16 December, 2018 ● Businessweekme.com
Companies to Watch in 2019 p33
Algeria…..…..…........DZD 215 Bahrain….......................BHD 1
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Egypt……............…...... EGP 18 Iraq……...…..…...... IQD 3200
Jordan....….........….......JOD 2 Kuwait….......…......KWD 0.75
Lebanon..............LBP 4000 Libya…........................LYD 3.5
Oman…….................…..OMR 1 Qatar……….................…QR 10
Saudi Arabia.........…SAR 10 Syria............................SYP 200
UAE...…....…..…........…AED 10 Yemen…..................YER 600
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SPECIAL REPORT:
QATAR
Resilient Growth Qatar’s economy has remained robust at a challenging time, and looks set for greater heights
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atar has defied the odds since the diplomatic crisis with a number of its GCC and regional neighbors started in June 2017. Despite the severing of diplomatic relations and trade with countries including Saudi Arabia, UAE, Bahrain and Egypt, Qatar has managed to steer its economy along a growth path. While this growth is no doubt less than would have been achieved if the diplomatic dispute had not arisen, it was enough to maintain confidence while also surprising many analysts. Qatar’s outlook was revised up to stable from negative by ratings agency S&P Global Ratings, which also affirmed the sovereign credit ratings at ‘AA-/A-1+’. “We believe Qatar has effectively managed the ongoing boycott’s impact on diplomatic ties and trade and transport links,” the organization said in a statement. “We expect economic growth to accelerate and external accounts to remain in surplus from
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2018-2021, except in the event of larger declines in oil prices.” By way of explanation of its rating upgrade, S&P Global Ratings stated: “The stable outlook primarily reflects our view that Qatar will continue to effectively mitigate the economic and financial fallout of the boycott imposed on the country in June 2017 by Saudi Arabia, United Arab Emirates (UAE), Bahrain, Egypt, Libya, and Yemen, and that Qatar will continue to pursue prudent macroeconomic policies that support large recurrent fiscal and external surpluses over 2018-2021.” S&P said that it believes the Qatari authorities have sufficient resourc-
es to continue to manage the boycott fallout, with the government already having taken measures to ease economic and financial impacts, and it expects to see larger budgetary and external surpluses at the end of 2018 than in its last review. “We project Qatar will continue to operate surpluses in external accounts over our 20182021 rating horizon, on the back of oil prices above $51 per barrel,” S&P stated. However, S&P added that the outlook could deteriorate forcing it to make a negative rating action if the boycott turns out to have a more severe impact than currently antici-
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MEDICAL CHALLENGE One critical sector that had to think on its feet in the wake of the blockade was healthcare, with certain medicines potentially being at risk of depletion. Peter Morris, CEO of Sidra Medicine, said that as a whole, the industry has fared well and as with other sectors of the economy there has been a big push on self-sufficiency. “For us as a hospital, one of the most immediate effects of the blockade was the need to find alternative sources for medicines and medical supplies, replacing those we had been using from Saudi Arabi and the Emirates. The government quickly established new trade routes and we began to import what we needed from countries including Turkey, Jordan, France and the U.K. amongst and others,” he said. “As a result, there was no great impact on patient or hospital needs.” Demand has also remained robust. “It is important to note also that we remain open to all patients who need our specialist expertise (Sidra Medicine is a specialty women’s and children’s hospital) and we now average at least two international patients a week primarily from the Gulf Cooperation Council (GCC) countries and beyond. We are experiencing significant demand in pediatric specialties including heart surgeries, urology, plastics and craniofacial, neurosurgery,” he said.
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SPECIAL ADVERTISING SECTION INTERVIEW:
Qatar’s peg to the U.S. dollar means that monetary policy will gradually tighten
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pated, potentially leading to a situation such as a significant capital outflow, or an unexpected deterioration in fiscal outcomes. Earlier in the year, the World Bank also struck an optimistic tone, stating that it expected growth in Qatar to recover to 2.8% in 2018 and to rise further to an average of 3% in 2019-20. The World Bank’s rationale for this increase in growth was primarily based on Qatar’s position as the world’s biggest exporter of liquefied natural gas and host nation of the 2022 FIFA World Cup. “As rising energy receipts help ease fiscal constraints, spending on the multi-year infrastructure upgrade ahead of the FIFA World Cup continues, and as the US$10 billion Barzan natural gas facility comes onstream in 2020,” the organization said. One potential headwind that Qatar, along with a number of other GCC nations, faces is rising U.S. interest rates. Indeed, Qatar’s peg to the U.S. dollar means that monetary policy will gradually tighten in tandem with the US monetary policy. However, government spending will be maintained at current levels, which could help off-set any negative impact from rate hikes given the economy’s current rising growth. A further plus for Qatar’s economy is key tax policy and administration measures, including the introduction of a VAT and excises during 2018, which are expected to further contain the fiscal deficit over the medium term, although inflation should also rise to close to 2.4% in 2018, the World Bank added. One of the pillars of Qatar’s economy that has helped maintain stability is the strength of the country’s banks, which are also showing improving operating conditions, with solid loan performance and strong capital, according to Moody’s ‘GCC Banks for 2019’ report. In fact, Qatar’s banking system displayed stability across all seven drivers, which consist of operating environment, asset risks, capital, profitability & efficiency, funding & liquidity and government support.
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Abdulla Mubarak Al-Khalifa Abdulla Mubarak Al-Khalifa, Acting Group Chief Executive Officer, Qatar National Bank, discusses key trends, challenges and opportunities in the market. How has business been during the past year for QNB? QNB’s strategy is to pursue sustainable profitable growth. We continue to experience strong growth in all our three core markets of Qatar, Turkey and Egypt as well as from the rest of our international network. As at September 30, 2018, net profit reached ~$3 billion, up by 6% year- on-year. This was driven by operating income, which increased to ~$5 billion, up by ~8% over the same period, demonstrating QNB Group’s success in maintaining growth across the range of revenue sources. In Egypt and Turkey, net profits increased by 18% and 13% in USD terms year-on- year. Moreover, we continue to maintain high asset quality and efficiency with the non-performing loans ratio at 1.8% and cost to income ratio at 26.2% - both considered one of the best ratios among financial institutions in the region. What are the main challenges that you face? How has the blockade affected business, and how have you tried to mitigate this challenge? There are several macro challenges impacting the banking sector. These range from rising fed rates, impact of the USChina trade war, emergence and disruption by non-banking players and increasing regulatory requirements. Together, they increase complexity, administrative burden, competitive intensity, cost and a sense of urgency for the sector. Qatar has weathered the blockade well proving its economy is robust and resilient. The authorities were quick to react and swiftly took several measures not only to mitigate the effect but also to re-di-
rect the economy towards new avenues of growth. Today, Qatar has successfully overcome the blockade which has served as a catalyst and platform for future long-term growth, where the challenges imposed were transformed into opportunities. The blockade has done little to substantially diminish our position as the largest bank in the Middle East and Africa. Domestically, it has reinvigorated the market, fostering more innovation, creativity and drive to self-sufficiency. It has fueled a number of sizeable food security, manufacturing, tourism and infrastructure (including utilities) projects that QNB is instrumental in supporting. Furthermore, several new trading partners and routes have been established. As we are already present in several of these markets, these flows have provided us another stream of opportunities to capitalize upon. What are your expectations for 2019? QNB Group is positioned as the gateway to Middle East and Africa, facilitating economic growth as a financial intermediary. Our top-tier ratings, diverse geographical footprint in over 31 countries across Asia, Africa and Europe and our strategic partnerships enable us to cement this positioning. Looking into 2019 and beyond, the growth prospects across the markets we are present in are favorable and likely to provide tailwinds to our growth trajectory. We will continue to invest in our flourishing domestic business to maintain our marketleading position, while growing our international network to uncover more opportunities to further diversify our business.
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TOURISM INTERVIEW:
Tarek M. El Sayed
Q4
How has business been in Qatar during the past year for your company? ARTIC’s resilient business model with its focus on diversity in terms of geographic presence, business type and business operating partners means we are well-placed to meet different challenges. ARTIC’s business operations in Qatar have continued to perform well. Our operating businesses enjoy leading market positions and partner with renowned international operators of the highest quality. Ideally located in the center of Doha with direct connectivity to one of Doha’s leading shopping centers, City Center Doha, and within walking distance of the Doha Exhibition and Convention Center, our properties are ideal for business or leisure. Regarding projects under development, we have made good progress in the past year and are confident that 2019
Managing director, Al Rayyan Tourism Investment Co.
will see the opening of more properties as planned. You’re involved in the hospitality sector – how are you finding the industry overall in Qatar? Along with the strong Qatari economy, government initiatives such as easing entry visa restrictions and the ongoing efforts of the Qatar Tourist Authority to promote the country’s tourism credentials including business and conference tourism, have all increased in-bound tourism and played a vital role in supporting Qatar’s hospitality industry. What are the main challenges that you face? How has the blockade affected business, and how have you tried to mitigate this challenge? While challenges are always present, it’s ARTIC’s entrepreneurial spirit and strategic thinking which enable us to turn these challenges into new opportunities. ARTIC’s unique business model and di-
versified geographic footprint allows us to mitigate the risks faced in specific markets. Although the blockade reduced the number of visitors from two neighboring countries, the swift initiatives implemented by the government and Qatar’s strong economy have led to growth of around 2% and have opened up new and bigger markets. What are your expectations for 2019? We look forward to strengthening our global position within the hospitality investment sector and to progressing our medium-term objective of becoming a listed company on one of the world’s leading stock exchanges. We will continue to seek new investment opportunities and to further develop our investment portfolio.
TELECOM INTERVIEW:
SPECIAL REPORT: QATAR
Diego Camberos
How has business been during the past year for Vodafone Qatar’s consumer and business services? This past year, the improvements that we have made in our operations and focus on our customers has led to a growth in monthly subscribers. The same is also true of our fixed line services. Taken together, this has increased our revenues. At the same time, we have carefully managed the costs in our business meaning that our overall profitability also improved. Our total revenue for the period from January to 30 September 2018 grew by 5% year-on-year to reach QR 1.5 billion ($421.7 million). This is due to growth in monthly postpaid subscribers, corporate
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Th COO, Vodafone Qatar
internet connections and handset sales. Our operating performance, as measured by EBITDA, increased by 16% year-on-year for the nine months to QR 425 million as a result of our higher revenues and lower costs. Our EBITDA margin has also improved and stands at 28%. The result is that we reported a net profit of QR 75 million for the nine months. This amounts to an increase of QR 303 million compared to the same period last year. We’re also seeing growth in our monthly, postpaid subscriber customers. As of 30 September 2018, these have grown by 24% year-on-year. This, together with higher service revenue, resulted in Average Revenue Per User (ARPU) – an important measure of the performance of telecommunications and digital businesses – increasing by QR 12 year-on-year. Our ARPU now stands at QR 103.
Our positive financial performance is driven by a clear strategy and an effective and focused programme for controlling costs right the way across our business. We continued our growth plans by delivering innovative products, providing unmatched customer experiences across our core mobile offering and expanding our rapidly growing fixed-line proposition. What is your current focus? We’re focused on working closely with our regulator to ensure the competitive dynamics of the industry best support the evolving needs and requirements of the county and its population, in line with the Qatar National Vision 2030. The intervention that we have seen earlier this year on duct access agreements is a positive step forward in meeting the best interests of customers. Increased infrastructure sharing enables both operators in the country to focus on greater innovation.
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Property Perspective UDC achieves solid 2018 performance amid high hopes for Qatar’s property market
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he World Bank attributed the projected increase in Qatar’s growth rate to spending on infrastructure-related projects ahead of the 2022 FIFA World Cup, the completion of a $10 billion new gas facility in 2020, and the adoption of new policies to further open up and diversify the economy. In particular, the government is planning to allow full foreign ownership of companies across all sectors, having already introduced permanent residency reforms and visa waivers for citizens from over 80 countries. These incentives, among several others, are luring foreign investors into Qatar’s various industries - particularly in the fields of sports, education, health, tourism and hospitality. By 2023, Qatar expects to attract 5.6 million visitors annually, double the
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number that the country welcomed in 2016. Qatar’s emerging tourism sector, a growing expat community and an attractive business environment are expected to further bolster demand for the real estate market, which delivered a solid performance in 2018. This year has been another successful year for United Development Company (UDC), a leading Qatari public shareholding company and the master developer of The Pearl-Qatar and Gewan Islands. Established in 1999, the company was listed on the Qatar Exchange in June 2003. UDC’s mission is to identify and invest in long-term projects contributing to the growth of The State of Qatar and providing good shareholder value. From day one, the company actively contributed to the development of
The State of Qatar, rapidly evolving into a leading Qatari Public Shareholding Company and has successfully established a group of various good performing investments. Through a combination of project activities and commercial enterprise, UDC and its subsidiaries have accumulated a large amount of specific experience including detailed knowledge of real-estate development, property management, hospitality and maritime, infrastructure and utilities. As part of its five-year business plan (2019-2023), UDC is leveraging its leading market position to achieve sustainable financial performance and maintain profitability targets by focusing on the core business activities and investing in new and viable real estate developments. The volume of residential properties rented during the first nine months of 2018 increased by 22% compared to the same period of 2017, while the volume of retail areas under lease increased by 6%. These increases indicate that The Pearl-Qatar, which recently won the 2018-2019 “Best Mixed-use Development” award at the Arabian Property Awards, is becoming a favored destination for residential and retail tenants in Qatar to live and operate a business. The strong demand for properties across The Pearl-Qatar reflected positively on UDC’s financial results for the nine months ending 30 September 2018. The company reported net profit of QR 416 million on revenues of QR 1.29 billion, while the net profit attributable to equity shareholders stood at QR 385 million, with basic earnings per share of QR 1.09. Amid these strong results, UDC moved forward with three major developments, namely Gewan Island, Giardino Village and Al Mutahidah Towers. In the second half of 2018, UDC completed the construction of Al Mutahidah Towers’ connecting bridge, the most complicated section of the structure, and a unique feature among towers at The Pearl-Qatar. The completion of the connecting bridge, which joins the two towers from the 12th till the 24th floor, was followed by the launch of the third sale phase of residential units at Al Mutahidah Towers, and the second stage of property sales at Giardino Village, one of the most luxurious and promising residential areas on the Island. This was followed by the inauguration of development works at Gewan Island, another major project by UDC.
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Setting benchmarks in global hospitality.
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