The Edge - Dec 2012 (Issue 39)

2012

w w w. t h e e d g e . m e

CONTENTS FINANCE & ECONOMICS .34. MARKET WATCH

Dheeraj Shahdadpuri takes a look at the economic outlook for Qatar and the MENA region.

.36. SPECIAL FOCUS

Richard Banks explains why investment to North African countries is increasing from GCC.

ON THE COVER

Salam International is Qatar’s most successful diversified private sector family firm, which has grown as a leading force in the country’s economy. CEO Issa Abdul Salam Abu Issa discusses with TheEDGE Salam’s history and the vision of his late father and founder, Abdul Salam Mohammed Abu Issa. (P.66)

.38. personal finance Fredic Afram analyses the importance of saving for your children’s future education.

.40. SPECIAL REPORT

Thomas Bacon writes about how the 2022 World Cup is fuelling Qatar’s construction sector.

.42. BALANCE SHEET

Luay Hanania explains how demergers work.

FEatures .46. IN THE SPOTLIGHT

Erika Widén examines the standards of public health and safety in Qatar post-Villagio mall fire.

.52. FEATURE STORY

Mark Van Dijk investigates whether Africa would be a wise choice for GCC investors.

.56. FEATURE STORY

Carl Attallah, president of

Chevron Qatar discusses the opening of the new Solar Test Facility at QSTP.

.62. ON THE PULSE

Shehan Mashood takes a look at the challenges in finding funding for the SME sector in Qatar.

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KNOWLEDGE & EXPERTISE .72. LEGAL INSIGHT

An overview of Qatar’s Permanent Establishment Risk Law.

.74. BUSINESS MANAGEMENT

A look at how (un)common sense could be the key to a firm's success.

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56 BuSINESS INSIGht INtErVIEWS .79. TheEDGE speaks with Stuart Anderson of Standard &

Poor’s Middle East about the importance of credit rating agencies for the local financial sector. MEEZA’s dep. CEO Ghada Philip El Rassi explains how organisations can benefit by leaving IT services to dedicated professionals and Ian Anderson, chief financial officer of QFC talks about the role of tax policy in attracting investment in Qatar.

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REGuLArS .06. .08. .12. .14. .22. .24. .29. .86. .88.

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FROM THE EdITOR CONTRIBUTORS FEEdBACK NEWS ETCETERA QATAR IMPACT COUNTRY FOCUS ENERGY ANd RESEARCH PROdUCT ANd REVIEWS 10 THINGS

FROM THE EDITOR

FROM PUBlICaTIONS DIRECTOR Mohamed Jaidah m.jaidah@firefly-me.com maNagINg EDITOR Miles Masterson m.masterson@theedge-me.com DEPUTy EDITOR Erika Widén e.widen@theedge-me.com DIgITal/EDITORIal aSSISTaNT Shehan Mashood s.mashood@theedge-me.com REgIONal SalES DIRECTOR Julia Toon j.toon@firefly-me.com +974 66880228 hEaD OF BUSINESS SalES Manu Parmar m.parmar@theedge-me.com +974 3332 5038 SalES maNagERS Joseph Issac j.issac@firefly-me.com +974 33675301 Johanna Romero j.romero@firefly-me.com +974 55007108 DISTRIBUTION & SUBSCRIPTIONS Azqa Haroon a.haroon@firefly-me.com +974 55692471 CREaTIVE DIRECTOR Roula zinati Ayoub DESIgN COORDINaTION Sarah Jabari FINalISER Michael Logaring PhOTOgRaPhER Herbert Villadelrey PROOFREaDER Geoffrey Instone PRINTED By Ali Bin Ali Printing Press, Doha, Qatar

THE EDITOR

2012 has been a year of mixed fortunes for Qatar. Arguably, the fact that Doha was chosen as the location of the world’s largest environmental summit, COP 18, was the most positive thing to happen to the country in 2012. Though Qatar has been maligned as a major emitter of greenhouses gases, and deserved or not, has a less than savoury reputation worldwide when it comes to many other forms of polluting and consuming, it is significant that this small Gulf state was chosen to host this important event.

As we went to print with this edition of TheEDGE, whether any major agreements would be met at COP 18 remained to be seen. But regardless, for Qatar, not only has the event given the country the opportunity to debunk some myths regarding its environmental credentials, Doha can also showcase the many initiatives – present and future – it has towards its desire to become more eco-conscious and sustainable.

COP 18 has also focused attention on the Middle East, which lags behind and surely needs all of the world's help to keep up with the pace of adaptation to more earth-friendly practices across business and society.

One positive impression that delegates to COP 18 will leave Qatar with is its commitment to harnessing the abundant solar energy. It is therefore timely that the Solar Testing Facility at the Qatar Science and Technology Park, a joint venture between energy multinational Chevron and local sustainability firm GreenGulf, was inaugurated in early December. As Chevron’s local head Carl Atallah tells us exclusively on page 56, this project will contribute in a large measure to the green energy ambitions of Qatar.

Conversely, if one were to determine a low point for Qatar in 2012, it would have to be

the Villaggio fire. This tragedy, in which 13 young expatriate children and four teachers, plus two civil defence emergency staff were killed will remain a black mark on Qatar’s history, and not just in 2012, but for all time. It made world headlines, and because punishing those who are ultimately responsible remains unresolved in Qatari courts, the story continues in global news – thanks in main to the efforts of those most affected by it: parents, family members and friends of those who died.

The repercussions of the Villaggio fire are still being felt in other realms in Doha, with a long overdue reflection in all quarters and a series of new laws regarding local safety standards, especially in malls and facilities for children.

But is all this attention going to actually make a difference to safety? While one would hope so, with the ongoing legal story, and an overall lack of transparency, as well as confusion regarding these laws – and ostensible lack of enforcement – being highlighted constantly in local media, many remain sceptical. In the Spotlight on page 46 Erika Widén examines whether any lessons have really been learned post-Villaggio.

On a more positive note, in this edition’s cover story we document the 60 year story of Salam International, one of Qatar’s preeminent family businesses through the eyes of its current chairman and CEO, Issa Abu Issa, on page 66.

We also take a look at Qatar’s potential as a venture capital hub and what needs to be done to achieve this end on page 62.

Please enjoy our final issue of 2012.

Miles Masterson, Managing Editor

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

theEDGE is printed monthly © 2012 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 or Firefly Communications.

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CONTRIBUTORS

CONTRIBUTORS

P. 26 Victoria Scott Journalist Doha, Qatar

P. 29 jamie stewart International Correspondent London, United Kingdom

P. 34 Dheeraj Shahdadpuri Analyst Dubai, UAE

P. 36 Richard Banks Regional Director Euromoney London, England

P.38 Fredric Afram Senior Financial Planner Guardian Wealth Qatar

P. 40 Thomas Bacon Analyst Oxford Business Group Istanbul, Turkey

P. 42 Luay Hanania Senior Manager Audit KPMG Qatar

P. 52 mArk VAN dIJk Journalist Cape Town, South Africa

P. 72 Kevin McManus Senior Tax Manager Ernst & Young Qatar

P. 74 Julian Birkinshaw Business Management Consultant London Business School London, United Kingdom

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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 10,000 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. Please e-mail info@theedge-me.com should you wish to contribute.

READER FEEDBACk

FEEDBaCK FEEDBACk lETTERS FROM ThEEDgE REaDERS

REACTION IN THE FORM OF LETTERS AND E-MAILS FROM THEEDGE READERS.

www.ThEEDgE.mE

Masterson, Managing Editor

CITy OF lIghT

Your article certainly painted a rosy picture of Lusail as a city of the future. While I was in awe of all the smart technology and environmental friendless, is it really going to be the next London or Paris? Are there any concerns about how they are going to populate an entire city?

Allison Peters, Doha There are lots of concerns about how fruitful these developments are going to be, but there is simply no way to tell until it is completed. – Miles Masterson, Managing Editor

Small BUSINESS SENSE

COP18: POlITICS aND PROTOCOlS

I do not understand why some people are so up in arms about the fact that Qatar is hosting a summit on climate change. What better way to reverse wasteful practices that we are guilty of as individuals and a nation than to highlight the importance and the threat global warming poses to Qatar.

Jassem, Doha Thanks you for writing to us Jassem. We certainly agree, hopefully this will highlight a lot of the issues that Qatar faces such as water security and motivate people to take conservation more seriously. – Miles

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FOLLOW THEEDGE AND WIN A NOkIA (MOBILE PhONE) Send us a letter or email correspondence, or follow TheEDGE on our Facebook page, Twitter feed or LinkedIn group in December and stand in line to win a Nokia (Mobile Phone) pictured here*. Each month one such reader will be drawn to receive this great prize.

I really enjoyed reading what the two Qatari entrepreneurs had to say about the culture of SME development here. It was nice to hear them put things into perspective.

Youssef, Doha

ThIS mONTh’S wINNER

Your article on small business sense was very interesting. The part about more government support for international expansion really hit home for me. As Qatar makes investments around the world it is a great opportunity for local SMEs to gain international contracts and I see no issue in playing favourites here.

Emad Saleh, Doha

*Open only to readers resident in Qatar.

We agree that there is certainly a lot of hype around the SME sector as TechnoQ’s Al Jaidah and Al Ansari (pictured above) pointed out, and lot still needs to be done. This month our article on page 62 looks at the challenges in funding SMEs. – Miles Masterson, Managing Editor

OF ThE NOKIa N9 SmaRTPhONE IS gRETEl BUSUTTIl

FOllOw theEDGE ONlINE FOllOw US ON TwITTER: @ThEEDgEQaTaR lIKE OUR FaCEBOOK gROUP: WWW.FACEBOOK.COM/ QATARTHEEDGE jOIN OUR lINKEDIN gROUP: ThEEDgE magazINE QaTaR

NEWS ETCETERA

NEWS ETCETERA

TO OF THE MONTH PHO

The

E D G E M A G A ZI N E

COP 18 IN DOHA “Now more than ever, the issues at the heart of these negotiations are at the forefront of global debate and discourse. All seven billion people living on the planet share a single challenge: climate change,” said Qatar’s deputy prime minister and United Nations Climate Change Conference and 18th Conference of the Parties (COP18) president Abdullah bin Hamad Al Attiyah at the opening session of the event in Doha late last month. “This is why we gather at the highest official levels in an international framework, this is our mission.

If we do not make the changes we need to now, it will soon be too late. We must decide whether we let our lifestyles jeopardise our life.” Christiana Figueres, executive secretary of the United Nations Framework Convention on Climate Change, also spoke at the opening session and reiterated the need for all the 195 parties to the convention, including representatives from every nation in the world to work together to achieve the main aims of the conference. These were to set up a global Green Climate Fund and to come up with a replacement for the now largely defunct Kyoto Protocol with one that provides a comprehensive worldwide plan for reducing greenhouse gas emissions by 2020. (Image Corbis/Reuters)

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NEWS Etcetera

NEWs Etcetera HH Sheikha Moza launches global INITIATIVE to deliver quality schooling for world’s MOST DEPRIVED AND REMOTE children

In late November Sheikha Moza bint Nasser launched a global initiative to bring

quality primary education to all the world’s children.

With 61 million children worldwide still deprived of education, the Educate A Child (EAC) initiative is partnering with the world’s most expert organisations to bring high quality learning to children affected by extreme poverty, conflict, natural disaster and prejudice.

Speaking at the launch recently of EAC at the World Innovation Summit on Education (WISE), Sheikha Moza said:

“EAC will reignite the world’s commitment to the hardest to reach children, the forgotten children. Our mission is to turn attention back to the disadvantaged children of today, who could become confident adults tomorrow, able to fulfil their potential, if we just give them the opportunity.”

EAC is already supporting 25 projects in countries across Africa, Asia and the Middle East, usually on a matching funding basis. At the time of its launch, there are already some 500,000 children enrolled in EAC funded projects.

The initiative is seeking further partnerships to help many more. Fostering innovation and creativity, it aims to share solutions that can be scaled up to reach millions of children and deliver sustainable education over the long term.

Mawashi Management HEADS the List of Top Executive Management in the Arab World Forbes Middle East named Mawashi management on the list of Top Executive Management in the Arab world in the service sector of listed companies. Ahmad Nasser Sraiya Al Kaabi, managing director and chief executive officer (CEO) of Mawashi, was nominated as the fourth on the list of most powerful CEOs of listed companies in the Arab world. The Forbes Middle East CEOs Forum was recently held in Dubai, UAE (United

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Arab Emirates) under the patronage of HE Eng Sultan bin Saeed Al Mansoori, UAE minister of economy. The event was attended by scores of decision makers who came to network, share ideas and showcase the respective organisations that they lead.

The award saw more than 324 entries from companies in the Arab world.

Moreover, Mawashi recently announced its financial results for the third quarter of 2012 with net profits reaching QR62.1

million for the period ending 30 September 2012. The company’s net profits surged by around 50 percent or by QR20.5 million, over the same period last year when the company registered QR41.5 million. Mawashi has evolved from a struggling company, planned to be owned by the government, to a multi million dollar organisation, one of the largest of its kind in Qatar and the region.

NEWS Etcetera

HH The Emir SheiKH HAMAD BIN KHALIFA AL THANI Inaugurates QAPCO’s third LDPE plant HH the Emir, Sheikh Hamad bin Kalifa Al Thani recently launched Qatar Petrochemical Company’s (QAPCO) third low density polyethylene plant, LDPE 3, at a high profile ceremony in Mesaieed Industrial City, attended by ministers and other VIP’s, including senior executives from QAPCO’s shareholders Industries Qatar and Total Petrochemicals of France. The ceremony was followed

by HH taking a tour of the LDPE 3 facility, escorted by HE Dr. Mohamed bin Saleh Al Sada, Qatar’s minister of energy and industry, and senior QAPCO officials. “Great achievements are the result of even greater visions,” said HE Dr. Al Sada. “ This modern facility is a direct and physical manifestation of Qatar’s National Vision 2030, guided by the country’s wise leadership. While Qatar is blessed by plentiful natural resources, it is the value that is created by processing the raw products that moves the country towards its economic diversification goals in the coming decades. On a national level, the country and its people can be proud that with LDPE 3, we continue to reinforce Qatar’s position as not only a regional industrial power, but also a global one. With the launching of LDPE 3 and plans to develop other petrochemical plants, Qatar is set to join the exclusive club of major petrochemical producers and exporters.”

QAPCO’s LDPE 3 puts the nation at the centre of the global petrochemical industry. At peak capacity, the facility will be able to produce 300,000 metric tons of LDPE per year, combined with QAPCO’s existing LDPE facilities, this pushes up the country’s output to 700,000 metric tons of LDPE per annum.

AGENCY 222 UNVEILS ITS NEW IDENTITY Agency 222, that have been operating under the project name The Agency for the past year revealed their company identity last month.

Simon Ferguson, chief executive officer of Agency 222 commented on the launch, “Our vision is to be recognised and applauded internationally as the leading communications and advertising agency network in the Middle East, led from Qatar. Our new identity reflects this vision and strong commitment to excellent customer service and creativity which has already won the recognition of major clients in Qatar. The spirit of 222 is in every member of the team, each and every one of us is committed to our agency, we are committed to Qatar and we’re proud to be the only Qatari headquartered agency group that is ready and able to fly the flag on the international stage and win.”

Oil & Gas Year Qatar 2012 The Oil & Gas Year Qatar 2012 book was officially launched recently at the Crowne Plaza Doha's Business Park, where the minister of energy and industry HE Mohammed bin Saleh Al Sada was honoured with The Oil & Gas Year Qatar 2012 Man of the Year Award.

Bringing maps, graphs, articles and interviews with key decision makers involved in the industry, The Oil & Gas Year Qatar 2012 provides fascinating insights into Qatar’s political environment, and covers the latest developments in exploration and production, downstream, marine and shipping, infrastructure developments, research and power generation.

NEWs IN BRIEF

Credit Suisse Partners with Qatar Holding in Asset Management Credit Suisse AG and Qatar Holding LLC have signed an agreement to form an asset management joint venture: Aventicum Capital Management which will operate out of two hubs including a Doha-based business focused on investment strategies in the Middle East, Turkey and other frontier markets as well as an international business, based outside of the region.

Doha bank retail mortgage Doha Bank announced recently the launch of its retail mortgage loans portfolio, which now has Qatar’s most competitive interest rate of 3.99 percent. The bank will provide loans of up to 70 percent of property value for Qataris and expatriates, with mortgage repayment periods of up to 20 years. The bank is also offering customers the option of bundling a furniture loan that may comprise up to a value of QR2 million under the same terms as their housing loan.

Euromoney Qatar Conference Held under the patronage of HE Sheikh Hamad bin Jassim bin Jabr Al Thani, prime minister and minister of foreign affairs, Euromoney will host a high-level international financial conference on 11 and 12 December 2012 together with Qatar Central Bank. The Euromoney Conference will moderate interactive sessions on the global financial crisis and the new global economic paradigm, the role of capital exporting nations and the finance in Qatar’s Vision 2030.

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NEWS Etcetera

2012 events calendar

December – Doha, Qatar

5 – 15

Doha 23rd International Book Fair

9 – 12

MENA Gas Processing Summit

9 – 12

Qatar Contact Centers Summit

10 – 11

HSE in Construction Qatar

11 – 12

Euromoney Qatar Conference

10 – 12

Counter IED Summit Middle East

11 – 12

Doha Goals Forum

For a full and comprehensive calendar of events in Qatar please visit www.theedge.me/events 18

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NEWS IN QUOTES “By winning this prestigious industry award, the chief executive officer and the team at GBI have shown that they have delivered on their commitment to our investors to build a state of the art network in the Gulf region and beyond…I am truly very pleased for them.”

Gulf Bridge International (GBI) has been recognised in this year’s Capacity Europe Awards as the world’s best niche/new player. The awards were hosted in Amsterdam recently, and recognised leading telecommunications companies from across the globe. GBI chairman Rashid Al Naimi expressed his gratitude to the team at GBI.

“When Greece has achieved, or is about to achieve, a primary surplus and fulfilled all of its conditions, we will, if need be, consider further measures for the reduction of the total debt.”

German finance minister Wolfgang Schaeuble said recently after an agreement between eurozone finance ministers and the International Monetary Fund to reduce Greece’s debt.

“I never believe in percapita as a measure for distribution. I think it’s calculated to show the small countries as the bad boys.”

Abdullah bin Hamad Al Attiya, former Qatari energy minister and president of COP18 defending Qatar’s emission status to a news agency recently.

“Barclays welcomes Qatar Holding’s message of confidence in its long-term prospects and continues to appreciate the consistent support it has received since Qatar Holding became its largest shareholder.”

Barclays chief executive officer, Antony Jenkins said recently in a statement after Qatar cashed in its remaining warrants in Britain’s Barclays Plc, a move that should yield a US$280 million (QR1 trillion) profit and still leaves the sovereign wealth fund as the bank’s top shareholder, following a controversial fundraising in 2008.

QATAR IMPACT

in qatari media In a year, newswise, few will forget in Qatar, where was the media? Kamahl Santamaria surveys the landscape and wonders if the local voices need to be heard more loudly.

T

he year 2012 will surely go down as some sort of ‘annus horribilis’ in Qatar. A year when the profile of the country shot up even more through its huge international investments and its efforts to resolve regional issues, but also when a fire at a shopping mall propelled it into global headlines for all the wrong reasons.

Some called it an innocence-lost moment which countries or cities sometimes go through in their development. At the very least it was – and as described in this magazine – a dark cloud over the country.

But what the Villaggio fire and its aftermath continue to demonstrate is that Qatar – certainly when it comes to English language media – is still lacking a strong independent press which people can turn to for good and critical local coverage.

Think about any big stories – the 9/11 attacks, the Iraq War, those sorts of events.

Your instinct when those happened was to probably switch on the television or listen to the radio.

That is unfortunately not a viable option in Qatar. Villaggio, the subsequent closure of other malls, and the trial and investigation into the blaze were the most newsworthy things to happen in this country in the past year, and yet people had to turn to the Internet and social media for immediate coverage.

Now to be fair, that is a fact of life

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anywhere in the world these days such is the immediacy and penetration of social media, but at least it is part of a wider choice. Here it is effectively the only choice. While you would have rightly expected major coverage on the national news bulletin the night of the fire, it was sadly lacking.

Newspapers obviously provided a lot of coverage over the next few days, but it largely reported what we could all see for our own eyes, or read from a twitter feed from the Ministry of Interior. When 13 children die in a shopping mall fire, questions need to be asked immediately, and once again social media was the only one truly doing that.

As a result, we all got to know the name Doha News a bit better. The Qatar based media entity had already been collating news about Qatar since March 2009 as a Twitter account first and then a blog. But it came to the fore with its accurate coverage of the Villaggio fire. According to its co-founder Omar Chatriwala “we were getting a couple of thousand visits a day, and on that day and the days after we got 100,000 plus visits.”

Now Doha News is something of a go-to news source for all local current events.

Chatriwala says the aim is to curate the best news and information and “try to do some original reporting too, especially in areas we see that have been under-reported by local or international media”.

But it is not yet a fully-fledged news outlet, and will not be until it can have a stronger presence, a team of reporters, and perhaps a more mainstream outlet. Doha News is,

ultimately, still an information source that relies heavily on, crowdsourcing information, something that can be as fraught and inaccurate as it can be immediate and brilliant.

User generated content is widely seen as the future of media – because someone nearly always has a camera on their phone and an Internet connection to get the news out – but it is difficult to regulate and can resign the trained media to a sideline role.

Perhaps, in the end, there could actually be a huge opportunity here. Just as HH the Emir Sheikh Hamad bin Khalifa Al Thani had the vision 16 years ago to launch Al Jazeera and provide a true news source for the Arab World – which had never seen anything like it before – maybe it is time for a similar push on a local level.

Much will depend on the impending and much-talked-about new media laws – the first since 1979 – but early indications are that reporting critically on ‘friendly countries’ and state interests will still be prevented.

I moved here more than seven years ago, and there was not a lot going on in local news. That has changed irrevocably, as has the population that wants to consume that news. When we turn on the television at home or the radio in the car or pick up a newspaper from the store, it would be great to hear about what is actually happening right here, right now?

Kamahl Santamaria is a Doha-based news anchor with Al Jazeera English and host of the channel’s business and economics programme Counting the Cost.

Country Focus

Turkey

and Qatar:

a fruitful relationship

Turkey’s geographic proximity and cultural similarities with the GCC is an advantage for Qatari and Turkish businessmen. Erika Widén reports further.

T

he Ambassador of Turkey to Qatar H. Emre Yunt is confident that the longstanding relationship between Qatar and Turkey will continue to develop.

“Considering the breakthrough that Qatar has accomplished during the last decade along with fraternal and deep-rooted historical ties between Turkey and Qatar, it is a must for the two countries to enjoy special relations and cooperation in every field, particularly in economy and trade,” says Yunt, “Frequent reciprocal visits by the leaders invigorates this process…and plays an important role in developing our ties.”

The Republic of Turkey is the second largest country in Europe after Germany, with a population of approximately 73.7 million people, and it is expected that by 2020 Turkey will be the most populous European nation, with more than 83 million people. According to the International Monetary Fund, the economy of Turkey is defined as an emerging market and one of the world’s newly industrialised countries.

Geographically, Turkey straddles two continents, Europe and Asia, and this has led to its recognition as a regional power in the Middle East due to its strategic location, growing economy and diplomatic initiatives.

In 1980 the Turkish embassy was established in Doha, and in 1992 a Qatari embassy was opened in Ankara. According to Yunt, currently there are 130,000 Turks residing throughout the Gulf Cooperation

Council (GCC). Saudi Arabia, which is the largest country in the GCC hosts 100,000 Turks, Qatar 8,000 and the remainder residing in the United Arab Emirates, Oman and Bahrain.

Yunt explains to TheEDGE that there are many Turks working in Doha on a temporary basis, as administrators, engineers, and foremen for construction companies, who will return home once the projects are completed. “The others are from the southern part of Turkey near the Syrian border. They speak Arabic, and work in sectors like the restaurant business, kebab house owners, barbers and other types of small business,” he adds.

According to the Turkish Ministry of Economy, Qatar has many opportunities for Turkish exporters and contractors, which have attracted Turkish businessmen in the last decade, and since then bilateral trade between both countries has grown. Yunt says that there are around 35 Turkish companies in Doha, mostly in the construction sector and some have been awarded projects of around US$2.5 billion (QR9.1 billion).Turkish investment in Qatar is led by the construction sector, and currently there are 59 projects in Qatar with a total value of US$7.6 billion (QR27 billion) running until 2012. Turkish exports to Qatar in 2011 reached US$188 million (QR684 million) mainly in electrical machinery and appliances, US$46 million (QR167 million); manufacture of metals, US$17.8 million (QR64 million); iron and steel, US$15 million (QR54 million); non-metallic mineral products US$10 million (QR36 million); and furniture US$9.6 million (QR34 million).

Ambassador of Turkey to Qatar, H.Emre Yunt speaks Qatar exports to TheEDGE about Qatar and Turkey’s current to Turkey in 2011 bilateral relationship.

country focus

Turkish investment in Qatar is led by the construction sector with a total value of US$7.6 billion (QR27 billion) running until 2012. totalled US$481 million (QR1.7 billion), concentrated primarily in non-ferrous metals US$308 million (QR1.1 billion); plastics in primary forms, US$80 million (QR291 million); gas, natural and manufactured, iron and steel US$27 million (QR98 million); and organic chemicals, US$17 million (QR61 million).

“We are trying to promote the Turkish construction, steel, marble, electronic goods, and food, and now Qatar has started to import livestock from Turkey,” continues Yunt. “When you go to the market you can see [Turkish] food stock such as cheese, soft drinks and also

textile materials. We have a mutual cooperation in different industries, and we are hoping to have a permanent showroom in Qatar as well to promote Turkish industrial goods.”

In 1985, the Economic and Technical Cooperation Agreement between both countries was signed. In 2008, two more understandings were signed, the Bilateral Investment Promotion and Protection Agreement, and the Double Taxation Prevention Agreement. Moreover, in order to complete the legal framework of bilateral commercial and economic relations the following Memorandums of Understanding (MOU) were endorsed: MOU of between the Diplomatic Institute of the Ministry of Foreign Affairs in Turkey and Qatar, MOU in the field of Environment, MOU between the Ministry of Energy and Natural Resources, and MOU of the Defence Industry.

TURKEY At A Glance Government: Republic of Turkey Capital: Ankara Population: 73.7 million GDP: US$773 billion (QR2.8 trillion) in 2011

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COUNTRy FOCUS

“We appreciate that Qatar is supporting the Free Trade Agreement between the GCC countries and Turkey, though it is not finalised yet,” adds Yunt.

In 2006, the Turkish-Qatari Business Association was founded to promote economic, trade and cultural relations between both nations, to represent the commercial interests of Turkish businessmen in Doha, and to increase the trade volume between Turkey and the state of Qatar.

Additionally, in 2011 the Qatar Turkey Business Forum was held in Doha, and 500 Turkish businessmen from more than 260 companies attended, led by the Turkish prime minister Recep Tayyip Erdogan.

Zafer Çaglayan, state minister for foreign trade said during the forum, “There is a need for increasing the volume of trade between the two countries. The bilateral trade has the potential [in the next couple of years] to reach US$10 billion (QR36.4 billion).”

TURKEY: A PROMINENT PROdUCER ANd ExPORTER • • • • • • • • •

The leading cement producer in Europe and the seventh-ranked in the world.

The world’s leading supplier of processed leather.

The world’s principal supplier of hazelnuts, chickpeas, fresh and dried figs, and apricots.

The second-ranked supplier of textiles and garments to the European Union.

The second-ranked supplier of cherries and watermelons in the world.

The second-ranked producer of pine tree honey in the world.

The second-ranked producer of tomatoes and tomato paste in the world.

The second-ranked exporter of jewellery in the world.

Has 40 percent of the world marble reserves.

Yunt explains to TheEDGE that big meetings such as the 2011 Qatar Turkish Business Forum gather both Qatari and Turkish businessmen together to interact and consult one another, listen to speeches conducted by high level authorities, and then meet and form business partnerships. “Turkey has a very good image here,” he says, “some Turkish companies are bringing industrial projects. They want to get a Qatari partner

and establish a factory in every field. We also have had proposals to introduce other types of production here. It is going well, though it will take time,” says Yunt.

Yunt believes that there is a lot of potential to further improve Turkish and Qatari economic ties. “Turkish companies are expected to be awarded new projects in construction and infrastructure, and they are ready to help Qatar in those areas,” he concludes.

BUSINESS TRaVEl INSIDER: ANKArA Ankara is Turkey’s capital, and although it has long been in Istanbul’s shadow, it is now developing rapidly, writes Victoria Scott.

GETTING THERE: Qatar Airways (www.qatarairways.com) flies to Ankara three times a week. An economy return fare costs from QR3790, and QR9370 in business. The flight time is around four hours.

Currency: Turkish Lira. TRY1 = QR2 (exchange rate as of October 2012) WHERE TO STAY: JW Marriott Hotel Ankara (www. marriott.com) Located in the business district, this hotel is not only home to the city’s largest conference facilities, but also

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several impressive restaurants and a spa that promises to melt your work-day stress away.

A standard room with city view costs from TRY339 (QR678) a night in December.

An executive room starts at TRY549 (QR1098) a night, including access to the executive lounge and free food and drink.

WHERE TO PLAY: Trilye (www.trilye.com.tr) Ankara may not be on the coast, but this upmarket restaurant serves fish so fresh you would think it had just been landed. It has excellent service, great ambience, and a price tag to match – book ahead, as it gets very busy.

SPLASH YOUR CASH: If you are in search of souvenirs and you feel like browsing, head to the small shops in Çıkrıkçılar Yokuu near Ulus. For more

mainstream goods, head to the Armada mall (www.armadaavm.com.tr) which hosts 250 stores – name your favourite brand, and it is bound to be here.

CULTURE VULTURE: You cannot visit Ankara without seeing Anıt Kabir, the mausoleum of Mustafa Kemal Atatürk, the founder of the Turkish Republic.

Perched atop a hill, the scope of this monument is impressive.

INSIDER TOP TIP: Ankara is a lovely city to explore on foot, but beware – traffic here has very little respect for pedestrians.

Even if you see a green light, look in both directions before stepping into the street.

SUBSCRIPTION

SUBSCRIPTION FORM 2012 TheEDGE is Qatar’s dedicated monthly business magazine.

TheEDGE incorporates a mix of industry news and analysis, in depth features, special interviews with key business decision makers, economic insight and market activity reports, and tips for how you can improve your day-to-day business operations.

TheEDGE is delivered straight to the door of the targeted business community.

To ensure you keep up-to-date, with what is happening in Qatar’s business landscape, please fill in the subscription form (below) to receive TheEDGE on a monthly basis.

Subscription is FREE (in Qatar). Forms are to be addressed to the Subscriptions Department at: TheEDGE Subscriptions Department Firefly Communications 11th Floor, Jaidah Tower PO Box 11596 Doha, Qatar

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TheEDGE

ENERGY & RESEARCH

QATAR LNG’S LOOMING REVENUE TEST Supply contracts linked to oil prices have proved lucrative for Qatar’s gas export industry, helping propel it to global dominance. But Doha may soon be forced to reconsider its options if it wishes to retain its position, reports Jamie Stewart

A giant Q-MAX liquefied natural gas tanker unloads a cargo from Qatar. Such cargoes may be sold under different contracts in future. (Image courtesy Qatar Petroleum)

atar has traditionally linked its long-term gas supply contracts to crude oil prices – a model of pricing known as oil indexation. But it may be forced to consider linking contracts to gas hub prices in future, because while the country has in place a moratorium on the further development of liquefied natural gas (LNG) production facilities, more LNG supply infrastructure is due to come on line from other parts of the world from 2015.

Qatar must be willing to price its LNG exports in a way that is more competitive or risk seeing its substantial global market share diminish over coming years, according to a top energy analyst. This supply from other quarters will of course, inevitably erode Doha’s market share, Trevor Sikorski, energy analyst at Barclays Bank told TheEDGE, unless Qatar is prepared to explore a more flexible pricing model.

“It’s not so clear, because it’s volumes or values,” Sikorski explained. “You can believe in value, which means you like to ensure gas is expensive regardless of how many customers use it, but effectively, the Qataris do have an issue, with a lot of new gas coming on line.”

ENERGY & RESEARCH

In 2011, 31 percent of the global LNG import volume was supplied by Qatar, or an immense 75.4 million tonnes, according to the France-based International Group of Liquefied Natural Gas Importers (GIIGNL). This made it global leader by a very comfortable margin.

To give an indication of Doha’s dominance, Malaysia regained its second rank ahead of Indonesia with a nine percent market share.

Little in the way of new production infrastructure is expected to come on line in 2013 and 2014. Indeed, as Sikorski said, “we think [the supply and demand balance in] 2014 will be fairly tight”, but thereafter, some major production infrastructure is expected to come on stream in Australia, while exports from the United States (US) are widely expected to pick up as a result of that nation’s boom in unconventional gas recovery.

OUTSIDE INVESTMENT Qatar’s moratorium on LNG production commenced after the nation reached its stated goal of having the capacity to produce 77 million tonnes per annum in 2011.

It has since been mooted that, in order to further develop their businesses in the global LNG arena, Qatar-owned companies would need to consider investing in production facilities outside of Qatar.

Qatar Petroleum (QP) for example, was understood to have expressed interest in acquiring a stake in the Yamal LNG project in Russia from independent Russian company Novatek, although the Qatar giant chose not to comment on any discussions. And earlier this year QP filed to convert the Golden Pass terminal in the US to an export facility.

But, according to Sikorski, such steps may not be strictly necessary if the goal is the protection of market share. “If they want market share they can go and get it. They have by far the most marginal cost of production, particularly when you compare it to some of the new facilities coming online,” he said.

And, on the demand side of the equation, pressure for a move away from oil indexation is fast growing.

European utilities including the Czech branch of Germany’s RWE and Italy’s Edison have successfully gone to arbitration – Edison with Qatar’s RasGas, as reported in TheEDGE – to argue for a discount on prices paid under long-term, oil-indexed contracts.

It may therefore be a case of sooner rather than later, if Qatar wishes to protect its share of the market, as opposed to taking the expensive overseas investment path via structural, sustainable financial means.

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Qatar must be willing to price its LNG exports in a way that is more competitive or risks seeing its global market share diminish.

Qatar’s 2011 LNG world market share In Numbers • Qatar supplied 31 percent of imported LNG across the globe in 2011, or 75 million tonnes – not far off its full annual capacity.

• Doha ended the year with an operational production capacity of 77 million tonnes of LNG per annum.

• Qatari production accounted for 67 percent of global LNG trade growth.

• Italy’s Edison said it saved around QR2 billion following contractual arbitration proceeding’s with Qatar’s RasGas.

Energy and research briefs QP SECURES LARGE STAKE IN IN OIL FIELD JOINT VENTURE State-owned energy giant Qatar Petroleum (QP) negotiated a deal guaranteeing itself a 60 percent interest in the Al Khalij oil field, 130 kilometres east of the Qatari coast, from 2014, while France-based partner Total will continue to run operations at the field.

The two companies have been running Al Khalij since production began in 1997. The current exploration and production sharing agreement is due for expiry in early 2014, but the new deal will see the joint-venture continue for a further 25 years. Under the deal the oil field will be further developed, Qatar energy minister and QP chairman HE Dr. Mohammed bin Saleh Al Sada said, which will “increase Qatar’s hydrocarbon reserves”. Total has a long standing interest in the Qatari energy sector, including being among the first to develop the country’s lucrative multi-billion dollar gas projects in Ras Laffan.

QATAR BOOSTS GAS EXPORTS WITHIN GCC Qatar’s inter-GCC gas export industry received a boost in November with the award of a QR910 million contract to upgrade a gas processing plant in Ras Laffan Industrial City.

The contract was awarded by plant owner and operator Dolphin Energy to India-based engineering giant Larsen & Toubro. The Indian firm will install three new gas turbine compressors at the site, each with a power output of 52 megawatts, bringing to nine the total number of compressors servicing the plant. “They will improve overall reliability and availability of natural gas exports [from Qatar] to the UAE (United Arab Emirates) and Oman,” Dolphin Energy said in a statement. Completion of the project is expected by the end of 2014. Dolphin Energy’s primary initiative, the Dolphin Project, involves the production and processing of natural gas from Qatar’s North Field, and transportation of the dry gas by sub-sea pipeline from Qatar to the UAE.

Energy & Research

QATAR RECOGNISED IN GAS FLARING REDUCTION PROJECT By Jamie Stewart For the second time in two months, Qatar’s research into gasflaring reduction has made headlines, and it couldn’t come at a more convenient time for the state, writes Jamie Stewart Qatargas engineering and ventures, chief operating officer Sheikh Khalid bin Abdulla Al Thani collects the award from the GGFR recently.

atar further extended what is fast becoming a globalleading position in the littleknown field of gas flaring reduction in early November after the World Bank-led Global Gas Flaring Reduction (GGFR) Partnership recognised work carried out by Qatargas at the Ras Laffan port.

The company picked up an award for excellence in its QR2.9 billion flaring reduction programme, which aims to recover gas being flared during the liquefied natural gas (LNG) ship-loading process at Ras Laffan. Qatargas engineering and ventures chief operating officer Sheikh Khalid bin Abdulla Al Thani explained that the jetty boil-off gas recovery project aims to enable gas to be collected from LNG ships and compressed at a central facility.

Compressed gas will then be sent to the LNG producers to be consumed as fuel or converted back into LNG. “The project is a cornerstone of Qatargas’ overall flare management and reduction strategy, and will be instrumental in our drive to reduce and maintain total flaring at regulatory target levels in the long-term to protect the environment,” Al Thani said, adding that the project “will recover enough natural gas per year to power the equivalent of

more than 40,000 homes”. The news followed the announcement the previous month that Qatar Petroleum and Denmark’s Maersk Oil had achieved a 50 percent cut in greenhouse gas emissions and a 90 percent reduction in gas flaring at their joint Al Shaheen gasgathering and flare reduction project.

GLOBAL REPERCUSSIONS According to a report published by Global Giant GE Energy in 2011: “There is almost unanimous agreement that systematic largescale gas flaring is a source of enormous negative environmental externalities.”

It continued “The impact on the global community in terms of greenhouse gas emissions is substantial.”

Recognition from the World Bank-led GGFR, a coalition of oil and gas industry members, has come at a particularly timely juncture, with Doha preparing to host the United Nations climate change conference COP 18, at which nations will seek to negotiate a successor to the Kyoto protocol, which set binding targets for 37 countries for the reduction of greenhouse gas emissions.

Some have questioned Doha’s selection as host of COP 18, with the nation being built on wealth derived from the burning of fossil fuels and Qatar struggling to rid itself of the world’s largest carbon footprint per capita title, according to global environmental group WWF. Indeed, there is a great deal of work still to be done if Qatar is to rid itself of the tag.

However, projects such as Qatargas’ flaring reduction work can be cited as examples of what Qatar is doing with its hydrocarbon wealth.

Al Thani said that a desire to reduce the nation’s carbon footprint was a “key driver” behind the flaring reduction scheme.

It could be argued that fossil fuels would be burnt and income received regardless of where in the world the deposits were stored, provided that they were accessible. What is important is that Doha continues to invest swathes of that income in schemes designed to better the country’s emissions record, and then follow up by sharing its knowledge with other gas-flaring reduction projects around the world.

“The project will be instrumental in our drive to reduce and maintain total flaring at regulatory target levels.” said Sheikh Khalid bin Abdulla Al Thani, Qatargas engineering and ventures CEO. TheEDGE

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FINANCE & ECONOMICS

Market Watch • Special FOCUS • PERSONAL FINANCE • SPECIAL Report • BALANCE SHEET

BENEFITS OF THE CORPORATE DEMERGER (P.42) KPMG’s Luay Hanania explains the intricacies associated with a corporate demerger and its possible benefits.

ALSO IN THIS SECTION: • Market Watch: Dheeraj Shahdadpuri discusses the Middle East and North Africa region’s economic outlook and Qatar’s strong economic forecast. (P.34) • Special Focus: Richard Banks explains why, lead by Qatar, the Gulf Cooperation Council is focussing their investments on North African countries. (P.36) • Personal Finance: Fredric Afram says parents need to have a savings plan in order to fund the future education of their children. (P.38) • Special Report Thomas Bacon writes how Qatar’s construction sector continues to be stimulated by major projects linked to the 2022 World Cup. (P.40)

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MARkET WATCH

MENA ANd QATAR – THE ECONOMIC OUTLOOK

BY DHEERAJ SHAHDADPURI

The Middle East and North Africa’s (MENA) economic outlook continues to remain uncertain. On the one hand oil exporting countries are forecasted to continue posting strong performances. However, most oil importing nations witnessing political upheaval remain in transition of achieving stability. According to the latest projections by the International Monetary Fund (IMF), the MENA region’s overall economic growth is set to improve slightly by 2.1 percent in 2012, which is a marginal increase of 0.1 percent from last year. However, the economic expansion of the oil exporting nations and that of the Gulf Cooperation Council (GCC) countries in particular is forecast to stay robust. This obviously will be driven by high oil revenue, which is supporting the vision of regional governments to develop the non-oil side of their economies by enabling continued expansion of fiscal and monetary policies.

Within the GCC, Qatar remains at the top of the chart in terms of economic growth. The gross domestic product (GDP) of the country is expected to surge by 6.3 percent (in real terms) in 2012. Next year although the growth is expected to decline to 4.9 percent, it will nevertheless remain above its regional peers. The IMF predicts that Qatar will continue to remain in positive fiscal balance of 9.6 percent of its GDP, despite having massive investment outlays. In line with

such growth projections, the underlying economic indicators of Qatar also provide a similar outlook, and the credit facilities by commercial banks have also posted impressive growth of 19.2 percent in the first nine months of the current year.

These sets of numbers could hardly be witnessed elsewhere around the world in current turbulent times, and hence rightfully reflect the healthy state of affairs of the country. Based on these prospects, foreign investors should continue to flock to the country driving economic expansion.

FISCAL CLIFF – THE NExT BIG HURdLE TO BE AVOIdEd The United States (US) economy undoubtedly has shown continuous improvement this year, albeit at a modest pace. There have been times when the economy has come under pressure from financial markets, but that largely had to do with the fragile state of affairs in the euro area.

But the money pumped into the economy thus far has also created parallel challenges. On the monetary side, the flush of liquidity can theoretically inflict inflation if massive economic support programmes are not withdrawn in an orderly manner. And on the fiscal side, the government has run a deficit now for many years, which has forced it to take more debt to cover the funding gap. This has taken the public debt-to-GDP ratio to above 100 percent, a level that is believed to be unsustainable for an economy which is only growing at a modest pace. To bring down the debt, we witnessed heated debate last year during August when the US economy hit its

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debt ceiling of 100 percent of GDP, although a last minute agreement was reached to avoid creating further economic troubles, and a major caveat of the deal was the introduction of deficit reduction of US$1.2 trillion (QR4.3 trillion) over the next 10 years. And as part of this deal, tax increases and spending cuts of US$600 billion (QR2.1 trillion) are to be implemented by January 2013. Given the multiplier effect, the impact of this amount will certainly be manifold and can slow down the US economy.

Obviously this event is highly undesirable for the global economy given the fact that euro area is still struggling. The fate of the global economy once again relies on congress and the US government, which have to arrive at a compromise. Policymakers have little room to take any imprudent decision that will take the global economy a step backwards in its long road to recovery.

SPECIAl FOCUS

QaTaR AND THE GCC: A ShIFt IN INVEStMENt StrAtEGY

North African countries are now attracting more investors from the GCC than from Europe.

Richard Banks explains how Qatar is leading this shift.

T

he Euromoney Egypt conference in Cairo held in October 2012 opened with the news that Qatar had deposited a second tranche of US$500 million (QR1.9 billion) to the Central Bank of Egypt. This is a signifier of a clear trend: the increase in investment by Gulf Cooperation Council(GCC) states in North African countries instead of from Europe. Qatari institutions are leading the Gulf, with its banks and companies increasing their cross-border activities in North Africa.

Qatar National Bank, for example has invested in Egypt, and Qatar recently announced a partnership with Algeria to develop a steel mill.

ShIFTINg REaSONS There are four main reasons why this has changed: capital, compliance, confidence and culture.

Capital: The GCC is a capital-exporting region and is looking for strong, long-term returns based on demographic and economic growth.

In a globally low-return investment environment, the markets of North Africa offer these fundamentals at very attractive prices and high rates of return. Many institutions in developed nations are withdrawing from the investment and financing markets and facing difficulties in their markets, reducing credit lines and selling their regional financing businesses, creating a capital vacuum for GCC institutions.

Compliance: Global financial institutions face many regulations, reducing their ability to finance and invest in growth markets. But in developing markets, in which legislative infrastructure is a work in progress, GCC institutions have more flexibility and pragmatism in their decisions, giving them a strong competitive advantage.

Confidence: The GCC is confident in its own capital resources and in the future of the markets in which it is investing. The financing institutions in the region are developing long-term strategies, and are upgrading their teams and skills to leverage these opportunities.

Culture: The GCC is intelligent and experienced, and will invest in growth markets such as North Africa.

The shared language of Arabic and historical ties also ease the process of investment.

As Gulf countries continue to invest in North Africa, this will bring more than just financial returns. These investments will consolidate the nations in economic development and cooperation in trade, education and the free movement of people.

Under the leadership of its chairman and Qatar Minister of Finance Yousef Hussain Kamal, Qatar National Bank has increased its investments in North African countries. (Image Reuters/Corbis)

aN UNCERTaIN ENVIRONmENT This opportunity has come at a time of profound uncertainty in the wider global economy. The forthcoming Euromoney Qatar Conference in Doha hosted by Qatar Central Bank will examine how global trends are being influcenced by the rise of GCC-based financial institutions.

The predominant financial and economic paradigm of developed nations in the past decades has not been, as some believe, capitalism. The best word to describe what it has been is, perhaps, ‘creditism’. Governments, banks and individuals have ramped up their debt – using it to fuel public spending, lending and private consumption. Corporations – the engines of capitalism – are by contrast often criticised for sitting on cash piles or returning capital to shareholders.

Governments have reacted to the credit crisis by increasing regulations on banks, upping capital requirements and restricting banks’ ability to take on risk. Banks and markets have reacted to the government debt crisis and the regulatory changes by reducing lending across the board and viewing sovereign debt as a credit product.

No longer a uniform safe-haven securities market, the sovereign debt market is now nuanced by the individual credit characteristics of nations. Many nations, who in the past were frequent borrowers on the back of implied safety, are now unable to access the private credit markets except at a significant or even punitive cost, and sovereign bond yields regularly make the evening news.

All of this is a good thing and long overdue. It may be painful but at least it is realistic – which sets the tone for a more secure mediumterm financial future. It also opens important opportunities for Gulf institutions, particularly in Qatar, because of their legacy of prudent management and solid financial foundations.

Indeed, for Qatar’s forward-looking financial institutions, banks and government entities, this new age of uncertainty is increasingly looking like an age of opportunity.

Richard Banks is the director of Euromoney Conferences. The inaugural Euromoney Qatar Conference ‘Global Finance: ReDesigned’ will take place in Doha from 11 to 12 December.

PERSONAl FINANCE

INVEStING IN Our

ChIlDREN’S EDUCaTION Education is the key to your child’s future success. Fredric Afram says the pressure is on the parents to save for their child’s future, and the planning must start today.

T

he price of education has never been more prominent than it is today. Headlines scream of rising university fees and student debt but with high unemployment levels plaguing the horizon, the pressure is on to give children the best start in life.

Ask any parent and their wish is for their child to gain a good education, and become successful without the burden of a massive debt. In my conversations with clients, I often find myself stressing that it is our responsibility as parents to protect and provide for our children, and they always agree. Children are our future and it is vital we invest in them now to reap the benefits later. It is no coincidence that those who receive a good degree from a respected institution feature among the highest earners.

As parents, we are our children’s best example, the people they look up to and the people they learn from. Research has shown that often children who grow up in an international environment seek to replicate their parents and study internationally.

As we all know, a good, well-rounded education – wherever it may be in the world – is invaluable but it does beg the question, at what cost?

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Providing a good education does not come cheap, and if you have more than one child, this amount multiplies further still. Planning for your child’s future is no easy feat and is not something that can be achieved overnight.

It takes careful and considerate planning.

At present, average total university fees in the United Kingdom amount to as much as US$20,000 (QR72,000) per year, taking into account everything from tuition fees to accommodation to books, travel, food and socialising. Needless to say, the figures are alarmingly expensive and are only set to rise further.

Bearing this in mind, and with inflation in the sector set a minimum of five percent, who knows what the costs will be several years down the line when it is your turn to wave them off to university?

From the moment your child is born, you have 216 monthly paydays before they reach their 18th birthday to put aside enough to cover the cost of university. At an average cost of US$20,000 (QR72,000) per year and for the duration of four years, you would need US$80,000 (QR291,200) saved. Take into account the five percent inflation level over the next 18 years and this amount equates to US$152,000 (QR553,280).

As such, there is really only one way to ensure that your children will have the opportunity to take this next step in life, and that is through education fees planning. It is essential that you be prepared for the outlays that you will face, and are realistic about the true cost of an invaluable education, or run the risk of encountering nasty shocks further down the line.

It is clear that the earlier you prepare, the easier it is to meet education costs, and acting sooner rather than later means you can relax knowing you have made the necessary provisions for your children’s future. But despite a shared goal, no two families are the same and their situations are often entirely unique. As such, we would urge people to seek professional advice, as by listening to your specific questions and concerns, as well as recognising your individual needs, a financial planner is able to come up with the right planning process and strategies for your particular circumstances. Above all, you need to find the right solution to get the most out of your money to make that university dream become an achievable reality.

Fredric Afram, senior financial planner at Guardian Wealth Management Qatar.

SPECIAL REPORT

Building for

the future

By Thomas Bacon

T

here is renewed demand in the Qatari construction sector stimulated by major projects linked to the 2022 World Cup. The building of stadiums and other projects should provide new opportunities for companies in the industry, which has seen increased competition and higher costs in recent years.

Winning the right to host the World Cup has helped accelerate the country’s long term infrastructure development programme, which includes a metro and light rail system, railways linking to a regional network, and improvements to the road system. It has also added momentum to the ongoing expansion of Qatar’s hotel capacity.

Construction on stadiums for the World Cup, for example, will commence in 2013, following a deal signed by the Qatar 2022 Supreme Committee and several major institutions, including developer Qatari Diar, Ashgal (the public works authority) and Qatar Rail, local press reported in mid October. During the World Cup, 12 stadiums will be used of which nine will be new, and three existing grounds will be expanded.

The full schedule for the construction work has yet to be announced, and will be confirmed after consultation with FIFA. Development of five of the stadiums is currently under planning or tender, with announcements on the other projects expected soon.

There is also an increasing focus on ensuring that the buildings and utilities to be used during the World Cup are environmentally friendly. In October, the local press reported that the Qatar Green Building Council had created a group to work on ensuring that existing and planned hotels meet green standards, including reducing carbon dioxide emissions and increasing waste recycling.

With the environment high on the national agenda, offering green construction options gives developers and contractors an edge in a very competitive market, according to Yousef Al Horr, the founder and chairman of the Gulf Organisation of Research and Development. “In order to stay attractive, developers are more inclined to adopt sustainable practices,” he told Oxford Business Group. “The awareness of the public has grown significantly in recent years, whereas three years ago developers really did not pay much attention to sustainable and green building practices, as demand was high. Now there is an oversupply in some areas.”

The strong growth of the large construction sector in past years has also drawn in a range of international companies, as well as encouraged the growth of domestic firms, many of which have varying experience in handling large projects. Some of these

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operators compete largely on cost and have led to contract prices being kept down.

Meanwhile, demand for construction materials, coming up against supply bottlenecks and rising international commodity costs, have led to input prices rising. An October report by MEED, a business intelligence firm, suggested that Qatar has the Gulf’s highest costs for construction materials. The third-quarter report states that construction materials cost on average 12 percent more than in the United Arab Emirates (UAE) and 4.5 percent more than in Saudi Arabia. For example, the average cost of rebar steel is 32 percent higher in Qatar than in the UAE, while concrete is 26.8 percent higher. MEED cited the strong pull effect of World Cup construction as the main reason for the higher prices.

The squeeze on contractors’ profits that has resulted made for hard going in the slower years of 2009 to 2010, and continues to have an effect, but the hope now is that progress on long term projects – and possibly the shaking out of competitors with lower capacity – will provide new room for construction firms to grow.

Meanwhile, demand has also picked up in the private sector. On October 23, the local press reported that Arabtec, the major contractor on the Al Waab City development, would be relaunching construction on the project by November 1, with the first units due to be completed by July 2013. Al Waab is one of Qatar’s biggest private real estate developments, with more than 200 luxury villas.

Private demand is expected to further accelerate over the next two years, as excess property capacity is taken up and the economy continues to grow. Over the medium-to-long term, a healthy balance of large scale government projects and private sector development should help provide opportunities for contractors, thus easing the pressure felt in recent years.

Thomas Bacon is an analyst at Oxford Business Group.

BALANCE SHEET

CORPORATE

DEMERGERs

Companies can enact corporate restructuring by performing a demerger. Luay Hanania examines how and why these demergers take place, and the impact of these ‘spin off’ companies.

BALANCE SHEET

D

emerger is a form of corporate restructuring in which the entity’s business operations are segregated into one or more components. It is the converse of a merger or acquisition.

A demerger can take place through a ‘spin-off’ (also known as a ‘spin-out’) by transferring the shares in a subsidiary holding the business to company shareholders carrying out the demerger. The demerger can also occur by transferring the relevant business to a new company or business to which that company’s shareholders are then issued shares. Under a spin-off, the company splits off sections of itself as a separate business.

The spin-off is when a division of a company or organisation becomes an independent business. The spin-off company takes assets, intellectual property, technology, and/or existing products from the parent organisation. Shareholders of the parent company receive equivalent shares in the new company in order to compensate for the loss of equity in the original stocks; therefore, at the moment of spin-off, the ownership of the original and spun-off companies is identical.

In other words, spin-offs occur when the equity owners of the parent company receive equity stakes in the newly demergered company. For example, when Agilent Technologies was separated from HewlettPackard (HP) in 1999, the stockholders of HP received stock in Agilent.

Demergers can be undertaken for various business and non-business reasons, such as government intervention, by way of anti-trust law, or through decentralisation.

Many times the management of the new company is from the same parent organisation. Often, a spin-out offers the opportunity for a division to be backed by the company but not be affected by the parent company’s image or history, giving potential to take existing ideas that had been languishing in an old environment and help them grow in a new environment.

In most cases, the parent company or organisation offers support by doing one or more of the following: • Investing equity in the new firm, • Being the first customer of the spin-out

Demergers can be undertaken for various business and non-business reasons, such as government intervention, by way of anti-trust law, or through decentralisation. (helps to create cash flow), • Providing incubation space (desk, chairs, phones, Internet access, etcetera) • Providing services such as legal, finance, technology, etcetera.

All the support from the parent company is provided with the explicit purpose of helping the spin-off grow. Shareholders can benefit from spin-off by having the ability to then buy and sell stocks from either company independently; this potentially makes investment in the companies more attractive, as potential share purchasers can invest in only the portion of the business they think will have the most growth.

The other type of spin-off is a firm formed when an employee or group of employees leaves an existing entity to form an independent start-up firm. The parent entity can be a firm, university, or another organisation. Spin-offs typically operate at arm’s length from their parent organisations and have independent sources of financing, products, services, customers, and so on.

In some cases, the spin-out may license technology from the parent or supply the parent with products or services.

Spin-offs are important sources of technological diffusion in high technology industries. Research oriented employees accept lower wages at firms with better technological expertise in exchange for the implicit opportunity to learn about their employer’s technology and capabilities.

Employees who successfully learn can leave their employer and start their own firms using some of their former employer’s knowledge. As this opportunity has high future value, employees are willing to accept lower wages today in return for the chance to ‘spin out’ tomorrow.

Technologically advanced firms are more likely to survive and more likely to generate spin-outs, as long as the spin-offs succeed in learning their parents’ strengths. The fact that spin-offs are important in the evolution of high technology industries during the initial take-off stage, challenges the previous conventional wisdom that forces outside the industry itself drive progress and entry early in the evolution of an industry.

The accounting impact of a spin-off is the necessity of determining whether the transaction represents transferring of assets or business, the fair value of considerations exchanged at the spin-off company level and the gain or loss to be recognised under the International Financial Reporting Standard.

On the other hand, determining whether the transaction represents a business combination at the spun-off company level, the fair value of the considerations exchanged, and the goodwill or the gain from bargain purchase transaction is a necessity.

Luay Hanania is a senior manager at KPMG in Qatar.

TheEDGE

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ALFARDAN PROPERTIES’ COMMERCIAL TOWERS

ARE STARS IN DOHA’S SKYLINE AND AN ICON OF EXCELLENCE Alfardan Properties, an innovative leader in Qatar›s real estate industry, has remained on the forefront as the ideal choice for top organisations when selecting a mainly by a growing interest in highlevel luxury offerings that cater to the corporate organizations and businesses in Qatar. The company has credited its vast experience as a long-time market leader and innovator in real estate solutions in Qatar for its ability to design and deliver iconic properties that meet the needs and exceed the expectations of its clients.

Alfardan Properties commercial properties’ uniqueness lies to exquisite benchmarking of state-of-the-art facilities, top-quality space; not to mention the locations of the commercial properties distributed in the prime business hubs around Doha. Some of Alfardan Properties’ popular commercial buildings renowned for their service and quality excellence within Qatar’s corporate sector are projects that have achieved considerable success. Alfardan Towers, Alfardan Centre and Alfardan Plaza, among others.

A

lfardan Towers, Alfardan Centre and Alfardan Plaza among Qatar’s most successful commercial properties

Alfardan Properties has distinguished itself as a premier provider of comprehensive range of real estate solutions, ranging from worldclass properties to professional property management services in Qatar. Alfardan Properties has been behind some of the most prestigious and exclusive residential and commercial property developments in Qatar. Its creations have been renowned for their technical superiority and distinct creativity, featuring an inspired combination of the traditional beauty of Arabic architecture, modern design concepts and cutting-edge technology.

Alfardan Properties has been awarded ISO Management System) in 2011 by Lloyd’s the company’s commitment to quality project development, leasing and property management services.

Muhibullah Mani, COO, Alfardan Properties, said: “Alfardan Properties

The 6-storey Alfardan Plaza is a modern day landmark with a fusion of traditional motifs blended with clean post-modern lines.

Strategically located in the heart of Doha city in building is home not only to the prestigious Alfardan Premier Motors and Land Rover Showroom, but also to several prominent companies and enterprises.

which is home to posh boutique retail in luxury brands, designer labels and a Gourmet Restaurant.

The 30-storey commercial tower offers

continues to capitalise on the company›s extensive market experience and professional expertise to fully understand client requirements and respond to evolving market demands. With this approach, we have been able to develop and maintain the quality of our innovative and luxurious commercial properties that complement Qatar’s reputation as one of the most dynamic and lucrative business destinations in the world. We have taken into consideration prime factors such as location, current corporate market requirements and contemporary design in the development of these commercial Properties’ uncompromising commitment to excellence in developing commercial and residential properties that exceed expectations in terms of quality, luxury and location.”

Established as a brand synonymous with luxury and excellence, Alfardan Properties real-estate continues to soar with new and innovative projects that are in line with the changing dynamics of Qatar’s property market.

The Alfardan Towers, well-known for being Doha, soar 40 storeys above the West Bay commercial district and are a symbol of Alfardan Properties’ continuous efforts towards luxury and excellence. Exuding an air of lavishness and exclusivity, the Commercial Tower is connected to the residential Tower by a podium at its base,

private secured access for employees and visitors; eight high-speed elevators; raised other amenities.

Alfardan Centre, located at the beginning of Doha’s Bank Street, serves as the being home to Alfardan Exchange and Alfardan Jewellery branches. Renowned area, Alfardan Centre is located adjacent to the historic souq Waqif, one of Doha’s biggest cultural attractions; in addition institutions, the Doha Securities market and the City’s famous Corniche.

IN THE SPOTLIGHT

public health and safety standards

has Qatar learned its lesson post-villaggio?

IN THE SPOTLIGHT

Never in Qatar’s history has a fire raised so much concern. Erika Widén examines how the tragic Villaggio mall blaze that killed 13 young children in May 2012 has led authorities and businesses to review their emergency and safety measures, and asks whether anything has really changed.

O

Sherien Moustafa of Child Care Center Nursery says that after the Villaggio fire they have installed more fire extinguishers, cameras to view the whole nursery and have bought fire proof playmate foam flooring and toys for additional safety for the toddlers.

n May 28, a major fire broke at the Gympanzee day care centre in Villaggio mall. A total of 19 people died, including 13 children, four women teachers and two civil defence personnel. According to the investigation committee, the fire started at a sportswear outlet due to faulty electrical wiring and immediately spread to adjacent Gympanzee. It was also reported that all parties concerned lacked appropriate licences to operate, and safety and evacuation measures were woefully inadequate.

The Villaggio tragedy prompted wideaspread public reaction. The Ministry of Social Affairs, in turn, immediately ordered all nurseries to use only the ground floor and in October 2012 a draft law was approved by the State Cabinet in order to monitor kindergartens and nurseries. The proposed law outlines that it will be compulsory for a nursery to obtain clearance from Civil Defence, prior to obtaining a license. The facility must be located on the ground floor, and not located on a main or busy road. Currently the Advisory Council is revising the draft law, and it is expected to be executed soon.

Most Doha nurseries themselves have taken additional steps to ensure the safety of their pupils. “The safety and security of the children in our nursery is one of our main concerns,” says Susan Harvie, manager of Acorn nursery. “Since we opened [March 2012] we have made sure that we have complied with all international standards, such as clear safety signs, staff training, staff student ratio, fire drills, procedures and our staff have first aid training.”

Sherien Moustafa, manager of Child Care Center Nursery says that their nursery opened three years ago and after the Villaggio accident they have installed more fire extinguishers and cameras to view the whole nursery, and have bought fire proof playmate foam flooring and toys for additional safety for the toddlers.

“The teachers have received first aid training and still we would like to improve the nursery. The playing area is new and I am constantly bringing healthy and secure materials for the children from the United Kingdom,” says Moustafa.

In an interview with a local Arabic daily nespapaer, Noora Al Hajiri, deputy director of family development affairs at the Ministry of Social Affairs advised parents that they should not admit their children to a nursery that did not hold a proper licence, including a commercial registration number. Al Hajiri stressed that the new law on nurseries will focus mainly on the safety and security of the premises besides health and hygiene, and academic qualifications of the teachers. Al Hajiri added “It will be mandatory for every new nursery when applying for a licence to obtain a certificate from the Civil Defence department stating that it fulfils the safety and security requirements.”

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IN THE SPOTLIGHT

The new law authorises Civil Defence to improve and monitor the safety of all of Qatar’s buildings.

CITY CENTER DOHA Following the Villaggio incident, one of Doha’s largest malls, City Center in West Bay, was closed for three weeks for inspection by the Civil Defence due to safety concerns. The centre has a total of 317 shopping outlets, and some were not allowed to operate until they met the safety requirements. Although the centre does not have a day care centre facility, there is Fun City, which is an entertainment area for children.

TheEDGE spoke to the director of ECE the facility management of City Center Doha, Olaf M. Kindt with regard to the measures the mall has taken in ensuring safety and security of its customers. “Villaggio showed, it can happen very fast and that’s why we are giving our tenants a very short notice of 24 hours,” he says, “and even if it’s a violation it is unacceptable. We have the power to close the shops and, this is important to underline, we are using this power.”

Kindt adds that in general City Center is working towards achieving an international security standard. “As our management ECE is based in Germany, and our company has more than 180 shopping centres under their management, therefore we are very structured and straight with fire and safety,” says Kindt.

According to Kindt, City Center has 55 trained security guards working around the clock, and an inhouse fire prevention team consisting of five guards who are also on duty 24 hours a day. The fire prevention team is highly trained in emergencies circumstances, such as fire, electrical and/or chemical problems.

Kindt adds that recently one of their tenants had a short circuit in one of the outlets, and within a minute and a half the prevention team arrived. In March there was also a minor fire in the food court area, and although the fire was quickly extinguished, the shopping centre was evacuated immediately.

“One of the food courts is closed because we are still doing the reconstruction, and because of the fire in March, the pipes and tubes are contaminated and we are now implementing the latest safety standards of Qatar,” says Kindt.

Kindt explains that one of the new requirements from the Civil Defence is to have flashing-lights throughout all areas of the mall for those who cannot hear properly to be aware that something has happened. In Europe the norm is that escalators do not stop, whereas Qatar’s Civil Defence requests they stop immediately.

“The Civil Defence request is to integrate that into the system and this is what we did. The incident is reported, the alarm is sounded and immediately the escalators stop and the sliding doors in the main entrance open, so the people can evacuate,” explains Kindt.

Recently, City Center held a fire drill during the day involving the Civil Defence in order to create full awareness to both their tenants and more than 1000 staff. “From time to time we need to refresh this because our employees are changing, and we need to remind our employees that these emergencies can happen,” says Kindt, who believes that now after the Villaggio accident, all Qatari businesses are more sensitive and prepared when it comes to the safety of their tenants and customers.

PARENTS’ CONCERNS Nevertheless, not long after Villaggio, which was closed for investigation and refurbishment for four months, reopened in September, a group of children were trapped on a fun ride at the mall’s Gonodolania indoor themed park. While the ride was in mid air, due to a technical malfunction it stalled for about an hour and a half.

The Ministry of Interior posted on their Twitter account. “Civil Defence rescue children without any injuries from a ride in Villaggio as it was stopped suddenly.” Following the Villaggio fire and the Gondolania’s ride incident, during the recent Eid holidays many parents were reluctant to bring their children to play areas, which are mostly located within malls. Although there was no fire, it created While some continue to flout laws banning smoking inside shopping malls, enforcement and fining of offenders is on the increase in further distress for many.

Qatar, though many feel much more needs to be done to eliminate it completely.

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IN THE SPOTlIGHT

rescue workers and first aid facilities to tackle an emergency, in addition to constant maintenance of play area equipment, age limit and that there be a caretaker present.

Despite Civil Defence efforts, there are still clearly other safety measures which need to be addressed post-Villagio fire. The amusement park ride incident has led the local community, perhaps for the first time, to question how prepared are all the facilities open to the public in Doha to handle an emergency.

Not that the business community itself has not reacted. Jinith T. Varghese, a representative of Enertech Qatar, a company that provides health, safety and environmental training tells TheEDGE, “After the Villaggio incident we have experienced a sudden increase in the number of delegates and students attending the fire fighting and first aid training, and many enquiries regarding consultation for emergency drills and preparedness.”

Varghese says that the delegates and students are coming from construction or oil and gas industries, hotels, offices, apartments and other sectors.

Olaf M. Kindt, director of ECE the facility management of City Center Doha tells TheEDGE what changes were made in City Center after it was closed for three weeks during the Civil Defence inspection.

In a recent Qatari newspaper article, a concerned local father said, “We visit malls but with deep fear to let children play in fun areas due to the two recent incidents.” In the article Qatari parents also expressed that there should be safety requirements such as

734

THE NUMBER OF FIRE-RELATED INCIDENTS IN QATAR IN 2010 DUE TO UNKNOWN CAUSES

CIVIl DEFENCE amENDED law In August HH the Emir Sheikh Hamad bin Khalifa Al Thani signed a new law, which amends the Civil Defence law issued in 1977. The new law authorises Civil Defence to improve and monitor the safety of all of Qatar’s buildings.

Mark Kenyon is a chartered safety and health practitioner and HSE manager of Velosi Qatar, a quality control and assurance company.

“The biggest and most fundamental change that has occurred in Qatar is the new Civil Defence Law,” says Kenyon. “Civil Defence have vastly increased the numbers of inspections that they conduct and it is also a requirement for companies to have their building inspected prior to the renewal of their commercial registration.”

Kenyon explains that the Civil Defence have proactively undertaken a number of fire and emergency evacuation drills in prominent public buildings and continue to do so to raise the need for building owners, operators and employers to understand what to do in the event of any emergency.

Kenyon also believes that the legacy of Villaggio undoubtedly created far greater awareness now for fire and fire risk management across all sectors, but this is not just as a result of the fire and includes all of the law enforcement action taken post-Villaggio.

There have of course always been laws in Qatar that ensure certain standards and safety requirements before obtaining a certain license for any business to operate in the country.

However, as Villaggio has ostensibly shown, the sentiment of many in Qatar is that there are still inadequate monitoring and reporting and enforcement mechanisms, which permits violations of the certain laws to continue, at least by some unscrupulous businessmen. Certainly, if this is the case, it is down to saving money as it will always cost less to construct and maintain buildings with substandard materials and to not train staff and make accommodation for health and safety equipment etcetera.

If anything can be learnt from the Villaggio fire – for Qatar’s businesses or the country’s safety construction preparedness is that parents, businessmen must adhere to apply and preserve safety measures, and to be vocal when attention is required to ensure a secure environment.

The authorities of course must play their part, but it is also the business community as a whole whose responsibilty it is to take action on these issues and ensure the safety of their customers and in the precious young lives in these kinds of facilities, in order to make sure that something like the Villaggio tragedy never happens in Qatar again.

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FEATURE STORY

AFRICA:

STILL THE ‘HOPELESS CONTINENT’ for investment?

By MARK VAN DIJK

FEATURE STORY

As Africa shows signs of economic growth, a violent mining strike in South Africa has sent shockwaves through the continent’s strongest economy, begging once again the perennial question: will volatile Africa ever be a smart choice for international business relationships and investors, especially those from Qatar and the GCC? Cry, The Beloved Country It started as a national tragedy, and quickly mutated into an international public relations nightmare for South Africa. In mid-August 2012, a workers’ strike at a platinum mine near Marikana in the country’s northwest heartland had turned violent, leaving approximately 44 people dead including 38 miners, most of whom were shot in the back by armed police officers.

Reporting on the country’s worst such incident since 1960, in late October, Londonbased news magazine The Economist ran a damning cover story titled Cry, The Beloved Country, echoing the title of a famous and painful 1948 book by Alan Paton regarding South Africa’s path to apartheid.

The sub-heading, South Africa’s Sad Decline gave a taste of what was inside the article. “In the past decade Africa to the north of the Limpopo river has been growing at an annual average of six percent, whereas South Africa’s rate for the past few years has

slowed to barely two percent,” reported The Economist. “Foreign investment is drying up.

The unemployment rate, officially 25 percent, is probably nearer 40 percent; half of South Africans under 24 looking for work have none.

Of those who have jobs, a third earn less than US$2 (QR7) a day. Inequality has grown since apartheid, and the gap between rich and poor is now among the world’s largest.”

In South Africa, the reaction to Marikana was mixed. Instead of leaping to their country’s defence, many locals admitted that, yes, all was indeed not well. In an opinion piece in South Africa’s Business Day, the opposition party’s leader in parliament, Lindiwe Mazibuko, wrote: “We live in an interconnected world; one of opportunities and risks. It was Qatar based Al Jazeera which provided the first pictures of South African police crouching behind armoured vehicles firing upon mineworkers in Marikana in August. Why does this matter? Qatar is the wealthiest state in the world per capita and the

Police violence following protests by miners in Marikana in South Africa earlier this year that ended up in scores of deaths echoed apartheid era violence and caused great concern in business circles about the social and financial stability of Africa’s strongest economy. (Image Corbis/Reuters)

emirate has a great deal of footloose capital waiting to be invested elsewhere in the world.

Will an investor sitting in Doha look towards our state as an investment destination, or rather to Botswana, Mauritius or Angola?”

South Africa’s ruling party, the African National Congress, issued an equally strong response. Presidential spokesman Mac Maharaj issued a statement saying: “In direct contrast to The Economist article, a strong vote of confidence was given in the last week by the international business community with the country’s inclusion in Citigroup’s World Government Bond Index...Our success is also visible when benchmarking the country against other emerging market economies such as the BRICs and Next 11 countries.”

Thanks to its natural resources, tourism, agriculture and a comparatively well educated population and solid infrascruture, South Africa is by some distance the strongest and most stable African economy.

It is, after all, often referred to as the capital ‘S’ in BRICS – an association of leading emerging economies which also includes global heavyweights Brazil, Russia, India and China. As The Economist itself pointed out in its piece: “At the turn of the millennium [South Africa] accounted for 40 percent of the total gross domestic product of the 48 countries south of the Sahara, whereas Nigeria, three times more populous, lurched along in second place with around 14 percent. The remainder, in raw economic terms, barely seemed to count.”

But post-Marikana, the damage had been done and it seemed to many analysts that the swathed socio-economic and political problems South Africa has been facing are starting to come to a head. And while Marikana and The Economist cover story remained a South African scandal, the implications echoed across the continent, long TheEDGE

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If South Africa’s economy is still considered volatile, what hope does the rest of Africa have?

In April 2012, Hussain Al Abdulla, senior executive of the Qatari sovereign wealth fund, revealed that the fund would invest at least US$30-billion (QR109 billion) in 2012 in Africa with a focus on commodities. “No-one yet has the knowhow to invest large amounts in Africa. This is not easy, but we are looking for direct investment,” he said. (Image Getty)

troubled by political strife, violence, disease, corruption and exploitation.

And, the thinking went, if this sort of decline could happen to South Africa, what hope for the rest of sub-Saharan Africa?

Arab Investment It is only natural at a time like this that Africans would look nervously towards a wealthy state such as Qatar. In April, Hussain Al Abdulla, senior executive of the Qatari sovereign wealth fund, revealed that the fund would invest at least US$30 billion (QR109 billion) in 2012 – with a key focus on commodities.

Abdulla added that the fund was looking especially for opportunities for direct investment in Africa, despite the inherent

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difficulties. “To invest large amounts in Africa, we need a mechanism,” he said.

“No-one yet has the knowhow to invest large amounts in Africa. This is not easy, but we are looking for direct investment.”

In September 2012, Qatar confirmed that it would invest US$18 billion (QR66 billion) in Egypt over the next five years. Qatar had already entered Tunisia, acquiring a 75 percent of the telephone operator Tunisiana, and has made significant investments in Algeria, Mauritania, and Morocco.

However, investments in sub-Saharan Africa – specifically in central and southern Africa – have not been quite as plentiful. In November 2012 a group of investors led by Qatar’s sovereign wealth fund and by Polish billionaire Jan Kulczyk were reported to be

bankrolling a US$700 million (QR2.5 billion) company investing in mineral exploration and extraction in Africa and South America.

Nevertheless, the heavy investment in North African economies does not represent the large amounts of investment that these countries have been hoping for. It is not entirely surprising, though, given the parochial nature of Middle East and North Africa (MENA) investors. The third-quarter 2012 Qatar Financial Centre Authority/FTSE Global Markets MENA Asset Management Survey revealed that over one third of the respondents have all their assets invested in the Middle East and North Africa. Given that natural resistance to investing outside the MENA region, what possible incentive could Qatari investors have for investing in subSaharan Africa, of all places?

The Good and Bad News Based purely on its natural resources, Africa should be an easy sell. After all, the continent – which, those with longer memories have not forgotten, was dismissed in 2000 by that same The Economist as “the hopeless continent” – sits on 13 percent of the global reserves for oil, 50 percent of proven

25%

The official unemployment rate in South Africa, in what is supposed to be sub-Saharan Africa’s ‘strongest’ economy.

FEATURE STORY

gold reserves, 50 percent of proven iron ore reserves, 60 percent of cobalt and 90 percent AFRICA’S LEADING ECONOMIES of the platinum group reserves. More than The top 10 African countries in terms of nominal GDP and where they fit into the global ranking: 100 African companies have annual revenues exceeding US$1 billion (QR4 billion), and the COUNTRY RANK IN AFRICA RANK IN THE GDP (in WORLD millions of continent is home to nine of the world’s 15 US$) fastest-growing countries.

But all that good news is overshadowed South Africa* 1 29 $408 689 by the all-too-familiar reports of the bad.

Nigeria* 2 40 $244 050 In 2010, the international watchdog group Egypt 3 43 $235 719 Transparency International (TI) ranked six Algeria 4 48 $197 862 African nations among the 10 most corrupt Angola* 5 60 $104 288 countries in the world. Those six – Sudan, Chad, Burundi, Angola, Equatorial Guinea Morocco 6 61 $99 279 and Somalia (listed as the most corrupt nation Sudan 7 66 $63 997 in the survey) – were joined by the majority Tunisia 8 77 $45 991 of the continent. According to TI’s scorecard Ghana* 9 83 $38 394 (which works on a 10 point scale, with zero Libya 10 84 $35 699 being the most corrupt), 44 of the 47 African countries in the 173 country survey earned *Considered to be in “Sub-Saharan Africa - Source: International Monetary Fund, 2011 a score of less than five. The least corrupt African nation, Botswana, could only muster a score of 5.8 out of 10.

Perhaps the most damning assessment of Africa’s continentAFRICA’S CREDIT RATINGS LEADERS wide leadership crisis comes from the Mo Ibrahim Foundation.

The top 10 African nations in terms of their credit rating, as ranked by Standard & Poor’s.

Established by Sudanese-born British billionaire Dr Mohamed Ibrahim, the Foundation offers a US$5 million (QR18.2 million) COUNTRY RATING OUTLOOK annual prize in recognition of excellence in African leadership. In Botswana AStable its six-year history, the prize has only actually been awarded three times. No award was given in 2009, 2010 or this year – simply South Africa BBB+ Stable because no worthy candidate could be found anywhere in Africa.

Morocco BBBStable “If we said we’re going to have a prize for exceptional leadership, Tunisia BBBStable we have to stick to that. We are not going to compromise,” Ibrahim Angola BBStable said after announcing in October that the prize would again go Gabon BBStable unclaimed in 2012.

Cape Verde B+ Stable But the negative publicity that has for so long plagued Africa as a business destination is becoming increasingly outdated. A recent Kenya B+ Stable report by the African Development Bank paints the continent as Mozambique B+ Stable being less like the same old Africa, and more of the new Asia. That Nigeria B+ Stable report – titled Africa in 50 Years’ Time, and published in September 2011 – projected that “by 2030 Africa will likely reach US$2.2 Source: S&P trillion (QR8 trillion) in annual expenditures and comprise about three percent of worldwide consumption”.

Qatar itself has already started a small amount of investment The African Development Bank report continues: “The emerging in South Africa. In 2007 Qatar Petroleum and South African middle class in the continent which some estimates equates roughly to petrochemicals firm Sasol entered a joint venture (named Oryx) to the size of the middle class in India or China, will continue to grow, construct a second-generation gas-to-liquids complex in Ras Laffan from 355 million (34 percent of Africa’s population) in 2010 to 1.1 Industrial City. In June 2011 South Africa and Saudi Arabia set up a billion (42 percent of the population) in 2060.”

US$2.4 billion QR 10 billion), 50-50 joint venture holding company Perhaps it is no wonder, then, that China has proposed or for farming, mining and petrochemical investments. And in January committed about US$101 billion (QR367 billion) in investment to commercial projects in Africa since 2010, with 19 percent of that in oil 2012 Qatar Petrochemical Company and natural gas, and 19 percent in rail and roads.

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FEATURE STORY

TESTING THE

SUN QATAR OPENS FIRST SOLAR POWER TECHNOLOGY TESTING FACILITY AT QSTP

FEATURE STORY

As part of Qatar’s ongoing drive towards energy efficiency, in early December 2012 international energy firm Chevron and Qatari renewable energy company GreenGulf will inaugurate their Solar Test Facility, a long-awaited joint venture to test and evaluate current and emerging solar technologies at the Qatar Science and Technology Park. TheEDGE spoke exclusively to Carl Atallah, president of Chevron Qatar Limited, about how the facility came to be, what it hopes to achieve, and how it might contribute to this small but sun washed Gulf state’s potential to become a future hub for solar energy production and industry.

T

he process that led to the inception of this facility, Carl Atallah reveals, began when Chevron signed an agreement with local authorities to locate its Centre for Sustainable Energy Efficiency (CSEE) at the Qatar Science and Technology Park (QSTP) in Doha in early 2009. “HE Abdullah bin Hamad Al Attiyah was instrumental in Chevron establishing the CSEE with the support of Qatar energy minister, HE Dr. Mohammed bin Saleh Al Sada, who inaugurated the centre when it officially opened in 2011,” says Atallah.

Focusing on showing to students, professional and officials how energy is consumed and how it can be done efficiently, the raison d’etre of the centre, explains Atallah, was a combination of motivation from these ministers, and all involved in the Qatari energy sector, realising that much energy is wasted in the production and generation of power from hydrocarbons. It was also down to the fact, he says, that “at Chevron we believe that energy efficiency is the most readily available and cheapest form of energy for both energy importing and exporting countries alike.”

Atallah explains that more than two decades ago Chevron embarked on an internal audit to transform how energy was utilised within their own facilities.

“We began to make changes in our own operations around the world, and that has resulted in a reduction of energy

consumption of more than 30 percent,” he tells TheEDGE. “At the same time the company doubled in size, so it is a huge impact in terms of energy consumption… about US$7 billion (QR26 billion) a year savings for Chevron globally. That is a huge economic benefit, but it is also a huge impact on cutting our own carbon footprint.”

AN UNTAPPED RESOURCE In regions well endowed with hydrocarbon resources such the Middle East, this cost saving approach to energy efficiency has not been a priority, says Atallah. However, the awareness that these resources are finite – and that production and consumption of energy can be achieved more energy efficiently and environmentally friendlier – prompted the Qatari authorities to pursue ways to improve the situation.

One such avenue eventually led to the formation of the CSEE, and ultimately the Solar Test Facility. In 2009, Qatari GreenGulf CEO Omran Al Kuwari had pitched the idea of establishing a solar test facility at QSTP. In March 2009, the project was announced under the patronage of HH Sheikha Moza bint Nasser, chairperson of Qatar Foundation.

In that same year, GreenGulf’s Corporate Research Agreement with QSTP was signed to move the project forward. With the support and guidance of QSTP, GreenGulf and Chevron agreed to develop the Solar Test Facility jointly and in 2010, both entities signed a Joint Study Agreement to develop

and operate the QSTP Solar Test Facility.

“Since we started this project, the National Vision from HH the Emir Sheikh Hamad bin Khalifa Al Thani has provided a platform for a discussion in renewable energy, because of his vision to make Qatar more sustainable,” says Atallah. “On the consumption side, cutting wasteful consumption of energy, in other words improving energy efficiency, is one important factor. On the energy generation side, Qatar receives some of the highest solar radiation in the world, so solar energy may prove to be a significant contributor to the energy mix in the future.”

But before investing in solar, explains Atallah, the technologies used to generate this form of energy in the Middle East must be accurately assessed. “How efficient is generating solar power under the harsh climatic conditions present in this region? is a question that must be answered,” he says.

Only the new facility can achieve this. It will be included among a small number of similar projects, all of which are in the United States (US), where Chevron has three sister sites in different environments: two in California and one in New Mexico. Set to become Chevron’s most comprehensive, the Doha Solar Test Facility will become a pivotal phase in the development and construction of solar power technology in the region, especially in determining which of these can withstand the rigours of exposure to the heat, humidity and dust common in the Arabian Gulf.

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Phase one of the Qatar facility, says Atallah, involved the installation of 20 photovoltaic cell solar power technologies, and in the very recently completed phase, 10 solar thermal technologies. “Photovoltaic basically takes the radiation from the sun and converts that directly into electricity,” he clarifies. “The solar panels start to generate electricity as soon as the sun hits them.

Whereas, with solar thermal, the sun is concentrated by mirrors into a tube of water or other liquids to generate steam or heat the liquid, and then the energy from the hot liquid is used to generate electricity, or it is applied directly for water heating, air conditioning and other applications.”

Chevron Qatar President Carl Atallah

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THE ULTIMATE TEST “What we are testing,” continues Atallah, “is commercial and near-commercial technologies that are readily available in the market with the understanding that not all solar technologies are created equal. We aim to identify those technologies that will be most efficient and cost effective in the environment of Qatar. Some technologies may be more affected by the heat, while others may be less efficient under the sandy and dusty conditions so prevalent in this region.”

The humidity, adds Atallah, will also be taken into serious consideration. “This is a big factor,” he confirms, “and I feel confident that we will identify those technologies that can perform most optimally in this environment.

We will be testing other elements as well, including the installation process to identify ways to expedite it, coating fluid, washing techniques, etcetera – all items that contribute to costs, because each of these components add cost, so maximising efficiency of all these components can improve the competitiveness of solar power.”

Even the angle of the sun through the day will factor in, including panels that follow the sun through its daily arc on single and double axles, as well as how the energy generated is stored in batteries and which types are the most efficient, will be included in the equation.

How these technologies perform during different times of the day and in each season will also be part of the evaluation process at the facility. “We have modelled the local

FEATURE STORY

US$20 million

Amount invested in construction, testing, equipment and operation at Qatar Solar Test Facility

conditions and we know that power generation not only decreases in the winter relative to the summer, but also power output changes during day with the location of the sun in the sky,” furthers Atallah. “There are definite variations, and those are the challenges that have to be addressed – how do the variations affect the grid, etcetera? – as managing that grid is an important factor as well.”

COST EFFICIENCY Ultimately, the most cost effective means of generating solar power will win out. This might not be the cheapest to produce or the cheapest in generating power, says Atallah, but it will be the overall most efficient and cost effective technology. This of course is sound logic strictly in a business sense, but he adds, it is especially pertinent for Qatar in the approach to the FIFA World Cup in 2022.

Carl Atallah, president of Chevron in Qatar and Qatar Solar Facility joint venture partner Omran Al Kuwari of Qatari renewable energy firm GreenGulf inspect panels on site.

“GreenGulf is confident that the facility will be an important component in Qatar’s vision to encourage the use of clean technology across the region,” says Al Kuwari. “It allows us to test new and emerging solar technologies in order to understand their suitability for the Middle East environment and the data it will generate may give rise to unique Intellectual Property to support the marketability of solar technology applications across the region.” (Image courtesy Chevron Qatar)

“This becomes very critical information for Qatar given the scale of the plans for solar power in the country,” Atallah says of the latter. “For example, FIFA has a requirement of 27 degrees Celsius on the pitch at the time of the games. As you know, summer temperatures here can reach high 40s. It will require a great deal of cooperation between all the companies working, and our knowledge and experience in optimising solar technologies for the Qatari environment should have great value and play an important role in ensuring the country achieves success in hosting a carbon neutral world cup.”

Thanks to advances in the technology in their manufacture, solar power-generating silicon photovoltaic cells have only in the past few years become much more cost effective to produce. As the price of solar power is central to the ongoing development of the technologies it employs, as well as in turn the very existence of the Solar Test Facility, Atallah then explains how the project has also been fortuitous due to the high oil price in recent years, making solar increasingly competitive with traditional hydrocarbon energy.

“It is linked to the price of a competing fossil fuel,” Atallah affirms. “When the price of the fossil fuel is low, solar energy becomes less competitive. At current price levels of near US$100 (QR364) per barrel, renewable energy is more competitive. In this region renewable energy is less competitive obviously because fossil fuels are sold in the local market, in effect, subsidised [but] this is the relevance in

Qatar of the Emir’s 2030 vision.”

Indeed, while Atallah agrees that solar technology is generally a medium- to longterm investment, one that might not reap dividends for years, even decades, assessing exactly what this cost versus revenue time frame might be also depends on the location and market dynamics at play. “In certain cases and certain areas it would be more expensive,” he says, “it depends on what you are competing against. In Germany where energy is expensive, solar competes fairly well even though the sun doesn’t shine as much. Conversely, in Qatar where there is plentiful gas, it is more challenging to make solar power competitive, but obviously the Qatari government is setting the requirement to increase renewables in the energy mix.”

In a broader commercial sense, the facility will operate on different levels, informs Atallah. To begin with, of the thirty or so technologies being deployed at the facility, from companies all around the world, including Germany, China, Japan, the US and Korea to name just a few, some have donated the equipment to test in exchange for return of data and others have sold the equipment to the facility. “Everybody has different approaches and requirements so it has been a very complex negotiation process,” explains Atallah. “It has taken us about a year to get to this point, and as of today we still have one or two companies with which we are still in negotiations.

“We will provide information to those companies that donated the panels as per the agreement,” Atallah continues. “The

“Qatar receives some of the highest solar radiation in the world, so solar energy may prove to be a significant contributor to the energy mix in the future.”

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“‘How efficient is generating solar power under the harsh climatic conditions present in this region? is a question that must be answered.”

Qatar Solar Test Facility Quick Facts • The test site, located at QSTP is 35,000 square metres.

• It has 200 kilowatts of photovoltaic and thermal systems respectively.

• It is a secure site with LEED Silver certified workshop and buildings.

• Electricity be will used to power the site with excess going to Qatar Foundation.

• Testing will commence in late 2012 and into 2013.

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information they will receive is strictly related to their performance in this environment, not compared to others in the test. We will hold the information of what works best in this environment as this information is proprietary.” Though Chevron and Green Gulf will not develop any of these technologies themselves, Atallah then points out, once optimum technologies have been determined Chevron, which he says is one of the largest installers of solar energy in California, is looking into doing the same here. “We are evaluating whether our business model can be applied in Qatar and the results obtained at the solar test site should help us find an answer,” he explains. “It provides us with an important technical advantage and provides a very interesting opportunity in growing with the solar business in Qatar and elsewhere in the region.”

Though this whole process is somewhat of a closed entity at present – at least to further businesses seeking to become involved in whatever guise – thanks to 2022 infrastructure projects, Atallah believes this may open up in the future. “At this time, we are conducting research and participating in a couple of small scale solar commercial opportunities,” he says. “There are still too few opportunities to define a business model, but we are hopeful that opportunities will grow in the medium to long term.”

A SOLAR QATAR Qatar, Atallah agrees, is certainly positioning itself well to become a regional hub for the development, manufacture and export of solar power and related technology. Beyond the test facility, unrelated collaborations involving the production of photovoltaic cells by Qatari companies such as Qatar Solar Technologies

(QSTec) at QSTP (see box out) and further initiatives by the Qatar Environment and Energy Research Institute (QEERI), bode well for growth in this sector overall.

However, Atallah offers a few caveats to this seemingly bright future. First he says that young Qataris must be developed to ensure available local human resources and second, local companies must continually adapt to keep pace. “We have a programme of internship for students, and this past summer we had three interns from Qatar University and Texas A&M. We think that it is very important to build organisational capability and to provide opportunity for students. It is encouraging to see that there is a good level of interest in the renewable energy field from the students graduating in Qatar. If Qatar is to become a centre for the export of these technologies and know-how then developing human resources is a critical process.

Regarding exporting solar technology, it is too early to speculate at this stage. At the end of the day it all boils down to how competitively Qatar can produce solar technology.

“Solar technologies are evolving quickly, and in this dynamic environment bankruptcies are common as you can see from some news reports recently,” adds Atallah, citing the failure of the high profile Solyndra in California as a prime example.

“Competition is high, change is rapid and there are companies in various countries that are able to do things better, cheaper, etcetera.

In any new technology, change happens fast, and companies have to innovate to stay in business. It is a challenge for all in the field, not just for Qatar.”

Through its facility here, however, Atallah says Chevron is primed to contribute meaningfully to Qatar’s presence in the global solar energy paradigm. “The test facility provides us with the opportunity to keep a competitive edge by having clear understanding of which new technologies have the edge for commercial deployment,” he concludes. “We are able to quickly incorporate new, better products as they appear in the market. This is how we respond to a fast moving field, and our customers can rest assured that we are providing best in class for the right price.”

FEATURE STORY

Qatar's SOLAR AMBITION The view from QSTP Hamad Al Kuwari on Qatar’s solar future Qatar Science and Technology Park (QSTP) managing director Hamad Al Kuwari is responsible for developing strategic plans for growth in technology development in four themed areas, energy, environment, information communication technologies and health sciences, which represent the four (technology related) pillars of the Qatar National Research Strategy (QNRS). He is also responsible for identifying areas where synergies can be built between members of QSTP, who are engaging in new activities (in line with QNRS), and QSTP, as well as liaising with governmental agencies. TheEDGE asked him a few questions regarding the development of solar technologies in Qatar: How important do you think developing solar energy resources is to Qatar and the Gulf region and how do you think QSTP and Qatar can contribute to this?

The 2030 vision, the Qatar National Development Strategy 2016, and the Qatar National Research Strategy 2012 (QNRS), all address the need for the use of alternative energy, where solar energy is the obvious low hanging fruit for Qatar. Given that the region has a similar climate, our research outcomes would be applicable elsewhere. Diversification of energy resources is very important, and harvesting the energy from the sun’s rays is a wise thing to do.

However, we need to understand the performance and adaptability of the different technologies available worldwide and their applicability in the country. Having plenty of sun does not mean solar energy is a fact; we need to assess and test. Once enough data is collected, technologies are ranked according to commercial viability. We will then be able to provide policy makers with scientific-proven information that can lead to a wider implementation of solar technologies. Setting an objective of providing certain electricity percentage through solar technologies is likely to reduce consumption of natural resources available in the country for exports opportunity cost, notwithstanding, minimising the environmental impact.

If some of these technologies are proven to be cost effective and efficient do you think that they will be adopted in a major way in Qatar, what role do you think Qatar can play in developing these technologies locally and exporting them to the world and what will QSTP’s role in this be?

The expected outcomes of the Solar Testing Facility are to understand the performance of these different technologies, quantifying the challenges that would be faced related to the local climate. Thus, there will be ranking of different technologies based on their performance and application. Qatar can play a significant role in adjusting those technologies to be more cost-effective and adaptive to the local environment, such as using nanotechnologies to reduce the potential effect of dust.

QSTP is not only involved with the Chevron/GreenGulf but also QStec in different aspects of solar power. Are there plans to facilitate and/or host further initiatives in this realm and what are the plans to manage the relationship between these separate but related entities and/or projects?

Our partners are Chevron and GreenGulf in the Solar Test Facility. QStec is an investment

by Qatar Foundation (QF) to produce polysilicon, which is the raw material for cell production. QSTEC is part of the QF family and once they are in operation, there will be plenty of room for collaboration, one of which will be testing the models produced using the polysilicon from that plant in the test facility. QSTP is always open for new initiatives as long as they are in line with the QNRS. Related to the previous question, how does QSTP balance the issue of managing corporate confidentiality (for example with a venture like Chevron/GreenGulf research’s information from the facility) with sharing information for further research and academic purposes?

One of the early discussions between QSTP and any of its partners after looking into the initiative itself is confidentiality and how the information will be dealt with, and then an agreement [can be] reached on the handling confidentiality prior to the start of any project.

QSTP MD Hamad Al Kuwari

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WHERE ARE ALL THE VENTURE CAPITALISTS? FUNDING QATAR’S SME SECTOR

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As Qatar looks to diversify from its reliance on hydrocarbon energy, a symbiotic culture of entrepreneurship and investment is an ideal means to develop a strong economy. Shehan Mashood looks at the challenges in funding the SME sector and asks whether there is scope for private sector venture capitalists or angel investors here.

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espite support from the Qatari government and the numerous initiatives it has backed, the small and medium enterprises (SME) sector in the country still faces many obstacles.

Though it is slowly changing, among these obstacles is the lack of engagement in start-ups from the local population, which it is widely acknowledged, is largely the result of the majority being in comfortable highly paid public sector jobs. The private sector in Qatar is also dominated by well diversified family businesses, ostensibly making it hard for small businesses to break into these markets.

The regulatory framework for setting up a business and access to funding in Qatar are also constraints hindering growth in the local SME sector. One of the biggest complaints is the prohibitive nature of start-up costs.

Khalifa Al Misnad is a Qatari entrepreneur and lawyer involved in numerous business ventures including his Doha-based law firm, Al Misnad and Rifaat, which provides local and international legal advice.

While Al Misnad points out that part of the reason start-up costs are so high is that the Qatari government is effectively creating a barrier to “fly by night” companies, he agrees the system does need to change.

“I think the government has some concerns in terms of allowing companies to set up that are actually credible, he adds.

“Then there are young entrepreneurs we see with simple business ideas that may not require a lot of financial needs to startup are actually filtered out. The angel investor can help out with that.”

BUILDING A START-UP SCENE Nevertheless, the government has established initiatives, and seems to be making an effort to create an environment that

is conducive for the development of SMEs. In fact most organisations working in Qatar developing the SME sector are either governmental or quasi-governmental.

Enterprise Qatar is a QR2 billion initiative to catalyse entrepreneurship and SME development within the country. Among education services and funding, it advocates for new corporate governance policies to benefit the SME sector.

Al Dhameem is a lending initiative set up by the Qatar Development Bank to assist SMEs and start-ups in borrowing from banks. Another source of funding for SMEs is the junior bourse setup by the Qatar Exchange geared towards SMEs with flexible regulations, making it easier to access capital for expansion. Silatech’s SILA angel network is yet another attempt at addressing the startup equity gap by connecting angel investors in the region with entrepreneurs.

Finnish investor Mikko Suonenlahti, previously based in Qatar, is active in the field of technology with more than 30 years experience. He points out that government involvement in the early development of an investment ready ecosystem is vital.

“Governments in the United States (US) and many European countries are very active in the pre-seed and seed stages of venture capital, as well as with business incubators and as limited partners in funds,” he explains.

WHERE ARE ALL THE VENTURE CAPITALISTS? For different sources of public capital to be available in Qatar for creating the start-up ecosystem, says Suonenlahti, you also need a symbiotic relationship with the private sector.

Part of the reason why much has not happened in Qatar, he feels, is that private equity firms in the region have always been very risk averse and have shied away from the inherent risk involved in unproven startups or SMEs. “There is a lot of idle capital lying in the side-lines, including with family businesses,” says Suonenlahti, adding that this could be used to create a venture capital fund. This creates the scope to develop the high risk, high rewards model under which venture capital funds work.

To make it easier to identify solid opportunities for investment, organisations such as ictQatar, the country’s Information Technology policy and regulatory body, have identified more than 68 distinct ICT investment opportunities within the country.

Prioritised opportunities such as cyber security, Arabic digital content – which they support through their incubator programme – and data management and monetisation ventures, provide attractive investment opportunities to any investor or venture capital fund, as they have scalability.

For a truly thriving venture capital ecosystem to really succeed in Qatar it needs a symbiotic relationship with both the public and private sector.

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Al Misnad and Suonenlahti agree that scalability of ideas is key to driving investment. “Qatar’s market is quite small,” says Al Misnad, “so it has to be something that can scale at least through the region.

And with online [ideas], it makes it more achievable, so that would be preferable.”

Al Misnad adds that innovation and a local perspective is important in this part of the world. “You do not want to just hop on the bandwagon of someone who is franchising another idea…understanding what different cultures need is an important dynamic.”

The highly publicised Qatar National Food Security Programme is a good example of an innovative and locally relevant programme, with around US$25 billion (QR91 billion) earmarked for its development, super hightech industries such as these require large investments. These could provide enormous returns, as technology addressing food shortages have applications in numerous countries beyond Qatar. Other issues such as addressing water shortages and energy efficiency could all lead to large returns.

This is exactly what the Qatar Science and Technology Park (QSTP) is doing by creating an environment to attract investment in healthcare, energy, the environment and ICT – all highly lucrative and specialised areas. QSTP, an established free zone, has a legal framework that is more accommodating to investors, especially those from overseas, allowing for 100 percent foreign ownership and unrestricted reparation of profits and capital. QSTP is an excellent blueprint for an eco system that will nurture and attract investment, and can be replicated in sectors beyond technology.

Doha-based lawyer Khalifa Al Misnad is a Qatari entrepreneur and the previous head of the Qatar chapter of the Entrepreneurs’ Organization says, “angel investors can help young entrepreneurs with business ideas that might not require a lot of financial needs.”

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ATTRACTING FOREIGN INVESTMENT Venture capital is regulated in many countries like the United Kingdom, the correct regulatory framework can prove advantageous in attracting foreign investment into the SME sector, explains Suonenlahti.

As the foreign venture capital industry in Qatar is regulated, Suonenlahti sees this as a positive contributing factor in the venture capital and private equity ecosystem.

“As Qatar is building its institutions, including venture capitals,” he furthers,

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zone, organisations functioning within QFC are also allowed full foreign ownership and unrestricted reparation of profits, and are only required to pay a 10 percent corporation tax on local profits.

The QFC also offers Qatar based firms the same opportunities, which could be lucrative for the creation of a local venture capital fund and deploying extra capital in the sidelines, including that of family businesses.

Venture capitals and the markets of venture capital backed companies are now global, Suonenlahti adds, as are capital flows, entrepreneurs and technological expertise.

Around 20 percent of technology founders in the US are from the Middle East and North Africa region, reveals Suonenlahti, who says that many are interested in relocating to Qatar and incorporating their start-ups in here.

The potential for funding, research universities, availability of software engineers in the region and access to the MENA, Asian and European markets and regulation, are all driving factors he adds.

“Qatar is one of the huge beneficiaries of globalisation,” he says. “Small countries like Estonia are creating thriving start-up ecosystems by channelling public funding back to entrepreneurs – from tax provided by Skype’s success. Estonia certainly is not limited by its small size or distance from key markets. Nor should Qatar be.”

Previously based in Qatar, Mikko Suonenlahti is an investor in technology. He has been on the board of a dozen start-ups, which have raised more than US$300 million (QR 1 billion) and are now valued at US$1 billion (QR 3.6 billion).

“there is big value added from the regulators in bringing best practices from the financial services industry as a whole. Transparency and regulation are in the interests of investors and make Qatar a better place to invest in.”

Within this ecosystem is the Qatar Financial Centre (QFC), which is another local entity fostering investment in the country. While the QSTP free zone functions as an avenue for investment, the QFC regulatory authority works on developing a strong framework, modelled on international best practices, for a variety of finance based entities, including private equity firms such as venture capitals, to function in.

Whilst it is technically not a free

Around 20 percent of technology founders in the US are from the MENA region and many are interested in relocating their start-ups to Qatar.

THE fundamental DIFFERENCES BETWEEN ANGEL INVESTORS AND VENTURE CAPITALists ANGEL INVESTOR Angel investors mostly provide seed funding, or start-up capital for new ventures. They usually invest their own money and are more personally involved in projects.

VENTURE CAPITALISTS Venture capital funds on the other hand prefer to become involved further down the line, when there is some proven benefit to the idea. This usually involves owning a significant stake in a company in exchange for funding. Venture capitalists do not invest their own money but rather money from funds of which they have a fiduciary duty to earn a high return on. Venture capital firms look to recoup their investment many times over by either offering an IPO or selling the company.

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FamIly FIrSt

THE STORY OF QATAR’S SALAM INTERNATIONAL AS TOLD BY CEO AND CHAIRMAN, ISSA ABDUL SALAM ABU ISSA

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From humble beginnings, Qatar’s largest and most successful diversified private sector family firm, Salam International, has grown to become a leading force in the Qatari economy. 2012 is also momentous for the company, as it celebrates its 60th year of trading in the region and finished its most ambitious project to date, The Gate in Doha’s West Bay. TheEDGE sat down recently with chairman and CEO Issa Abdul Salam Abu Issa, to discuss Salam’s history, how the company is an enduring legacy of his late father and founder Abdul Salam Mohammed Abu Issa’s vision.

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Above: Abdul Salam Mohammed Abu Issa with staff outside the original Salam Studio & Stores in Doha during the 1950s. (Image courtesy Salam International).

Left: Thanks to the vision company founder Abdul Salam Mohammed Abu Issa and continued by his sons Issa and Hussam Abu Issa, Salam International has grown into the most successfully wholly family owned private sector company in Qatar, with the completion of The Gate a fulfilment, explains Issa Abu Issa, of a dream started by late father. “I think he would be very proud,” he says.

iry and tall, Issa Abdul Salam Abu Issa greets TheEDGE with an easy smile and a firm handshake. From behind his large desk in his plush woodpanelled offices overlooking Doha’s Corniche, he recounts the story of the genesis of the multisector, multinational, multibillion riyal listed firm he now leads, having been handed the responsibility of doing so when his father passed away in the 1980s.

In the late 1940s the teenaged Abdul Salam Mohammed Abu Issa arrived in Qatar from Palestine to work as a welder on the pipeline from Dukhan to Mesaieed, from where the country’s first oil was exported in 1949.

Hailing from a small, simple Levant farming town in the mountains of El Carmel, Issa Abu Issa describes how his father learned his vocational skills at a plant nearby Haifa under the guidance of an Italian foreman, before travelling to Qatar in search of better prospects, where he quickly advanced in the oil industry.

Then, introduced to it by an ArmenianLebanese colleague, the young Abdul Salam Mohammed Abu Issa discovered photography, a pastime and profession that would form the foundation of his soon-to-be entrepreneurial endeavour: Salam Studio, as Qatar’s sole professional photographer, and a Doha retail outlet selling and processing film, and retailing a small selection of imported camera equipment.

It was the first and only store of its kind in Qatar and most of the Middle East at the time, and enjoyed instant success. This soon TheEDGE

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opportunities opened for him.

When he saw the opportunity of photography he liked it, and he excelled in it.

Luck comes along the way but you cannot sit at home and wait for it.

You have to be determined and this is how we go about our lives. Bad luck comes more than The first ground being broken on the site that is now Salam International’s The Gate development in Doha circa 1979. Note the Sheraton under construction and the vast and good luck by the otherwise vacant desert lot in what is now West Bay’s CBD. (Image courtesy Salam Int.) way, if you want to depend on luck then you should just forget it. included becoming the designated photographer “Between 1952 and the 1960s my father for the ruling Al Thani family in the 1950s. taught himself English,” adds Issa Abu Issa.

As legend has it, the then Emir HH Sheikh Ali “He travelled the world more than anybody bin Abdullah Al Thani saw some of Abu Issa’s in the Middle East probably at that early age. photographs and as the only man with a camera In seven or eight years he was able to build in Qatar, quickly enlisted him to officially take something for himself to enable him to further portraits and document the royal family. progress in life, so it is actually, I would say, Abdul Salam Mohammed Abu Issa was the determination, the eagerness and the clearly fortunate in choosing photography curiosity and the quest for success were the and selling camera equipment just when driving factors.” it was becoming popular and affordable worldwide and was spreading in the Middle EVOlUTION, ExPaNSION aND East – and that it lead to royal patronage CONSOlIDaTION and connections. Issa Abu Issa responds In 1954 Abdul Salam Mohammed Abu animatedly to a question about whether he Issa extended the size of his first photographic feels it was luck and good timing that played shop by turning a neighbouring restaurant a role in his father’s success and the rapid into a gift shop and evolved the outlet’s name growth of his start-up. to ‘Salam Studio & Stores’, a pattern of “Luck is one thing, and eagerness to do something better in your life is another thing,” expansion and extension that endures in the corporation to this day. underlines Issa Abu Issa emphatically. “You Moreover, as Salam this month celebrates have to make the decision that you deserve its diamond anniversary, much focus is also to do something better with your life so you can progress, and this young man, sixteen or seventeen years old, decided that he wanted to do something better with his life. My father went to the refinery [in Haifa] and he worked as a boy helper and here is where the eagerness to learn comes in.

“So he learned,” Issa Abu Issa continues, “any opportunity that came his way, he learned from it and he excelled in it. He became a successful welder, then a foreman; then the company took him abroad and

being placed on its long-term partnerships with brands sourced from the world over. A prolific traveller, especially during the 1950s, Abdul Salam Mohammed Abu Issa canvassed many well-known international firms, such as Canon in Japan, for example, and convinced them to enter into distribution agreements.

“Within eight years from 1952 my father was able to convince international companies that he could be a successful partner,” Issa Abu Issa says. “From inception he was a reliable business partner that gained the trust of companies such as Canon, with whom we just celebrated 50 years of partnership, or Estee Lauder, who we have been working with for more than 50 years. He was able to leave a positive impression on people. He was persuasive and able to build confidence whenever he met people, and today more than two thirds of the business we have are the companies that he established contacts with and are still ongoing.”

As far as passing on the custodianship of the Salam store, Issa Abu Issa tells TheEDGE there was never a doubt that as eldest son, along with his younger brother Hussam Abdul Salam Abu Issa, the business would remain within the family. From their early teens, the young Issa and Hussam would go to the store directly after school almost every day and spend most of their holidays working and absorbing all they needed to about the nascent photographic and retail business first hand. When they had finished studying – in Issa Abu Issa’s case a Bachelor of Science in Business Administration at United States International University in San Diego, California – they both assumed leadership positions in the firm around 1980.

His father sent his children overseas to study, digresses Issa Abu Issa briefly, as he

In Qatar Abdul Salam Mohammed Abu Issa discovered photography, which formed the foundation of his first entrepreneurial endeavour: Salam Studio.

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believed it would broaden their worldview and help their decision making processes to mature far more quickly, which Issa Abu Issa has also done with his own children, some of whom are now working within the Salam company fold.

“In the future you have to take decisions on your own, so you really have to develop your children to think independently. This is really more important than being able to add and subtract,” Issa Abu Issa explains, before continuing the story of how he took over the family firm from his father. “We used to come in and be trained and work for him. From the age of fourteen, he used to take us with him to

exhibitions, to meet companies, to introduce us to the business world continuously. He really put in a lot of effort and injected us with a lot of his knowledge. Then we graduated and joined the business and we were with him for a couple of years, and then he passed away. I was in my mid-20s and my brother was a year and a half younger and we had to take over the responsibilities, and we grew Salam to where it is today.”

Under the guidance of his late father in the early days, Salam Studio Stores, says Issa Abu Issa, was the first Qatari company among its ilk of all the large Doha-based local family businesses to begin trading in

another country: in Abu Dhabi in the United Arab Emirates (UAE) in 1966. In 1967 another store followed in Dubai and then Oman in the 1980s, with many more across the region to follow. Within a few years, Salam’s operations would encompass studios, stores and divisions for wholesale, retail merchandise and services serving the entire Gulf under the umbrella of Salam Holdings, which went public in 2002, listing on what was then the Doha Securities Market.

In June of the same year, Salam Holdings merged into Salam International and then, in October 2005, Salam Group merged into Salam International Investment Limited

Often animated and passionate when discussing business in Qatar and the company that his father Abdul Salam Mohammed Abu Issa and he now is in charge of, Issa Abu Issa is at once optimistic and pragmatic about the future of Salam International. “[We have] to strategise properly, to navigate carefully in the economy,” he tells TheEDGE..

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a balance between that and a planned approach. The state of the greater world economy, of course is an influence on the latter – and like many businesses a few years ago, the global financial crisis restricted some of Salam’s expansion ambitions.

Salam has thus also been cautiously managing its asset base, reinvesting in the company and its growth and operations, but also increasingly undertaking a broad-based equity strategy, specifically in real assets classes such as property. “Because we are in (SIIL). Now, explains Issa Abu Issa, SIIL as administration etcetera being optimised on a small economy,” explains Issa Abu Issa, operates four sectors or industries under the back end. “and because we are very dependent on the broad umbrella of the Qatar ExchangeAnother competitive advantage to this government spending, we have decided the listed firm: contracting, industry and energy, unified strategy, adds Issa Abu Issa, is best way to soften the spikes in revenue is by technology, and luxury retail and hospitality. attracting and retaining talented and suitably creating a stream of revenue from real estate.

“We established our Salam International qualified staff and creating a place where This is not the easiest thing to build though, as a vehicle, it was a small company and they want to work and feel comfortable doing because it is a long-term investment. I thought gradually we started adding the family so. “Talent and the retention of talent is a that we should have a floor of incomebusinesses to it, doing some mergers and so challenge,” he says. “In the US and Europe generating assets that can continuously get on. In a public shareholding company the you can just pick up qualified people across you a flow of income, because more than half mindset has to change, consolidation and the board and plug in the people who are more of our company depends on contracting in the corporate governance must have a great receptive to the culture of your company. But IT, oil and gas or building sectors. The retail deal of importance. Though others have in general, it is much more difficult here. We followed suite, we were the first family have more than 22 nationalities working within business is a stabilising element and if you put both of those two together that will bring business in Qatar to go public by many our company, so you have to create a home – you cash flow and revenues. It was more of a years. This consolidation and restructuring is which is the company, Salam, the larger family strategic move for the company. Usually you a continuous process in our company and we and the unifying factor. Thanks to God that we would build your own assets on a personal have done it three times so far. It is a living are one of the few companies that have been basis, but I wanted that to happen for the thing rather than something you just do once, able to grow and retain and attract talent better company in order to protect it. Remember we and though we have grown the business than anybody else.” are not – like most of the listed companies tremendously since then, I think that the in the Qatar stock exchange – government company has the potential to still grow three ThE lEgaCy OF ThE gaTE to four times in the coming five years.” driven. We are the only private company so Harking back to the legacy of Abdul we are not privileged with anything other than Part of the advantage of this consolidation Salam Mohammed Abu Issa – who saw an being able to strategise properly, to navigate strategy, adds Issa Abu Issa, is clustering what opportunity in the photographic realm and carefully in the economy.” he calls business likes with likes, creating a embraced it, growing the company from critical mass and enabling a broad-spanning Chief among Salam International’s there – Salam’s style of business agrees investments is The Gate in West Bay in business to optimise Salam’s strengths and a Issa Abu Issa, has always been somewhat Doha, which after three decades of phasesynergistic relationship between its various opportunistic. However, now he says the by-phase development, was completed in trading entities. He cites Salam’s construction company is trying to focus more and more October this year. While this might seem a operations as an example. This contains more on being more strategic. But, he adds, recent project to the casual observer, Issa than a dozen companies, from building to because the manner of market in developing Abu Issa reveals to TheEDGE that The Gate electrical, mechanical engineering, aluminium countries tends to force the former style is in fact a fulfilment of a long-term the and steel fabrication, landscaping and interior of business it is ultimately about finding vision of his father, design. Issa Abu Issa who bought parcels of explains how these were the original land it now brought together under one covers incrementally managing director, so that through the 1960s and strategic opportunities could 1970s, with he and his be identified and leveraged brother completing this for the benefit of all, as well THE TOTAL AMOUNT IN SQUARE METRES OF OFFICE SPACE IN THE GATE.

Chief among Salam International’s investments is multi-billion riyal The Gate in Doha, which after three decades of development, was completed in 2012.

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process throughout the 1980s.

Though Salam owns other properties – most notably Jumana Tower on the Pearl and of course the long standing Salam Tower, in which we sat talking on the Corniche – The Gate is now the focus, encompassing QR1.7 billion in investment from within Salam and from external funders, under the auspices of its managing entity Salam Bounian, structured in such as way to minimise risk to SIIL – a decision taken even before the 2008/2009 financial crisis.

“We started leasing the property about a year ago, and it is a bit slow but it is building up. Now in 2013 I think it will start to move very fast,” Issa Abu Issa says. “The idea of The Gate is that we wanted to create a mixed-use building that can contribute to the diversity in its income. It is a flagship project that we have been able to build on the legacy of what my father started in 1982. Salam International controls it and owns part of it along with investors, but it is a separate company with no impact on Salam International.”

As far as the state of real estate, and more pertinently, retail in Qatar at present, Issa Abu Issa has mixed feelings. On one hand he is bullish about The Gate project and SIIL’s interests. However, what does concern him, particularly on the retail side, is the overabundance of multi-purpose retail space planned for the country. “During my 32 years of working in Qatar I have seen many business trends,” he explains, adding that in the past few decades certain types of commerce have become popular at the same time among local family owned companies.

For a time this was real estate and the building of towers, adds Issa Abu Issa and though this of course was stalled by the financial downturn there is he feels still and overabundance of office space, which will take

Work (left) advancing on the first phase of what is now The Gate development, the centrepiece of the Salam International company’s retail empire, which has now been completed (above).

around half a decade to return to a balance between supply and demand.

In Qatar now, he continues, the latest popular development investment is a retail explosion in shopping malls, which while on one hand is encouraging, Issa Abu Issa also finds a little disconcerting, especially if one considers that all these malls will require growth in local population with disposable income to be feasible. “It is going to be a challenge,” he says.

Like all Qatari businessmen, inflation in the economy is another issue that is of concern for Issa Abu Issa. Although there are many projects planned for the near future, doubling if not tripling business for contracting and service companies, all going well, such as those under the Salam umbrella, slow decision-making processes are Continuation on page 78

“I think that the company has the potential to still grow three to four times in the coming five years.” – Issa Abu Issa, Salam International chairman and CEO.

ThE gaTE QUICK FaCTS • There are four levels of shopping and three towers, joined by a glass bridge, giving The Gate its name and logo.

• With safety in mind, the three towers were designed as low-rise buildings with the highest being 16th floors.

• Design of The Gate has won Best Development and Best High Rise Architecture at the CNBC Arabian Property Awards, among others.

• The Gate’s office space span three towers. offering 52,000m² of premium offices, with an surface area of 1000m².

• The offices enjoy dedicated access from the 1200 bay garage, through access-controlled lobbies, directly to the offices via elevators.

• Two towers will offer luxury hotels and more than premier residential areas of 200 apartments, ranging from studios to three bedrooms with exclusive entrances.

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LEGAL INSIGHT

Permanent Establishment Risk:

When business travelling becomes more taxing

By Hannah Kennet and Kevin McManus atar has become something of a melting pot. Baking under the heat of the Arabian sun, it has become an amalgam of countries and creeds brought together in a nation that boasts not only the fastest growing economy in the world but also, depending on your source, the highest gross domestic product per capita at more than US$100,000 (QR364,000).

A government intent on developing and diversifying the country has proved magnetic to business to the extent that expatriates now outnumber Qatari nationals somewhere in the region of six to one.

Statistics like these have brought with them an increasingly complex business environment which could easily trip an unwitting new entrant to the market, and a hazard that is recurring with noticeable regularity is that of Permanent Establishments, commonly shortened to PE. PE is a tax concept, and arises where an overseas business (for example a business which is resident or has its head office outside of Qatar) creates a taxable presence in a foreign country such as Qatar. Presence does not necessarily need to arise from a deliberate act, but can still result in tax liabilities and compliance obligations that can lead to financial penalties if not complied with. Part of its danger lies within the term permanent,

which creates a bit of a misnomer as the line can be crossed much more easily than the average travelling business person might ordinarily consider.

How a PE may arise Although normally triggered by the existence of a fixed place of business, such as a construction or installation site lasting longer than, for example, six months or an overseas office of a law firm, it is very possible that a PE could be created by an employee regularly travelling to or through Qatar and undertaking business activities as they do so. In the multinational, globalised world of today, short term transfers of employees from overseas offices of the same group, to fill temporary resource deficiencies on particular projects and engagements, are now common. This could have the same outcome for tax purposes.

Flying in subject matter specialists from abroad is also increasingly becoming standard practice, particularly within the Gulf Cooperation Council (GCC), in professional services firms such as accountants, consultants and lawyers. A recurring presence in the same location may create a PE issue for the home office. Even when formally seconded to overseas offices, businesses need to consider the tax implications of employees’ undertakings for their home office in the

foreign jurisdiction.

As a different but equally pertinent example, it may not be immediately obvious but an overseas business using an exclusive distributor in Qatar (such as automotive distributors or fast moving consumer goods or as part of a wakala arrangement) may inadvertently create a PE through the dependent relationship with the wakeel or agent. This will become more of an issue where the distributors advertise themselves as acting on behalf of the company whose products they market, whether or not to the knowledge of, and generally to the detriment of the multinational producer, who can discover complex tax issues have been created through no fault of their own.

These are just common, basic examples of exactly the kind of PE risk that would tend to escape most organisations but could well be picked up by increasingly attentive tax authorities.

Resulting tax issues A taxable presence means that it is likely a tax liability will result. Where a PE exists in Qatar it will be subject to tax at a rate of 10 percent on its tax adjusted accounting profits, requiring a calculation as to what profits of the company should be allocated to the branch. This is a conceptually difficult and potentially expensive calculation if you have

LEGAL INSIGHT

flown colleagues over from Dubai to Doha to assist on a million dollar engagement. How much of that million dollars is attributed to the temporarily imported staff? Phrased differently, how much of that million dollars could the Dubai entity face a tax bill for in Qatar? It might be more than you think, or at least more than you might like it to be.

Although relief for a tax bill incurred overseas may be available in the home jurisdiction, there is no blanket guarantee that the whole amount will be covered, or any if no double tax treaty exists between the two countries. At a minimum the chances are that there will be a detrimental impact on cash flow which could potentially last several years until amounts can be reclaimed. This of course assumes the problem is spotted before penalties arise, something that no relief will be given for anywhere.

Alongside this there are compliance obligations. The tax authorities in Qatar must be notified within 30 days of the taxable presence being created – a timescale that is difficult when the boundaries are so grey. A tax card will also need to be obtained and audited annual returns filed.

Notwithstanding that the PE may be subject to 10 percent corporate income tax on its profits, it may also find that it remains subject to withholding tax of five percent or possibly seven percent on its gross revenue.

The hidden compliance costs and added complexities can start to multiply.

Resulting Legal Issues The activities of foreign entities in Qatar are permitted in all sectors of the national economy, except in banking and insurance (to the extent excluded by a Decision of the Cabinet of Ministers), commercial agency and real estate trading sectors. Such activities are governed by the Foreign Investment Law No. (13) of 2000 (as amended) (Foreign Investment Law). Fines are imposed as a penalty for those found to be carrying out economic activities that violate applicable Qatari laws.

Under the Foreign Investment Law, nonQataris, whether natural or juristic persons, may invest only through the medium of a company incorporated in Qatar in which one

A Permanent Establishment is a tax concept that arises where an overseas business creates a taxable presence in a foreign country such as Qatar. or more Qatari persons and or 100 percent Qatari owned entities hold not less than 51 percent of the share capital (where the non-Qatari element consists of wholly Gulf Cooperation Council persons or entities, the 51 percent may be read as 50 percent). Except in very special cases, that company must be an limited liability company (LLC). The rules regarding the establishment of an LLC are contained in Law No. (5) of the Year 2002 Commercial Companies Law. The Foreign Investment Law does set out some exceptions to the general rule above.

One of the exceptions is the establishment of a branch of a foreign company in Qatar, if that foreign company has a contract in Qatar that results in facilitating the rendering of a service or implies a public benefit (Foreign Branch). An exemption in the form of a resolution from the minister of business and trade is required.

It should be noted that such a resolution limits the Foreign Branch to carrying out the specific contract approved by the minister and that the minister’s approval is discretionary. Each new contract or extension to an approved contract that is awarded to the foreign company requires re-application by the Foreign Branch to the minister.

Once an entity has been established in Qatar, it will then require commercial registration under Law No (25) of 2005. In addition, if the business relates to engineering or architecture professions, then the entity will also be subject to Law No (19) Organising the Exercise of Engineering Profession.

In addition to having a commercial registration, a commercial permit (Municipal Licence and Signage Licence), Qatar Chamber of Commercial Registration, and the Labour

Card issued by the Department of Immigration of the Ministry of Interior will be required.

Once the above procedures have been completed, an entity will then be able to bring over employees and sponsor them so that they can carry out its work.

Professional Support Global mobility and international operations require professional support, as the pitfalls and hurdles are not always signposted. Analysis of issues like PE risk requires specialist advice as generating answers is far from an exact science. Carefully structured contracts and receiving assistance before commencing operations overseas, whatever form they may be in, can go a long way to ensuring that the grey middle returns to being closer to black and white. Advice will help ensure that any risks are known and well managed, but this is not something companies are likely to be able to source internally, whether small owner-managed operation or global company. There is just too much scope to make a financial or reputational mistake much more expensive than the plane ticket in and out.

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 should be used for information purposes only. It is not legal advice and should not be used as such.

Should you have any questions, please contact Hannah Kennett of SNR Denton Hannah. kennet@snrdenton.com TheEDGE

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BUSINESS MANAGEMENT

UNCOMMON SENSE ARE CLEVER LOGIC AND SELF BELIEF THE KEYS TO EXTRAORDINARY BUSINESS SUCCESS?

BUSINESS MANAGEMENT

Common sense can help a company along. But, by developing a distinctive belief system, can (un)common sense beat competitors?

London Business School’s Julian Birkinshaw, Jules Goddard and Tony Eccles explain their approach.

W

hat makes a company successful? What elevates it into the stratosphere of the global elite? Slick products, inventive customer service, and attractive employee opportunities – all of these are necessary for success. But in a crowded, ever imitative business world, the best weapon in an owner or business manager’s arsenal is simple. Stand out from everyone else.

Apple. Google. Virgin. What makes these companies unique and innovative in their approach is something that can be called (un)common sense. Strong leadership and robust business models aside, a company’s core beliefs can have the greatest impact on its sense of distinction, the kind of distinction that can capture the world’s attention.

None of this is new, of course. In a 1994 article for the Harvard Business Review, Peter Drucker argued that the underlying beliefs held by a company, usually developed naturally over time, reflect how that company ultimately operates. Knowing that, how can business manager deliberately build a core belief system appropriate to his or her own company? And, even more importantly, how can an executive develop such (un)common sense and turn it into focused action?

GETTING STARTED Very few companies stumble onto a winning formula by simply throwing out ideas and testing them in a proverbial vacuum. In fact, most dig out a whole array of benchmark assessments, industry projections, strategies and other common tools in the hopes of forging a successful business model. Unfortunately, by using them, companies miss the opportunity to understand what really drives customers toward certain products and services – or away from others.

Really, it is the ‘blue ocean’ strategy (a market or potential market with no obvious competitors) that makes a truly distinct belief system possible. While the companies at the bottom of the proverbial food chain compete for a stake in the marketplace, those at the top simply invent new ones, ultimately diversifying their services and further cementing the unique persona they want to portray.

For example, Sam Walton, founder of American retail giant Walmart, credited his success to putting stores in small rural and semi-urban towns in need of his one-stop shop for affordable retail goods. The three-ring spectacle, Cirque de Soleil, continues to draw audiences by blending the artistry of a live circus with the theatrical polish of a Broadway production.

But these kinds of blue ocean opportunities are rare and most are smaller in scale. Consider HCL Technologies in India, whose employees first, customers second philosophy has actually led to stronger client relationships. Likewise, Arup (a leading multinational engineering consultation firm) places a higher premium on providing an interesting and rewarding environment for its employees than on pursuing financial success.

In other words, companies do not win competitive

footholds by accident. It is our perspective that those who find success first adopt a deliberate, self-actualised core belief system, one that makes them stand out from the crowd. And they work constantly to stay ahead of the market, predicting which trends are on the rise, what customers are after and how even their own employees respond to their market decisions.

But it is not enough to simply have a set of core beliefs. Those beliefs also have to ring true with consumers, or at least more closely than the competition’s. A company must know something that its competitors do not, and both customers and prospective customers alike must feel it. That is really the essence of uncommon sense – a set of beliefs that make sense because they are true and are uncommon because they are like no others in the world of business.

That is not to say that an ironclad system of beliefs will always be so. Trends fade. Markets collapse. Customers lose interest and move on to more promising avenues of service. Companies need to regularly assess the value of their market position and experiment with developing new strategies and beliefs as old ones expire.

STAYING TRUE For almost five decades, IKEA, the Swedish furniture retailer has struck gold with a unique business model by providing inexpensive but high quality furniture to the many who cannot afford Italian-made leather sofas and designer coffee tables.

It is no surprise that IKEA grew internationally by simply repeating their working formula in each new country. But when the company noticed that the

It is not enough for a company to simply carve out a new and unique niche and then sit back, hoping to reap the benefits.

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Those who find success, first adopt a deliberate and self-actualised core belief system that makes them stand out from the crowd. formula was not working in Japan and the United States, its executives started looking for answers. They soon realised that they had not considered the obvious – what might work in one culture will not necessarily work in another. Upon opening stores in other countries, they had made decisions without understanding the larger questions: how will this new audience respond to unfamiliar names and expansive showrooms? Will these new buyers be receptive to assembling furniture pieces if it means lower prices?

Their experience illustrates that companies need to stay current with the evolving needs of customers, lest they lose sight of what is likely to catch on.

STANDING OUT But how does a company sell itself as the unique, cannot miss alternative to what is already widely available? We often talk about alternative thinking as a means of getting ahead of the competition. But it is not enough for a company to simply carve out a new and unique niche and then sit back, hoping to reap the benefits once customers come flocking. It is just as important to undermine the competition and its ability to move in to imitate novel success.

How do companies pull it all together? Successful companies, we have found, strategise carefully and test new beliefs on the market in the least risky way Consider the case of 24/7 Customer, a growing California-based business-tobusiness firm that specialises in fulfilling its clients’ customer service needs. Noting that most of their competitors were peddling large call centres, 24/7 Customer chose a different route. The firm devised an online destination that could learn over time and offer a database of solutions for customers before they even needed to phone for help.

The company’s innovation lab is the source of the firm’s fresh ideas. It employs 100 creative individuals who are tasked with thinking up new service ideas, testing and developing the most viable options. Even those that fail in testing often lead to a greater understanding of how to better serve customers the heartbeat of the company’s success.

Make no mistake it is not always this easy. Finding that fresh, competitive foothold in the marketplace means keeping up to speed (even at the upper management level) on what is in, what is out, what is working and what is not.

It makes sense that companies such as 24/7 Customer have found success by bucking the status quo and taking a fresh stab at the marketplace, given that they are led by their founder and the entrepreneurial spirit is – by nature – creative and non traditional. But that does not preclude older, more entrenched companies from shedding their baggage and embracing new ideas and beliefs.

In other words, yes, it is tough to get an executive to change the way he takes his coffee, much less the manner in which he operates his company. But for many who took the leap, their decision quite literally paid dividends. In our opinion, many

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businesses explore strategy by beginning in the wrong place. They look at what their competitors are doing, at existing customer needs or at specific topics (such as the need to reduce costs).

We believe it is advantageous to begin by examining the company’s underlying beliefs and determining which are true and which are unreliable.

It is that (un)common sense — the ability to revolutionise business by replacing the old with something entirely new, unique and exciting — that holds the potential not simply for new market opportunities, but for genuine long lasting success.

SEVEN STEPS TO UNCOMMON SENSE 1. Assemble the best and brightest employees, (especially if they have worked for competitors). Their familiarity will be invaluable in understanding where the opportunities for new market strategies lie.

2. Have those employees tell you what they think the basic beliefs and assumptions of your company are, from the business model to the management model. Ask them what they think about the future of the industry as a whole.

3. Compile the viewpoints and lay them all out and look for clusters of agreement and outlying ideas that only a few people have mentioned.

4. Consider common beliefs first. How do you know these beliefs are actually true? How can you go about discovering if any of them are inaccurate reflections of your company?

The goal here is to weed out the ‘common nonsense’, or anything that might cloud your understanding of where your company currently stands.

5. Now look at the uncommon beliefs. What information or insight causes those employees to hold them? Are they valid? Again, you want to understand which beliefs have value and which are based simply on biased or erroneous ideals.

6. Once you have eliminated the bad ideas, brainstorm with your team and talk through any new beliefs that might warrant adoption.

7. With any luck, at this stage you now have a set of new beliefs in hand that your company might adopt. Because knowledge is the key to advantage, list ways you can test these beliefs to see if any will float.

Spillover

AFRICA: STILL THE ‘HOPELESS CONTINENT’ for investment?

the two countries have still not reached full potential.

Continued from page 55 (QAPCO) opened a representative office in Cape Town, South Africa.

But while Qatar represents one of South Africa’s largest investments in the Middle East (as witnessed by Oryx GTL), the feeling in South Africa’s capital Pretoria is that bilateral trade and investment between

Future Growth Potential Despite the Marikana crisis and a litinay of social ills, health problems such as malnutrition and AIDS, and the greatest concern of all, corruption, investor interest in South Africa specifically – and Africa in general – is still positive. As South Africa’s finance minister Pravin Gordhan said in the wake of Marikana, “Will it impact on growth? I don’t think so, not in any significant way. It is important that we communicate to the rest of the world that South Africa is still hard at work, that most of it is still highly productive, and available for investment opportunities.”

FAMILY FIRST: Issa abu issa

Continued from page 71 delaying their announcement, and Issa Abu Issa says, influencing inflation, which is a normal outcome and something that must be anticipated. This is of course not an issue endemic to Qatar but the greater Gulf. And though Salam’s presence in neighbouring countries, particularly in the UAE, does indicate a broader economic strategy regionally, thanks to the after-effects of the economic crisis in the Gulf, most of SIIL’s focus remains in Qatar, which has remained relatively immune to global financial woes.

“Qatar for us is extremely important, and right now it is 70 percent of our business,” explains Issa Abu Issa. “The problem is that the rest of the region, and the rest of the world, is hungry for business and Qatar is over publicised. The amount of projects that we have in Doha is not enough to feed the rest of the world. It is hardly enough to feed us here, the local business community, but everybody

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is hungry and lots of companies have come in and failed to sustain their operations. In the past they have competed very harshly for projects and then realised that it is not an easy game and closed shop and left. In that process, a lot of damage has being done to the economy. Luckily today there is a different stream today with a deadline, the 2022 World Cup, and that is a milestone that nobody can mess around with.”

The downside repeats Issa Abu Issa, is that dates for many of the projects have not yet been set, making specific planning difficult at this stage, especially for contracting firms.

But, he reiterates, at least there is a common purpose and goal for the country to be ready.

In the meantime, until these projects come on stream, much of his attention is on The Gate.

Issa Abu Issa tells TheEDGE he has been deeply emotionally involved in The Gate as a continuation of what his father began 60 years ago. He has been personally involved with almost every detail, working very closely with architect Michael Leeds to make sure that the legacy of Abdul Salam Mohammed Abu Issa lives on in the project and all of Salam International’s business interests. “We are very much driven by our history,” he says, “because if you don’t build on your history, if you don’t know it, then you don’t have a future. This is what we always teach our children.”

His father, Issa Abu Issa closes, would be pleased with how Salam International has

Added to this, Africa is becoming increasingly connected. In Q2 2012, according to market analysts Wireless Intelligence, there were 700 million cellular connections across Africa. Markets like Eastern Africa (26 percent), Southern Africa (21 percent) and Middle Africa (25 percent) were showing remarkable annual growth rates in mobile sales.

It seems that telecommunications – along with manufacturing, transportation, and wholesale and retail commerce – is becoming more and more of a driver in African economies. The continent’s most famous resource, mineral wealth is no longer its only lucrative investment, and though countries in Africa south of the Sahara remain risky, there are also potentially lucrative options for brave investors. eveolved. “I think he would be very proud, especially to see the development of The Gate,” he says, before relating a poignant story that is a fitting conclusion to the first six decades of the company’s existence and the vision of its founder. “I was walking with my father once after the inauguration of Salam Plaza, phase one of the Gate which was opened in 1982 and at the time the largest private sector project in Qatar. After a long day at work we were walking from one roundabout to the other for some exercise and he stopped at that roundabout and looked at the building and at me and said that people will one day say that a person called Abdul Salam Abu Issa passed from here.”

For more information on The Gate and Salam International go to: www.thegate-qatar.com www.salam-bounian.com www.salaminternational.com To view of photographs

bY Abdul Salam Mohammed Abu issa and the first Salam stores go to: www.qatarmycountry.com

BUSINESS INSIGHT Inside the minds of leading business figures

Qatar’s tax policIES and impact on business (P.84) At the inaugural GCC branch meeting of the International Fiscal Association in Doha TheEDGE spoke with Ian Anderson, chief financial officer at QFC about the different tax policies in Qatar.

ALSO IN THIS SECTION: •

The impact of credit ratings agencies. Stuart Anderson, managing director and regional head of Standard & Poor’s for the Middle East discusses the role credit rating agencies can play in strengthening Qatar’s financial sector. (P.80)

•

Extracting the most for your organisation with managed IT services. TheEDGE spoke to Ghada Philip El Rassi, deputy chief executive officer of MEEZA about how organisations can benefit from leaving their IT service management to professionals and focus on their core business. (P.82)

BUSINESS INSIGHT

Financial Services

The role of credit ratings agencies in Qatar’s economy TheEDGE spoke exclusively with Stuart Anderson, managing director and regional head of Standard & Poor’s for the Middle East regarding the role credit ratings agencies can play in strengthening the financial infrastructure of firms and Qatar’s financial sector as a whole, by providing confidence to issuers and investors.

Can you tell us about S&P’s work in the region?

S&P has been active in the Middle East for more than 30 years, rating sovereigns, banks, government institutions and corporations, but we have only been on the ground with a presence in the Dubai International Finance Centre (DIFC) since 2007. We started with three people, since then we have seen rapid growth. We expect to have 28 employees by the end of this year and that growth is all for the right reasons. A lot of it is redeployment of analyst core talent, moving people out of Europe who were previously covering the Middle East, but just moving them much closer to where they should be. Two-thirds of those people are in ratings, the rest are in two of our sister businesses, S&P Capital IQ, and what is now S&P Dow Jones indices. S&P took a 74 percent stake in Dow Jones in June this year so that business now has US$6 trillion (QR21 trillion) of assets tracked globally. We have full cross practise analytical representation, meaning that we structure our rating business by practice groups.

Are the number of organisations entering into your credit rating growing?

At the moment we have 140 public ratings.

In addition, there are always going to be private and confidential ratings and we see very healthy growth in the medium term. That has a lot to do with the natural development of capital markets and domestic markets, and also growth within the foreign currency market. We also see a lot of

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activity in the project space.

The primary role of a ratings agency is ensuring that investors are comfortable. There are disconnects: governments and sponsors to some extent remain reticent to provide unconditional support in the early build up phases, but the region has what I call high quality challenges and Qatar is absolutely in the middle of that, with funding requirements that are ambitious.

Have you experienced these problems elsewhere in the world? A combination of massive wealth, reticence of information and lack of transparency – what are the challenges?

I spent a lot of my career in East Asia, and we all went through the same issues there. Hong Kong is a great example of a city-state; there are many similarities between the two. Singapore is another example.

These city-states share core commonalities.

One thing that Hong Kong did which applies to this region is the way in which the government took a very positive view towards embarking on a borrowing programme as a sovereign in order to develop a domestic bond market. And they built a very robust 10 year curve. So I think that there is certainly a very strong precedent.

Another area is the whole projects space and how this is funded. The number that has been touted is US$1.9 trillion (QR6.9 trillion) of projects, of which US$750 billion (QR2.7 trillion) is core energy projects. All this comes down to how much can be funded by traditional project

BUSINESS INSIGHT

finance providers. European banks have pulled back substantially from this market, even from Qatar, and they probably won’t return in the numbers that were there before, so funding can be taken up to an extent by the regional banks.

The other interesting longer term story for S&P is family businesses.

You mentioned the reticence in the working environment, how do you explain rating agencies and convince family run businesses that releasing private information could work to their advantage?

Rating agencies typically sit as an intermediary between investors and issuers. The business model that we employ is the issuer pays model. So an issuer of a bond for example would pay us fees. Our role is to ensure that investors have access to an assessment of companies’ credit positions that are independent, objective and have a high degree of integrity, and there is a strong brand value in this.

Our work with family businesses is an interesting example of how value is generated by a rating, not just from these businesses being able to raise capital, but also to take a rating and to work with it. If a company comes to us and states that they want a bond issuance in two months (and we have never dealt with the counterparty before and it does not have a rating) that would be completely unrealistic. We would generally encourage any private group that is new to the rating process to think about this at least a year in advance, if not longer.

How do credit rating agencies play into the framework of family run businesses?

It’s not just about raising money for family-run businesses in the Gulf, it is also about what the whole rating process can help to achieve in terms of structuring family businesses appropriately.

Many family businesses have a high concentration of wealth in a single unit and the rating process can help to establish disciplines and ground rules that prepare the company for any financial scenario. It is the rating on the company that gives a clear indication as to our view, not only the financial condition of the company but also the quality of the corporate governance.

Do you advise on how organisations can improve their rating?

We do not advise, we have conversations, but never offer full advice. What would usually happen is a counterparty would come back with scenarios, and we would subsequently rate

Multinationals asked to invest in projects have questioned why they are being asked to come in and invest, whilst the sovereign wealth fund is investing offshore in lower political risk environments. scenarios if they were looking to restructure their balance sheet.

What we also offer is private ratings with family businesses. We benchmark them against the competition that does have public ratings.

In this instance, they may be benchmarking themselves against larger corporates, but it is a way in which shareholders maintain management discipline. So when we publish a new rating it is not necessarily true that the rating has just been determined, it could have been in place for some time but was just never published.

How do you separate yourself from other rating agencies?

What differentiates us is that we are very rigorous, disciplined and we follow very tough criteria. Our criteria are also very transparent, which provides a uniform benchmark globally.

We are additionally looking at developing our regional rating scale and looking to explore opportunities within the Middle East market for rating local corporates, which may potentially involve a different rating process. But at this stage it is very much about our global criteria.

How important are credit ratings?

The feedback that we receive is that more than 50 percent of investors would not contemplate investing in an unrated security, and they find huge value in a rating being delivered by certain names such as S&P. There has been a noticeable uptake in inward investment as Qatar tries to establish itself as a financial hub, are you seeing a noticeable uptake in this?

There are two parts to inward investment, one is the fact that Qatari banks are increasingly funding themselves from offshore.

The other is around what multinationals are investing in. I think Qatar potentially faces a perception challenge in this regard whereby in Qatar there is a very successful sovereign wealth fund that has very high profile global investment activities. Multinationals who have been asked to invest tens if not hundreds of millions of dollars

in projects have questioned why they are being asked to come in and invest onshore, whilst the sovereign wealth fund is investing offshore in lower political risk environments.

How do you see credit ratings changing in the future?

Our research team in London have looked at long term outlooks for ratings, stretching out to 2035 or 2040, and there is a scenario whereby there could be no AAA sovereigns left in the world. The fiscal burden of health care and pensions with ageing populations could quite possibly cause many countries to lose their AAA or even their AA status. In this respect, the AA rating that Qatar holds is getting relatively stronger.

There is a large young population in the region, how will that affect the future?

Certainly youth employment is a significant issue, as is financial inclusion. If you look beyond the wealthy Gulf states, the Middle East and North Africa region can be divided in two, the oil states, those with the hydrocarbon endowment, and those without.

It is a tale of two halves. If you look at some of the countries such as Egypt, Lebanon, Jordan just a few that are closest to the Gulf region, economic management is a major issue, as is youth unemployment.

Qatar Central Bank has recently set up its own internal ratings agency. What are your thoughts on that?

We welcome free and fair competition and initiatives to develop local currency bond markets. We equally believe that the quality, independence, comparability and global coverage offered by our ratings will continue to be critical in helping to raise funds in international markets for Qatari debt issuers.

S&P has a successful track record in the Middle East, with its ratings expertise in the region built on a combination of global analytical insights and a deep understanding of local and regional issues.

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BUSINESS INSIGHT

Information Technology

Extracting the most for your organisation by deploying managed IT services TheEDGE spoke exclusively with Ghada Philip El Rassi, deputy chief executive officer of MEEZA, a leading Qatari information technology (IT) solutions and services provider about how organisations can benefit the most by focusing on their own core business assigning the managed IT services to dedicated professionals.

What are managed IT services and what types of services does MEEZA offer?

Managed IT services is a term used when companies outsource their day-to-day IT management responsibilities as a way to improve their business operations. This enables them to allocate resources (people, equipment, investments) for their core business instead of managing their own IT. These services are provided by managed IT services providers such as MEEZA, who in turn manage, operate and are responsible for all end-to-end IT requirements.

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How can managed IT services help businesses? What are the advantages for companies outsourcing these functions?

Like any other service, outsourcing IT services is generally a strategic decision a company makes to support its business growth.

Outsourcing these services will ultimately reduce

cost, save time and increase resource utilisation and efficiency. Companies can focus on their core business, and leave IT matters to a third party expert.

As a leading provider, MEEZA works with clients to fully understand their specific IT challenges and offer cost effective IT services

BUSINESS INSIGHT

and solutions to help them focus on their core business and enable their business to scale rapidly.

What are the complexities involved in managing and monitoring company IT infrastructure? How does MEEZA do it?

Companies realise as they go on setting up and managing their on-premises IT infrastructure that it is not an easy task to manage and bring it to a good level of efficiency and cost-effectiveness. First, they need to acquire the physical infrastructure, which includes hardware and software. Then they need to recruit IT experts to manage and operate the infrastructure. Furthermore, it is important to implement a strong security, back-up and recovery plan for all IT systems as a significant component in the overall business strategy.

With our multiple, interconnected and geographically diverse data centres in Qatar, MEEZA provides all IT solutions and services.

Our team of experts are certified to manage and operate complex IT services to different types of companies.

Can partners develop or run their own applications?

To build their own applications, companies have to carry the burden of all expenses for the software and hardware infrastructures as well as allocate resources for support. However, like any other IT solution, business applications are better outsourced through a provider like MEEZA. The payroll application for example, is a personalised application which can be offered through a private or public cloud platform, allowing companies to speed up the payroll process (in addition to other benefits).

Companies, who are enrolled in this solution, would get a user name and password for an account on the application where they will enter the relevant data, and by then they are live on the solution. This is a pay-per-use model offering agility and flexibility, in a secure environment running under local regulations.

Cyber attacks are on the rise in the Middle East, while high profile organisations are exposed to more threats. Does the same apply for other government organisations and smaller private sector companies?

Security applies to all sectors whether it is a government organisation or a small private sector company. The probability of focused (targeted) cyber-attacks on government organisations and larger enterprises is much higher than small, medium enterprises (SMEs),

We are local, our support is local, our infrastructure is local, and we run under local regulations, thus emphasising the benefits of working with MEEZA. however the prevalence of intelligent viruses means everyone needs to be aware of the risk and make appropriate business decisions to defend the company’s assets.

What can companies do to prevent data loss and downtime?

Ensure that business continuity plans are available and tested on a regular basis. An increased awareness to test and ensure that their disaster recovery is part of their overall Business Continuity Plan that covers people, processes and technology.

How do MEEZA’s back-up solutions work?

The MEEZA backup solution utilises Tier 1 backup technologies, and we offer a multitenant solution that supports all recent major advances in technology. A recent advance in our methodology is that we now utilise and offer the latest features available through our virtualisation platform and fibre channel based backups, significantly reducing backup times from hours to minutes and providing full image recovery, this in turn offers extremely fast restore times, reducing recovery time objectives.

Can MEEZA drive down IT start-up costs for projects?

MEEZA services are provided through a shared platform, allowing us to offer costeffective solutions. We help clients minimise business risk, reduce IT capital expenditure and speed up time-to-market for new initiatives.

These services address the growing need that companies in Qatar require to manage their IT infrastructure and ensuring that their IT strategy delivers real value to their business.

Our services also provide businesses access to a robust IT infrastructure and the latest applications without having to bear the high costs of license ownership and maintenance.

Thus, our investment helps businesses drive down IT start-up costs for projects.

Can this be applied to SMEs? MEEZA services and solutions are applicable to companies of all sizes. Cloud services in

particular are the best way to start up and grow a business moving onto attaining a range of services. The aim is to provide companies the ease of time and costs on IT so they can focus on their business development. In addition, these services are suitable for companies in many verticals; be it finance, healthcare, government, in the private or public sector.

In the example of cloud services, we have more than 40 SME clients who have taken on this solution. On the other hand, solutions such as back up as a service or disaster recovery have become mandatory solutions for companies of all sizes. Given the recent security breaches in some large organisations in the region, companies now acknowledge the importance of having well tested and well built solutions, and are eager to outsource them to leading providers such as MEEZA. Do you think companies in Qatar moving towards managed IT services will benefit the economy?

Moving towards managed IT services is one of the components that will help companies mature and develop, hence if a majority develops in this manner, it will definitely impact the local economy.

Companies are now able to focus on their core business, they will grow rapidly and generate more business.

Virtualisation of business functions is becoming very real, do you feel organisations in Qatar are ready to make this shift?

Yes, businesses and government organisations in Qatar are developing innovative e-business models. Cloud computing is one of the single biggest shifts in computing that we have seen in recent years. Companies are realising that it makes business and economic sense. The cloud will be an important part of the future of IT. When Qatar’s e-commerce law was enacted in April 2010, it represented an important step forward in fostering the growth of e-commerce in the country.

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BUSINESS INSIGHT

Tax Policy

Qatar’s tax policies and impact on business and investments The inaugural GCC branch meeting of The International Fiscal Association (IFA) was held in Qatar to discuss the state of tax policy in the country and the region.TheEDGE spoke exclusively with Ian Anderson, chief financial officer of Qatar Financial Centre at the event about the role of tax policy in attracting investment and the various tax policies at work in Doha.

O

pening the event was Jeffrey Owens, the previous director of tax policy at the Organisation for Economic Cooperation and Development (OECD). In the opening remarks, he discussed the role of the financial and economic crisis that he says is driving a lot of what is being seen in the tax world both in terms of tax legislation and tax enforcement.

When it comes to tax competition, Owens explained the world has changed. “All of our tax bases whether you are talking about capital, individuals or consumption, have been eroded,” he said. And because of this companies have become very sensitive to tax differentials, an issue that the governments need to resolve efficiently to stay competitive and attract investment.

While nobody will invest in a country just because of tax, you certainly may decide not to invest in a country because of the tax system, he pointed out.

“Bad tax policy can damaging,” furthered Ian Anderson, chief financial officer (CFO) and

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BUSINESS INSIGHT

director of taxation of Qatar Financial Centre (QFC). “You need to make sure that you do not do anything that scares people away. For a company making a decision to invest in a country, tax is one part of that calculation. It affects the overall net profit, cost of capital, so having the right tax environment is pretty important. I think that is fundamentally why they [the government] have worked very hard recently at modernising the tax rules.”

Declan Mordaunt, partner at PwC Qatar who gave a presentation on tax treaty issues in the GCC added, “The importance of the Middle East is growing more and more…we are working together to try and make this an attractive destination for foreign investors, equally we try to work with locals who are trying to invest in overseas markets and make it work.”

DOUBLE TAX TREATIES The principle driver behind double tax treaties (DTT) is to ultimately avoid repeat taxation, said Anderson. “It is of mutual benefit for Qatar and the countries we are negotiating the treaty with. Anderson noted that DTT’s are particularly important for Qatar “it is partly to assist in inward investment,” he said, “but also Qatar is in a situation where it is not only investing in its own economy…it is obviously capital rich so it is looking to invest overseas.”

This mitigates the overall risk of suffering double tax, major issues like withholding taxes on the distribution of profit and interest are covered in the treaties. Qatar has significantly expanded its treaty network over the last few years.

However, there is a need for clarification and transparency with regards to tax treaties, commented PwC’s Mordaunt, “I have a list of treaties but cannot get access to them. That is not a great situation to be in if you are trying to create certainty for tax payers,” he explained, “We need a lot more guidance on how treaties are going to be applied in the region. We need a place as practitioners to give certainty to companies.”

Another issue with regards to treaties is their enforcement said Mordaunt, “to get the benefit of the treaty, firms are having to make a claim, that is not helping businesses, I mean is that the way the treaty should apply? That just seems contrary to the spirit in which the agreements of that nature have been made.

This leads to an issue for investors.”

Sajid Khan, director of international tax at PwC Qatar also part of the presentation

“While nobody will invest in a country just because of tax, you certainly may decide not to invest in a country because of the tax system,”– says Jeffrey Owens the previous director of tax policy at the OECD. team pointed out that double tax treaties play an important role in cross border investment flow. “At the high level the benefits are not just increase in foreign direct investment (FDI) but also very good foreign portfolio investment,” which he says is very important from an outbound perspective.

The Gulf Cooperation Council (GCC) also has in place a parity agreement that is intended to spur growth in the region, and help outbound investors come in and structure themselves tax efficiently within the GCC explained Khan.

The parity agreement in essence, said Khan is an attempt to level the playing field for how nationals in one country are treated in another.

“The spirit is that an Emirati should be treated the same way in Qatar as a Qatari or Qatari company would be treated.”

A good example where this would be working well is the GCC Customs Union, noted Khan, “You pay custom duty at the point of entry (five percent more or less) and then any further movement within the GCC is not subject to any custom duty.” Sovereign states do have the right to tweak these for certain purposes,” he furthered, “for example if they want to spur construction they might want to produce a zero rate for a particular period of time.”

VALUE ADDED TAX, COMING TO QATAR? According to Owens, there is a big shift in the structure of taxation occurring, countries are beginning to move away from direct taxes towards indirect taxation and value added taxes.

To get approval on tax reform, Owens remarked, “You reduce your income tax, reduce corporate income tax and put more emphasis on consumption taxes, environmental taxes and taxes on property, because they have the least harmful affect on growth perspectives.”

The value added tax (VAT) is one tax programme that is in its pilot stages in many GCC countries. Ian Anderson from the QFC said he does not know when VAT will be

introduced. However, he explained that it is a huge undertaking, “There is a desire to make it coordinated throughout the GCC. It is not only agreeing with people internally, it is agreeing with other countries in the GCC, and that adds an extra layer of complication.”

Anderson believed that this is a positive move, as it will potentially cover every single transaction a company does, forcing them to keep proper records. “I think it will force companies to improve their accounting systems and recording systems,” he commented. “Moreover,” said Anderson, “it will provide data to the government about what is going on in the economy… and in some areas it is quite difficult to identify that in Qatar at the moment.”

There has been a revolution on the VAT noted Owens, “we have gone from a situation where in the mid 1950s there were six countries that had a VAT system to a situation today where there are 160, and every year you see more.” VAT in the OECD countries accounts for about 20 percent of all tax revenue and is the single most important source of revenue for many countries, points out Owens.

CHANGING TAX LAWS At the start of January 2010 Qatar issued a revised set of tax regulations; which coincided with the QFC issuing their own regulation, says Anderson. “Regulations in Qatar were more than 30 years old,” he explained, “so they needed to be updated to really deal with the nature of the Qatari economy today.”

The government is looking for clarity with regards to their tax policies said Anderson, and that is what they have looked to do at the QFC. “In addition we offer a tax advance ruling service,” explained Anderson, “whereby if there is any uncertainty on the interpretation of tax law you can apply for an advance ruling, which will give you certainty with your tax affairs going forward. We think this is really important, particularly when we are trying to attract firms into Qatar, and the service has been well used to date”.

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PRODUCTS & REvIEWS

REaD IT: SMArt truSt

Salam Stores unveils the new 24 megapixel Nikon D600 camera

Salam Stores has just unveiled one of the season’s most anticipated cameras, the new Nikon D600 digital SLR. This latest addition to the Nikon family carries the smallest, lightest body among other Nikon FX-format cameras. Boosted by its advanced performance capabilities the Nikon D600 digital SLR combines a number of the highly effective familiar features of its predecessors, while uniting them with a unique optimised set of new features that revel in best in class imaging technology of today.

aSPIRE U SERIES all-IN-ONE REDEFINES THE PC TOUCH INTERFACE Trust is the one thing everyone in the world could use a little more of. Why? Because it is a hyper-connected, lowtrust world. How do we know who to trust among our many links, friends and followers? How can we operate with high trust in a low-trust world without getting conned? How can we extend trust wisely to people when not everyone can be trusted? How do you exercise sound judgment, minimise risk and vulnerability, while maximising your opportunities? Those are the questions Stephen R. Covey and co-author Greg Link attempt to answer in Smart Trust: Creating Prosperity, Energy and Joy in a Low-Trust World, a followup to Covey’s best-selling Speed of Trust.

The authors define smart trust this way: “Trust is judgment. It is a competency and a process that enables us to operate with high trust in a low-trust world.

It minimises risk and maximises possibilities. It optimises two key factors: First a propensity to trust and second, analysis. Simply put, smart trust is how to trust in a low-trust world.”

Available at Virgin Megastore for QR115.

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The Aspire U Series comes in two sizes, a 23inch and a 27-inch. Each boasts an ultra-slim 35 mm profile and Full HD 1920 x 1080 LED backlit display.The screen features durable edgeto-edge glass and a transparent base, visually suspending the PC and giving it the illusion of floating on air. These models ship with a keyboard and wireless mouse that also feature transparent and glossy black materials, to match.

The Aspire U Series screen tilts from 30 to 80 degrees with an easy press of the fingertips.The smooth tilt action is made possible by an exclusive sliding springhinge design. The 30-degree tilt effectively transforms the AIO into a large desktopentertainment tablet, for gaming with one or more players or for viewing photos with friends. The 80-degree tilt creates the best angle to watch Full HD movies.

NOKIa DEBUTS THE LUMIA RANGE WITH ARABIC ENABLED WINDOWS PHONE

Nokia Middle East has announced the official launch of the Nokia Lumia 920 and the Nokia Lumia 820, based on Windows Phone 8. The Nokia Lumia 920 is the flagship Windows Phone 8 smartphone, including Arabic language capabilities. The latest advances in Nokia PureView technology make it possible for a smartphone camera to take the kind of images usually only seen on a standalone SLR camera.

10 TEN THINGS

rEASonS To uPgrAdE To MICROSOFT WINdOWS 8 Shehan Mashood attended the launch of the latest Windows upgrade in Dubai recently, and takes a look at 10 interesting features Windows 8 brings to the working environment.

EASE OF USER INTERFACE Windows 8 interface is a huge departure from what most people are used to, and is ostensibly confirmation that we will be moving towards an era of touch based devices working alongside traditional input devices like the keyboard in the future.

WINDOWS ON THE GO Portable applications are a growing trend.

Web browsers and other software applications can be run from a USB drive, with Windows 8 you can now take the entire operating system with you.

All your personalised settings will be saved, meaning that you can now essentially carry your personal computer (PC) around with you minus the bulky hardware.

REFRESH YOUR OPERATING SYSTEM Previous iterations of Windows would become sluggish over time due to applications being installed and removed, creating performance issues.

The only solution was to wipe the hard drive. The new operating system offers a less drastic measure, by retaining all your personal data and customisations and re-installing only

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the operating system, a definite advantage for novice users.

BETTER PROTECTION A new tool within the boot up process verifies that your computer has not been tampered by malware. It also checks addresses entered into web browsers against a database of malware links to ensure they are safe.

WORKING IN THE CLOUD With Windows Live ID you can now not only access your files but your PC directly.

Since all data is synced with Microsoft servers everything from spellcheck to your wallpaper will be reflected on any computer you log in to.

PRICING It is no secret that the preferred method of acquiring Windows has been through pirating for most consumers and small organisations.

The new pricing structure changes all that, you can download Windows 8 for QR145.

SOFTWARE COMPATIBILITY Upgrading enterprises to Windows 8 should not be a problem. While the Windows 8 platform certainly lends itself to touch based

apps, you can still access the old Windows interface to run programmes designed to run in that environment.

HARDWARE GALORE The varieties of options available to users are already too many to choose from.

Everything from tablets, netbooks and notebooks with touchscreen functionality allows users to select hardware that meets their specification.

WINDOWS METRO The reimagined Windows interface and works as a set of tiles and allows users to built customised view screens with their favourite apps. The app store functions much in the same way that Apple’s iTunes store or the Android app store does.

ANOTHER APP GOLD RUSH Organisations will be looking to develop apps that function to their specific needs and upgrade their system to work in a touch-enabled environment. If Windows 8 adoption becomes widespread (adoption has so far been sluggish in comparison to Windows 7) there is potential for a massive market to develop.