The Edge - Sep 2013 (Issue 47)

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cover story

48

contents

featuresFeature Story: Qatar 2.0 64

Will Qatar’s recent leadership change, the MSCI upgrade, the country’s upcoming spate of IPOs and internationalising of its debt lead to a redefining of Qatar’s financial outlook?

Business Interview: Salah Jaidah 70In an exclusive interview with The Edge, Salah Jaidah, chief country officer of Deutsche Bank in Qatar and its vice chairman for the Middle East and North Africa talks at length

on the strategic importance of the Qatar market.

Feature Story: Beyond bricks and mortar 54Qatar was recently ranked by the World Economic Forum as the most networked Arab

country and the 23rd most networked nation in the world. But can Qatari e-commerce allow it to become ‘The Silicon Valley’ of the Middle East?

Business Interview: Issa Al Mohannadi 60Issa Al Mohannadi, founder and chairman of Qatar Green Building Council shares his

insights on the scope of sustainability in Qatar’s largest projects.

Business Management: Cross-company dialogue 76The London Business School’s Adam Kingl examines the wisdom of a manager

encouraging communication and sharing ideas within diverse teams.

The Gulf Cooperation Council (GCC), formed in 1981, is a different entity today

compared to when it was conceived. Where does Qatar stand in this union

and what does the future of the GCC hold politically and economically?

Khalifa Saleh Haroon, who set up I Love Qatar (ILQ), a popular information portal in Qatar, says there are many opportunities for online businesses here either because something has just not ever been done before, or it has not been done well.

64

54

A feature of Qatar’s redefined economy could be the internationalising of its debt markets.

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sectorsFinance & Markets 25The United Nations Conference on Trade and Development (UNCTAD) has said in its World Investment Report 2013 that foreign direct investment (FDI) flows from Qatar declined by 8.5 percent to USD1.8 billion (QAR6.6 billion) last year.

Energy & Sustainability 29Increased focus on private sector investment in Qatar’s hydrocarbon sector and renewables is key to future energy security, suggests recent research by Chatham House. Lead author of the study Glada Lahn reflects.

Real Estate & Construction 35Launched in May 2013, Qatar’s first passivhaus an energy efficient home (with only 16.1 percent increase in capital costs compared to a conventional villa) is preparing for its first occupants.

Tech. & Communications 39The succesful launch of Qatar’s first satellite the Es’hail 1 into orbit could mean significant advantages for telecommunications providers in the region.

Samir Mardini, Head of Talent Consulting MENA of Aon Hewitt tells The Edge that companies that get engagement of employees correct will enjoy a source of competitive advantage in their talent strategy.

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regularsFrom the Editor 10Photo of the month 14Business News 16Qatar Perspectives 20Country Focus 44Products Page 86The View from Doha 88

Business Insight 79Speaking exclusively with The Edge, Hiroyasu Sugiyama, managing director of Sony Middle East and Africa (MEA) talks about the importance of MEA markets to the company. Samir Mardini, head of talent consulting MENA of Aon Hewitt discusses their recent survey on employee engagement and the Qatar market.

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8 | The Edge

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Is Qatar’s summer 2022 World Cup in jeopardy? FIFA’s executive committee are set to vote on the matter in Zurich, Switzerland in early October.

At this pivotal meeting, for both Qatar and global football, they will decide whether to compel Qatar to move the event to cooler winter months.

Should FIFA’s ExCo do so – and in late August, FIFA president Sepp Blatter said he was convinced they will – the ramifications for both Qatar and the World Cup could be enormous. In a worst-case scenario it may result in Qatar losing the rights to hold the event altogether, say some pundits.

This unprecedented development is but the latest in the ongoing controversies surrounding the awarding of both Qatar’s 2022 and Russia’s 2018 FIFA World Cup tournament rights.

When Blatter joined the Qatar 2022 bid team on stage to lift the trophy and celebrate that historic moment in football in Zurich in December 2010, he seemed supportive of the legitimacy of Qatar’s bid for a summer event, despite issues such as the heat, and alcohol sponsorship and consumption by visitors in an Islamic state.

Indeed, on the former point, Blatter and FIFA only said he/they would entertain the idea of moving the event to cooler months if Qatar requested it. But at first Blatter was at pains to counter detractors to the decision, justifying that it was important for the growth of the beautiful game that the event was held in new locations, such as South Africa that very year, the first time ever on the continent, and in Russia in 2018.

The Qatar 2022 Supreme Committee (Q22) in turn reiterated their willingness to consider moving the tournament to winter, but also to their commitment to hold the event in June-July as planned. After all, they won the bid with that in mind, their promise to have air-conditioning for the stadiums and fan zones etcetera, seeming enough at the time to satisfy the FIFA executives.

Since then, global media speculation regarding whether they should move the tournament has

Miles Masterson Managing Editor

editor’s letter

Recently global media speculation over Qatar’s

hosting of the FIFA World Cup in summer 2022 has grown.

grown, fuelled by recent comments by prominent figures in world football, including Blatter himself.

Further negative coverage has also emerged from human rights organisations around the plight of the migrant construction workers being employed in Qatar in the build-up to 2022. This is against a background of unfounded accusations of corruption within FIFA, which Qatar’s most vocal opponents use to bolster its non-legitimacy as the 2022 World Cup host.

Should the FIFA executive committee fulfill Blatter’s prophecy in October, what will this mean for Qatar 2022? The disruption to European club tournaments, the main obstacle to holding the event in months the climate in the Gulf can be regarded as cool enough, is the central challenge, one that will affect thousands of players, millions of fans and sponsors and media rights worldwide.

Unsuccessful bidders for 2022 such as Australia and United States could also seek to legally nullify the 2010 FIFA vote on the grounds that Qatar had not fulfilled its original bid criteria.

But the question has to beg why would FIFA’s executive make such a demonstrative change after nearly three years? Why intentionally cause so much disruption and cast the Qatar 2022 World Cup into doubt? So far at the time of writing no insight has been provided as to the real reason behind this seemingly sudden loss of faith in Qatar’s ability to keep the players and fans cool in the summer of 2022 using sustainable methods.

Whether or not Qatar could have pulled it off with air-conditioned stadiums and fan zones it seems may itself become a moot point. If the stakeholders fail to negotiate the winter option and Qatar does in fact lose the event rights in the coming months, the country itself will retain its dignity and continue to thrive. But it would be also be a shame because it may be the only chance many Arabs might get to see the event in person. It would also send a clear message that the FIFA World Cup may never be held in the Middle East and North Africa, due to the mid-year heat and unresolvable European winter scheduling clashes.

One can only hope that whatever follows the probable FIFA October vote against a summer event is resolved – and Qatar can continue to prepare for 2022 unhindered by controversy.

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Clearing the barMutaz Essa Barshim of Qatar competes during the men’s high jump final at the IAAF World Athletics Championships at the Luzhniki stadium in Moscow on August 15. With a jump of 2.38 metres Barshim claimed the silver medal at the event, ahead of Canada’s Derek Drouin, whom he beat on countback. Along with Barshim, widely considered the two in form high jumpers in the world at present, Ukrainian Bohdan Bondarenko won gold in a tightly contested final. Barshim’s final attempts at bettering Bondarenko’s final jump of 2.44 metres came agonisingly close, but resulted in the Qatari clipping the bar and having to settle for a very credible second place medal to add to his collection, which includes a 2012 Olympic bronze. (Image Reuters/Arabian Eye)

photoof the month

16 | The Edge

newsbusiness

Al Jazeera faces competition for US viewers

In August Al Jazeera launched its new network in the United States (US), Al Jazeera America (AJAM), but according to Nielsen data from the first full week of AJAM programming, the network did not perform well, with its most popular primetime show managing to garner only 27,000 viewers. Though it has access to 40 million homes in the US through various distribution deals, AJAM is still struggling to secure distribution with certain key cable providers. Its initial footprint was also slightly less than expected on the launch day when it was dropped by broacaster AT&T, (against which AJAM has filed a lawsuit).

However, despite the seemingly poor numbers, media expert Everette E. Dennis, the CEO and dean of Northwestern University Qatar, feels that AJAM does not need substantial numbers to compete with existing cable news competitors. In the week of AJAM’s launch, one of the most watched shows on Fox News, The O’Reilly Factor drew in only 2.97 million viewers, which is significantly lower than other

entertainment programming on cable networks. Nevertheless, AJAM still faces numerous obstacles

including an image problem in the US, where Al Jazeera was criticised in the past for broadcasting video messages from Al Qaeda. At the moment however, AJAM seems to be focused on striking a deal with cable providers in the US to increase its distribution. According to Dennis, who believes that negotiations are still taking place between Time Warner and other providers.

“It will be difficult for AJAM to generate large audiences,” continued Dennis, “but what it will have are high demographics of more educated, affluent viewers, including a student following and a younger audience.

“There is a great dissatisfaction in the US over some of the cable networks,” he continued. “I think there is a demand for more substantive stories, the New York Times proves that everyday and there is room for that.”

Al Jazeera America is still struggling to gain distribution on some of the US biggest cable broadcasters. (Image Reuters)

Number of the monthThe number of viewers of Al Jazeera America’s most popular prime time show in the week of the channel’s launch.

27,000

“It will be difficult for Al Jazeera

America to generate large audiences, but what it will have are high demographics of affluent viewers.” - Dennis E. Everette, dean Northwestern University Qatar.

The Edge | 17

“We have chosen a range of items that are representative of the sale in its entirety, including pieces that have an immediate relevance to the audience in Doha and those visiting the exhibition from the wider region,” added Gibbs. “Doha is an ideal audience for these sales as it is home to one of the world’s outstanding collections housed in the Museum of Islamic Art (MIA). Sotheby’s is proud of its relationship with Doha which dates back over two decades.”

The selection has been chosen from the 188 exceptional objects to be offered for sale in the forthcoming auctions of Sotheby’s ‘Arts of the Islamic World’ and ‘Art of Imperial India’ sales in London. The pieces that will be on display in Doha represent the very best of what will be sold on October 9, at Sotheby’s New Bond Street in London, and provide fascinating insights into Muslim history and culture, encompassing almost 1400 years of every kind of decorative art produced in lands under Islamic patronage from Spain to India.

A particularly noteworthy inclusion in the Arts of the Islamic World exhibition in Doha is The Fall of Constantinople, an extremely rare and important late 15th to early 16th century Italian oil painting of the ancient city of Constantinople (modern-day Istanbul).

Sotheby’s to exhibit Islamic art in Doha

newsbusiness

In conjuction with the Qatar United Kingdom (UK) 2013 Year of Culture, the Qatar Museums Authority along with The British Council are inviting architects to explore the process of regeneration of the urban landscape in the older parts of urban Doha.The Old Doha Prize is organised in association with the Doha Architecture Centre and Msheireb Properties in Qatar as well as the Royal Institute for British Architects (RIBA) and The Bartlett School of Architecture, UCL in the UK. The Prize offers Qatari architects the unique opportunity to collaborate with their UK counterparts as five teams will research and explore new ways to address the changing urban landscape of old Doha. They will share approaches, skills and creative ideas to explore the process of regeneration and potential for incorporating the heritage of the area into their designs.

The competition has a specific focus on the neighborhoods of Al Asmakh and Najada, in the centre of old Doha, and winners will be awarded a grant of GBP15,000 (QAR85,000). The grant will provide the team with the opportunity and resource to implement ideas explored as part of the design residency. This might include the implementation of the project in the form of an exhibition, research project, publication, installation, public intervention or film. Nayef Essa Al Romaihi, of Qatar UK 2013 explained that with so many projects underway in the country, being able to

Old Doha architectural competition to explore urban regeneration

A diamond-set and enameled gold tray and casket, North India, 18th century. Expected price is between GBP200,000 and GBP300,000 (QAR1.1 million and QAR1.7 million). (Image courtesy Sotheby’s)

The Old Doha Prize is an attempt to engage Qatari architects in collaboration with their UK counterparts to improve the streets of Doha.

On September 12 and 14, 2013 Sotheby’s auction house will stage an exhibition at Building Katara Cultural Village featuring a selection of highlights of Art of the Islamic World. There will be a total of 37 objects exemplifying the broad artistic traditions of the Muslim world, including ceramics, metalwork, manuscripts, jewellery, weapons and paintings. “We are delighted to follow on from our successful sale of contemporary art in Doha this April with an exhibition of art objects of superb quality and importance from our forthcoming ‘Arts of the Islamic World’ sale in London.” Edward Gibbs, chairman and head of Sotheby’s Middle East, who will lead the Doha exhibition, told The Edge.

showcase homegrown Qatari architecture is a matter of pride. While Al Romaihi does not believe that Qatar architecture is under threat he explained that traditional architecture needed to be protected. “Architects in the UK have been involved in conservation to a much higher extent than our Qatari architects,” he said. “Qatar is a blank canvas where architects’ imagination can run free while preserving the country’s architectural heritage.”

18 | The Edge

Qatar Development Bank recently announced the launch of Trade Secrets, a guidebook developed in association with the International Trade Centre (ITC), a United Nations agency.

The book, which is available in English and Arabic, aims to provide Qatari companies with a source of information on all issues related to exporting, and includes details about the procedures companies must follow inside and outside Qatar when selling their goods and services abroad.

“One Qatari citizen is worth an entire people

and the people of Qatar are equal to an entire nation. This is what we teach our sons, with all respect and appreciation to the others.”

Qatari foreign minister Khalid Al Attiyah said on Twitter, ostensibly in reply to Saudi Arabia’s Prince Bandar Bin Sultan Al Saud’s alleged comment that Qatar is “nothing but 300 people…and a TV channel.”

“There is a need for the government to play a role

with a sense of urgency including taking measures to

deal with waste water.”Japan’s prime minister, Shinzo Abe

speaking about the latest Fukishima nuclear leak during his recent visit to Doha.

Professional development, management competency, an ageing workforce and the specialist skills gap in the region’s oil and gas sector have been highlighted as major issues after a global survey revealed that 86 percent of regional oil and gas labour is imported. These will be among the topics discussed at the 9th Annual HSE Forum in Energy to be held in Doha in October 2013. According to the 2013 Global Oil & Gas Salary Guide released by Hays, the global oil and gas recruitment company, health and safety is a concern, especially with new recruits.

The Middle Eastern business intelligence service recently announced a new platform that combines financial and business intelligence, to offer a comprehensive view on the growth and investment opportunities in the MENA region. Antonio De Gregorio, general manager, Zawya, said, “The platform features coverage of MENA markets including exclusive financial news, research and analysis.”

86 percent of regional oil and gas labour is imported

Zawya launches new investor platform

Vodafone Business Services increases client offerings

Kahramaa successfully tests first underground substation at Msheireb

newsbusiness in brief

Vodafone is expanding its business services team to increase the company’s ability to craft tailor-made solutions for corporate clients. Its Al Safwa Centre, also has an Innovation Room where Vodafone holds workshops with senior executives from companies to better understand the direction of their business and how new technologies can help make them much more competitive.

Mansour Ibrahim Al Mahmoud, CEO of Qatar Development Bank, noted that the publication would help to familiarise SMEs with export procedures, both locally and internationally.

The Vodafone Al Safwa Centre was opened earlier this year and aims to service corporate clients. (Image Vodafone)

The 66 kilovolt substation was jointly designed and developed by Msheireb Properties and Kahramaa. The substation is connected to the Ras Abu Aboud super substation to ensure a reliable supply of electricity. Engineer Mohammad

Masoud Al Marri chief officer design and delivery at Msheireb Properties, said, “The environmental considerations of the substation... underscore our long-term commitment to sustainable development.”

An underground location was chosen for the substation to preserve the traditional character of the project’s distinctive design maximise the amount of green space open to the public.

The latest results from the MasterCard Index of Consumer Confidence reveal that, with a score of 96.4, Qatar is second in the region behind Kuwait, which is slightly higher at 96.8. Consumers in Qatar are especially optimistic in areas of employment, economy and quality of life, despite the slight decrease in the overall score from the previous index in March 2013 where it topped the Middle East. Pankaj Kathuria, area head, Southern Gulf, MasterCard said, “Consumers are most optimistic about their employment prospects, and this outlook reflects the abundance of opportunities that the government is creating for Qataris and expatriates alike.”

Qatar’s consumers still among most optimistic in Middle East

QDB launches Trade Secrets

Words & Numbers

3The number of requests Qatar

had made to Facebook for user data in the first six months of

2013. According to Facebook’s Global Government Request Report none were granted by

the social media website.

20%The percentage by which

the average monthly salary increased in Qatar according to the Ministry of Development Planning

& Statistics (MDPS).

The Edge | 19

event of the month30 September - 2 October

17-19 September

eventsbusinessQatar, September 2013

HSE Forum in Energy The HSE Forum in Energy this year in Qatar features an overall agenda on health and safety that is set to include Middle East oil and gas professionals voicing their concerns over environmental issues, safety regulations and threats to security and safety caused by social unrest. This event is in its ninth year, and will address these issues at both a regional and international level, with high profile industry speakers presenting case studies. Zenab Husain, conference director for the event from Fleming Gulf said, “This year’s forum provides a relevant platform for regional industry decision makers to not only share experiences, but pool ideas to formulate a practical and achievable road map for the future. The potential skills shortage and its effect on health and safety is leading the agenda on development and strategy.”

The HSE Forum will also include a series of workshops on the third day designed to help support initiatives to reduce workplace fatalities and maintain employee wellbeing in the energy sector. (Image Corbis)

ITS Road Safety Forum This event is expected to highlight solutions to the latest challenges in Qatar and the wider Middle East’s transporatation and infrastructure industries. Qatar alone has allocated approximately QAR45.5 billion on improving and creating road networks. Under the Qatar Public Works Authority, Ashghal is planning to integrate state-of-the-art technologies under its ITS Masterplan project, which will be one of the topics of discussion at the event. This includes technologies incorporating the latest traffic management systems to improve safety and enhancing communication networks to improve traffic flow, among other topics.

16-18 September

GCC Europe SME ForumA three-day conference, to promote EU and GCC cooperation for public and private institutional support for SMEs in the region will be held in Doha. The GCC Europe SME Forum is a joint initiative by the Association of European Chamber of Commerce and Industry, the Federation of GCC Chambers and International Fairs and Promotions.

upcoming eventsDoha International Oil and Gas Exhibition The eighth Doha International Oil and Gas Exhibition (DIOGE) will provide businesses the opportunity to exhibit the latest technologies in the hydrocarbon industry. This includes technologies in the fields of exploration, production and the transportation of oil, gas and petrochemicals. Visitors to the exhibition will be able to gain an understanding of what is new in the market, obtain technical knowledge and evaluate products from manufacturers in the oil and gas field from all over the world.

7 – 10 October

7 - 10 October

30 - 31 OctoberClimate Control Conference

Food Chain Conference

Qatari entrepreneur Zeyad Al Jaidah discusses the regulatory framework foreign companies, seeking to enter Qatar’s market should be aware of in order to lessen their chances of failure.

What do foreign companies need to know before entering Qatar?

Zeyad Al Jaidah is the nanaging director of TechnoQ, a systems integrator company based in Qatar.

There is great buoyancy and a sense of enthusiasm among the business community in Qatar, and as a local business owner, lately I have been receiving an increasing number of requests through various channels from foreign companies seeking local sponsorship opportunities.

For international businesses wanting to establish a business in Qatar, probably the major hindrance is the requirement that foreign companies must have a local partner, and that the foreign share in the ownership structure cannot exceed 49 percent.

Qatar’s market, like any other market in the world, has its own guidelines and requirements concerning foreign companies operating in this country. I seek to summarise the major obstacles firms should be aware of, a set of criteria for sponsor selection, and what to expect from a local partner in order to establish a competitive business operation in Qatar. These need to be discussed because we are witnessing many major international companies establishing businesses in Qatar and failing miserably, resulting in closure of their business accompanied by a negative experience on both sides.

The first step should be to conduct a feasibility study about your product’s or service’s probability to succeed in the Qatari market. This study should be based on factors such as the existing competition, market channels and consumer tastes. An industry sector analysis can form a solid starting point for a viable feasibility study.

Selecting a reliable sponsorThe next step is to thoroughly inspect prospective Qatari businesses and determine which local companies would be best to work with.

Selecting a reliable and committed local partner can mean all the difference between success and failure in Qatar. The most important criterion in selecting the

right local sponsor would be to evaluate how valuable your business would be in comparison to the rest of the businesses your local partner owns. If your business is going to represent one percent of your local sponsor’s business portfolio, then the probability of the foreign company succeeding is not likely to be very high. The sponsor’s attention and efforts will be directed toward the big money generators and the new foreign business would end up being just a brand name amongst many other businesses in his portfolio. Foreign companies should search for a local sponsor who is as keen to set up the same type of business and determined to succeed within the same industry.

In case of equity partnership between the local sponsor and the foreign business entity, the turnover of the joint business should be significant in order to make it worth their while. If the agreement is based on the foreign company putting down all the investment and know-how, the local partner should at least be able to contribute by managing the local logistics in terms of trade licences, import licences, and visas for staff etcetera. These could prove to be cumbersome tasks even for the biggest international businesses coming to Qatar.

If the foreign entity is merely selling a franchise in Qatar, the franchisor needs to ensure that the right amount of time is spent to provide relevant training to the local franchisee’s staff in order to maintain the signature attributes of the brand along with the proper level of quality in products and services being offered.

There are two types of local business sponsorships depending on the nature of the business operation which will be taking place in Qatar. If the foreign business is intending to simply operate as an exporter of products to Qatar, a commercial agent or sponsor is required to act only as a local distributor.

However, foreign companies, whose business operation is based on services provision or project execution, require a service agent type of sponsorship, in which the role of the sponsor would be to obtain all the relevant permits and documentation.

Get it in writing Before signing any type of a contract, foreign companies ought to be prepared for worst-case scenarios. Before making any commitments, make sure that the agreement is put down on paper to ensure compliance by all parties involved.

Surprisingly, many large international companies fail to assess all the risks involved and hope the worst might not happen. A contract, taken at cost with hopes of profit being generated from variations, is one of the biggest causes of foreign business failing in Qatar’s market. One must read the contract very carefully, paying special attention to the variation clause if they are counting on generating profit from that prospect.

As trivial as this may sound, we have witnessed more than a few big international players fail at taking the necessary steps and precautions to ensure a successful presence in Qatar’s business market.

“A reliable, committed

local partner can mean all the difference between success and failure for a foreign company in Qatar.”

qatar perspectives

20 | The Edge

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QFBA Sept.pdf 1 8/21/13 3:17 PM

of its exports are tied in long-term contracts, assuring it stable revenues. Currently, the bulk of Qatar’s LNG exports are directed at Asia Pacific and Europe. In fact, Qatar has been promoting long-term sales and purchase agreements since the end of 2010 to secure stable revenues. Second, Qatar continues to have a cost advantage, since many of the new projects tend to be more expensive.

According to the IEA, LNG development costs have more than doubled since 2003. The capital costs per tonne of LNG of some of the recent Australian LNG projects have been much higher than that of organisations such as Qatargas. And since Qatar produces and exports significant quantities of condensate and natural gas liquids in association with natural gas, the effective average cost of producing LNG is much lower. Qatar also has a strong transportation infrastructure, reducing its transportation costs and risks.

Yet despite these cost advantages in production and transportation infrastructure, and certainty of volume off-take from current long-term contracts derived from its competitive position as a low-cost producer, competition to Qatar’s exports could emerge toward the end of this decade from increases in unconventional gas production in the US, and the emergence of Australia as a leading LNG producer as well as price shifts in LNG.

Nevertheless, shale gas will take time to get to the market and will not be cheap. When these new supplies do begin flowing to the market, exporters like Qatar will be motivated to lock their prices into long-term contracts, while buyers will want to wait and shop for the best spot price.

22 | The Edge

qatar perspectives

In the United States (US), shale gas climbed from about one percent of the total natural gas production to about 34 percent by 2011, according to the US Energy Information Agency (EIA). This dramatic rise in gas production, coupled with the post-financial crisis drop in the demand for natural gas, resulted in a decline in the average US Henry Hub gas price (a key benchmark in the industry) from a high of more than USD10 (QAR36.4) per million British thermal units (MBtu) to USD2 (QAR7.28) per MBtu during the second half of 2011. This was the lowest prices in a decade, since then, the average price has slightly rebounded to just over USD4 (QAR14.56).

Price variationBut the increase in US shale gas production has had little effect on the global gas market, with wide price differentials and a broad divergence of pricing mechanisms. This regional segmentation reflects large differences in supply costs, contract arrangements, transportation costs and demand patterns, which all affect price.

In the Association of South-East Asian Nations (ASEAN) countries and Japan, market segmentation and growing demand have kept import prices much higher than in the US. Similarly, over 2011–12, European gas prices averaged between USD8 (QAR29.12) and USD12 (QAR43.68) per MBtu. For the near future, this growing demand will be met by increased liquid natural gas (LNG) imports and, perhaps, in the not-so-near future, domestic production of shale gas.

Untapped reservesOutside of the US, potential shale gas reserves are estimated to be large, although a thorough assessment still needs to be performed. Algeria, Argentina, Australia, Canada, China, India, Poland, Saudi Arabia, and the United Kingdom (UK), among others, are exploring shale gas resources, but there are many uncertainties that might delay production. China, for example, has some of the most promising potential, but

The recent discovery of shale gas reserves around the world has stirred excitement over the possibility of lower fuel prices. The question for natural gas exporters such as Qatar, is how these changes might affect their share of the market, writes Qatar International Monetary Fund (IMF) mission head A.Prasad.

Qatar and the global shale gas boom

Ananthakrishnan Prasad is the IMF mission head to Qatar.

“Shale gas will take a

while to get to the market, and it will not be cheap.”

has not mastered drilling technologies to exploit it. To encourage foreign shale gas exploration and partnerships with Chinese companies, China has started amending its own laws, but other issues associated with regulation and pricing will also need to be addressed. Europe is moving more slowly than China toward production. Ukraine recently signed a shale gas deal with Shell, and the UK only in July set tax breaks to encourage shale gas production. Hungary, Poland, and Romania are advancing cautiously, and moratoriums on hydro-fracking, the most common shale gas extraction technology, have been imposed in Bulgaria, France, Germany, Northern Ireland and Switzerland.

In the meantime, Australia’s new plants will make it the largest LNG producer in the world, with the added advantage that some of these projects are close to the Asian market. But the capital costs of these projects are also much higher than those faced by low-cost producers, such as Qatar.

The two shale producers, then, with the nearest likelihood of affecting the global market are China and North America, with the US already in production and China actively seeking to start. Demand in China, as in India, is growing at such a pace that it is likely to fully absorb any new domestic gas production. For the US to begin exporting liquid natural gas, significant new infrastructure would be required.

What does this mean for Qatar?Qatar enjoys a number of competitive advantages in the LNG market. First, the bulk

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Contents: FDI outflow from Qatar declines 25 . Regional SWFs gain 26. Increase in GCC remittances 27 . QFC releases the first MENA Reinsurance Barometer 28.

finance & markets

UNCTAD’s country fact sheet on Qatar’s ‘cross-border merger and acquisition’ (M&A) shows Qatar’s net purchases reached

USD4.61 billion (QAR16.8 billion) in 2012.The report noted FDI flows from the GCC to

other countries declined last year, by 17.7 percent to USD18.6 billion (QAR67.7 billion). Kuwait was once again the largest investor overseas, accounting for 41 percent of outflows with USD7.6 billion (QAR27.7 billion).

The GCC’s positive performance is further accentuated when placed in the context of a developing economy and world FDI flows, both of which declined in 2012, by 4.4 percent and 18.2 percent, respectively. The GCC increased its share of developing economy FDI to 3.8 percent from 3.6 percent.

Commenting on the decline of the FDI outflow from Qatar, Abdul Hakeem Mostafawi, chief executive officer of HSBC in Qatar said that part of the reason relates to the reduced level of mergers and acquisitons (M&A) by the sovereign wealth

Qatar’s FDI outflow declinesThe United Nations Conference on Trade and Development (UNCTAD) has said in its recent World Investment Report 2013 that Foreign Direct Investment (FDI) outflows from Qatar to other countries declined by 8.5 percent to USD1.8 billion (QAR6.6 billion) last year. By Aparajita Mukherjee.

This section is brought to you by Qatar Financial Centre

Qatar Investment Authority, the largest shareholder of Tiffany & Co, further raised its stake in the US luxury jeweller to 11.27 percent, in March 2013.

Brought to you by:

26 | The Edge

sectors | finance & markets

Emerging markets

Regional SWFs gain While many global sovereign wealth funds (SWFs), on the back of recent diversification into high-growth emerging markets, are readying for modest 2013 profits, the fortunes of the SWFs in the region, which have been partly mitigated by the increase in the price of oil, are looking bullish.

Indeed, oil sector gains and other recent similar windfalls, may allow many sovereign funds, which globally control USD5 trillion (QAR18.2 trillion) in assets, to weather losses in the long term.SWFs have also invested heavitly into emerging markets, crucially via public equity and debt markets, which are cheap to invest in and large enough to absorb sizeable investments.

According to Thomson Reuters data, the world’s top 38 sovereign funds, which globally invest nearly USD900 billion (QAR3.3 trillion) in listed public equities, allocate more than a third of the total to emerging markets at USD383 billion (QAR1.4 trillion), up 18 percent from mid-2012. These assets, which benefited from cheap money from advanced economies, helped many SWFs earn double-digit profits in 2012. But this may be ending, as emerging economies struggle to attract capital flows from the still-recovering West.

Early indications of that, for example, come from Norway, whose USD760 billion (QAR2.8 trillion) sovereign fund allocates 10 percent of its equity portfolio in emerging markets. Its emerging equity investments lost 5.9 percent in the second quarter of 2013.

As liquidity tightened in the West largely due to the lingering impact of the financial crisis and, more recently, the eurozone sovereign debt crisis, the influence of Middle Eastern SWFs on the global economy has grown. Now, more than ever, these SWFs are viewed by the West as a vitally important source of capital.

fund (SWF), which had previously been more active. “Levels of activity were also relative to the availability of opportunities and associated risk due to on-going global financial challenges, added Mostafawi. “Instead it has become clear that the majority of the investment activities in 2012 were around purchasing shares in large public companies, typically as passive/financial holdings that would not qualify as FDI.”

Mostafawi continued that based on the on-going growth of Qatar’s SWF Qatar Investment Authority (QIA), one would expect such investments to be materially higher than the FDI reported. “This,” he said, “should reflect the actual amount of investing Qatar is doing abroad which continues to be substantial and, as estimated by some, could be upwards of USD12 billion (QAR43.7 billion) per annum at present, although only USD1.8 billion (QAR6.6 billion) qualified as FDI.”

Interpreting the downswing of FDIs from Qatar for The Edge, KPMG partner

Krishnaswamy Venkatesh was not sure if the figure of USD1.8 billion (QAR6.6 billion) could be called a decline as such. “Qatar has always been both opportunistic and strategic with its overseas investments and I suspect this twin approach will continue, he said. “Economic diversification is at the core of Qatar’s 2030 vision and will continue to influence how Qatar deploys its financial surplus.”

Inflow and the futureThe inflow into Qatar showed a marginal increase at USD327 million (QAR1.2 billion). said HSBC’s Mostafawi, “I believe you will see an increase in the FDI in Qatar, in part related to some of the joint ventures around the petrochemical and energy space, where there are examples of large multi-billion projects announced for Qatar that will be supported in part by foreign investors that would lead to an uptick in FDI in Qatar... the general trend over the coming three to five years is expected to be higher than what we saw in 2012.”

Abdul Hakeem Mostafawi, CEO of HSBC in Qatar said that part of the reason for the FDI outflow from Qatar going down relates to the reduced level of M&A transactions by the country’s sovereign wealth fund which had previously been more active.

Top 10 Global Sovereign Wealth Funds (AUM)

Source: SWF Institute as at March 2013

No Country Sovereign Wealth FundAUM

(USD Billion)

1 Norway Goverment Pension Fund 716

2 UAEAbu Dhabi Investment

Authority627

3 ChinaSAFE Investment

Company568

4 KSA SAMA Foreign Holdings 533

5 ChinaChina Investment

Corporation482

6China

Hong Kong

Hong Kong Monetary Authority Investment

Portfolio299

7 KuwaitKuwait Investment

Authority296

8 SingaporeGovernment of Singapore

Investment Corporation248

9 Russia National Welfare Fund 176

10 ChinaNational Social Security Fund

161

The Edge | 27

Migrant workers who form a sizeable section of population in the GCC countries remit a large part of their incomes back home to take care of their families as both Mohyeddin of Commercial Bank and Bokma of QIIB point out.

finance & markets | sectors

Foreign exchange

Increase in GCC remittancesAccording to a recent report, remittance volumes have increased from the GCC, some sources pegging it at USD50 billion (QAR182 billion). Aparajita Mukherjee asked treasury heads how far this trend would be sustained in the medium term, given that it is partially due to currency volatility – particularly that of the Unites States (US) dollar, with respect to major South Asian currencies such as the Indian rupee.The International Herald Tribune (IHT), in recent report on regional remittance volume revealed that Saudi Arabia ranks second in the world after the US. Around USD27 billion (QAR98.28 billion) was sent from the Kingdom in remittances in 2010. The figure for the outflow from the US in that year was USD50 billion (QAR182 billion), according to a study conducted by the American University in Sharjah.

The UAE and Kuwait that also have large expatriate populations, but data shows these countries could not compete with Saudi Arabia in terms of remittance outflows from the GCC in 2010. The figure for the UAE was USD8.7 billion (QAR31.66 billion), while that for Kuwait was slightly higher at USD11.7 billion (QAR42.58 billion), IHT reported.

India topped the list of 10 countries that received the largest of the above remittances. And with the recent decline of the Indian rupee against the US dollar, remittances by Indians in the GCC have grown enormously in recent weeks, foreign exchange operators have said.

Commenting on the remittance trend from Qatar, Peter Bokma, chief of treasury and investments, Qatar International Islamic Bank said, “The economy in Qatar is very much supported by the expatriate labour force, whose main objective is to support family in their home countries. Those expatriates send a very large portion of their income to their family abroad, which explains how the growth of the expatriate labour force in Qatar has contributed to the fact that the GCC accounts for amongst the highest remittance volume in the world.”

Commercial Bank’s head of treasury and financial markets Risha A Mohyeddin said that remittances from GCC are growing at the rate of seven to eight percent every

2011QAR

37.5 billion

2012 QAR

38.97 billion

2013 Q1 QAR

8.2 billionSource: Qatar Central Bank data on total remittances

However, despite this fact, SWFs in the Middle East appear to be viewing the West with caution and, as a result, have invested less internationally than they have done in the past. Whether this is due to international forces, such as the eurozone debt crisis, or as a result of local factors, such as the Arab Spring, it is becoming evident that SWFs are redirecting a portion of their funds from international investments back into the Middle East.

In general, the most common changes within the region can be seen in local wage inflation and increases in major local infrastructure spend. This is evident in Qatar as the country gears up for the 2022 World Cup, and in Abu Dhabi as it seeks to grow into a major global financial centre. Analysts believe that 2013 is set to be an extremely active year for SWFs in the region. Many funds have increased their headcount significantly during 2011 and 2012 and have strengthened their in-house capabilities.

While distressed periods are typically times when hydrocarbon-rich SWFs have taken advantage of opportunities to acquire assets in the West, analysts expect there to remain a heightened sense of caution to remain.

Western governments in turn and organisations looking for capital from the Middle East, may need to adapt and demonstrate a deeper understanding of what is driving the thinking of SWFs in the region, and be dedicated to making a long-term commitment to building relationships that add value to their investment policies.

India topped the list of

10 countries that received the largest amount of remittances.

As liquidity tightened

in the West due to the financial and sovereign debt crises, the influence of Middle Eastern SWFs on the global economy has grown.

28 | The Edge

sectors | finance & markets

Financial services

QFC releases the first MENA Reinsurance BarometerQatar Financial Centre recently released the inaugaural MENA Reinsurance Barometer, an annual market survey of regional reinsurance trends. According to the report, thanks to strong economic conditions and prospects, the MENA region continues to be perceived as an attractive reinsurance growth market with limited exposure to natural perils.

The majority of respondents surveyed for the report believed that reinsurance premium growth would continue to outpace regional GDP growth. The survey also highlighted that reinsurance terms and conditions have continued to tighten over the past 12 months, a trend which started in 2011. To some extent, this explained why the MENA reinsurance market remained attractive despite relatively low rates. The percentage of participants who expected reinsurance capacity in the MENA region to grow further decreased slightly from 54 percent to 50 percent.

A further inflow of capacity was expected as the region remains an attractive high growth, low-catastrophe market with positive effects on overall portfolio diversification. Around 50

Stable47%

Outlook on reinsurance prices

Current average reinsurance prices

Low71%

Very Low18%

Average8%

Aboveaverage

3%

Decrease byup to 10%

19%Increase byup to 10%

34%

year, and this year remittances are expected to grow by 11 percent or close to USD30 billion (QAR109.2 billion). Mohyeddin continued, “Remittances are highest in the world from GCC because of large expatriate ratio in the population and lack of avenues to invest unlike in Western economies. Hence, most of the money earned in GCC is remitted back to the home countries of the expatriate population.”

Commenting on the volatility of the US dollar with respect to some South Asian currencies, and its impact would it have on the remittance volumes, Mohyeddin added, “Our view is that there will be no impact on the local economy based on expatriate remittance’s habits, as we continue to see increase in expatriate population as GCC undergoes infrastructure boom. Hence, outflows will continue to grow.”

percent (up from 41 percent) of respondents believe that the share of regional and Asian reinsurance capacity will continue to increase, at the expense of traditional Western capacity. This was driven by continued strong capital formation in emerging markets and closer economic ties between the Middle East and Asia.

Many survey participants also expected that Western capacity will continue to retreat because of profitability concerns.

Peter Bokma, chief of treasury and investments, Qatar International Islamic Bank said that the economy in Qatar is very much supported by expatriate labour force whose main objective is to support family in their home countries.

A further inflow of

capacity was expected as the region remains an attractive high growth, low-catastrophe insurance market with positive effects on overall portfolio diversification.

Expected remittance figures from the GCC in 2013.

QAR

109.2billion

Source: MENA Reinsurance Barometer

The Edge | 29

Gulf states, including Qatar, are spending more money subsidising their hydrocarbon-led energy

sectors than they are on either health or education, according to a report released by United Kingdom international affairs think-tank Chatham House in August. The study, Saving Oil and Gas in the Gulf, draws on two years of research and workshops held in the region, and offers a long-term means of easing the burden, says Lahn.

Would the Gulf energy sector benefit from more private sector involvement?Yes, the idea being to create a competitive market for providers. Establishing an independent electricity and cogeneration regulator must be a priority to create the right investment environment. Material infrastructure is equally important, namely a grid into which large scale and decentralised renewable energy can be fed.

Contents: Qatar’s hydrocarbon future 29 . Qatar and Europe – the 10-year waiting game 30 . Qatar’s gas pledge to Egypt: LNG 31 . RasGas ships ranked among most eco-friendly globally 32 . Al Shaheen oil field slashes emissions 32.

energy & sustainability

Following a recently published study, Chatham House recommended Gulf states including Qatar provide more opportunity for private sector firms to invest in the oil and gas sector, and that they should divert public funds to invest in renewable energy and sectors, such as education and healthcare. (Image courtesy Ras Laffan)

Increased focus on private sector investment in Qatar’s hydrocarbon sector and renewables is key to future energy security suggests recent research by Chatham House. Jamie Stewart, The Edge Energy & Sustainability Sector editor, recently spoke to report lead author Glada Lahn about the study.

Qatar’s hydrocarbon future

What incentives must the state put in place to encourage the large investment required?There should be a clear, long-term framework for private sector investors which offsets the very low cost of gas inputs to power generation by, for instance, setting the price for renewable electricity provided to the grid, often known as feed in tariffs (FiTs). If the government wants to relieve itself of the subsidy burden over time, the price of electricity fuelled by gas should move towards that of electricity produced by renewable energy over time – through a gradually rising domestic gas price and the gradually lowering of the FiTs as technology costs fall.

Qatar’s energy sector is based on natural gas consumption. Given that gas is less carbon intensive than oil, and the country sits on the world’s third-

largest reserves of natural gas, is there a convincing environmental case for increasing the penetration of renewable energy in the overall mix?Electricity fuelled by gas emits around two-thirds of the CO2 emitted by electricity fuelled by residual oil, but it still [causes emissions]. If we want to decarbonise our energy systems worldwide by 2050 – what the science tells us we need to do to keep the climate stable – then there is a choice between using some form of carbon capture and storage and clean energy, or a combination of the two. Across the GCC, demand for desalinated water is soaring so pioneering solar desalination techniques – as Qatar is – is a smart move. Around the world, electricity will also be increasingly used in transport, creating cleaner cities – something that is particularly important to Qatar as an international event destination.

30 | The Edge

Power sector

Qatar and Europe – the 10-year waiting game

sectors | energy & sustainability

What is the economic case for this?Most of the Middle East countries are looking to diversify away from oil and gas export dependence. Growing new sectors such as renewables will allow energy exporters to stay on top in terms of global energy expertise and create some new sectors for the employment of nationals.

The United Arab Emirates (UAE) and Saudi Arabia, have begun down the path of nuclear power. Should Qatar? It would not make economic sense for Qatar. In the case of the UAE, they want to offset rising costs for imported LNG, while in Saudi Arabia, they are concerned about maintaining oil export capacity and face constraints in gas production. Qatar does not have these problems.

But if the Qatari government is interested in nuclear power, how should it proceed? An assessment of the lifecycle costs and benefits of nuclear power against demand side measures (and other low carbon energy sources, including carbon capture and storage) will show that much more gas and oil demand, and therefore emissions, can be avoided through efficiency measures at lower cost – and more quickly. These can be through proven interventions such as building code enforcement, retrofitting, air conditioning appliance upgrades, vehicle fuel efficiency and behavioural change. As we show in our report, new forms of energy must be developed in tandem with demand side measures to get the most benefit, and this requires an integrated energy policy and far better coordination between all the relevant agencies than is currently the case.

In mid-2013 Qatar acquired one-quarter of Greece’s Heron II natural gas-fired power station for USD58 million (QAR211 million) from the GEK Terna Group. The deal, which was executed through Qatar Petroleum International (QPI), was the Doha-based company’s first foray into the overseas energy production field.

According to a GEK Terna statement, the deal would appear to be more the beginning of something than an end in itself: “The strategic alliance holds much potential for projects and investments, not only in Greece, but across South Eastern Europe as well,” the company stated in a press release.

Doha has made no attempt to hide its intentions. Earlier this summer the QAR3.6 billion Nebras Power was established in Doha with the specific goal of investing in overseas power and water utilities. But if Qatar wishes to extend its financial interests into international energy production – an area that it has expertise in, and given the strength of its domestic hydrocarbon industry – it may do better to consider areas other than European electricity generation.

To date, this year, the European power production sector has succumbed to twin drivers of poor demand and a changing power generation mix.

Within the past month, Sweden’s largest energy company, state-owned Vattenfall, announced it was writing down assets worth almost QAR17 billion. “The company now makes the assessment that the market will not recover in the foreseeable future,” it said. And within weeks, two of Germany’s biggest utilities announced plans to close a host of major power plants citing poor economics.

Enter into this uncertain picture, preceded by an international reputation as an aggressive, no-nonsense investor with massive resources: Qatar. But extracting

Energy subsidies vs. Social spending as a % of GDP in Qatar, 2010

Source: International Monetary Fund

Energy subsidies

EducationHealth

Health and education publicspending

Post-tax subsidies

65

4

321

0

Pre-tax subsidies

Glada Lahn, lead author of recently published Chatham House study on the hydrocarbon’s sector in the GCC entitled Saving Oil and Gas in the Gulf told The Edge that “there should be a clear, long-term framework for private sector investors” in the regional industry.

Qatar is purchasing European electricity assets despite the obvious risks. Jamie Stewart looks for financial sense in Doha’s latest energy acquisition strategy.

“New forms of

energy must be developed with an integrated energy policy.” - Glada Lahn, author of Chatham House’s Saving Oil and Gas in the Gulf.

The Edge | 31

energy & sustainability | sectors

Gas exports

Qatar’s pledge to Egypt: LNG

Qatargas will send five shipments to Egypt to assist the troubled MENA nation in meeting its short-term energy needs, which is experiencing shortages due to political upheaval. (Image courtesy Qatargas)

Qatar could benefit as Europe’s energy mix shifts from coal to renewable power (Getty Images)

financial returns from a sector that is having trouble supporting its own traditional utility-led base may prove challenging.

This will present Qatar with a choice: abandon its stated plans – a very uncharacteristic thing to do – or, as seems to be the preferred option, acquire assets while times are bad, stick out the pain, and hope to regain the investment and more when the situation improves.

If Doha is prepared to play the waiting game, it may well pay-off to buy into a distressed Europe today. Over the next decade, environmental legislation is going to force the closure of a substantial number of aged coal-fired power plants across the European Union.

The loss of this generation capacity will inevitably lead to higher electricity prices as supply falls away, allowing assets already in place – such as, for example, gas-fired power plants in Greece – which will become a more generous income stream for Qatar.

The initial value of Nebras Power, Qatar’s foreign water

and power investment firm set up in Q2 of 2013.

QAR

3.6 billion

Doha’s natural gas pledge to troubled Egypt looks set to be valued at almost QR2.5 million, with the fourth of five tankers having left Qatar’s Ras Laffan port in late August, calculations show.The first tanker pledged by Qatar was received in mid-August, according to shipping data. The move was the first step in Doha fulfilling a pledge made in June to supply Egypt with five shipments of liquefied natural gas (LNG) to relieve a shortage of fuel for power stations in the country.

Under the terms of the deal, it was understood that energy companies BG

Group and GDF Suez were to accept the shipments of Qatari LNG as a proxy for volumes of gas owed to them under contract by Egyptian producers.

This would allow Cairo to divert its own production volumes, which would otherwise have been exported, for use in its own domestic power sector.

The first tanker, the Al Mafyar, was received by French energy giant GDF Suez at the Port of Marseille on August 13. The ship held 266,000 cubic metres of LNG, shipping records show, a volume that would change hands for around QAR450,000 at global LNG prices. Assuming similar size tankers were used for the remaining four shipments, this brings the total value of gas supplied in at QAR2.25 million.

This sounds a handsome figure, but to put the volume in perspective, Qatar’s natural gas consumption in 2012 averaged around 220 million cubic metres per day, according to the most recent BP Statistical Review of World Energy.

This means that the Al Mafyar can carry, at full capacity, just 0.06 percent of what Qatar can extract from its territory on a daily basis. The shipment of the first cargo was confirmed by the Qatar state news agency: “LNG carrier, Al Mafyar, which belongs to the fleet of Qatar Gas Transport Company Limited, sailed from Ras Laffan port laden with an LNG shipment to the Arab Republic of Egypt after the completion of loading processes and departure procedures,” the agency reported at the beginning of August.

The third and fourth cargoes left Ras Laffan towards the end of the month, the agency said, with departure of the fifth tanker bound for Cairo expected in some time in September.

32 | The Edge

The number of barrels of oil per day produced by Al Shaheen oil field.

300,000

sectors | energy & sustainability

The reduction in flaring at the Al Shaheen field has allowed Maersk Oil Qatar to cut greenhouse gas emissions from its operations by more than half compared with 2007, the company said in its 2012 sustainability report.At 300,000 barrels per day the output from the Al Shaheen field, operated by both Maersk Oil Qatar and Qatar Petroleum, is equivalent to more than one-third of the nation’s daily oil production.

According to the World Bank, which has spearheaded international efforts to cut flaring through its Global Gas Flaring Reduction Partnership, wasteful flaring of gases associated with oil production releases some 400 million tonnes of harmful greenhouse gas emissions every year, without extracting the corresponding energy value of the gas.

But progress is being made, and last year, the Qatar company picked up an ‘Excellence in flare reduction’ award from the World Bank.

Moreover, in the next six months, the bank has said, it is to “scale up” its flaring reduction programme, which could see Maersk Oil Qatar and Qatar Petroleum pass on any knowledge and expertise gained over the past five years to global oil firms.

Environmental standards

RasGas ships ranked among most eco-friendly globally

Carbon emissions

Al Shaheen oil field slashes emissions

The RasGas LNG carrier Al Daayen came second of more than 2000 ships in the World Port Climate Initiative’s environmental ranking. (Image RasGas)

The operator of Qatar’s largest offshore oil field has slashed gas flaring at the site by 92 percent over the past five years. (Image Corbis)

RasGas’ LNG tankers, Al Areesh

and Al Daayen, occupied first and second place respectively on a recent world ranking for environmental performance.

Ships chartered by RasGas are ranked first and second in a list of more than 2000 vessels for environmental performance, the Qatar energy giant said last month. International shipping is a difficult area to legislate for because, as a sector, it does not fall under the jurisdiction of any single national body, yet it is a major contributor to greenhouse gas emissions.

Under the World Port Climate Initiative (WPCI), 55 partnering ports offer incentives to ships with the best environmental performance to call at their facilities, with the aim of reducing greenhouse gas emissions on a port-by-port basis.

The ranking means it is more economically viable for the RasGas tankers to supply Qatari liquid national gas (LNG) to specific ports than it would be for vessels from competing LNG producing nations.

In total, 2148 ships meet the standards put in place by the WCPI and last month, RasGas’ liquefied natural gas (LNG) tankers, Al Areesh and Al Daayen, occupied first and second place respectively.

In addition, three of RasGas’ chartered ships, the Lusail, Ejnan and Al Marrouna, were ranked among the top 25. RasGas chief marketing and shipping officer Khalid Al Kuwari said the ranking was “testament to the rigorous environmental standards we maintain throughout the supply chain.”

DIOGE NEW Sept.pdf 1 8/27/13 10:15 AM

CGC Sept.pdf 1 9/1/13 10:01 AM


The Edge | 35

Contents: . Qatar’s passivhaus prepares for occupants 35 . Qataris buying luxury homes in Dubai increase, says realtor 36. Qatar real estate transactions more than double y-o-y in July 37.

real estate & construction

L aunched in May this year, the completion of Qatar’s first passivhaus showed only 16.1

percent increase in the capital costs compared to a conventional villa. The two houses have been constructed as part of an experimental project called Baytna, a joint initiative by Qatar Green Building Council (QGBC), Kahramaa and Barwa Real Estate Group to study the benefits of the passivhaus design in Qatar’s hot climate.

Constructed in less than eight months, the passivhaus is predicted to consume 50 percent less water and energy, cutting down carbon dioxide emissions by the same proportion. Now being tested for its running costs against a conventional villa for six months, the next stage of the experiment will welcome families to inhabit the two houses for a more realistic estimation of the costs.

Speaking with The Edge, director of QGBC, Meshal Al Shamari said, “Two similar-sized families will move in, and further monitoring will take place for a year as a real life demonstration of environmental principles in practice.” While the three-bedroom passivhaus is scheduled for inhabitation in early next

Director of Qatar Green Building Council Meshal Al Shamari believes that once eco-friendly houses become main-stream in Qatar, their construction duration will not be longer than conventional villas.

A small-sized family will occupy Qatar’s first passivhaus once its performance is initially tested against a conventional villa, writes Farwa Zahra.

Qatar’s passivhaus prepares for occupants

“A passivhaus can be built at

any chosen location Qatar.” – Meshal Al Shamari, director QGBC.

36 | The Edge

sectors | real estate & construction

Purchases of residential units in Dubai by Qataris are governed by investment returns, as well as being a second home for work or holidays, according to a regional real estate firm. By Farwa ZahraThe Dubai-Doha air journey is currently the seventh most popular international route in the world, according to CAPA Centre for Aviation, and Innovata data. While much of this traffic is ostensibly business related, many Qataris also often visit Dubai for leisure purporses.

This travel frequency has also corresponded with an increase in Qataris purchasing premium properties in Dubai’s residential real estate sector.

So says Niall McLoughlin, who is the senior vice president of Damac Properties in The United Arab Emirates (UAE). “Qatari investors are looking for unique destinations that are with a dynamic business centre and offering touristic attractions, shopping, fine dining and quality hotels, it’s definitely Dubai,” he said.

While the motivation to invest in Dubai’s real estate may be driven by capital returns, purchases of luxury residential units often have a thrust of having a second home in Dubai, added McLoughlin. “Many Qataris,

Real estate investment

Qataris buying luxury homes in Dubai increase, says realtor

Senior vice president of Damac Properties Niall McLoughlin says that many Qataris intending to buy residential units in Dubai are looking for luxury ser-viced apartments and serviced villas.

Developments such as this 28-million square foot luxury master unit at Akoya in Dubai are increasingly luring Qatar investors, says a regional property firm.

year, the passivhaus villa will be occupied late June 2014.

If the results favour the eco-friendly villa, adds Al Shamari, Qatar can begin applying passivhaus technologies to future projects. Explaining the feasibility of such projects, Al Shamari said, “There are no specific location requirements in Qatar for the construction of passivhaus. It can be built at any chosen location in the country.”

While the Baytna project is focused on green credentials and cost effectiveness of villas, most residential units in Doha comprise of apartments. When asked about the usefulness of this ongoing research for apartments, Al Shamari responded that the passivhaus technologies can be used in apartments as well, as long as they are applied for the entire building. “A standalone apartment in a building cannot be built as passivhaus,” he said.

With assurance of Baytna’s benefits for a wider range of residential projects within Qatar, another dimension that concerns the developers is whether these kind of projects can match the pace of increasing requirements for new housing units in this ever-growing country.

Introducing innovative green technologies may lead to longer construction time – an aspect that Baytna project cannot fully address. “The passivhaus constructed at Barwa is an experimental house with a number of detailed experiments planned,” said Al Shamari and pointed out, “requiring considerable experimentations that would not be included in a conventional villa, or indeed even in a new passivhaus”.

Therefore, he argued, this project is not illustrative of a passivhaus construction.” Nevertheless, construction of a passivhaus could also take longer due to the unfamiliarity that building constructors have in Qatar about this modern concept.

“If passivhaus construction became more common in Qatar, there is no reason to assume that the construction of these projects would be significantly longer than a conventional villa,” countered Shamari.

Dr. Alex Amato, head of sustainability at QGBC agreed. telling The Edge that the increase in scale of such projects could also lead to further lower capital costs. “If the design and construction processes from the onset sought to address ‘lean construction’ techniques,” said Amato, “and if the project size was sufficiently large to permit economies of scale to be fully realised, then it is probable that the additional capital costs could be reduced to around or below 10 percent.”

The Edge | 37

real estate & construction | sectors

Property market

Qatar real estate transactions more than double y-o-y in July

“Qatari investors

are looking for unique destinations with a dynamic business centre and touristic attractions.” –Niall McLoughlin, Damac Properties.

who regularly visit Dubai, are looking to own their own place, so the market trend is moving heavily towards luxury serviced apartments and serviced villas, as they provide a home-away-from-home where the whole family can experience homely comforts and top class service,” he said.

As always, the location of the property plays a key role in the overall decision of investors from Qatar, explained McLoughlin further. Matching the type of niche in luxury residences, Qataris often prefer to have their properties in prime locations.

“We have seen overwhelming interest in luxury serviced living in the Burj Area of Dubai, which attracts more than 65 million visitors a year and has become the central hub for both visitors and tourists,” said McLoughlin, also mentioning Dubai Marina as another location which saw the highest transaction activity and price increases last year, according to the Real Estate Regulatory Authority (RERA).

While having a second home in Dubai may be the driving motivation behind a residential purchase, its value for money and worth over the years cannot be ruled out of a buying decision though, reasoned McLoughlin.

“Dubai offers unparalleled investment advantages that qualify it to be on top of the list for most investors in the Gulf Cooperation Council and worldwide,” he said. “At the same time many international investors choose Dubai as a second home or holiday home.”

Qatar’s real estate sector transactions during July grew 103 percent to reach QAR5.5 billion compared to QAR2.7 billion during the corresponding period last year, according to an Ezdan Holding report released recently. The report indicated that Qatar’s real estate sector has ostensibly benefited from the recent boom of projects related to the developmental strategy and Qatar’s National Vision 2030, and as well the commencement of mega projects related to the 2022 World Cup. The report also noted that the award of some tenders by Qatar Rail for the Doha Metro project has had a positive impact in stimulating the real estate sector.

Commenting on this growth, Mark Proudley, associate director at DTZ in Doha told The Edge, “There is undoubtedly greater investor confidence in Qatar’s real estate market, which is being motivated by two main factors – delays in the completion of construction and, therefore, new supply

Summer and Ramadan notwithstanding, the Qatar real estate sector witnessed a doubling in growth in mid-2013. Talking to property experts in Doha, Aparajita Mukherjee ascertains why and if this kind of growth is sustainable in the medium term.

Change in Qatar’s real estate transaction between

July 2012 and July 2013

2012QAR2.7 billion

2013QAR5.5 billion

July JulyMark Proudley, associate director, consulting and re-search, DTZ said that in addition to improving market conditions access to preferable finance rates, com-pared to previous years are making real estate a viable investment option.

38 | The Edge

sectors | real estate & construction

reaching the market, combined with rising demand generated by economic growth and population growth. “Both of these are driving rental growth and improved returns. In addition to improving market conditions access to preferable finance rates, compared to previous years are making real estate a viable investment option.”

The Pearl-QatarThe Ezdan report referred to the growth of sales in The Pearl-Qatar, which continued to attract investors interested in the luxury residential sector, where the project has witnessed large developments during the second quarter of 2013. The Pearl project, the report cited, is the first real estate development project, which displays the exclusive ownership of real estate property for foreigners in Qatar.

Putting the Pearl project into context, Johnny Archer, head of valuation, research and consultancy at Asteco Qatar said that the demand for apartments in The Pearl, coupled with a temporary lull in new product coming to the market has seen rents increase, and has inspired investor confidence to levels the market has not seen for some time.

Sustainability of growthIn the medium term, Proudley said that he expected the real estate investment activity and prices will continue to increase, though he warned that it would not be wise to draw a conclusion on the trends of the real estate market, based on the figures of a single month.

Asteco’s Archer agreed. “The increase of more than 100 percent in transaction value is, in our opinion, a statistical anomaly and would be unsustainable in the long term,” he told The Edge. “It is evident, however, that favourable market conditions and major infrastructural projects will help to support a robust property market in the coming years and growth rates, should continue, albeit at less spectacular levels.”

“The increase of more than

100 percent in transaction value is a statistical anomaly and would be unsustainable in the long term.” –Johnny Archer, Asteco Qatar.

The Edge | 39

Contents: Qatar’s Es’hail 1 could benefit regional broadcasters 39 . Innovative financing the key to working around IT budget constraints 40 . “.shabaka” the world’s first Arabic borderless Top-Level Domain 42 .

tech & communications

While Qatar’s population and infrastructure growth is likely to fuel the demand for some

broadcast and telecommunications capacity of the Es’hail 1 satellite, the Qatari company Es’hailSat is much more likely to benefit from the growth of the Middle East and North African markets. Much of Qatar will be fibre-ready by 2017 according to ambitious plans by Qatar National Broadband Network (QNBN) but CEO of Es’hailSat Ali Al Kuwari, speaking to CommsMEA noted, “We are

Qatar’s satellite may benefit regional broadcasters

The Es’hail 1 Qatar’s first satellite seen here aboard the Ariane 5 space rocket, was launched into orbit succesfully recently from the European Spaceport in French Guiana.

At the end of August, Qatar launched its first ever satellite the Es’hail 1 in to orbit. A project that has been three years in the making is set to benefit not just Qatar but the wider region. By Shehan Mashood.

lucky in Qatar we have fibre everywhere but somewhere else in the region other operators can utilise our services and benefit from the service of Es’hail 1.” As demand for fibre increases in areas of highly congested terrestrial fibre optics or remote areas without the infrastructure, the satellite’s ability to provide high bandwith will prove useful for telecom operators in the region.

The satellite was built in partnership with French firm Eutelsat Communications, that owns 44.5 percent of the satellite. The

satellite will operate from an orbital position that will serve the MENA region and even parts of Central Asia. Es’hailSat, while tasked with providing strategic communications support for the government, and possibly telecom operators and broadcasters in Qatar, is a commercial entity and will look to secure deals with customers in the region.

However, up until a few days before the launch of Es’hail 1 it was unclear how ARABSAT, a satellite company founded by the Arab League would react, since the

40 | The Edge

IT investment

Innovative financing the key to IT budget constraints

sectors | technology & communications

Es’hail 1 satellite would be positioned at 25.5 degrees East, just 0.5 degrees off ARABSAT’s satellite positioning.

But on 19 August, 10 days before the launch of the satellite, the company signed a strategic partnership agreement with ARABSAT to strengthen the reach and penetration in prime ‘hot spots’ for television broadcasting. According to the press release, the Es’hailSat and ARABSAT agreement will “pave the way for operational flexibility and mutual in-orbit back-up between the two satellite fleets”.

The new satellite is equipped with both KU band and KA band services, which are frequencies on the electromagnetic spectrum that are becoming extremely important in the broadcast industry to trasmit high-quality data. According to Al Kuwari, the KU band currently used by most broadcasters is becoming very constrained and will see an eventual switch to the newer KA band service in a few years that could provide vast potential for growth.

The Es’hail 1 launch is only the first in a series of satellites that the company wants to operate. The organisation is already defining the function of Es’hail 2 and plans to eventually have a global fleet that compromises six or more satellites.

Qatar’s organisations no longer deploy the latest solutions because they want to. Instead, they must do so because the evironment demands they do, says Khaled Kamel, a communications technology expert. While there has been an increase in regional markets over the past three years with both government spending and increasing investment in the region driving growth, businesses in the Qatar are faced with a peculiar dilemma.

In the race to adopt the latest and best technologies, organisations have overlooked their critical network infrastructure. Ageing network backbones are under tremendous strain from the exponential growth in data traffic. As the cost of operating and maintaining these legacy networks

55.5%The percentage of Es’hail 1 owned by Qatar

Satellite Company Es’hailSat.Financial assistance from banking institutions are becoming difficult to attain for investment in IT, says Khaled Kamel, Brocade Communications.

continually rises, IT departments now find that they can neither afford to invest in IT, nor can they afford not to invest in IT.

Financial assistance from banking institutions is also becoming more difficult to attain. But here lies a great opportunity for value added resellers (VARs) and system integrators (SIs) to remedy the situation.

With profits and revenues being squeezed ever harder, where the money comes from to pay for critical IT investment is becoming an increasingly urgent issue. Already, almost 70 percent of organisations now select IT vendors based on the availability to offer leasing or financing solutions. So where does this leave VARs and SIs, other than potentially becoming financial advisors as well as technical ones, assisting customers who are trying to manage multiple lease and purchase agreements to secure the solutions they need?

Simpler, smarter, flexible financingAs with all things related to selling solutions and services, the objective should be to deliver the benefits the customer wants in as simple a way as possible. Rather than developing solutions that help lock in customers even further, and trying to pass on the complexity, vendors need to recognise a trend that is bigger than they are and which could, eventually, see a significant knock-on effect on their own revenues, not

The Edge | 41

How businesses in Qatar deploy ICTComputer penetration among businesses by number of employees

64%

75%

2008

Source: Qatar’s ICT Landscape 2013: Business

Internet penetration among business establishments

Qatar (All) 66%91%

65%81%

92%

Qatar (10+ employees)Saudi Arabia

Singapore

UAE

Overall Small(1-9)

Medium(10-49)

Large(50-249)

VeryLarge

(250+)employees

2010

74%

53% 57

%58

%

97% 10

0%94

% 100%

100%

2012

Web presence among start-ups

68%

12%

Web presence only in Arabic

Web presence but not in Arabic

Web presence in Arabic plus more languages

No web presence

6%

14%

technology & communications | sectors

“Anyone who thinks

finance is a little dull or the province of accountants, needs to wake up to business realities determining IT investment, and fast.” – Khaled Kamel, Brocade Communications.

Khaled Kamel is the territory channel manager, MENA at Brocade Communications, a global networking solutions provider.

just those of their channel.An appropriate response to this would

be to provide subscription-based financing wherein the customer is permitted to increase or decrease the number of network ports they pay for on a ‘pay-as-you-go-bundle’ subscription basis. For the customer, this translates to simplicity - one contract, one deal and one solution through one partner.

Such a straightforward financing model is only going to play a more critical role in enabling customers to adopt innovation, and for VARs and SIs it will be an invaluable advantage in winning business and securing a sale. Anyone who thinks finance is a little dull or the province of accountants, needs to wake up to business realities determining IT investment, and fast.

42 | The Edge

businesses to grow and flourish... in the Arabic language,” also adding that this is in line with the company’s strategy to expand into international markets.

ICANN is currently running final testing requirements on the namespace before it becomes accessible on the Internet in the upcoming months.

sectors | technology & communications

Domains registry

“.shabaka” the world’s first Arabic borderless top-level domainArabic speaking Internet users from all over the world will be able to access the Internet using only Arabic for the first time after the Internet Corporation for Assigned Names and Numbers (ICANN), the global regulator of web addresses entered into a contract with .shabaka registry “شبكة.” making it the world’s first Arabic Top-Level Domain (TLD).The domain, which is expected to be launched in the coming months is part of a wider effort on the part of ICANN to expand the Internet’s web address system. The TLD is likely to be a welcome addition to the region, which is striving to create more Arabic content for the web as demand increases exponentially. According to Internet World Stats tracking Internet usage shows that between 2000 and 2011, Arabic speaking audience online increased by 2500 percent.

In 2011, the Qatar Domains Registry made available Qatar specific Arabic Internet domain names. At the time, Saleh Al Kuwari, chief technical manager at ictQATAR was quoted as saying; “The introduction of Arabic domain names is a major milestone in making the Internet accessible for all.”

The .shabaka namespace which translates to .web in English will provide Arabic speaking audiences with alternatives to established English namespaces such as .com, .net and .org. The application was selected by ICANN from amongst 1900 others submitted from around the world.

Yasmin Omer, general manager of dotShabaka Registry noted that, “.shabaka will have a global audience, with over 20 countries in the Middle East and North Africa which use Arabic as an official language – a region that comprises over 380 million people.”

“In spite of the boom in Arabic content online, users are still burdened with the need to use English on the Internet. Many websites and Internet applications force visitors to only use English. Through .shabaka, we are campaigning for a truly Arabic Internet experience from start to finish,” Omer said.

International organisations are also taking note of the growth and opportunities in developing Arabic content. Blake Irving, CEO of GoDaddy, the world’s largest domain name and web hosting provider noted that, “The domain name extension marks a meaningful change for the Arabic Internet, with tremendous opportunities for new

Saleh Al Kuwari, chief technical manager at ictQATAR speaking at the launch of Qatar’s own Arabic domain registry in 2011. He noted “The Arab world represents a region with enormous potential for growth both in terms of usage and the creation of new digital content, especially Arabic content.” (Image by ictQatar)

“The domain name marks

a meaningful change for the Arabic Internet, with opportunities for new businesses to flourish.” - Blake Irving, CEO, GoDaddy.

2500%The percentage by which Arabic speaking

audience online increased between the years 2000 and 2011.

ClimateControl Sept.pdf 1 8/25/13 10:36 AM

44 | The Edge

For a country which has had diplomatic relations with Qatar for the past 11 years, South Africa has

a number of areas in which it wishes to broaden its relations with Qatar. In the opinion of Saad Cachalia, South African ambassador to Qatar, energy is the most important determinant of this relationship. South Africa being dependant on energy imports, historically it looked at the

country focus | south africa

Qatar and South Africa: Inviting foreign investment

With a large energy requirement, South Africa looks to Qatar as one of its strongest partners in the energy sector. But Saad Cachalia, Ambassador of South Africa to Qatar is clear on what he wants out of this mtual partnership. In a conversation with Aparajita Mukherjee, Cachalia expresses why he would like to see Qatar invest in the South African economy.

The 2010 FIFA World Cup Final took place on July 11, 2010 at Soccer City in Johannesburg, South Africa, in which Spain defeated the Netherlands by one goal four minutes from the end of extra time. Johannesburg, though not traditionally primarily known as a travel destination itself, is a transit point for connecting flights to the country’s many tourist destinations such as Cape Town, the Garden Route, Durban, and the Kruger National Park (Image Corbis).

Middle East as soon as the country, the largest economy in Africa, became a true democracy in 1994.

Given the historical perspective of the energy needs of the South African economy, Cachalia says, “One of the first countries that the new president Nelson Mandela visited when he was released was Saudi Arabia. The Middle East, being the energy hub of the world and South Africa

with its difficulty with energy all along, we looked at the Middle East in earnest and up until today, you would find all of our oil coming from this region.”

Cachalia says that given the focus of bilateral relations that have already factored in sectors such as sports, culture and tourism, his specific focus would be to work on areas such as job creation, employment and all-inclusive economic

The Edge | 45

Saad Cachalia, ambassador of South Africa to Qatar, says that South Africa would like to see Qatar invest in their economy, and have local companies present themselves to Qatar and show that they are capable of doing business efficiently.

south africa | country focus

Government: Constitutional

parliamentary republic

Capital: Pretoria (executive); Bloemfontein

(judicial); Cape Town (legislative)

Population: 52,981,991 (2013 estimate)

GDP: USD375.944 billion (QAR1.37 trillion)

SOUTH AFRICA ATA GLANCE

growth. “This focus comes from the fact that South Africa is an essential part of the BRICS (Brazil, Russia, India, China and South Africa) nations,” he says, “and it is time we began to look at issues that are crucial for development now in our country, for which foreign direct investment is a crucial element,”

At present, Cachalia continues, the groundwork is being laid for what he calls “rigorous trade relations between us. We would like to see Qatar invest in the South African economy and we would like to see our companies being afforded the opportunity to present themselves and to show that they are capable of doing business efficiently.”

Trade and food securityWith energy as the main tradeable commodity, it is evident that the trade figures are highly skewed in favour of Qatar, amounting to USD3.2 billion (QAR11.65 billion). The corresponding figure for South Africa, is around USD480 million (QAR1.7 billion). The skew in the trade figures can, in part, be rectified by South Africa’s vibrant manufacturing industries, particularly the automobile industry. For instance, C-Class Mercedes-Benz is assembled in South Africa, informs Cachalia. “There is renewed interest in our automobile industry and we are looking at developing this sector which can be an important trade component with energy rich Middle East countries.”

The ambassador further explains, “I think that the trade gap is going to narrow, given that there is a lot of appetite for South African products here in Qatar. We have mineral resources reserves and we have an abundance of food. The idea is to look at these commodities in a very lateral way and begin exploring avenues outside of the normal import-export route.”

Commenting on the sectors that he foresees having great trade potential between Qatar and South Africa, Cachalia mentions security, sports and food, “We want to look into increasing food production. South Africans are very particular as to how they grow food with very little genetically modified food grown in the country because we believe in organic farming. We need to talk about how Qatar benefits from getting directly involved in food and food production in South Africa.”

Cachalia also mentions that Qatar Petroleum Company (QAPCO) opened an office in Cape Town last year, which will be

the entry point into the energy operations in South Africa. Commenting on this move by QAPCO, the ambassador says, “This step by Qatar is the beginning of the precipitation in the regulations between our countries.” Steps like these, in Cachalia’s view, can form the basis of a bilateral dialogue on what he terms as “gas for food exchange”. He adds that there already is Oryx GTL, a partnership between Qatar Petroleum (51 percent) and the South African energy major Sasol (49 percent), utilising a particular South African technology that converts gas to liquid.

Commonalities and politicsWith the completion of 4th Bilateral Consultation between Qatar and South Africa earlier in 2013, Cachalia is hopeful that there will be newer areas of cooperation between the two nations. “In these bilateral consultations, we have a whole lot of agreements which have been put into place between Qatar and South Africa, which though not signed yet, we definitely look forward to six agreements around security, sports, defence and overall business dynamics.”

The ambassador is of the opinion that at the level of global politics, Qatar and South Africa are firm believers in peaceful resolution of conflict. “This is evident in the role Qatar has played in peace processes in Sudan. In the Darfur issue, we have had our former president of South Africa Thabo Mbeki who shared the peacemaker’s role with Qatar, showing that both the nations have a convergence of interest on matters that relate to world stability.”

Sharing World Cup experienceAs hosts to the World Cup 2010, South Africa is in a position to share its experiences and advise Qatar, which can help the latter prepare for its turn in 2022. Cachalia mentions that these dialogues with Qatar began sometime ago, and since there are a number of sectors which will require attention, there are separate initiatives being undertaken, based on the sector. “Last year we dealt with the security side,

“I think that the trade gap is going to narrow, given that

there is a lot of appetite for South African products here in Qatar.”

46 | The Edge

both to Qatari companies as well as those from South Africa, if there was a degree of cooperation.”

As a case in point, Cachalia cites the World Cup Legacy exhibition that was brought to Qatar, as a joint initiative between the South African embassy, the Department of Trade and Industry of South Africa and the Qatar Chamber of Commerce and Industry.

“With this exhibition,” he adds, “we have begun to see interest and appetite for what South Africa is able to offer in the construction sector, steel, building design and completing projects on time and within budget. For an event like the FIFA World Cup, one has to keep the factor of cost escalation in mind and this requires a specific financial skill.”

Professional baseThere is a growing South African population in Qatar and most are in the professional category. Two years ago, according to the ambassador, there were roughly 2600 South African citizens in Qatar.

“You will come across South Africans in the upper echelons of the business sector spanning a number of sectors like engineering, manufacturing – aluminium, fertiliser – health services and equestrian experts,” says Cachalia.

country focus | south africa

and we had top police personnel flown here from South Africa. We ran a three-day programme where we discussed the problems we faced on issues over security and those related to the methods we used to cordon off areas, how to make an area secure, how to deal with emergencies.”

The ambassador details how South Africa faced a situation when an aircraft flew into the country unannounced. “We explained to Qatar how our intelligence system intercepted the aircraft and brought it to land. We then dealt with the passengers (who had come in to watch the World Cup) and they were processed properly through immigration and allowed to watch the matches.”

Cachalia is also keen for his country to win some manufacturing deals in the run-up to the 2022 World Cup. He details that there is a South African company which had manufactured the stadium plastic seats. “The same company has been commissioned by Brazil for the 2014 World Cup. The reason why I feel this could be a good prospect for Qatar is the fact that the plastic that they use is an offshoot of petrochemcials, a byproduct that Qatar is abundant in.”

As part of the World Cup related ongoing dialogues, South Africa is sharing with Qatar its experience on the guarantees that FIFA wants before the event starts. FIFA, according to Cachalia, wants guarantees of issues related to security, the guarantee of food and even minute details like the type of grass they need the host country to grow in the stadiums.

“Also with an event like this, it is important to remember that there is always a chance of situations getting out of hand, with spectators going unruly in a festive atmosphere. And since many of the spectators are foreign nationals, South Africa had set up special courts to process incidents related to the World Cup,” he says.

Cachalia also mentions that it is extremely important to work out cooperation with the police department of other countries, especially from those nations which are likely to send the most number of spectators, “This helps the host nation to do a background check as the prospective spectators apply for a visa to come for the tournament. We were able

to sift those people out who had criminal records in their country of origin.”

The other sector that a FIFA World Cup indirectly contributes to is tourism. “Our tourism figures have increased tremendously since the World Cup. The issue before the government is to determine how the country can harness this and encash the benefits,” he says. For their part, South Africa has taken the legacy issues of the World Cup very seriously to the extent that even after the event, the stadiums are still being used.

Infrastructure sectorWith media reports that talk about an infrastructure spend to the tune of USD200 billion (QAR728 billion) on construction projects to host the 2022 World Cup, The Edge asked Cachalia what expectations he had for South African firms benefitting from this.

“With the infrastructure sector, in particular, I think that we have got what it takes from South Africa. We have good construction companies and we have been involved in Dubai years ago. Apart from our construction expertise, what we want to offer Qatar are joint venture opportunities which would be beneficial

Commenting on the sectors that he foresees having great

trade potential between Qatar and South Africa, Cachalia mentions security, sports and food.

Though the Qatar-South Africa trade figures are heavily weighted to the former due to energy exports to the latter, one area the Ambassodor Cachalia feels Africa’s strongest economy, an agricultural powerhouse, can contribute meaningfully to the relationship between the two nations is in food-security. (Image Corbis)

QIBS New Sept.pdf 1 9/4/13 2:20 PM

Racing for returns

ATAR & THE GCCQ

50 | The Edge

cover story | regional competition

The Gulf Cooperation Council (GCC) was formed in 1981 against the backdrop of the Islamic revolution in Iran and the Iraq-Iran war. Today, the six-nation GCC is a different entity compared to when it was conceived. In tune with the dynamics of regional politics, the GCC has not achieved many of the collaborative efforts that it had originally sought – a common army or a single currency, for instance – but it is equally true that economicially these nations have also become far more succesful and competitive in many business sectors, including financial services, tourism, construction and real estate than could even be concieved of 30 years ago. So where does Qatar stand in this union historically and what does the future of the GCC hold politically and economically? asksThe Edge’s Aparajita Mukherjee.

Intra-GCC trade in 2012.

QAR

502billion

Established in Abu Dhabi on May 25, 1981, the GCC comprised the 630-million-acre (2,500,000 km2) Persian Gulf states of the United Arab Emirates (UAE), Bahrain, Saudi Arabia, Oman,

Qatar and Kuwait. The unified economic agreement between the countries of the GCC was signed on November 11, 1981 in Abu Dhabi.

Among the stated objectives were: formulating similar regulations in various fields such as religion, finance, trade, customs, tourism, legislation and administration; fostering scientific and technical progress in industry, mining, agriculture, water and animal resources; establishing scientific research centres; a unified military presence (Peninsula Shield Force), and establishing a common currency by 2010.

However, in December 2006 Oman announced that it would not be able to meet the target date for the latter. Following the announcement that the central bank for the monetary union would be located in Riyadh and not in the UAE, Oman and the UAE announced their withdrawal from the project in May 2009.

Nevertheless, economic development in the Gulf area has continued apace, some of the fastest growing economies in the

world, mostly due to a rise in oil and natural gas revenues coupled with a building and investment boom, backed by decades of petroleum revenues. In an effort to build a tax base and economic foundation before the hydrocarbon reserves are depleted, as part of broader diversification ambitions, GCC nations such as the UAE and Qatar have created globally assertive investment arms, including Abu Dhabi Investment Authority which retains

An aerial view of The Pearl-Qatar, located in Doha. This real estate development many see as created to compete with the Palm Jumeirah in Dubai. (Image Corbis)

The Edge | 51

regional competition | cover story

Dignitaries from the Gulf Co-operation Council member states at the start of the 33rd GCC Summit in Manama, Bahrain in December 2012. (Image Corbis)

GCC CPI Inflation (Jan-12 to May-13)

(Percentage change year-on-year, overall is weighted by GDP)

Average Inflation in 2013

Source: Bloomberg, DataInsight, IMF & QNB Group analysis

Bahrain 3.1%Kuwait 2.5%Oman 2.1%Qatar 3.5%Saudi Arabia 3.9%UAE 0.8%

2.12.0

2.4

2.82.9

Jan-12 May-12 Sep-12 Jan-13 May-13

Overall Inflation

over USD900 billion (QAR3.3 trillion) and the Qatar Investment Authority which has USD115 billion (QAR418.6 billion) in assets.

From the time the GCC was set up, economic research has pointed to the combined economic strength of the six-member bloc. In a recent study entitled Integrating, Not Integrated: A Scorecard of GCC Economic Integration, Booz & Co showed that the per capita gross domestic product (GDP) of the GCC countries has increased by 45 percent over the past decade, to USD42,000 (QAR152880) in 2010, and is expected to reach USD54,000 (QAR196560) by 2015. Moreover, the study says, the GCC controls almost 40 percent of the world’s proven oil reserves, 20 percent of gas reserves, and close to 40 percent of the global financial reserves, making it an important financial and economic bloc on the world stage.

Indeed, there is generally policy parity in all GCC countries when it comes to the management of their economies and diversifying away from hydrocarbons. The Institute of International Finance (IIF), in a recent conference held at the Dubai International Financial Centre, lauded the diversification of all the GCC economies. Dr. George T. Abed, IIF senior counselor and IIF director for Africa and the Middle East, notes that “the GCC countries have pressed ahead with economic diversification as the share of the hydrocarbon ratio has continued to decline, from 41 percent in 2000 to 27 percent.”

Growth, in turn, has been driven by rising public sector spending, says Dr. Abed, especially on physical and social infrastructure, and buoyant private sector activity. However, to sustain this momentum as the share of the hydrocarbon sector continues to decline, structural reforms need to be deepened and sustained, he warns.

Against the backdrop of policy unity, when it comes to individual countries there is ample research evidence that clearly points to the benefits of intra-GCC cooperation in various fields. However, this can be tempered with each country’s individual internal politics, some of which tend to complicate a more integrated GCC. There are also the realities of bilateral relations within the loose grouping, all of which give rise more to competition than cooperation among GCC member states.

Economic rivalries According to Gerd Nonneman, dean of Georgetown University in Qatar, the main competition among the GCC nations lies in sectors such as financial services and transport (from ports to airports), as well as potentially in manufacturing sectors such as aluminum, petrochemicals and steel.

With all the nations of the GCC following policies of diversification and looking beyond hydrocarbon wealth in the long run, Michael Stephens, researcher of Royal United Services Institute (RUSI) Qatar agrees that this competition is intensifying, especially high growth sectors such as financial services.

Political upheaval and social unrest can also quickly affect the situation, says Stephens, citing the competition between Bahrain and Dubai in the sector a few years, which due to the Arab Spring became a race which Bahrain can now never hope to win.

52 | The Edge

cover story | regional competition

Loading in progress at Oman Port. Reports cite that the volume of trade between the GCC countries rose to QAR502 billion in 2012. (Image Corbis)

Countries Population GDP GDP/Capita Oil Production(Barrels Per Day)

Non-Energy Component of GDP (%) Trade Balance

Saudi Arabia 28.3 million USD746 billion USD25,162 11.54 billion 45 USD47,437 million

UAE 9.2 million USD369 billion USD64,779 3.21 million 67.3 USD128,213 million

Kuwait 3.2 million USD173 billion USD44,584 2.79 million 32 USD22,285 million

Qatar 2.1 million USD189 billion USD98,737 1.58 million 32 USD29,397 million

Oman 3.3 million USD79 billion USD24,729 0.92 million 60 USD22,366 million

Bahrain 1.3 million USD28 billion USD23,930 0.05 million NA USD6,510 million

Sources: IMF, World Bank Data, US Energy Information Administration, Trading Economics

Qatar Central Bank governor Sheikh Abdullah bin Saud Al Thani addressed the GCC Regulators’ Summit in February 2013, saying, “Cooperation amongst GCC regulators is now a crucial need, especially as we move forward with addressing loopholes in the GCC financial and business regulatory frameworks.”

Stephens explains how when the disturbances began in Bahrain, many bankers relocated to Dubai, especially from French banks, and never came back. “There is always a lot of political ramifications behind the economic realities of these GCC countries,” he adds. “For instance, Saudi Arabia is building a huge financial district, right up to the northwest of Riyadh. They will have to strengthen the project in such a way that they can out-compete Dubai.”

Qatar too is positoning itself as a hub of banking, insurance and asset management etcetara, but Stephens feels that although Qatar has more hydrocarbon reserves compared with Abu Dhabi, on a very subtle level, this competition also has a lot to do with branding issues rather than deep state coffers. “Qatar and Abu Dhabi are competing with each other, trying to brand their respective economies as more competitive with greater ease of doing business,” he adds.

David Roberts, director of RUSI Qatar agrees with his colleague, noting that “There is a huge branding dynamic amongst the GCC countries, as David Ricardo, the British economist had spoken about, calling it comparative advantage. All the nations do a branding exercise while selling their countries to the world.” But while such competition can be positive for the market and for consumers, there is also a downside when it comes to the GCC, adds Roberts. “There is a lack of coordination amongst countries, say between Qatar and Abu Dhabi, when it comes to strengthening their financial sectors. How much of that is duplication of resources within the same country is anybody’s guess. Overall the GCC is marked by a lack of unity of goals and has not really acted like other global trading blocs,” he says.

GCC countries by the numbers

The Edge | 53


The Edge | 53

“The GCC states need

to continue with reforms that help increase the pace of economic diversification.” – Dr. Naser Al Tamimi, a UK-based analyst.

regional competition | cover story

Assets under management of the QIA.

QAR

418.6 billion

Dr. Naser Al Tamimi, a UK-based analyst, journalist and author says that the GCC states need to continue with reforms that help increase the pace of economic diversification and allow the private sector to have a greater share in the economy.

Intra-GCC tradeSetting a historical context to the trade between the GCC countries, Georgetown’s Nonneman says that figures and trends for intra-GCC trade are skewed by their share of oil and gas in their exports. He adds that until the 1990s intra-GCC trade remained shackled by a range of obstacles, from customs duties to incompatible rules and standards. “So it actually made a lot of sense to develop the frameworks to reduce those barriers: from a free trade area (gradually built from 1983), to a customs union (launched in 2003 but remaining incomplete) and then the beginnings of a common market (from 2008),” he says. “As real effects of these two combined trends (development and integration), intra-GCC trade grew from USD22 billion (QAR80 billion) in 2003, to USD138 billion (QAR502 billion) in 2012.”

Discussing current trade relations between GCC countries with The Edge, Dr. Naser Al Tamimi, a UK-based analyst, journalist and the author feels that the impact of intra-GCC trade can, in his opinion, have a wider impact on the countries provided they continue with policy reforms that help increase the pace of economic diversification and allow the private sector to have a greater share in the economy.

GCC’s rising defence budgetsAnother area GCC states invest in heavily and cooperate efficiently, thanks to the Arab Spring and regional instability, is defence spending. According to the Stockholm International Peace Research Institute (SIPRI) the Middle East region has accelerated spending 8.5 percent in 2012, despite an overall decline in global military expenditure last year.Continued on page 85

A single ‘khaleeji’ currency and the Gulf’s dollar pegsAt the GCC summit in December 2001, the six member states voted to establish a unified currency by 2010 and GCC-level central bank that would manage fiscal policy across the Gulf. However, in both areas the GCC has seen limited progress.

According to Dr. Naser Al Tamimi, the single currency would not be an end in itself. “Rather, monetary integration in GCC marks the final phase of a broader integration process fostering also economic and fiscal integration, especially the integration of financial markets,” he says.

There are of course theoretical advantages of a working monetary union for the GCC, although they are not huge. However, there are several difficulties. Some are economic, but the key ones are political, feels Gerd Nonneman. The first is that the sort of convergence criteria the European Union (EU) required for countries to join the Euro, have for the most part not been met in the GCC economies, and are not likely to be in the near future.

Michael Stephens of RUSI Qatar agrees. “Oman will reject the idea given their foreign policy issues with the UAE and Saudi Arabia.”

The main obstacle that stands in the way of a common currency in the GCC is the reality that none of the nations need it. And that is where lies the difference with the Euro region, concur analysts. “In the case of the Euro, there were hard choices that were made where countries gave up their own currencies but they were dictated by ground works which were done long before in the late 1970s,” says David Roberts of RUSI. “The economies of the GCC will only probably need a single currency if oil drops to a pricing of USD50 per barrel (QAR182) or below. For now, the dollar peg is going to stay, because pegging to another currency – say the Euro – will not work.”

All GCC currencies are pegged to the United States (US) dollar, except Kuwait which pegs its dinar to a basket of currencies, a situation that all the experts The Edge consulted, seem to agree, will not change in the immediate future. In Kuwait’s case, according to Nonneman, it would require a more substantial non-dollar component for it to become economically more significant, and neither economic nor political considerations point in that direction.

For the rest of the Gulf states, he says, “Moving away from the peg would in essence be a political symbol; at most, the symbolism might be adopted without truly ‘dumping the dollar’ – a little like the Kuwaiti choice, something that was ostensibly hinted by the Qatar Central Bank governor Sheikh Abdullah bin Saud Al Thani in early 2013; but recently pointedly refuted the Qatar Central Bank.

Can Qatar really become the ‘Silicon Valley’ of the Middle East?

& MortarBeyond Bricks

Can Qatar really become the ‘Silicon Valley’ of the Middle East?

““There is so much opportunity in Qatar, either because something has not been done or it has not

been done well.” – Khalifa Saleh Al Haroon, entrepreneur and CEO of iloveqatar.net

56 | The Edge56 | The Edge

feature story | e-commerce in Qatar

When noted British entrepreneur James Caan visited Qatar a few years ago, the

country was in the midst of launching numerous programmes to encourage entrepreneurship within the country. Caan rather emphatically stated during a speech that he believed “Qatar should become the Silicon Valley of the region.“

It is a statement that has since been thrown about by numerous people in the entrepreneurship scene here in Qatar. But how realisitc is that statement? Is the country really ready, or even a conducive enivronment for Internet businesses?

Starting up an online business in Qatar is as complicated as one might expect. The issue stems from the fact that in Qatar, online businesses are not treated any differently to traditional bricks and

Elias Ghanem (right) managing director PayPal MENA seen here with Ali Rashid Al Mohannadi (left) executive general manager and chief operating officer, QNB at the press conference for the recent launch of PayPal’s partnership with QNB. In order for e-commerce to grow, payment options need to increase in the region, says Ghanem.

mortar businesses.Khalifa Saleh Al Haroon set up

ILoveQatar (ILQ) as a portal for information about Qatar while at University, after he became weary of people not knowing anything about the country he came from. Soon, he explains, people started asking him to create a forum and then an events section. From there, the purpose for the website was born.

“People started to feel like they owned the site. It was at that time I decided to create a site that is a Qatari friend, especially for an expatriate. So if it happens in Qatar you will find it on ILQ.”

Typically most online businesses start with little to no staff, a computer and an idea, adds Haroon. However, he still needed to come up with the QAR200,000 capital the state requires businesses to

Qatar was recently ranked by the World Economic Forum as the most networked Arab country and the 23rd most networked nation in the world. Thanks to the ubiquitous nature of the Internet in Qatar, the opportunities for businesss online are growing. In 2012, Qatar’s e-commerce market was worth USD600 million (QAR2.2 billion), a figure that by 2015 is expected to reach USD1.1 billion (QAR4 billion). As the country’s behavioural trends follow those of more networked nations, it is important to question if Qatar’s e-commerce industry is actually on track for this sort of growth. By Shehan Mashood

“Until the company

registration process catches

up, there is a lot of innovation

that is going to be stifled.” – Aziz

Sharif, managing partner Mannzili.

The Edge | 57The Edge | 57

e-commerce in Qatar | feature story

invest before getting a licence in addition to renting office space. “You can see that the barrier to entry is almost immediately set quite high, it’s not e-commerce-friendly,” points out Haroon.

Dr. Thomas Emerson, a professor of entrepreneurship at Carnegie Mellon University in Qatar explains to The Edge that one of the appealing factors of an online business is usually the small start-up capital required. The government-imposed requirement seems particularly unhelpful in the case of online start-ups, he says, “The requirement should be significantly lowered or removed for businesses that operate solely online.”

However, Haroon’s struggle to set up his company did not end there. When he first approached the Ministry of Business and Trade for a licence, they could not understand his business model, ostensibly because it did not fit into one of the few categories under which a company can be licensed in Qatar. Being a portal for information meant that he was not selling a product to customers per se, but would be looking to generate revenue through advertising by leveraging the engagement of people on that portal.

“I eventually ended up registering a normal business with a marketing and advertising licence which is typically what a publishing company will apply for,” says Haroon.

Aziz Sharif is an online entrepreneur, who soon after moving back to Doha following an MBA, decided to join his friend to work on Mannzili, an online real estate portal. He is also of the view that getting the correct company registration can be difficult for some online business models, which he says could have legal ramifications in the future, if for example someone decides to sue your organisation.

Haroon offers a diferent view, and points out that a license will define how you are going to be generating revenue, “If I have a marketing and advertising licence, it’s clear I generate revenue from advertising. Tomorrow if I wanted to sell something online then I would apply for a licence specifically to that item that I am trying to sell. So there is nothing to fear as long as you go through the correct steps.”

Nevertheless, Sharif raises the point that he is currently working on a disruptive product, and questions how that will be classified within the current system. Although he is not ready to reveal his idea yet, often online based ideas create new products and can sometimes give rise

Qatar’s e-commerce in numbersValue of e-commerce transactions

Success of Qatar’s e-Gov portal Hukoomi shows people arewilling to conduct transactions online from trusted sources.

But establishments with their own e-commerceportals for customers are very low

Trends in the MENA region

But

Most popular e-commerce payment handlers in Qatar

48 %Doha based global operator Qpay

2012

QatarUSD1.1 billionQatar

USD600 millionGCC

USD8 billion

GCC USD15 billion

2015

35%

6%

2.5 millionTransactions

2011

Year-on-year growth expected in the GCC

ownership of an e-commerce portal

MENA regional operator cashU

24%

have payment cards47%

of online orders are cash on delivery70 – 80%cited lack of trust in payments43%suggested the lack of online retailers27%

Source: PayPal, ictQATAR

feature story | e-commerce in Qatar

The challenge today is to leverage the country’s energy-centric wealth to produce a diversified and stable economy, says Dr. Thomas Emerson, a professor of entrepre-neurship at Carnegie Mellon University in Qatar. Adding that “online business can play a very big part in the needed diversification.” (Image Corbis)

to entire industries – think about social media marketing. “This product requires interaction with a number of other institutions,” continues Sharif, “how do we tick all the right boxes so that it doesn’t fall through or have any issues on the legal requirements. Until that sort of thing catches up, there is a lot of innovation that is going to be stifled.”

Setting up a website in Qatar is no different to anywhere else in the world; you buy a domain name and launch your site. That is what Omar Chatriwala, co-founder of Doha News first did when he and his wife and co-founder Shabina Khatri first started their now highly popular online news outlet. From Chatriwala’s perspective, it was only once they felt they were an established website that was steadily growing in traffic that they looked to register as a formal business. “When we started taking money in the country [from advertisers], that is when we felt like we needed to have some sort of business registration in order to make sure that we were not crossing any red lines,” says Chatriwala. “We did need some support and investment to stabilise our operations,” he explains, and so ILQ became their sponsor, which is part of the holding company Haroon United Group managed by Khalifa Al Haroon.

The business modelGenerally, economies work best when the rules are transparent, clear and

consistently and fairly applied, says Dr. Emerson. And while Qatar has made some positive strides in this area in recent years, the process still requires some improvement, he says. In particular, the requirement for 51 percent Qatari ownership in a new business is especially burdensome for online businesses, as these are often started by expatriates and not by Qataris. “The government should reconsider the goals of this policy,” he continues, “Apart from retarding economic growth and diversification, what is being accomplished by this policy with respect to online businesses?”

Many online businesses today generate revenue through sponsorship and advertising. Online marketing is a discipline in its own right, and both business owners and marketers are constantly looking for new and inventive ways to integrate advertising into online platforms. Qatari businesses are no different in this regard. A majority of Doha News’ revenue comes from advertising, says Chatriwala. While there is a great deal of advertising in this country, much of it is spent on traditional media such as newspapers. Online advertising in Qatar has not seen the growth many other countries have. It has been slow, but it is evolving, notes Chatriwala. All the online business owners The Edge spoke to seem to have encountered the same issue of apprehension and lack of confidence

in advertising through online mediums. However, a recent MENA Media Survey conducted by the Northwestern University Qatar showed that 70 percent of people surveyed in Qatar identified the Internet as the most popular source for news and current events. “We definitely have to explain to certain companies the benefits of advertising online,” says Haroon.

“On the other end of this spectrum,” says Haroon, “are people who try to apply the American advanced model of online advertising to Qatar, where our market is simply not ready.” Paying a minimal fixed fee per visit to a page on a website for example, is not going to work, explains Haroon, “you are going to hit a threshold because Qatar is such a small market.”

Infrastructure and logisticsThe Internet advertising model is not the only issue online business owners

QAR4

billionThe estimated value of e-commerce

transactions in Qatar expected by 2015.

58 | The Edge

has followed under CEO Jeff Bezos, Haroon says during the first three years his goal was to achieve ‘critical mass’. Amazon has consistenly cut prices and increased services for its customers in an attempt to gain market share. Its investors have been unfazed with the consistenly poor performace for more than a decade (last year it reported QAR997 million in losses for the third quarter) trusting CEO Jeff Bezos in creating long-term shareholder value.

“Now imagine if you go ahead and try to sell that idea to an investor,” says Haroon, “and tell him for the first couple of years we are just going to work on building an audience and a trusted brand, and only then think about alternative opportunities for revenue. How can you find someone who is willing to take that risk?” There is so much opportunity in Qatar, explains Haroon, either because something just has not been done before or it has not been done well. The issue is with banks not taking enough risks with innovative start-ups and the lack of angel investors and venture capitalists within the country, he says. “There is so much money around here, and everybody talks about the money, the money isn’t everywhere, it is controlled by a select few and sadly those select few don’t necessarily want to take risks.”

This gets to the very heart of the issue. The way the markets in Qatar are established means sole distributors control and limit the entry of both products and competitors into the market.

“It makes no sense, that if you could access another market and buy a product cheaper, why you wouldn’t do that,” says Sharif. What is really holding down the growth of e-commerce in Qatar is not the fear or the risk of failing, but as Haroon best puts it, “There are more opportunities for assured success. A risky project here [in Qatar] doesn’t necessarily mean high reward. So the question becomes, why should I do that when I can just open up a franchise that will guarantee me revenue?”

Other countries in the region such as Jordan are already being talked of as hubs for technology with venture capitalists and tech giants investing millions, and are well on their way to becoming centres for tech entrepreneurs. There is a lot of potential in Qatar with many talented entrepreneurs, but the country perhaps still has some way to go in fulfilling James Caan’s vision of becoming the ‘Silicon Valley of the Middle East‘.

e-commerce in Qatar | feature story

Omar Chatriwala, co-founder of Doha News feels that people are slowly waking up to the idea of online advertising, and that it is only a matter of time before.

have to contend with. Infrastructural challenges inherent to most of the Middle East are also present in Qatar. Elias Ghanem, managing director for PayPal MENA, explains that while the rate of e-commerce growth in the MENA region has been phenomenal, for it to continue, more payment options need to materialise for one.

Most recently PayPal partnered with Qatar National Bank to provide its retail customers with the opportunity to make online purchases. Today credit cards are the only way Qatari consumers can shop online, and even then international stores often reject credit cards from Qatar. Ghanem believes that with the introduction of services such as PayPal, more customers can start to shop online.

For online ‘merchants’ as they are reffered to by PayPal, it will become much easier explains Ghanem, going to banks for payment solutions can become quite expensive and complicated. Over the coming months, he says, they will be enabling the service for merchants. However, Sharif explains that while PayPal has a high degree of trust with customers, the charges per transaction can be very expensive for merchants. Options are limited adds Haroon, pointing out that even local banks have high charges for collecting payments online.

The lack of payment options and trust from customers has led to the emergence of cash-on-delivery as a trend, which now accounts for 80 percent of regional e-commerce, according to Ghanem. This creates an enormous probem for online businesses, he says, as the rate of product returns increases so do the costs to logistics. Qatar, which has only recently introduced numbered housing adds to the woes, especially if you want to use a private company, then delivery can become very expensive, adds Haroon.

Dr. Emerson, however, thinks Qatar has made some wise investments in logistics infrastructure. “The country has excellent air and sea transportation facilities. It has a strategic location in the heart of the Arab world, and convenient to Europe, Asia and Africa.”

Most of the expensive and difficult infrastructure problems have already been addressed and solved, says Dr. Emerson, and the remaining problem is the infrastructure for distribution of goods within the country, which will be solved by the investments being made

in conjunction with the 2022 World Cup. “No current online start-up should be deterred because of logistical barriers. By the time that start-up has substantial need for infrastructure, the problem is likely to have been solved,” he concludes.

So, what is stopping the growth of e-commerce?Haroon says that it was only in January of this year that he started focussing on turning ILQ in to a real business. Much like the model the online retail giant Amazon

“The money isn’t

everywhere, it is controlled by a select few and they don’t necessarily want to take risks.” – Khalifa Saleh Al Haroon, CEO ILQ.

The Edge | 59

60 | The Edge

green Issa Al Mohannadi, founder and chair of Qatar Green Building Council and

chairman of Qatar Tourism Authority shares with The Edge his insights on the scope of green buildings and sustainability in Qatar. By Farwa Zahra

Building Qatar

Founder and chair of Qatar Green Building Council and chairman of Qatar Tourism Authority, Issa Al Mohannadi believes that social elements and human development also need to be taken into consideration for truly sustainable development in Qatar.

The Edge | 61

sustainable construction | business interview

In the wake of increasing industrial development across the world, the preservation of natural habitats has emerged as a major concern of environmentalists. Of late, the construction industry has been a focus of criticism for the heavy toll it takes on natural

resources. This global concern has simultaneously led to the rise of sustainability and green buildings in the real estate and construction industry.

Ahead of the 2022 World Cup and the National Vision 2030, Qatar faces an added challenge. Amid the rapid growth in construction, the country needs to ensure sustainability for a wide range of projects being developed simultaneously.

Simplifying the concept of sustainability founder and chair of Qatar Green Building Council (QGBC) , Issa Al Mohannadi, who is also chairman of Qatar Tourism Authority (QTA), tells The Edge, “The ground-breaking report, Our Common Future, published by the Brundtland Commission, defined the concept of sustainability as a ‘development that meets the needs of the present without comprising the ability of future generations to meet their own needs.”

While many countries have adopted this definition, Mohannadi explains its specific significance for Qatar. In the process of modernising and expanding its economy, Qatar National Vision 2030 pays considerable attention to the “needs of this generation and the needs of future generations”. The core principle of sustainability, which is to save the environmental resources for future generations, hence, aligns with Qatar’s charter of progress, he explains.

In preparation for the 18th Conference of the Parties (COP 18) to the United Nations Framework Convention on Climate Change (UNFCCC), QGBC launched the Green Hotel Interest Group (GHIG) last year. GHIG is a joint initiative of QGBC with QTA, which brings together representatives and interested parties from the hotel, hospitality and tourism sectors to discuss and identify opportunities to improve the sustainable landscape in Qatar. Offering the rationale behind GHIG’s establishment, Mohannadi stresses the significance of the hotel industry’s role in leading the country towards sustainability. As an industry regulator, he explains, QTA urges the implementation of green technology into all developments and hotel operations.

“Our overall tourism development strategy is not only aimed at lowering Qatar’s carbon footprint and its energy and water consumption, but also looks at protecting Qatar’s natural habitats, its wildlife and its marine reserves,” he says. In doing so, Mohannadi believes the country has an advantage, “As a destination, we have very few old hotels, and the very best cost-, energy- and water-saving technology can be implemented from the start.”

Formidable challengesIn a country such as Qatar where adding green credentials to real estate development is still an emerging concept, sustainability comes with a fair share of challenges. The country’s climate conditions make it prone to specific problems, says Mohannadi. Qatar’s high tempratures and water scarcity have been key environmental concerns for sustainability scientists here. Exacerbating the situation further is the inadequate number of qualified professionals and green services in the country. Because of Qatar’s self-sufficency in oil and gas resources, which have led to low energy costs, a general concern for energy preservation has become a lower priority.

This, however, is not the only attitude problem in the way of sustainability in Qatar. Developers, too, are resistant to encouraging green construction. “The fundamental challenge is changing the way the industry thinks about development. Going green may

“The challenge is changing the way the industry thinks. Going

green may require developers to move outside their comfort zone.”

62 | The Edge

business interview | sustainable construction

options despite these challenges.” With the phenomenon of green buildings and sustainability still new in the

region, Qatar also faces a shortage of sustainability experts, with expatriates being hired to fill the gap. “As green development gains momentum in Qatar, so will the demand for industry experts who can steer the real estate industry into this new direction of sustainable design and construction,” says Mohannadi, adding, “these experts will need to provide insight into green building policies, standards, legislation, and programmes at various levels of the industry.”

Speaking particularly about the area of his professional expertise in the tourism industry, Mohannadi addresses some of these challenges facing the hospitality sector in Qatar, “Holding hotels accountable for their environmental performance, and creating market and incentive programmes for ‘going green’ are some of the initiatives that will help the sector become more sustainable.”

The significance of sustainability for Qatar’s future generations, Mohannadi explains, should work as a primary motivator in expanding the scope of sustainability beyond a few sectors. “This should force us to think about sustainability in everything we do, especially when it comes to development. This includes the quality of air we breathe, the processing of solid waste, implementing a smart and efficient transportation system, and of course, green and intelligent buildings,” he says, further adding that “social elements and human development also need to be taken into consideration for truly sustainable development.”

Qatar’s progressRich in hydrocarbon resources, recent developments in the GCC countries reflect their primary concern to preserve their natural environment. All the GCC members have their own green building councils and foundations. For instance, the MUSTADAM Initiative in Kuwait launched by Kuwait Green Building Council involves government authorities, private sectors, academia, media and individuals collectively endorsing the green-related projects in the country. In the United Arab Emirates (UAE), Green Key Program is the counterpart of Qatar’s Green Hotel Interest Group (GHIG). However, the Green Key Program takes the lead for being the largest global eco-label related to accommodation.

As a developing country, Mohannadi believes that Qatar has an edge to ensure sustainability from the design stage for major projects in the country. “As a developing country, we have an opportunity to outperform our developed economy peers by embracing sustainability as we grow,” he says. Behind the competitive role that Qatar is playing in the sustainability sector, Mohannadi credits the factors otherwise considered as a hindrance in the way of green construction, “The real estate industry in Qatar is a disparate sector that comprises developers and maintenance professionals as well as residential

“As green development gains momentum in Qatar, so will the

demand for industry experts.”

require developers to move outside their comfort zone, from traditional means and methods, and conventional cost considerations,” says Mohannadi, who believes the growth of sustainability in other parts of the world is supported by both an informed construction industry and government incentives.

Qatar’s government has been keen to promote the concept and practice of green buildings through projects such as Global Sustainability Assessment System (GSAS) – a performance-based sustainability rating system in the MENA region, developed by Gulf Organisation for Research and Development (GORD) in collaboration with T C Chan Center at the University of Pennsylvania. However, “the construction industry culture still looks for the fastest and easiest ways”, says Mohannadi.

The resistance from these developers is also due to the lack of information about financial viability of sustainable buildings and developments. Analysis of the life cycle cost of a project is critical for an accurate assessment of any investment in green building. A green project may cost more initially, but its long-term impact is what makes it more cost-efficient and environmentally-friendly. Addressing this fact, Mohannadi thinks, is another challenge. That said, he also believes that “Qatar should be recognised for taking the decision to embrace green

Qatar’s first passivhaus is a part of the Baytna project, which will analyse the performance of a green villa against a conventional villa.

The Edge | 63

Marina District and Energy City at Lusail are current examples of developments committed to sustainable design practices in Qatar.

Speaking about the regional progress and Qatar’s performance in sustainability sectors, Mohannadi says, “Many countries are tackling sustainability with innovative programmes and Qatar is certainly at the forefront of regional efforts. By continuing with aggressive policies, Qatar can maintain its position as an emerging leader in sustainability planning and can further serve as a world-class model.”

and commercial property managers and investors. This diversity of people and ideas in a select industry is bringing a new wave of competition, and resulting in a sector that is fast embracing sustainability as its guiding force.” As a result, he says, an increasing number of sophisticated buildings in Doha are meeting energy and water-efficiency regulations while integrating innovative technologies such as solar cells.

In the last few years, Qatar has welcomed sustainable developments such as Qatar Foundation’s Education City and Msherib Downtown Doha. The

“Holding hotels

accountable and creating incentives will help the sector become more sustainable.”

Qatar’s main achievements in promoting sustainability

QGBCIn 2009, Qatar joined the World Green Building Council, which is a network of national green building councils operating in more than 90 countries. Qatar Green Building Council (QGBC) promotes sustainable practices for green building design. A member of Qatar Foundation, QGBC also has support programmes for health and sustainability of the environment, the people, and economic security in Qatar.

GSASPreviously known as QSAS, Global Sustainability Assessment System (GSAS) is a sustainability rating system for construction and infrastructure projects. Its latest and second version stands out for providing the world’s first railroad projects assessment system. In the Middle East, the GSAS also provides the first assessment plan for sustainable parks and public spaces.

BaytnaUnder the Baytna project, launched by QGBC, Kahramaa and Barwa Real Estate Group, Qatar’s first passivhaus opened this year. Located in Barwa City in Mesaimeer, the passivhaus is built along with a conventional villa as part of a comparative experiment to measure the performance of a passivhaus, which is supposed to save up to 50 percent of electricity and water.

sustainable construction | business interview

Qatari students at LAS building in the Education City, which, according to green building experts, is one of the recent developments committed to sustainable design practices. (Image Corbis)

Qatar 2.0

Will Qatar’s recent leadership change and MSCI upgrade to Emerging Market, plus the country’s upcoming spate of IPOs and internationalising of its debt, lead to a broader redefining of Qatar’s financial outlook? Simon Watkins delves deeper.

feature story | financial outlook

Given the recent announcement by the Qatar government that its spending will be higher than the budgeted USD58 billion (QAR211 billion) in 2013 to 2014, and may reach

USD66 billion (QAR240 billion) this financial year in the run-up to the 2022 World Cup in Doha, and a world crude oil price that looks to be increasingly threatened by shale energy supplies, such diversification of the state’s capital base would be welcomed by the international investment community. However, the path from the old economy to the new one may not be all smooth.

Entering the emerging marketsPerhaps more than any other single factor – perennial fears over rising inflation, latent concerns over a housing bubble, or ongoing worries over the debt burden of the domestic banking system – the key driving force for change in Qatar’s national balance sheet may come from the announcement in June by Morgan Stanley Capital International (MSCI).

From next May the Qatar Stock Exchange (QSE) will be upgraded in classification from ‘Frontier Market’ to ‘Emerging Market’ status, along with the neighbouring United Arab Emirates (UAE). It is true that the actual likely size of fund inflows directly caused by the upgrade may only be modest compared to the markets’ size overall. Indeed, most local analysts are projecting roughly USD500 million (QAR1.82 billion) of inflows for Qatar and a similar amount for the UAE (the UAE currently has a capitalisation of about USD140 billion (QAR510 billion), and Qatar of around USD110 billion (QAR400 billion).

However, says Sachin Mohindra, portfolio manager with Invest AD SICAV GCC Focus Fund in Dubai, in broader terms, MSCI’s decision is a reflection of greater maturity in the markets that will lend legitimacy to them, and in the future should lead to global institutional investors taking larger, long-term positions. “More liquidity in the markets should draw more investors, thereby starting a virtuous cycle, and new institutional investment flows could find their way into these markets from emerging markets and global index trackers, even if one assumes a neutral weighting for the region,” he says.

Additionally, Mohindra underlines, Qatar may see an even bigger impact in the coming years because unlike the UAE, the

The rise to rule of Qatar of HH the Emir Sheikh Tamim bin Khalifa Al Thani is but one of many landmark occurrences this year set to have a marked impact on the country and its economy. (Image Corbis/Reuters)

2013 may well be regarded by future generations of Qataris as being the most pivotal in recent memory, not just because of the once-in-a-lifetime handover of power in late June from His Highness the Father Emir Sheikh Hamad bin Khalifa Al Thani to His Highness the Emir Sheikh Tamim bin Hamad Al Thani, but also because it may mark the key turning point from Qatar being a hydrocarbon resources-based economy to one with a broader and deeper self-sustaining capital base.

The estimated amount of Qatari government external debt to mature post-2017.

QAR

87.7 billion

66 | The Edge

With a recent MSCI upgrade from Frontier to Emerging Market, subsequent rallies and a flurry of IPOs expected at year’s end, 2013 is proving as eventful for the Qatar stock exchange as the rest of the country. (Image Corbis)

“MSCI’s decision is

a reflection of greater maturity in the Qatar stock market, that will lend legitimacy, and in the future lead to investors taking larger long-term positions.” – Sachin Mohindra, Invest AD SICAV GCC Focus Fund, Dubai.

financial outlook | feature story

Qatari market was not previously included in the FTSE Emerging Markets Index, which is tracked by some major passive investors. “The MSCI decision,” Mohindra adds, “is likely to lead to a similar move by FTSE and, with Qatar having been an underperformer compared to other regional markets over the last year and with many stocks now attractively valued, the MSCI decision could prove to be a catalyst for a long-term rally.”

New investors, new moneyApart from the IPOs already planned for Qatari firms towards the end of 2013, Mohindra also feels that many of the initial public offer (IPO) plans for a number of Qatari companies that have languished since the global financial crisis could also be brought back together with increased float plans from existing listed companies. Indeed, just days before the official MSCI announcement in June, the QE announced that some major companies had applied to increase the number of shares available to foreign investors. The new limits are still not high - in many cases, they will be 25 percent of a company’s market capitalisation, up from 25 percent of its free float - but MSCI said it was satisfied by Qatar’s commitment to future change. “Greater market liquidity could also open up the dormant IPO market, and we may even see companies from neighbouring countries start to consider listing in the UAE and Qatar as a way of tapping global emerging market investors,” adds Mohindra.

37.1

26.3

18

2004 2006 2008Source: www.tradingeconomics.com International Monetary Fund

Source: Bloomberg

Percentage of the GDP

2010

Qatar Government Debt to GDP

2012

12.18

11.7

28.830.9 31.5

2009 MAY SEP 2010 MAY SEP

Qatar Stock Exchange - 5 Year Performance

2011 MAY SEP 2012 MAY SEP 2013 MAY

12500

10000

7500

5000

12500

10000

7500

5000

The Edge | 67

68 | The Edge

feature story | financial outlook

There are expectations from local Doha-based brokers of new listings are from Barwa Bank, Doha Global Investment Company, and of four new Qatar Petroleum subsidiary companies going public, among others. According to Qatar Exchange, Doha Bank has recently changed its free float to 25 percent of the market capitalisation, but more may well come, as this compares to a free float for Masraf Al Rayan of 49 percent at present, and reports are that the Commercial Bank of Qatar and Qatar Islamic Bank have also positively responded to this new market paradigm and may well increase their free floats within the next quarter.

And, following the dearth in big-scale IPO activity across the Middle East as a whole since 2008 to 2009, a positive sign of things to come, according to a recent report by Ernst&Young, Dubai, was the standout USD1.3 billion (QAR4.7 billion) offering by Qtel’s Asiacell Communications during the first quarter of 2013.

Dr. Sayid Al Sayfi, professor of Islamic

finance at Qatar Faculty of Islamic Studies says a new draft company law will help create new companies and encourage investment.

Doha financial powerhouse Barwa Bank is one of a group of large Qatari firms offering an IPO on the Qatari bourse Qatar Exchange in 2013. (Image Corbis)

Greater scrutiny, greater transparency According to a July report issued by the Abu Dhabi Investment Company, the upgrade in MSCI status will mean that many Qatari companies may “need to step up their investor relations and demonstrate greater transparency,” given their new-found higher international investment profile. The need for such ostensibly explains the Qatar Financial Centre (QFC) recently introducing the Collective Investment Schemes Rules 2010 and the Private Placement Schemes Rules 2010 in an attempt to enhance the QFC’s reputation as a prime jurisdiction in which to establish investment funds, although the Qatar Financial Centre Regulatory Authority (QFCRA) regulates all funds formed in the QFC.

For investors, one key benefit of this new regulatory architecture is that a QFC fund is exempt from all Qatari taxes. In addition to this, the QFC has recently released a swathe of rules covering three areas of regulation – corporate governance, anti-money laundering and combating the financing of terrorism – in keeping with international regulatory standards for insurance and banking supervision. In terms of corporate governance, the new rules seek to strengthen regulations covering governance and risk management by requiring the governing body of a QFC-authorised firm to approve and establish a formal governance framework, risk management and internal controls framework, and remuneration policy. In addition, the new rules include a new controlled function for internal audit for QFC insurers, QFC banks, and QFC Islamic banks.

A new draft company law is also under discussion that seeks to boost the performance of the QSE through increasing the number of firms able to list on it, according to Dr. Sayid Al Sayfi, professor of Islamic finance at Qatar Faculty of Islamic Studies, in Doha: “It will encourage the creation of new companies and... investment in Qatar.”

The Edge | 69

financial outlook | feature story

Though Qatar’s economy is strong and the mood in the country is bouyant for many reasons, there is also some room for caution. The International Monetary Fund (IMF), wary that unexpected flows of money could destabilise the banking system and of government debt, the second largest in the GCC, among other factors and issued a warning as such in Q1, 2013. “We hope that [introducing open market instruments to manage its liquidity] will help Qatar prevent and control inflationary pressure,” stated the IMF. The ramifications for Qatar in relying almost entirely on its domestic banking system will not just be felt in terms of vague reputational deterioration for Qatar either. [in two watershed quarters of last year - Q2 and Q3 - total lending by banks increased to represent 120.1 percent of deposits, according to the Qatar Central Bank, implying that Qatari banks were reliant on short-term borrowing from capital markets and other domestic banks.] Only last quarter, ratings agency Standard & Poor’s (S&P) specifically highlighted that a particular rating constraint for Qatar is the lack of monetary policy flexibility in terms of its

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However, he adds, some of the proposed articles need clarification: “Article (110) of the new draft law stresses that the chairman and members of the board or the directors of companies should refund the sums they had gained at the transactions they performed for their companies in which they have direct or indirect interest. The penalty should be stricter for such actions and should not be limited to just refunding the money.”

Attracting the greater interest of international equity investors, of course, should allow the Qataris to leverage this into internationalising its debt markets as well, says Sam Barden, CEO of SBI Fund Management in Dubai, and this could not come at a better time. Currently, as highlighted (that is to say politely warned) by the IMF in Q1 of this year (see box out), a large percentage of the Qatari government’s external debt, an estimated QAR87.7 billion, is maturing post-2017.

However, as long as Qatar’s balance sheet continues to grow, along with the running budget surpluses, debt rollover risk is unlikely and the government should be able to refinance its debt or meet maturities. However, if any of these factors falter, then Qatar’s sovereign standing in the global financial world will be re-assessed, and certainly not to its benefit.

Nevertheless, despite the risks and uncertainties, 2013 may yet be remembered as the year the course of Qatar was truly set towards economic diversification, and not just because one of the primary architects of Qatar Vision 2030, HH the Father Emir Sheikh Hamad bin Khalifa Al Thani abdicated in favour of his son HH the Emir Tamim bin Hamad Al Thani, and a new generation took over.

transmission mechanism via the financial system and capital markets. Shallow local currency debt markets can hamper the transmission of policy into the financial markets, impending plans to broaden non-oil output bases, diversify the sources of funding including financial small and midsize enterprises, and undertake long-term investment projects, added S&P.

However, Amwal International Investment Company CEO, George Shehadeh, in Kuwait City, is one of many who believe that the development of a broader debt market in Qatar, evolving naturally out of the greater international equity presence due next year from the MSCI upgrade, would lead to a positive cycle for Qatar and the international asset management community.

“Sovereign issues are a critical icebreaker for debt markets as they help establish the local risk-free benchmark as well as a yield curve that can stretch into longer dated maturities,” he says, “and we are seeing increasing interest from investors in a variety of debt and debt related instruments, with the traditionally equity-biased investors in the region being ready to support a broader debt market,” Shehadeh told The Edge.

Qatar Reality Cheque 2.0: Debt, liquidity and policy

Though it is experiencing unprecedented economic activity and development Qatar seems aware of the risks inherent in such rapid growth and is taking many regulatory and fiscal steps to safeguard systematic integrity. (Image Corbis)

passionBanking on

Salah Jaidah, chief country officer of Deutsche Bank in Qatar and its vice chairman for the Middle East and North Africa (MENA) talks to The Edge at great length on what Islamic banking means for a global financial institution such as Deutsche Bank and why the Qatar market is strategically important to the bank. By Aparajita Mukherjee

Discussing the growth trends in the Islamic banking sector in the MENA region, Salah Jaidah, chief country officer of Deutsche Bank in Qatar, and its vice chairman for the Middle East and North Africa, is of the view that in the wholesale sector, there will likely be a double-digit growth in the coming year.

72 | The Edge

Islamic banking,

according to Jaidah, faces a constraint which has two sides – one, the demand of funding and the other, the surplus liquidity within the industry.

business interview | financial services

Expected growth of Islamic banking in the MENA.

13%

M aking a difficult professional choice when he was younger, Jaidah opted to become a

banker, he says, because he felt he was a good lender and a good collector of money and a career in finance seemed like a logical step.

Having served an Islamic bank earlier in his career, Jaidah brought in his experience to Deutsche Bank Qatar which is an notable institution within the Islamic finance market, and where he now exlusively oversees wholesale deals under the auspices of the Qatar Financial Centre (QFC).

Asked whether the bank’s focus on Islamic banking takes away any prospect of business growth that wholesale banking brings, Jaidah answers candidly, saying that the bank’s product profiling on Islamic banking is not local, but regional and global and hence is not at odds with wholesale deals.

“We happen to cover a part of the MENA region. We have taken advantage of the location of Qatar, and how we interact with clients within the country, but the rest of the team is in Dubai. So it is definitely a multi-location coverage model,” he furthers.

Moreover, according to Jaidah, the bank’s view is that Qatar is well positioned `– both strategically and geographically – in the realm of Islamic banking. “There have been quite a number of initiatives, which will bring value into this industry and capitalise the steep growth curve in Qatar while complementing the business rationale of the firms within QFC,” he says.

Talking about the growth trends in the Islamic banking sector in the MENA region, Jaidah is of the view that on the wholesale side, there will be a double-digit growth for the coming year. “It should be around 13 percent and this figure is on the back of some very interesting initiatives coming from Saudi Arabia, Qatar and as well as from Malaysia and Indonesia. Turkey is also constantly looking to enter the regional market and we assume that they will come back again to tap the market,” explains Jaidah.

Funding crunchIslamic banking, according to Jaidah, faces a constraint which has two sides. One is the demand for funding and the other is the surplus liquidity within the Islamic banking industry.

“Most of the investors and depositors within the region would prefer to see alternative solutions within Islamic banking. Both the government and semi-government agencies are verifying that these surpluses are available and they are eagerly developing projects that will allow them to tap into these resources. Some countries are using it as control management within the ambit of liquidity management of the state to prevent inflation. So, the quest for alternative solutions has had multiple

usage and multiple needs, and this trend will continue.” There have been interesting growth rates on the deposit side and the investment side, according to Jaidah. Because the alternative solutions coming from conventional banking may not always compare better with Islamic banking products, investors are eager to put their money into Islamic products.

This growth has also yielded a certain optimism in Islamic banking circles and Jaidah relates that barring some countries which, due to regulation, do not allow Islamic banking, there are Muslim nations (both within and outside of the Middle East and some countries in South-East Asia) where the encouragement comes from the state and from the regulators.

“This makes them position Islamic banking to the forefront, as a result of which they introduce new laws and new standards in order to flexibly attract and grow the

According to Jaidah, Deutsche Bank’s view is that Qatar is well positioned, strategically and geographically, in the realm of Islamic banking. (Image Corbis)

The Edge | 73

Jaidah also predicts momentum. “We foresee ourselves capable of

providing the necessary alternative solutions, be it for the sovereign or for semi-sovereign entities that are going to address the infrastructure overhaul of Qatar,” he says. “On the institutional side, there will be several categories of players – financial institutions, corporate entities (both local and foreign players), international contracting firms – and the bank has strategies lined up for each category.”

Deutsche Bank is capable of providing the necessary solutions, having proved their capability with previous transactions. Jaidah continues that even if the bank were to stay away from the sovereign, “we will look at the capital requirements of the financial institutions and addressing their ability to book assets is going to be a way for us to enter the market and give the right solutions. We also feel that most of the banks are going to readdress their capital adequacy, looking at themselves being the fund providers for those projects going forward.”

On the corporate side, Jaidah believes that there will be many foreign corporates working jointly with the local firms. The former will will require the support of foreign banks for formal guarantee, tender guarantee and trade finance activities. “We will collaborate with local banks while addressing local corporate needs and would definitely like to work with local banks when it comes to local corporate credit in the private sector.” says Jaidah. Deutsche Bank will also partner with international contracting firms and address their requirements when they think about joint ventures with Qatari firms. “We will work jointly with the local banks on a full cycle. We see the possibility of a number of European firms coming and bidding for these projects, in the service and in the infrastructure sectors and we have good working relationships with the European firms.”

Financial trends and recession In Europe, within the domain of private wealth, following the recession of 2008

positive impact on the business in Qatar, Jaidah says that it is this partly that helps the bank position itself as more of a solution provider. “No matter what kind of alternative needs the client has in mind, we stand firmly committed to his diverse needs and try to meet each one of his needs with tailor-made deals.”

Explaining that for Islamic solutions, Deutsche Bank believes in unique, individual deals, Jaidah explains that one can copy and paste certain terms from agreements but there definitely are distinguished needs that a client might need addressing and he says, “we will need to provide a distinguished alternative solution for those needs.” The bank always believes in proactively interacting with its clients, he furthers, understanding their needs and providing either Islamic or conventional solutions, as per the client’s needs. “This ability, to me, gives a global bank a little bit of an edge which many institutions may not have.”

Prospects for infrastructure fundingWith reported infrastructure projects in Qatar to the tune of USD44 billion in the pre-2022 World Cup period (QAR160.16 billion), Jaidah is of the opinion that Qatar will definitely need funding beyond what has been budgeted for. On the project level,

financial services | business interview

“Irrespective of the needs the client has in mind,

Deutsche Bank is committed to his diverse needs with tailor-made solutions.”

industry,” he says. “We have also seen it in pockets of Europe, which shows interest into this alternative shari’ah compliant mode of banking and the regulators are very interested to address these alternative solutions because a certain percentage of their population is Muslim.”

Indeed, new markets are continually opening up for Islamic banking and Jaidah predicts that North Africa is going to be one of the leading markets, with growth concentrated in Egypt and Tunisia, which will be the lead players, to be helped by Libya and Morocco in the later stages.

Commenting on business segmentation of these countries, Jaidah adds that on the wholesale side of the business, it is going to be a double-digit growth story that encapsulates the governments as well as semi-government initiatives and appetite. “The trend includes global banks, capable of providing the alternative structures and capable of distribution and giving the right solution needed by clients.”

Achievements and brand strengthOn the wholesale side of the business sector, Jaidah feels that Deutsche Bank in the region has been a key player. “We have been a strong solutions provider for a lot of the sukuk issuing.” he say, explaining that Deutsche Bank conducted the Indonesian government sukuk, as well as some transactions within Saudi Arabia. Most of these deals have been exceptional in terms of size and tenor, says Jaidah. “We did a Qatar Islamic Bank (QIB) sukuk last year. We are in the second position on the league table in terms of size and diversity but if one looks at the global ranking, we are probably number one because we work on a global scale.”

With the brand strength of Deutsche Bank, he adds, having an absolutely

“We are building on a base, we are not short term,

we are not suitcase bankers. Having a Qatari head the business here adds a degree of comfort to a lot of clients.”

74 | The Edge

business interview | financial services

Jaidah predicts that North Africa is

going to be one of the leading markets for Islamic Banking.

and 2009, Jaidah thinks that mortgage finance has been a leading trend for a lot of the investors, who looked at Europe as an alternative acquisition opportunity on booking property. This trend has to be looked at in the backdrop of a sharp price decrease that certain markets have experienced.

“We are very well positioned to provide mortgage finance for private wealth when they conduct their personal acquisition, or even commercial acquisitions for the investment sector. I think that wealth management and initiating alternative solutions to assist families on their European assets is an issue that we can address pretty well.” Deutsche Bank, Jaidah adds, has been operating with high net worth families who have multiple geographic asset allocation that needed a global bank to address those solutions and give them the right advice.

Talking about the local trend in private wealth management, Jaidah says that it is natural for many wealthy families here to have strong interrelations with corporate organisations. “For instance, within Deutsche Bank, our private wealth management arm has always had an interesting interaction with our investment banking arm that brings huge value to our family clients.”

Jaidah continues that, as part of strategy, Deutsche Bank brings the platform of the bank’s corporate services to the client and provides them the necessary advisory on their corporate needs. “This has added tremendous value to our services,” he says. “We have looked at a wide variety of asset classes within the region, addressed funding against local equities in the Kuwaiti market, but we are not as competitive as the local banks there when it comes to funding against local assets. We look at our private wealth division as a solution beyond borders and that is what we are to them.”

Stability in businessIn banking, as in any other business, success comes to those that have a longer tenure in the country. In Jaidah’s opinion, one of the most strategic things for Deutsche Bank is that they are here to stay. “We are building on a base, we are not short term, we are not suitcase bankers. Every single interaction that we have is registered and the regulators here monitor it. So the customers should be satisfied that we are genuine bankers on the ground conducting business. That to me is a big message to clients who want to establish personal relationships with the bank.”

Being a global bank, Deutsche Bank’s product offerings (with the exception of retail) compare favourably with any international bank, he says. “In wholesale banking, in investment banking, in private wealth management, we definitely are equal to all of the international banks and sometimes we go beyond the basics of many international players because of our long-term commitment to the region.”

Jaidah adds that the bank has the commitment globally to bring people from within and employ them to be the face of the bank in each country that it operates in. “The philosophy behind this hiring policy is that we would like to reflect that Deutsche Bank, irrespective of which country we are talking about, believes in being part of that society.” Having a Qatari head the business here adds a degree of comfort to a lot of clients who can expect a personal touch and transparency in dealings.”

Jaidah says that Deutsche Bank in Qatar foresees itself capable of providing the necessary alternative solutions, be it for the sovereign or for semi-sovereign entities that are going to address the infrastructural overhaul of the country.

The Edge | 75

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Can cross-companydialogue really

business management | internal communication

deliver results?

The Edge | 77

T he most common fear in teams is that of internal conflict, the assumption being that conflict and effectiveness

are mutually exclusive, or that harmony alone contributes to business success.

But arguably, a bigger risk is too much homogeneity and agreement and the irony that the manager seeking harmony could cause his or her team to underperform. What could a team look and feel like if it did not equate vigorous dialogue with ineffectiveness if it actively sought to add to its diversity and encouraged its members to disagree before finding answers? Could managers who maintain a well-balanced unit, yet value conflicting or disparate ideas more highly than consensus, expect a better performing team?

This might be because the more diverse a team’s knowledge, the more solutions it can consider. A cross-disciplinary dialogue among people with different specialisms is more useful than a single expert view in a complex problem-solving context.

Take the following example. A major problem in Alaska is how to remove ice from power lines, so a team is put together to find a solution.

Person A: There are a lot of bears in Alaska; maybe we can use them somehow.

Person B: Yes, and we could make them climb the poles, making the power lines vibrate, so that the ice will fall off.

Person A: Yes… and if we place fresh

meat on the top of each pole, this will attract bears and make them climb the pole to get the meat.

Person B: Yes, so let us use helicopters to bring the fresh meat to the top of the poles.

Person A: Then we need stockpiles of gasoline in the area for the helicopter.

Person B: Hey, what about pouring gasoline on the wire and burning the ice away?

Person A: Yes, and we could wrap heating elements around the wires to heat it off?

Person B: Why don’t we let the helicopters hover over the power lines? Their hovering will vibrate the ice off the lines, solving the entire problem.

Person A has knowledge about animal behaviour as well as logistical knowledge about helicopters. Person B has knowledge about the principle of vibration to remove ice, logistical problems in the coastline areas of Alaska and the heat capacity of gasoline. Each idea inspires the next but there is no direct connection: knowledge builds from a number of different fields.

Yes...andIt is of course an exaggerated example, but the above kind of dialogue is also productive because the participants are utilising a classic innovation technique of “Yes... and”.

Employees from different departments bring their unique perspectives to the decision making process, contributing to the overall growth of an organisation. Adam Kingl, director of learning solutions, executive education at London Business School, examines the wisdom of managers encouraging communication within diverse teams.

The more diverse a team’s knowledge, the more solutions

it can consider than a single expert’s view on a complex problem.

internal communication | business management

78 | The Edge

In other words, they are building on each other’s ideas before they volunteer new ones. This technique explores the realm of the possible, giving each thought its due, instead of simply listing options without any depth. An additional advantage of this method is that any eventual solution is more likely to achieve buy-in from all members of the group, not because they all came up with the same idea, but their individual ideas were explored in more depth and therefore people are confident that the decision making process was fair.

All of this may seem intuitive, but what it tells us about knowledge sharing may not be: the variety of information from different disciplines is more valuable than the status of the knowledge. The best solution may not come from an expert in the field. An individual amateur will not typically outperform an individual expert, but there is considerable value in the diversity of a larger crowd. While no one person in a group with diverse experiences would be expected to outperform a professional on his or her own topic, as a group, the crowd possesses geographically and functionally nuanced information that an expert could not possibly retain. So recruiting diverse teams and creating a strong framework for cross-organisational working could yield real benefits for an organisation.

Best Buy’s hidden expertsIn The Future of Management, Gary Hamel describes the example of American consumer electronics retail chain Best Buy in soliciting diverse opinion to achieve better insight than the so-called experts.

Best Buy’s vice president of Consumer and Brand Marketing, Jeff Severts, conducted a controlled experiment to prove that the company’s forecasts were too aggressive rather than his advertising spend being ineffective. Severts wanted to see if an average group of Best Buy employees could predict gift card sales more accurately than their experts.

He asked several hundred employees to participate in guessing gift card sales for the following month, having only very little historical data. The experts were historically accurate within five percent. The several hundred employees were diverse: stockists, customer service representatives, store managers and back office functions. Their collective average guess turned out to be only 0.5 percent off the actual sales figure. The employee sample was 10 times more accurate than the so-called experts.

Why would this be so? The store manager in Minnesota, for example, may have recognised that she is having a particularly harsh winter and so will discount her estimate, thinking that there will be fewer shoppers this year. The stockist in Miami may have noticed that the new store was on a busy shopping street, and so would be more optimistic. All of those tiny, local adjustments become part of the average estimate. At the same time, those individual forecasts that are widely off are pushed to the radical ends of the bell curve, and so influence the average less than the more widely held view.

To ensure the result was not a fluke, Severts conducted a larger experiment. This time he asked for forecasts of the company’s total sales. He asked Best Buy’s

expert forecasters as well as hundreds of random employees, incentivising them to make an estimate with a small prize for the most accurate guess. This time, the experts’ forecast was off by seven per cent, and the average collective guess of the employees was 99.9 percent accurate.

Of course, the view of the expert in the team must still be given its due. It could be argued that the smaller the team, the more this lesson is true. With larger teams, recommended is a balance between considering the expert view and leveraging the collective wisdom inherent in diversity and numbers (see box out).

Diversity: A caveatThere is an important distinction when the term diversity is used in this context. The utility of diversity discussed here is in relation to different perspectives, worldviews, experiences and expertise rather than diversity of gender, race, creed or sexual orientation and indeed such a mix of genders and nationalities may or may not achieve the benefits illustrated. Therefore, team leaders must do more due diligence in the recruitment stage to understand, above all, the perspectives (rather than the superficial profile) of applicants, and have the courage to select the novel, challenging or unique view.

Where diversified knowledge is valued and its contribution from employees across the company is encouraged, it is also possible that the organisation would have enhanced morale and motivation from the inclusive culture created, that their leaders trust their opinions enough to solicit them in the first place, and satisfaction from witnessing the results of their higher performance through thoughtful dialogue. A diverse group’s mosaic of views, some perhaps ignorant or radical, balances the important but sometimes narrow view of the expert.

The challenge for the manager is to leverage the incentives and cultural norms that make the soliciting of views a regular occurrence. Instead of following the cliché of agreeing to disagree, perhaps embracing multiple and diverse points of view could lead to the stronger paradigm of disagreeing to converge.

Size of Team Use of Experts Use of Diverse Group

Small Experts likely to provide the best answers.

May not have enough diversity in a small number of people.

Medium Solicit their opinionDiscuss the experts’ views separately before bringing

them back into the dialogue.

LargeSolicit their opinion

and test the average collective view with them.

Survey their views and look for trends and averages.

Organisation

Gather a group of experts with diverse views to test

the views of the wider organisation and to ask

follow-up questions.

Use social media to collect large samples, ‘votes’, and

discussion boards to test all viable ideas and options.

Adam Kingl ([email protected]) is the director of learning solutions, executive education at London Business School.

business management | internal communication

The merits of using experts vs a diverse group

The Edge | 79

EMPLOYEE ENGAGEMENT>82

In an exclusive conversation with The Edge Samir Mardini, head of talent consulting MENA

at Aon Hewitt, discusses employee engagement in Qatar and what sets it apart from other GCC states.

business insightInside the minds of leading business figures

Aon Hewitt’s Engagement Trends in the Middle East 2013 study reveals that both male and female employees in Qatar have slightly higher engagement scores in comparison to their peers in the GCC. (Image Corbis/Arabian Eye)

also in this sectionA legacy of innovation drives business growth

Hiroyasu Sugiyama, the managing director of Sony Middle East and Africa (MEA) discusses the importance of MEA to the company

and what trends he sees emerging that electronics companies can capitalise on. >80

82

80 | The Edge

business insight | consumer electronics

A legacy of innovation drives business growthThe Edge spoke exclusively with Hiroyasu Sugiyama, the managing director of Sony Middle East and Africa (MEA) about the importance of MEA markets to the company and what trends he sees emerging that electronics companies can capitalise on.

Can you talk about the importance of the Middle East market to Sony? What opportunities do you see?The Middle East market is undoubtedly one of the most significant contributors to our business growth. Consumers in this region exhibit a good level of trust in the Sony brand, as well as readiness to experience the innovation and quality we offer.

We have identified considerable opportunity in emerging markets such as Iraq, where the economy has stabilised to a large extent and is showing tremendous progress. We recently held a distributor conference in the country to announce our plans for widespread investment to bring the Sony experience to the Iraqi population.

What are some of the challenges you face in the Middle Eastern markets?

Some countries in the Middle East and Africa are going through a difficult period of social and political evolution. This brings with it economic and business uncertainties, and is one of the biggest challenges Sony faces in the region.

In the electronics market, the intense competition, rapid price erosion and an accelerating product lifecycle is a global phenomenon, and this region is also affected by this challenge.

Hiroyasu Sugiyama, the managing director of Sony Middle East and Africa says the growth of the consumer electronics market in Africa is expected to be the single largest contributor to business growth in the continent.

REGIONAL MARKETS

How involved are you with your local partners? What sort of things do you work on together to develop your position in the market?

Our local sales partners and distributors form the backbone of our business in the Middle East and Africa region. We are constantly in discussion with them to design mutually beneficial strategies for extending our reach and exposure in the respective markets. Indeed, we depend on them to serve as the best ambassadors of our products and the Sony brand.

In Qatar, for example, we have a successful relationship with Darwish Holding, who, through their retail arm Fifty One East, have been distributing Sony products in Qatar for over 50 years.

What do you think sets Sony apart from its competitors?

Sony is an electronics and entertainment conglomerate with a wealth of proprietary technologies and high-quality products. With this portfolio, we are able to leverage our links within the Sony Group in an effort

The Edge | 81

consumer electronics | business insight

to further differentiate Sony’s hardware from that of its rivals, and to elevate the appeal of our products.

In our television (TV) business, for example, we believe that there is potential to sufficiently differentiate from rival products by leveraging our carefully cultivated proprietary technologies to enhance picture and sound quality. The technologies that we utilise comprise signal processing-technologies to reinforce features such as contrast performance, video response performance, energy-saving capabilities, and audio technologies.

How important is Africa to your future growth plans?The growing consumer electronics market in Africa is

expected to be the single largest contributor to business growth in the continent. We have seen a hunger for new products and technology in this market, and hope to capitalise on this huge potential to grow the business exponentially. Our target is to secure a market share of USD1.4 billion (QAR5.1 billion) by 2015. However, our focus is not on sales growth alone, but the 360-degree development of our business, covering all facets of operations in Africa. This includes setting-up offices and investing in local talent to run these offices, to opening Sony branded stores and service centres that will be managed and operated by local professionals trained by Sony experts.

Could you give us some specifics on what this plan entails?Sony’s growth strategy for Africa is hinged on market

expansion – establishing zonal offices in Nigeria, Ghana, Morocco, Angola and Kenya – to increase market presence. We also have an extensive range of products for all consumer segments and are now working on launching them in Africa simultaneously with their global launch dates. Sony’s new concept stores will give customers a hands-on experience and access to live demonstrations of our latest products to help them easily appreciate the product benefits.

We are also looking to capitalise on the high demand registered for Sony audio products, which have proven to be category leaders with a dominant market share, to stir consumer interest in new products. Sony is also looking to develop Africa-centric products focused on the needs and requirements of African customers and create products that fit their preferences. And finally, maximise our potential in the mobile business, which is growing at a phenomenal pace, with our strong line-up of Sony Xperia devices.

What are some of the trends we can expect to see in TV technology in the future? Will there be a focus on more integration with personal devices?

TV is a critical device for consumers to enjoy various content and services at home. The Bravia range of TVs are Wi-Fi enabled and offer a wide range of Internet connected services including Sony’s smart connect solutions, enabling cross-device connectivity between mobile devices and the TV. In addition, smart connect features such as one-touch mirroring provides greater control and additional content options by interconnecting media sources across the home and mobile entertainment ecosystem. These technologies are increasingly determining the purchase decisions of consumers, and are a gradual but promising trend in the sector.

“Our local partners and distributors

form the backbone of our business in the Middle East and Africa region.”

Could you explain what the new 4K TV technology is?4K TV technology is defined by enhanced picture and sound

quality. The series feature four times the resolution of full HD and are packed with Sony’s own technologies such as signal processing, speakers, and signal–to-sound architecture to deliver powerful sound quality.

The 4K TVs are quite expensive today. Will this stay a high-end product or do you see prices dropping in the future and this technology becoming the standard for all your TVs?

The beauty of 4K images is easily apparent, and the difference in quality is comparable to the effect delivered when consumers shifted from standard definition to high definition. Once a consumer has experienced the 4K picture quality, it would be difficult to go back. We believe that 4K will become the next best standard of home entertainment. From our experience with the launch of the 84-inch 4K Bravia LED TV, the sales of which far exceeded our expectations, it is clear that consumers are willing to see the value for their investment in 4K.

At the same time, our goal is to extend the 4K viewing experience to as many consumer segments as possible. We do realise that the Sony 84-inch 4KTV, priced at QAR99,999 is not for everyone and so we have launched the 4K format in smaller, more affordable, screen sizes of 65-inch and 55-inch. We will continue to review our offerings in this regard, without compromising on quality.

Your CEO recently announced a revival plan for Sony, what will be the focus of it?

Indeed, Sony has been, and is still undergoing strategic restructuring, which involves consistent efforts to take the best course of action based on lessons learned and the dynamic turns of global consumer technology trends. One major step in this direction is Sony’s enhanced focus on mobile technology, digital imaging and gaming offerings.

For the television business, Sony televisions have always set the best standards. Superior television technology has always been our strength. We will continue to be in this business of offering customers the most compelling television experiences at the best value and will spare absolutely no efforts to turn around our TV business and consumer electronics operations.

A host of other propositions are under consideration, but the end goal is invariably the same, which is to preserve the legacy of innovation that precedes the Sony brand across the entire product line-up.

82 | The Edge

business insight | human resources

Satisfaction, commitment and engagement are three stages of an employee’s state of mind In an exclusive conversation with The Edge, Samir Mardini, head of talent consulting MENA of Aon Hewitt discusses their recent survey on employee engagement and what sets the Qatar market apart from the rest of the Gulf Cooperation Council (GCC) states.

What is Aon Hewitt and what are some of the major services it provides?Aon Hewitt is the global talent, retirement and health solutions business of Aon plc. (NYSE: AON). It aids organisations and individuals to secure talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.

Aon Hewitt is the global leader in human resource (HR) solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.

What is your experience in the MENA?I am a veteran of the HR industry with over 15

years’ experience, my current role is head of talent in the MENA region. I have been with Aon Hewitt for the past six years, handling project and relationship management in the Middle East, specialising in employee engagement, performance management, organisation structuring, talent management, HR diagnostics and employer branding.

Tell us about the recent survey on employee engagement. What is employee engagement and how is it measured?

Aon Hewitt’s Engagement Trends in the Middle East 2013 paper reveals the state of engagement in the Middle East as of 2012, with data from over 100,000 employees across 250 organisations in the last five years.

Engagement is a measure of the emotional and intellectual commitment that employees have to their organisation. It goes beyond satisfaction (which is a function of how much I like things

STAFF ENGAGEMENT

Engagement Behaviors

SAY

Speak positively

Consistently speakpositively aboutthe company tocolleagues, potentialemployees andcustomers.

Have an intense desireto be part of the company

Employees are inspiredby the company toexert extra effort

Want to remaina member of theorganisation

Exert Effort

STAY STRIVE

here) and commitment (which is determined by how much I want to be here) to engagement (which comes down to how much I want to and actually do to improve our business results).

The best organisations know that measuring employees’ opinion and attitude, and understanding the extent of employee engagement in the organisation, is only a first step. Success comes to organisations that not only measure engagement but also understand, plan and act upon those results.

Opinion-based research has the tendency of being subjective. How do you ensure the results are objective and reliable?

We have over 30 years’ experience working with clients and the most extensive, industry-wide database for benchmarking results.

We recently announced the results of Aon Hewitt’s Best Employers Middle East. Launched globally over 10 years ago, the study has become an international benchmark for business, reflecting the opinions of a large number of employees and providing organisations with a unique opportunity to assess and understand the impact that engagement has on workforce performance.

Best Employers first began in the Middle East in 2009, with the goal of providing definitive benchmarks and insights into how organisations in the region can create real competitive advantage through people.

For employees to be engaged, they need to have a high score on all three above behaviours.

Engagement at Aon Hewitt is displayed through three key behaviours:

The Edge | 83

human resources | business insight

Samir Mardini, head of talent consulting MENA of Aon Hewitt tells The Edge that companies that get engagement of employees correct will enjoy a source of competitive advantage in their talent strategy and business results that is can be difficult for other firms to replicate.

Both men and women in Qatar have higher

engagement scores at 60 percent compared to their peers in GCC at 57 percent.

Our Best Employers and Engagement study results are very objective as they are based on quantitative statistics derived from the data submitted by the client organisations. The data is aggregated to show employee satisfaction on various drivers that impact employee engagement.

What is the level of employee engagement in the Middle East compared to the other regions? What about Qatar?

Although employee engagement is common across Qatar and the GCC states (60 percent each), if you split the data by demographics you can see that employees in the age group 55 and above in Qatar are highly engaged at 68 percent compared to their peers across GCC at 62 percent.

Both males and females have higher engagement scores at 60 percent compared to their peers in GCC at 57 percent.

Based on the type of job, it is both the senior management and executive teams that are engaged the highest in Qatar and the trend is similar across the GCC and small increase is seen across all levels when compared to the other GCC states.

Going by job function, highest engagement levels are in the finance and customer service functions with 70 percent and 69 percent, respectively. For the GCC as a whole, the highest engagement levels are for HR and business development at 70 percent and 65 percent, respectively

Are there specific industries which generally showed the highest levels of employee engagement in the Middle East?

According to Aon Hewitt’s Best Employers Middle East survey, the 15 organisations receiving Best Employers accreditation this year represent a wide range of industries, which shows how maximising employee engagement is an important factor for all businesses, regardless of the industry in which they operate. However, three industries were particularly prominent: fast moving consumer goods, with five best employers; transport, storage and logistics, with four best employers; and information technology, with three best employers.

According to the survey results, employee engagement in the Middle East dropped in 2012. Why do you think this is?

The Middle East is a diverse region with the majority of its working population hailing from all corners of the world. As such, most companies identify this as a unique region within their organisational structures and hence the engagement in this region is also different compared with other markets. With companies becoming more aware of the return on investment of an engaged employee, they have started evaluating options to create and raise awareness of its importance amongst leaders and HR professionals. However, it has been three years since the economic crisis and organisations have only recently started showing signs of improvement around productivity, profitability and overall hiring. Given the recent conditions, engagement levels in the Middle East are volatile and have increased in the past four years from 68 percent in 2009 to 69 percent in 2012.

What is the most important take out from the survey?It is more important than ever for organisations to understand

what drives the engagement of their employees. The companies that get the engagement right will enjoy a source of competitive advantage in their talent strategy and business results that is hard for others to replicate.

For more exclusive content visit us at

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Q a t a r ’s B u s i n e s s Magaz ine

Stay informed about business in Qatar.Online.

Theedge web-FINAL SFP.pdf 1 9/5/13 5:19 PM

The Edge | 85

SpilloverContinued from page 53

Qatar and the GCC:Racing for returns

Thanks to regonal instability and in line with GCC allies, Qatar has increased defence spending in recent years. (Image Corbis)

In June, local media reported that the US plans to sell Qatar two spare engines for C-17 Globemaster III transport planes. According to reports, this is the fourth arms agreement between the US and Qatar since December 2012, when Qatar was reported have purchased USD406 million (QAR1.48 billion) mobile rocket launchers. Qatar also ordered USD122 million (QAR444 million) in antitank missiles in April. Citing the Defense Security Cooperation Agency (DSCA), the report states that the latest USD35 million (QAR127 million) purchase will enhance Qatar’s ability to operate its C-17s, supporting its capability to provide humanitarian aid in the MENA region and support its troops in coalition operations.

Of course, one of the objectives of setting up the GCC was also military cooperation. Neil Partrick, a visiting fellow of the London School of Economics argues in his research paper, The GCC: Gulf State Integration or Leadership Cooperation? that the conflict between Iraq and Iran presented a major security threats to the Gulf Arab nations, necessitating this investment and show of unity.

This need has further been exacerbated more recently by difficult relations with Iran and the ongoing Syrian conflict. Though Partrick adds that the GCC external defence is largely symbolic due to a numerically and practically limited force, with its shared interests, this is one of the areas that the GCC cooperation continues to be strongest, despite political differences and business rivalries between member states. For Qatar, with the apparent scaling back of its active role in regional political affairs, which some analysts feel might give rise to a quieter domestic focus, Doha is well positioned to take advantage of its economic prominence in the region and to further increase its business influence and the competitive race for profits in the GCC and beyond.

86 | The Edge

The Nokia Lumia 625, now available in Qatar features a 4.7 inch LCD touch screen, 4G Internet access capability, as well as many features found on the flagship Nokia Lumia 1020. This includes integrated camera applications like Nokia Smart Camera and Nokia Cinemagraph for moving pictures. Powered by the latest version of Windows Phone 8 and including the Nokia Lumia Amber update, the Nokia Lumia 625 features Live Tiles update direct to the home screen, and the People Hub app for communicating with friends and family. Windows Phone 8 also includes Xbox Live, Microsoft Office, and 7GB of online SkyDrive. With access to more than 165,000 apps including Vimeo, Temple Run and WhatsApp, the Nokia Lumia 625 offers safer surfing with Internet Explorer 10. The Nokia Lumia 625 also offers SD memory card support, allowing up to 64GB of additional content storage.

Running on the latest Windows 8 platform, the Toshiba PX30t desktop computer is powered by the 4th generation Intel Core i7 processor with Quad Core CPU support. Users can choose between Intel HD 4000 graphics for power efficiency and high performance graphics and NVIDIA GeForce with NVIDIA Optimus technology for high-resolution images and HD video. The Toshiba PX30t has up to 3TB of hard disk space, and up to 16GB of RAM, ensuring efficient multitasking, and a 23-inch (58.4 cm) full HD screen with LED backlighting and touch screen functionality. Its Blu-Ray Disc with BDXL Drive also allows users to watch HD movies not stored in the computer’s hard drive. The computer also has a wireless keyboard and mouse and requires only one power cable, plus it features a HDMI port for connecting to a gaming console or set-top box.

productsand reviews

Though this book was initially published more than half a decade ago now, it has just appeared for sale in Doha and is perhaps worth a gander, especially if you have read author John Perkins’s first book, Confessions of an Economic Hitman. In that offering, Perkins came clean on how as an agent of what he calls the United States’ corporatocracy – collectively the vast American political, military and corporate machine – that has been systematically exploiting most third world countries for decades and how as an agent thereof, an ‘economic hitman’, he was party to this until he had a spiritual revelation and decided to write his expose.

Chronicling the dubious activities of the above triumvirate in countries as diverse as Panama and Indonesia, Perkin’s first book became a controversial best-seller, as acclaimed by activists and liberals as it was derided by historians and conservatives. The Secret History of the American Empire continues in that vein but this time brings in confessionals and anecdotal experiences of the many like-minded individuals Perkins came across – NGO workers, bankers, government agents and fellow ‘economic hitmen’ – who were inspired by his first book and approached him with their own similar stories from all around the world, including the Middle East.

While Perkins has been criticised for self-aggrandising and in truth some of it comes across a little like Ripley’s Believe it or Not, taken with a dose of scepticism it makes for an entertaining read if nothing else, and if you liked Perkin’s first book you will no doubt also enjoy this one.

Toshiba PX30t computer

Available at Virgin Megastore for QAR 68

Nokia Lumia 625

Read it: The Secret History of the American Empire

Wacom Intuos Creative Stylus for iPad

The Wacom Intuos Creative Stylus is a new pressure-sensitive digital pen for

sketching, drawing and painting on an iPad, allowing creatives to draw or sketch with a series of

creative apps, including Wacom’s own digital notebook app, Bamboo

Paper. Bluetooth 4.0 Smart technology ensures seamless

connection to the latest iPad devices. Designed for the iPad 3, 4 and Mini, the Intuos Creative Stylus is also compatible with

popular creative apps such as Autodesk SketchBook Pro for iPad, ArtRage (by Ambient Design), ProCreate (by Savage Interactive) and Psykopaint. The Intuos Creative Stylus is designed with a brushed aluminium housing in two colour versions – black and blue/black – and an ergonomically shaped flared tip. Additionally, artists can save time with the convenient shortcut buttons. A thin but powerful AAAA battery ensures days of constant use and The Creative Stylus comes with a convenient case that holds the stylus, spare battery and two replacement nibs.

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FoodChain Sept.pdf 1 8/25/13 10:54 AM

88 | The Edge

discovered during my time there, San Francisco’s microclimates can be something of a hazard. SF Climate gives you forecasts for individual neighbourhoods, which is great – especially when the famous fog rolls in.

Importantly, these types of apps and services show how San Francisco and Silicon Valley have weathered the American jobs downturn so well.

Reema Bahnasy, the co-founder of San Francisco-based tech PR company The Hatch Agency, told me: “The area has incredibly regenerative DNA. It’s a place where intractable problems, economic inefficiencies and everyday annoyances are all just challenges yet to be solved, hacked and disrupted. Apps which make our lives better – not our online lives but our real offline lives.”

As I sit here back in Doha writing this article, I wonder how long it will take for the same to be true here. I have no doubt that the will and minds exist in Qatar to make it happen. According to ictQATAR, a household here averages three mobile phones, one smartphone and two computers, so people here are very well connected – especially the youth.

But some serious infrastructure advancements need to happen first for such apps and services to work. In Doha, a maintenance or callout can take days. And we are still navigating by roundabouts and local landmarks instead of using proper street names and numbers. Uber would not stand a chance! The innovation and tech-savvy youth are here already. What they need are more of the country’s infrastructural ‘building blocks’ in place for them to play with.

the view from doha

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.

Silicon ValleyApp-titudeAl Jazeera news anchor and The Edge columnist Kamahl Santamaria recently travelled to San Francisco, near the heartland of technology, Silicon Valley in the United States. In this month’s View from Doha, he describes the ‘app-led’ nature of the city and indeed of his entire vacation.

Before setting out from Doha for my summer holiday to San Francisco, I made a decision. This would be an ‘e-holiday’. No hotel confirmations, no flight printouts, no maps. Just my passport, my smartphone apps, and

me. Of course there was the risk of technical failure or loss-of-phone, but I was willing to take the risk. After all, in this digital age there’s usually a work-around.

I am pleased to say it all went well. The Qatar Airways app let me check-in well ahead of my flight to Washington DC, and the United Airlines app did the same, but also pinged alerts to me when my flight was delayed. And on the ground, the Marriott Hotels app allowed me to check-in to my hotel before arriving in the city.

But all this convenience was topped by a week spent in San Francisco, and the city’s ‘app culture’, which so seamlessly permeates everyday life. Take Uber for example. Leaving a restaurant in the early hours of the morning, in a part of town where taxis were not exactly zipping by, a friend used Uber to get us a ride home.

This app locates taxi drivers who are nearby and comes up with a time estimate for how long it will take them to reach you (my friend’s personal average is four minutes). You pick one and within minutes the driver is calling you to

find your exact location. And of course for convenience’s sake, you and your credit card details are already logged into the app, so you do not even have to pay the driver.

It was so simple, and yet so brilliant. And from a business perspective, the supply and demand chain has been streamlined, especially for drivers who have capacity but not demand.

Uber is now in 40 cities in 16 countries, but its genesis was in San Francisco.Dolo is one of the most niche apps I

have seen, because it is designed solely for use in San Francisco’s Delores Park – a 13 hectare public space where people like to meet but cannot necessarily find each other. By logging into Dolo, you announce yourself on a funky animated map of the park on your phone, and on the phones of your friends. Suddenly you are all connected, even notified when one of them walks by.

Another app I wish I had known about before is SF Climate. As I

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The Edge - Sep 2013 (Issue 47)