWAKE AT NIGHT?

TOP PRIORITIES IN EUROPE AND THE MIDDLE EAST After such a period of economic and political turmoil, it should come as no surprise that many businesses are continuing to re-evaluate where their priorities lie. In general, however, most senior executives are focusing on making their businesses fit for today, in preparation for growth going forward. Many are focusing on business performance management – aligning their cost base to their organisation’s future strategy and ensuring cash and working capital. The top priorities are “changing business operations to realise cost efficiencies” (a priority for 51 percent of senior executives), “improving cash and working capital management” (42 percent) and “preparing your organisation for major business model changes” (33 percent). For many European companies, things could get a lot worse before they get better. Growth forecasts are being slashed, causing top-line opportunities to remain unpredictable, so executives are latching on to the one thing they can control – costs. So far, many businesses have been successful at cutting capacity-related costs such as headcount, inventories, etcetera. But now they have to dig deeper and identify how to imbed more competitive levels of efficiency into their cost bases, so that when growth eventually returns, they will generate more bang for their buck. Perhaps surprisingly “exploiting growth opportunities through successful transactions” also ranked highly (36 percent). The renewed focus on transactional activity suggests that organic growth is difficult to achieve. As a result businesses are looking for acquisitions to expand. Overall, there is volume in the mergers and acquisitions market currently – but not value. Once the final hints of negativity or fear of further surprises have receded, we might see a return to a sustained number of high value transactions. TOP PRIORITIES BY INDUSTRY SECTOR The industry sections of the survey provide a fascinating snapshot of the big issues currently in play across a dozen different industry sectors.

Property specialists believe Europe’s stable market is about to make it a big target for inbound investment while their media counterparts express a strong belief in monetising content through paywalls. According to the survey, 92 percent of respondents foresee a much greater involvement of the private sector in public healthcare, both in terms of direct medical provision but also in terms outsourced back office functions. Not surprisingly, the majority of respondents across all sectors are worried about the recent rise in oil and commodity prices and 60 percent believe the price appreciation will continue to curtail the economic recovery.

ECONOMIC OUTLOOK IN EUROPE European business leaders are focused on the debt crisis in the European Economic Community peripheral economies and its overall impact on the currency and economic growth. Most understand the need for real wage/price adjustments in these countries to restore competitiveness on top of austerity measures to correct public finances. But the impact of these measures is less certain. The majority of business leaders in Europe and the Middle East (64 percent) agree that the continent’s position as a world economic and political superpower has peaked and that its importance will decline over coming years. The ongoing shift in power to developing and emerging markets provides an interesting opportunity for Europe; strong growth in the emerging markets should help Europe grow. Although Europe may be economically better off, its relative world position would still be in decline. For sectors such as manufacturing, maintaining a foothold within Europe (either in terms of supply chain or research and development) will be part of their overall strategy. TOP PRIORITIES IN QATAR Similar to their regional and European counterparts, many Qatar business leaders place a high importance on transforming business operations, including “changing business operations to realise cost efficiencies” – but perhaps for slightly different reasons. Government institutions and agencies in Qatar are looking at rolling out transformation programmes primarily to better utilise the country’s substantial financial resources. This means getting their business systems and processes in order, developing clear strategic objectives and better managing risk. Qatar-based respondents, for example, place a far greater emphasis on “addressing risk throughout the organisation” (57 percent, compared to 30 percent as a survey average), demonstrating the increasing emphasis on corporate governance and financial risk management. Looking at the private sector, Qatar’s family-run businesses are growing rapidly, making acquisitions and becoming more corporatised. As a result they are also keen to put in place business transformation initiatives, including “making better use of company data for more effective planning and forecasting”, and “using technology as a strategic enabler, not just an operational facilitator”. TheEDGE

BALANCE SHEET

Another interesting difference revealed by the survey is the greater emphasis Qatar-based business leaders place on sustainability. Nineteen percent of Qatar-based respondents said “working on the company’s approach to sustainability and the green agenda” is of high importance (compared to nine percent as a survey average). This reflects how companies are looking to enhance their corporate social responsibility credentials and overall reputations as they become increasingly outward looking. Interestingly, no Qatar-based respondents placed an importance on “adapting to take into account

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changing customer and stakeholder behaviour” (compared to 24 percent as a survey average). This probably reflects Qatar’s low-reliance on overseas investment and the important role government monopolies play in many service sectors. It will be interesting to see how much importance is placed on this business priority going forward, as Qatar’s economy opens up to the rest of the world leading up to the 2022 Fifa World Cup. Richard Kohinga is the director and head of markets for KPMG in Qatar and Bahrain.

ECONOMIC BAROMETER

BY THE BARREL: THE UBIQUITY OF OIL

As the current economic and political conditions in the Middle East and other factors have lead to a sharp spike in the price of crude, the value of oil between 2010 and the summer of 2011 bears scrutiny. Karim Nakhle looks at the influences that might have contributed to these oil price increases, and the ecoomic and political machinations of the oil as commodity sector around the world.

ECONOMIC BAROMETER

ith each passing year, oil seems to play an even greater role in the global economy. It is somewhat ironic to then recall that in the 19th century, discovering crude oil during a drill was considered somewhat of a nuisance, as the intended treasures were normally water or salt. It was not until 1857 that the first commercial oil well was drilled in Romania, and the United States (US) petroleum industry was born two years later with an intentional drilling in Titusville, Pennsylvania. Of course, since then, thanks to the emergence of the combustion engine and its necessity for a plethora of petrochemical products from plastics to Vaseline, ‘black gold’ has become one of the world’s most sought after, politically charged and controversial commodities.

PRICES AND TRADERS With oil’s stature as a high-demand commodity comes the possibility that major fluctuations in price can have a significant economic impact on countries, regions and the entire global economy. The three primary factors that impact the price of oil are supply and demand, market sentiment and the overall geo-political environment. The concept of supply and demand is fairly straightforward. As demand increases (or supply decreases) the price should go up. As demand decreases (or supply increases) the price should go down. Though this might sound simple, it is not quite so. The price of oil as we know it is actually set in what is called the oil futures market. An oil futures contract is a binding agreement that gives one the right to purchase oil by the barrel at a predefined price on a predefined date in the future. Under a futures contract, both the buyer and the seller are obligated to fulfil their side of the transaction on the specified date. Accordingly, there are two types of futures traders who in turn exert an undue influence on the market price: hedgers and speculators. An example of a hedger would be an airline buying oil futures to guard against potential future rising prices. An example of a speculator would be someone who is just guessing the price direction and has no intention of actually buying the product but is out to make a profit from trading this commodity. It is interesting to note here that majority of futures trading is done by speculators as less than three percent of transactions actually result in the purchaser of a futures contract taking possession of the commodity being traded. SENTIMENT AND POLITICS Another key factor in determining oil prices is sentiment. The mere belief that oil demand will increase dramatically at some point in the future can result in a dramatic increase in oil prices in the present as speculators and hedgers alike snap up oil futures contracts. Of course, the opposite is also true. The mere belief that oil demand will decrease at some point in the future can result in a dramatic decrease in prices in the present as oil futures contracts are sold. So where do all the commotion, issues, wheeling and deal, secret deals, kickbacks, commissions, accumulated and unaccounted wealth that are so often associated with oil commerce originate?

The third factor, of course: geopolitics. In the 12 member Organisation of Oil Exporting (OPEC) countries where oil infrastructure is the ultimate key to power and purse strings, war and other major political crises can typically resulted in supply disruptions that take years or decades to bounce back from (member states are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela). Iran’s 1979 revolution cut the country’s output by more than half, and production never recovered fully. Similarly, Iraq’s 1990 invasion of Kuwait ultimately slashed output in both countries for years, and ravaged Kuwaiti oil wells. Venezuela’s massive oil industry strike of 2002 crippled production, which has never returned to pre-strike levels. Periods of political chaos in OPEC countries have usually resulted in these kinds of lasting scars on the oil sector. With now Egypt, Tunisia, Algeria and Libya under pressure, few expect the situation to be any different in the near future. If the price of oil has been fluctuating wildly in the last three months, it is partially the aftermath of the Arab Spring uprising.

Traders hustle in the crude oil options pit during afternoon trading at the New York Mercantile Exchange during June 2011, when oil prices rose above US$100 (QR364) per barrel, following an unexpected OPEC announcement on unchanged production levels. (Image Gallo/Getty)

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ECONOMIC BAROMETER

THE TOP 20 WORLD OIL PRODUCERS 1. Russia - While Russia produces 9.5 million barrels of oil per day and is the top producer of oil, they are ranked second to the exporters below the Kingdom of Saudi Arabia (KSA) as Russia exports 5.4 million barrels per day (bpd) as opposed to KSA’s 6.84 million bpd. 2. The Kingdom of Saudi Arabia - 8.3 million bpd. 3. United States of America – 5.4 million bpd. 4. Iran – 4 million bpd. 5. China – 3.8 million bpd. 6. Canada – 2.6 million bpd (exports two million bpd). 7. Mexico – 2.6 million bpd (exports 1.3 million bpd). 8. United Arab Emirates – 2.4 million bpd (exports two million barrels per day). 9. Iraq - 2.4 million bpd (exports 1.9 million bpd). 10. Kuwait – 2.4 bpd (exports 1.4 bpd). 11. Venezuela – 2.3 million bpd. 12. Nigeria – 2.2 million bpd. 13. Norway – 2.1 million bpd. 14. Brazil – two million bpd. 15. Angola – 1.9 million bpd. 16. Algeria – 1.8 million bpd. 17. Libya – 1.2 million bpd (currently 700,000) 18. Kazakhstan – 1.5 million bpd. 19. United Kingdom – 1.3 million bpd. 20. Azerbaijan – one million bpd.

A petroleum worker walks through a Libyan oil refinery in February 2011 in Brega, Libya. Since the revolution began opposition leadership has stressed that oil facilities in rebel-held territory are safe, despite the conflict embroiling the country. Libyan production is currently at 700,000 barrels a day, some 500,000 barrels less than its pre-conflict daily average. (Photo by John Moore/Getty Images)

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Canada, the seventh largest oil-producing country in the world, is rapidly deploying new technology in its old oil fields, and has an energy industry poised to contribute to a significant jump in the world’s potential oil reserves. THE LIBYA FACTOR Libya is currently a prime example of how disruption can affect a country’s internal economy, as well as the global price. Regardless of what comes next in Libya’s lethal political standoff, the OPEC country’s oil sector is nearly certain to suffer, following the eruption of civil war and attacks on energy infrastructure and reservoir damage which brought long-lasting supply disruptions or even permanent irrevocable damage. As Africa’s number three oil-producer and the site of the continent’s largest proved reserves, estimated at 44 billion barrels, Libyan oil usually accounts for two percent of world output, and Libya is the world’s 12th-largest oil producer. The country, whose oil accounts for a quarter of Italy’s demand, is the first major oil exporter to be thrust into acute turmoil. An estimated 900,000 barrels per day (bpd) of Libya’s 1.6 million bpd of production has been halted, as companies evacuated staff and suspended operations. And though Qatar has stepped in and a small measure of production has resumed under the control of the rebel authorities in Benghazi, until a permanent resolution is reached in all of Libya, the uncertainty seems set to continue for some time. Oil prices are a serious risk for the global economic recovery; the surge in oil prices caused by the turmoil in Libya could derail the global economic recovery, weakening trade balances, add to inflation and put pressure on central banks to raise interest rates at a time when economic growth remains lacklustre in many countries, especially Europe and the US. Subsequently, if the consumer starts to feel the cost of higher fuel at the pumps, which will inevitably adversely affect their disposable income, then retail activity will fall sharply and that means lower growth, if any at all. RIPPLE EFFECTS International Energy Agency members would consider a coordinated release of oil from their emergency stocks to tackle any supply disruption if the turmoil continues in the Middle East and

A key factor in determining oil value is sentiment. The mere belief that oil demand will increase dramatically at some point in the future can result in a dramatic increase in oil prices.

Iilluminated at night, an oil derrick in Edmonton, Alberta, Canada exemplifies the bright future of the Canadian oil industry, already the seventh largest producer in the world, following the development of technology that will unlock vast reserves said to be larger than those in much of the Middle East, prompting some to dub Canada “the next Saudi Arabia”. (Getty Images)

North Africa. The agency’s members – Organisation for Economic Co-operation and Development (OECD) - which are mostly western economies, hold 1.6 billion barrels of emergency oil stocks. Saudi Arabia started to pump more oil to avoid shortage and further rises in oil prices, since supply concerns pushed the price of brent crude above US$110 (QR400) per barrel. The closest comparison to the current unrest in the Middle East and North Africa (MENA) region is the 1990-1991 Gulf War. If Libya and Algeria were to halt oil production together, commodity analysts raised the possibility that prices could perhaps hit US$150 (QR546) a barrel and OPEC’s spare capacity will be reduced to levels seen during the Gulf War, when prices reached US$147 (QR535) in 2008. The situation in North Africa and the Middle East, and the knockon effect on the price of oil, is causing others to reconsider the issue of energy security. Canada, the seventh largest oil producing country in the world, and the third largest oil reserve after Saudi Arabia and Venezuela, is rapidly deploying new technology in its old oil fields, and has an energy industry poised to produce as many as 15 billion barrels it never expected to extract, a significant jump in the world’s potential oil reserves.

The number could be even higher, given that new technology is opening up areas never before considered viable for profitable production. This has created a bonanza for junior and medium-sized oil companies that have, in recent years, taken over many of those old fields from larger players. They now find themselves sitting on one of Canada’s richest energy plays, where the cost to produce a barrel of oil can be as little as half that in the oil sands, creating the potential for substantial profits. Where oil sands developments typically require crude prices of between US$60 (QR218) and US$80 (QR291) per barrel to turn a profit, the new fracturing technology allows companies to be profitable at US$30 (QR109) to US$50 (QR182). This increasing production and profit potential is timely, as China has become one of the biggest oil consumers in the world, and economists expect it will burn even more fuel this year. But a recent crackdown on bank lending has raised fears that China’s economic recovery — and its appetite for oil — could falter. Nevertheless, the People’s Republic is not giving up on its strategic oil alliances, especially with African nations, such as Sudan and the new nation of South Sudan. China is a major buyer of Sudanese crude oil, and has been keen to ensure the partition of Sudan into two states would not descend into fighting that could disrupt supplies and damage Beijing’s stake on both sides of the new border. China has long had close relations with the government in Khartoum, but has been moving to ensure it also remains friendly with South Sudan, where the majority of the old unified Sudan’s oil reserves were. China was the first country to establish diplomatic ties with South Sudan since the emergence of the world’s newest nation was announced in June 2011. China’s rise has, as well as the uncertainty in the Middle East. also affected Saudi Arabia’s relationship with the west, particularly the US and the country’s oil exports are now increasingly moving eastward. The political and economic global playing field is shifting accordingly. There is indeed no doubt that, the controversy of recent oil spills and environmental concerns aside, as long as the demand for oil and oil derivative products continues, it will continue to influence the global economy and political relationships – with a power that arguably no other commodity exerts. TheEDGE

Why Banking Must Change its gaMe You are on the train with 15 minutes to kill. Time to bank. After logging in on your smartphone, you check that your pay has come in, settle your credit cards, pay your rent by bank cheque and move money into your savings account. Before you reach your station, there is just enough time to locate the nearest cash point and check for discount offers at your favourite lunch spot. It is a far cry from banking of old, and this is only the beginning of what Internet and mobile technology can offer. As device sophistication and network speed increase, so will consumers’ expectations of usability and service. Next generation customers want banking that fits into their lives, not the other way around. For banks, this means we must adopt a whole new way of thinking, right down from how we develop our products and services. More than what we offer, it is how we deliver that will drive our relationship with the customer in coming years. In next generation banking, there is no place for top-down, blinkered innovation. We must ask not ‘What do we want to sell?’, but ‘What does the customer want to do, and how can we help them do it?’ Standard Chartered’s customer research has revealed above all else a wish for simpler, faster banking, be it at the branch, on the phone or via mobiles. In general, customers have grown to demand more from service providers, and banks are seen to be lagging behind.

anks can no longer expect customers to follow their rules, argues Raheel Ahmed, Group Head of Distribution Channels at Standard Chartered. Next generation consumers want simpler, faster ways to manage their money, and banks must respond by adopting a whole new way of thinking.

In the past, banks expected customers to follow their rules. Today however, there is a growing, global tribe of trendsetting and tech-savvy consumers who demand relevant banking that is instant, intuitive and integrated. United by mindset, not demographics, these people want more control over their finances. If banks were slow to adapt usability to their services in the past, they now need to catch up fast. Our Breeze Mobile Banking app evolved, not from a top-level committee, but out of desire on the part of some of our youngest employees to make

banking simpler by creating an intuitive, plain-speaking smartphone interface. Development was undertaken by small technology start-ups in Singapore. With many nationalities involved both inside and outside Standard Chartered, Breeze Mobile Banking was brought to life by a global village of creators. We used much the same model to develop Breeze Living, China’s first augmented reality app, which lets users find and share discount offers with other urban tribe members. Originally intended as a reward scheme for our customers, Breeze Living evolved to become a free app available to all. Our Chinese customers, consulted through focus groups and blogger forums, told us they wanted this. Statistics would appear to confirm huge demand for such mobile services: in 2010, the number of China’s web users accessing the Internet via mobile phones rose to 303 million, a significant proportion of China’s 437 million online Internet users. With a similar trend evident in many markets, demand for easy banking on the go is increasing rapidly. In Singapore, where Breeze Mobile Banking was first launched, it has been consistently in the top 5 downloads of the iTunes app store for finance. We believe that many, if not all, of our customers will be using mobile phones to interact with us in the medium term. And mobile banking platforms won’t be limited to banking alone.

Ultimately, such platforms will transform into integrated one-stop shops, where customers can do anything they want to do on the go, whether it’s checking their bank balance, buying a movie ticket or booking a flight. We want to be part of this exciting future. However, this does not mean that we will invest in the mobile banking channel above all others. Increasingly, customers want to interact with banks across a number of different channels to fulfill their financial needs. A home buyer wanting to take out a mortgage, for example, may research options online, get details over the phone or through web chat and then walk into the branch to buy the product. This means that banks need to ensure all channels – including the traditional branch – are as user friendly as smartphone banking. To do this, banks may need to look for inspiration in new places. At Standard Chartered, we want to sustain a culture of innovation and learn from other industries and leading players such as Apple and Samsung. Particularly, we want to embrace co-creation, and actively solicit advice from our customers to get our solutions right before they hit the market. We continue to invest in our branches, but we are making some big changes to provide a customer experience similar to what you might expect from an up-market coffee shop or fashion retailer.

For banks, this means we must adopt a whole new way of thinking

To test this, we set up a mock branch in a lab environment in Singapore and asked customers to try it. The result was a step change: in the next generation branches that we have started to roll out across our markets, the shop front is open, the interior sleek and brightly lit. With Wi-Fi throughout, staff use laptops to serve customers at any desk, and automated check-in systems and comfortable waiting areas mean customers avoid the hassle of queuing. We are even trialing signature scents and music, a feature successfully deployed by big retail names such as Nike and Wal-Mart. We know that people bank because they have to. What we must focus on is making the experience as simple and convenient as possible so customers can get on with living their lives. If we are to win over the new audience of next generation consumers, we must position ourselves, not just as service companies, but as dynamic financial advocates that empower customers to reach their life goals. While the marriage of new technology and changing consumer lifestyles will require banks to turn the traditional concept of customer service on its head, some things will not change: people will always have to pay for goods and services, to save and invest, to buy homes and grow their wealth. And trust between the bank and the customer will remain pivotal. At the end of the day, banking is about enabling customers to achieve their ambitions; it is about helping them to protect and grow their wealth and enhance their life styles. While channels of delivery will change as technology and needs evolve, this should never be forgotten.

SPECIAL FEATURE

Qatar

SPECIAL FEATURE

years of success

In the fast-paced world of international business and world affairs, 40 years can pass in an instant. September marks the 40th anniversary of the founding of Qatar as an independent nation, and, in many ways, its success on the world stage is mirrored by its local business acumen. Rachel Morris traces a brief history of Qatar’s thriving business community since 1971.

HUMBLE ORIGINS By any standards, it is a remarkable achievement. A small desert nation, once among the world’s poorest, rises to become the world’s richest in just a few decades. Declared a nation in 1971 and given independence from the United Kingdom, Qatar was at that stage a fledgling country in the desert. Today, it is the wealthiest country in the world, the biggest exporter of liquefied natural gas and as we all know, the host of the World Cup in 2022 and a host of other international events. Doha has come a long way from its beginnings as a sleepy fishing village. It has been an amazing journey and one that is still continuing thanks to the country’s entrepreneurial spirit and the wise stewardship of His Highness Sheikh Hamad bin Khalifa Al Thani, Emir of Qatar, and the men and women who have shaped the business landscape here. September 3, 2011, marks the official anniversary of 40 years of Qatar as a nation. Once a small fishing and pearling community, it is now considered a gateway to the region and hosts a plethora of internationally recognised big business names as well as a world-class airline and a competitive financial services hub under the auspices of the Qatar Financial Centre Authority. Qatar has expanded far and beyond its early days, when business was based on small family holdings, sea-based import and export business and the country’s famed Gulf maritime heritage.

VALUABLE DISCOVERIES The discovery of oil in the North Field off the coast of Qatar boosted the country’s economy. In 1949, the first cargo of Qatari crude oil left the country’s ports. During the 1950s and 1960s gradually increasing oil revenues brought prosperity, rapid immigration, substantial social progress, and the beginnings of Qatar’s modern history. The discovery of North Gas Field by Winter Shell in 1971 marked another new stage of development, as it is the largest single field in the world for natural non-associated gas. While this discovery enabled Qatar to take its place on the international stage and indeed, nearly 75 percent of the country’s income comes from its hydrocarbon riches, the country has a vibrant and enviable business environment with deep community roots. FAMILY VALUES Qatar’s history of business doesn’t start and stop with its bountiful natural resources, although their discovery and exploitation has enabled the country to boom. The business foundations of this country were laid by the

very families and companies that continue to dominate the domestic business scene. As in other Gulf Cooperation (GCC) countries, many of the large families with established businesses won concessions and franchises for international brands and companies, further cementing their influence and reach. The family names and the big players still feature heavily in Qatar’s fast evolving business environment, including Al Jaidah, Al Fardan, Ali bin Ali and others, who have all become regional and in some cases international names. For example, the Ali Bin Ali Group was established in 1945 with the vision to provide quality international products and services to the people of Qatar. Today the Group is one of the largest retail and distribution companies in the country and has a longstanding history of successful partnerships with the world’s leading brands, including food services, medical products, luxury retail and electronics. The Alfardan Group, one of the renowned merchant families in the GCC region, has been operating out of Doha for more than 50

Qatar has come a long way since the early days of this young country when business was based on small family holdings and its maritime heritage. TheEDGE

SPECIAL FEATURE

years. Tracing the family’s lineage back to early pearl trading, it now spans automobiles, jewellery, fashion and real estate. In other sectors, the influence of some of the country’s founding companies, many with history dating back to the early days of the nation, is still felt. The meteoric rise of Qatar Petroleum (QP) is mirrored in effect by that of the rise of the State of Qatar. In 1963 the Qatar Petroleum Company was founded, evolving into QP in 1974 following the government’s nationalisation of the oil sector. QP now generates the major source of revenue for the State of Qatar and it is the prime producer of energy products for the community and for local industries. Meanwhile, Qatar Navigation was established in 1957 and remains one of the country’s most active and profitable

companies. Guiding these locally grown companies has been the Qatar Chamber of Commerce and Industry (QCCI), which has acted as an advocate and advisor to the country’s business community. GALA CELEBRATION This month the QCCI will host a gala celebration marking four decades of excellence and achievement in business in the country. This event will be the business community’s forum for marking the milestone. The QCCI was founded even before the State of Qatar, in 1963 and is one of the oldest in the region. “The Qatar Chamber has kept pace with these changes and played a key role in enhancing the business experience for companies and employees, providing them

The discoveries of oil and gas enabled Qatar to take its place on the international stage and indeed, nearly 75 percent of the country’s income comes from its hydrocarbon riches, creating a vibrant and enviable business community. 46

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top-tier services and guidance,” says QCCI chairman HE Sheikh Khalifa bin Jassim bin Mohammad Al Thani. “In fact, Qatar has witnessed a rapid and growing development in different economic, social, cultural and sporting sectors,” said Sheikh Khalifa. “Qatar is now turning its attention to the non-oil sector, with heavy investment planned in key infrastructure facilities such as roads, ports, clubs, airports, rail networks and facilities for the 2022 Fifa World Cup.” In a testament to Qatar’s growing stature on the world stage, the QCCI won the rights to host the World Chambers Congress (WCC) in 2013 – a first for an Arab country. “At QCCI we feel that we are uniquely qualified to host an exceptional World Chambers Congress that will have a lasting impact on visiting organisations and on the region in general,” Sheikh Khalifa said of the organisation’s successful bid. The WCC is the world’s signature gathering of international businesspeople and is held every two years. One other constant on the Qatari business landscape has been the Qatar Central Bank, or, as it was originally known, the Qatar and Dubai Currency Board, which oversaw the introduction of the country’s first legal currency. The first Qatari riyals, as they eventually became known, were first issued in 1981. While many will be paying tribute to the work of the pioneers of the business community, some are also looking ahead to 2022, and beyond and to how the business community can continue to thrive. Prime Minister HE Sheikh Hamad bin Jassim bin Jabor Al Thani recently paid tribute to the growth and development of Qatar and the next 40 years of nationhood. “Qatar’s recent development achievements have been truly remarkable and have received international acclaim,” he said. “Qatar has compressed into the space of less than two decades changes that have taken several decades in some other countries. Progress has been made possible by Qatar’s bountiful hydrocarbon resources, and by the foresight and wisdom of its leadership. Hydrocarbon wealth has provided the means for the development of a vibrant economy and for advances in human development.”

IN THE SPOTLIGHT

SECOND ACt

THE ‘ArAb SPrING’ REVISITED ,

Slightly more than six months ago, a series of events once so inconceivable that no one could predicted them, and which have transformed the Middle East and North Africa, began to unfold. Though much has taken place during this time, many believe the so-called ‘Arab Spring’ has far from run its course and, as Jamie Stewart discovers, six months down the line, this saga is nowhere close to the end of the story. In many ways, it is only really the beginning.

IN THE SPOTLIGHT

ince the end of December 2010, the Arab world has been the vast stage on which one of modern history’s most astonishing series of social, political and economic events has played out – the ‘Arab Spring’. Regimes that a mere six months ago appeared entrenched and that had grown used to calling upon years of rule, passed down through bloodline as justification for continued authoritarian governance, began to appear no firmer than the shifting desert sands on which their palatial government houses were built. Sparked by a Tunisian fruitseller’s act of self-mutilation, fuelled thereafter by a lust for change among an educated and progressively minded youth across the 22 Arab nations, and facilitated by access to forms of mass media outside of state control, the Arab Spring began at a sprint. Within weeks, two regimes – in Tunisia and Egypt – were overthrown. Since this heady beginning, however, the ongoing spirit of revolution has collided with a stubborn element within many of the affected interim governments that refuses to bow to the people’s push for a more representative form of leadership. Yet consensus exists among experts across the board, from the fields of academia, politics

or economics, that the Arab Spring is a long way from running its course. Far from this being the end, they say, the Arab world is experiencing the beginning of what will be a long but ultimately successful push for a more consensus-driven form of rule. What began in Tunisia has since moved like a desert sandstorm – and often with similar destructive consequences – through a number of states that have witnessed rumblings of dissent, and others that have seen, and in some cases desperately fought against, revolution, namely Egypt, Libya, Yemen, and most recently, Syria. SYRIA: A LOYAL MILITARY For decades, the people of Syria have occupied an uneasy position on the world map, both the familiar geographic one and the once-familiar political one. Bordered by Turkey to the north, the regime in Syria has for some time found itself next-door to a functioning democracy. Indeed, all of the countries that have witnessed turmoil and upheaval as part of the Arab Spring, only Syria shares a border with a such a state, one that is also part of Europe. But despite this, Syria has for years fallen into the more traditionally Middle

Since February 2011 the entire MENA region has been gripped by the Arab Spring protests and revolutions, many of which have been going on for months with no real end to the story in sight. (Photo by Mario Tama/Getty Images)

Eastern model of governance; one of leadership passed down through inheritance, where family name is worth more than personal or institutional merit or public opinion. Events across North Africa and the Middle East over the past six months, however, have cast a vastly different light on the nation, transforming the political landscape from one of familiarity and authoritarian government to one with a suddenly uncertain outcome. At the time of writing, the ongoing turmoil in Syria has to date claimed 1300 lives. The question of Western involvement, therefore, has again bubbled to the surface, as it did in Bahrain. That question being, why is the outside world so content to sit back and allow events to take their course, despite the bloodshed, when in the case of Libya, the North Atlantic Treaty Organisation (NATO) to name but one, espoused military intervention? According to BBC international security analyst Frank Gardner, “the answer usually given is that unlike Libya, Syria is not ‘selfcontained’. Its largely loyal military and intelligence apparatus are supported by Iran, and it also has a close alliance with Lebanon’s Hezbollah. Even if the West had the appetite and the capacity – which it does not – to become involved militarily in Syria, no-one wants to stir up a conflict that could draw in Israel, Lebanon and Iran.” Which begs a second question: what next for Syria? The state military has remained loyal to president Bashar Al Assad’s government, yet the street protests have grown increasingly numerous and frequent in recent months, testament to the extraordinary courage that has characterised the character and longevity of the Arab Spring. The presence of Turkey casts a passive influence over proceedings, one which varies depending on your standing – to Al Assad, Turkey is a looming shadow; to those behind the uprising, it is a beacon of hope. Ultimately, experts doubt that Al Assad’s presidency will survive the Arab Spring in Syria and will not see out 2012, particularly with the presence of a successful secular Muslim democracy looming to the north of the country. TheEDGE

IN THE SPOTLIGHT

YEMEN’S POWER BROKERS Alongside Syria, two further states are continuing to experience a push to overthrow the leadership directly inspired by events in the early stages of the Arab Spring: Yemen and Libya. The Yemeni uprising was among the first in which the Gulf States chose to play an active role, as opposed to a passive one (see box out). In March, the Gulf Cooperation Council (GCC) proposed a transition plan to Yemen president Ali Abdullah Saleh. The move was triggered by a chain of events: Protests began to gather momentum in the wake of the Tunisia and Egypt uprising; then in March, senior army commander general Ali Mohsin broke with Saleh after a fatal sniper attack on a protester’s camp in the capital Sana’a. The Gulf transition plan was presented in April. It was seen as an attempt to bypass the seemingly inevitable spread of violence, and could perhaps have formed a model that would then be followed by other states across the wider region – but Saleh refused the proposals. The Gulf plan is now backed by only five of the six GCC member states, with Qatar having withdrawn its support. “[Yemen’s] next steps are likely to be determined by

Since its heady beginning, the ongoing spirit of revolution at the heart of the ‘Arab Spring’ has collided with a stubborn element within many of the affected interim governments. a factionalised network of power brokers who cluster around the security services and the business community,” says Ginny Hill, Middle East and North Africa programme associate fellow at United Kingdom (UK)based thinktank, Chatham House. “A new framework for regional and international engagement is urgently required that addresses the likelihood of renewed violence as elite factions re-position,” Hill continues. “Beyond that, the international community would be wise to prepare for several cycles of transition in coming years.” Hill’s assessment draws uncomfortable parallels with the Libya situation. The threat of violence extending into the longer-

Rebel Libyan fighters gas up their vehicles via a fuel truck brought near front line positions west of Ajdabiyah, Libya. Despite some exports being revived thanks to Qatar’s assistance, half of the country’s vast oil reserves largely lie unutilised and its economy stalled as Gaddafi continues to cling to power. (Photo by Chris Hondros/Getty Images)

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term is one that continues to dog the people of both nations. LIBYA: MILITARY STALEMATE? As professor of Middle East politics at the University of Exeter in the UK, Larbi Sadiki, says: “Conscious action by individuals on behalf of systems intended to hurt, punish, dehumanise and humiliate – of which there has been plenty of in the Arab revolutions – discloses a type of mental impairment.” And nowhere has this been truer than in Muammar Gaddafi’s Libya. Yet despite high profile Western intervention, under the umbrella of the UN (United Nations), Gadaffi has to date clung to power. In a report exploring the options for Libya going forwards, Chatham House says: “It is possible, given Gaddafi’s demonstrated tenacity, that a prolonged military stalemate could develop, or even that a ‘failed state’ phase could ensue, with Gaddafi continuing to claim leadership.” Either of these scenarios would potentially be tragic for Libyan prosperity, as well as shining a questionable light on future UNsanctioned intervention. “It is necessary to ensure some diplomatic lines are left open to Gaddafi, should he choose to use them,” the Chatham House report continues. “The [Western] coalition is not in a position to play a direct diplomatic role, but diplomacy could be pursued through a combination of the United Nations and the African Union.” The process of African self-determination as a means of offsetting any future possible resentment between states of different continents is one promoted by many experts. A more interventionist role may therefore

IN THE SPOTLIGHT

THE GULF STATES, SIX MONTHS INTO THE ‘ARAB SPRING’... Six months into the Arab Spring, the Gulf nations have been feeling their way from one level of interventionism to another, and back again, with Bahrain being the obvious exception, due to dealing with its own uprising. Back in February, Saudi Arabia’s King Abdullah bin Abdul Aziz unveiled a QR132 billion social benefit package, successfully placating burgeoning protests among his own populace. Ever since, rumblings at street level have continued – including Saudi women literally taking to the streets in their cars, against the law of the land – but the momentum built up by the early stirrings has since sunk back below the surface. In the UAE and Qatar, continued economic progress has given a largely unconcerned citizenry little to become enraged about. Indeed, with World Cup 2022 secured in parallel to the Arab Spring unfolding, the fortune of Qatar’s leadership has traced a path in the direct polar-opposite direction to that of Tunisia and Egypt’s former rulers, to name two examples. Collectively, the monarchy-dominated GCC has sought to intervene via peaceful means when it has seen violence on its doorstep, as was the case with the Yemen transition plan. Bahrain aside, the situation remains comparatively peaceful across the Gulf, with the area’s economic safety net of hydrocarbon export wealth securely in place for the time being.

In April 2011 Yemeni president Ali Abdullah Saleh delivered a speech during a rally in the capital Sana’a, saying he welcomed an initiative with Gulf Cooperation Council (GCC) foreign ministers to transfer power peacefully, yet he clings to power, fomenting continued unrest and uncertainty in one of the region’s poorest nations. (Image Xinhua/Xinhua/Xinhua Press/Corbis)

be called for from the African nations in the south and the centre of the continent to avoid the turmoil in the north developing into something that reaches beyond the confines of the Middle East and North Africa. HISTORIC TUNISIAN GENESIS And so to where it all began, Tunisia, where a little more than six months ago, Tunisian fruitseller Mohammed Bouazizi set himself ablaze. Today, Tunisia and Egypt

remain the only two countries that have overthrown their rulers – and yet many in both countries complain that the interim governments are little better than those that preceded. The dire economic circumstances – widespread unemployment, corruption and other related factors - that lead to the above incident and have motivated protests and activists in most affected countries continue as before, with little real change – and ironically are getting worse in most cases.

George Soros, the billionaire investor who grew up in the US, but hails from Hungary, feels that there are strong corollaries between the revolutionary fervour that gripped Eastern Europe decades ago and the current Arab Spring. “[It is] a historic event that will change those countries forever,” he says. (Photo by Spencer Platt/Getty Images)

These facts say much about revolutions: for all their historical glamour and romance, for all the hope they encapsulate, rarely has the process of full-scale revolution been a painless one for the ordinary citizens of societies or custodians of their economies. These lessons are drawn upon by billionaire United States (US) investor George Soros. Originally from Hungary, Soros fled the capital Budapest as a teenager following the country’s failed revolution of 1956, and went on to make his fortune in the US. “Revolutions are rarely successful. They often end in tragedy. But they change the behaviour of that country afterwards,” Soros says. “The 1956 Hungarian Revolution was repressed. But it carried with it the seeds of a successful revolution in 1989.” Soros touches upon the fact that people have been willing to lay down their lives across the Arab world, the effect of which he says is “irreversible”. As a collection of acts, such bravery will echo down the years, regardless of whether or not Gaddafi, Saleh or Al Assad are successful in clinging to power for the time being. Soros calls it “a memory; a historic event that will change those countries forever”. But just how it may change them and when the final act of the Arab Spring will play out, ultimately remains to be seen. TheEDGE

Business interview

RETAIL CAUTIONARY

Business interview

If you have read a newspaper in Doha at any time during the past 10 years, you have probably seen Mohamed Althaf. He is usually photographed with a group of people, handing one of them a giant cheque, or the keys to a car. As regional director of LuLu, the hypermarket and department store, Althaf is possibly one of the lowest profile company heads in Qatar – yet arguably one of the shrewdest. He gives a rare interview to Rachel Morris about the company’s ethos and LuLu’s ambitious expansion plans. HUMBLE ORIGINS LuLu is a brand name that is familiar to almost anyone who lives in Qatar – or the region for that matter. For many westerners, it is their first exposure to the hypermarket concept – a store that sells everything from mangos to the kitchen sink, where you can buy a chicken and a barbeque to cook it on. The chain is also famous for its giveaways – cars, money, televisions, jewellery and gold – all glittering enticements for the retail giant’s loyal and diverse customer base. “We get around two to three million entries in each of those draws,” Mohamed Althaf reveals of the company’s trademark competitions when he meets TheEDGE in his modest office next to the company’s Old Airport area flagship store. “Quite amazing isn’t it?” LuLu – which bills itself as a business encompassing hypermarkets, supermarkets and department stores – is now in its 10th year of operation in Qatar. Starting from somewhat humble beginnings in Abu Dhabi 60 years ago, as a small import store opened by founder Yuseffali M.A, the company, now under the EMKE Group, has grown into a household name in the region. “We were basically a meat and poultry importer,” says Althaf. “With one small store in Abu Dhabi we continued operation for a very long time. Regionally we went wider during the first Gulf War; we started experimenting with smaller format stores. Now we run nearly every retail format that

you can conceive. We run local co-operatives, we do military canteens and convenience stores, we have stand-alone department stores, convenience stores. But petrol stations we have not yet done!” MEASURED EXPANSION LuLu has grown from one small store to now offer its own house brands in everything from flour to electronic and household appliances, and even has a co-branded credit card system in the United Arab Emirates (UAE). To put LuLu’s success and reach in perspective, the company’s market share accounts for more than a third of the Gulf Cooperation Council region’s market share. Althaf has been there from the start, when the company opened its store on D-Ring Road in Doha, and says the company took a deliberately slow and cautious approach to expansion in Qatar. “For a long time we only had the one store,’ Althaf says of the LuLu Department Store opposite Hamad Medical City. The Old Airport store came two years later. The company sat tight, and in 2009 opened its new store targeting the western expatriates in the Garrafah area, followed in 2010 with its small ‘Express’ store at Education City. “We’ve taken a very measured approach (to expansion),” he adds. “We haven’t felt the need to expand rapidly. First we go with the small format and we experiment with the market and learn things, put up infrastructure. That takes about two years.” TheEDGE

Business interview

Althaf says one of the issues is the availability of quality real estate for largescale development. “This is in short supply and you really need to find the right location,” he says. “Quality retail real estate is difficult to find. We need quality space. We could not match the pace of Qatar in that respect.” The next six months will see a big step for the company with the opening of its first shopping centre in Al Khor to the north of Doha. In what Althaf describes as a mall, the 33,000 square foot mall will have not just a hypermarket but also 20 dining outlets and a cinema. “This is significant,” he says. “It is our first mall in Qatar. It’s a neighbourhood mall. There is 70,000 square metres of parking alone. Growth-wise we plan to go to Al Khor. That is number one for us at the moment. We aim to attract a many people

from Doha there. It’s a different mix. Food and beverage will be strong. You have Chilis, Starbucks, KFC, and a four-screen cinema.” Meanwhile, the company has in its sights a new operation in Al Wakra, serving the country’s south as well as a new store on Salwa Road. “These will take some pressure from our existing stores,” he adds. QATAR’S CONTRIBUTION According to Althaf, Qatar makes a significant contribution to the LuLu company’s’ bottom line, accounting for around eight per cent of the organisation’s entire retail business. “Qatar is sizeable,” he says. Althaf’s territory also covers Egypt where the company has two stores. “The UAE is our biggest market,” he continues. “We also have operations in Kenya.”

To put LuLu’s success and reach in perspective, the company’s market share accounts for more than a third of the GCC region’s supermarket market share. 54

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The company’s mission statement is “right products, for the right customer at the right time” and says Althaf there is no “typical LuLu shopper”. He admits that French hypermarket giant Carrefour is perhaps the company’s biggest competitor, but feels that LuLu matches them in quality and price. “We believe that quality food should not cost a lot of money,” Althaf says. “In a country like Qatar you cannot cater to one single community and survive. We are international in terms of our efficiency and infrastructure and the quality of our produce. In that sense we compare with Tesco [in the United Kingdom (UK)].” “But at the same time we are local,” Al Thaf adds. “We know our communities. Ethnically we are diverse. A Filipino can walk in and find all of their foods and so can someone from the United States (US), like a salad dressing from Texas. These things matter. We reflect the demography.” GLOBAL GROWTH He then reveals that LuLu itself is in an expansion phase internationally. “I think we can say that we are the fastest growing retail chain in the world,’ says Althaf. “Most of them (retail chains) are slowing down their growth. We actually opened close to one store a month in 2010. We are looking at Indonesia and North Africa now, emerging markets.” Althaf points to the development of the company’s most ambitious project yet in Cochin in the state of Kerala, in south India. The LuLu International Convention Centre and Gardens Hotels includes two hotels run by international chains Hyatt and JW Marriott, a retail mall and a ‘leisure zone’ for families. “It will be the largest mall in South Asia,” he explains. “We are diverse but our core business remains the same. We only add services which supplement or run in synergy with our operations.” Althaf says the company keeps costs low by establishing themselves in key areas and working directly with suppliers, cutting out the expensive middlemen. The company has operations in Asia and Europe, where most of the region’s produce is sourced. “Our backward integration is very strong. We have three offices in China. We are in Indonesia, we have two operations in Thailand – one for

Business interview

“Population growth is the key. Retail in Qatar is big business and there is room for everyone, for every format. So you don’t cannibalise, you don’t eat each other.” – Mohamad Althaf.

LULU BY NUMBERS Lulu Stores has 90 outlets around the region including Egypt and Kuwait and plans to open 100 stores by 2012. The company serves an estimated 500,000 customers a day internationally in more than 12 million square metres of retail space in 20 countries around the region and Asia. In Qatar there are four stores at present and 2200 employees, ranging from sales assistants through to butchers, bakers and executives. The company has 24,000 employees globally.

fruit and vegetables, one for non food – and now we are trying to set up one in Turkey,” he explains. “And we are moving our operations into UK. Right now we procure most of our produce from Belgium and Holland so an office there makes sense. We have very established relationships in Australia and New Zealand for meat and poultry.” THE QATAR ‘CAKE’ While Al Khor is firmly in the company’s near sights, LuLu isn’t done yet with Qatar. “Our aim is to open one store every year in Qatar over the next three to four years,” says Althaf. “One very good thing about here is that the (retail) cake is expanding. The population growth is the key. Retail now here is big business and there is room for everyone, for every format. So you don’t cannibalise, you don’t eat each other. “I know most of the grocers now…they come and buy from us, because of our prices. Even the small neighbourhood ‘mom and pop’ shops, they are all doing quite well in the current climate. There is room for everyone.” That said, like every good businessman, Althaf watches his competitors, especially Carrefour and expat favourite Spinneys, who have one store in Doha and another two set to open later this year on The Pearl-Qatar. LuLu is also looking to embrace technology, including integrating new ideas to make shopping easier for their customers. “We are really up to date when it comes to technology and design. We are introducing LED screens for pricing (on the shelves), which is a first here in Doha. And we have other developments underway,” Althaf says. “Our stores are also extremely modern. The Al Khor development will be a good example of our format and how up to date we are.” Born and raised in India, Al Thaf studied law at the University of Delhi but found himself in Abu Dhabi working for the growing LuLu empire, where in his early years as a trainee, he says he experienced all aspects of the supermarket business. “I was a lawyer,” as a trainee says. “I specialised in intellectual property rights. And now, I am a grocer. It’s a lovely job.” TheEDGE

ON THE PULSE

The business of

preservation

ON THE PULSE

The battle to ensure food and water security in Qatar and the wider Middle East is assuming increased importance, with population growth placing intensifying strain on governments to pull through. As Edward Jameson discovers, this is one problem that will be as much about business as it is about technology.

n a dusty corner of the Australian state of Victoria, roughly 200 kilometres from Melbourne along the Western Highway, lies the unassuming city of Ararat. The sun-scorched settlement, home to only 8200 people, has for years built itself on the back of its agricultural industries. The city is not used to making the news, but in recent weeks, a major acquisition has whipped up a storm of controversy, riling the local population and leading to cries of an international ‘land grab’. “This buy-up of land has happened so quickly it’s almost too late,” said Ararat Shire mayor, Andrea Marian. “One after another, after another, and the next thing you know half your region doesn’t belong to you.” The storm clouds began to gather following Qatar-based Hassad Food’s acquisition of sheep-grazing and cropping land in the vicinity of Ararat. The deal covered 8ooo hectares, which came with a hefty QR137 million price tag attached. The reaction was not so much down to the economics of the deal – indeed, experts estimated that Hassad Food paid 20 percent above market value in order to secure the land – but was more inspired by sovereignty issues, stirring the famously nationalist streak of the Australian bush dwellers. The story, which on closer inspection appears blown out of proportion – as these things often are when perceptions of national sovereignty are involved – is unlikely to change much on the ground for the people of Ararat. But it does represent a bigger issue in Qatar: how to assure food security in a parched landscape, in light of the state’s hugely ambitious growth plans.

Food consumption in Qatar is forecast to grow faster than in any other GCC country over the coming four years, at a rate of 6.3 percent per annum.

Agricultural empire When commodity prices spiked in 2008, global food prices rose to record highs, which had a deep impact on the Gulf, due to it being one of the world’s biggest food importing regions. This saw Gulf governments scramble to cut reliance on the rest of the world to feed their growing population. Hassad Food, which is owned by the government of Qatar, was established in July 2008 as a reaction to the above. The company was set up to oversee food security in Qatar from a commercial angle, and has established a geographically diverse portfolio of projects in the short time since its inception. In Australia alone, the company owns a 2630-hectare estate, 130 kilometres west of Ararat, as well as a sprawling 125,000-hectare holding in the north of the country and 6,800 hectares in the state of New South Wales. The idea is not to utilise land on the other side of the world in order to produce food for Qatar – such a strategy would be firmly against the TheEDGE

ON THE PULSE

In Australia alone, Hassad Food owns a 2630-hectare estate, a 125,000-hectare holding in the north of the country, and 6800 hectares in the state of New South Wales. sustainability principles that Hassad Food promotes – but to develop a diverse, profitable, global agricultural empire, the proceeds from which can be reinvested back into food security projects in Qatar. And increasing food security at a domestic level will be vital if the government wishes to continue growing the overall economy. Growing pains According to market research firm Euromonitor, Qatar’s population grew at an average rate of nearly 12 percent per year over the past decade. By 2030, the population will reach 2.4 million, the company says, up from today’s 1.4 million. Such growth will place enormous pressure on the food supply chain. Meanwhile in the shorter term, food consumption in Qatar is forecast to grow faster than in any other Gulf Cooperation Council (GCC) country over the coming four years, at a rate of 6.3 percent per annum, according to a food industry report published by Dubai-based investment bank Alpen Capital. “When it comes to food sufficiency, due to water shortages and lack of arable land, the GCC countries need to import almost 90 percent of their food requirements,” Alpen Capital managing director, Sameena Ahmad, explains. Today, only a tenth of Qatar’s 65,000 hectares of arable land is being used for agriculture due to a lack of fresh water supplies, which is why an increasing amount of resources are being placed into food security projects. PRESENT Projects Alongside private enterprise, the public sector is also doing its bit. The Qatar National Food Security Programme (QNFSP), also established in 2008, is the body charged with setting policy to break reliance on food imports into the country. Its master plan is around four economic sectors in Qatar: renewable energy, water desalination and management, agricultural production, and food processing. Most recently, the government set up a ‘task force’ to deal with the issue, which includes representatives from 14 ministries. “We are in the process of framing new rules and regulations to support agriculture in the country,” QNFSP chairman, Fahad Al Attiyah, told the Qatar

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Tribune. “Our strategy includes incentives to encourage people to invest in the farm sector so that Qatar does not have to depend on imports for its food needs,” he added. In Qatar therefore, the challenge of feeding a growing population is going to require an approach that is as much about business and economics as it is about technology and innovation. And intrinsically linked to the issues is a second vital aspect of security – one that is infinitely more important than food, because without it, there can be no food. Water. Water DANGER Far from being an issue restricted to any domestic government, water security is by its very nature a GCC-wide problem that requires a GCC-wide approach. As Sameena Ahmad stated, the GCC countries

ON THE PULSE

“The real wild card for political and social unrest in the Middle East over the next 20 years will not be war, terrorism, or revolution – it will be water.” must import 90 percent of their food requirements because a lack of water means that the arable land cannot be utilised to its full potential. A spirit of cooperation is vital at this stage in the evolution of the GCC – taking into account the ongoing shift from an energy exportled economy to a more diverse one – because ultimately, if economic diversification is to be achieved, water must be the fuel that drives the accompanying growth. And like anything that fuels the engine of growth, should it not be managed carefully, the consequences could be severe. “The real wild card for political and social unrest in the Middle East over the next 20 years is not war, terrorism, or revolution – it is water,” says Jon Alterman, Middle East programme director at the Washington-based Center for Strategic and International Studies (CSIS) in the United States. “Conventional security threats dominate public debate and government thinking, but water is the true gamechanger in Middle Eastern politics,” he insists. To date, agriculture across the region has been fuelled predominantly by groundwater sources, with water being extracted from underground aquifers. But this process is becoming unsustainable in many countries, including Qatar, as the QNFSP warns: “Groundwater extraction has to be discontinued and the aquifers need to be recharged with desalinated water. Such a strategy will allow the groundwater aquifers to act as reservoirs that will enhance Qatar’s water security.” dealing with the Threat According to Alterman, the issue is one of immediate concern. “Finite supplies of underground water within national borders pose a more immediate and strategically consequential challenge,” he says. “Groundwater has fed the agriculture that many regional leaders have used to cement political loyalties. But its potential exhaustion now threatens existing political balances.” The solution is a two-pronged one in which the supply and demand sides must be of equal weight. On the supply side, huge investments in desalination – the process of removing salt from saltwater – is required. This is part of the approach being taken in Qatar. Desalination is an expensive, energy-intensive option, but the QNFSP plans to tackle this through the extensive use of solar-powered

desalination, thereby using one resource that the nation has in abundance – sunlight – to secure one that it does not – fresh water. And moves must also be made on the demand side. The CSIS advocates a water pricing system, which offers incentives for responsible use. In all Gulf countries, it will be “crucial” to change the perceptions of ordinary people about water and appropriate uses for it, the group says. If water appears to be a free resource, it will continue to be treated as an inexhaustible one. According to Alterman, the time to act is now. “Reform will need to happen quickly,” he says. “A combination of government action and inaction has shaped the Middle East’s water problems, and only government action can prevent them from causing sudden upheaval.” Food and water security are two issues that go hand in hand, and each must be dealt with if economic progress is to be made across the Middle East. Now is the time for deal makers and science to step up. The appliance of science The harsh environment of the Middle East requires the creative and innovative use of technological solutions if water security is to be preserved for future generations. Firstly, Qatar has ambitious plans to utilise the latest advances in reverse osmosis – a type of desalination technology – and solar desalination. The power needed to run the reverse osmosis systems is expected to originate from a giant solar park to be built in the south of the country, the advantage being that little space will be taken up on the coastline. Secondly, recovered waste heat from the nation’s industrial cities can also be adapted as a clean form of energy for desalination. It can either be used directly as steam for distillation plants, or indirectly to generate electricity to power reverse osmosis plants. Investment in advanced technologies for water production, treatment, and reuse is a “feasible route” for some Gulf countries, “particularly wealthy ones”, the Center for Strategic and International Studies says. Take for example Saudi Arabia, which faces the same problems as Qatar. The issue in the Kingdom is being approached from a similar angle. Last year, the King Abdulaziz City of Science and Technology launched a pilot desalination effort that uses solar power, whereas the nation’s existing desalination plants have traditionally been oil-fired. The government of Saudi Arabia plans immense investment in new and upgraded desalination plants over the next 15 years, so growing such pilot projects “will be of enormous benefit to the government’s efforts to save energy and maintain its finances”, the CSIS says.

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COVER STORY

the rise of islamic finance

As world markets struggle to rebalance following the rupture that was the global financial crisis, one financial industry survivor emerged largely unscathed. Indeed, Islamic or Shariâ&#x20AC;&#x2122;ah compliant finance and finance products proved to be quite resilient to the downturn, and many commentators and investors are turning to this once-niche market for solid returns. Rachel Morris looks at Islamic finance and the part Qatar is playing in its emergence.

COVER STORY

“

he principles of Islamic finance may represent a possible cure for ailing markets”. So stated a Vatican economic spokesman in 2009, as the world stared into a gaping economic abyss. “The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service,” put forward the Catholic Church’s official newspaper Osservatore Romano. It was a strong endorsement from an influential European ecclesiastical organisation, one that has reaped the very lucrative benefits of the conventional Western capitalistic banking system for centuries. It is also a recognition that tried and tested financial instruments failed during the crisis. UNTAPPED POTENTIAL Fast forward a couple of years and Islamic finance is a field of growing importance for Muslims and savvy investors alike, especially with those in the Middle East, many of whom are uncomfortable with Western-style bonds and banking, which have proven to be unreliable and lacking depth and somewhat in integrity during times of economic crisis. Yousuf Al Jaida, director of asset management and banking at QFC Authority (QFCA) in Doha, says the growing confidence in Shari’ah compliant or Islamic finance is real and is corroborated by numbers. “Even though worldwide there is an estimated US$1 trillion (QR3.6 trillion) of Islamic assets, this only accounts for between one to five percent of total conventional finance assets. However, the sector has grown quickly, doubling in size since 2006, and the rate of growth is expected to be maintained,” Al Jaida tells TheEDGE. “It has been estimated that only about 12 per cent of Muslims – out of 1.6 billion globally – use Islamic finance, so the potential is clear,” Al Jaida continues. “All the signs are that the demand for finance and insurance products is likely to strengthen in 2011 and 2012 across the Middle East and in Qatar, in particular, on the back of strong economic growth, huge infrastructure developments, evolving regulations, more compulsory insurance and a number of other factors.” GOING GLOBAL Islamic finance is banking or banking activity that is consistent with the principles of Islamic law, Shari’ah law, and its practical application through the development of Islamic economics. As it applies to finance, Shari’ah prohibits the payment or acceptance of specific interest or fees, which are known as Riba or usury, for loans of money. Investing in businesses that provide goods or services considered contrary to Islamic principles is also ‘haram’ or forbidden. While these principles were used as the basis for a flourishing economy in countries in the Middle East and other Asian nations

in bygone ages, it is only in the late 20th century that a number of banks and institutions were formed to bring the practices widespread exposure and accessibility for those looking for alternatives in line with their approach to their faith. These range from large-scale banks such as Qatar Islamic Bank, this country’s biggest Islamic bank, through to small cooperatives. Moreover, the network now criss-crosses the world to markets not traditionally associated with Shari’ah. For example, an Australian Islamic association is offering a new scheme of interest-free loans to low-income Muslims according to the Islamic Shari’ah. It offers small, interest-free loans of up to AUS$1000 (QR3900) to people on low incomes for the purchase of essential household goods and services. So far Asian Islamic countries including Malaysia and Indonesia have led the charge on establishing Shari’ah compliant banking and finance institutions. Malaysia in particular has been active, establishing rules that have been adopted across the Islamic world. However, these systems sometimes compete with each other. The Accounting and Auditing Organisation for Islamic Financial Institutions and the Islamic Financial Services Board are both looking at the standardisation and harmonisation of Islamic finance products across all markets. QATAR’S CONTRIBUTION However, as the QFCA’s Mr Al Jaida explains, Qatar is moving to set the agenda within the Middle East in establishing an environment for Islamic finance to thrive, with some positive bolstering from no less than the International Monetary Fund (IMF) itself. “The Islamic finance market in Qatar is still young but the conditions for growth are very favourable,” Al Jaida explains. “The strong economic backdrop (the IMF expects the economy to grow 20 percent this year), the anticipated spend on infrastructure (over US$100 billion or QR3.64 billion of projects are expected to start over the next three years), the growing population (which has more than quadrupled since 2000), the growing wealth (which is increasingly being invested at home rather than internationally), unusually high savings rates, the demand for health insurance as people live longer, and other forms of personal insurance, some compulsory, will all drive demand for financial services and products.” Among those taking advantage of the country’s interest in Shari’ah compliance is its youngest bank, Barwa Bank. Osama Al Deraie, executive member of Barwa Bank’s Shari’ah Board, says the practices are driving economic growth. “Shari’ah compliant banking is still relatively new, but it has proved to be resilient and strong during the recent global crisis,” he said recently. “This is due mainly to the belief and moral principles that govern all transactions. If the banks want to achieve the prosperity and successes they should work closely with

TheEDGE

COVER STORY

While Islamic banking principles were used as the basis for flourishing Middle Eastern and Asian economies in bygone ages, it is only in the late 20th century that banks and institutions were formed to bring the practice widespread exposure. 62

TheEDGE

customers in various sectors to apply these principles to innovative Shari’ah compliant banking products and services that meet their needs,” Al Deraie added. Al Jaida confirms that the key driver is the support of the Qatar Central Bank (QCB), which this year also issued a controversial directive to all banks operating inside the country to shutter their Islamic banking arms. “The QCB has been developing regulations to support a robust industry in a very clear and proactive way,” he explains. “This has been highlighted by the decision to eliminate overlapping of non-Islamic and Shari’ah activities of conventional banks, which QCB said created difficulties for them to manage their risks. The QCB move should bring more transparency and improved governance to the Islamic finance industry, and addresses the criticism that it too closely mirrors conventional finance and does not have the appropriate oversight to make sure it fully complies with Islamic law.” Demand for financial services in Qatar is not only being driven by the country’s extraordinary wealth, but also its increasing populace. Between 2000 and 2009 gross domestic product has more than quintupled from US$17.9 billion (QR65 billion) to US$98 billion (QR357 billion), and population growth more than quadrupling over the same period from over 400,000 to nearly 1.7 million in the 2010 Qatar Census. There is also the increasing propensity of investors to keep more of their investments closer to home as domestic economic prospects look increasingly attractive. This is also true for countries like Saudi Arabia, where investors are looking for Gulf Cooperation Council (GCC)-specific investments. Alongside conventional funds, Shari’ah funds have been rapidly growing in popularity in the GCC. Although only 35 percent of funds in the GCC are Shari’ah compliant, the number of funds and asset allocation to these funds has been steadily increasing in recent years. According to international research and data resource, Eurekahedge, there are more than 680 Islamic funds with US$44 billion (QR160 billion) assets under management, of which 58 percent are invested in portfolios covering the Middle East North Africa region. “There is another factor in asset management, and that is through the global financial crisis we have seen Islamic products out performing conventional finance, with investors looking at alternatives with lower risk, transparent options,” says Mr Al Jaida. Increasingly, Qatar is seeing more products and firms set up to take advantage of the opportunity. Last May, Qatar First Investment Bank and Gulfmena Investments launched Tebyan Asset Management, a new Shari’ah compliant asset management company. And in November 2010, Doha-based investment bank QInvest received the Shari’ah Fund of the Year award at the Global Investor Future of Capital Markets Forum in Dubai. In addition, QInvest, has won the prestigious award for Best Shari’ah Compliant Firm at the Private Equity World Awards. “Firms such as these will

COVER STORY

Islamic banks in Qatar will soon have their own capital adequacy requirements as Qatar Central Bank is working on a new set of rules in line with Islamic Financial Services Board standards. continue to differentiate Qatar as the pre-eminent regional hub for asset management,” says Mr Al Jaida. INSURANCE AND EQUITY The story is similar in insurance. Insurance being offered in accordance to Shari’ah principles is known as takaful and the practice dates back more than 1400 years. The underlying principle is that policyholders cooperate among themselves and they all pay a subscription. Losses are divided in accordance with a ‘pooling’ system. Insurance penetration rates are less than one percent generally in the GCC, as compared to approximately seven percent as a global average. The global takaful market is still relatively new with approximately three-quarters situated in Iran, Malaysia, United Arab Emirates and Saudi Arabia. Most takaful operators in the GCC are start-ups or small players. Qatar, among these, has already annual takaful premiums worth more than US$100 million (QR364 million) according to a recent Ernst and Young Takaful report. Meanwhile, Islamic investment equity funds market is one of the fastest-growing sectors within the Islamic financial system. Currently, there are approximately 100 Islamic equity funds worldwide. The total assets managed through these funds currently exceed US$5 billion (QR18.2 billion) and is growing by 12–15 percent per annum. The industry in Qatar is also maturing. Qatar’s finance and economy minister, HE Yousef Kamal, recently announced Islamic banks in the country will soon have their own capital adequacy requirements as Qatar Central Bank is working on a new set of rules in line with Islamic Financial Services Board standards. With this in the background, Doha is poised to capitalise on a rapidly ascending component of banking. In Qatar alone there are currently nearly US$1 billion (QR3.64 billion) in value of projects set to commence in coming years, including the Qatar-Bahrain Causeway and the New Doha Port. This is of course aside from the other infrastructure needed for the 2022 FIFA World Cup.

A GUIDE TO ISLAMIC FINANCE TERMS Shari’ah law: This prohibits usury, the collection and payment of interest, also commonly known as ‘riba’. Sukuk: Financial instruments that serve much the same purpose as debt, but which are structured to avoid the payment of interest. Ijara: A sale and leaseback transaction used to generate income that can be classified as rent, rather than as interest. Gharar: Gambling, which is ‘haram’. Certain highly speculative investment products, such as some futures contracts, option contracts, derivatives and securities linked to market indexes are against Islamic principles. Takaful: Shari’ah-compliant insurance which is structured as mutual aid and risk sharing. Tawarruq: Translates as “turns into silver.” A method used by Islamic banks to make loans and avoid the appearance of collecting interest on them.

“This represents a significant opportunity not only for the property segment, but also for the maintenance and risk management segments once these projects are complete,” says Al Jaida. “Given the volume of financing required, Islamic finance should play a significant role in order to support the growth.”

For more legal information on Shari’ah Governance in Islamic Financial Institutions, please turn to our Legal Insight section on page 76 of this issue.

TheEDGE

SPECIAL FOCUS

SAFE IN THE The cloud services sector is growing in leaps and bounds, but, advises Steve Bailey, itâ&#x20AC;&#x2122;s best to understand the evolving risks and liabilities before you take the leap.

teady growth in the cloud services sector reflects the rapid pace at which companies are moving all or portions of their computing, applications and data storage requirements to this emerging destination. According to technology research firm Gartner, the cloud computing industry is poised for strong growth through 2014, when worldwide cloud services revenue is projected to reach US$148.8 billion (QR541 billion). This groundswell of enthusiasm for cloud computing is not unwarranted as the benefits are compelling. The opportunity to reduce information technology (IT) costs dramatically as well as boost operational efficiency, corporate collaboration and business agility are major drivers. Moreover, emerging service options offer many choices, including Infrastructure as a Service, as provided by Amazon web services, Rackspace, Nirvanix and others; Platform as a Service, by outlets including Microsoft Azure and Google Apps, and Software as a Service (SaaS), from providers such as Salesforce.com and CaseCentral. Early adopters of cloud technologies have viewed the migration as an imperative, despite the potential of service outages and exposure to security and privacy risks. But it is clear, that cloud service providers understand the initial hesitation companies are experiencing in trusting crucial information assets to them and they continue to work diligently to assuage concerns with stringent Service Level Agreements addressing issues such as uptime, privacy and security. Headline-grabbing stories about Intuitâ&#x20AC;&#x2122;s and Googleâ&#x20AC;&#x2122;s recent prolonged service outages only reinforce that disruptions in the cloud can and will occur, which means that service quality and data availability will persist as front-and-centre issues. While encryption remains the baseline for securing data when moving to the cloud, there are other questions that should be asked about how data is migrated and accounted for, as well as additional risks that must be addressed before entering into a relationship with any cloud service provider.

SPECIAL FOCUS

CLOUD? There is also a set of equally important issues starting to surface in conversations about cloud-related risks. While they may not be grabbing headlines yet, there are far-reaching ramifications, which necessitate ongoing discussions and concerns. Savvy IT leaders are beginning to understand they must look beyond the ‘big three’ – outages, privacy and security – when weighing cloud computing risks. Now more than ever, careful evaluation and forming partnerships with other organisational stakeholders are essential for understanding and mitigating risks relating to records management, eDiscovery, jurisdictional issues and exit strategies.

DAtA rEtENtION & DEStruCtION One of the overarching benefits of moving information to the cloud is the opportunity to greatly simplify and streamline data management. To date, companies have focused on ensuring data integrity and availability, but haven’t spent much time considering the requirements of information retention and destruction. This area requires collaboration between corporate IT and legal departments to understand and articulate specific data keeping and disposal needs, especially since the contracts of many cloud service providers are standard cookie-cutter agreements. Also, remember that cloud providers are in the business of collecting data, not purging it. They make it extremely easy to add capacity, which encourages organisations to keep everything. The topic of data destruction often doesn’t come up, but it should. Moving to the cloud is supposed to make data management easier, yet managing data retention in this new frontier can be more complicated and difficult than handling it in-house. For that reason, companies need to find out what their options are and how the provider deals with records management.

For instance, understanding how a provider applies multiple retention policies is key, as is their approach for purging certain data sets according to a mutually agreed schedule. In some cases, such as dealing with a SaaS cloud service model, retention and destruction might be integrated into the offering. Many SaaS-based e-mail providers include policies for deleting all messages after one year. In other cases, it’s possible to manage data retention through the organization’s backup software. Regardless of approach, the customer needs to play an active role in setting both data retention and destruction policies, while working closely to understand the legal ramifications and risks if these policies are violated, even inadvertently.

EDISCOvEry: DAtA PrESErvAtION, COLLECtION AND PrODuCtION Cloud computing also can make searching, accessing, collecting and preserving electronically stored information more laborious, complicated and risk prone when compared to handling processes internally. In addressing this area, enterprise IT departments need to engage their legal counterparts for guidance and advice on how discovery in the cloud is different than storing boxes an offsite document storage facility. As with records management, the type of cloud service will impact the level of

functionality. For example, if an organisation is leveraging the cloud simply as a storage repository, the likelihood of being able to search the data is greatly reduced. If the organisation is using a SaaS cloud service, however, there’s a greater chance of being able to perform searches and content indexing to support discovery demands. In evaluating these capabilities, it is important to ask about the tools offered by the cloud provider. In some instances, the organisation can use a combination of internal and external tools for data search and identification. Another important question entails understanding the authenticity and admissibility of cloud-based data. When data is moved to the cloud, for example, does ownership of the data change and are an organisation’s rights to the ‘clouded data’ any different than if it was stored locally? How is data authenticity evaluated and monitored? It’s critical to maintain data in its original format, but sometimes moving to the cloud creates changes in metadata and file names. This can cause serious complications, especially if companies no longer have access to the same metadata as when the data was stored locally. If information is altered when moved to the cloud, companies should determine whether it’s possible to audit the data to demonstrate that it is still available in its original format.

Since everyone knows that the best defense is a strong offense, companies seeking to reduce their cloud-related risks need to look and listen to their legal departments before they enter the cloud. TheEDGE

special focus

In the legal world, the ability to apply ‘legal holds’ is essential to preserving data as part of an evidence management strategy. This process can become more complicated when dealing with cloud-based data, and therefore requires additional due diligence before signing with a cloud service provider. Foremost, organisations need to understand if data must be restored to the customer site in order to place a legal hold or if it is possible to apply the hold while the data still resides in the cloud. Above all, ensure that no action is taken by the cloud provider that could lead to spoliation, which would likely result in sanctions or other costly legal results. eDiscovery issues in the cloud will continue to gain ground as the inability to produce data in the manner and timeframe required by a court during any litigation proceeding can yield dire consequences. The best way to avoid this slippery slope is to engage legal experts and stakeholders early in the process so any potential eDiscovery pitfalls can be pinpointed. Jurisdictional issues Companies must ensure that their cloud service provider operates in accordance with whatever laws pertain to a particular location where data might be stored. Next, consider the nature of the data, especially if a United States (US) cloud provider is retaining data or e-mails that belong to foreign nationals as Europe has much stricter privacy laws. Universities across the US have been among the earliest adopters of cloud computing technology, with many migrating student e-mails to the cloud to lower capital IT costs and resources. Still an unfortunate reality for some schools, is the additional risk of outsourcing e-mail for faculty and students who are European residents. The European Union has far stricter privacy laws than the US, which could require seeking permission from the parties prior to engaging a third-party to handle their e-mail. Cross-border issues extend beyond the owners of the data to the physical location of a cloud provider’s file servers. Since many providers house data in multiple data centres around the world, it’s prudent to find out the location of each centre as privacy laws will differ. The underlying goal is to minimise exposure, and jurisdiction is an area that

TheEDGE

Savvy IT leaders are beginning to understand they must look beyond the ‘big three’ – outages, privacy and security – when weighing cloud computing risks. can trigger legal, regulatory and compliance risks and concerns. Getting data back Perhaps the most overlooked area is what happens when an organisation wants to leave the cloud or migrate to a different service provider. There are countless scenarios for why a company should develop an exit strategy upfront, including avoiding exposure if the cloud provider goes bankrupt. To date, cloud service providers have not focused much on this area and it’s reasonable to expect they may be reluctant to address this topic, but it is crucial to understand the process of returning data to the customer. In some cases, it may be possible to move data from Vendor A to Vendor B directly. In both cases, there are cost and timeframe considerations as well as potential risks that require attention and legal advice. Not all cloud service providers are equal, and some may be more willing to negotiate than others. It’s advisable to avoid contracts that don’t permit customisation or modification. Clearly, the bigger the customer, the more power is brought to the negotiating table. Smaller organisations should exercise caution before moving mission-critical data to the cloud, as they can be impacted severely. Mitigating the risks Because of potential reputation-damaging publicity, expect service providers to focus first and foremost on minimizing widespread service outages while adopting policies and procedures for reducing privacy and security risks. What is less likely to grab headlines are the isolated instances when a cloud customer cannot retrieve its data and is forced to deal with a sanction that can cost thousands.

For that reason and all the others described here, it is imperative for IT organisations to begin vetting the less-publicised, yet equally impactful, risks posed by moving data to the cloud. In the meantime, both large and small enterprises share responsibility for making sure all areas of concern are addressed to ensure a move to the cloud increases business benefits, not liabilities. Since everyone knows that the best defense is a strong offense, companies seeking to reduce their cloud-related risks need to look and listen to legal before they leap. Bringing an organisation’s IT and legal forces together for a meeting of the minds is a good first step. Together, this crossfunctional team can take a holistic view of the company’s data before creating a detailed strategy that ensures any move to the cloud increases corporate efficiencies and processes, without creating bottlenecks or risks.

Steve Bailey is the regional operations director of CommVault Systems in Dubai. Negotiating service level agreements Establishing Service Level Agreements should be a critical part of any negotiations with a cloud service provider. Clear rules regarding the following should be ensured: • Ownership • Physical location • Degree of acceptable co-mingling • Retention • Destruction • Access • Recovery time • Liability

KNOWLEDGE & EXPERTISE

Innovation culture • BUSINESS management • small business know-how • marketing and design • legal insight

THE AGE OF TRANSPARENCY (P.68)

i360’s Kamal Hassan lauds the merits of companies adopting a comprehensive online presence and social media strategy to communicate with their customers and possibly help in the development of new value-added innovations.

ALSO IN THIS SECTION: • •

Business Management: As on the television show Mythbusters, Freek Vermeulen takes a stab at debunking the perceived value of downsizing (P.70). Small Business Know-How: Timing the hiring of employees can spur a growing business to success or it can mean disaster, writes Justin Williams (P.72).

• •

Marketing and Design: Charles Vincent makes the argument for firms to ensure they make the most of their website for marketing purposes. (P.74). Legal Insight: David Salt and Charbel Neaman look at the legalities of Shari’ah finance, one of the fastest growing components of banking and insurance (P.76).

innovation culture

THE AGE OF

BRAND

TRANSPARENCY

our customers are on Facebook, Twitter, LinkedIn and many more online social networks. Here they freely share their opinions on everything under the sun, even your products and services. It is an amazing, non-stop flow of information. Think about it. What we are witnessing is the most exciting opportunity for both private and government organisations that has come along in decades. The number of people who use these sites is the first indication that something big is happening. Facebook has more than 750 million users, 70 percent of them outside the United States (US). Twitter has more than 200 million users sending hundreds of millions of ‘tweets’ (short messages) a day. Even Google+ reported 10 million users just two weeks after its launch, which was by invitation only. Social media adoption in Middle East and North Africa (MENA) countries started out slow, but the number of regional users is growing quickly. The Arab Social Media Report, a recent in-depth study by the Dubai School of Government, calculated that there are now 1.1 million Twitter users in the Arab region. This is a drop in the bucket compared to the nearly 28 million Facebook users in Arab countries (with more than 28 percent penetration in Qatar).

What if you could know what your customers are thinking? What if you knew their likes, dislikes, hopes, fears and frustrations? Imagine the insights you could gain from having this information, and how you might use it to improve your current offerings or create new value-added innovations says Kamal Hassan. But there is a way – and it is called social media.

According to the study, the number of Facebook users in the Arab world increased 30 percent in the first quarter of 2011. The report attributes much of this to the demonstrations in Egypt, Libya and Syria, as more people joined these social networks to stay informed on the events. This may cause some to wonder if Arabs will continue to join and use social networking sites after the excitement of the ‘Arab Spring’ ebbs? But you only have to observe the conversations on Facebook and Twitter for a few minutes to see that politics is merely one of the many

topics being discussed. What people have realised is that social media networks provide a convenient, immediate and satisfying platform for sharing their thoughts. FAR FROM A FAD Two years ago an organisation could write social media off as a passing fad. Today, the numbers speak for themselves. In addition to MENA, user numbers are growing tremendously in the Asia-Pacific region. China also has home-grown versions of Facebook, Twitter, YouTube and other Western social networks, some with 100 million users or more. The exploding popularity of social media is partly due to increased awareness, thanks in part to the regional demonstrations that made Facebook a household name around the world. There is also a technology component,

innovation culture

Accept that you will make mistakes, but owning up to them is part of being transparent. Humanise your brand, and let your customers get to know you as you get to know them. as more people around the globe gain access to faster internet connections and the use of smartphones with internet connectivity continues to increase exponentially. User numbers are not the only data we have. A recent McKinsey survey showed that nearly nine out 10 companies using social media technology receive measurable business benefits from it. More than 50 percent reported increased marketing effectiveness and increased speed of access to knowledge (both internally and externally for suppliers/partners), as well as reduced communication costs. Other benefits included increased customer satisfaction, increased revenue and even an increased number of successful new product/service innovations. As a business owner, I have been involved in social media for several years and give it credit for a portion of my business, both directly and indirectly. Social media has been instrumental in increasing brand recognition for my company, connecting us with partners and like-minded organisations, and helping us understand what people expect and need from a business like ours. On LinkedIn, for example, a virtual group my company facilitates (Middle East Innovation) has gathered 1250 people with a common interest in the topic. The group members post discussions on regional innovation efforts, entrepreneurship, idea generation, etcetera. Recently, we organised an in-person networking event for members of the group. This gave people a chance to exchange ideas, and we also got their

opinions. The event was such a success we have already had requests for the next one. Whether or not you use social media as a launching point for events, you can still learn much from your customers and your target market by joining the social media conversation. SOCIAL MEDIA TRANSPARENCY The data demonstrates that businesses can benefit from social media. Then why do we not see a bigger adoption among both private and public organisations? One issue is perception – many business people see social media networks like Facebook as places where kids go to play games and chat online with their friends. Unless this is your target market, it’s easy to think that you have no reason to go there. However, the data shows a surprising range of age demographics for social media users. (Just ask any teenager if his parents, aunts, uncles and grandparents are on Facebook and the look on his face will tell you they are.) Social networks appeal to young people because it provides them a forum to share their thoughts with their friends. But adults also need a place to express their opinions, both personal and professional, and social networks provide that outlet. This leads to the second reason why many organisations (especially governments) shy away from social media – fear of transparency.

It is most evident in the internet shutdowns enacted by several Arab dictators to keep protestors from communicating on Facebook and Twitter. This fear is also apparent in countries that censor the internet, such as China, where Western social networks are blocked and homegrown ones are closely monitored to assure adherence to the party line. Even the US, despite President Obama’s Facebook and Twitter campaigns, struggles with the level of transparency that social media produces. It’s no wonder that companies are afraid to dive into social media. What if our customers learn we’re not perfect? What if social media reveals our trade secrets? What if we look like we don’t know what we’re doing? Firstly, your customers already know you are not perfect, and they are already talking about you so you might as well join the conversation. Second, social media doesn’t require you to be completely transparent, just authentic and responsive (a good social media policy can help ensure that anyone who represents you on social media knows not to share confidential information). Finally, if you are new to social media, my advice is to jump in. Find a social network where your customers or constituents go and join in the conversation. Figure out the tools as you go. Accept that you will make mistakes, but owning up to them is part of being transparent. Humanise your brand, and let your customers get to know you as you get to know them. As you do this, you will see that the benefits of social media far outweigh the risks.

Kamal Hassan is the president and chief executive officer of Middle East innovation culture company, Innovation 360 Institute. TheEDGE

Business management

Cutting

business myths

down to size

The value of downsizing is one of the most pervasive, and destructive, myths in the business world. Freek Vermeulen says that learning the truth about the practice can teach managers important lessons. It might even save their companies.

omewhere in their schooling, most students were forced to read classic mythology, from Apollo to Zeus. All in all, the stories weren’t that bad, and some even helped a student cope with life. Reading about Icarus (with his self-invented wings made of wax and feathers, flying so successfully that his giddy overconfidence took him too close to the sun, melted the wax and sent him crashing) taught the reader a good lesson about defining one’s core competence and not pushing oneself far beyond that. Today, myths are more likely to be seen as unreal stories that hold little value and even less truth. There is a website that lists the ‘Top 10 Urban Legends and Myths’, and, if you think there are alligators living in the New York sewers, you should visit that site right away. Similarly Mythbusters is a globally popular television show that often debunks what is widely held true by many people. Then again, some very smart people in the business world are equally victims of management myths: they believe something without testing it and, worse, act on that belief. The good news is that sometimes the effects of such actions are not all bad. On the other hand, acting on myths in business can bring you down as fast as Icarus.

Down and out Let me focus on just one myth that has been pervasive in business or years: when business sags, the first thing one needs to do is cut people. The practice of ‘downsizing’ (or rationalising, restructuring, reorganising, or making people redundant) is a trend that has now been going on for at least a decade and a half. Top managers think that, because a lot of companies downsize, it must work. But managers need to dig deeper. Sure, downsizing leads to lower costs (sometimes accompanied by a positive response from the stock market to the announcement of the programme), and if other costs are managed, one can bank on profits returning (or increasing), and the wisdom of pushing people out of the firm is self-evident. But is this line of thinking really true? There is evidence of sizeable long-term detrimental influences, such as reduced innovation and lower employee commitment and loyalty. However, such consequences are only noticeable in the long run. Usually, when a firm faces a serious problem (for example, the lack of new products in the pipeline), top management does not realise that the lack of innovation is caused by the downsizing programme that they engaged in, a decade or more previously.

Business management

Cause and effect are often tricky things to determine in the world of business. When a certain management practice gives companies immediate benefits, corporate leaders are inclined to assume it must be a good one. However, the presence of short term benefits does not mean that the overall, long-term consequences will be all that healthy. Yet, when those consequences finally materialise, many leaders don’t quite grasp that it is their own practices from years before that caused them. The efficacy of downsizing may be the most destructive myth in business in terms of how many lives it affects, and how many companies suffer for their short-sightedness. Does downsizing work? So, let’s think a bit more about this practice of downsizing. What is the evidence to suggest it is a good practice? Does it actually work… ever? No, it doesn’t. The practice started in the early 1980s, when an economic slowdown more or less forced firms into it; yet downsizing was no passing trend. In the ensuing decades, many firms have continued to engage in systematic workforce reductions. Just tune in to any daily business news programme to hear about the latest corporate trimming – in almost every case, one can read comments by the firm’s leaders affirming the need for, and the benefits from, cutting headcount. I always see visions of profitability dancing in their managers’ heads. However many have found that such a vision was, after all, a mirage. Professors James Guthrie, from the University of Kansas, and Deepak Datta, from the University of Texas at Arlington, researched the issue in a systematic way. They managed to obtain in-depth data on 122 firms that had engaged in downsizing. The professors performed various statistical techniques to examine whether the downsizing programmes had improved their profitability. The answer? No, they did not. Beforehand, Guthrie and Datta had thought that downsizing would likely be harmful for companies that rely heavily on people, such as firms in industries in

which research and development, is very important, firms with low capital intensity and firms that are in growth industries (since it would be more difficult to justify mass lay-offs there). They were right. In those types of businesses, downsizing programmes significantly reduced firms’ subsequent profitability. However, they had also expected the reverse to be true: that firms in industries in which people were less central to the companies’ competitive advantage (firms in industries with low research and development, firms with high capital intensity) and firms in low-growth industries would be able to get away with downsizing programmes and increase their profitability as a result. Yet, what they expected did not prove to be true. Even in such businesses, downsizing did not help a bit, and it usually lowered performance and they could not find a single business where downsizing was beneficial. The average company did not benefit from a downsizing effort, no matter what situation and industry they were in. Of course, firms in trouble need to do something. But, simply reducing headcount, based on these studies, will not do the trick. Why do downsizing programmes usually not work? Well, for starters, as you can imagine, it is not a great motivator for the survivors. Academic studies confirm that organisational commitment usually decreases after a downsizing programme and voluntary turnover rates surge. Hence, downsizing is not something to be taken lightly and should be avoided if at all possible. But sometimes, of course, a company’s situation may have become so dire that avoidance is not possible. What then? Who might be able to get away with it? Professors Charlie Trevor and Anthony Nyberg from the University of WisconsinMadison decided to examine this question, surveying several hundreds of companies in the United States on their downsizing efforts, voluntary turnover rates and human resources (HR) practices. As expected, they found that, for most companies, voluntary turnover rates increased significantly after a downsizing programme.

Many of the survivors, earmarked to guide the company through its process of recovery, decided to call it a day and continue their employment somewhere else — a nasty and unexpected aftershock for many companies that became more leaner than intended. Next, however, Trevor and Nyberg examined who could get away with a downsizing programme or, put differently, what sorts of companies did not suffer from such an unexpected surge in voluntary turnover after their downsizing programme. The answer was clear. Companies that had a history of effective HR practices aimed at assuring procedural fairness and employment justice — such as having an ombudsman who is designated to address employee complaints, confidential hotlines for problem resolution or the existence of grievance or appeal processes for non-union employees — did not see their turnover heighten after a downsizing effort. Apparently, in such companies, the remaining employees were confident that the downsizing effort had been fair and unavoidable.Similarly, Trevor and Nyberg found that companies with paid sabbaticals, on-site childcare, defined benefit plans and flexible or nonstandard arrival and departure times did much better in limiting the detrimental effects of downsizing. The surviving employees were more understanding of the company’s efforts, had higher commitment or simply found the firm too good a place to desert. In general, research shows that downsizing can work, but only if you have always taken seriously commitment to your people. If your employees sense that you may be taking the issue lightly, they will vote with their feet. Or as Fortune once observed of most firms that downsize: “rather than becoming lean and mean, [they] often end up lean and lame.” And this is the problem with those who manage by myths. Acting on beliefs that are built on half-truths or untruths will not only cause the myth to go bust, it can also take your career or your firm with it.

Freek Vermeulen is associate professor of strategic and international management at London Business School.

TheEDGE

small business know-how

START-UP GROWING PAINS:

WHEN TO HIRE While it is true that an additional employee can help your business flourish, hiring staff at the wrong time or for the wrong reasons can also be disastrous. Expanding human resources is an essential step in fostering and growing an organisation, says Justin Williams, who offers some insight into a dilemma that faces most, if not all, entrepreneurs. “To hire or not to hire, that is the question”. As straightforward as it sounds, the hiring of an employee, of expanding from a ‘one-man (or woman) show’ to a real concern is a very significant step for most start-ups, and can significantly contribute to the success or failure of a fledgling firm. Indeed, while success is of course welcomed, as a business grows (and the faster it grows) the time comes when every successful entrepreneur must wrestle with a simple question: should I hire someone to help me? To illustrate the point, consider the following examples:

TO HIRE OR NOT TO HIRE “I just don’t have enough time to do everything.” “I can’t fill these contracts when the clients need them.” “I am losing money and clients, I just can’t keep up with the demand” “Everyone wants things done NOW. It’s just not possible.”

Growing Pains Case Study #1 An individual operated a successful boutique business management company. Originally, she had only one client and performed all accounting functions. However, she soon realised that she needed to expand and so hired another accountant, then another, then ultimately an office administrator. Eventually, the company had five employees, who performed mostly administrative and accounting functions. The owner’s strength was in gaining clients, client relations, and in ensuring high quality service. This is a good example of how to run a business with the employees performing tasks that would have otherwise occupied the

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owner’s valuable time and taken away from her strengths on the frontline of her business. Growing Pains Case Study #2 Take another example, a successful entrepreneur who worked on a small scale and did highly specialised work. He had a strong record of successful projects completed on time and a loyal clientele. Seeing an opportunity for growth, he decided to hire an employee and expand his business, prompting a move into a larger office area, and of course an increase in overheads. He also hired a receptionist. But she did not really have enough full-time work as most of the company owner’s responsibilities were so specialised, the receptionist wasn’t able to assist him. Nor did he have time to properly train either of the new employees. The result was a major increase in operating capital and subsequent loss in net revenue. Ultimately, he collapsed the expansion, realising that he had hired employees for the wrong reasons. YOUR TIME IS MONEY As we can see from the second example, having an employee means valuable time spent recruiting, orienting, and then training that employee, at least initially. You will also need to mentor them for the first six months if they are to perform well. Of course, this depends on how complex their work is, what experience they have, and what your expectations are. It also means knowing about employment legalities, managing payrolls and additional time spent on administrative paperwork, answering questions and dealing with gripes. Including their salary, the time spent on all this is the overall financial cost of an employee to your business. Moreover, one factor often overlooked by many successful small business owners, is that once you have employees you are now not only an entrepreneur, but you are also a manager too. This is more difficult than it sounds. Mismanagement of employees can be costly. It can hurt your business and cause additional personal stress, taking time away from what you did best in the first place to get your business to where it is.

An employee should be in a position to empower you and your dream, and further the potential and profits of your company. Depending on the type of business you have, you may need an employee to facilitate your time to build the business. This means that you remain the primary driver. Your efforts should result in clear business goals and your newfound employee will help you build them. Managing is much an art as a science, but first, do you really need an employee? Some signs to pay attention to: • You are not spending your time doing what will make your business grow. • You are working at an unsustainable rate. • The quality of your work is declining or at risk of declining. • You are turning clients away because you cannot accommodate them. • You are often are not able to deliver on time or meet deadlines. If you answered ‘yes’ to any of these questions, an employee may be the answer. However, a little self-reflection will also help to make sure that you have the correct approach to moving from the ‘entrepreneur’ to the ‘entre-manager’: • I do not like working with people. • Managing is a waste of time. • Anyone can do the job, I just need more ‘hands’ to help out. • Employees will see my vision, I don’t need to explain it. • By having employees, I will be more successful immediately. If you agreed with any of these statements, you might need to step back and re-evaluate if you are ready to make the next move by hiring new staff. Have a plan, Stan You have decided that yes, you need help. But how do you go about it? You will need some sort of gameplan to make sure that you hire the right individual to fulfil the right needs, so you need to ask yourself the following questions: • What type of employee do you need? Be clear about what role the employee will play. Do you need a subject matter expert, a front office person, a business development specialist? A delivery boy? Will they be

Do you really need an employee? Ask yourself: 1) Do you find yourself not spending enough time doing what will make your business grow? 2) Do you think you are working at an unsustainable rate? 3) Is the quality of your work is declining or at risk? 4) Are you turning clients away because you cannot accommodate them? 5) Are you often unable to deliver on time or meet deadlines? If you answered ‘yes’ to any of these questions, hiring a new employee may be the answer. generating revenue? Will they be freeing up time for you to generate revenue or will they be delivering products or services? • What do you want? Once you’ve identified the position you need, be clear about what your expectations are. What will they be doing? How will you know they are doing what you want? Many entrepreneurs have difficulty delegating (Steve Jobs from Apple comes to mind). You will need to be clear with yourself about your comfort level. • How will you communicate your plans with your new employee? You will need to spend time bringing your employee into your vision for the company. How will you tell them what you need? Commitment and hard work will be important but you also need them to hear what your plan is and get their buy-in. Hiring an employee requires a plan and a clear goal of what you want to achieve. Ultimately, bringing on new employees is necessary in order for a business to expand. If you are serious about growth, confident that extra help will help to drive your business, and you believe that your market offering has growth potential, then the time may be right now.

Justin Williams is on the faculty at the School of Business Studies at the College of the North Atlantic-Qatar. TheEDGE

Marketing & Design

THE MODERN GUIDE TO WEBSITES

USER IN YOUR FACE Having a successful website necessitates taking care of many attributes and is a process that needs to be carefully studied from start to finish. The cosmetic aspect – how the website looks and feels – naturally comes first, but the way people will interact with the website and its user interface is equally, if not more, important. Indeed, in order to create an intuitive and enjoyable experience for the user, the organisation of contents and their presentation needs to follow basic human behaviour. A crucial component of the overall site functionality is whether it is easy to navigate. Though from company to company the agenda may vary (for example, an insurance company’s website might differ in aim from a government department’s), apart from pure branding, the dissemination of information about a company’s services and/or products is usually high on the list for a website’s purpose. If it is difficult to understand where this information is located or to find this information on the site at all, or even to move from one page to another in a purposeful and clear manner, users will quickly move on to another site, possibly that of a competitor.

Online representation for companies in the form of a website has become a compulsory part of branding and marketing strategy during the last decade. However, despite the world wide web having been in operation for more than 15 years, as the internet and its usage evolves, firms still make mistakes in their attempts to turn the benefits of this medium into tangible returns. As Charles Vincent advises, there is a a wrong way and a right way to a build a corporate website as part of an online strategy.

In fact, research has shown that a high percentage of new visitors to websites leave a portal that does not meet their approval within 10 seconds of arrival. Often companies will become enamoured with all kinds of pop-up windows and other bells and whistles that might look attractive and – some might feel – add to the value of the user experience. But often they are distracting and clutter the point of contact unnecessarily, putting visitors to your site off to the point where they may never return. When it comes to navigation, simplicity and ease of use will always trump flashy gimmickry, especially if the latter takes a long time to load.

MARKETING & DESIGN

ANALySE thIS Creating a great website that attracts a decent amount of traffic is only part of the journey towards effectively utilising this online realm for your company’s marketing needs. To convert all these positive points into an accountable outcome you will need to analyse the result. Google Analytics is a free analytic tool that provides accurate number of clicks, time spent on your website and the source of traffic to your website. You will also find out which products or page were seen the most and can thus better tailor your site’s presentation, content and co-marketing in a far more focused manner.

Related to the above, aspects of design and content are also important in keeping users on your website. Images, graphics and other elements need to be web-optimised and load quickly as not all users have the fastest connections available. Text sizes need to be reasonably sized so that those with less than perfect eyesight can read it easily. Apart from making sure your site is easy to use and move around, adding a search functionality to assist visitors in finding the information they are looking for is also a good idea (third party searches such as those provide by Google can often serve this purpose). Of course, it is not just good enough to create a site that contains a fair degree of archive information and is easy to use. Another error many entities still make in this information technology era, is not updating their site regularly enough. New content creates an interest in visiting the page frequently and thus creates loyalty to the brand. Conversely, not doing so can damage the credibility of your brand. NEEDLE IN AN E-StACK These days anyone wanting to know more about a company, for whatever reason, would first look for an answer on the internet. Typing in (or as many might say ‘Googling’) the name of the business or the product he/she is looking for has become part of the modern process for gathering information. However, this is not a guarantee that users will in fact find your particular website. Competition is fierce for eyeballs online, and search engine optimisation (SEO) is the technical term for various techniques utilised to attract the most traffic to your website. SEO needs to be taken into account from the initial developmental stages of your business portal. These methods include adding succinct titles to every page, internal links from page to page, strong use of keywords and the proper kinds of headers.

Obtaining references from or creating partnerships with other non-competing websites that link to your website also helps. Online yellow pages websites, news websites and YouTube channels that your business could create, are additional means to promote your site and products where you still control the information. At present, Facebook is of course de facto the biggest social network that allows free representation of your business and is an ideal platform from which to promote traffic to your website. Similarly, Twitter and LinkedIn are other tools that can be utilised to drive traffic to your website. Again, this is where a decent interface and user-friendly site as well as regular updates become absolutely crucial to your success. GEttING AhEAD WIth ADvErtISING Beyond the investment in your own website, advertising on others can also be beneficial for brand recognition, advertising products and services as well as driving traffic to your site (especially beneficial if your site is e-commerce related) and is still an underutilised marketing tool. However this route offers numerous options, many in which a non-experienced buyer may be lost. Indeed, even if their number of visitors to a site is high, the chance of campaign success may be slim and costly. However, the advantages of a successful online advertising campaign can offer large returns. These include: • Relative cost effectiveness compared to print, plus outdoor or other media and payment options are often based on click-throughs and often are therefore more flexible. • Wider coverage from a regional to a global scale and better focused audience targeting and therefore better branding. • Tracking and conversion is far easier to measure (see Analytics box out). • Speed: online advertising is immediate. • Audience engagement. Online representation has become compulsory nowadays and yet a lot of companies haven’t reach the first step of having a decent presence. The promotion of the brand should be supported by the website which acts as an ‘online address’ of the business and gives value to the brand through its presence and the interactivity provided to its visitors. While a website can be the main point of sales for some businesses, it will generally remain an additional means to reach your audience – but as ever, most companies still need to take action offline thanks to a sound and strategic overall campaign.

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

LEGAL INSIGHT

SHARI’AH GOVERNANCE IN

ISLAMIC FINANCIAL INSTITUTIONS By David Salt and Charbel Neaman

1 In recent years financial transactions carried out under the banner of Islamic Finance have grown considerably in the Middle East, owing to two major factors. The first factor relates to attempts to develop financial products that comply with the dictates of Islamic Law (Shari’ah), which has led to increased awareness among customers of such products. The second factor lies in the risks and instability demonstrated in certain conventional financial transactions, which, since the global financial crisis in 2007, have led to Islamic institutions to be perceived as a safe haven for investors. As a result, there has recently been a considerable growth in investments in Shari’ah financial instruments. The fundamental difference between an Islamic Financial and a Capitalist economy is that Islamic Finance avows religious doctrines in financial transactions. According to Muslim authors, the absence from the capitalist economy of any religious considerations, has allowed imbalances in society by concentrating wealth in the hands of a few individuals that made money through activities that are impermissible as a matter of Shari’ah, such as the imposition of usurious interest, gambling, and by creating monopolies which have not contributed to the overall benefit of society. The objective of this article is to set out the main prohibitions on which Islamic Finance is based and to outline Shari’ah governance in Islamic Financial Institutions, which aims to ensure compliance of Islamic Finance transactions with Shari’ah principles.

Prohibitions Islamic Finance is based on a set of religious prohibitions. The main prohibitions are set out below:

1.1

Prohibition of Riba: The Arab word ‘Riba’ means ‘interest’. Riba is defined under the Islamic jurisprudence as “an additional value without counterpart”. Based on this definition, any interest arising from a loan contract or compensation due to the failure of a debtor to pay his debt is strictly prohibited in Islam. The rationale behind this prohibition is based on the concept of “Justice”. Islamic authors argue that money is deemed to be a means of exchange not an end in itself and therefore imposing interest in a loan contract or compensation on unpaid debt is deemed to be unjust.

LEGAL INSIGHT

1.2

Prohibition of excessive Gharar: The Arab word “Gharar” means “uncertainty, risk or hazard”. Islam forbids any transaction or bargain in which the result of it is uncertain as such uncertainty is deemed to be unjust for either party to the transaction. Owing to the development of financial and commercial transactions, Islamic scholars raise the question as to how someone can take a financial decision that can be free of Gharar. Therefore, the jurisprudence is now consistent in its opinion that a certain degree of Gharar is acceptable in the Islamic framework but that excessive Gharar needs to be avoided.

Shari’ah Governance A significant challenge for Islamic Finance Institutions is to operate and conduct Islamic transactions by innovating and developing a wide range of products and services within the ambit of Shari’ah principles. This challenge necessitates the existence of a proper Shari’ah supervisory body consisting of Shari’ah experts to supervise and control the performance of an Islamic Financial Institution and to guide its transactions in compliance with Shari’ah principles. This body is usually referred to as Shari’ah Supervisory Board (SSB). The existence of an SSB in Islamic Financial Institutions is required under Principle 3.1 of the Islamic Financial Services Board (IFSB) Guiding Principles on Risk Management (IFSB Guiding Principles) which states that “Islamic Financial Institutions shall have in place adequate systems and controls, including a SSB to ensure compliance with the Shari’ah principles”. The main features of the SSB are set out below:

1.3

Prohibition of investment in unethical products and services: Islamic Finance is based on ethical considerations. Investment in products or services which are deemed to be impermissible is strictly prohibited in Islam. Scholars define ethical investment as any investment that benefits society in a positive and sustainable way. The most common impermissible investments are the investments in casinos, alcohol, pork, tobacco, pornography business, etcetera. Due to the rapid growth of Islamic Finance transactions, international markets have developed screening methods aimed at identifying such unethical products or services. The Dow Jones Islamic Market Index Rulebook is an example of these screening methods.

2.1

Role of the SSB: The role of the SSB is to advise and certify in a form of legal opinions (Fatwas) that a product or a service offered by an Islamic Financial Institution is compliant with Shari’ah principles. The Accounting and Auditing Organisation for Islamic Financial Institution (AAOIFI) defines the SSB as a body “entrusted with the duty of directing, reviewing and supervising the activities of the Islamic financial Institution to ensure that they are in compliance with Islamic Shari´ah rules and principles. The Fatwas and rulings of the SSB shall be binding on the Islamic financial Institution”.

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LEGAL INSIGHT

2.2

2.3

Note: All Qatari Laws (save for those issued by the Qatar Financial Centre (QFC) to regulate its own business) are issued in Arabic and there are no official translations, therefore for the purposes of drafting this article we have used our own translation and interpreted the same in the context of Qatari regulation and current market practice. This article is also intended to be of a general nature and should not be considered legal advice. Any person or entity requiring legal advice should contact a lawyer. If you would like further information please contact David Salt (david. salt@clydeco.com.qa) or Charbel Neaman (Charbel.Neaman@ clydeco.com.qa).

Islamic scholars are consistent in their opinion that the existence of the SSB in Islamic Financial Institutions is the backbone of Islamic Finance, as it boosts the confidence of Islamic Financial Institutions’ customers that products and services offered by them comply with Shari’ah principles. However, the wide discretion of the SSB to assess whether a product or a service complies with Shari’ah principles prevents the existence of consistent jurisprudence on which national or international Islamic standards may be built. Therefore, certain modules such as the modules applicable in Pakistan and Malaysia require the existence of a Supreme Advisory Council at a national level under the supervision and control of the Central Bank to supervise and advise on any Islamic Finance matter referred to it by the SSB. In Qatar, this role is carried out by a Supreme Shari’ah Council, which is established under the control of the Awqaf Ministry. Despite the eminent role played by it in the unification of the Shari’ah jurisprudence in Qatar, the rapid development of the Islamic finance sector, which is now witnessing investment in specialized and technical economic fields necessitates the establishment of a council under the supervision of the Central Bank of Qatar to meet the expertise and specialization required for the development of the sector.

Duties of SSB: These are summarised as follows: - Confirming consistency and compliance of a service/ product in Shari’ah principles; - Reviewing and certifying the permissibility of all contracts, documentation and products entered into or offered by an Islamic Financial Institution; - Advising the Islamic Financial Institution on Shari’ah rulings; - Advising and monitoring the manner of disposing of the non- Shari’ah compliant earnings made by the Islamic Financial Institution; - Issuing a Shari’ah Supervisory Report certifying that all transactions conducted by the Islamic Financial Institution comply with Shari’ah principles.

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Appointment, Composition and qualification of the SSB members: Pursuant to the IFSB Guiding Principles, the SSB shall have total independence from the management of the Islamic Financial Institution in order for it to carry on its duties and responsibilities in an impartial way. As such, members of the SSB should be appointed by the shareholders of the Islamic Financial Institution directly, rather than by its board of managers. As to the composition of the SSB, there is no unified module applicable to all Islamic Financial Institutions. Whereas the AAOIFI module and the module applicable in Malaysia under the Central Bank of Malaysia Act of 1958 require a minimum number of three individuals in the SSB, other modules, such as the module applicable in Pakistan allows a minimum of one individual. In contemporary practice, most of the Islamic Financial Institutions appoint between three to six members to the SSB. Members of the SSB shall have educational qualifications or wide experience in Islamic Jurisprudence (Usul Al-Fiqh) and in Islamic transactions/Commercial Law (Fiqh Al-Muamalat). The minimum degree of qualification and years of experience differ from one module to another. Under the module applicable in Malaysia, members of the SSB are not required to have qualifications if they have wide experience in Usul Al-Fiqh and Fiqh Al-Muamalat. To the contrary, the module applicable in Pakistan requires members to have educational qualification and at least three years experience in Shari’ah rulings or five years experience in research and development of Islamic Finance.

BUSINESS INSIGHT Inside the minds of leading business figures

Retail at the pearl (P.80)

Qatar’s retail sector is beginning to grow exponentially and the jewel in the crown of the country’s shopping options has to be the luxury stores at The Pearl-Qatar. TheEDGE spoke to executive vice president of Fashion and Retail leasing, Kirk Martin, about the brands and options available and the potential at the newest high-brow shopping experience in Doha.

ALSO IN THIS SECTION: •

Tom Farrell, Nokia’s new general manager for the lower Gulf, offers some frank and exclusive insights into the mobile phone brand’s local and regional marketing

strategy and new products such as the E9 smart phone, and discusses the pivotal role partnerships play in the sector and why “it is 1989 all over again” (P83.).

BUSINESS INSIGHT

Luxury Retail

Luxury retail at The Pearl-Qatar

TheEDGE

BUSINESS INSIGHT

As The Pearl-Qatar gears up to become an iconic destination for visitors to the country, Megan Masterson spoke with executive vice-president of Fashion and Retail Leasing, Kirk Martin, about the road that led him to this tiny Gulf country, and what we can expect from this monumental project in the years ahead. When Kirk Martin’s father told him he had to figure out a way to pay for two-thirds of his own university fees, little did he know that he would be setting his son on a path to a highly successful career in luxury retail. “My father said he wanted me to understand the value of money,” remembers United States (US)-born Martin, executive vice-president of Fashion and Retail Leasing at The Pearl-Qatar. “So, in order to pay for school and buy some of the nice things in life that I like – cars, clothes and stereo equipment – I had to work while going to school.” Although he held several jobs during his time at university, it was during his final year, as a sales clerk at a clothing store, that he was introduced to the world of retail and brands. From this initial exposure to the world of fashion buyers began the career trajectory that saw him headhunted by the DFS Group, the world’s leading luxury travel retailer, in Hong Kong, and then to his current position at The Pearl-Qatar. “I love brands and I love product,” he enthuses, “and the thrill of visiting retail stores will always be with me. In my career, I reached a stage where I had to evolve into more strategy and planning…But I have never lost the passion for visiting stores, or seeing the retail scene in a new city, or being in a brand’s showroom.” Indeed, Martin’s early years on the sales floor in the US have proven invaluable, giving him tremendous insight into understanding buyer behaviour and their changing needs, “The customer on the East Coast was a certain type of customer,” he explains. “They were professionals, vacationing in the Bahamas or Bermuda or Florida, so they were buying certain types of clothing – vacation clothes or clothes for work – and they weren’t as ‘dressed’ as someone in Europe would be. I lived for a while

in Asia, and again, that’s a different customer, with different consumer behaviour patterns.” But from the East Coast of the US, to Hong Kong, to Qatar, there are certain brands that people always want, brands that appeal to a broad spectrum of nationalities – Salvatore Ferragamo and Giorgio Armani, for example. And in Qatar, a country with a fast-growing economy, one of the highest gross domestic product per capita in the world, and an exploding population with a taste for all things unique and expensive, Martin has found the perfect project. “At The Pearl-Qatar, we are working on filling two hundred thousand square metres of space, across three retail precincts. We have approximately 100,000 square metres of space in Porto Arabia, 60,000 square metres in Medina Centrale, and 40,000 square metres in Qanat Quartier.” He continues, “If you realise that where we’re sitting right now was water in 2004, it’s so exciting that just seven years later, we have 100 operating units (stores, restaurants, banks, etcetera) approximately 6000 residents, and by December we’ll have 65 additional units, and by next March, an estimated 230 units. When you look at seven years, to go from the sea to this… it’s fantastic.” Martin explains that Qatar has luxury branded fashion stores, but is underdeveloped, and needed to evolve to the next level. The Pearl-Qatar is providing the platform for this needed evolution, with a world class island residential and resort development, providing a luxurious setting – geographically and imagewise – for international brands. “The luxury market in Qatar, in my view, was born in the world of watches, jewellery and cars, with companies like Al Fardan, Al Majeed and

Martin explains that Qatar has luxury branded fashion stores but needed to evolve to the next level, and that The Pearl-Qatar is providing the platform for this muchneeded evolution, with a world-class island development providing a luxurious setting for international brands.

Ali Bin Ali bringing the world’s prestigious watch and jewellery brands to Qatar. With cars, I have heard that Qatar is Ferrari’s second market in the world, if figured on a per capita basis, only surpassed by Switzerland, the market leader. “For fashion luxury,” he continues, “clothing accessories such as shoes and handbags, cosmetics and fragrance, the first foray into the market were multi-brand stores such as Salam Stores and the Blue Salon Store, who began to create cosmetic departments in their stores, and departments selling international fashion brands. “One of the large shopping centres in Doha took Qatar to the next step with the opening of a new wing a few years ago. This gave a venue to large international brands like Louis Vuitton, Dior, Burberry and Gucci to enter the market, and it is a certainty that brands will continue to open stores in Qatar as the growth continues.” And that expected growth – of both Qatar’s economy and the local population – is what’s bringing a twinkle to the eye of luxury brands. “The population has already doubled to 1.7 million over the last six years. If you extrapolate that across the next six or seven years, your target market for a project like The Pearl-Qatar, with its balance of high-end stores, and popular priced, high demand brands is very promising.” Discussing the future of this tiny peninsula, with its plans for hotels and retail space, Martin is optimistic but realistic. “Part of what we need for Qatar, and part of what is going to help soak up the added retail space coming on the market, is tourism. We need tourism. “Today, there are approximately 7500 four- and five-star quality rooms in Qatar, with an estimated 5000 rooms in the immediate pipeline, Out of the rooms in the pipeline, 1100 rooms, are due to open here at The Pearl-Qatar in six five-star hotels, including a Four Seasons Resort, Kempinski Resort, and a Nikki Beach Hotel. Yet, I’ve heard estimates that we’ll need 55,000 rooms in total by 2022. “If you look at the new malls being planned, the increase in tourism, and the growing population, in order to create a business that is sustainable for the long term, past the 2020 World Cup, you need to build projects that will keep people coming to the country. “The government has been very supportive of The Pearl-Qatar because it’s so iconic for the TheEDGE

BUSINESS INSIGHT

Naturally, many international brands have to adapt to the local market, while staying true to their image. For example, Martin mentions that more long dresses are sold in Qatar than in Europe due to local demand.

country, a destination and lifestyle not only for residents, but one for tourists too, especially as we open our hotels.” Beyond the hotel projects though, The Pearl-Qatar will also be expanding the brands it offers, and is set to move beyond luxury retail in order to cater for residents and visitors alike. “What we’re opening from now through Spring 2012, in the newer sections, will be mid-range popular brands. So you’ll have brands that will appeal to a much broader market, driving additional traffic here.” Martin confirms that restaurants, convenience stores, and services such as banks are earmarked to open for The Pearl-Qatar’s residents in the future. “Residents have specific needs, so we’re putting in a laundry service, an alterations shop... In Medina Centrale, we’ll likely have a little shop doing keycutting and shoe repair, etcetera. We’ll have a 500-square-metre Spinneys convenience market in Porto Arabia, and we are building a 4000-square-metre Spinneys flagship

TheEDGE

supermarket in Medina Centrale.” Much of The Pearl-Qatar’s appeal is that it is such a different experience to spending time in a shopping mall. “You have customers coming here that like the environment. We’re not a traditional shopping mall, we’re indoor-outdoor,” says Martin, explaining the appeal of walking along The Croisette, and then visiting a building that houses the likes of Ferragamo and the Rolls-Royce showroom. “For up to nine months of the year, it’s beautiful weather at The Pearl-Qatar, so this indoor-outdoor experience is a plus for us. People come here for that experience, the setting, and yes, they’re attracted by the brands and the restaurants.” Core customers include local Qataris, visiting Gulf Cooperation Council Arabs, such as Kuwaiti, and Emiratis, as well as Saudi Arabians, followed by affluent expatriates. “This customer base will become more diverse on the island as we open Spinneys and popular priced brands that have broad customer

appeal,” such as the Reebok, Puma and Adidas, all set for standalone stores in the near-future. Naturally, many of the international brands have to adapt their strategies for the local market, while staying true to their image and brand ‘DNA’. For example, Martin mentions that more long dresses are sold in Qatar than would be in Europe or the US. “We request brands to add more long dresses when planning their collections and they comply due to the demand from our market and from other Arabian countries. Another example is Ferragamo, who added higher heels on some of their women’s models due to demands from our market.” There are local challenges that have to be taken into account as well, with finding top-notch sales staff at the top of the list. “[Finding sales staff] who have a fashion sense, are savvy and sophisticated, and who can handle demanding customers in a polished and diplomatic manner, is probably our greatest challenge. We have been steadily improving at this over the last 24 months, and are making really excellent progress. We now have a staff trainer in place who works with our staff on everything from dealing with customers to grooming to product knowledge training.” A second challenge is a little tougher to tackle. “Our sales cycle falls mainly between September and May, due to the fact that local Qataris leave Qatar for a large part of the summer, and expatriates are on vacation. And in the last few years, Ramadan falls in this period as well. But this is a fact of life in Qatar, and we adjust our buying around that. It simply shortens our fall selling season for fashion goods.” Challenges aside, Martin is passionate not only about The Pearl-Qatar, but also about retail and the experience that both have afforded the residents of Qatar. “I love brands, I love product, and I love being in retail stores – the ambience and seeing product being looked at by customers. “The Pearl-Qatar is a wonderful project and I like talking to brands about it. I am proud of the fact that The Pearl-Qatar has opened leading international brands that are a first in Qatar. Brands such as Giorgio Armani, Roberto Cavalli, Ferragamo, Etro, and others in such a gorgeous and prestigious setting. There is no question that The Pearl-Qatar is on its way to being the leading icon of luxury for a Riviera lifestyle for residents and visitors, combining resorts, shopping venues, restaurants and entertainment, parks and schools in a totally landscaped and planned community.”

BUSINESS INSIGHT

Mena Mobile Market

Nokia’s strategy to react to blogosphere criticism and focus on regional and local marketing Nokia, a brand synonymous with the mobile phone market, recently hosted a press conference in Doha. Under discussion was purported criticism of the brand and its products, especially on the blogosphere, as well as insights into the mobile phone producer’s local and regional marketing strategy and new products. Miles Masterson spoke to Nokia’s new general manager for the lower Gulf, Tom Farrell, afterwards for some further exclusive insights. All brands of course have to censure from time to time regarding their products, strategies, alliances and comparisons to competitors – particularly in the modern day world, on online specialist blogs and forums. However, a quick web search soon makes it clear that Nokia has been on the receiving end of what seems like more than its fair share of online disapproval from bloggers and other critics recently. At the outset, the Doha press conference, said Anil Mahajan (chief operating officer of CGC, the brand’s Qatari distributor), was in response to and aimed at allaying any negative sentiment in the country, some of which has been filtering back to Nokia of late. What emerged could be construed as a case study of how a brand – that is not necessarily faltering, but certainly slowing in growth – can strategise to counter this kind of lingering bad sentiment. Mahajan then handed over to incoming lower gulf general manager Tom Farrell, who in turn acknowledged that Nokia’s regional market share is not as dominant as it once was and the brand has some challenges regarding its profile in the region and country. “These are challenging times, that is clear, and looking ahead, we know what we need to do,” he said, adding that the launch of their new N9 model later this year will be a strong point of

their revised strategy of reinforcing their brand message and presence in the region. “We are starting to get really consumer focused to take the brand to the next level,” Farrell told TheEDGE in a personal interview shortly afterwards. “You have to be prepared to accept criticism if it is fair and equally you want to be loud and proud too.” Before he outlined specifics, Farrell underlined that Nokia has an extended history in the Gulf region, stretching back almost as far as its international presence as one of the first and certainly strongest entrants into the international mobile market, that dates all the way back to the late 1980s and into the early 1990s. Though he admits market share has been somewhat eroded locally of late, Nokia remains the market leader in its category in Qatar and a vibrant force in the global mobile market, continued Farrell. Indeed, internationally the brand remains strong, a fact Farrell underlined by citing the number of applications (apps) downloaded through its online store www.ovi.com, which amount to six million a day around the world and five million a week in the Middle East. “There are very savvy consumers in this part of the world,” said Farrell of the latter, revealing that most local downloads comprise messaging

apps, including Nokia’s most popular mobile communication tool, ‘What’s App?’. The phenomenal growth of the telecommunications industry in the Middle East and the Nokia brand’s longstanding association with distributors and service providers, Farrell then explained, put Nokia in an advantageous position to capitalise on their long-term relationships here as well as their strong partnership with Microsoft. This is further increased by the massive opportunity Farrell feels exists to service regional firm owners for bespoke mobile business solutions. “When you dive into the business segment, and you think of Microsoft,” he explained, “with their hosted exchange capabilities in the office and the cloud, it is huge – and they are trying to empower and enable the operators to sell it to them so the operators can offer it. TheEDGE

BUSINESS INSIGHT

“I can give you an example: in the United Arab Emirates (UAE), out of 300,000 SME companies, probably I think it is somewhere around eight or nine percent have been truly penetrated in terms of a package, they were sold a business offering or a proposition, so the head room for growth is [huge].” “It’s a consumer pattern, a profile,” he then told to TheEDGE. “How many minutes of SMS do I need? What tools do I need? And then pricing, especially when you are traveling – roaming, you need to really craft that all together. So this is where us working with operators and Microsoft is really exciting. I joined Nokia originally in the enterprise focused division, so I have worked a bit in that area… and the corporate and the government, they are really sophisticated, those guys have a great understanding of technology and invest in longterm thinking, so it is all to play for.” As far as associations with service providers are concerned, Farrell provides a regional example of Etisalat, with whom Nokia have a unique payment deal for subscribers. “Our relationship with them is something that nobody is doing except Nokia, where our app store is technically integrated with Etisalat, one click buy, done – no credit card,” Farrell described. “And what is even more interesting and I didn’t say this earlier, if you think about the ecosystem and more importantly the business model and how it is changing, we have made the operator a core part of the ecosystem…unlike some of our competition, we have made our local operator part of the game. Frankly it is about open and being inclusive, [and] is very much in our DNA.” On the subject of mobile telecoms ‘ecosystems’ – essentially the combination of device, applications, developers and service providers – Farrell expanded, joking that within Nokia, it was “1989 again” in an allusion to how the playing field has been levelled by multiple emerging technologies. “Gone are days where it was device versus device or company versus company; now it is about a strategic war of ecosystems instead of solely device development. You must have good allies, such as Nokia and Microsoft…[and] from a business point of view our Microsoft partnership offers fantastic seamless integration.” On a global level, Farrell explained to the conference how the brand has invested a lot of time in research and development, resulting in the new N9 flagship device, as well as a series of remaining new products to cater to as many aspects of the market as possible, some with dual Sim cards and others with progressive

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Though Farrell admits market share has been somewhat eroded locally of late, Nokia remains the market leader in its category in Qatar, a force in the global mobile market and has a clear mission to regain its top position. technology such as the E6, which features the Symbian Anna platform, tailored for optimum social connectivity in particular. “There are three things people want from a phone,” added Farrell, “notifications/updates/ information for meetings and conferences, etcetera; to be able to easily launch apps; and to be able to seamlessly switch between apps.” The N9 though, he explains, is the culmination of trying to meet these needs. This slick device is also highly streamlined, featuring a curved customised glass surface and full interface integration that does not necessitate any additional buttons. He added that the brand is not merely resting on the fact they have created what they feel is a product that rivals any offering by their chief competitors, such as Apple and Blackberry, but are taking the fight further, hyper-localising it in countries with lucrative markets, such as Qatar. Regarding the above and association with local service providers, Nokia is in discussions with Qtel and the mobile phone company is increasing its presence and involvement in local educational institutions. “I think the N9 is an early proof point for bringing back things that people really desire – there is no substitute for a great product,” Farrell then said. “But there are multiple touch points, it is not just about the product, we reach out to universities and application developers, entrepreneurs, computer scientists…we will go there and train them on how to build an application for a device, how to put it into a store and we will seed some devices and just try to generate awareness and training. So that is one example, and social media, to get on the front foot and get Facebook pages up and to use Twitter to make our voice heard.” Speaking of social media and especially brand profile among the youth, these are two areas that Nokia is also focusing on. Earlier, in the press conference a member of the audience had put to Farrell that the brand’s ‘cool quota’ among the Qatari youth was particularly low and enquired what they might be planning on

doing to turn that perception around. Farrell acknowledged that this was an issue for the brand and was something they were looking to work on. One of the ways, he said, will be to target the online realm and deal with some of their critics head on. “We have launched the UAE Facebook page, and of course we want to branch out and cover Kuwait, Oman, Qatar and Bahrain; so I want to see Nokia come to life in the digital world…we are going to contact certain individuals, depending on the blogger.” “If the blogosphere is talking, that then affects local. So we are conscious and sensitive and [want] make sure that whatever has been written or whatever people are reading in the blogosphere, we are here as a voice and face… it is all about co-creation; how to build with local entrepreneurs and Qatar University…working on innovation and applications with local influence.” In coming months Nokia will also be rolling out unique kiosks where customers and the general will not only be able to discover any information they need about the new range, but also to find out which applications are available, upload them and offer up their own applications. The brand is also exploiting near field communication (NFC) technology, which will further enhance their drive to hyper localise their presence in markets such as Qatar’s. “We are constantly thinking about how we can bring NFC to life in the local market and play into the local culture,” closed Farrell. “We have a pilot running already in the office, they are called smart posters, angry bird posters, and if you tap the poster on the corner, it unlocks levels that you can only get on that poster. “So think about this, if you are a local retailer, a local entrepreneur in Doha,” he summed up, “and you want to generate business in your shop and you want to get footfall into your shop, let us say you are a consumer electronics shop; what a cool idea to have a special that you can only get here, games, music – people come in and physically tap the poster. There is something so human about that and it inspires me.”

LIFE & STYLE NO GUTS, NO GLORY (P.87)

From dodgy referee calls on forward passes and questionable tackles that leave hulking men in tears, to wings that race cheetahs and taunting losses that never heal, the Rugby World Cup 2011 is the sublime sporting event of the year. Let our guide help you blag your way through the hooligan’s game played by gentlemen.

ALSO IN THIS SECTION: •

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North and South: The land of the long white cloud, New Zealand, is hosting this year’s Rugby World Cup. We discover a breathtaking country that offers so much more than the beloved and feared All Blacks (P.86). Read it: In a departure from our usual business-related reads, this month we recommend a work of fiction that is a great holiday page-turner. Jonathan Franzen’s long-

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awaited novel, Freedom, has fittingly been dubbed “A masterpiece” by the New York Times (P.87). 10 earners from the beyond: Some legends never die, as evidenced by the ever-successful, ever-profitable likes of Elvis Presley, Marilyn Monroe and Kurt Cobain. We take a look at just 10 of the top earners who have long since passed on (P.88).

TRAVEL

A tale of two islands

It’s the land of the long white cloud, a country of devastating natural beauty where sheep outnumber humans 12 to one, and it is the home of the formidable Maori. Welcome to New Zealand. No doubt, the breathtaking landscapes of New Zealand have entered your psyche through films such as The Piano, The Chronicles of Narnia and the Lord of the Rings trilogy. From the steaming, bubbling, otherworldliness of the Volcanic Plateau on the North Island, to the snow-dusted mountains of the South Island, anyone with a hankering for adventure in a virtually unspoilt land should give New Zealand a look-in. And, as the country is hosting the 2011 Rugby World Cup, September to October is the perfect time to participate in a massive event that is likely to see the host country lift the trophy. Auckland is the arrival point for most visitors, and this North Island city is an ideal place to begin your exploration. Some of the World Cup’s most intriguing group stage match-ups will take place here, and the metropolis is crammed with sophisticated restaurants and museums. The temperate year-round weather also makes it perfect for a spot of adventure, so why not start with a trip to Northland’s forests, and the Bay of Islands, with its pristine, miles-long beaches? Or head south of Auckland to Tongariro National Park, home to three active volcanoes and a paradise of forests, crater lakes and mountains. For accommodation, try Kauri Cliffs with its 18-hole golf course and two-mile beachfront, or The Farm at Cape Kidnappers, a luxury lodge with the world’s 27th-best golf course attached to it. Travelling to the South Island is easy enough with domestic flights servicing all areas, but those trying to cram in as much rugby action as possible would be able to get there faster with a chartered helicopter. Helilink Limited offers flights leaving from downtown Auckland. The South Island is the perfect spot to indulge in a thousand-foot bungee jump or

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The Rugby World Cup: Be there!

to try your hand at catching a monster trout. Visit its largest city, Christchurch, or Lake Wakatipu, hugged on all sides by mountains and where you can book in for a stay at the fantastic Blanket Bay hotel. Take a ferry or four-seater plane to Stewart Island, or venture to Kaikoura for possibly some of the best whale-watching in the world. But best make sure you’re back on the North Island in Auckland on October 23 for the party of the year, as the Rugby World Cup 2011 draws to a close.

Charter a yacht: Alloy Yachts and Dubois Yachts are offering a luxury charter in New Zealand during the World Cup. The modern motor yacht, VVS1, accommodates up to eight guests, has its own Teppanyaki bar, and fishing equipment for light and heavy game fishing. www.charterworld.com Join a cruise: Adventure World is offering a 20-night cruise onboard the ms Volendam, that travels from Sydney to 13 locations hosting the Cup. The journey will include match analyses from fellow guests such as ex-Wallaby, Nick Farr-Jones and coach Bob Dwyer. www.adventureworld.com.au Go to the games: In-stadium hospitality packages make for a once-in-a-lifetime experience. Try the Platinum or Skybox options, which offer gourmet meals, a match ticket and private tables. www.rth2011.com

LIFESTYLE

Blagger’s Guide to the Rugby World Cup The Chokers

“You can go to the end of time, the last World Cup in the history of mankind, and the All Blacks will be favourites for it,” said Australian legend, Phil Kearns, and it’s true. New Zealand’s All Blacks rank number one worldwide, year after year, filling their cabinets with trophies, records and accolades, yet that shiny World Cup has only been in their possession at the inaugural 1987 Cup. In the years since, the All Blacks have picked up the unflattering ‘choker’ reputation, having lost in 1991 to Australia, 1995 to South Africa, 1999 to France, 2003 to Australia (“Four more years boys,” smirked Wallaby, George Gregan), and 2007 to France. “Has self-belief and potential ever exploded so often, so predictably?” a Times reporter wrote after their 2007 exit. While the idea of ‘home advantage’ could be complete myth (it’s only ever worked for New Zealand in 1987 and South Africa in 1995), this is finally likely to be the year the All Blacks lift that trophy (but don’t put money on it).

Read it

Freedom, by Jonathan Franzen We thought it would make for a needed change to focus this month on a fiction book to enjoy on vacation. Freedom is a funny, poignant portrait of a Midwestern family centred on Walter and Patty Berglund as they marry and fall prey to a host of modern predicaments. Characterrich with often-unlikeable characters, this is an unforgettably trip through family life. Available at Virgin Megastore for QR79.

The Underdogs

While it’s not often that an underdog beats a world favourite in rugby, there are exceptions, as proven by the unpredictable 2007 tournament. A hulking Argentina beat France, Georgia just about ended Ireland’s dream, and the Tongans had everyone running for cover, beating Samoa, scaring South Africa silly and giving England a wake-up smack. And although they were the defending champions at the time, England were definite underdogs after South Africa destroyed them 36-0 in a terrific pool game. To everyone’s surprise, they managed to oust Australia thanks to a solid scrum and Johnny Wilkinson’s boot, and appeared unexpectedly in the final. In 1987, an inspired Wales beat Australia for the thirdplace play-off, with Paul Thorburn easily landing a phenomenal 52-metre kick. When Wales’ manager, Clive Rowlands was asked, “Do you think Wales were really the third-best team in the world?”, he responded, “Of course I do! I have a medal at home that proves we were!”

Bogey Teams

On paper they’re not necessarily stronger than you, or even equal, and at any other time, you can beat them easily. Yet come Rugby World Cup, they magically turn into your ‘bogey’ team. They seem to become superhuman, running circles around your defence and catching ‘white line fever’ as the clock ticks down. For New Zealand, this is France. For Wales, it’s Samoa. For Australia, it’s England. As Andrew Mehrtens so succinctly said after his All Blacks lost to France in 1999, “The French are predictably unpredictable.”

Big Brawls

“If you can’t take a punch, you should play table tennis,” responded Pierre Berbizier after Scotland accused the French of foul play in 1995. All that testosterone in a pressure-cooker atmosphere often adds up to a brawl on the world stage. In 1987, England and Australia came to blows, while in a very tense 1995, Wales brawled with Canada before trouncing them 42-17, and South Africa saw their campaign also threatened by a massive punch-up with the Canucks. In 1999, it was Australia and Ireland that famously came to blows in a scrappy, ill-tempered game. TheEDGE

10 TEN THINGS

Neverending Legends

After news of singer Amy Winehouse’s recent passing, her album Back to Black reentered the music charts, a phenomenon echoed by the passing of many other musicians. In fact, some of the world’s top earners have long shed this mortal coil. Kurt Cobain The lead singer and songwriter of Nirvana died in April 1994, but his estate has since skyrocketed. Two live posthumous albums have sold more than five million copies combined, while a further two albums and boxset paid massive dividends to his surviving wife, Courtney Love. A meagre three percent of the profits of Nirvana’s publishing rights is split between surviving bandmates, Dave Grohl and Krist Novoselic.

Marilyn Monroe The Hollywood actress may have said, “I’m not interested in money, I just want to be wonderful”, but CMG Worldwide, the company that manages her estate, thinks she’s both. Monroe averaged US$8 million (QR28 million) in earnings per year from 2003 to 2005 from advertising campaigns for brands such as Visa and Volkswagen alone. Bob Marley The creative minds behind the vast Robert Nesta Marley estate continue to find fresh ways to grow the late singer’s popularity. His Legend album, released three years after his

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death, has sold more than 20 million copies to date, in addition to reissues of digitally enhanced albums and the Vintage Marley store in Miami. Marley’s musical catalogue alone is valued at over US$100 million (QR364 million). Tupac Shakur Before his murder in 1996, the West Coast rapper created hundreds of songs that have slowly been released to the public. Shakur’s mother, Afeni, successfully sued Death Row Records for control of her son’s music, and now manages his estate through Amaru Entertainment, releasing 10 posthumous albums, most of which have debuted at number one on the Billboard Top 100. Johnny Cash Despite his death in 2003, Cash earned US$7 million (QR25 million) in 2005 alone, his popularity never waning thanks to Oscarnominated biopic, Walk The Line, sales of his American V DVD, and memorabilia auctions. Theodor Geisel Geisel’s children’s books, the Dr Seuss series, continue to enchant generations to such an

extent that the author’s birthday has been declared Read Across America Day. His catalogue includes 44 books that have been published in 20 languages, and have sold more than 500 million copies, stuffed animals, audio books, two movies and memorabilia. Elvis Presley The allure of Elvis has never faded, despite his death in 1977. His daughter, Lisa Marie acted alone in the affairs of her father’s estate, until 2005, when CKX acquired an 85 percent stake in Elvis’ income stream for US$100 million (QR364 million) in cash and stock. With this new partnership has come a slew of new products – including a documentary and a television series about the King of Rock ‘n’ Roll – and a big-business management style that has upped revenues at Graceland. Andy Warhol Since his passing in 1987, Warhol’s paintings, sculptures and drawings continue to derive revenue for The Andy Warhol Foundation. The Foundation, a non-profit organisation, donates all of the profits of Warhol’s estate to charity. John Lennon Album sales, artwork, a Broadway musical, licenced kids’ toys, memorabilia and silver jewellery are all part of the revenue from Lennon’s estate. The Beatles singer, who was shot and killed on a New York street in 1980, earned US$22 million (QR80 million) in 2005 alone, and his estate is controlled by his widow, Yoko Ono. Charles M.Schultz With the Peanuts cartoon syndicated in 2400 newspapers and licencing on clothing and greeting cards worldwide, Schultz smartly created Charles M.Schultz Creative Associates to manage the business and ensure his family is long looked after.