Exclusive: New Vodafone Qatar CEO Kyle Whitehill talks brand and strategy
SPECIAL SECTION: Vol. 5 No. 10 - Issue 48 - October 2013
FLIGHT PATH The battle to dominate Middle East aviation
WHERE DOES THE GAS GO?
Exploring Qatar’s LNG export matrix
FINANCING INFRASTRUCTURE Qatar banks look toward funding ambitious projects
Preparing for Qatarisation QCCI’s Remy Rowhani on the ‘Doha Deadlock’ Kamahl Santamaria on the ‘IKEA Effect’ Business Travel Insider: The Netherlands
contents October 2013
w w w.t h e e d ge. m e
Exclusive: New Vodafone Qatar CEO Kyle Whitehill talks brand and strategy
SPECIAL SECTION: Vol. 5 No. 10 - Issue 48 - October 2013
Feature Story: Global power: Qatar’s gas exports
FLIGHT PATH The battle to dominate Middle East aviation
WHERE DOES THE GAS GO?
Exploring Qatar’s LNG export matrix
Qatar banks look toward funding ambitious projects
Preparing for Qatarisation QCCI’s Remy Rowhani on the ‘Doha Deadlock’ Kamahl Santamaria on the ‘IKEA Effect’ Business Travel Insider: The Netherlands
How secure is the hegemony and dominance of the ‘big three’, Qatar Airways, Etihad and Emirates, in regional commercial aviation? Is there room for a fourth large regional player, and what of the growing low-cost market? Aviation correspondent Martin Rivers takes a look at increasing competition in this influential sector.
Incoming Vodafone Qatar CEO, Kyle Whitehill has extensive experience in emerging markets, and in an exclusive interview tells The Edge that he aspires to have a positive effect on his firm and Qatar’s telecommunications sector in general.
- QATAR’S CATALYST FOR BUSINESS - Vol. 5 No. 10 - Issue 48 - October 2013
Since its rise from a little-known Emirate to the world’s largest exporter of liquid natural gas (LNG), Qatar’s stature in global energy has grown exponentially. The Edge’s Jamie Stewart finds out where all the Qatari gas goes.
Business Interview: Kyle Whitehill
New Vodafone Qatar CEO, Kyle Whitehill tells The Edge how he hopes his time spent working for the brand in Africa and India will be great preparation for his current role.
Feature Story: Qatar’s infrastructure financing
In tandem with Qatar’s developmental milestones – Qatar Vision 2030 and the 2022 World Cup – Qatar’s infrastructure will require massive investment. Will local banks derive a significant project finance portfolio? Aparajita Mukherjee investigates.
Business Management: Preparing for Qatarisation
The practice of fulfilling government mandated employment quotas for local populations is a commonly debated and contested topic. Matthew Lewis and David Jones explore what private sector companies can do to attract and retain Qatari nationals.
Special Section: Qatar Healthcare
The health of Qatar’s economy is often discussed, but what of its people, who live a largely sedentary life in one of the world’s harshest environments? An 18-page Special Section,The Edge Q-Healthcare takes a look at the initiatives, challenges and opportunities in the country’s fast-growing healthcare sector.
The large infrastructure projects will require massive investment and while the government will fund a sizeable part, both local and international banks are looking with increasing optimism at project finance.
The Edge | 3
Finance & Markets 23
With a plateau in natural gas production and the MSCI upgrade from ‘Frontier’ to ‘Emerging’ market, Qatar will have to adopt necessary regulatory reforms.
Energy & Sustainability 27
As Gulf gas production slows down amid a rise in the region’s electricity needs, Qatar might be able to capitalise on gas exports closer to home.
Qatar could benefit from regional power requirements.
Real Estate & Construction 31
According to a recent report, Qatar is the most expensive country to build in across the region. But what are the implications of this?
Tech. & Communications 37
The recent release of ictQATAR’s regulatory strategy for 2013 to 2016 outlines the priorities and actions of the regulatory authority for the upcoming years.
Business Insight 89
Sanjay Bhatia, managing director, Alpen Capital Investment Bank (Qatar) LLC speaks about their business segments and their outlook on the Qatar market. Ghassan Barghouth, country president Qatar, Schneider Electric tells The Edge that their broader business philosophy lies in helping clients save energy.
84 Ghassan Barghouth, country president Qatar, Schneider Electric said that the company’s approach of ‘Planet, Profit and People first’ is achieved through the quality and reliability of their products and local expertise.
regulars From the Editor 08 Photo of the month 12 Business News 15 Qatar Perspectives 18 Country Focus 42 Products Page 98 The View from Doha 100 4 | The Edge
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editor’s letter Did you know that if each of the seven billion people on the planet ate two hot meals every day, the Gulf’s South Pars and North Dome gas field, shared by Qatar and Iran, contains sufficient fuel – 51 trillion cubic metres – to heat those meals for the next 124 years? Or that gas that originated in Qatar has, after downstream processing, been put to use in the scientific study of materials at very low temperatures (known as cryogenics); as a lifting agent in balloons at childrens’ parties; and as environmentally-friendly fuel aboard a Qatar Airways Airbus flight from Doha to London? Perhaps you knew the latter, as it was fairly well-publicised a few months ago, but personally I did not know much more about where Qatar’s gas goes – specifically liquid natural gas (LNG) exports – and what it is utilised for beyond heating and cooking around the world. As the world’s largest gas supplier and with the third largest reserves, it was this curiosity within The Edge team – where the main resource that currently underpins the Qatari economy ends up – that prompted the feature article our energy sector correspondent Jamie Stewart on page 52. Citing a famous quote from a decades ago regarding the sudden wealth from the Arab world’s natural resources by former Saudi King Sheikh Faisal Abdulaziz Al Saud, “from camels to Cadillacs”, Stewart writes that the true legacy of Qatar’s gas income will not be to enrich its population in the short term. Indeed, by including the stern warning King Faisal followed his statement up with – that these resources need to be well-managed, lest the region return to riding said beasts as their main transport, once the oil and gas reserves expire – Stewart concludes that these will rather be the basis for the longevity of the nation centuries after the last ounce of fossil fuel has been extracted. Such statistics regarding Qatar gas exports and usage will one day not too far in the future
be just a matter of historical record, but if Doha achieves its goals in diversifying its economy away from hydrocarbon dependence for the majority of gross domestic product, and continues to invest revenues derived therefrom wisely, this vaporous element will be remembered as being the catalyst of the country’s future prosperity. Hopefully the camels will still be around then, though. Moving on, our cover story focuses on the growing battle for supremacy in the region between the ‘big three’ Arab airlines, Qatar Airways, Etihad and Emirates and their respective airport hubs, and how this is being challenged by a fourth, fast-growing player that is using their own strategies and marketing methods to challenge their regional hegemony: Turkish Airlines. As our aviation correspondent Martin Rivers points out (starting on page 46), the positioning of the latter airline’s own hub in Istanbul and its secondary base in Ankara reflects the Gulf airlines’ strategic geographic advantage. This is of course, the airline presenting itself as a bridge between the East and West as well as being in the centre of a large population, and places its CEO Temel Kotil and his firm in a strong position. The threat this presents to the ‘big three’ is no doubt being taken seriously and for consumers this will hopefully, through the addition of extra competition, result in better prices and service for airborne commuters throughout the region. Another interesting development in this sector is the slow but sure rise of so-called ‘budget airlines’ and Rivers also takes a look at how this new subsector might factor into the aviation sector in this region in the future. Finally, a Qatar and regional business sector with its collective focus on medium- to long-term planning is banking, in particular the financing of the numerous infrastructure projects scheduled for Qatar in the next two decades, both for 2022 and as part of the country’s general growth. The Edge’s senior business editor Aparajita Mukherjee reports on page 64 that though challenges and downside risks are acknowledged, sentiments in the banking sector are still bullish in this realm, which bodes well for the future viability of Qatar’s myriad construction projects.
The local banking sector is collectively focusing on financing Miles Masterson Qatar’s many future projects. Managing Editor 8 | The Edge
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photo of the month
On the world stage
The Emir of Qatar His Highness Sheikh Tamim bin Hamad Al Thani spoke to 120 gathered heads of state and delegates for the first time, at the opening of the General Debate of the 68th session of the United Nations General Assembly at the UN headquarters in New York in late September. HH the Emir covered issues such as the ongoing political warfare and humanitarian crisis in Syria, the plight of Palestine, the Middle East world post-Arab Spring and specifically when it came to Qatar, how the country aims to continue to be a neutral location, assisting in resolving regional conflicts, as well as its continuing developmental ambitions. (Image Corbis) The Edge | 13
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Q-Construct to ensure construction project delivery
Robert Musgrove, CEO of QICDRC told The Edge that in the absence of a scheme such as Q-Construct, it is an inevitability parties will resort to litigation or arbitration, given the complexity and amounts involved.
The numerous projects in Qatar that need to be delivered in a tight deadline require a specialist fast-track construction dispute resolution scheme.
The Qatar International Court and Dispute Resolution Centre (QICDRC) has developed the recently unveiled Q-Construct entity to assist construction projects in maintaining a strict time frame, Robert Musgrove, CEO of QICDRC, told The Edge exclusively. The delivery schedule of the projects related to the 2022 World Cup are not flexible, added Musgrove. “These projects cannot afford to fail, must not be late, and therefore need a specialist fast-track construction dispute resolution scheme to enable projects to progress quickly, without getting bogged down in legal disputes,” he said. Musgrove also explained that 85 percent of major construction projects have some form of dispute. “In the absence of a scheme such as Q-Construct, it is an inevitability the parties involved resort to litigation or arbitration, given the complexity and sums involved,” he said.
Q-Construct’s role is to resolve disputes as they arise, avoiding usually lengthy and expensive litigation or arbitration claims, Musgrove added. “The QICDRC also believes that Qatari disputes should be resolved in Qatar rather than in London, Paris, New York or elsewhere.” The system is at the final stage of development and the QICDRC is now waiting for a soon-expected change in the law by the Council of Ministers to become fully operational. Q-Construct is aligned with global best practice and was designed by a committee established by the QICDRC consisting of 11 leading construction law firms, said Musgrove.
Qatar’s labour rights in focus
workers is becoming a contentious issue as focus from the international media on the country grows due to the 2022 World Cup. Discontent and strikes are inevitable, said Nicholas McGeehan, a Gulf Human Rights Watch researcher. But Michael Stephens, from the Royal United Services Institute in Qatar disagreed, “The current employment system favours the sponsor,” he told The Edge. “However it has become increasingly clear that there will come a time in which this system has to change. The international media of late has been severely critical of labour practices in Qatar, which may play a role in instigating change.” Collective labour rights can only arise when political will can overcome the strength of businesses that feel unions are prohibitive to their productivity, added Stephens.
In a first for Qatar, bus drivers from three schools in the country went on strike in early September demanding better pay and working conditions. Such strikes however small are rare in the Middle East, where the right to organise for collective bargaining is severely limited, and in Qatar at least, illegal except for nationals. However, the subject of labour rights in Qatar, especially those of migrant
“Qatari disputes should be resolved in Qatar.” - Robert Musgrove, Q-Construct.
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business in brief Words & Numbers
“The foundations of this [Qatar’s] extraordinary success, which have been so magnificently built upon, were laid over a century ago by the pioneering spirit of Jassim bin Muhammad bin Thani.” Qatari author Sheikh Mohamed AJ Al Thani at the recent launch of his book Jassim the Leader, Founder of Qatar.
QFBA graduates first batch of students from Kawader Programme
Agreement signed to establish cross-appointed academic clinicians
The Qatar Finance and Business Academy (QFBA) recently graduated its first batch of students from Part A of its Kawader Programme. The four- to six-week foundation section of the programme had enrolled students from numerous institutions such as Qatar University, Carnegie Mellon University and Georgetown University among others. QFBA chief executive officer Dr. Abdulaziz Al Horr said during the announcement, “The response to our inaugural course has been overwhelming, which meant the final candidates who gained entry to Kawader represent the cream of the current year of Qatari graduates.”
Qatar University (QU) recently signed a MoU with Hamad Medical Corporation (HMC) to create a system HMC managing director Dr. Hanan Al Kuwari (left), of crosswith QU president professor appointments. Sheikha Abdulla Al Misnad (right) at the signing. Under the terms of the agreement, cross-appointed QU faculty will work closely with HMC clinicians, contributing to patient care, in addition to their teaching and research responsibilities. Reciprocally, clinicians from HMC will engage in teaching and academic activities at the University.
QAR103 billion: the projected value of the GCC hospitality sector by 2016, according to a report from Alpen Capital.
Euromoney conference to return to Qatar in December
Dr. Abdulaziz Al Horr, CEO of QFBA (left) noted that programmes such as Kawader will help make Qatar an incubator of leadership and talent in the financial services sector.
Jaidah Automotive opens two Chevrolet quick service centres
“No GCC countries have raised objections so far.” Ali Al Naimi, Saudi Arabia’s minister of petroleum and mineral resources, said recently, regarding the possibility of a unification of oil prices in the GCC.
The percentage of Internet users in Qatar that have shopped online in the past 12 months according to recent PayPal statistics.
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Jaidah Group, the exclusive importer and distributor of Chevrolet in Qatar, recently opened two new quick service centres, located at the old airport and Um Al Dome. “By increasing the number of service facilities, we aim to get closer to the customer and provide them with best-in-industry service in the fastest time possible,” said Mark Jenkins, general manager of Jaidah Automotive. The two new facilities bring the total number of Jaidah Automotive’s service facilities in Qatar to three, with the new locations enabling the company to attend to a total of 60 customers a day.
Qatar’s first International Boat Show
The Qatar International Boat Show will take place from 12 to 16 November at the Lusail Marina located within Lusail City. The event is expected to host around 100 international and local exhibitors, with 150 boats on display, and an estimated 15,000 visitors.
In 2012 Euromoney Conferences launched the first in a series of events, to consider how finance must be redesigned, re-engineered Numerous high-level dignitaries were in and re-launched. attendance at last The conference year’s conference, including now finance will reconvene in minister HE Sharif December 2013 Al Emadi (far right). (Image Euromoney where the financing of Conferences) stable growth through capital markets and capital exporters will be discussed. Emad Mansour, erstwhile chief executive officer, Qatar First Bank said, “It was a great networking opportunity and a fruitful discussion forum on many contemporary issues.”
QNB unveils new Business Banking programme
QNB’s Business Banking platform offers business oriented solutions that will enable all current and future business owners to expand or start a business by granting them easy, convenient and quick access to finance their small to medium businesses. The platform offers a set of products and business offerings that include term loans, equipment finance, trade services, vehicle loans, and IT support.
Qatar, October 2013
event of the month 6-7 October
The Climate Control Conference
The Climate Control Conference, co-hosted by Qatar Cool in Doha will look at the framework of regulation, the sustainable use of water, the end-user aspirations and carbon credits as a source of finance in district cooling. The aim is to have a broad, yet Qatar-specific, policy-level discussion on the different aspects impacting all the stakeholders. Regulation is a key driver for stability of the district cooling industry. Clarity relating to power infrastructure, the availability of water and its responsible use are among key factors that call for immediate attention. Equally important is the need to meet and even surpass end-user expectations of reliable thermal comfort at affordable rates. The conference will discuss the above aspects through applying scientific approaches to communication, so that the messages that emerge lead to raising the standard on water and power use, sustainability, technology and business practices.
7 - 10 October
Doha International Oil and Gas Exhibition
The 8th Doha International Oil and Gas Exhibition will showcase the latest technologies and developments of the gas industry. The event is expected to attract participants from 20 countries including Saudi Arabia, United Arab Emirates, United States and Singapore. Visitors will be able to gauge what is new in the market, obtain technical knowledge and evaluate new industry projects.
30 - 31 October Food Chain Conference
The first-of-its-kind, cold chain event in Qatar will focus on critical temperature control issues and food safety regulations in the country. The Doha Municipality’s food consultant, Dr. Shady Salah Zeyadah, will be speaking on the topic, ‘Inspection structure, procedures and initiatives taken to tackle food safety violations’. “Considering the much-felt need for a better understanding of food safety regulations and inspection procedures, the importance of Doha Municipality’s participation cannot be overstated,” said B. Surendar, the editorial director and associate publisher of CPI Industry.
upcoming events 16 - 19 November Aspire4Sport
Aspire4Sport 2013 Congress and Exhibition, which will take place this year at Aspire Dome, will bring the sports facilities conference, Coliseum Summit. With exclusive presentations, case studies and interactive panel discussions, Coliseum Summit – part of Aspire4Sport 2013 – is the preeminent conference in all stadiumrelated aspects, and brings to the fore key figures and personalities in the industry, together with their projects, and covers key issues.
24 - 27 November Qatar Customer Service Forum
Among topics to be discussed is Qatar’s decisive shift to phase-based development of district cooling schemes, in sync with occupancy rates. Financial considerations of the like might have a bearing on Qatar Cool, which has numerous projects around Doha. (Image Qatar Cool)
26 - 28 November Doha International Transportation and Logistics Expo
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Avoiding litigation takes due diligence Whether it is a multi-billion dollar investment dispute, or a hightech commercial contract or a shipping deal gone wrong, there are key themes that emerge in litigation and international arbitration. Professor Khawar Qureshi QC, cites some recent examples from the GCC that serve as ample warning for businesses in the region. For most businesses, the main motivation for agreeing a deal with other parties is the commercial gain – profit. Of course, there may be situations in which a potential long-term advantage is given priority over commercial gain, such as building up a relationship which might blossom into a multilevel commercial arrangement, but those are fairly limited. I will refer to three recent situations which I have dealt with in the Gulf Cooperation Council (GCC) in the past 12 months, which will reveal the shortcomings of deals done in good faith or incomplete documentation.
An infrastructure project
I was representing a state that had entered into an agreement, one potentially worth hundreds of millions of dollars, which had a contract dispute with regards to performance. When I reviewed the documents, some worrying features were apparent. The contract had been entered into with a company that did not exist – no one had done any due diligence on the counter party. The contract had been drafted by a lawyer for the counter party, and unsurprisingly was one sided. The state’s lawyers had also been given very little time to review the contract, add to that the state officials had kept very little documentation. Fortunately, we managed to have the claim dismissed on the basis that the claimant did not exist as a matter of law, and so there was no binding agreement. However, if the due diligence had been done, it is likely the contract would never have been entered into. If the claim had not been dismissed because of the one-sided nature of the contract, the state potentially 18 | The Edge
exposed to a claimed liability of up to USD100 million (QAR364 million).
A banking dispute
In another case, a share purchase agreement for a bank to sell one of its assets gave rise to a dispute. Both sides had been instructed by well-known international law firms and the amount at stake was around USD200 million (QAR728 million). The key question was whether a senior representative of the bank had entered into an oral agreement which had an effect very different to the carefully drafted written agreement between the two parties. The oral agreement was not supported by any documents. It was a classic case of the word of one person against another. Such cases are increasingly rare internationally, however, in the GCC as well as a few other jurisdictions, doing business with a handshake is still very common. Much emphasis is placed upon custom, trust and keeping to one’s word before God. In the modern world, it is very difficult to persuade people unfamiliar with the customs and traditions of the Middle East that people can agree to do something worth huge amounts of money, or even agree to adjust a very carefully drafted contract over coffee in the majlis. In that case, a settlement satisfactory to both sides was achieved, not least perhaps because the prospect of being cross-examined (a process unique to legal systems such as England) was less than attractive for some of the parties.
In the GCC, doing business with a handshake is still very common.
party. Following extensive negotiations, the foreign party backed down on almost all of the points in the draft, which, if legal advice had not been sought, might well have ended in a binding agreement. While it is easy for someone such as myself to draw comparisons between the approach to legal agreements and disputes in the GCC and the UK or Russia or the US, the reality is that GCC states are undergoing a massive cultural transformation. A vital part of that process is being aware of the need for sound legal advice, or face the risk of having potential rights denied, and equally badly, of facing costly claims.
Joint venture agreements (JVA)
A GCC party sought advice before entering into a complex high-value long-term JVA with a multinational corporation. This in itself is not as common as it should be in the GCC, whereas in the United States (US) or the United Kingdom (UK) directors would probably be sued for negligence if they failed to take legal advice. Nevertheless, in this instance, a review of the draft agreement made it clear that the foreign party was trying to exclude potential advantages that my client would have if the contract were governed by the law of their country. The draft agreement also sought to reduce financial benefits for the GCC party, as well as limit the liability of the foreign
Professor Khawar Qureshi QC is one of the UK’s top Queen’s Counsels and a leading global commercial litigation and international arbitration expert.
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Cracking Doha’s world trade deadlock The ‘Doha Round’ of the World Trade Organisation’s (WTO) global trade negotiations, launched at a summit in Qatar in 2001. The aim was to craft an accord on opening markets and removing trade barriers, but met with no consensus. Yet, writes Remy Rowhani, the current global economic trend of advancing bilateral state, corporate, regional and interregional trade agreements appears to be the rational approach if WTO member states are to crack the decade-old Doha Development Round deadlock. Several hundred business leaders and trade experts met for Beyond Doha, the ICC Business World Trade Agenda Summit (WTA) held on the first day of the 2013 congress, to seek progress in the stalled talks to provide debt-free stimulus for the global economy. The invitation, extended by Qatar Chamber to the national chambers of 50 of the world’s least developed countries (LDCs), was an attempt to revive the stalled talks of the Doha Development Round of world trade negotiations launched in the capital in 2001, the aim of which was to further liberalise global trade and facilitate the integration of LDCs into the WTO’s multilateral system. Through the initiative, five recommendations were developed, aimed at achieving tangible outcomes by the end of 2013. The recommendations were: to conclude trade facilitation agreements; implement duty-free and quota-free market access for exports from LDCs; phase out agricultural export subsidies; renounce food export restrictions; and expand the trade of IT products to encourage worldwide growth of e-commerce. The liberalisation of trade in services, it is estimated, could generate world trade gains of USD1.1 trillion (QAR4 trillion), translating into the creation of nine million jobs worldwide. Simplifying customs procedures through trade facilitation measures, member countries could potentially deliver global job gains of 21 million, with 20 | The Edge
developing countries gaining more than 18 million of those jobs. Additionally, a significant agreement to liberalise the trade of environmental goods could result in USD10.3 billion (QAR37 billion) of additional global exports. The current global economic trend of advancing bilateral state, corporate, regional and interregional trade agreements appears to be the rational approach if WTO member states are to crack the decadelong Doha Development Round deadlock. However, as stated by Roberto Azevêdo, the newly elected director general of the WTO, protracted efforts to end the stagnation, run the risk of paralysing multilateral trade and impeding the globalisation process. Concerns have also been raised that the art of negotiation seems to have been abandoned by member states, to the detriment of multilateral trade, which could bear grave consequences if the impasse is not broken at the WTO 9th Ministerial Conference in Bali this December. A key barrier to a collaborative agreement also rests in food security programmes, whereby governments buy and distribute food to poorer countries. Wealthier nations have failed to reach agreements with developing countries that assert the need for greater flexibility than allowed by WTO rules in setting prices they can pay to poor farmers and what governments can do with any surplus grains. The United States and other rich countries, meanwhile, countered that government food security programmes distort commodity markets when the surplus from government stockpiles is exported, or sold on the open market. They have also questioned how transparent pricing is for those programmes. However, Roberto Azevêdo recently called on member countries to break this deadlock ahead of the Bali conference and a so-called ‘peace clause’ is currently being negotiated. In addition, the outcomes of the recent G20 summit in Russia yielded positive results, despite media depiction of failure due to a lack of agreement on Syria. On the contrary, great work was achieved through agreements on trade, protectionism, taxation, anti-corruption and other measures crucial to the world business community. These are indeed positive indicators of the crumbling deadlock surrounding the
There are indeed positive indicators of the crumbling deadlock surrounding the Doha Round.
Doha Round. I therefore have confidence in the ongoing global campaign phase of the WTA initiative, aimed at engaging ICC’s 6.5 million strong company network to push for trade facilitation agreements at the upcoming WTO conference in Bali.
Remy Rowhani is the director general of the Qatar Chamber of Commerce and Industry and the CEO of the International Chamber of Commerce Qatar (ICC – Qatar).
This section is brought to you by Qatar Financial Centre Contents: Qatar examines equity options 23 . Public spending helps Qatari banks 25. Better growth prospects of Islamic banks 25.
finance & markets Qatar examines equity options With a plateau in natural gas production and the MSCI upgrade from ‘Frontier’ to ‘Emerging’ market, Qatar will necessarily have to look for options of broad basing its economy by listing more companies on the Qatar Exchange (QE) with the intention of producing a viable second market on the QE. But that will require regulatory reforms, including institutions within the Qatar Financial Centre (QFC) as well, writes Simon Watkins.
side from the fact that Qatar’s oil and gas sector grew by a meagre 0.8 percent in Q1 of 2013, as natural gas production reached a plateau, highlighting again the necessity to diversify its economy away from the hydrocarbons sector, there are two other key reasons why Qatar needs to develop its domestic capital base as quickly as possible. First, according to Qatar’s General Secretariat for Development Planning (GSDP), in Doha, projects worth more than USD29 billion (QAR105.6 billion) are expected to be awarded this year, adding to the USD27.5 billion (QAR100.1 billion) pledged already, bringing the total to an estimated USD56.5 billion (QAR205.7 billion) in 2013, twice the value of contracts
Brought to you by:
A new regulatory regime, including new rules from the QFMA, has been designed to bring Qatar more in line with global standards.
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sectors | finance & markets
awarded in 2012. And second, even more directly, as part of the understanding that the Qatar government has with Morgan Stanley Capital International (MSCI), QE will broaden and deepen its capital base ahead of its upgrade in re-classification from ‘Frontier’ to ‘Emerging’ Market status with effect from May 2014. In the case of the former, Qatari banks are already heavily leveraged on their balance sheets, the onus for meeting new infrastructure spending will have to be more apportioned to other sources, Chiradeep Ghosh, senior Middle East equities analyst for SICO Investment Bank, in Bahrain, told The Edge. Indeed, he estimated that total lending by Qatar’s banks now represents around 125 percent of deposits, implying that they are dangerously reliant on shortterm borrowing from other domestic banks, the sort of debt profile that prompted the collapse of Lehman Brothers on September 15, 2008. All the more worrisome, highlighted Saleh Al Nabit, secretary general of the GSDP, in Doha, as, “Delivery of a large number of big projects in a confined geographical space poses challenges and, unless well-executed, could have adverse effects for businesses in the rest of the economy.”
Capital markets base
By far the most cost-efficient execution sourcing of capital for such projects would be from an expansion to a well-functioning
capital markets base in Qatar, highlights Michiel Visser, partner at White & Case, an international law firm, in Doha, with an increase in the number of listings on the QE from the current 42 firms, and a current aggregate market capitalisation of around USD145 billion (QAR527.8 billion). To this end, a range of new regulations is being introduced with the intention of producing a viable second market on the QE, and doubling the number of companies listed on it within the next five years. Among these
Reform areas include new mergers and acquisitions rules for listed companies and a frame for more broad-based margin trading.
new reforms will be a set of laws aimed at increasing company transparency through improved reporting guidelines (continued implementation of updates to the international Anti-Money Laundering Law and aligned to the Financial Action Task Force by the Qatar financial authorities) and improved accounting procedures. This would be more akin to the UK’s Generally Accepted Accounting Principles (GAAP) – model than the current International Financial Reporting Standards (IFRS) model used largely in Qatar. Finally, ongoing efforts to improve the country’s ranking in Transparency International’s ‘Corruption Perceptions Index’ (Qatar came in at equal 27 with the UAE, out of 174 nations).
Rise in public expenditure
Qatar’s public expenditures have jumped to over 160 percent during the period 2008 to 2013, to USD683 billion (QAR2.4 trillion), and set to go even higher ahead of the 2022 World Cup in Doha, said Zain Al Abdin Sharar, director of legal affairs and enforcement at the Qatar Financial Markets Authority (QFMA). The areas include new mergers and acquisitions rules for listed companies, a framework for the introduction of more broad-based margin trading and for the listing of real estate investment funds. This latter change, Deloitte said, will serve as a major boon for real estate developers and construction companies in providing additional capital to meet the significant
New rules for financial adequacy for financial service firms will shortly be introduced by the QFMA to bring Qatar into line with the increased Tier 1 capital ratios being implemented globally under the Basel III directive. (Image Reuters/Arabian Eye)
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finance & markets | sectors
pick-up in demand for affordable properties in the run-up to 2022 World Cup. Ahmed Jassim Al Jolo, chairman of Qatar Society of Engineers, in Doha said, “The country is not likely to witness a severe shortage of residential space in the short term, but a situation close to what existed during 2006 to 2007 may arise again, when work on new projects go in full swing, attracting huge number of foreign workers to the country.” These new rules would augment the new guidance for internal audits for QFC insurers, QFC banks, and QFC Islamic banks that commenced on July 1, 2013, and for 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. It is also expected that new rules for financial adequacy for financial service firms will shortly be introduced by the QFMA to bring Qatar into line with the increased
Tier 1 capital ratios being implemented globally under the Basel III directive, commented Bernard Barbour, head of legal and shari’ah business for QInvest, in Doha. This would include a minimum of seven percent of a bank’s risk-weighted assets being Tier 1 to act as a buffer against losses (compared to the two percent required under Basel II), the implementation of the tighter definition of what liabilities can be classified as core Tier 1, and the necessity for maintaining a counter-cyclical buffer of 0 percent to 2.5 percent, which is to be built up when the economy is strong so that it can be called upon in tougher times.
Central Bank initiatives
Concomitant with this development of the QE directly, though, is to be the broadening out of the capital markets more generally, highlighted in September by Qatar’s Central Bank issuing QAR3 billion worth of local currency government bonds and a QAR1
Loan book growth
Public spending helps Qatari banks Public spending has helped Qatari banks’ loan book growth to the highest in the GCC. Banks in Qatar registered the highest growth of 23.1 percent year-on-year in the second quarter of 2013, way ahead of regional banks, said Global Investment House.
The overall loan book growth in the region during the period is 13.9 percent. Qatari banks, up 30.6 percent year-on-year, 2013 led the region’s non-interest income growth during Q2. The profitability of banks in Qatar increased by 13.4 percent during the period. The loan book of GCC banks grew 13.9 percent year-on-year to USD631.2 billion in Q2 of 2013. Qatar witnessed the highest increase followed by Saudi Arabia, 13.0 percent. Commenting on this trend, Mohamed A Abdulkhalek, al khaliji’s group chief business officer said that Qatari banks have been building up their capital base and intellectual capital to support projects which will call for huge investments and are in various stages of planning and implementation. “Public sector spending will continue to drive credit growth,” he added.
Mohamed A Abdulkhalek, al khaliji’s group chief business officer said that Qatari banks have been building up their capital base and intellectual capital to support projects which will call for huge investments.
Banks, Abdulkhalek said, will provide long-term financing to the developers of the projects and will also provide tailormade financing packages to various parties involved at the implementation level including contractors and suppliers. The level of capitalisation maintained by Qatari banks should enable them to play a major role in the development of these projects. “Also, most Qatari banks have tapped debt capital markets during the last few years which enabled them to secure long-term funds at competitive borrowing rates, benefiting from high demand for Qatari issuers,” he said. al khaliji’s loan book grew by 14 percent during H1 2013 and 30 percent comparing with H1 2012 to reach QAR14.9 Billion.
billion sukuk, as part of the government’s new debt markets strategy, begun in March, of having quarterly government bond sales, including both conventional and Islamic bond offerings. Indeed, as has been evident for some time, but having fallen by the way with some high-profile failures in the sector (most notably perhaps the Goldman Sachs Malaysia sukuk debacle), Islamic banking and sukuk issues – if handled properly, according to the basic tenets of shari’ah finance – could well afford the Qatari government a valuable adjunct money-raising strategy to augment its lackluster capital markets one.
Better growth prospects Qatar’s four Islamic lenders will almost double their asset base to USD100 billion (QAR364 billion) by 2017, Standard & Poor’s has said in a report entitled Qatar’s Islamic Banks Are On A Fast Track To Growth. By Aparajita Mukherjee
In an exclusive interview with The Edge, Timucin Engin, associate director, Financial Services Ratings, Standard Poor’s said that given the large pipeline of future infrastructure investments, they expect Qatar to register a fast-paced domestic credit growth over the next few years, which will translate into lending opportunities for the country’s Islamic banks as well. Commenting on whether Islamic banks will perform better than conventional banks, he said, “Kuwait and UAE had more pronounced asset quality deterioration than most other countries in the GCC region during the 2008 and 2009 crisis due to country-specific issues, whereas in Qatar and Saudi, the asset quality deterioration was less pronounced. Consequently, most of the banks both, conventional and Islamic, in KSA and Qatar generally performed better than their peers in the UAE and Kuwait.”
QAR 364 billion The projected asset base of Qatar’s four Islamic lenders by 2017. The Edge | 25
Contents: Gulf gas supply amid rising power needs could mean more regional Qatar exports 27 . National energy firms must open up or face risks 28 . Qatar to host 8th Doha International Oil and Gas Exhibition 30 . 10% Qatar-owned APICORP’s 2013 H1 net profit rises 31% 30 .
energy & sustainability
As gas production slows down in other GCC member states, Qatar could benefit from exports closer to home to supply their growing electricity needs.
Gulf gas supply amid rising power needs could mean more regional Qatar exports A swathe of factors is set to impose gas shortages across the Gulf Cooperation Council (GCC) by 2015, according to a new report, which could set a platform for Qatar to up its income by supplying gas across the region, writes Energy & Sustainability Editor Jamie Stewart
ncreasing power consumption, depleting oil fields, gas exploration and long-term gas export commitments have limited the local supply of gas in the GCC, according to consultancy Booz & Company, which in light of limited supply growth, will create a supply-demand imbalance. The consultancy suggests dealing with the encroaching imbalance by raising local gas prices gradually, a measure that may not go down so well in countries that are net importers but could set up a windfall for net gas exporters, the largest of which by a comfortable margin is Qatar. “Governments need a mix of short- and long-term measures to address the gas shortage. They need to invest
in new developments to increase production, increase local gas prices steadily to encourage efficiency, and expand the use of alternative sources in the energy mix,” said Robin Mills, consulting head at regional firm Manaar Energy. The issue was among those addressed at the Power and Water Middle East conference in Abu Dhabi in late September. Gas, alongside oil, is a vital source of fuel for power generation across the GCC. According to the Doha-based Gulf Organisation for Industrial Consulting, GCC states will invest more than QAR1 trillion in some 20 electricity projects by the end of the decade, which will generate eight gigawatts of additional power – equivalent to the output of five third-generation nuclear power The Edge | 27
sectors | energy & sustainability
plants – a substantial proportion of which will be gas fired. This highlights the importance of the role that Qatar could play in meeting this demand and ensuring a steady supply of gas-related income from closer to home than its more traditional Asian sources. For example the United Arab Emirates, already an importer of Qatari gas via the Dolphin Gas Project, is making no secret of its need to up import volumes through construction of a liquefied natural gas import terminal in Fujairah.
The amount GCC states will invest in electricity projects over the next 20 years. Corporate governance
National energy firms must open up or face risks
economies, which would include Qatar according to financial services giant Dow Jones, which said in its most recent emerging market indices: “Qatar currently meets all quantitative criteria for emerging markets.” As such, the, governance warning can apply to Qatargas and RasGas, both subsidiaries of state-owned Qatar Petroleum (QP). “Without proper governance, NOCs [national oil companies] can face significant challenges in many areas, both external and internal to the organisation,” the Deloitte paper also stated. “From an external point of view, sourcing funding and attracting investment will be very difficult if those sources of funding and investment are not convinced that there are adequate controls, checks and balances that a governance framework can provide in place.” Although Qatar’s big two gas companies receive a healthy dose of state funding, the governance issue highlights what could be a potential hurdle to attracting private sector investment. State-run and state-owned bodies in Qatar have long been plagued by a perceived lack of transparency in the eyes of global finance institutions – the very groups that bear a strong influence on where institutional investors choose to put their money. Only last month the US-based Peterson Institute for International Economics said in a report on sovereign wealth fund transparency: “The case of Qatar, with an extremely low initial score and essentially no improvement over five years, is particularly troubling. Qatar fancies itself
as a major political, economic, and financial player, and as such should hold itself to a high standard.” It concluded that Qatar’s recent performance in terms of transparency had been “decidedly disappointing”. This becomes all the more relevant for these companies if they wish to list on local stock exchanges, such as one of Qatar Petroleum’s subsidiaries, which may float an initial public offering (IPO) as early as December 2013. The IPO will only be available to Qataris at first but will later be opened up to international investors, according to reports.
According to a recent Deloitte paper, without proper governance, national oil companies may face significant challenges.
A new study focuses on governance in the nationalised hydrocarbon sector, and Qatar’s energy giants may do well to take note. National oil and gas companies will find it difficult to source funding and attract investment if a strong governance framework is absent from their operations, according to an advisory paper issued recently by Deloitte. Furthermore, “a distorted view of earnings and balance sheet performance” is a risk that is more likely in such circumstances, according to the Deloitte white paper. The paper relates specifically to national firms in developing and emerging 28 | The Edge
According to financial services giant Deloitte, national firms in the world hydrocarbon sector, such as Qatar’s Qatar Petroleum and subsidiaries, must improve corporate governance to increase investment potential and maximise profits. (Image Corbis)
sectors | energy & sustainability
Qatar to host 8th Doha International Oil and Gas Exhibition Qatar oil production, thousand barrels a day 2002-2012 2500 2000 1500 Qatar’s oil reserves are a proportionally small but nevertheless important component of the Gulf states energy reserves, which will be on display at the Doha International Oil and Gas Exhibition in Qatar this month.
Qatar hosts the 8th Doha International Oil and Gas Exhibition (DIOGE) from 7 to 10 October at the Qatar Exhibition Centre. This year’s event is timely for the local business community, set against the backdrop of looming gas supply shortages across the GCC, according to Booz & Co. This shortage will become more pronounced within two years as demand growth is projected to outstrip production growth, opening up business opportunities for smaller suppliers. It is therefore the time when Qatar companies should be positioning themselves for a potentially lucrative period in the regional gas industry. But besides gas, oil has increased production in Qatar despite fears of a global slowdown once proven reserves start to dissipate. At the end of 2012, Qatar’s proven oil reserves totalled almost 24 billion barrels, or 1.4 percent of the globe’s reserves, ranking 13th in the world. Despite these hefty reserves, output is “maturing”, according to the US-based Energy Information Administration, with the giant Dukhan field along the west coast of the peninsula having passed what experts refer to as peak oil – the point when output reaches the top of a natural bellcurve – indicating that extractable volumes should decline further in future, barring major technological breakthroughs. However other fields have increased production to take up the slack, and indeed, Qatar’s national oil production has continued to grow year-on-year over the last decade (see chart). 30 | The Edge
1000 500 0 2002 2003 2004 2005 2006
2007 2008 2009 2010 2011
Source: Booz & Co
Qatar’s national oil production has continued to grow year-onyear over the last decade Regional oil sector
10% Qatar-owned APICORP’s 2013 H1 net profit rises 31% Arab Petroleum Investments Corporation (APICORP), the multilateral development bank owned by the 10 member nations of the Organisation of Arab Petroleum Exporting Countries (OAPEC), recently announced that its net profit for the first half of the year grew 31 percent. Profits grew to USD66 million (QAR240 million) from USD51 million (QAR186 million) for H1 2012. APICORP’s assets reached USD5.12 billion (QAR 18.6 billion) at the end of H1 2013. The government of Qatar owns a 10 percent stake in APICORP. The multilateral development bank also announced that leading global ratings agency Moody’s has affirmed its issuer rating and senior unsecured rating at Aa3 with a stable outlook. The rating affirmation reflects APICORP’s strong capital adequacy
position, high-quality asset portfolio and strong shareholder support. Moody’s also retained its Prime-1 rating for APICORP’s short-term debt.
“APICORP will be conducting an extensive exercise to develop a new five-year strategic plan for 2014 to 2018 that will further support our mandate of raising capital access and enhancing the financial performance of the Arab energy industry,” said Ahmad bin Hamad Al Nuaimi, CEO and GM of APICORP.
Contents: Qatar most expensive country to build in the Middle East 31 . District cooling has environmental benefits 32.
real estate & construction
The main risk to construction costs could be a materials price hike due to inadequate supplies and price escalation. These factors could, in turn, drive up the costs to the contractors who will then seek to recover the increased costs from their clients. (Image Corbis).
Qatar most expensive country for building in the Middle East According to the 2013 International Construction Costs report released recently by global built asset consultancy EC Harris, Qatar is the most expensive country to build in across the Middle East. What are the implications of this cost and what lessons can Qatar learn from other economies such as Hong Kong? Aparajita Mukherjee finds out.
he annual study, by EC Harris, which benchmarks building costs in 47 countries, found that relative construction costs across the globe have been affected by substantial fluctuations
in currency throughout the year. With Gulf currencies closely tracking the US dollar, the impact of these fluctuations on Gulf countries has been limited. However, Qatar and the United Arab Emirates (UAE) remain in the top 20 most expensive locations to build, and with inflation running at around five percent per annum, the Kingdom of Saudi Arabia has also continued to move up. Neil Hamilton, director of quantity surveying services at Quantex Qatar told The Edge that the main risk to construction costs could be a materials price hike due to inadequate supplies and cost escalations. “This could in turn drive up the costs to the contractors, who will then seek to recover these increased costs from their clients.” Suggesting a possible solution, Hamilton
mentioned that by careful planning of logistics through ports and an increase in the number of local manufacturers and suppliers, price increases could be managed. This would mean a ‘soft landing’ in terms of how modest construction price escalation could be achieved, essentially avoiding the 16 percent per annum increases experienced in 2008. In the opinion of Aziz Sharif, managing partner of real estate website Mannzili, “the sheer size of the infrastructure projects relative to the size of the Qatar construction sector will result in a dramatic cost-pulled inflationary pressure.” He added that taking into consideration the influx of labour that would be required to execute these projects along with the upward pressure on demand The Edge | 31
sectors | real estate & construction
“By careful planning and logistics through ports and an increase in the number of local manufacturers and suppliers, constructiondriven price increases could be managed.” – Neil Hamilton, Quantex Qatar.
Per annum construction price increases experienced in 2008. that they will place on other sectors in Qatar, it would be reasonable to expect Qatar will climb the ranks of the most expensive countries in which to build.
Lessons to be learnt
The report stated that Hong Kong, the most expensive construction market in the world, had experienced a significant price rise during 2012 and 2013 though it had recovered quickly from the 2008 downturn, bolstered by high levels of tourism, consumer spend from the Chinese mainland and a booming residential market. The Hong Kong construction market has remained buoyant through the delivery of infrastructure and new commercial and residential space in previous industrial areas.
Hamilton was of the view that the best solutions from expensive countries such as Hong Kong and the United Kingdom were to plan ahead with upfront procurement, supply chain management, off-site manufacture, smart building techniques and risk sharing contracts, together with a proactive management approach from all stakeholders. “This,” he added, “assumed that all parties have a vested interest in successful project completions.” Sharif felt that a market such as Hong Kong has been able to endure their high prices largely due to their relevance in their region. “The city is a business and logistical hub along with being a conduit for business with mainline China with a thriving tourism market. Qatar has none of these characteristics.” Sharif was also of the view that Qatar would be better served by drawing lessons from Singapore where they had to compete regionally over the past decade. He cited the case of regional rail integration that enabled Singapore, to become less reliant on shipping for the delivery of building materials from its neighbours. “This is something that would significantly assist Qatar in controlling the spiralling costs of production,” he added.
District cooling has environmental benefits With district cooling now becoming more prevalent, players in the industry are talking about the impact that the technique has and why it should be more widely used. The Edge spoke with two companies that provide cooling solutions in the region to understand how environmentally friendly the technique is. With the spate of construction in Qatar, it is a matter of concern whether the speed of construction (driven by the high demand) is in fact sacrificing environmental safety. The 5th Middle East Annual District Cooling Summit, to be held in Doha in November, will attempt to address these issues, the summit chairman, George Berbari, CEO, DC Pro Engineering, told The Edge, “District cooling is today considered the most sustainable and environmentfriendly solution to address the cooling requirements of the burgeoning real estate and infrastructure development sector in Qatar, the region and elsewhere. 32 | The Edge
Chiller room inside the largest district cooling plan in the world, at The Pearl-Qatar. (Image courtesy Qatar Cool)
As far as Qatar is concerned, there has been a rapid development and implementation of district cooling technologies with a penetration rate of 10 percent in new projects such as The Pearl-Qatar, West Bay, Lusail, Downtown Doha and the Barwa Business Avenue, etcetera. Sharing his perspective on the issue, Mohannad Khader, VP commercial, Qatar Cool said that many aspects contribute to the sustainability of district cooling. “First would be the reduction in energy consumption. While GCC countries use 70 percent of the energy produced for cooling needs, district cooling provides a more efficient way of cooling that uses 40 to 60 percent less energy than conventional cooling systems and thereby releasing much lower amounts of CO2 into the atmosphere.” Additionally, Khader said, moving away from conventional cooling systems such as split units (that use harmful refrigerant gases which contribute to depletion of the ozone layer) rids the atmosphere by emitting more CO2 compared with district cooling which uses ozone-friendly refrigerant R134A. “Sustainability could also be emphasised by the ability of some district cooling systems to use different sources of water such as treated sewage effluent (TSE) and salt water. Such practices conserve the use of potable water,” Khader added.
“District cooling uses 40 percent to 60 percent less energy than conventional cooling systems.” Mohannad Khader, VP commercial, Qatar Cool. The Edge | 33
Contents: Qatar mobile network hindered by access to land use 37 . Remote working poses security risk 38 . Niche app markets and the potential for growth 40 .
tech & communications
Qatar mobile network hindered by access to land use
The ability of large property developers to deny access to telecommunications service providers and in some cases dictate the terms of access have resulted in the slow rollout of infrastructure.
The recent release of ictQATARâ€™s Regulatory Strategy 2013 to 2016 outlines the priorities of the regulatory authority in upcoming years. A public consultation on the draft strategy revealed that service providers were severely hindered in their network rollout plans by the impediments to land use in Qatar. By Shehan Mashood
ccording to a document released by ictQATAR that contained the responses submitted during the consultation, telecommunications companies have cited the challenges in securing access to land for installation of infrastructure as one of the biggest impediments to the development of their mobile network infrastructure. Among the barriers to entry stated included the ability of large property developers to deny access to telecommunications service providers and in some cases dictate the terms of access, stated the response submitted by Ooredoo. The firmâ€™s responses suggest that Vodafone Qatar also suffers from similar difficulties in acquiring sites to build infrastructure. Both telcos have tried to The Edge | 37
sectors | technology & communications
address this problem by deploying what are know as Cell on Wheels (COW), a cellular antenna attached to a truck that can be moved around and integrated into the existing infrastructure. This has however resulted in poor network quality due to the lack of stability in the cell network, claimed Ooredoo. According to comments in the report, across the nine markets in which Ooredoo operates, the number of COWs in its mobile network in Qatar is the largest, despite it being one the smallest markets they operate in. COWs represent less than one percent of mobile sites across all of Ooredoo’s networks, meanwhile in Qatar it represents more than 10 percent of the network. Vodafone Qatar stated that it had not received a permit to build a site on government land for the past two years and as a result 30 percent of their sites are made up of COWs. Vodafone Qatar also noted in its report that while ictQATAR has introduced some initiatives to improve the site sharing between operators, it would welcome a standardised approval process whereby existing towers could be upgraded for the purpose of sharing, especially since access to government land remains an issue. Ooredoo contended that, “Many of the difficulties currently experienced by all licensees could be mitigated or avoided with the right leadership from the government.” Predictions from Ooredoo suggest they will need to deploy as many as 300 additional mobile sites by 2016 to support its network, with Vodafone expected to require deploying just as many. While it is much easier to secure access to private land for deploying mobile infrastructure, obtaining planning approvals and other permissions are “unnecessarily time-consuming and cumbersome,” stated Ooredoo. Building permits for 24 Ooredoo mobile sites approved in 2012 were the result of “months of frustration and inaction and finally escalation to high-level meeting between Ooredoo and the Ministry of Municipality and Urban Planning (MMUP),” claimed Ooredoo, “Even with such high level intervention, the average length of time for approval for such sites was over 180 days.” As such, streamlining the government approval process and expediting the issuance of building permits is one of the recommendations Ooredoo made to the draft regulatory strategy. It also recommended that the MMUP and other government agencies insulate the approval process from undue influence of individuals opposed to tower construction. 38 | The Edge
Of Vodafone Qatar’s mobile network is made up of cell on wheels (COW).
Remote working poses security risk Unprotected remote working can pose significant risks to both individuals and businesses across the Middle East, say numerous security experts.
According to the Ooredoo consultation, local opposition is based on aesthetic concerns and in some cases the fears regarding the effect of radio emissions on personal health. In the Regulatory Strategy 2013 to 2016, ictQATAR acknowledged “the current arrangements have made it difficult for them to meet quality of service licence obligations”. It also noted that reducing the barriers to building out networks will have the potential to drive improvements in the quality of service. Following the public consultation process, ictQATAR has promised to implement a range of policies and other regulatory instruments to improve the site approval process, and the use of government land with regards to mobile infrastructure deployment.
According to security and privacy software firm AnchorFree, workers accessing office systems outside the office are becoming particularly prone to attacks from identity thieves and malware. A recent study in the United States discovered that a “moderately skilled” adversary with network access could exploit 13 of the most popular wireless routers. The fact that employees are accessing work applications and documents from unsecured systems creates a significant security threat for firms. Public WiFi is also highly susceptible to targeted attacks. A recent study found that 88 percent of hotspots globally at locations such as coffee shops and airports were unsecure. Qatar is no different, with numerous public spaces offering free WiFi access. “Cyber-criminals are getting smarter, and remote workers are big targets,” said David Gorodyansky, CEO of AnchorFree.
ictQATAR has held numerous events, most recently earlier this year to promote the safer and more responsible use of online technology in Qatar. (Image ictQATAR)
sectors | technology & communications
A recent annual survey by Gulf Business Machines found that approximately 45 percent of IT professionals in the GCC admitted that their organisations had at least one IT security incident that they were aware of in the last 12 months. Another recent survey by Cisco found that over three quarters of Middle East respondents fear that they are no longer in control of their data online. “Qatari organisations should be focusing on two things,” said Jason Mical, vice president of cyber security firm, Access Data, “detecting unknown threats and responding faster and more comprehensively to security incidents. However, currently organisations focus most of their attention on alerting and prevention tools.” Gorodyansky explained that social media activity, web searches or even app downloads can be exploited if they have vulnerabilities, “Whether it is confidential data falling into the wrong hands or process-crippling malware. This is a big concern for business leaders if employees are using computers or smart devices that also connect to workplace networks.” Gorodyansky’s firm are the creators of the popular virtual private network (VPN) software, Hotspot Shield which hides online user activity by creating a secure channel between the user’s device and the Internet. According to a press release from AnchorFree, the software is being adopted by 250,000 new users a day, and is also rated the number one security app on iOS. A security protocol that includes educating employees on the basics of cyber security is vital continued Gorodyansky, “This should include educating on the basics such as updating passwords properly, clearing cookies, avoiding over sharing data via social media, and also the use of technology like VPNs to safeguard privacy and identity by encrypting all internet activities,” he said.
New users are downloading Hotspot Shield every day. 40 | The Edge
Niche app markets and the potential for growth
Around four million pilgrims performed the Hajj last year, and as many are expected this year. In time for the Hajj season, Hajjnet has launched its latest app HajjSalam, an app that guides Muslims through the rituals of the pilgrimage. (Image Corbis)
The burgeoning app market is a significant opportunity for developers, with Apple paying out USD5 billion (QAR18.2 billion) to its developers in 2012. One company looking to make of the most of this growth is Dubai based start-up Hajjnet, which is focussed on delivering apps aimed at Muslim markets. One of its most recent apps, UmrahSalam is a guide for Muslims visiting Mecca for the Umrah (a religious pilgrimage). The Edge spoke with CEO and founder of Hajjnet, Ali Dabaja. Where did the idea for UmrahSalam come from? Up until starting Hajjnet I worked in banking and investment. The germinating event was when I was visiting a Hajji (a person that has completed the Hajj pilgrimage – similar to the Umrah) after his return from Hajj the second year in a row we started to discuss his challenges, experiences. The more we studied the business opportunity, the more compelling it became. We could see from the beginning that Hajj and Umrah
pilgrims’ need for information and support was incredible. As of September 2013, UmrahSalam is in the top 10 in the Travel category in five countries and in the top 100 in 20 countries. Things really started to pick up when Apple put us on the iTunes app home page in the New and Noteworthy section in seven stores. Are you working on localising the app? Arabic is of course the priority, and we are in the process of localising now. Localisation for Indonesia, Turkey, Malaysia and France will follow. There are also plans for a Hajj app, how far away is that from being completed? Yes, we have just completed HajjSalam for Hajj and submitted it to Apple. It is available on the app store in time for this year’s Hajj season. One of the things we made great effort for was design both in terms of aesthetics as well as intuitiveness and ease of use. We even had a photographer who was going on Umrah take around 1000 photos of specific things from the angle and vantage point of the user so that the environment would look familiar, and he or she could focus on the spiritual aspects. Are there plans for an Android version or even a non-smartphone version? Yes, we are working on an Android version but no plans for a nonsmartphone version. Do you have plans to charge for the app in the future? Or are you looking for other ways to monetise it? We may charge for our apps in the future but our key concern today is being valuable to our users. Yes, we have other plans to monetise including in-app purchases of additional content and features. Is the religious app market an area you want to grow in, what potential do you see for growth in these areas? Our apps are just a component of the Hajjnet experience as we plan to roll out a suite of web features as well. Almost all of them will either complement our apps or be integrated with them. We see tremendous potential in our space, as about a quarter of the world’s population are Muslims and each one of us must perform Hajj if physically and financially able. The growth of smartphones, Internet and social media as well as rapid development in our major markets only supports our business case.
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country focus | netherlands
Qatar and the Netherlands: Building on gas trade and technology exchange
The container terminal at the Port of Rotterdam, which is one of the most important junctions of goods flows of the world, with an annual throughput of about 450 million tonnes is the gateway to the European market of more than 350 million consumers. (Image Corbis)
Energy, especially gas, has linked Qatar and the Netherlands for a long time and in a meaningful way. While that component of bilateral ties will continue to deepen, Yvette Burghgraef-van Eechoud, Dutch Ambassador to Qatar tells The Edge’s Aparajita Mukherjee that she is keen to see the relations widen to include other sectors such as maritime, logistics and agriculture.
eing a gas hub, the Netherlands (which is presently the second largest natural gas producer in Europe and the ninth in the world), has a natural and historic connection with Qatar. Yvette Burghgraef-van Eechoud, Dutch Ambassador to Qatar chooses to categorise the importance of gas to both these economies by saying, “Natural gas is like the veins of our respective economies and
42 | The Edge
the gas dialogue is very intense between us. Royal Dutch Shell has been present in Qatar for a long time, with its investment in the Pearl Gas-to-Liquids (GTL) project running into more than USD25 billion (QAR91 billion) and is not break-even yet,” adding, “this is a huge investment for the company, given the dynamics of the gas market and the gradual focus shifting to shale gas, which heighten the risks involved.”
The total exports from Qatar to the Netherlands as of December 2012 amounted to EUR339 million (QAR1.6 billion) whereas the imports into Qatar was EUR369 million (QAR1.8 billion). Burghgraef-van Eechoud says that given the current realities of the energy market coupled with the very nature of the petrochemicals industry, the tie between the Netherlands and Qatar is seeing a
netherlands | country focus
transformation to include newer facets, such as sustainability with a clear focus on renewables. As an example, she cites Royal Dutch Shell’s research unit at the Qatar Science and Technology Park focusing on carbon capture and storage. “It is aspects like these that reflect the priorities of the energy markets today with a thrust on clean technology, given the global environmental crisis,” she adds. “Another aspect of our bilateral relations which has been developing over time,” the ambassador says, “is the maritime industry, with the Netherlands being a maritime nation.” van Eechoud adds that the Port of Rotterdam is the largest in Europe and the third largest in the world and “everything that has to do with energy flows is very important for this port. It handles the logistics of minerals, gas and other commodities from the Netherlands to the rest of the world”. An important aspect of Qatar’s Dutch relations lies in the tie up between Qatar’s Nakilat and Damen Shipyard, one of the largest companies in the shipbuilding and maintenance industries globally. Commenting on this cooperation, Burghgraef-van Eechoud mentions that the company currently assembles ships here in Qatar, but would ideally graduate to building them here. “This, when it happens, will be a positive development for Qatar, since the country is looking to diversifying the economy. But since Damen Shipyard believes in stringent quality, this is likely to take some time and will involve high costs”.
Burghgraef-van Eechoud lists port logistics, a sub-sector of the maritime industry, as an area of increasing cooperation between Qatar and the Netherlands. Talking about the possibilities of cooperation in logistics, she says that, as an industry, logistics has high applicability in the Port of Rotterdam, which, with the traffic volume, is efficient enough to transfer goods anywhere in Europe within 24 hours. This has necessitated a high level of investment in systems and technology, she says, adding that Qatar could benefit by setting the Port of Rotterdam as a benchmark. “Doha could emerge as the regional hub, warding off competition from Dubai, Singapore or Malaysia.” Engineering and construction is another sector that the ambassador thinks has good prospects. She mentions that Qatar, with its infrastructure and construction plans, is seeing the active participation of Dutch
companies such as RoyalHaskoningDHV, a company active in the tunnelling industry and is working on the Doha Bay Crossing project. “There is a good scope for cooperation,” she says, ”between our engineers and Qatar in the fields of infrastructure, logistics, engineering and they could deliver good-quality innovative projects to match Qatar’s need.” Burghgraef-van Eechoud says convincingly that Qatar can benefit by employing Dutch technology in all these fields since, as a nation, the Dutch invest heavily in technology to help them achieve the best solution for projects. She explains, “Being a small nation – we are slightly larger than Qatar in terms of area – we need to employ the latest technology so that we are innovative in terms of the usage of space and have the fastest turn-around time when we take on projects.” She continues, “The match between our national characters is that both nations appreciate quality and understand its value. Qatar’s vision and its economic means to actuate that vision run in tandem with its exposure to world-class quality.” Listing soft sports infrastructure such as academies, training, medical with healthy prospects for Qatar, the ambassador says that in January 2014, there will be a delegation comprising of sports medical professionals coming to the country which will probe the possibilities of cooperation. Speaking about the specific scope of cooperation in this front, she says, “We will explore capacity building and transfer of experience and knowledge.” Food security and agriculture hold a significant promise for Burghgraef-van
“If Damen Shipyard can manufacture ships in Qatar, it will be a positive development since the country is looking to diversify its economy.”
The Netherlands at a glance Government: : Hereditary monarchy, unitary state Capital: Amsterdam Population: 16,788,973 GDP: USD706.955 billion (QAR2.6 trillion)
Yvette Burghgraef-van Eechoud, Dutch Ambassador to Qatar tells The Edge thatthe Dutch are obsessed with quality, which leads to their innovative approach and high efficiency.
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country focus | netherlands
Eechoud. She mentions that Wageningen University, the agricultural university in the Netherlands, with its research focus on tropical, urban and closed agriculture (one which uses greenhouses) is already looking at ways of increasing food production in Qatar. Delving into the ways the sector can benefit from Dutch cooperation, she adds that the Netherlands is the secondlargest exporter of agricultural products (second only to the US). She adds, “this has been possible because of the technology, which focuses on sustainable agricultural practices and targeting the maximum output with minimum resources.”
High-level ministerial visits are a regular feature between the Netherlands and Qatar. The ambassador says, “We just had a successful visit of the Dutch minister of foreign affairs Frans Timmermans, who has had engaging dialogues with his Qatari counterpart HE Dr. Khalid bin Mohamed Al Attiyah on issues that call for better cooperation.” The commonality between the Netherlands and Qatar is the fact that they are both small countries with big ambitions, she says. Burghgraef-van Eechoud furthers that Qatar will soon see the Dutch minister of economic affairs and energy Henk Kamp who will be leading a delegation comprising energy research and development companies and energyrelated institutions from the Netherlands. She says, “The delegation will focus on intensifying the energy cooperation between our countries.”
Qatar has hired Amsterdam Arena as stadium operations consultants for the 2022 World Cup. Commenting on the contract, the ambassador says that the scope of work for Amsterdam Arena is mainly on the advisory side, rather than actual execution. “Amsterdam Arena has been hired to advise Qatar on how to manage crowds, how to manage the stadiums, the legacy management of stadiums so that something useful emerges from the stadiums when the event gets over. This can be done only by building in some sort of community involvement so that they have a lasting value for the people at large,” the 44 | The Edge
ambassador says. She adds that the other aspect that Amsterdam Arena will look at is the management of security so that it does not burden the expectations of the fans or the VIPs who will come to watch the tournament and establish links with companies that can deliver these services. November will see an exhibition of Dutch Sports Infrastructure (an overarching body that includes Dutch companies bringing together industrial and management expertise for stadiums and sports facilities) at Aspire4Sport. Commenting on the forthcoming exhibition, Burghgraef-van Eechoud is of the opinion that the exhibition will be an interesting one, with participation from wide-ranging companies spanning sports infrastructure, associations, companies linking community and sports, health and sports, etcetera. Managing an event like the 2022 World Cup will be a complex issue, the ambassador forecasts and adds that Dutch companies have the knowhow and the wherewithal to show innovative, yet simple solutions for managing an event of that proportion. For instance, she adds, Philips Lighting, a Dutch company, has brought light emitting diode (LED) lamps into the market. These are an energy-saving substitute for lighting stadiums which earlier had to be lit up way ahead of a match, and were high on energy consumption. “This is one more instance of the Dutch fascination with technology,” she adds. “Qatar is doing a fantastic job of surveying the global market for the various components before they actually sign a contract. This is the Qatari way of being cautious, bold and being aware of what options are available in the market.”
There are a number of reputed architects and designer companies in the Netherlands that are already in Qatar, says Burghgraef-van Eechoud, either bidding for projects or looking for opportunities here. “These companies focus not only on the design but cooperate with construction engineers like RoyalHaskoningDHV to ensure that technical aspects of their design can be precisely executed.”
Designers and architects
“The match between our national characters is that both nations appreciate quality and understand its value.”
Earlier in the year 2013, Qatar Airport City was awarded to Dutch architect Rem Koolhaas. Commenting on the award, the ambassador says that the Dutch have developed a reputation for quality architecture. “Rem Koolhaas is not Dutch alone, he is more of a global citizen and he is very positive about Qatar, making it a point to communicate this sentiment to the Dutch architect community,” she says, adding that “Qatar is an architect’s paradise since they have the guts and the ambition to build world-class projects, giving full freedom to our architects.”
One area the Dutch ambassador to Qatar Yvette Burghgraef-van Eechoud feels the Netherlands could contribute to the development of Qatar is in agriculture, particularly greenhouses, in which her nation excels.
The battle to dominate Middle East aviation
regional aviation | cover story
The Middle East aviation sector is one of the fastest growing in the world. But how secure is the regional hegemony and dominance of the Gulf’s ‘big three’ carriers, Qatar Airways, Etihad and Emirates? Is there room for Turkish Airlines as a fourth large regional player, and what of the growing ‘low-cost’ market – and the increasing challenge more and more aeroplanes in the sky presents to airline safety in the skies above Qatar? The Edge investigates.
by Martin Rivers
ew dispute that Qatar Airways’ expansion rate since launching in 1994 has been anything other than exceptional. The award-winning Doha-based airline’s 125-aircraft fleet now serves 130 destinations across the globe, with an average of one new route being launched every month. And recent orders for another USD50 billion (QAR182 billion) worth of aircraft will ensure growth for years to come. Together with Dubai’s Emirates and Abu Dhabi’s Etihad, Doha’s flag carrier has helped to bring the Middle East to the forefront of global aviation. But the local hegemony of the ‘big three’ Gulf airlines and airports is also being threatened, as they are not the only players seeking to realign traffic away from legacy hubs in western Europe. Indeed, the region’s wealth and population growth have made it an attractive potential market for competitors both internationally on a grand scale and locally on the low-cost end of the aviation sector.
Turkish Airlines CEO Temel Kotil has pursued aggressive expansion for his company, one that emulates the business model of Middle Eastern airlines such as Etihad, Emirates and Qatar Airways, and which is ironically proving an increasing threat by his airline to their regional hegemony. (Image Courtesy Turkish Airlines)
“Our main strategy is to use the sixth-freedom hub model. As we are sitting at the heart of Eurasia, we can combine both short- and long-haul.”- Turkish Airlines CEO Temel Kotil.
Alongside Abu Dhabi, Dubai and Doha, Kotil hopes to elevate Istanbul as a rival fourth regional hub to the powerful ‘big three’ Arab airports and airlines, but with the added boon of a 74 million strong local population “Having a large domestic market is a major advantage,” Kotil tells The Edge.
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cover story | regional aviation
AIRPORT TRAFFIC (in August 2013) NO. OF FLIGHTS
Flights from Dubai
Flights from London
Total flights out of Doha Aiport No. of Flights
Low-cost carriers lag behind in the region
Flights from Doha
Flights from Dubai
Flights from London
Total in service
Total in service
Total on order
Total on order
Total in service
Total in service
Total on order
Total on order
MOST FREQUENT DESTINATIONS FROM DOHA (in August 2013)
Source: Fleet data from Ascend Online, Route map, capacity and traffic data Innovata Flight
48 | The Edge
regional aviation | cover story
While Turkish Airlines fleet is made up of narrow body (single aisle) aircraft, reflecting its strategic focus on high-frequency, mid-haul routes, Qatar Airways combines larger aircraft such as its upcoming Airbus A380s with relatively small A319s and is 10 percent larger overall by industry standard. (Image Reuters/Corbis)
Of the former, on a grand scale, Turkish Airlines (THY) is fast becoming the most likely contender – and in doing so it is echoing many of the strategies so successfully deployed in Qatar and the United Arab Emirates. Over the past two decades, the Gulf states transformed themselves into a key bridging point between east and west through a combination of strong government support, natural geographical advantage, and favourable economic conditions. While Europe’s legacy airlines were saddled by high cost structures and dated infrastructure from the glory days of air travel, Qatar and the UAE had a clean slate on which to craft efficient business models. It is ironic, then, that THY, one of the oldest airlines in Europe, has emerged as perhaps their strongest competitor. Chief executive officer (CEO) Temel Kotil has held the top job at the flag carrier for eight years, and his vision of turning Istanbul into the default stopover for intercontinental flights bears all the hallmarks of the Gulf carriers’ flight-path. “Our main strategy is to use the sixth-freedom hub model,” he tells The Edge, referring to the aviation term for using a domestic hub to connect flights between two foreign destinations. “As we are sitting at the heart of Eurasia, we can combine both short- and long-haul, and we can proudly say that we are doing our job excellently.”
Similarities and differences
When examined more closely, the similarities between THY’s expansion plan and that of the Gulf carriers are even more striking. Between 2002 and 2012, Turkey’s flag carrier expanded its international network from 77 to 182 destinations, spreading its reach liberally across Europe, Asia, Africa and the Americas. Its double-digit annual growth figures – passenger traffic grew by 26.3 percent last year – had previously been considered the exclusive preserve of Middle Eastern success stories. Like the Gulf carriers, there is a clear focus on tapping the potential of emerging economies in Africa. Qatar’s interest in the region was reinforced with the launch of Addis Ababa, Ethiopia flights in September, bringing its number of African routes to 20. Emirates recently restored flights to Tripoli, Libya, while Etihad has extended its reach on the continent through partnerships with South African Airways, Kenya Airways and Air Seychelles. “The future of Africa is very bright,” Kotil says, noting that THY’s traffic to the continent has tripled in four years. “Currently, we are operating flights to 34 destinations on the continent. In 2012, we added 15 new points in Africa to our network, and we are planning to add another 10 additional points.” Even the lexicon that THY uses to describe its target markets is reminiscent of the Middle East aviation model. Management at Etihad and Emirates frequently point out to journalists that one-third of the world’s population lives within four hour’s flying time of the Gulf, and two-thirds within eight hours. However, Kotil opts to frame his approach
The total current future aircraft order book of Qatar Airways. The Edge | 49
cover story | regional aviation
With the emergence of Turkish Airlines as a real threat to market share in the commercial aviation section race to dominate the Middle East region must be taken seriously by the likes of Qatar Airways, Emirates and Etihad. (Image Reuters/Corbis)
by using slightly different geographical marketing language, speaking about Istanbul having a catchment area of 55 countries within 3.5 hour’s flying time. Nevertheless, despite the similarities there are several aspects of Kotil’s business model that differ markedly from the Gulf region. Turkey’s population of 74 million and its larger land mass affords THY the kind of domestic market that Gulf operators can only dream of, for example. “Having a large domestic market is a major advantage,” Kotil insists. “In addition to the Istanbul hub [Atatürk Airport], THY has two more hubs at Sabiha Gökçen Airport – the secondary airport in Istanbul – and Ankara [Esenboğa Airport]. Sabiha Gökçen serves domestic, European and Middle Eastern markets, and Ankara only serves domestic markets.”
FlyDubai CEO Ghaith Al Ghaith concedes his budget airline “goes beyond what you would expect from a low-cost carrier”.
At first glance, THY’s fleet seems comparable in scale to Emirates. The Turkish airline operates 192 aircraft and has orders for 208 more, while Dubai’s flag carrier deploys 202 aircraft with another 192 in its order book. Qatar Airways appears to trail behind with 125 existing units, plus 171 future commitments. But the vast majority of THY’s fleet is made up of narrow body (single aisle) aircraft, reflecting its strategic focus on highfrequency, mid-haul routes. By contrast, Emirates operates an all-wide body (twin aisle) fleet better suited to intercontinental trunk routes. Qatar opts for the middle ground, combining larger aircraft such as its upcoming Airbus A380s with relatively small A319s. Measured by Revenue Passenger Kilometres – the industry standard for traffic – Qatar is 10 percent larger than THY. Perhaps the most significant difference between THY and its Gulf counterparts, however, is its ownership structure. Turkey’s government has been a minority shareholder in the airline since 50 | The Edge
FlyDubai’s CEO Gaith Al Gaith embraces what he calls “low cost principles” and is slowly pursuing regional growth of more than 10 percent in this aviation sector, by following the example of European models such as Ryanair and easyJet, and could force Qatar Airways to drop fares on some regional routes. (Image Reuters/Corbis)
regional aviation | cover story
May 2006, limiting its options for providing direct financial support. By contrast, the governments of Dubai and Abu Dhabi wholly own Emirates and Etihad respectively. Qatar Airways is 50 percent owned by the Qatari government and 50 percent by private shareholders, though its precise structure is not disclosed. Though allegations of state support for the Gulf carriers are often exaggerated, the fact remains that Istanbul Stock Exchange-listed THY is exposed to deeper financial scrutiny than its Gulf counterparts. Nonetheless, Kotil insists the flag carrier and the government work together with “great harmony” in pursuit of the country’s aviation aspirations. Projects such as the upcoming Istanbul New Airport lend credence to this view. “The Turkish government has a clear vision concerning civil aviation, and thanks to its political support and motivation, major investments have been made,” he says.
Low cost challengers
While the growing competitive threat from Turkey will not force a strategic rethink in the Gulf countries, where traffic growth consistently outpaces hikes in capacity, and it would take a significant macroeconomic shock to thwart Qatar Airways’ expansion plans. However, the Doha-based carrier must remain nimble, with new threats also potentially emerging from a new breed of low-cost operators in the region and in fact on its very doorstep. Today, Qatar’s tiny low-cost sector is comprised of a handful of flights operated by FlyDubai, Air Arabia and Air India Express. It is generally accepted that the Europeanstyle no-frills business models are illsuited to the Gulf, mainly due to bilateral restrictions and visa requirements. But FlyDubai – which will be one of ten launch carriers at Doha’s Hamad International Airport next year – is adapting the European model to suit the region. The sister carrier of Emirates took delivery of its first aircraft configured with Business Class seats in August, enabling it to attract higher-yielding passengers who can in effect subsidise lower fares in Economy. If successful, its strategy could ultimately force Qatar Airways to cut fares on regional routes. Speaking to The Edge, FlyDubai CEO Ghaith Al Ghaith concedes that his budget airline now “goes beyond what you would expect from a low-cost carrier”. As well as offering Business Class, the airline gives free baggage allowances on certain routes.
Managing Congested Skies
With continued growth in number of commercial planes over the region only set to grown apace in the future and to peak around events such as the 2022 FIFA World Cup, air traffic management will be a vital component of the Middle East aviation paradigm. (Image courtesy Qatar Airways).
The Middle East first implemented regional airspace efficiency measures in 2003 and with continued growth in number of commercial planes over the region only set to grown apace in the future, air traffic management specialist NATS is one of the key players working to optimise the region’s airspace. The company started life as the body regulating air navigation in the United Kingdom, but has since branched out to provide air traffic services to governments, airports and airlines around the world. “A NATS team is currently working on an airspace design and implementation consultancy project at the New Doha International Airport,” notes John Swift, Middle East director of NATS. “In the UAE, NATS completed an operational performance summary at Dubai International Airport, as well as Public Safety Zone studies. We also developed a concept of operations and procedure design for the new Al Maktoum International Airport.” Having fulfilled other contracts in Bahrain, Oman and Kuwait, the company has a broad understanding of the challenges facing Middle Eastern operators. Swift explains that Qatar is particularly exposed to congested skies because of its own Doha hub, as well as its proximity to the UAE and Saudi Arabia. “Regional collaboration will be essential to delivering improvements,” he says. “All stakeholders need to acknowledge that a regional solution is required, and identify the appropriate body to co-ordinate activities, integrate the master plans of individual states, and identify efficiencies and quick wins. Technology is in itself not a challenge, but rather the planning required to converge individual state programmes into a regional programme.” Citing NATS experience of handling airspace during the London 2012 Olympic Games, Swift predicts that Qatar will face “complex logistical challenges” during high-profile events such as the upcoming 2022 FIFA World Cup. In London, for example, NATS collaborated with the UK’s Ministry of Defence to roll out a number of airspace restrictions geared towards heightening security and better managing the influx of business jets. Swift says that NATS’ multi-year contract for the Qatar Airspace Design and Implementation (QADI) project will ensure that Doha’s new airport is at the forefront of efforts to better manage regional air traffic. QADI encompasses direct collaboration Regional collaboration is esto delivering improvewith Qatar Airways and the Qatar Emiri Air Force – the two sential ments, says John Swift, Middle main stakeholders in the country’s skies. - Martin Rivers East director of NATS.
Continued on page 94
The Edge | 51
POWER QATAR’S GAS EXPORTS
Since its rise from a little-known, dusty Emirate to the world’s largest exporter of liquid natural gas (LNG), Qatar’s stature and influence in the global energy world has grown exponentially. But where does Qatari gas go? And whose lives does it affect and enrich? The Edge takes a trip around the globe to find out.
by Jamie Stewart
feature story | gas exports
icture a present-day world that is not blessed with Qatar’s oil and, especially, its gas exports. In Tokyo, Japan, the Sato family watch from their fifth-storey apartment as the lights of the city are dulled for rationing. Without such measures since the 2011 tsunami and the switch-off of the nuclear plants, the family, and all those in the vicinity, do not have enough energy to cook their evening meals. In London in the United Kingdom (UK), the Smith family gather round their two-bar gas heater for warmth. They are not poor – far from it, Mr. Smith has a well-paid job in finance – but these days, the government cannot provide enough energy to allow him to heat their home. And finally in Doha, Qatar the Hassan family relax after a day in the heat, glad for the breeze blowing down the wind-catcher. Later the family take a walk to watch the opening of the capital city’s newest major development – a four-storey concrete office building midway around the traffic-free bell-curve of Doha’s Corniche.
“In one generation we went from riding camels to riding Cadillacs,” said then-ruler of Saudi Arabia King Faisal bin Abdulaziz Al Saud in the early 1970s. King Faisal’s famous quote is one that is still arguably applicable today to a number of Gulf states, including Qatar, which have, in less than a generation, transformed their cities from dusty post-colonial outposts to ultra-modern metropolises. Qatar sits on the 13th largest proven oil reserves in the world, and the third largest natural gas reserves behind only Russia and Iran. Doha is reliant on the immense income generated through the extraction of these resources to diversify into an economy capable of sustaining and creating wealth long after the oil and gas are depleted. How Qatar’s oil and gas is used today is vital for the livelihoods of coming generations. For Doha, failure is not an option, and the success of today’s vast operation will be defined by the state of the nation for hundreds of years if not just decades from now.
‘From camels to Cadillacs’
The expansive figures relating to the volume of Qatar’s gas reserves, mostly under the waters of the Arabian Gulf in the ‘North Field’, and exports are difficult to absorb. As of January 2013,
The above picture of global energy rationing and a dusty desert outpost called Doha is extreme, of course. The world will not be forced to take lifestyle-changing energy conservation measures – not yet anyway – with ample fossil-fuels to supply its energy needs. But how different the world might look today was it not for the vast operations in resource-rich countries such as those in the Arabian Gulf, vital nations that send hydrocarbons to the ends of the earth to power homes, cities and industries. Without them in Qatar, life as we know it would be unrecognisable. Among the nations, not only blessed with the raw resources and moreover the processing capacity to export them en masse, the oil and gas beneath Qatar is one of the global energy industry’s most valuable natural resources, and mainly with the latter is able to provide power and heat to millions, as well as fund its expansive ambitions as a nation.
Qatar’s gas reserves: the figures
Qatar’s proven natural gas reserves of in cubic metres (tcm), 13 percent of the world total reserves.
In March 2012 Qatargas delivered its first ever cargo of liquefied natural gas (LNG) to Singapore on board the Q-Max LNG carrier Umm Slal to Singapore LNG Corporation Pte Ltd’s (SLNG) first LNG receiving terminal at Jurong Island. (Image courtesy Qatargas)
54 | The Edge
With proven gas reserves of 25 trillion cubic metres (tcm), 13 percent of the world total reserves, Qatar’s preeminence in the world energy matrix is a given and the capital Doha has grown from a sleepy seaside fishing and pearling village to a world-recognised financial capital and business centre. How Qatar utilises its main export resource to ensure the country’s future prosperity will be the key issue in the coming decades. (Image Reuters/Corbis)
Qatar held proven natural gas reserves of 25 trillion cubic metres (tcm), 13 percent of the world total, according to BP’s most recent Statistical Review of World Energy. At today’s prices, the value of this gas is sufficient to cover what Qatar has agreed to spend on infrastructure in the build-up to the 2022 FIFA World Cup 151 times over, somewhere in the region of USD8.5 trillion or QAR31 trillion. In Qatar, production comfortably outweighs consumption. Production last year hit an all-time high of 157 billion cubic metres (bcm), up eight percent from 2011 and five percent of total global production. Of national production, 26 bcm was consumed domestically, less than one percent of global consumption. This supply-demand balance left 131 bcm for export, the vast majority of which, 123 bcm, left the country in the form of natural gas, 19 bcm via pipeline, and 106 bcm loaded aboard liquefied natural gas (LNG) tankers and shipped around the globe.
Growing Asian market
The Asia-Pacific region is the destination for more than half of Qatar’s LNG exports. Vast quantities are shipped to China, India, South Korea and Taiwan, with Thailand emerging as a large customer while Singapore is also set to follow. Japan, however, remains not only the biggest consumer of Qatar’s gas in the Asia-Pacific region, but in the world. The country imported just over 21 bcm from Qatar in 2012 – just over a sixth of Japan’s total LNG imports and enough to fill a large stadium 18,500 times. The primary use of Qatar gas in Japan is to run the country’s gas-fired power stations, a need that became all the more pressing overnight in the aftermath of the 2011 tsunami and subsequent switch-off of nuclear power plants. As a result fossil fuels accounted for almost 90 percent of Japan’s electricity production last year, up from 60 percent in 2010. Similarly the UK is one of the largest consumers of Qatar gas, for household heating and centralised power generation. Last year, almost all of the UK’s imported LNG originated in Qatar.
The primary use of Qatar gas in Japan was to run its power stations in the aftermath of the 2011 tsunami and nuclear disaster. The Edge | 55
feature story | gas exports
Natural gas from beneath Qatar is the very stuff that contributes to running industrialised nations such as Japan and the UK, powering electric ovens in kitchens across both nations, keeping the famous lights of Tokyo and London burning through the night, and fuelling heaters up and down both countries during the cold, snowy winters.
In light of the United States’ (US) highprofile push to become energy independent via exploitation of its shale gas resources, Qatar has in the last decade increasingly targeted Asian nations to sustain and grow its LNG exports sector. It may therefore come as a surprise to discover that in 2007 the share of Qatar’s gas exports to the Asian-Pacific nations stood at 78 percent, far above last year’s 53 percent, mainly because of Doha’s production growth. While volumes going into Asia continued to decrease, those going elsewhere, at least until last year, increased proportionally faster, with a fourfold increase going into Europe and a sevenfold increase into North America. But North American exports are set to fall in the next few years, with Qatar National Bank predicting US natural gas independence by 2017. But rather than stand by and watch, Doha has revised its approach and diversified within the sector in the US. Last year, US-based Golden Pass Products, a joint-venture between Qatar Petroleum and US energy major ExxonMobil Corporation, submitted an application to export LNG from an existing terminal in Texas, southern US. This will not be Qatar‘s gas, but the US deal will ensure that Doha is in line for a share of the income derived from any exports.
Indeed, the keyword in Qatar’s push to secure a future without undue reliance on a single economic sector is ‘diversification’, not just beyond of oil and gas as per the 2030 National Vision, but within the hydrocarbon sphere itself. This need has fed into rapid growth in downstream hydrocarbons. Last year, 6 bcm of natural gas fed into Qatar’s downstream hydrocarbon industries as feedstock prior to export in forms such as liquefied petroleum gas (LPG) or helium. According to the Qatar Statistics Authority, the state exports a vast array of downstream hydrocarbon products, including coalgas, water-gas, petroleum oils, hydrogen, propane, butane, condensate and rare 56 | The Edge
Ras Laffan is Qatar’s largest processing plant for its hydrocarbon resources, including LNG, GTL and associated downstream industries. (Image Corbis).
Demand for energy in Japan, Qatar’s best LNG customer, rose sharply following the 2011 tsunami disaster that resulted in the closure of several of that country’s nuclear plants. (Image Corbis)
gases. On a domestic basis, the vast majority of the gas that Qatar consumed in 2012 fed into the nation’s fleet of gas-fired power stations, which dominate the electricity generation mix. Output from the gas-to-liquid (GTL) sector, which includes liquefied petroleum gas (LPG) as well as products such as kerosene, naphtha and paraffin, is also consumed on a limited domestic basis, although the vast majority is processed for export, with Qatar Petroleum at the centre of the increasingly diverse industry. GTL is the conversion of natural gas into liquid-based hydrocarbon fuels such as diesel or petrol. Qatar has turned to this area of hydrocarbons to drive growth across its domestic economy in light of a moratorium on further development of upstream infrastructure.
The number of stadiums the equivalent volume of LNG imported in 2012 by Japan, Qatar’s top gas customer, could fill.
gas exports | feature story
The oil and gas beneath Qatar is one of the global energy industry’s most valuable natural resources able to provide power to millions of people. Qatar’s energy minister and chief executive of Qatar Petroleum, HE Mohammed Bin Saleh Al Sada with the Gas Exporting Countries Forum (GECF) Secretary General Leonid Bokhanovsky (L) of Russia attend a news conference at the 13th ministerial meeting of the GECF in Doha November 13, 2011. (Image Reuters/Corbis)
Qatar’s 2012 natural gas exports by volume Destinations, with volumes by billion cubic metres
Japan / South Korea / Taiwan
South & Central America
Source: BP Statistical Review of World Energy 2013
An encyclopaedic entry written just twenty years ago, as Qatar faced dwindling oil production in the aftermath of a blast that ripped apart vital infrastructure, made reference to the Qatar’s North Field and the 4.6 million cubic metres of gas it was believed to hold. It said: “This gloomy outlook is mitigated to some degree by hope for development of the massive natural gas reserves in the North Field. Discovered in 1972 by SCQ [Shell Company-Qatar], its proven reserves ... will be productive well into the twentyfirst century.” Today in the 21st, century the North Field is known to hold more than 11 million times the figure quoted just two decades ago, and the outlook for Qatar is considered rather less “gloomy”. Indeed, thanks to this, the scale of Qatar’s hydrocarbon sector is vast – necessarily so, because today’s generation is building not just an industry, but attempting to lay firm economic foundations for the nation of the future. The repercussions of not doing so are stark. After the then-ruler of Saudi Arabia King Faisal made his Cadillac quip roughly four decades ago, he followed it with a more serious statement, which could be taken as a stern warning for the hydrocarbon rich states of the Gulf, and that is even more pertinent today. “In one generation we went from riding camels to riding Cadillacs. The way we are wasting money, I fear the next generation will be riding camels again.” Using its global hydrocarbon export empire to fund its National Vision, Doha clearly plans to avoid this dire prophecy. The Edge | 57
58 | The Edge
telecommunications | business interview
In an exclusive interview, new Vodafone Qatar CEO Kyle Whitehill tells The Edge how his time spent working for the brand in Africa and India, as well as with joint ventures, has been ideal preparation for his current role. He reveals his insights into the telecommunications sector and how he plans to grow his firm’s Qatari market share and company stock value.
by Miles Masterson
Incoming Vodafone Qatar CEO Kyle Whitehill hopes to increase network coverage, raise the brand profile, add value and improve service standards, as well as increase market share for Vodafone among Qatari nationals and in the fixed line and enterprise market segments.
pon meeting Kyle Whitehill, the new chief executive officer (CEO) of Vodafone Qatar, it is as clear as a strong mobile phone signal that he is fascinated with the dynamics of telecommunications in diverse emerging markets such as Qatar. Whitehill’s career – which prior to his arrival in Doha in June of this year includes more than two years as chief operating officer of Vodafone in India, and three years as CEO of Vodafone in Ghana – also points to an affinity to working with a range of nationalities in warmer climates far removed from his native Scotland. For Whitehill, this diversity begins with his own staff, which in Qatar encompasses 400 people of more than 40 nationalities. “Qatar and the United Arab Emirates (UAE) and Saudi Arabia are quite unique in this kind of multiple country population, from a culture point of view,” Whitehill tells The Edge with a broad smile, adding, “Vodafone’s big thing in people has been about diversity. I see culture, and I say I am living the dream here.” This enthusiastic embracing of multiplicity within his own organisation, and in the wider Qatari telecommunications market, presents Whitehill with a challenge he relishes, but more importantly has the practical experience to take on. From a distance, Whitehill reasons, one can easily surmise Qatar, with the highest per capita income in the world, is comprised of an excessively wealthy population. But the reality, he says, is that the vast majority are here to perform a relatively unskilled job and their demands are very similar to those of prepaid customers in Africa or India. “They want good value and they want access to you to solve their problems,” he explains. “So I think there is a similarity; when you are serving a large customer base that has the same type of thinking and needs as Africa and India, it is really helpful.” Whitehill’s origins and experience in the United Kingdom and Europe also place him well to understand the Qatar-based expatriate market segment that is, he says, “the complete contrast, which is the population that is very European and American in their thinking and want a completely different type of service.” Moreover, working in diverse emerging markets, Whitehill adds, has placed him well to not only relate to the prepaid and expatriate markets, but to deal effectively with board members of different nationalities (in his case mostly Qatari establishments and individuals), and to recognise the complicated structure of joint ventures, where Vodafone Qatar might not necessarily be the only partner. “Understanding how that works was also important,” Whitehill continues, adding that Vodafone also aims to grow their The Edge | 59
Capturing what he calls the “high value” portion of the Qatar market will be a challenge for Vodafone Qatar, one that Whitehill tells The Edge must be a one-to-one customer service model similar to high end fashion brands such as Burberry in the UK. “It has got to be personalised,” he says. (Image Corbis)
share of the fixed line market, “and we want to become serious players with enterprise – business to business – and I have a lot of experience with that... those things were the key drivers.”
During his first few months in Doha, Whitehill reveals, he has observed that international white-collar expatriates – predominantly North American or European – behave otherwise as consumers in Qatar than they might at home. “I find that very fascinating,” he says. “They make very different buying decisions.” For example, such an expatriate might buy a telecoms product in a supermarket, consumer behaviour that has more akin with the migrant worker prepaid market. “I ask them why wouldn’t you go to an Ooredoo or Vodafone store?” Whitehill says, displaying for the first time his penchant for referring to his company in the first person, as if he and Vodafone Qatar were a single entity. “I want to understand that one better.” Whitehill concedes that this might be due to a period when Vodafone Qatar was perhaps growing too fast and was the subject of some negative publicity regarding its services and offerings. “But that does not reflect the reality today,” he counters. Indeed, communicating to these consumers that Vodafone Qatar’s products and service have evolved as considerably is one aim for Whitehill and Vodafone Qatar. However with 60 | The Edge
1.146 million customers in Qatar at last count in June 2013 – gaining 268,000 customers in comparison to the same period of last year and up 62,000 from April to June this year alone – their overall market share is ostensibly moving closer to 30 percent from its 2012 year-end figure of 28.5 percent (their target for 2018 is 40 percent). It is also a goal of Vodafone Qatar to grow their share among consumers in what he terms the Northern Arab and particularly the Qatari population, which Whitehill refers to enthusiastically as “high value”, to 300,000. “I love that segment,” he says, “because [they are] hugely sophisticated in their thinking. The vast majority of Qataris have a very strong relationship with London and are completely familiar with the way that brands work [and] what they want from a level of service from a provider.” These consumers, adds Whitehill are also familiar with the globally ubiquitous red Vodafone brand. However many of these multiple handset and SIM card owning individuals may use Vodafone whilst travelling, once back in Doha they revert to using the services of the firm’s only competitor, Ooredoo. Whether this is due to force of habit or familiarity, or even affection in the national psyche towards the 40-year-old former ‘Q-company’ Qtel, Whitehill admits he is not sure. He also concedes that winning over the higher end of the local market is a far tougher proposition than prepaid African or Asian
40% The target market share for Vodafone Qatar by 2018.
telecommunications | business interview
The embracing of multiplicity in Qatar presents Whitehill with a challenge he relishes, but more importantly one he has the practical experience to take on. migrant workers or postpaid office-bound Asians, Northern Arabs or Europeans. Few of these local “high value” prospects, Whitehill opines, will enter a Vodafone or competitor store, leaving only one alternative. “A very high percentage of those Qataris have never had any experience with me,” offers Whitehill, again blurring the line between the CEO and his firm as he talks. “The reality is I need to go to them, he says. “[What] we are trying to drive our insight around is, how am I going to get to you, when you are sitting in a big villa surrounded by people, and me giving you a meaningful discussion about why Vodafone would be an attractive partner for you?” Rather than a passive retail method, “where you wait for customers to come to you” as Whitehill says, the answer he feels is an active one-to-one customer service model, which he compares that employed by high-end fashion brands such as Burberry in the UK. “It has got to be personalised. It has got to be,” Whitehill continues emphatically. “You build a relationship…and you build trust in that relationship over time.” However, on the business-to-business and enterprise segment, Whitehill is far more upbeat when it comes to Qatari enterprise. “I can go meet him in his office and have a completely different conversation, because he is a businessman with different needs,” he furthers. Indeed, Whitehill says that the response to Vodafone’s ever-increasing offerings in the business space have been welcomed by Qataris, grateful that another operator has forced down prices and improved scope and service in the local market.
Network, brand, value, service
Overall for Vodafone Qatar, the way to achieve the company’s aims for Whitehill comes down to four simple components: build a network and a brand, create value and focus on service. “There is no great mystery around telecoms,” Whitehill smiles, explaining that while Vodafone’s strong presence in the Indian and Egyptian markets creates high awareness in the South Asian and Northern Arab diaspora, they are still working on better understanding as to how these groups connect with the brand while in Qatar. A larger challenge for Whitehill and Vodafone Qatar now is to dispel the perception of the firm as a foreign entity, as it is majority owned by Qataris (see graphic right), while building on the strength of the global brand but retaining local relevance and fitting into Qatari culture. On the value proposition, referring again to the benefit of having a more competitive market and not one that is dominated by a public sector entity, Whitehill points out that prices have dropped sharply since Vodafone has come into the marketplace. Service, he reiterates, has also improved in general – and in Vodafone especially – since they came into Qatar. Indeed, furthers Whitehill, good service
VODAFONE BY THE NUMBERS Total number of subscribers in Qatar
1.146 million Mobile market share in 2012
40% Public 27% Qatar Foundation 22.95% Vodafone Group 3.40% Military staff loans funds 3.30% Military pension funds Health and
3.30% education endowment
MOBILE USAGE IN QATAR Mobile penetration Qatar
Smartphone penetration Qatar
Average number of mobile phones per household
Source: ict Qatar, Vodafone Qatar, Zawya
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business interview | telecommunications
is the key thing to get right and to moreover innovate in its delivery, because ”that is going to make the difference to you ultimately.” As the incumbent former monopoly, Ooredoo presents for Vodafone Qatar a formidable competitor for the local market share, but also across the spectrum of telecoms products and services in which the two firms compete. Despite support from Qatar Foundation (QF), taking on the then Qtel was always going to be a challenge, Whitehill says, comparing their obstacles to those faced by pretenders to the dominance of the former UK state monopoly British Telecom (BT) when it privatised and that market opened up. Competing with the fixed line incumbent with access to millions of homes through copper and later fibre, explains Whitehill, offers such firms a massive competitive advantage. “I have to work really hard to have any degree of competition. You know, we have the Pearl-Qatar, we have Barwa City where we are providing internet now, and that is terrific, but our competitor still has a huge advantage, so I am looking forward to having that unravel over time and we will have a more equal status.” Taking a lead from BT and other similar examples in Europe, the only way Whitehill believes that a balanced market place can be fostered by a regulator in Qatar creating a separate network entity and allow them “to fight it out for customers...which I think is what Qatar will ultimately do. “I have no problem with that, if I can’t beat them on management, then I shouldn’t be here, right?” adds Whitehill, who says he respects his competitor highly and watches them closely. When The Edge raises the possibility of a third telecoms operator coming into the Qatar market to challenge Vodafone and Ooredoo, Whitehill shakes his head. Citing India as an example, Whitehill explains how the market there once comprised of six operators – across 1.3 billion people, he is quick to add – and then grew to 14 companies before going back down to the current six. Whitehill is adamant that even if a third operator was to emerge in Qatar it would struggle to survive, given that though Vodafone recently posted a quarterly distributable profits for the first time, the company is yet to make money. “In a population of more than say 20 million,” he says, “you might be able to sustain a third operator. But roughly you are going to have one or two operators who are going to able to make some money and a third who comes in as a challenger...falls away and then another that comes in and tries again. And I am talking in populations of 20 million or more.”
“Vodafone aims to become serious players in the fixed line marketplace and we want to become serious players with enterprise – business to business.” Profits and shares
After three-and-a-half years in the market, Vodafone Qatar itself is yet to achieve a full year of profitability. The firm recently posted its first positive quarter and has been achieving distributable profits for some months, and hopes to pay its first dividend to shareholders in the near future. Since floating on the Qatar Exchange (QE) in July 2009, with an IPO (initial public offering) issue share price of QAR10.25, Vodafone Qatar’s share price briefly peaked that month at QAR11.4 but then sharply declined, bottoming out at QAR7.24 in March 2012, before recovering in May 2013 to QAR9.4 and staying closer to that value. A potential decisive conundrum sometimes facing incoming CEOs in Whitehill’s position – pressure from stakeholders to deliver returns, but also to service and grow clientele in a demanding, diverse market – could be: which do you please first? Typically forthright, Whitehill says: “My absolute number one priority has got to be delivering a return for your shareholders, no debate about that…I would love to be north of QAR10, because then any shareholder who bought stock will be positive.” Nevertheless, Whitehill explains that his mentor within Vodafone – none other than enigmatic group CEO Vittorio Colao – recently advised him not to obsess about share price. Markets are of course influenced by many factors, and though QE was recently awarded Emerging Market status by MSCI, Whitehill believes it will be some time before the positive effects will be felt, but adding when they do, “I am sure that will help everybody’s price.” Vodafone’s presence in Qatar also positions it well for regional expansion, the international group potentially using Qatar as a small but strategic base to enter nearby markets. “All of my competition in the Middle East is expanding, Ooredoo are doing a fantastic job of expanding not just in the [region] but beyond the Middle East,” says Whitehill. “Zain are in six countries and you have got the UAE operators who all have ambition...QF have that ambition...so I think we have to have that ambition In recent months Vodafone has opened new retail stores as well as a business service centre and increased its brand efforts in to expand.” Qatar, earning the firm numerous accolades including a recent MENA Customer Delight award. (Image courtesy Vodafone) 62 | The Edge
A challenge Whitehill hopes to have resolved soon for Vodafone Qatar is full network coverage across the country, especially in the desert areas, where both Qataris and expatriates spend a lot of time on the weekends and need to know their phones will work. “You shouldn’t have to think about it,” says Whitehill. (Image Corbis)
Vodafone Qatar’s ‘3D’ Strategy
recounts how he had recently seen a 2004 photo of West Bay Concerning Vodafone’s domestic strategy for Qatar, Whitehill calls and was then shown an artist’s impression of how Qatar might this the ‘Three Ds: Deserts, Doha and Developments’. “We have to look in 2030. “Unbelievable,” he says. “And what I sat and thought was, I want be physically present outside of Doha,” Whitehill elaborates on the first point, explaining that desert coverage is crucial in appealing to to be a part of this, because I don’t think there are many jobs or Qataris. “Whether there is one person or a thousand people there countries in the world where people like you and I have got the we have to be there,” he says.” You shouldn’t have to think about it.” opportunity to be part of this extraordinary change...this real sense Then Doha, Whitehill explains, has not evolved to be highly of pride about the expectation in Qatar is really high and so I need compatible with traditional mobile networks. Mobile signal has to aim high for Vodafone here, that is what I need to do.” to penetrate high, thick-walled office towers and underground, as well as handle busy shopping malls, also with thick walls. “The priority is giving you great coverage,” Whitehill repeats. “I don’t need you to be worrying about not getting a good signal.” The third D, development, is an equally important focus for Vodafone Qatar because the country, and especially Doha, is growing so fast. There are, Whitehill offers, more developments in the city in 20 years here than in the borough of Manhattan in New York, which is of comparable size, in a century. “They had 100 years to get it right, and here it is all being done in less than 17 years from now.” The vital thing Whitehill adds, is to try and correctly anticipate what technology might be available in the future and to be prepared for how that will affect coverage. Fortunately, Whitehill has technology on his side, including access to research and development data from the entire Vodafone Group, working on what fixed lines and mobility might look in the future and how to apply software solutions to optimise networks. Vodafone Qatar CEO Kyle Whitehill hopes that during his tenure the firm’s QE share price will Nowhere perhaps is this more pressing than New exceed QAR10 . “My number one priority is delivering returns for my shareholders,” Whitehill tells Qatar. As the interview winds down, Whitehill The Edge. The Edge | 63
Investing in Qatarâ€™s
infrastructure Is the Doha banking sector prepared to fund the countryâ€™s major projects? by Aparajita Mukherjee
64 | The Edge
project funding | feature story
In tandem with the Qatar Vision 2030 and the fixed deadline of the 2022 World Cup, Qatar’s infrastructure agenda has assumed a proportion that lends itself to few global comparisons. In progress are public works authority Ashghal’s multiple projects, rail and metro construction and the airport completion and ports expansion plans, to name a few. These will require massive investment, and while the government will fund a sizeable part, both local and international banks are looking with increasing optimism at project finance. But how significant will this business be? Can the risks and the long-gestation periods associated with this sector justify the banks’ exposure? The Edge finds out.
nfrastructure financing models vary across the world. In mature economies of the West, past governments supported the infrastructure and project finance markets with cash and/or guarantees. However, this is no longer sustainable due to significant deficits and sovereign debt levels in developed countries, and has led to public-private partnerships (PPPs) increasing in countries such as the United Kingdom (UK), Canada and Australia. Emerging economies that require large infrastructure spending can consider PPPs, provided the government partners can show private investors both stability and a professional transactional capacity. Qatar has tried such PPP models in its power generation sector (Ras Laffan A, B, C IWPP and Mesaieed IPP) and with public works authority Ashghal and Qatar Foundation projects. The Ministry of Business and Trade has also set up a PPP Directorate to develop the business case and policy framework for PPP in Qatar. Globally, however, PPP has exhibited weaknesses relating to both cost and time overruns. Anthony Holmes, director at the Institute for Infrastructure Studies in the UK tells The Edge that PPPs might not be the best model for Qatar, though Doha can certainly learn from global examples. “Even PPP projects get delayed and get delivered at substantial cost overrun,” explains Holmes, “and the complex infrastructure projects on a global basis like airports, ports or railways are often delivered at 100 percent above the cost estimated when the projects were conceived. Legal systems and structures cannot avoid that”. “PPP,” Holmes adds, “may be a reality in Qatar in the second stage of the projects wherein we may see that the government may feel the need to hand over the operating management of some of the projects to international companies.
Qatar, Holmes also points out, does not need the PPP option to fund its infrastructure programme since it has enough monetary reserves of its own. “If at all, it wants to distribute more of the infrastructure activity into the economy, he says, “then it could think about coordinating the purchase of some key raw materials for construction like cement, rather than allow separate projects to do their own purchasing on a piecemeal basis. Qatar has a particular problem in
that it pays more for its cost of project than anywhere else in the region, which may be avoidable if there is central control over the purchase of key raw materials.” Qatar’s infrastructure projects span multiple areas. There are Ashghal projects such as roads, drainage, sewerage and buildings valued at QAR100 billion to be delivered within the next five to seven years. In addition, regional business resource MEED estimates put the complex
Given the scope of infrastructure projects in Qatar and the overall regulatory climate, local bankers attest to a heightened appetite for project finance.
At the opening of the Qatar Banking Summit, organised by regional business resource MEED, Qatar Central Bank governor HE Sheikh Abdullah bin Saud Al Thani, said that the total assets of commercial banks operating in Qatar increased by 18 percent to QAR875 billion in the first half of 2013. (Image Reuters/Arabian Eye).
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feature story | project funding
Estimated Qatar infrastructure spend: Transportation:
• Qatar Integrated Rail Project: QAR127.4 billion • New Doha Port: QAR25.5 billion to QAR29.12 billion, split in three phases by 2030 • New Doha International Airport: QAR40 billion • Various roads projects awarded in 2011 totalling to nearly QAR7.28 billion
Qatar Rail Development Programme (comprising the Doha Metro, passenger rail, freight rail and light rail) at a combined investment figure of USD35 billion (QAR127.4 billion, over the next 10 years). There also is the New Doha International Airport with its remaining project opportunities and future expansion plans for USD12.5 billion (QAR45.5 billion) and the port expansion plans at Qatar’s three main ports – Ras Laffan City, Mesaieed City and the New Port Project (see box out for details). In June 2013, Qatar Central Bank issued a circular that reduced bank limits on equity and debt investments from 30 percent to 25 percent of capital reserves. This move is thought to be driven by a desire to free up funding for the upcoming infrastructure projects in the country by ensuring banks have enough cash to fund the growing government debt market.
Infrastructure financing realities
• Sidra Medical & Research Center: QAR28.76 billion • Education City: In line with Qatar Vision 2030, total projects planned are close to QAR21.8 billion • Doha North Wastewater Treatment Plant: QAR5.5 billion
• Barzan Gas Development: Nearly QAR32.7 billion project to be fully operational by 2015. • Ras Laffan Olefins Complex: QAR21.8 billion project to be completed by 2016. • Al Sajeel Project: QAR26.9 billion • Joint venture (JV) between QP and QAPCO. Construction to start Q3 2015. • Al Karaana Project: QAR23.3 billion • JV between QP and the Royal Dutch Shell Group. Construction to start Q2 2014.
Sources: QNB Reports, General Secretariat Development Planning, Qatar and MEED.
The total estimated infrastructure spend in Qatar between 2013 and 2018.
66 | The Edge
Given the scope of infrastructure projects in Qatar and the overall regulatory climate, local bankers attest to a heightened appetite for project finance, a cycle they say has returned with renewed optimism after the Lehman Brothers collapse in 2008. At the recent Qatar Banking Summit, organised by MEED, Yusuf Saeed, acting assistant general manager, global structured finance, group corporate and institution banking at Qatar National Bank, pegged the total infrastructure spend between 2013 and 2018 at USD205 billion (QAR746.2 billion). “With general global economic recovery, the banks’ appetite for this product has gone up,” he said at a talk at the conference. “In Qatar, banks like ours are experiencing a new-found attraction, which is not a result of any dictate from the government.” Also speaking at the event, Bhupendra Jain head of corporate banking at International Bank of Qatar (IBQ) added that of the total spend, it is expected that infrastructure finance demand will be more than USD100 billion (QAR364 billion). Saeed categorised infrastructure projects in Qatar into two categories: oil and gas projects (such as the Barzan Gas project which sought a loan of USD4.7 billion, (QAR17.1 billion) and which saw global and international banks participate, with a substantial funding component), as well as water and power projects, which will host increasing participation of Islamic banks in coming years. “Projects of this scale have the capacity to bring in a new investor class, the Islamic banks, who will participate in the funding of infrastructure projects by issuing bonds,” Saeed added. The other category of projects, according to Saeed, features integrated infrastructure such as the Qatar Rail Development Programme, which will largely fall under sovereign funding and sukuks. “The metro alone,” added IBQ’s Jain, “is going to be about USD35 billion (QAR127.4 billion) and the ports at USD7 billion to 8 billion (QAR25.5 billion to QAR29.12 billion). Then there are roads, electricity and water, sewage, Aviation City, the stadiums for the 2022 World Cup plus hotels, new shopping malls, Lusail City, etcetera. The funding requirements for these projects will be a percentage of these numbers and is a complex algorithm.”
Opportunity and risk
A prevailing sentiment among bankers who spoke to The Edge is that the main opportunities around the infrastructure spends Qatar will see in the coming years will be more related to the contracting companies that are building the projects and their financing requirements than direct funding. “There is a large funding requirement as part of most projects, and there are also material working capital requirements for many
project funding | feature story
of the contractors,” Jody Sanderson, managing director and head of global banking, HSBC tells The Edge, However the amount would be well below the size of the projects planned”. Moreover, with the size of the projects and the longer timeframe of the delivery schedules, banks need to build in a thorough riskmanagement audit before committing to any business. Financing structures in many cases will be built according to individual project feasibility, implementation plan and economics and complete due diligence will be conducted by financiers including cost analysis and risk assessment. The structures, according to some bankers, will address the profitability of the banks while not inconveniencing the contractors in any way. “Banks will be able to offer hedging solutions to enable project owners to manage potential currency or interest rate risks,” Mohamed A Abdulkhalek, al khaliji bank’s group chief business officer says, “while also ensuring that the project model is based on economic realities. These are likely to have conservative assumptions that indicate a considerable profit margin for the contractor and in the meantime achieve debt service.” Learning from past mistakes will also be a factor when it comes to designing financing structures, and it will be a joint effort between the banking community and the contractors. Bankers will need to give considerable thought to the potential inflationary effects, given the reality that projects are to commence in a relatively short time period which might lead to bottlenecks, higher project costs and inflation that were seen around the 2006 Asian games. Sanderson of HSBC points to the safeguards that the contracting companies should adopt. “The better-run contracting companies will be factoring in these risks when taking on jobs,” he says, adding, “however it’s something that cannot be fully mitigated and there is the potential for some material challenges in this regard.” The pricing strategy of banks will play a crucial role in determining how much of the infrastructure business they can obtain. This in effect, will be a factor of their ability to evaluate the project risks, and bear in mind that there is a factor of dynamism involved in such contracts. Sunit Bhardwaj, country head Qatar of First Gulf Bank agrees that the correct pricing is what will get banks the business, but understanding the risks will determine the pricing strategy. Contractors present at the MEED Banking Summit shared their perspective on the risks of financing multiple projects at similar delivery schedules. Both Mark Rudman, Qatar director of UK construction major Faithful+Gould and Rupert Booth, associate director of Atkins Qatar, said that companies that are planning projects such as Ashghal or Qatar Rail are prioritising these to ward off massive burden on the supply chain, both in terms of labour supply and resources, which could lead to cost escalation. With the average size of the expected projects to be massive,
Qatar will see huge spends on the infrastructure sector in line with Qatar National Vision 2030 and the 2022 World Cup, but some bankers feel that the main funding opportunity around the infrastructure spends is related to the contracting companies that are building the projects and their financing requirements. (Image Corbis)
Continued on page 95
A sentiment among bankers is that the main opportunities around infrastructure spend in Qatar will be related to contracting.
Yusuf Saeed, acting assistant general manager, global structured finance, group corporate and institution banking, Qatar National Bank placed infrastructure projects in Qatar in two categories: oil and gas projects like Barzan which saw global and international banks participate and others like the Qatar Rail Development Programme which will largely fall under the aegis of sovereign funding and sukuks.
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Preparing the private sector for
Qatarisation 68 | The Edge
human resources | business management
The practice of fulfilling government mandated employment quotas for local populations, known as Qatarisation in Qatar, is a commonly debated and contested topic amongst human resources professionals in Qatari or multinational companies. It can also be a socioeconomically sensitive area, as it is in all Gulf states with small local populations. Matthew Lewis and David Jones take a closer look at what private sector companies can do to attract and retain Qatari nationals.
hile there are similarities between Saudisation, Emiratisation etcetera, the answers to improving the level of engagement, attraction and retention vary from country to country. In this respect Qatar has some unique challenges and opportunities (see Qatarisation key facts below). How we look at Qatarisation 2.0 in the future requires a complete revision of existing approaches to national talent development. The key must be to focus as much on the engagement and retention of current employees as about attracting new talent. This focus on retention is extremely crucial. What seems to be obvious is the need for a more refined approach, focussed on selecting, developing and retaining the ‘right’ quality of candidates, as compared to achieving a more quota-based approach to achieve short-term recruitment targets.
A strategy reboot
Deploying a more distinct and targeted employer brand, which clearly communicates sustainable mutual expectations is critical. This would help attract those nationals who might be motivated, engaged and committed to work for the longer term, impacting new hire success and also retention. A targeted employer brand would also allow for those candidates who do not fit the culture to ‘de-select’ themselves during the recruitment stage. Recent research has also demonstrated that there are some notable and distinct attributes of the current pool of highperforming/high potential Qataris. Proactively screening talent on similar attributes and strengths during the hiring process would significantly help employers in selecting the ‘right’ talent. A large proportion of females under the age of 34 are graduates, creating a greater availability of female talent in the labour market. This is a significant opportunity for employers, as Qatari
Qatarisation key facts
Qatar’s current population is approximately 1.9 million. • 2010 census indicates only 11 percent of the total population were Qataris. • Population expected to reach 2 million by 2014. Key characteristics of the Qatar labour market include: • Out of a 1.34 million total labour force, 88,600 are Qataris. • Qatari male labour force participation: 68.1 percent. • Qatari female labour force participation: 34.6 percent. • Saturated public sector with over 83.7 percent of Qataris. • 99.2 percent of private-sector jobs held by expatriates. • Of the 2600 Qataris unemployed (3.1 percent), 71 percent of these are below the age of 30.
organisations can develop and implement some new initiatives and programs to support youth and female inclusion, effectively speaking the right language to the growing constituencies within the labour pool. These macro external and internal demands can be summarised as follows: External Factors: • Local labour force availability: Extremely tight labour market with limited number of Qatari labour force supply, especially in technical roles. • High demand for local talent: With continuous growth of the Qatar economy and especially the services sector, the competition for attracting and hiring Qatari talent is going to be at peak. • Greater availability of female talent: Higher number of female graduates as compared to their male counterparts. External Factors: • Qatarisation targets: An increased focus on retention is key to achieving Qatarisation targets in the long term. • Attrition: High risk of attrition, especially amongst younger employees, in a tight labour market this is likely to make investments in talent development increasingly risky for employers. • Female employees: Females are a relatively latent talent pool within Qatar – actions to push the development of senior female employees and target the growth of women in the workforce is not just the right thing to do, it is undoubtedly the smart thing to do as well. • Proactive strategy: Employers can significantly establish their employer and customer brand by adopting a pro-active strategy to talent development and establishing stronger links with educational providers.
In order to maintain the defined Qatarisation targets, it becomes all the more important for employers to ensure that they engage existing talent. The Edge | 69
business management | human resources
importantly, in providing an engaging, vibrant and comprehensive employment ecosystem for national talent, with immense possibility for growth and progression. “The key is to have a clearly articulated strategy and to maintain a sustained focus throughout”, adds Jones.
Qatari labour force by employer (2012) Government departments
Train and retain
Mixed sector Total
Threats of failing to meet Qatarisation targets can be pared down to two main areas:
Source: QSA and QNB Group analysis
All local government, private and multinational organisations will be competing to attract this local talent to meet their Qatarisation targets, hence making the labour market very competitive, and will inevitably result in higher costs of hiring Qatari talent. In order to keep its focus on Qatarisation and maintain the defined Qatarisation targets, it becomes all the more important for employers to ensure that they retain, develop and engage their existing talent to avoid a higher opportunity cost of sourcing new candidates to replace exiting employees at various levels of management. “Most interestingly, our recent research indicates recent double and triple – digit pay awards for Qataris working in the public sector has not increased their engagement relative to the private sector,” says David Jones, managing director of the Talent Enterprise, “and the risk of attrition for the public sector is higher than amongst private sector employers. More than 85 percent of Qatari nationals expect to be promoted within the next year, and so managing these expectations is critically important. In the longer term, this indicates that public sector productivity will become a growing challenge as wage increases are typically sustained by proportional increases in productivity over time.” Private sector employers are seeking to attract and retain national talent in a highly competitive labour market, in what is considered to be a challenging working environment for Qatari employment. Despite these challenges, there is a strong belief that we have an unprecedented and tremendous opportunity before us in terms of Qatarisation 2.0. It is business critical to establish each private sector employer brand as the front-runner in not just employing Qataris, but more
A key demographic is employees less than 34 years of age, who form almost 50 percent of the total Qatari workforce. 70 | The Edge
High risk attrition • A key demographic group are the employees less than 34 years of age, who form almost 50 percent of the total Qatari workforce. At the same time, this group is also the least engaged and least satisfied with the current people, practices and systems in place within the nation’s workplaces. It is essential for employers to act upon the needs and requirements of this group in order to proactively retain and engage them. • Our overall attrition data indicates that of the employees who left private sector organisations, the maximum number resigned due to better compensation offers they received from other organisations. Whilst attractive offers are important in attracting new staff, other factors such as enduring employee engagement, providing learning opportunities and creating clear and realistic career paths are more important when it comes to retention. It is critical that employers identify employee preferences and offer the best employment experience in the form of learning, growth and development in order to retain them. Losing high performers • High performing and high potential employees always desire continuous learning, development and mentoring. Such employees are more prone to becoming disengaged if their full potential is not utilised. Employers need to focus on identifying such high potential employees and provide them a line of sight for potential career paths within the firm, with the fast track growth and development they demand and deserve.
• The key to attracting and retaining the right Qatari talent who fit the organisational needs and culture is to first understand who forms the current top talent group within your organisation. • It is essential to first identify who these positive deviants are and then understand their strengths and their expectations from the organisation. • Seek to identify the profile of high performers within the Qatari private sector and then evaluate what differentiates the high performers from other employees. In other words, what are the key strengths displayed by this group versus others? • These key attributes and strengths can be used by employers to filter the best-fit candidates for to the benefit of the Qatari employees, the organisation and the country’s overall talent development. • Furthermore, workforce analytics is the key to establishing the attributes of your talent pool, which drives performance and productivity in your organisation.
Matthew Lewis is the director of Boyden Middle East and David Jones is the founder and managing director of The Talent Enterprise.
Special Section: Qatar healthcare Inside:
Qatarâ€™s healthcare renaissance 73 Private sector growth 80 Healthcare insurance 85 Research and education 86
QATAR’S HEALTHCARE RENAISSANCE
The health of Qatar’s economy is often discussed, but what of its people, who live a largely sedentary life in one of the world’s harshest environments? As a health revolution takes place across the country, Jamie Stewart looks at what is being done – and what should be done – to safeguard the nation’s most precious commodity: its people.
t is true that Qatar is a nation literally built within a harsh, arid climate that can itself be a threat to human wellbeing. Even in terms of an urban environment, it is not the healthiest place to live in the world, but Qatar is framing its approach around an ageold maxim in health circles: prevention is better than cure. In 2012 it was announced that Qatar ranked as the top healthcare spender per capita in the region, having invested up to QR12 billion on healthcare in the year before, registering a 27 percent increase from 2010. According to the National Health Accounts (NHA) report released last year, this translates into an increase in per capita health expenditure from QAR5682 to QAR6988 between 2010 and 2011. In 2013 the focus has been importance of the specific dangers to and maintaining health in the modern Arab world, subjects about which an emerging body of work in Qatar is seeking to inform the population. In June of this year, The Primary Health Care Corporation (PHCC) of Qatar launched its National Primary Healthcare Strategy 20132018, aimed at addressing and responding to the healthcare challenges of the future, while the Hamad Medical Corporation (HMC) is running an ongoing campaign to raise public awareness and influence behaviour related to important health issues. And the emerging health revolution is not restricted to the public sector. For example, in the private sector, law firm Pinsent Masons and financial services provider PwC held a round table in June focused on e-Health dialogue in Qatar. From this, The Edge Q-Healthcare has learned that Qatar is seeking to position itself as the model for ‘Health Information Exchange’ in the Gulf Cooperation Council (GCC). The Edge | 73
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“The pattern of diseases emerging in Qatar reflects those seen in other developed countries worldwide including obesity, diabetes and cardiovascular disease,” Qatar Biobank’s Dr. Nahla Maher Afifi, tells The Edge Q-Healthcare. “Over the next few years, scientists working with Qatar Biobank will be able to gain unique insight into the causes of these diseases in the Qatari population.”
According to notes from the meeting provided by the companies, what it called a new privacy law, which is pending and due to be passed soon, will allow for a formal exchange model to be established. “Such an information exchange is part of the national health strategy, and it was suggested that the time is right for this to move forward, although it will require various regulatory decisions to be brought into law to ensure protection of privacy, as well as ensuring that there is the right technological capability,” the notes stated.
In sickness and in wealth
Indeed, Qatar is taking an interest in healthrelated matters perhaps never before seen in the history of the swiftly developing
country, one which says much about the evolution of a nation, both socially and economically. Once people start to appreciate the trappings of an affluent lifestyle – fragrances, fast cars, jewellery – they are also likely to begin pondering how to make that life last as long as possible. This ties in with a study, published in March in the first issue of the Journal of Local and Global Health Perspectives, edited by Sohaila Cheema of Doha-based Weill Cornell Medical College in Qatar, into preventable conditions and risk factors associated with heart attack and stroke in Qatar. The results of the study, carried out by HMC in Qatar made concerning reading: “Cardiovascular diseases have for some time been the leading cause of death
“We identified a case of diabetes, hypertension and obesity in a 15 year old.” – Dr. Khalid Abdulnoor Saifeldeen, coordinator for Kulluna for Health and Safety in Qatar. 74 | The Edge
worldwide,” said Alvin Mushlin, chairman of the public health department at the New York-based Weill Cornell Medical College. “But high income countries in the Arabian Gulf region, such as Qatar, have experienced an especially dramatic increase in cardiovascular diseases and other noncommunicable and chronic diseases.” This especially dramatic increase, Mushlin said, has been driven in part by major changes in population and lifestyle factors in recent years. Another national resource that has sprung to the forefront of healthcare development in the country is Qatar Biobank. The health initiative will enable medical research on issues prevailing in Qatar, specifically through the collection of information and biological samples from Qataris and long-term residents. Qatar Biobank is a member of Qatar Foundation, in partnership with the Supreme Council for Health (SCH), HMC and supported by scientists of Imperial College London. Training and education manager at Qatar Biobank, Dr. Nahla Maher Afifi, offers a potential answer to the question of why there is so much focus on healthcare in Qatar at present. “The pattern of diseases emerging in Qatar reflects those seen in other developed countries worldwide including obesity, diabetes and cardiovascular disease,” Dr. Afifi tells The Edge Q-Healthcare. Themes are emerging across the various programmes. Qatar Biobank breaks the threats to local health in Qatar down into three fields: lifestyle, environment and genetics. “Essentially all three factors affect health locally,” Dr. Afifi adds. “Over the next few years, scientists working with Qatar Biobank will be able to gain unique insight into the causes of these diseases in the Qatari population. The knowledge gained so far, continues Dr. Afifi, shows that lifestyle has a significant impact upon health. “One of the biggest changes in the Qatari community’s lifestyle has been in diet,” she said, “and we have therefore developed a questionnaire that captures the full range of traditional and more Western-style foods that are typically eaten in Qatar.” Alongside the well-documented dietary and lifestyle threats, the HMC study found that more than two-thirds of heart attack patients and half of stroke patients in Qatar were younger than 55 years, while some were younger than 40 – an alarming statistic. Among the Qataris, the study concluded that diabetes was the strongest
special section | qatar healthcare preventable risk factor for both heart attack and stroke, increasing the risk by over fourfold in both cases. This was followed by high blood pressure, high cholesterol and smoking. And these factors “seemed to increase heart attack and stroke risk to a greater extent among the Qatari natives as compared to other groups,” Weill Cornell’s Mushlin adds, indicating that genetics also come into effect here and why further research into this field is so important.
Beat the heat
The third factor under scrutiny is the environment, with air pollution widely recognised as a major threat to health. Research led by Qatar University has shown that “the level of fine particles in the air in Qatar is almost six times above the permissible limit,” Dr. Afifi, informs The Edge Q-Healthcare. “Air pollution contributes to high rates of asthma and respiratory illnesses in the country,” she says. “Various local pollutants mix with particulates in the air, including chronically high levels of dust, which cause air quality problems that contribute to asthma and respiratory illnesses, eye diseases such as trachoma as well as vascular diseases.” Qatar Biobank has aligned itself with the Qatar National Research Strategy, which Dr. Afifi adds recognises air quality as a national challenge. This links into a second area of study, one that has rarely been touched on across the Middle East, but could ostensibly affect the health of the people of Qatar in the future: the link between climate, pollution and health. Carbon pollution across the globe is causing climate change, which drives dangerous heat waves, in turn worsening smog pollution, contributing to serious respiratory illnesses. US-based Stanford University scientist Mark Jacobson is among the few people that have conducted research into this link,
The total amount Qatar invested in healthcare in 2011.
Qatar’s renewed focus on healthcare includes three tracks, environment, lifestyle and genetics. (Image Corbis)
In 2013 the focus has been importance of the specific dangers to and maintaining health in the modern Arab world, subjects about which an emerging body of work in Qatar is seeking to inform the population. and a world leader in air pollution and global warming research, as well as renewable energy solutions to these problems. In 2008, Jacobson unveiled the results of a study that spelled out for the first time the direct relation between increased levels of carbon dioxide in the atmosphere and increases in human mortality. The work detailed how upward of 20,000 air-pollution-related deaths per year per degree Celsius of warming may occur, as a result of asthma and other causalities, due to man-made carbon emissions. Speaking to The Edge Q-Healthcare, Jacobson explains why a high level of pollution combined with increased heat is dangerous: “Higher temperatures increase pollution where that pollution is already bad, but not where it is low,” he says. “Thus, polluted cities will become more polluted with increased warming.”
Doha, therefore, should beware. Like any fast-developing city, the capital struggles with air pollution issues, as Dr. Afifi points out. This partly results from a high degree of construction activity – and will only increase over the next decade as large-scale construction continues to grow in Qatar. Add to this Doha’s reliance on private cars for transportation, in lieu of its underconstruction public transit systems, and the city faces a problem of pollution with no outstanding solution. In addition the ‘urban heat island’ effect will exacerbate the issue, heightening Qatar’s exposure. An urban heat island is a populated area that is markedly warmer than its unpopulated surroundings, due to concentrated human activity, including the production of pollution, atmospheric modifications and the covering of natural surfaces. The Edge | 75
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Dr. Khalid Abdulnoor Saifeldeen, coordinator for Kulluna for Health and Safety in Qatar informs The Edge Q-Healthcare that there is a worrying prevalence of undiagnosed illnesses in the country.
The impact is therefore magnified in Qatar, where the vast majority of people live in a single city – Doha. Therefore a higher percentage of the national population is exposed to this effect, and by extension, increased pollution and accompanying health issues. “The urban heat island effect is an additional contributor to warming beyond the emissions of CO2 and other warming agents,” Jacobson adds. Apart from the human toll, treating preventable diseases also has a high cost. A team of scientists from the National Resources Defense Council (NRDC) partnered with economists to investigate the health costs of six climate changerelated events in the US between 2002 and 2009. The events included ozone smog pollution and heat waves, both of which Qatar is exposed to. The results were made public 18 months ago. Data published by the NRDC, smog-related health costs ran to USD6.5 billion (QAR23.7 billion) between 2002 and 2009, while heat-wave related costs totalled USD5.3 billion (QAR19.3 billion), a combined total of QAR43 billion. The figure is by no means a small cost, even for a country of Qatar’s financial standing, representing seven percent of gross 76 | The Edge
“The level of fine particles in the air in Qatar is almost six times above the permissible limit. Various local pollutants mix with high levels of dust contributing to respiratory illnesses,” - Dr. Nahla Maher Afifi, Qatar Biobank.
Fast food and a sedentary urban lifestyle, worsened by lack of exercise and smoking, has been blamed for the high prevalence of diet, respiratory and coronary-related maladies in Qatar. (Image Corbis)
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Kulluna June statistics The Kulluna For a Healthy Heart campaign held a comprehensive public screening campaign.
At least people visited the polyclinic every day
5000 undiagnosed cases of
high blood pressure
5500 hours given by HMC staff
55,000 tests conducted in 15 days
one-to-one consultations with cardiologists
The number of stroke patients in Qatar under the age of 50. domestic product, according to World Bank figures. This may equate to an apparently manageable one percent of GDP per year over the seven-year study, but the outlay most certainly does not end there. Consider the fact that as global temperatures rise, the costs will only increase in terms of plain economics and severity, and it becomes clear that the scale of the potential problem facing countries such as Qatar becomes ever larger
The good news is that Qatar is taking many necessary, basic steps to tackle threats to health as its economy matures. For example, in June, the Qatar Diabetes Association and HMC took part in a comprehensive public screening campaign, providing free diabetes testing. A joint initiative by HMC and Conoco Phillips, the annual theme for Kulluna this year was For a Healthy Heart. “We are identifying a worrying trend of undiagnosed illnesses,” Dr. Khalid Abdulnoor Saifeldeen, coordinator for Kulluna for Health and Safety in Qatar tells
The Edge Q-Healthcare. As a part of the month-long campaign, which started at the end of May, a polyclinic was set up in City Center where people were tested for body composition, heart diseases, obesity, diabetes and hypertension etcetera. For smokers, the level of carbon monoxide was also tested. While a number of undiagnosed cases among the visitors was identified, the tests conducted also led to the diagnosis of extreme cases where the patient had to be referred for emergency treatment. “Can you imagine all those thousands without treatment of hypertension walking around?” continues Dr. Saifeldeen. “There’s a good chance for a number of them within days to have a stroke [or] heart attack.” Dr. Saifeldeen reveals more details about the topic, such as rare but alarming cases. “We identified a case of diabetes and hypertension in a 15 year old, and he was obese as well. Hypertension and diabetes in a 15 year old just coming to have fun with his friends.” The polyclinic was divided into stands dealing with medical testing and rescue as well as healthy lifestyle initiatives. A special stall was dedicated to the demonstration of cardiopulmonary resuscitation (CPR) to the general public. Explaining the idea behind the initiative, Dr. Saifeldeen says, “Everybody who witnesses this can potentially save a life outside.” Other stands of the campaign included, Be Fit, promoting physical exercises, Healthy Eating featuring healthy
50% of the people taking the tests diagnosed to be overweight
20 to 25 percent tested positive for high-cholesterol cases, previously undiagnosed
tested positive for hypertension, previously undiagnosed
2000 people attended the demonstration for the cardiopulmonary resuscitation (CPR)
Qatar Biobank will boost research on issues that prevail in Qatar through the collection of information and biological samples. (Image Qatar Biobank/Adrian Haddad Photography)
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University of Calgary - Qatar Educating nursing leaders of the future The National Health Strategy is an ambitious and far-reaching blueprint for the future of healthcare in Qatar. The Strategy makes it clear that Qatar needs nurses -thousands of welleducated and committed nurses - to take their roles in realizing this vision.
niversity of Calgary - Qatar (UCQ) holds the privileged role of delivering elite, university-level nursing education in the state of Qatar. The only international branch campus of the University of Calgary, UCQ nursing programs combine the academic excellence of the nursing education offered at the University of Calgary in Canada with the unique needs of Qatar. UCQ graduates can become nursing leaders, health researchers, policy makers, educators, and primary care-givers. The Bachelor of Nursing (BN) program offered at UCQ is the equivalent of the internationally renowned and recognized program available in Canada at the University of Calgary, and is taught by internationally certified Canadian nursing professors and educators. At UCQ there are two BN degree: one designed for students applying directly from high school, and the other for working nurses who already hold a recognized diploma in nursing. BN graduates may apply to the Master of Nursing in Oncology program - that is sponsored by Hamad Medical Corporation and in support of the Qatar National Cancer Strategy, or to the University of Calgary. The Qatar National Research Strategy (QNRS) envisions Qatar as an “international centre for research and development, excellence and innovation.” A pillar of healthcare in Qatar, UCQ supports the QNRS vision through interdisciplinary research initiatives undertaken by UCQ faculty, graduates, and nursing students. Since 2010, UCQ has received more than 3.8 million USD in HMC and QNRF research funding. Current research projects include a study of climate on respiratory health in Qatar, Interprofessional Healthcare Education, diabetes prevention, and the relationship between healthy living and cardio-vascular disease among women in Qatar. UCQ nursing students and faculty are committed to identifying key health issues and providing solutions that will benefit the people of Qatar. As a partner in the Academic Health System (AHS) UCQ supports the AHS mission of drawing key participants in healthcare education, delivery and research together in support of the National Healthcare Strategy. UCQ Students and faculty are active in community engagement projects with organizations such as Qatar Diabetes Association, the American School Doha, and the ‘Waqalya’ campaign of the Qatar Red Crescent.
qatar healthcare | special section nutritional advice, Don’t Smoke, Quit Smoking, warning about the side-effects of smoking, Know Your Numbers conducting tests to calculate body compositions, along with more general stands such as Ask the Pharma, ECG and Ask the Doctor. The booklets provided to the visitors could work as both the guide to heart problems and a record of health-related numbers such as blood pressure, pulse, body mass index (BMI), blood sugar and cholesterol level, all tested on the spot during the campaign. Operating for six hours every day, people of different demographics waited for the clinic to open at four pm so they could get their tests done free of cost. “It’s not only the number but also the demographics and the distribution… we see the Qataris, people from GCC, the Asians, the Westerners, we see the men and women, we see young teenagers,” says Dr. Saifeldeen. Kulluna’s strategy for raising awareness is by first capturing the people, conducting the tests, identifying if there is any complication and then refer to them for further advice. “The challenge is often for people to come, a lot of them don’t want to know,” Dr. Saifeldeen added. In August a Kulluna drive called ‘Beat the heat’ supported by Conoco Philips Qatar and the Qatar Centre for Voluntary Activities (QCVA) targeted awareness at construction sites. At the launch of the campaign, Kulluna programme chairman Dr. Saifeldeen says heat-related illnesses such as heat stress, heat stroke and heat exhaustion can damage the brain and other vital organs, and can as well cause death in extreme cases, advising workers to drink sufficient fluid, stay in the shade where possible and to take frequent rest breaks. “During summer days and nights, numerous cases of dehydration and heat-related illnesses are being presented to the emergency departments, and the vast majority of cases are seen in outdoor workers.” Accordingly, the main aim of the Kulluna campaign is to increase awareness of the dangers of heat exposure, emphasis
that prevention is the best way to beat the heat and to promote collective and shared responsibility among all sectors of the community, also advising employers to provide workers with fluids and shaded areas, ensure they get adequate rest times and comply with legal working hours during the hottest hours of summer days. “We have distributed gift packages to thousands of outdoor workers by visiting more than 50 locations in Doha, Al Khor, Al Wakra and Mesaieed. The gift items included a water bottle, refillable drink bottle, bottle cooler and a cap. We also distributed leaflets written in four languages, Dr. Saifeldeen tells The Edge Q-Healthcare. “Also, we are very pleased to have QCVA helping us in this campaign and we look forward to further cooperation in the future.” Apart from such programmes, centralised measures are also being taken in Qatar. Recently, the government launched its universal health insurance scheme, which seeks to limit the exposure of the population to the potentially high costs of healthcare. However, though Qatar is taking steps to address lifestyle and genetic threats to its peoples’ health through public awareness and professional research and information sharing, what of the lesser-discussed environment front? Scientist Mark Jacobson advises there is one thing Doha can do to protect itself and its people from adverse climate-changelinked health effects: the electrification of transportation. “Even if the electricity is generated from fossil fuels, pollution will be moved from the street, where more people breathe it, to power plants,” Jacobson says. “CO2 reductions will occur,” he continues, “due to the efficiency of electricity for vehicles versus internal combustion.” Health issues in an emerging economy are an expensive problem, and given the lifestyle influence, a potential future crisis. But if Doha continues to act appropriately as it is currently doing, it could go some way to saving Qatar’s wealth and, more importantly, the health of its population.
Encouraging better lifestyle choices, such as a focus on improved diet and more exercise would go a long way to improving the health and longevity of Qatar’s population (Image Corbis/Arabian Eye)
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PRIVATE SECTOR GROWTH While the healthcare sector in Qatar is primarily run by the state â€“ with the Supreme Council of Health (SCH), the Ministry of Public Health and Hamad Medical Corporation (HMC) playing the major roles â€“ business opportunities in the private sector healthcare are continually improving, writes Aparajita Mukherjee.
Business opportunities for healthcare providers exist in Qatar to service expatriate communities and provide specialised services, (Image Corbis/Arabian Eye)
Private healthcare is often deemed expensive the world over since it does not have the subsidies that the public healthcare sector can bank on. The Edge | 81
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ith a healthcare system that is primarily dependent on the public sector, led by the SCH (which does the policy planning for the sector), the Ministry of Public Health and the HMC (which takes care of the execution aspect), the role of the private sector healthcare providers at present in Qatar is complementary. However, it is expected this will eventually increase with the phased announcement of the National Health Insurance Scheme (see box out). Raed Izzat H. Abugheith, general manager of Qatar Medical Center tells The Edge Q-Healthcare that once the NHIS comes into effect, it is likely that most Qatar Healthcare by the numbers
Private hospitals Qatar’s healthcare needs will also include demand for medicines as the population grows.
3000 Deficit in hospital beds according to WHO standards
82 | The Edge
Qataris will continue to use the stateprovided health service, at least for more basic treatments, whereas private firms will have the most impact in specialised services, which require more expertise and, in turn, can generate more revenue. “As more Qataris benefit from the economy’s growth, the pool of patients willing to pay for improved and quickly available healthcare should deepen, allowing the private healthcare sector to strengthen,” he says. Dr. Sameer Moopan, CEO of DM Healthcare, which owns regional private healthcare provider Aster Healthcare, agrees. ”Currently the insurance sector is seeing a redefinition which signifies how much impact the healthcare sector will be having in a year’s time. Regulations and standards are being raised which ensure high quality healthcare. The private health
sector will be focussed mainly on primary healthcare and partly on secondary care.”
In the overall dynamics of the healthcare sector, the private hospitals and clinics, licensed by the Ministry, play an increasingly important role in providing healthcare to the residents of Qatar. There are two private hospitals (with more than 100 beds), 128 private clinics, more than 20 polyclinics, more than 100 dental clinics and nearly 200 private pharmacies. According to Abugheith, 67 percent of the healthcare providers in Qatar work in the private sector. Listing the business segments that the private sector players operate in, he distinguishes between health service providers (primary care, hospitals, clinics, residential care, ambulances and diagnostic services); retailers and
“The pool of patients willing to pay for improved and quickly available healthcare should deepen.” – Raed Izzat H. Abugheith, GM, QMC.
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Qatar’s private clinics handle a significant traffic of day-care patients. (Image courtesy Aster Healthcare)
distributors (pharmacies, drug shops, and pharmaceutical distributors); health management organisations (insurance companies and other risk-pooling entities; and manufacturing entities (manufacturers of pharmaceuticals, medical supplies, medical equipment, and biosciences).
With the number of private healthcare clinics, business is competitive in terms of the service segments and the price that people have to pay for the services, and according to Dr. Moopan in the past few years the number of private healthcare providers and healthcare centres has increased across Gulf Cooperation Council (GCC) countries. “There are a lot of outpatient clinics in the private sector,” he says, adding that there is a huge gap in regard to the need for hospital beds in Qatar. “The number of hospitals in Qatar needs to be increased. According to the current population count and World Health Organization (WHO) standards, the current deficit in hospital beds in Qatar is approximately 3000 beds. By 2022, there will be a rise in population, thereby the demand for healthcare would be on a rise.” Abugheith adds that healthcare spending per capita is expected to remain high, driven by outpatient services, higher awareness levels and overconsumption patterns. This growth will be driven by a combination of an increasing incidence of chronic lifestyle diseases, a growing ageing population, high purchasing power, low inﬂation, substantial government 84 | The Edge
budgetary allocation to the sector and an increasing volume of patient encounters. This means that the healthcare sector has huge potential to grow in the near future.
Pricing and PPP possibilities
Private healthcare is often deemed expensive the world over since it does not have the subsidies that the public healthcare sector can bank on. Dr Moopan says that there are three levels of pricing in case of the private sector of healthcare. “The majority of the healthcare is priced at an average level. The newcomers in the health industry are priced at minimal costs. Very few medical centres are priced at a level that’s considered expensive.” Dr. Moopan feels that public-private partnership is the future for any country. “In Dubai, DM Healthcare has tied up with the Dubai Health Authority (DHA). Aster looks into health education in association with DHA. There are lots of activities that can be done by such a tie up.” In case of Qatar, Dr. Moopan says that initially the SCH had planned for something similar, in tie up with private healthcare providers, to provide for the single male expatriate labourers by setting up hospitals. “The private healthcare centres had bid for the same and they are waiting for the further proceedings. Two hospitals and four medical centres were set up by the government in various regions with regard to this planning, which is now undertaken by Red Crescent and similar organisations.”
3000 The current deficit of hospital beds Qatar, according to WHO standards.
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insurance in Qatar
The Qatar National Health Insurance Scheme that will provide universal healthcare for both citizens and expatriates is a culmination of a four-year long project by the Supreme Council of Health (SCH), managed by the new National Health Insurance Company (NHIC) set up by the SCH.
n July 2013 the first of five stages of the health insurance scheme went into effect, providing cover for Qatari women aged 12 and above for maternity and related women’s health conditions. According to a SCH report, by sometime in 2015 the mandatory health insurance law will apply to all Qatari nationals, and both white-collar and blue-collar expatriates. HE Abdulla al Qahtani, minister for Public Health and secretary general of the Supreme Council of Health, noted in an interview that the new health insurance scheme, “will give patients the freedom to choose their provider, both from the public and the private sectors. Patients will no longer need private health insurance to go to a private hospital, and by offering choice, we will create competition in the sector, which in turn, will improve services.” Insurance premiums for Qatari nationals will be paid for by the government, irrespective of whether they work in the public or private sector, and expatriates by their employers. The new law has a number of key objectives beyond improving the quality of healthcare delivery services, explains Roger Phillips, legal director at Pinsent Masons law firm in Qatar, its aim will be to improve overall access to healthcare (especially among nonprofessional workers), regulation to ensure costumer protection, matching healthcare services with the burgeoning population and increasing accountability of both healthcare and insurance providers. The SCH is yet to release a detailed plan of what benefits will be covered under the mandatory health insurance scheme. However, Ryder Smith, a partner at PwC in Qatar tells The Edge Q-Healthcare, the initial drafts of the law stated there would be a basic package applicable to all expatriates regardless of their profession and an enhanced basic package applicable to all nationals. “Technical details on how preexisting conditions will be treated are expected to be part of the regulations covering the basic and supplementary packages,” says Smith. The SCH has worked with both the private and public sector in deriving the scheme, and is in ongoing discussions with insurers, who according to Smith would like more clarity around the scope of basic cover for individuals. The implications for insurance companies will depend on the regulations for implementation by the NHIC, which will be the sole provider of the basic coverage at the outset that all residents and visitors will be subscribed to, explains Smith. Under the scheme, other private sector insurance companies will only be able to offer the supplementary benefit package
for benefits not covered in the basic package. Any provider that wants to sell top-up cover will be regulated by the SCH by way of standards, rules and procedures, says Smith, however the approach of the SCH has not yet been officially communicated. “Insurance companies will clearly need to be approved by the SCH and be able to demonstrate sound systems of control around the offering, marketing and administration of their products consistent with international standards,” he adds. There is a new State law in place governing the supervision and regulation of insurance by the Qatar Central Bank (QCB) – Law No.13 of 2012, which is a priority for QCB, says Phillips. “[It] should raise standards, improve competition and attract quality providers. There is evidence also of insurance companies in Qatar now establishing new subsidiary life and medical insurance companies.” However, insurance companies regulated by the Qatar Financial Centre Regulatory Authority are at a potential advantage in gaining a licence, says Phillips since they are already subject to detailed prudential and marketing provisions, giving them a potential advantage in gaining a licence. Phillips continues that employers with a large workforce, such as contractors in the construction industry, would need to prepare and provision carefully for the upcoming change. “There is also a high probability there will be options for tiered plans or supplemental cover above the basic package,” adds Smith, “and we would expect that to be an area companies might look at in order to compete for in the recruitment of talented staff.” - By Shehan Mashood
HE Abdulla Al Qahtani, Minister for Public Health and secretary general of the Supreme Council of Health in a recent interview noted that by offering patients the choice of public or private sector service providers, The Qatar National Health Insurance Scheme will create competition and improve services.
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Role of research in the
Qatari healthcare system Speaking to The Edge Q-Healthcare, Qatar’s research and education players talk about the role they play in achieving the milestones laid out in the National Healthcare Strategy.
Education is important in fulfilling national needs Qatar University’s College of Pharmacy offers both clinical and pharmaceutical sciences focus in its courses, says Dr. Ayman El Kadi, professor and dean, College of Pharmacy. What is the focus of the courses that the College of Pharmacy of Qatar University offers?
The emphasis is on fostering the integration of knowledge and skills in biomedical sciences, pharmaceutical sciences, behavioural, social and administrative pharmacy sciences, pharmacy practice and clinical pharmacy. Practical experience also plays an important role in training the students prior to graduation. Students must complete a mandatory 24 weeks (960 hours) of clinical internships under the supervision of licensed pharmacists. We follow the Canadian system, NAPRA or National Association of Pharmacy Regulatory Authorities, which is a guideline to prepare pharmacists for entry to practice.
How are the courses tailored to meet the Qatar National Health Strategy? World-class education is an important pillar towards fulfilling the needs of the nation. The BSc(Pharmacy) programme is accredited by the sole accreditation body in Canada; the Canadian Council for Accreditation of Pharmacy Programs (CCAPP). We are the first international programme to achieve full accreditation.
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Our mission is to enrich Qatar’s health In their programmes, the University of Calgary – Qatar, combines academic excellence with the unique needs of Qatar says Dr. Kim Critchley, dean and CEO of the University. What is the focus of the University of Calgary - Qatar (UCQ)?
UCQ offers university education in nursing to Qatari nationals and residents. We are the only international branch campus of the University of Calgary in Canada and are accredited by the Canadian Association of Schools of Nursing. UCQ was established at the invitation of the State of Qatar to bring the high-level nursing education of the Faculty of Nursing at the University of Calgary here to Qatar in support of Qatar Vision 2030.
How are the courses tailored to meet the Qatar National Health Strategy?
Our mission at UCQ is to enrich Qatar’s health and wellness through academic excellence, research initiatives, and community engagement. In our programmes we combine the academic excellence of the nursing education offered at the University of Calgary in Canada with the unique needs of Qatar. To do this we partner closely with key policy makers, health educators, and service providers to tailor our programmes to the needs identified in the National Health Strategy. For example, our Master of Nursing programmes is in partnership with Hamad Medical Corporation (HMC), and in support of the National Cancer Strategy, the specialisation is Oncology. We have developed collaborative training partnerships in Qatar not only with HMC, but also with Qatar Red Crescent, Qatar University, Weill Cornell Medical College in Qatar, the Qatar Diabetes Association, Sidra Medical and Research Centre, the Academic Health System, Qatar Supreme Council of Education, and Qatar Supreme Council of Health in order to focus on the specific needs of Qatar.
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Sidra to help Qatar’s residents flourish Sidra is being built to the highest international standards, committed to offering the best care for women says Dr. Francesco M Marincola, chief research officer. What would be Sidra’s contribution towards Qatar’s healthcare and education sector?
Sidra will be a world–class medical and research centre to be the home of pioneering treatment and research for women and children in the region. Sidra is part of Qatar Foundation (QF) an independent, private, non-profit, chartered organisation founded in 1995 by His Highness Sheikh Hamad Bin Khalifa Al Thani, the Father Emir, to support centres of excellence to develop human capital.
How does the organisation plan to connect the education with professional practice in Qatar?
Sidra aims to be the interface between the populations’ needs and treatments that are delivered by our medical staff with the help of the research conducted on our premises. Sidra was created under the QF’s science and research programme and as part of this, Sidra will interface with many other centres of excellence from across the region to share learnings and best practice, working closely in collaboration with HMC, the national, public healthcare provider in Qatar, ensuring patient services offered by them are complementary and seamless.
Stem cells are being used in the treatment of over 80 illnesses Stem cells are the body’s master cells and provides the family with access to lifesaving qualities of cord blood, says Chris Goodman, CEO, Virgin Health Bank (VHB). What, according to VHB, is the benefit of stem cells for the family?
The overall benefit of stem cell banking is to be able to provide individuals, families, and communities with potential lifesaving options that they may not have available to them. Stem cells are the body’s master cells. They create our organs, tissues, blood and immune system. Saving the stem cells from your newborn’s umbilical cord provides a family with the benefit of having access to both the lifesaving qualities of cord blood and the potential future uses of cord tissue that are in research stages.
Why should anyone store with Virgin Health Bank?
VHB’s headquarters are located in the state-of-the art lab at Qatar Science and Technology Park. All of the equipment that we use is designed for its intended use. We use closed system technology, process the stem cells within validated clean rooms so that the sterility of collection is maintained during the processing.
WCMC-Q has 33 active laboratories Weill Cornell Medical College in Qatar (WCMC-Q) has established strong infrastructure supporting its ongoing research projects, says Javed Sheikh, dean of WCMC-Q. What kind of research facilities does WCMC-Q have here?
At present, WCMC-Q has 33 active laboratories investigating a wide variety of fields, including molecular biology, metabolic disorders such as diabetes, neurogenetic disorders, lipid metabolism, endothelial function, genomics, the ecology of Qatar, and the pathology of various infectious diseases. The university has established a strong infrastructure that provides support for its ongoing research projects and its team of more than 130 researchers. This infrastructure consists of a series of core facilities and services that investigators can utilise in their research projects. These include a bioinformatics core that provides advanced tools for analysis of biological data; a biostatistics,
epidemiology and biomathematics core that helps investigators with study design, data analysis and grant proposal preparation, among others.
How is the course at WCMC-Q tailored to meet the Qatar National Health Strategy?
WCMC-Q’s medical programme produces the doctors needed to meet the health strategy’s goal of establishing a world-class healthcare system and a national workforce of skilled medical professionals. The college is committed to producing excellent doctors, and entry requirements and curriculum are the same as those of the college’s campus in New York, ensuring only the most talented candidates are accepted. The WCMC-Q is the only college outside of the United States (US) that awards its graduates a fully US accredited MD degree. WCMC-Q students are recruited from all over the world but special efforts are made to find and nurture talented Qatari students in order to establish a homegrown pool of doctors and researchers, which is a key pillar of the National Health Strategy. The college also runs a foundation course designed to prepare Qatari high school graduates for the rigours of the premedical and medical programme. The Edge | 87
Inside the minds of leading business figures
business insight Reduction in power consumption is a key differentiator in the market >90
In an exclusive conversation with The Edge, Ghassan Barghouth, country president Qatar for Schneider Electric discusses their business philosophy of environmental protection by helping clients conserve energy.
also in this section Equity, debt, mergers and acquisitions advisory are Alpenâ€™s core business areas
Sanjay Bhatia, managing director Alpen Capital Investment Bank (Qatar) discusses the market outlook, including the rise of mergers and acquisitions and the bankâ€™s unchanged business model, post financial crisis. >92
90 Energy savings by up to 30 percent can be realised by deploying smart city technologies such as those developed by Schneider Electric, says Ghassan Barghouth, country president Qatar. This includes smart grids for managing electricity demand. (Image Corbis)
The Edge | 89
business insight | smart technology
Reduction in power usage is a key differentiator in the energy solutions market Tracing the company’s history in Qatar for 30 years when they began supplying electrical equipment to Qatar Petroleum (QP), Ghassan Barghouth, Country President Qatar, Kuwait and Bahrain, Schneider Electric told The Edge about their broader business philosophy of environmental protection by helping clients save energy. Energy efficiency, sustainability and financial performance are the three paradigms of your global operations. Tell us how you achieve congruence of these three while offering solutions to your clients? Schneider Electric is a leading solution provider and a global specialist in energy management, offering integrated solutions across multiple market segments, including leadership positions in energy and infrastructure, industrial processes, building automation and data centres/networks, as well as a broad presence in residential applications. By focusing on making energy safe, reliable, and efficient we help individuals and organisations make the most of their energy. Our approach of ‘Planet, Profit and People first’ is achieved through the quality and reliability of our products and our local expertise. We are close to our partners and customers to whom we deliver end-to-end solutions for effective energy management. Our comprehensive portfolio of products ensures providing our customers with the best solutions that meet their demand. Our commitment to ethical and responsible practice is exemplary. By measuring our environmental performance, our ability to ensure steady, responsible economic growth while offering products and services that have minimal impact on the environment, and abiding by our commitments to the wellbeing of our employees and support of the local 90 | The Edge
communities in all the countries in which we operate, we make sure operations do not jeopardise the environment. In your smart grid solutions, the company talks about driving network stability, integrating renewables, managing the grid efficiently. How do you do that, if you can illustrate it with an example? The interest generated for smart grids in the Middle East is rising quickly, and most of the utilities are already working on smart grids on a mid- to long-term master plan, documenting its benefits and how to implement the same. The main driver is the existence of available technologies to allow utilities to improve customer service, increase network reliability, reduce technical losses and work on peak loads to avoid extremely expensive peak energy. This will also allow the integration and management of renewable energies, along with the future of electric vehicles. In terms of examples, we are working across the region including here in Qatar with numerous clients to reduce power consumption by up to 30 percent. Energy audits are a good example of the work that we are doing to justify the transition adoption of Schneider Electric smart technologies. Oil and gas is one of the areas that the company operates in. What are the current Qatari projects that you are handling in this field? We are currently working on various projects with a number of clients – we
actually started operations in Qatar 30 years ago as a supplier of electrical equipment for Qatar Petroleum’s oil and gas fields, and expanded to the remaining market segments. As a global specialist in sustainable energy management, we are completely confident in our ability to make meaningful and lasting savings in energy consumption. The oil and gas industry is one of the largest emitters of harmful gases including carbon, and our technologies are helping to improve and increase efficiency in all areas of the industry from extraction through to supply. Smart cities are a craze in many parts of the world. Which are the prominent projects that you are handling in this area? We are working on projects throughout the region. Here in Qatar we are working closely with Lusail on a range of solutions including from our smart city portfolio. Around the region we are also involved with key projects in Saudi Arabia and the United Arab Emirates (UAE). Our innovative smart city offering combines a host of applications that can help realise ambitious plans through facilitating energy savings of up to 30 percent. Solutions for smart city include smart grids for managing demand in electricity, smart water for managing water hazards and growing water demand and smart buildings and homes, for optimising resource consumption and comfort through green buildings
smart technology | business insight
“The Middle East’s energy sector will see investment in its water and renewable energy sector to the tune of approximately USD32.7 billion (QAR119 billion) in 2013.”
According to Schneider Electric country president Qatar, Ghassan Barghouth, due to dwindling fossil fuel reserves there is increasing demand for the services of providers of smart and sustainable power generation technologies.
for hospitals as well as residential and commercial centres. With urbanisation increasing rapidly, it is estimated that cities consume 75 percent of global energy. By 2050, they will accommodate 70 percent of the world’s population, up from the current 50 percent. Therefore, government and municipalities are looking for solutions that ensure efficiency, sustainability and affordability. A smart city is a unified solution helping improve infrastructure for cities worldwide, ranging from mature cities in developed countries to hyper-growth destinations in emerging regions. With your wide experience in the field of power generation, what, in your view, are the challenges facing the field of power generation? Dependable, clean, and affordable energy is the future of the world’s energy issues. We see significant growth in various forms
including wind and solar. Solar panels, for instance, are safe, easyto-install, 100 percent reliable, efficient, and widely available. A solarpowered home adds value to the price of a property, in addition to reducing monthly living costs and the overall carbon footprint. Although there are numerous challenges remaining for the uptake of solar, including lack of subsidies in various countries, steps are being taken to start thinking seriously about the potential of solar and other renewable energy sources. For us at Schneider Electric, we understand one thing clearly – with pressure on fossil fuels from dwindling resources to excessive carbon emissions – it is time to realise that there is a huge future for our products and solutions in the renewable energy space. What is the role that integrated water and power plant projects (IWPPs) will play in the region where water is scarce? The Middle East’s energy sector will see investment in its water and renewable energy sector to the tune of approximately USD32.7 billion (QAR119 billion), initiated this year alone. At Schneider Electric, our smart grid solutions will support IWPP as well as existing infrastructure to reduce energy and waste. The Qatari government recently announced that it is looking to install energy- and water-saving devices in mosques and government schools across the country to help ration and reduce the consumption of these resources. There is an expectation that the scheme will lower electricity and water consumption in mosques and government schools by 37 percent and four percent, respectively. The Edge | 91
business insight | financial services
Equity, debt, mergers and acquisitions advisory as Alpen’s core business areas In an exclusive interview with The Edge, Sanjay Bhatia, managing director, Alpen Capital Investment Bank (Qatar) LLC spoke about investment banking and his firm’s outlook on the Qatar market. He added that post financial crisis, their business model has not changed on the back of a rational matching of risk and returns.
“M&A activity has picked up considerably since last year and more so in the last few months, which has positively impacted our business.” 92 | The Edge
Sanjay Bhatia, managing director, Alpen Capital Investment Bank (Qatar) LLC told The Edge that the expected IPOs on the Qatar Exchange are likely to widen the investor base.
financial services | business insight
“Most of the deals that we work on are in the mid-cap category ranging from QAR182 million to QAR912 million.”
When it comes to the global strategy of Alpen Capital, what is the main focus? And how does that contribute to your bottom lines? Alpen Capital is a regional investment bank providing advisory solutions in the areas of debt, equity, capital markets and mergers and acquisitions (M&A). We have a physical presence in most of the Gulf Cooperation Council (GCC) countries, since our objective is to work closely with our clients to find the right fit and best solution to address their financial and business growth strategies. We have advised on several debt transactions for our clients where most of the deals that we have advised and arranged are in the mid-cap category, ranging from USD50 million (QAR182 million) to USD250 million (QAR912 million). Another area of our expertise is equity advisory where we advise clients on private equity placements or a pre-initial public offering (IPO) strategy. Some of our key clients with whom we have worked in this area are in the family-owned business sector, where planning for an IPO means they require support prior to making the transition towards corporatising their business. For many clients we have advised on a private equity capital raising strategy where we have facilitated private equity funds of international repute to infuse growth capital into the family-owned businesses. We continue to advise on many M&A transactions, interacting closely with family-owned businesses who at some point had diversified and, given the current market realities, want to now realign and focus on their core businesses for sustained longterm growth. We support these companies in divesting non-core businesses or enabling a strategic partnership to strengthen their market positioning. Research is a significant part of your business. How does that help the company? Our research is instrumental in our business development and marketing efforts. We are not industry agnostic, which allows us to work with many different industry leaders, covering the market holistically. In addition, our research capabilities also builds our brand with extensive media coverage, which is generated from each published report. In the present business climate, which of your advisory divisions – debt or equity – is more profitable and why? Understanding our client needs and adjusting to market conditions are essential to our business. Hence, in the current market scenario we have seen a significant rise in our equity and M&A advisory service offering.
Do you see a trend reversal in the near term as far as your advisory volumes are concerned? Given our current business pipeline and expected infrastructure projects to be awarded in Qatar, we expect a fair mix of debt and M&A advisory revenues to continue. The India-GCC corridor has also become a key source of business for us where we have seen a rise in several cross-border transactions. M&As have picked up in the MENA region. What does this trend foretell for your business growth in the region? M&A activity has picked up considerably since last year and more so in the last few months, which has positively impacted our business. Companies are currently spending on acquisitions designed to advance their businesses, and using acquisitions both for top-line growth and to expand into geographies and new product lines. Due to the current economic sentiments, there is also an increasing trend among companies to focus on their core competencies and most divestment or dilution decisions are being taken with a need to re-focus on their business growth strategies. While talking about your key strengths in your global website, there is mention of solid reputation, strong values, clientcentric approach and In-depth understanding of the local market. How do your global corporate values shape the deals that you do close? Our strong and diversified corporate culture is the core of our organisation strategy. This is clearly reflected in our interaction with clients and our vast relationships across the GCC and beyond, which is a direct result of where our brand is today. Our presence across GCC and India enables us to tap into the local resources and various areas of expertise whenever it is required, adding value to our clients. We always encourage our employees to be innovative and entrepreneurial in nature, and this positively shapes our interaction with clients as well. How, in your view, will the MSCI upgrade affect the equity markets in Qatar and the UAE? Both the UAE and Qatar are economies with a lot of growth potential and now with the MSCI upgrade, both countries will automatically attract a large pool of foreign investors. The expected IPOs slated [in Qatar] should also create more liquidity amongst stocks and investors. This essentially is a cycle in the sense that IPOs create new investors and vice versa. What is your take on the large volume of infrastructure spend that Qatar will see in the period to the run up to the 2022 World Cup? The infrastructure spend will have a positive impact on the business climate of the country as a whole. We feel that Qatar is very carefully and systematically managing the award of contracts to avoid possibilities of overheating of the market. The pace is being managed well and our outlook on the Qatar market remains bullish. How have the fundamentals of investment banking altered in the period after the financial crisis? Our strategy has remained unchanged. Our focus is to provide capital raising and M&A advisory services to our clients, on a very conservative, well thought through and analytical level. We do what we do best – find the right opportunities that suit our clients’ needs and requirements. The Edge | 93
Spillover Continued from page 51
While Qatar Airways CEO has said the airline is not considering entering the low cost sector, Akbar Al Baker will no doubt be watching developments in the region and specifically the growing commercial threat of Turkish Airlines closely in order to maintain Qatar Airways’ market share. (Image courtesy Qatar Airways)
routes. It also utilises jet bridges at its Dubai hub – a perk that most of Europe’s low-cost carriers have deemed too expensive. Nonetheless, Al Ghaith insists that FlyDubai is standing by its “low-cost principles” in every other regard. The airline’s young fleet age, fast turnaround times and favourable labour contracts echo the underlying principles that allowed operators such as Ryanair and easyJet to revolutionise air travel in Europe. In Europe, the more mature no-frills sector has grown to 34 percent of traffic, while the Gulf’s regulatory landscape continues to favour incumbent full-service airlines such as Qatar Airways. Nonetheless FlyDubai is slowly but surely lifting the region’s 10 percent low-cost carrier penetration rate. “There are a lot of complexities facing the whole of the aviation industry,” Al Ghaith replies when asked about the challenges. He notes that high oil prices affect airlines operating from every region in the world, adding: “We are, however, fortunate to be based in a globally recognised centre for trade, tourism, logistics and transportation.” For now, FlyDubai’s presence in Doha is limited to one spoke feeding traffic back to its UAE hub. Qatar Airways has no plans for a low-cost subsidiary, and foreign ownership restrictions make it unlikely that the flag carrier will be usurped at home. However, from further afield the pressure is mounting for Qatar Airways to continue outperforming its competition in product quality, while also keeping fares as low as possible, as it is clear that a growing spectrum of airlines is noticing the Middle East region’s rapidly growing market potential in the global aviation sector. 94 | The Edge
Continued from page 67
Investing in Qatar’s infrastructure
Mark Rudman, Qatar Director of UK construction major Faithful+Gould says that companies that are planning projects such as Ashghal or Qatar Rail are prioritising these to ward off massive burden on the supply chain.
disbursements will also be of a matching size. QNB’s Saeed said as the state-owned bank, QNB is in a position to write large cheques, they would rather invite syndications to facilitate sustained business of foreign banks in the country. But though facilitating international banks is one aspect, a greater reality is also that these banks will want to be involved in the large-scale projects. IBQ’s Jain was of the opinion that foreign banks will make an increasing attempt to take part, largely based on the perception of the Qatar story. Given the size and complexity of planned expenditures, Qatar would need banks to form consortiums and combine deals to accommodate the financing requirements. Except for QNB, no single bank has the financial depth to individually fund any project. This, in a way, will be good for smaller banks, which can hope to contribute to the growth of Qatar. al khaliji’s Abdulkhalek agrees, “Consortiums will reduce competition among local banks and enable the establishment of product risk management process.” Of course, the eventual size of the infrastructure business that any bank will be able to fund, will also to some extent depend on the existing banking relationships that the contractors of these projects have. “Quite often the simplest solution is bank financing through a bilateral loan or syndication with a core group of relationship banks, which is the most common funding tool used in Qatar,” says HSBC’s Sanderson. Bankers widely agree that with the project pipeline as it is – and the banks’ willingness to partake in this business segment – what is now needed is a logistical fine-tuning. This will ensure that deadlines do not clash and costs do not escalate, which will unleash an inflationary spiral. Ultimately this will call for exacting coordination between the government to manage the total process, the banking community and the contractors executing the projects. The Edge | 95
products and reviews Sony Xperia Z1
Canon EOS 70D
The five-inch Xperia Z1 is the latest in Sony’s Z series of smartphones that draws on the best of its Sony camera heritage. The Xperia Z1 features a 27 millimetre wide angle lens and a combination of other camera technologies that delivers the same level of quality and performance as a conventional compact digital camera in a slim, waterproof smartphone. High shutter speeds and three times clear image zoom also prevents shots from being blurred while enabling them to be captured at a distance.
The EOS 70D is the first digital SLR in the world to feature Canon’s dual pixel CMOS AF technology, which delivers smooth and accurate autofocus (AF) when shooting Full HD movies and fast AF acquisition when shooting in live view mode. The 70D has the ability to capture full-resolution images at up to seven frames per second, with up to 65 JPEG or 16 RAW images in a single burst. The three inch LCD touch screen supports a series of multitouch gestures including swiping and pinch-zooming for navigating menus, amending settings or flicking through images. It is also the latest EOS model to feature integrated Wi-Fi, providing the user the ability to remotely control the camera, as well as share images. In multiple-exposure mode, photographers can shoot and combine up to nine exposures into a single image, or use a range of filters to instantly change the style and look of their shot.
Read it: Are You Smart Enough to Work at Google?
William Poundstone’s latest book, Are you smart enough to work at Google? Is similar to one of his previous books, How Would You Move Mount Fuji?: Microsoft’s Cult of the Puzzle - How the World’s Smartest Companies Select the Most Creative Thinkers published in 2003. This book much in the same vein as his last, looks at the odd and challenging questions that potential employees have to answer if they want to work not just at Google but any of America’s largest and most profitable companies. The first part of Poundstone’s new book details how Silicon Valley has become a leader in hiring practices. Google’s human resources department, or ‘People Ops’ as it is known, even employed an industrial psychologist to perform statistical analyses in determining what factors mattered in hiring. In the book, Poundstone quotes Amazon hiring manager Steve Yegge from a blog post in 2004 as writing, “Everyone knows Google’s doing a good job at hiring smart people. What’s not so clear, I think, is that Google is actually so good at technical recruiting that it’s not just a difference in magnitude; it’s a difference in kind.” But if like most people you are not interested in HR practices of the workplace, the book is definitely worth reading for the 150 odd pages (which is half the book) of puzzles, riddles and trick questions. How many golf balls will fit in a school bus? How much would you charge to wash all the windows in Seattle? Can you swim faster through water or syrup? Or use a programming language to describe a chicken? If you are the sort of person that would enjoy trying to figure out the answers to these sorts of questions, this book is definitely worth a read. Available at Virgin Megastore for QAR 68
Iconia A3 Android Tablet The Iconia A3 tablet by Acer is designed with wide viewing angles and quadcore performance to provide a richer entertainment, multimedia, gaming, and web experience. The Android platform based tablet creates a virtualised 5.1 channel surround experience over headphones, reduced background noise and volume boost for clear dialogues and consistent volume levels. The 10.1-inch display offers crisp and accurate colours from wide viewing angles for a better visual experience. Powered with a quad-core 1.2GHz cortex A7 processor, the Iconia A3 can deliver up to 11 hours of HD video playback, as well as fluid and fast navigation through apps and websites. The Iconia A3 also features Acer’s ‘IntelliSpin’ technology that expands the tablet’s screen image rotation feature, so even when lying flat, the screen image will rotate to match the user’s orientation when turned.
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the view from doha
EFFECT’ Doha is still a young-enough city whereby the arrival of one new business can become a major event. Such was the case with IKEA. Kamahl Santamaria looks at how the Swedish giant has infiltrated Qatar’s homes and lives.
ave you ever heard of the ‘IKEA Effect’? It is more than a quirky phase, it is actually a real term from a psychological study – the result of a 2011 research paper from Harvard Business School in the United States – which showed that when people constructed something themselves (as they do with IKEA flat-pack furniture) they felt an inordinate amount of affection and pride for it. It sounds fairly simple, but having made several trips to IKEA in the past few months and successfully assembled a children’s chair, a computer desk and who-knows-what-else, I understand the feeling. There is a sense of a job well done after a battle with pieces of wood, diagrams and Allen keys! Yet I feel that in our desert city, there is a different kind of ‘IKEA Effect’. One that speaks to a blue-and-yellow behemoth on Shamal Road, which has changed our thinking and our shopping habits in a short space of time. IKEA’s arrival in Qatar was ridiculously highly anticipated. The feeling, particularly amongst the expatriate community, was that this was what the retail sector needed. A home store where you could get everything instead of visiting three different malls to get what you needed. A friend of mine now has almost an entire house furnished with IKEA purchases. She endured living in a sparsely furnished house for months – made worse by the opening delays – but said it was worth it as the other options available in Doha did not compare.
Since March 2013 IKEA has become an incredibly strong focal point. It recorded 500,000 visitors in its first three months. IKEA’s regional managing director even admitted there was difficulty in getting products in at the beginning, such was the high demand. But besides that, IKEA has turned into a topic of discussion almost in the way that politics or current events can be, and a social destination it its own right. Which leads me to wonder – why the obsession? I think part of it is the initial novelty factor, just as it was when Boots and Virgin Megastore arrived in Doha. Western expatriate shoppers found it almost like being reunited with a long-lost-friend – though it is interesting to note that in a customer breakdown of IKEA’s first three months, the largest portion of visitors were Qataris (30 percent) with the next highest being Arab expatriates (25 percent). Perhaps this highlights a new audience for IKEA – people who might not have experienced it before and wanted to see what all the hype was about. But in the end, it is about choice. Qatar is still growing and options can be limited. Plus more and more people are arriving to live and work here, and they come with certain hopes and expectations. No doubt, being able to easily source the basic elements for a home is one of them. IKEA has simply introduced a completely triedand-true business model that has succeeded in around 40 other countries. However the key in Qatar is the consumer – one that was always looking for new options, but had convinced itself months before opening day that IKEA would be its retail saviour. With that sort of audience, how could it lose?
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. One of IKEA’s greatest strengths is its sheer depth and variety of products. (Image Corbis)
100 | The Edge
The Edge is a business magazine targeting ambitious professionals operating within Qatar’s multi-sector business landscape. The Edge is read...