The Edge January 2015 Issue 63

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contents January 2015

w w w.t h e e d ge. m e

Vol. 7 No. 1

- January 2015

36

46 Rifts and the resolving of disputes within the Gulf Cooperation Council (GCC) made many headlines in 2014; here Qatar’s Foreign Minister Khalid bin Mohamed Al Attiyah (left) attends a recent GCC meeting in Riyadh in Saudi Arabia. (Image Reuters/Arabian Eye)

Inside the cover story

38 Hamad International Airport: Aviation game changer 40 Market strengthening: A key legacy of bourse upgrades 42 2014: Landmark year in Qatari construction 44 The Gulf: Can the GCC nations integrate? 46 Qatar’s rent inflation: A problem to solve 48 Growing Qatar’s entrepreneurial scene with QBIC 52 The impact of Qatar’s expansive cyber crime bill 54 Impending changes to Qatar’s labour law 56 Qatar’s ecological footprint challenge 60 From Doha to Rio: Qatar-Brazil 2014 Year of Culture 62 Ukraine: Russia’s “soft underbelly”

- QATAR’S BUSINESS MAGAZINE - Vol. 7 No. 1 - Issue 63 - January 2015

cover story

TOWARD

2015 Examining some of the biggest business stories of 2014 and the bearing they might have on the coming year

100% Qatari

PLUS:

Qatar is en route to becoming the GCC financial hub Middle East banks may face major challenges from Basel III Oil price decline: Challenging times for Qatar? Mobile money in Qatar: Giving migrant workers access to financial services

Examining some of the biggest business stories of 2014 and the bearing they might have on the coming year, including events in Ukraine and how they may effect Qatar, political machinations in the GCC, cyber crime and migrant worker rights in Qatar and the opening of Hamad International Airport, among others .

48

Qatar realtor Mark Proudley discusses the key factors driving Qatar’s rental inflation in 2014, and what can be expected in the country’s real estate sector in 2015. Pictured here is a view of the Pearl-Qatar. (Image Corbis)

The Edge | 3


contents page

sectors

Finance & Markets 23

The Basel III standards on banks’ capital adequacy will have a profound effect on banks in the Middle East in the run-up to final implementation on March 31, 2019.

Energy & Sustainability 27

As OPEC holds steady on production levels and the oil price remains depressed going into 2015, what does this mean for Qatar?

Real Estate & Construction 31

Before the year 2014 closed, Qatar unveiled designs for two more stadiums – Khalifa International Stadium and Qatar Foundation Stadium, both featuring a seating capacity of 40,000.

Khalifa International Stadium is redesigned to feature a parking space for 6000 cars and 2300 buses. (Image Supreme Committee for Delivery and Legacy)

Tech & Communications 33

A new mobile-based payroll system launched by Ooredoo and QNB recently could provide low-income migrants with access to their salaries, and the government the opportunity to monitor and make sure salaries are paid on time.

In Qatar, 100 percent of ‘transient labourers’ or low-income migrant workers have access to a mobile phone, making mobile money a key factor in reducing the number of people who are unbanked. (Image Reuters/Arabian Eye)

regulars From the Editor 8 Photo of the month 10 Business News 12 Qatar Perspectives 18 Products 65 4 | The Edge


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firefly communications PO Box 11596, Doha , Qatar Tel: +974 44340360 / Fax: +974 44340359 www.firefly-me.com The Edge is printed monthly Š 2014 Firefly Communications. All material strictly copyright and all rights reserved. Reproduction in whole or in part, without the prior written permission of Firefly Communications, is strictly forbidden. All content is believed to be factual at the time of publication. Views expressed by contributors are their own derived opinions and not necessarily endorsed by The Edge or Firefly Communications. No responsibility or liability is accepted by the editorial staff or the publishers for any loss occasioned to any individual or company, legal or physical, acting or refraining from action as a result of any statement, fact, figure, expression of opinion or belief contained in The Edge. The publisher (Firefly Communications) does not officially endorse any advertising or advertorial content for third party products. Photography/image credits and copyright, where not specifically stated, are that of Shutterstock and/or iStock Photo or Firefly Communications.

6 | The Edge



editor’s letter Philip L. Graham, erstwhile publisher of the The Washington Post, once said, “News is the first rough draft of history.” This sentiment sums up our approach to this edition of The Edge. In our special cover feature, Toward 2015, we focus on some of 2014’s biggest stories through the prism of continuum and influence on the coming year. First is the Russia-Ukraine saga, which we ran as a cover story in The Edge in May. A key connect for Qatar is of course that an important part of the Putin plotline is the control of gas supply, to and through Ukraine, which funnels more than half of Europe’s gas through its territory. Though less relevant now, thanks to the recent drop in oil price, Russia’s annexation of Crimea and its ongoing influence in Eastern Ukraine, contributed significantly to the volatility of gas prices in Europe in 2014. The situation also spurred energy sector analysts to postulate whether, if Russia did indeed cut or severely deplete gas supplies via state energy company Gazprom to Europe, that Qatar might replace it. Non-existent growth in Western Europe (and its reliance on cheap Russian gas) has made this possibility seemingly unlikely in the short term. But ongoing disruption in the Ukraine and sanctions and political wrangling between Russia and the West means that this story is far from over and will continue to dominate headlines in 2015. In Qatar, stories such as the Hamad International Airport (HIA) opening and, related in many senses, Qatar’s massive construction boom, concentrated attention to a large degree around Qatar’s investment in infrastructure and preparation for the 2022 World Cup. A connection here, of course, is the questions raised by sceptics over delays in construction and the final inauguration of HIA, which opened five years later than originally planned. Has this set a precedent in Qatar? Will every project that needs to be finished by established deadlines meet its goal? What will be the repercussions of failure? These were all questions asked in 2014. Optimists are confident in Qatar’s ability to meet

its ambitious goals and cite unique complexities in constructing a large aviation hub that most other major projects do not face. But the fact remains that all eyes will be on Qatar until that first kick off whistle blows in 2022, and the country faces a massive challenge to ensure that the numerous large-scale projects being undertaken here at present are completed on time and within budget. This scrutiny will be felt more acutely from 2015 onward. One cannot mention the 2022 World Cup nor construction without mentioning the issue of migrant worker rights in Qatar and their alleged abuse and denial of basic needs and rights. This is an ongoing narrative, perpetuated by international media and human rights organisations. In 2014, this was backdropped by numerous commitments made by Qatar to revise its controversial labour laws under the Kafala system. These highly debated improvements will, ostensibly, include promises the government made, and be implemented in 2015. Rental inflation, as well as its effect on overall inflation in Qatar, has been another hot topic in the country in 2014, and is a debate that seems set to continue into the new year. Another issue we cover is Qatar’s greenhouse gas emissions and high ranking on the World Wildlife Fund’s Living Planet Report, which rates carbon emissions per capita. The country held the top spot in 2012, and is now second only to Kuwait. Some further stories we cover this issue, among others, from 2014, include the MSCI upgrade of the Qatar Stock Exchange and Qatar’s relations with its Gulf Cooperation Council neighbours, which improved dramatically after a volatile year, and seem set to continue to do so in 2015. For balance, we also looked at positive stories such as the Qatar Business Incubation Centre, catalysing all the effort into promoting entrepreneurism in Qatar for the past few years. Finally, ending the year on a feel-good story, the well-received QatarBrazil Year of Culture culminated recently, following those of Japan and the United Kingdom; cementing the success of this initiative that, it is hoped, will continue with Qatar-Turkey in 2015. As these histories and others unfold around us, many challenges, failures and successes await. So here is to 2015 being prosperous and positive for us all.

In Toward 2015, we focus on some of 2014’s biggest stories through the prism of Miles Masterson continuum. Managing Editor 8 | The Edge



10 | The Edge

Army parade on Qatar National Day


photo of the month

Qatar National Day has been celebrated since 2007 on December 18, by an Emiri Decree of HH the Father Emir Sheikh Hamad bin Khalifa Al Thani, prior to which it was September 3. Pictured here is the army parade, which took place in the morning on the Corniche. The parade started with a rendition of the national anthem and an 18-gun salute to mark the event and showcased Arabian horses and camels, parachutists belonging to the Armed Forces and Internal Security Force (Lekhwiya), the infantry columns of the army, police and the Emiri Guard. (Image FotoArabia/ Charbel Najem) The Edge | 11


news

business news

QIA appoints new head The Qatari sovereign wealth fund is looking at broadening its geographical focus of investment to include Asia and venturing into new companies, amid a shake-up at the helm.

main story

HH the Emir Sheikh Tamim bin Hamad Al Thani has appointed HE Sheikh Abdullah bin Mohamed bin Saud Al Thani as the new head of the Qatar Investment Authority (QIA). Sheikh Abdullah is currently chairman of Ooredoo, a position he has held since 2000, and has served as the chief of the royal court from 2000 to 2005, in addition to being a member of the country’s planning council. Commentators have argued that the change in leadership would not alter the fund’s strategy, estimated by the Sovereign Wealth Fund Institute to be worth about USD170 billion (QAR618.8 billion). Sheikh Abdullah replaces Ahmed Al Sayed, who had been chief executive of Qatar Holding, the investment arm of QIA, before his appointment to the QIA job in July 2013. Al Sayed is set to be appointed as an adviser to HH the Emir following his departure, and will retain his minister of state title, which he held concurrently with the top job at the fund, the source added. HH the Emir also ordered a reshuffle of QIA’s board of directors, in a move which saw him step down as chairman. The QIA has recently focused on Asia as it looks to diversify its portfolio of assets away from Europe, where it has predominantly invested in the last few years. It aims to invest between USD15 billion (QAR54.6 billion) and USD20 billion (QAR72.8 billion) in Asia over the next five years, it had been announced earlier. QIA is also said to have bought a stake in the mobile taxi dispatching service, Uber. International media has announced that QIA was among the investors who took part in Uber’s USD1.2 billion (QAR4.47 billion) financing round, though the size of the fund’s investment has not been disclosed. It has been argued that the recent round of financing raised by Uber came on the back of the evaluation of USD40 billion (QAR145.6 billion), a figure which more than doubled itself in less than six months after raising money last summer at a USD18 billion (QAR65.5 billion) valuation, which many feel is a precursor to the company’s initial public offering. In another investment bid early last month, the QIA, along with Canada’s investment firm, Brookfield, tabled a final bid for Songbird Estates (the principal activity of which is the management of its investment in its main operating subsidiary, Canary Wharf Group plc), by raising the price by 18.6 percent from their previous bid. The new offer was made directly to Songbird investors rather than the company’s management team. The QIA and Brookfield stated that their new bid was a final cash offer, which means that under law it cannot be increased. “It’s a take it or leave it offer,” a source said. Songbird’s shareholders include Total worth of QIA a small number of large investors. As

HE Sheikh Abdullah bin Mohamed bin Saud Al Thani has recently been appointed as the new head of the QIA. Sheikh Abdullah is currently chairman of Ooredoo, a position he has held since 2000.

QIA has recently focused on Asia as it looks to diversify its portfolio away from Europe.

QAR

618.8 billion

12 | The Edge

well as the QIA, which owns a 28.6 percent stake, other major investors include New York investor Simon Glick, who owns 25.9 percent, China Investment Corporation, which owns 15.8 percent, and Morgan Stanley, which owns 8.5 percent.


“Functionality of buildings will become more important than their form”

In conversation with The Edge, Nick Witty, director of real estate at Deloitte, provides an overview of Qatar’s real estate sector.

What are some key trends in Qatar’s real estate market right now? A significant volume of development activity in Qatar is speculative in nature, According to Nick Witty, meaning that construction commences director, real estate, Deloitte, rents are generally market with no tenant necessarily signed up at driven and when tenants cannot afford a particular that time. During the construction period product, they will naturally migrate to a different, more and post-practical completion, a ‘letting’ affordable one. agent is appointed to attract and sign up tenants, but there is always a risk that the development in question remains vacant for a period of time. While approximately 10 years ago, the market was relatively immature and the limited new product was relatively easy to lease, today the market has matured significantly; as such, tenants have more choice and are in many cases more discerning. As a consequence, I envisage that developers will become far more end-user focused, whereby the functionality of the building will be more important than the form, that is, the external appearance, so they will build with this in mind in an attempt to secure quality tenants for longer periods of time. Currently, there are 13 new malls under construction in Doha, which will add an additional 1.3 million square metres (sqm) to the existing retail supply of approximately 712,000 sqm by the end of 2017, assuming they are delivered on time. The more successful developments will be those that have carefully thought out tenant mix plans, offering a wide choice to the shopper, but equally those that have been designed with both the shopper and retailer in mind. What other measures do you think Qatar can take to relieve rent pressures? Rents are generally market-driven and when tenants cannot afford a particular product, they will naturally migrate to a different, more affordable one. This will create different market tiers across all use classes that are prime, secondary and tertiary. In the event landlords cannot lease their prime product due to the affordability of the tenant, and they are experiencing high levels of vacancy, by default, they are most likely to reduce their rents. While this may take time, this balance of supply, demand and pricing is likely to take effect. Clearly the challenge will be whether tenants have an option, other than high-rented accommodation, and whether they are prepared to move down a tier. Only time will tell. Which sub sector of the real estate will see the most competition in Qatar in the near future? All sectors are increasing supply, but if we are to highlight which is likely to face the most competition in the near term, it is probably high-end residential.

by the numbers

news

Corporate Social Responsibility in Qatar Top CSR focus areas critical for sustainable development Education

Employment

78% 86%

Youth

66% 42%

Qatari organisations surveyed are actively engaged in CSR

CEO’s involvement in CSR Involved

Not involved

69% 31% CSR impact on clients

95%

agree that sustainability- led organisations drive more customers

78%

attract and engage their clients through CSR CSR impact on businesses

97% 72% 97%

of CSR professionals agree that sustainability performance is very important said they improved the bottom line said that building a business case for CSR initiatives is a challenge

Changes since

2013

60%

of companies now see social return on investment

52%

see increase in operating outcomes

34%

see reduction in staff turnover

58%

see increase in organisational performance

Source: Results are from a survey done with 69+ organisations and professionals in Qatar. CSR Qatar Summit 2014, Informa Middle East.

The Edge | 13


news “Works within Qatar for the GCC Rail for passenger and freight transport would begin next year and the first, rail movement is expected sometime in 2018.” Qatar Rail’s managing director, Eng. Abdullah bin Abdulaziz Turki, alluded to the long-distance rail that was also discussed at the recently held GCC summit in Doha, where a statement alluded to the project being “of great importance in facilitating trade and movement of people between member states.”

Silatech, IREX train Palestinian career guidance advisors Silatech and an international nonprofit organisation, IREX, recently concluded a four-day training programme, graduating a new group of 13 Tamheed advisors at the ceremony. During the course, representatives from six youth development resource centres (YDRCs) in the West Bank received training as career advisors, qualifying them to conduct individual career counselling sessions aimed at helping youth choose a career.

RasGas recognised for project integration excellence

Nafez Bseiso, RasGas chief venture officer, accepted the IPTC Excellence in Project Integration Award on behalf of the company.

“In Qatar, they are working in big companies from Germany, from France, from England and from other European countries, and they are responsible for their workers and not FIFA.” Sepp Blatter, president of FIFA, told reporters during a visit to Sri Lanka that his organisation would not be held responsible for the working conditions of migrant workers helping build infrastructure leading up to the 2022 World Cup in Qatar.

14 | The Edge

Business News in Brief

The RasGas Expansion Phase 2 project - one of the company’s largest and most ambitious ventures - received the 8th International Petroleum Technology Conference (IPTC) Excellence in Project Integration award on the inaugural day of the three-day event recently held in Malaysia’s capital, Kuala Lumpur. From amongst 13 submissions considered, the Company was shortlisted along with Shell and Aramco before being selected for recognition at the award presentation and conference dinner.

Fifty One East and Sony hold a workshop to introduce 4D focus system

Fifty One East, the leading consumer electronics brand, hosted a workshop on Sony’s latest ‘4D Focus’ system, which sets a new benchmark in photography. The workshop was held in Fifty One East at Lagoona Mall by experts from Sony Middle East and attended by representatives of Fifty One East, and a group of professional photographers and modern technology enthusiasts. The workshop captivated the participants, who showed big interest in the presentation, and experienced for themselves the 4D Focus system with the assistance of Sony experts.


business in brief Vodafone showcases M2M connections of the future at ITU 2014 The city of the future is one where citizens are not only connected to each other, but to the information and systems that matter to them. The city of the future is underpinned by connectivity. Mobile is driving the vision of the smart city by enabling entirely new developments to be built from the ground up using the latest technology to connect devices, systems and infrastructure directly to their inhabitants. This is the commitment Vodafone Qatar made to support the Qatar National Vision 2030 at ITU Telecom World 2014, held in Doha, Qatar at the Qatar National Convention Centre in early December by the International Telecommunication Union (ITU). Vodafone has over 20 years in Machine-to-Machine (M2M) technology. It has been recently positioned as a leader in Gartner’s first ever Magic Quadrant M2M Services, placing highest in both ability to execute and completeness of vision.

Start-up Watch

news

This month we look at two startups launched in 2014 that will have an impact in the coming year. AiO 3D Printer XYZprinting, a company set up last year, is just one of many clamouring to mainstream 3D printing by building a mass market home printer. The XYZprinting da Vinci 1.0 AiO is a square box that comes with a 3D printer, as well as a laser 3D scanner. A slow spinning disk rotates objects as the laser maps the contours of an object which can be directly printed, using specially designed software. This is the first piece of hardware that has the ability to make a 3D copy of a physical object. While the printer might not be the best in the world in terms of its output, a few years ago, such a feat would have been thought impossible. The fact that XYZprinting has managed to price the AiO at USD799 (QAR2900) is even more startling. The 7.8 x 7.8 x 7.5 inch scanner and printer is certainly worth it. Reviews so far have been positive, with most users being impressed by the quality and detail with which the laser was able to capture and reproduce.

The AiO printer is one of the first 3D printers in the market that is able to scan and print replicas of 3D objects.

Katara hosts 4th International Opera Awards ceremony

The International Opera and Classical Music Awards ceremony (Oscar della Lirica) at Katara’s Amphitheater, held recently at Katara.

The Cultural Village Foundation (Katara), recently hosted the fourth edition of the International Opera and Classical Music Awards ceremony (Oscar della Lirica) at Katara’s Amphitheater, in the presence of Qatar Olympic Committee’s secretary general, HE Sheikh Saoud bin Abdulrahman Al Thani; International Basketball Federation’s President, Horacio Muratore; and Katara’s director general, Dr. Khalid bin Ibrahim al Sulaiti, among others. The ceremony was also attended by a distinctive group of top international artists, renowned opera singers and musicians, and local and international media, in addition to a large audience of opera and classical music lovers.

Ello’s model of no ads for its social networking site has resonated with many users.

Ello the ‘No Ads’ social network Another startup to watch is Ello, the ‘No Ads’ social networking site that launched last year by designer Paul Budnitz, who promised a site that was the polar opposite of Facebook. There would be no selling of advertising based on user preferences or gleaned through personal data. The site launched in March 2014, but user growth exploded in the last quarter of the year, and continues to grow. A manifesto on the site reads, “We believe a social network can be a tool for empowerment. Not a tool to deceive, coerce and manipulate — but a place to connect, create and celebrate life. You are not a product.” The company’s rather strong stance against current business models in the social media space has had a strong resonance with many users, who have since flocked to the service. Plans to monetise the site in the future include a premium model where users pay to unlock certain features. The Edge | 15


news

events

1 February

Qatar Design Awards

Located in Doha and designed by French architect Jean Nouvel, Burj Qatar received the ‘Overall Project of the Year’ award at the fifth annual Middle East Architect Awards 2012.

The Qatar Design Awards is aimed at recognising and awarding outstanding interior design and architecture projects located within Qatar. The ceremony will be held at the W Hotel in Doha. The Qatar Design Awards will bring together 150 leading industry professionals. The competition was open to developers, operators, interior designers and architects for projects located within Qatar to send their entries online. An expert panel of industry specialists will judge the Qatar Design Awards.

24–25 March

The Energy Efficiency & Conservation Forum

Current patterns of energy use put Arab economies among the least efficient in the world. Growth in energy consumption has been faster than economic growth during the past decade. This trend implies energy is not being used effectively to produce value within the regional economies. The Energy Efficiency and Conservation Forum is designed to provide a common platform for experts, government officials and delegates to share their experiences and research ideas. Topics of discussion at the event will include the energy and water nexus in the Arab world, an energy efficient Qatar including Kahramaa‘s advancements toward energy efficiency and conservation, energy policies to develop sustainability and smart metering technology in efficient energy usage. The event will also include an exhibition featuring the latest technology offerings in the market by companies that provide products and services the in power sector.

4-7 May

26-28 January Offshore Middle East

March

10-11 March Qatar Projects Conference

6-7 April Future BIM Implementation

Qatar Chamber 1st SMEs Conference

16 | The Edge

January

April

10–11 March

As part of its mission to support small and medium size enterprises (SMEs), Qatar Chamber is planning to host an annual conference in Doha to promote entrepreneurship, stimulate services for SMEs, support diversification and to create employment opportunities for the national workforce. The first edition of the Qatar Chamber SMEs conference will focus on Germany and it represents an opportunity to share best practice and enable local SMEs to compete for the business opportunities Qatar has to offer by connecting them with key stakeholders as well as with foreign companies to explore potential alliances.

Events Listing

May As a dedicated design and interiors event, the IQ Exhibition will attract a highly targeted audience.

Project Qatar

Project Qatar 2015, the 12th International Construction Technology & Building Materials Exhibition, will return with a four-day show from May 4 to 7. Established as Qatar’s biggest construction event, Project Qatar 2015 will attract buyers and suppliers, offering them networking opportunities while providing them a chance to have details about key products and services. Running concurrently with Project Qatar 2015 will be Heavy Max 2015, the 12th international exhibition for heavy machinery.

4-7 May Project Qatar 4-7 May Qatar StoneTech 4-7 May Heavy Max Machinery Exhibition 18-21 May World Stadium Congress


Q a t a r ’s B u s i n e s s M a g a z i n e

Stay informed about business in Qatar. Online.

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qatar perspectives Qatar is en route to becoming the financial hub of the GCC According to Abdul Hakeem Mostafawi, Qatar’s compelling growth story, with a gross domestic product (GDP) growth rate of above six percent, increased spend on infrastructure projects and a predicted rise in the budget for the coming year, are all being fuelled by the country’s financial sector, and more specifically, in banking.

In Qatar, the banking sector is growing at more than 12 percent year on year. This is the fastest growth rate in the region. With total banking assets currently in excess of USD250 billion (QAR910 billion), it also accounts for the third largest banking sector in the Middle East and North Africa region. The asset quality is strong with non-performing loans (NPLs) expected to remain below two percent of total gross loans for the foreseeable future, one of the lowest in the region. In addition, the banking sector is expected to finance at least USD100 billion (QAR364 billion) in infrastructure development until 2022. Furthermore, banks are increasingly looking at expanding their business abroad. In December 2013, 17.7 percent of Qatari banks’ assets were outside the country in comparison to 15.6 percent the year before. The diversification strategy also cements a healthy foundation for sustainable future growth and indicates the progressiveness of the sector in comparison to the rest of the region. Qatar has a highly competitive banking sector. This naturally results in improved customer service as a key competitive differentiator. Local as well as international banks have to stay at the front of new and innovative banking services and products that speak to the demands of the customers. This has already spurred improvements in modern banking channels, such as digital banking and personal relationship banking for both corporate and retail customers. 18 | The Edge

The banking sector is expected to finance at least QAR364 billion in infrastructure development until 2022. Finally, the successful and sustainable growth of the banking and finance industry in Qatar is reliant on the solid foundation that is set by the governance of the Qatar Central Bank (QCB), the main objective of which is to build a resilient financial sector that operates at the highest international standards of regulations and supervision. The strategic plan for QCB is based on critical goals that include enhanced regulations, strengthening the financial market infrastructure and building human capital through training and development of local talent, to name a few. A cornerstone for sustainable growth would be the proactive investment in the human capital with the vision of cultivating a strong talent pool for the financial sector, young people with new ideas and an eagerness to build on the future of the sector in the country. QCB further believes that the country’s financial sector is also critical to supporting the efforts of a diversified economy that will result in job creation and investment, and is instrumental in creating a future that is not so dependent on the vulnerability of the energy sector. Entrepreneurship and innovation are key to the future of economic diversification and the banking sector is pivotal to supporting the establishment of new and innovative businesses. International connectivity and sound financial relationships with trade partners will also secure the sustainability of the financial sector. Therefore, the RMB35 billon (QAR20.8 billion) currency swap deal that made headlines last November, which allows the QCB to supply banks

with the Chinese currency for use in trade settlement, is a clear step in the right direction. It is one of a handful of similar accords, which the People’s Bank of China, the Chinese central bank has signed with countries around the world. Taking all of these factors into consideration, it is definite that the path is clearly laid. Under the continuation of visionary leadership, we can be confident that the financial sector in Qatar is onroute to establishing its importance in the Gulf Cooperation Council, and firmly supporting the Qatar National Vision 2030.

Abdul Hakeem Mostafawi is the CEO of HSBC Bank Middle East Limited, Qatar.

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qatar perspectives

Qatari family businesses: New leadership and corporate governance models needed One of the major strengths of Qatar’s economy is the continued growth of Qatari family businesses, with their distinctive leadership styles, business values and governance. However, there are key issues, which have to be addressed so that Qatar is able to achieve its potential and increase its global presence, write William Scott-Jackson and Roger Phillips. It is well recognised that family businesses are a key driver of prosperity across the countries of the Gulf Cooperation Council (GCC). It is estimated that 75 percent of the private sector economy in the GCC is accounted for by family businesses. The leaders of these businesses are increasingly concerned to see the establishment of and improvements to the governance model for such businesses, including effective oversight and participation by family members and stakeholders. As in many GCC countries, Qatar’s family firms have helped drive economic success and have provided stability and a strong cohesive link between national and private sector strategies and objectives. Family firms compete for revenues and resources with all other types of organisations worldwide and this often requires work in order to bring all operations in line with other international standards. In addition, informal governance structures that may work well in close-knit family companies with strong leaders do not always mesh with the divergent goals and interests of new generations. There

may be a struggle for power among a wider family group, for example. All these point to careful planning and a solid understanding of the needs of the stakeholders, so that the transition to the new generation can be effectively managed, critically preserving the business for the future in line with the family’s strategic objectives.

Succession and transition plan for future generations

The strategy for succession in a family firm may be simply based on family position, but to safeguard the future of the company, selecting the next leader must take into account competence and leadership factors. The Human Development Pillar of the Qatar National Vision 2030 provides a valuable framework for the issues of governance, ownership and succession. Compared to other models, these strengths include: a strong sense of vision and pride (often based on the name and reputation of the founder); deep loyalty and engagement of leadership teams; a long-term strategy; for growth rather than short-term profit; concern for reputation and influence for good, rather than just money; management of risks and a clarity of leadership, assuming there are no external shareholders (accepting potential tensions in families themselves, of course). There is no universally appropriate governance model, but one that needs to be developed and maintained with careful evaluation of and close regard to the risks of mixing family matters and assets with corporate assets. Research by Oxford Strategic Consulting into the key factors, which should be taken into account when

Careful planning and understanding of stakeholder needs can help transition to the new generation. 20 | The Edge

designing the governance and succession in Qatari family organisations, found two key elements: one, the traditional and prevalent leadership style adopted by senior Qataris is distinct and has some major advantages over the commonly taught Western leadership styles. Two, due to rapid growth and labour market demographics, if every senior role in Qatar was to be taken by a Qatari, then 80 percent of Qataris would have to be leaders. To ensure Qatar thrives as a global hub of business, there is the need to implement a new model of governance, leadership and succession that combine the best and most relevant aspects of global best practice with the unique and valuable differentiating factors inherent in Qatar’s social, family and political traditions, coherent with Islamic concepts and aspirations as stated in the Constitution and reiterated in Qatar National Vision 2030.

Professor William Scott-Jackson is chairman of Oxford Strategic Consulting. Roger Phillips is legal director, Pinsent Masons, QFC branch.




Contents: Middle East banks may face major challenges from Basel III. 23. GCC as an investment destination. 24.

finance & markets Analysts argue that Middle East banks – including Qatari financial institutions – have three choices in rebalancing their capital and income to address such issues . (Image Corbis)

The Basel III standards on banks’ capital adequacy, stress testing, and market liquidity risks were formulated in 2010-11 by the Basel Committee on Banking Supervision specifically to prevent the type of Western banking crisis that erupted in 2007-08, and led to the global financial crisis, happening again. However, its tangential effects on banks in the Middle East will also be profound in the runup to the final implementation of the standards on March 31, 2019 writes Simon Watkins.

“F

or forward-looking banks, the Basel III requirements can be much more than an administrative burden and a drag on growth and profitability; rather, financial institutions should consider the new rules as a catalyst to upgrade their capabilities and as a call for thoughtful, balanced improvements of their risk-return profile,” Daniel Diemers, partner with global management consultancy Strategy&, in Dubai, told The Edge. He added: “This will benefit the region not just during times of financial crisis or market dislocation, but for decades to come.” The most publicised part of Basel III has broadly been its primary goal of increasing

Middle East banks may face major challenges from Basel III the level, quality, and global consistency of regulatory capital, and to standardise the corollary requisite deductions and adjustments. According to the standard, each bank’s Tier 1 capital should enable it to absorb losses while remaining a going concern and, in this context, it categorises Tier 2 capital as a ‘gone concern’ reserve to protect creditors in the event of an insolvency, and abolishes Tier 3 capital altogether. It also states that Tier 1 capital should predominantly comprise common equity and retained earnings, with a tighter definition of common equity Tier 1. In practical terms, says Diemers, for Middle East banks, these requirements place greater

emphasis on them holding high-quality liquid assets (HQLA), such as government debt. Currently, the Middle East debt markets are not consistently deep enough to provide that sort of liquidity – although this may change before 2019 – and, although the region’s central banks have never failed to step in to provide liquidity during times of stress, counterparties (especially foreign) may become far less tolerant of banks that rely on implicit support rather than real balance-sheet liquidity. With that said, specifically for Islamic banks in the region, Mohamed Damak, global head of Islamic Finance for global ratings agency Standard & Poor’s, in Paris The Edge | 23


sectors | finance & markets

told The Edge, the revision of the capital definitions are unlikely to have a major impact on their quality of capital, as most of their capital already comprises common equity. “The recourse to Tier 2 capital instruments – primarily subordinated sukuk issuance – has been limited over the past 10 years. Tier 3 capital instruments are nonexistent,” he said, “and over this period, Islamic banks have issued USD86.1 billion (QAR313.4 billion) of sukuk in total, USD6.2 billion (QAR22.6 billion) of which comprised Tier 2 instruments issued mainly by banks in Saudi Arabia, Malaysia, and Turkey.” It may well be, he adds, that the HQLA issue for the region’s banks as a whole may be at least partly addressed by central banks, the International Islamic Liquidity Management Corporates (IILM), and the Islamic Development Bank (IDB). This follows the lead of the Central Bank of Malaysia, which in recent years has tackled the HQLA problem by becoming the largest issuer of short-term sukuk that have provided Malaysian Islamic banks with much needed liquidity management instruments. “Basel III implementation may encourage highly-rated sovereigns and corporates to list their sukuk on developed and liquid markets to make them eligible for HQLA inclusion,” he concluded. It is not just the quality of capital, though, that underpins Basel III, but also the quantity, with the new standards calling for a bank’s minimum capital to assets ratio (CAR) expected to be in the 15 to 18 percent range, with systemically important financial institutions (SIFIs) to be at the very top end of that band. Although the impact of this ratio on Middle East banks is likely to be less significant than on their United States or European counterparts, said Strategy&’s Diemers, the higher requirements,

QAR

313.4 billion

The amount of subordinated sukuk issued by Islamic banks in the past 10 years. 24 | The Edge

combined with more stringent definitions of capital, mean that they will need to raise substantially more capital if they want to continue on their current growth trajectory, or make some tough decisions about where they want to grow and where they can rein in growth. In this context, the firm’s analysis of 22 banks in the Gulf Cooperation Council (GCC) and the Levant (Jordan and Lebanon) found that by 2019, Middle East banks that do not address the new capital requirements will find themselves with capital adequacy ratios ranging from shortfalls of -10.4 percent to excesses of +10.5 percent of Basel III minimums. “Fast-growing players in Qatar, Kuwait, and the Levant will be the hardest hit, as any growth in assets requires accompanying growth in Tier 1 capital to meet new standards,” Diemers told The Edge. “By contrast, countries that have witnessed relatively slower growth in recent years – including Bahrain, Saudi Arabia, and the United Arab Emirates – will have little difficulty meeting or even exceeding required CAR if they continue along that trajectory.” Even in this latter respect, he says that, the new capital requirements will hinder their growth if they want to ramp up regional and international expansion, and consequently they too would need to rethink their business and asset mix with an eye to strategic capital requirements. Investment

GCC as an investment destination The look-east policy of the Gulf Cooperation Council (GCC) and the ever-growing desire of India to secure energy supplies further strengthened economic and business ties for mutual benefit writes Sanjay Vig. The phenomenal economic rise of the GCC and growing prominence of India in the global economy have been hallmarks of this century. Although economic relations between these two regions date back several centuries, a deepening of economic engagements was facilitated by high economic growth rate in India

The signing of the BIPA between India and the GCC will promote GCC investment into India. and GCC substantial financial liquidity over the last decade. In a bid to promote cross-border investments, several joint initiatives have been undertaken by the GCC and Indian governments. One such initiative pertains to the signing of the Bilateral Investment Promotion and Protection Agreement (BIPA) between India and the GCC, promoting investment into Indian infrastructure by GCC companies. The signing of this treaty with all GCC countries has raised the prospect of an India-GCC Free Trade Agreement as well. The GCC offers several distinctive advantages for overseas investors. GCC’s investor-friendly economic environment, geographical proximity and inherent advantages in energy-intensive manufacturing hold tremendous potential for attracting further investments from Indian industries and strengthen its position as a manufacturing and re-export hub. All these advantages, if properly showcased, could attract substantial investment flows from Indian corporates, who are looking to expand their global footprint and scouting for distinctive cost advantages to remain globally competitive.

Sanjay Vig is the managing director of Alpen Capital.

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Contents: Oil price decline: Challenging times for Qatar. 27. Is Pakistan finally going ahead with Qatar LNG imports?. 28.

energy & sustainability Qatargas CEO Khalid bin Khalifa Al Thani has been quoted as saying the country intends to expand LNG exports to Asia in general, and to China and India in particular.

Oil price decline: Challenging times for Qatar?

As Organization of Petroleum Exporting Countries (OPEC) holds steady on production levels and the oil price remains depressed going into 2015, what does this mean for Qatar? As burgeoning shale energy supplies and increased competition in many of its target markets have marginalised its role as the world’s swing producer of natural gas, business has been more challenging than usual recently for the world’s leading liquid natural gas (LNG) exporter. But there may be succour for Qatar from an unexpected quarter, writes Simon Watkins

I

ndeed, with oil prices stuck in a bearish trend after the OPEC decided to hold steady on current production levels at its November meeting, Qatar may yet find relief for its global ambitions, providing benefits that more than outweigh the negative budget implications of a depressed hydrocarbons pricing complex. Until Brent oil broke down and consolidated under the USD90 (QAR328) per barrel (pb) level in July, Australia was set to surpass the annual LNG-manufacturing capacity of Qatar by 2018, with a swathe of new liquefaction plant construction projects projected to triple its LNG capacity to 85 million tonnes by 2018, according to industry data. Enjoying a comparative geographical advantage over Qatar – and corollary beneficial shipping rates – Australia seemed poised to challenge the oft-repeated strategic plans of Qatargas CEO Khalid bin Khalifa Al Thani to expand LNG exports to Asia in general, and to China and India in particular. Speaking recently at a monthly gas lecture organised by the The Edge | 27


sectors | energy & sustainability

LNG projects generally have lives that span decades, thus allowing developers to focus on longer-term oil forecasts when considering investment decisions. Gas Exporting Countries Forum in Doha, Al Thani highlighted that although there clearly are opportunities for the firm in other continents, the fact remains that currently the bulk of these supplies are to Asia, which holds 75 percent of total LNG demand, and added that LNG demand in the Asia Pacific region by 2016 may well hit the 320 million tonnes per year level, having almost doubled since 2005. Australia was regarded as an even more potent threat to these plans, given the longstanding high-level commercial contacts that were built up between it and

QAR

655 billion

The total cost of Australia’s planned LNG project developments in coming years.

Asia as a consequence of Australia’s being the biggest supplier of iron ore (used in steel) and a major source of coking coal to the region during the various construction booms seen there over the past few years. “No more so than in China and India,” highlighted Calvin Cobb, president of global energy consultancy Calvin Cobb and Associates, in Houston, to The Edge, “and these are key target markets – for business in general, not just hydrocarbons - for Qatar.” This was again underlined by the fact that Qatar has even shifted the focus of the Qatar Investment Authority to the region, announcing recently that it plans to invest around USD15-20 billion (QAR5573 billion) over the next five years in Asia. However, with spot oil prices still trading below the USD75-90 (QAR273-328) per pb level required for many Australian LNG firms to generate a 10 percent rate of return, some of these projects could – at the very least – be substantially delayed, Sam Barden, CEO of SBI Markets, in Dubai, told The Edge. In this context, Woodside Petroleum’s chief executive officer, Peter Coleman, said

Estimated production for projects with 2015 FID 8 7 6

Gas

5

Gas Condensate

4 3 2

Oil

1 0 2015

2020

2025

Source: UCube by Rystad Energy

in a speech in November that a prolonged oil price slump will hurt returns at existing LNG projects and threaten future developments, presumably placing at risk its target of approving the USD35 billion (QAR 127 billion) Browse LNG project in the second half of next year. It is true, of course, that LNG projects generally have lives that span decades, thus allowing developers to focus on longer-term oil forecasts when considering investment decisions, and when up and running can generate significant cashflows for 20 to 30 years, said Wood Mackenzie LNG analyst, Robert Morris, in Singapore, as evidenced by the fact that when Chevron’s Gorgon LNG project was approved in 2009, the oil price was at almost record lows.

Oil prices

Is Pakistan finally going ahead with Qatar LNG imports? A deal appears finally to have been struck for Qatar to supply energy-starved Pakistan with liquefied natural gas (LNG) as from the beginning of 2015, having been mooted since at least the middle of 2012, reports Simon Watkins. A deal appears finally to have been struck for Qatar to supply energy-starved Pakistan with liquefied natural gas (LNG) from the beginning of 2015, having been mooted since at least the middle of 2012. According to a recent statement from Pakistan’s Minister of State for Petroleum Jam Kamal Khan, in Islamabad, Pakistan is due to complete the construction of an LNG import terminal in 28 | The Edge

January near the southern port city of Karachi that will initially handle 400 million cubic feet (bcf) of liquid natural gas (LNG) per day (3.1 million tonnes per year). From Pakistan’s perspective, the case for dramatically increasing its imports of gas has been compelling for many years, but has been exacerbated recently by the authorities encouraging drivers to convert their cars to

With a population of around 180 million, Pakistan requires six to eight bcf per of gas which the deal with new LNG import deal with Qatar will help excerbate. (Image Corbis)


energy & sustainability | sectors

Pakistan is due to complete the construction of an LNG import terminal in January near the southern port city of Karachi that will initially handle 400 million cubic feet of LNG per day. compressed gas, which is cheaper than gasoline. With a population of around 180 million, Pakistan actually requires six to eight bcf per day of gas, depending on the time of year, but currently produces a maximum of around 4.1 bcf, which has led to persistent power cuts in many areas – including key industrial cities - for up to 20 hours per day. One major reason why it has taken so long to bridge at least part of the demand and supply gap has been pressure from the US on Pakistan not to go ahead with the long-planned Iran-Pakistan (IP) gas pipeline project, due to ongoing tensions between Tehran and the West over Iran’s nuclear programme. In January 2010, the US formally requested that Pakistan abandon the pipeline project in return for which Pakistan would receive assistance from Washington for the construction of an LNG gas terminal and to import electricity from Tajikistan through Afghanistan’s Wakhan Corridor. This understanding, though, was invalidated only two months later when Iran and Pakistan signed an agreement on the IP pipeline on 16 March. With Pakistan failing to make any substantive progress on constructing its part of the pipeline, despite Iran having completed its section by July 2011, the US stepped back into the situation in the shape of energy giant ConocoPhillips (CP), which began mediating an LNG deal between Pakistan and Qatar. Former US Secretary of State Richard Armitage – a member of the board of ConocoPhillips – was drafted in to play a part in persuading Pakistan (also at that point in receipt of vast sums of USAID money and technical expertise) to reach an agreement with Qatar, with July 2012 seeing high-level CP executives fly to London and Dubai to negotiate the terms of LNG contracts with senior members of Pakistan’s petroleum ministry. The Edge | 29


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Contents: Qatar reveals designs for two more stadiums. 31. Challenges for delivering smart cities addressed in Doha. 32.

real estate & construction Qatar reveals designs for two more stadiums

With the redesigned look of Khalifa International Stadium unveiled in November, the renovation works are scheduled to be complete by 2016. (Image Supreme Committee for Delivery & Legacy)

Before the year 2014 closed, Qatar unveiled the designs for two more stadiums – Khalifa International Stadium and Qatar Foundation Stadium. by Farwa Zahra

A

head of the 2022 World Cup, Qatar has unveiled designs for four stadiums, while the total number of stadiums is yet to be confirmed. Three of these stadiums were revealed in 2014, reflecting Qatar’s active role in hosting the tournament, despite bribery allegations and worker controversies marring the prospects of the World Cup. The first to be unveiled in November was the new design for Khalifa International Stadium. Once the renovation works are complete, the stadium will have a seating capacity for 40,000. If works proceed in line with the initial plan, Khalifa Stadium will be ready in 2016, featuring a parking space for 6000 cars and 2300 buses, along with two metro stations that will be located

in the surrounding area to provide easy access to public transport. The stadium will be attached to the Olympic and Sports Museum, featuring historic sport collections. Built in 1976, the stadium is one of the oldest sporting venues of Qatar. It was last renovated in 2006 to comply with the requirements for Asian Games. Following the unveiling of Khalifa Stadium was the design launch of Qatar Foundation Stadium and Health & Wellness Precinct. Planned to be completed in 2018, the stadium was unveiled on December 2, marking the fourth anniversary of Qatar’s winning bid for the World Cup. Qatar Foundation Stadium too will feature a seating capacity of 40,000. Speaking at the unveiling of the sports

venue, secretary general of the Supreme Committee for Delivery & Legacy, Hassan Al Thawadi said, “This is another key milestone in our preparations for hosting the 2022 FIFA World Cup, and is the fourth stadium design we have unveiled in the past 13 months. The QF Stadium and Health & Wellness Precinct will not only allow us to host an amazing World Cup, but also leave a genuine legacy in Qatar well beyond 2022.” Both the stadiums have been designed to be functional for a summer tournament, featuring innovative cooling technology to ensure an optimal playing temperature of 26 degrees Celsius and provide a comfortable viewing environment for fans and players. In December, the Supreme Committee signed a contract with Qatar Mobility Innovations The Edge | 31


sectors | real estate & construction

The Supreme Committee has signed a contract with Qatar Mobility Innovations Center to provide the innovative Air Quality Monitoring System (Hawa’ak). Center to provide the innovative Air Quality Monitoring System (Hawa’ak). Hawa’ak is an air quality monitoring system that utilises a rich Internet of Things platform, to support real-time monitoring of air quality, weather

and climate, and other environmental conditions, allowing users to access this information via multiple channels, including mobile delivery, and web portals. In June 2014, Qatar unveiled the design for Al Bayt Stadium, only a month after ground breaking works commenced on the site of Al Wakrah Stadium. With the launch of two more stadium designs, Qatar is well on its way to delivering the 2022 World Cup, undeterred by the ongoing international scrutiny over bribery allegation, hot summers and the treatment of migrant workers. In November, FIFA cleared Qatar of alleged corruption in bidding for the 2022 World Cup. However, Michael Garcia, the American lawyer who submitted the investigation report about the case, has accused FIFA of erroneous representations of the facts presented in his report. Amid pressure to disclose the report’s findings, FIFA’s executive committee is yet to decide whether the document would be published or not.

“This is another key milestone in our preparations for hosting the 2022 FIFA World Cup, and is the fourth stadium design we have unveiled following in the past 13 months,” said Hassan Al Thawadi, secretary general, Supreme Committee for Delivery & Legacy. (Image Flickr/ Doha Stadium Plus Qatar)

80,000 The combined seating capacity of Khalifa International Stadium and Qatar Foundation Stadium.

Smart cities

Challenges of delivering smart cities addressed in Doha

Impacts of transmitter waves on human health was among the issues discussed at the Annual Middle East Smart Cities Summit in Doha. According to the World Health Organization, the urban population in 2014 reached 54 percent of the total global population. Furthermore, it is expected that by 2017, a majority of people will be living in urban areas. As the number of people in cities continues to grow, smart cities can efficiently manage the population through smart transportation, smart energy, smart buildings and smart networks, among other mechanisms. With Qatar on its way to developing its first smart city at Lusail, the recently held third edition of Annual Middle East Smart Cities Summit raised potential issues that must be resolved to ensure successful delivery of the project. One such challenge relates to the impact of rapid digitalisation on human health. Speaking at the event, Ebrahim Al Haddad, regional director, ITU Regional Office for the Arab States Telecommunication Development Bureau, Egypt, said that the risks related to wave transmissions could be avoided by increasing the number of 32 | The Edge

transmitters across the network. By doing so, he said, the signal strength can be lowered, thus reducing any health risks. Giving a critique of smart cities in context of the Gulf Cooperation Council, Tareq Alemadi, head of information technology at Qatar National Food Security Programme, said that many of current smart solutions in the region are not user-focused, adding that smart cities are not possible without smart people. Eventually, promoting smart cities leads to tremendous amounts of data generated on a daily basis. Suggesting some ways of improving data management practices, Sam Alkharrat, president of SAP MENA, said, “The Middle East’s smart cities need to ‘smartify’ data generated by the growing number of connected devices in the ‘Internet of Things’ era. By analysing data, governments can gain new insights, provide unique experiences, and create novel sources of value to make citizens and tourists happier, and their businesses more successful.”

“The Middle East’s smart cities need to ‘smartify’ data generated by the growing number of connected devices in the ‘Internet of Things’ era.” Sam Alkharrat, president, SAP MENA.

Smart cities can efficiently manage increasing population through smart transportation, smart energy, and smart buildings.


Contents: Mobile money in Qatar: Giving migrant workers access to financial services. 33.

tech & communications Mobile money in Qatar: Giving migrant workers access to financial services A new payroll system recently launched by Ooredoo and QNB recently could provide lowincome migrants with easy access to their salaries, and the government an opportunity to monitor and make sure salaries are being paid on time. by Shehan Mashood

I

In Qatar, 100 percent of ‘transient labourers’ or low-income migrant workers have access to a mobile phone, making mobile money a key factor in reducing the number of people that are unbanked. (Image Reuters)

n July 2014, the Cabinet approved the recommendations of a committee that advised the payment of all workers’ wages in the country through banks. The wage protection system (WPS) was created to make sure that salaries of employees were paid in a timely manner. Low-income workers in Qatar are often paid in cash, which makes it easy for companies to delay or deny payment, as many human rights reports have stated. By making the payment of salaries to banks, the Ministry of Labour and Social Affairs will be able to monitor payments. According to the Qatar News Agency, workers would need to be paid salaries in the first week of every month through bank transfers, and delays would “attract punitive action in the form of a fine”. The problem, however, is that many low-income migrant workers favour cash payments, having been an unbanked sector of the population. While the new mandate to transfer money to an employee’s bank account will indeed increase transparency and hold companies accountable, migrant The Edge | 33


sectors | technology & communications

workers are likely to face challenges in accessing that money easily. Bank branches, for example, are almost nonexistent in labour camps, and transport is often difficult for low-income workers. Due to a combination of factors, the poorest in society are often unbanked, and Qatar is no different with its migrant worker population making up a small part of the estimated 2.5 billion around the world that rely on cash or informal financial services for their needs. The opportunity however to serve this market might be through mobile money. According to ictQATAR data from 2014, 100 percent of ‘transient labourers’ or low-income migrant workers have a mobile phone, and 23.6 percent have access to a smartphone, a number that is expected to grow as the prices of low-cost smartphones drop. In fact, Ooredoo and QNB’s recent rollout of the region’s first-ever payroll service on Ooredoo Mobile Money would help bridge this gap, allowing salaries to be directly sent to their Mobile Money accounts, giving them better access to money. A statement from Ooredoo said, “The launch of Payroll services on Ooredoo Mobile Money will

address a range of Waleed Al Sayed, chief important social operating officer, Ooredoo Qatar, said, “Ooredoo Mobile issues, ensuring Money has provided an that employees important service for the under-banked in Qatar and are paid directly around the world.” and reducing concerns relating to payments by cash and cheques, particularly for migrant workers. Employees will be able to service for the under-banked in Qatar and see immediately when payments have been around the world, and the addition of the made, and be able to transfer the money payroll option provides an important new quickly and safely, all via their mobile phone.” service for businesses and for employees. Since its launch, Ooredoo Mobile Companies have the benefit of an easilyMoney has become one of the fastest- managed payment service that delivers growing financial services in Qatar, with directly to employees using Ooredoo’s over QAR100 million being remitted every bigger, faster network, while employees month from Qatar to countries including enjoy safe and secure salary transfers they the Philippines, India, Nepal, Bangladesh, can access on their mobile phone.” Egypt, Kenya and Nigeria. The Mobile Money With many low-income workers in Qatar service allows customers to transfer money choosing to use mobile money to manage both locally and domestically, providing a their finances, services such as these, which much more secure alternative to cash. address both the government’s need for Waleed Al Sayed, chief operating monitoring payments and the ease of use officer, Ooredoo Qatar, said, “Ooredoo for the end user, are likely to benefit all Mobile Money has provided an important parties involved.

Technology in the air HOW TECHNOLOGY IS IMPACTING PASSENGER EXPERIENCE This however, is lower than the global average of

16% in the Middle East are disatissfied with their travel experience

22%

Technology investment priorities of passengers

Passengers demand for new mobile services Airport maps & directions Scan phone for access

Better comparability of airline fares

Better flight information

In-flight wireless services

Percentage of passengers who would use the service in-flight

Use mobile for ID Smartphone payments Mobile wallet travel itinerary

My entertainment

My communications

Source: 2014 The Passenger IT Trends Survey SITA

34 | The Edge

My purchases


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ward

15 Examining some of the biggest business stories of 2014 and the bearing they might have on the coming year


cover story | toward 2015

Ukraine: Russia’s

“soft underbelly”

S

In what was one of the biggest global stories of 2014, Russia annexed Crimea and threatened to use its gas supply as a bargaining tool with Ukraine, and indeed much of Europe. All the while, chaos continued to erupt in Eastern Ukraine, allegedly backed by Putin’s government. The Edge examines this ongoing saga and its potential continued effect on the global energy sector. by Simon Watkins, financial analyst.

38 | The Edge

ince the September 5 ceasefire was signed between Russia and Ukraine, a r o u n d 1000 people have died east of Donetsk. Russia has seen its hard currency reserves decline, and the political noise from the United Nations on expanding sanctions against Moscow beyond the limited financial penalties currently in place is growing. Indeed, the recent limited financial sanctions on Russia were insufficient to prevent it from sending a column of 32 Russian tanks and dozens of trucks full of troops into Ukraine’s eastern territories on November 5 in a bid to support pro-Russian separatists fighting Kiev government forces. More troops and heavy weapons were sent into Ukraine over a two-day period beginning on November 10. Given the cultural and military importance of Ukraine to Russia, though, this is hardly surprising. For both cultural and strategic reasons, Ukraine is as important to Russia as Scotland is to England or Texas is to the United States (US). “From a purely strategic standpoint, Ukraine is Russia’s soft underbelly as, dominated by Russia, it anchors Russian power in the Carpathians,” underlines George Friedman, CEO of global intelligence and security firm, Stratfor, in

Washington. However, he adds, if Ukraine is under the influence or control of a Western power, Russia’s southern flank is wide open along an arc running from the Polish border across a distance of more than 1,000 miles, more than 700 of which lie along Russia proper, with few natural barriers. Consequently, short of direct military action against Russia by the West in Ukraine, even with expanded sanctions, Russia is unlikely to alter its rebel-backed occupancy of the strategicallyvital eastern Ukraine in 2015. Its intransigence in this respect was underlined very recently in its willingness to play the sanctions game back at the West, with its cancellation of the South Stream pipeline project that would have supplied gas directly to European countries. Instead, by concentrating all such supplies through Ukraine, Russia has underlined the importance of maintaining its foothold in the country in the form of the – massive, but discretionary - tariffs that it charges Ukraine’s Naftogaz. Despite threats of sanctions from some quarters, the EU, it seems, needs Russia at least as much as Russia needs the increasingly fiscally troubled collection of states. For a start, with the EU recording month upon month of zero or nearzero economic growth, and energy costs constituting a major chunk of export goods’ prices, losing gas supplies from Russia would expose the trade area to having to plug the gaps

at emerging energy pricing tariffs, with corollary negative effects on the competitiveness of its exports. Aside from this, of course, the de facto leader of the EU – Germany – is extremely unlikely to back any increase in sanctions against Russia from the EU, given that Germany sold about EUR36 billion (QAR161 billion) of goods to Russia last year. Some 6200 German firms are active there, with EUR20 billion (QAR90 billion) of investment. Moreover, Germany imports around 35 percent of its gas from Russia. In the unlikely event that sanctions were expanded to include importing Russian energy, is Qatar likely to materially benefit from diminished Russia supplies? Looking around the globe, the inexorable rise of US shale gas will continue to contribute to the North American continent becoming entirely energy selfsufficient, according to analyst consensus; already, there are growing calls to end the 40year US ban on gas and oil exports that came into effect after price shocks from the 1973 Arab oil embargo. Having said this, its threat to usurping Qatar’s position as the global gas swing producer has diminished recently as, with oil still trading below the per barrel level required for many Australian LNG firms to generate a 10 percent rate of return, some of these projects could - at the very least - be substantially delayed. In South


sector name | banner heading

A regular maintenance check being done on a Russian gas supply network in Ukraine.

3:1 The ratio of Russian versus Qatari LNG supplied to Europe

A woman holds banners against Russian president Vladimir Putin during a protest against G20 leaders on November 15, 2014 in Brisbane, Australia. Putin is largely seen as the bogeyman in the Ukraine-Russia conflict and is widely accused of using Russia’s gas supplies via state-owned gas company Gazprom as a blunt leverage with both Ukraine and Europe, who obtain 50 percent of their gas supplies from Russia through pipelines in Ukraine. (Image Getty Images)

America, in the meantime, abundant locally-sourced, often subsidised supplies (and the proximity of North America’s shale supplies if needs be) continue to mean little opportunity for Qatar. For the EU, as well, Qatar currently does not figure as a substitute for diminished Russian gas supplies, with a senior figure involved in developing its energy strategy saying at the end of September that, “Iran is far towards the top of our priorities for midterm measures that will help reduce our reliance on Russian gas supplies.” Theoretically, of course, the swap of gas supply from Iran for that from Russia would seem to have much to recommend it, given that, as of January this year, Iran’s estimated proved natural gas reserves were 1193 trillion cubic feet (tcf), second only to Russia’s, and it is also estimated

to hold 2 Tcf of proved and probable natural gas reserves onshore and offshore in the Caspian basin. Practically as well, the matter of ongoing sanctions – as implemented by the EU – has also become largely irrelevant now. This is a result of the astonishingly convenient failure in October of the EU’s top lawyers to appeal against a court ruling that annulled sanctions on Iran’s main oil tanker firm – the National Iranian Tanker Company (NITC) – meaning that the firm can be used to ship whatever amount of oil and gas for which there are buyers and can freely utilise insurance and banking services in the EU, albeit with a UScentric caveat. Finally, Russia itself has prepared the way for a dramatic reduction in energy exports’ revenues from the EU by upping its energy relationship with

China, in the form most notably of two gigantic deals done this year. In addition to the deal earlier this year for Russia’s top gas producer Gazprom to deliver 38 biliion cubic metres of gas a year for 30 years across China’s northeastern border, the new agreement announced in November will see Russia sell an additional 30 bcm to Beijing for the same period via deposits in West Siberia, delivered through the proposed Altai pipeline. Looking closer to home, the questions looking into 2015 are: can anything be done to successfully deter Russia from its ongoing actions in Ukraine, and what will be the ramifications for other energy providers, such as Qatar of additional policy measures that may come into force against one of the world’s biggest oil and gas exporters? Time will, of course, tell.

In the unlikely event that sanctions against the country are expanded to include importing Russian energy, which of the increasing sources of energy supply might benefit, and where? The Edge | 39


cover story | toward 2015

Hamad International Airport: Aviation

game changer Good things come to those who wait, and after several years of delays, Doha’s glistening new Hamad International Airport (HIA) finally flung its doors open to customers of flagship carrier Qatar Airways on May 27, 2014. by Martin Rivers, regional aviation journalist.

H

iccups are the these potentially life-saving efforts, any norm for large inconvenience faced by travellers paled infrastructure into insignificance. projects, There were other contributing factors, but HIA’s too. Qatar Airways chief executive, Akbar delays were Al Baker, immediately alleged blame lay p a r t i c u l a r l y with United States developer Bechtel, a w k w a r d whom he accused of being “complacent” because of the short notice given before in meeting deadlines and adhering to the authorities stopped the first planned stringent regulatory requirements. opening. Its April 1, 2013 launch date – Cynics also speculated that opening perhaps the most widely anticipated – was the hub on time might have been politically cancelled literally hours before operations difficult, given the incomplete status of had been due to begin. HIA’s premium lounges and, purportedly, Though not officially confirmed, the its double-decker Airbus A380 contact delay likely traced its roots back to one stands. of the most tragic In the end, premium events in Qatar’s recent travellers still had to history: the May 2012 wait another three Villaggio Mall fire that months before gaining left 19 people dead, access to HIA’s luxurious including 13 children. Al Mourjan Business Qatar had immediately Lounge, which features, undertaken a blanket among other things, a review of all safety four-tiered chandelier The number of new systems in public and a Formula 1 driving aircrafts Qatar Airways simulator. As impressive places following the disaster, desperate currently has on order. as it is, the stakes will be to ensure that such raised once again when scenes would never the Al Safwa First Class again be repeated. Amid Lounge eventually opens.

207

40 | The Edge

“Despite all the challenges, we worked tirelessly and persistently to accomplish, this great edifice will remain a source of pride for our generation and for the coming generations.,” said Abdul Aziz Mohamad Al Noaimi, chairman of the steering committee of the New Doha International Airport Project at the facility’s soft launch in 2014. (Image courtesy NDIA)

HIA remains one of the most ambitious projects undertaken by Qatar and will be augmented by a second terminal, but this is unlikely to occur in 2015. (Image courtesy NDIA)


toward 2015 | cover story

But with passengers in all travel classes already growing accustomed to HIA, what surprises lie further down the road for travellers passing through Doha in 2015? As one would expect in a business dedicated to flying people around the globe, the flag carrier’s ever-expanding fleet of ultra-modern aircraft will undergo the most noticeable changes. With an already impressive fleet of 140 in-service aircraft – including two brand new A380s and 17 Boeing 787 Dreamliners – Qatar Airways should also become the launch customer of the A350, a twin-engine widebody aircraft that is effectively Airbus’s answer to the Dreamliner. It has ordered 80 of the type, with eight due to arrive in 2015. However. Al Baker is among the most unforgiving airline bosses on the circuit, inspecting every inch of his new deliveries to ensure they meet Qatar Airways’ uniquely exacting standards. Indeed, he has in recent years made something of a sport of turning away aircraft for perceived shortcomings, which is a factor. Meanwhile, the Airbus A350 programme, which was supposed to have started last month has been postponed and having already refused to accept several Dreamliners and A380s, the Qatar Airways chief executive has left no doubt about what he expects when the Qatari government forks over hundreds of millions of dollars for each new plane. With 207 aircraft on order, both Airbus and Boeing will surely be working overtime to keep their valued customer happy. A final word goes to the flag-carrier’s new all-Business Class service to London Heathrow Airport. The A319 service operates daily with 40 lie-flat seats. Allpremium flying has been a notoriously difficult nut for airlines to crack, but with a strong brand backing its service, Qatar Airways has the best chance yet. If customer demand stays strong, the product may soon appear on other routes in 2015 and beyond.

CEO Akbar Al Baker is among the most unforgiving airline bosses on the circuit, inspecting every inch of his new deliveries to ensure they meet Qatar Airways’ uniquely exacting standards. HIA IN NUMBERS

1000

Architects, designers, consulants and engineers were involved in its construction, with a workforce of

50,000

at its peak.

The passenger terminal is

600,000

sqm.

The entire facility covers

29 60% and

km2

65

of that land is reclaimed from the Gulf.

At HIA, there are

contact gates

138

and passenger loading bridges.

The aiport can automatically sort bags per hour, which is up to

19,500 468,000

individual bags a day.

Source: NDIA

The Edge | 41


sector name | banner heading

Market strengthening: A key legacy of bourse upgrades It has been something of a tumultuous year for Qatar’s capital markets. The 12 months saw two major country upgrades, moves to change the rules on foreign ownership, a very successful initial public offering (IPO), a move towards dual listing, exchange traded funds (ETFs), margin trading and short selling, writes Oliver Cornock, regional editor, Middle East for Qxford Business Group.

42 | The Edge

T

he new developments in the QSE have been underscored by some strong growth in securities, coupled with a bolstering of bonds. Maintaining that momentum may well be the challenge in 2015, then, with regional uncertainties, anxieties over the 2022 World Cup, doubts about global growth and a seemingly sustained weakening of hydrocarbon prices – coupled with the impact of quantitative easing’s demise – all likely to have an influence. Nevertheless, with Qatar’s macroeconomic growth prospects remaining essentially positive, as the country’s massive infrastructure project pipeline continues to inject new business, the QSE will likely continue to benefit from its upgraded international status in the year ahead. The upgrades will also likely spur efforts to broaden and deepen the capital markets, with beneficial results for investors – and for the economy overall.

Getting promoted

Although heralded back in 2013, the upgrading of Qatar from ‘Frontier’ to ‘Emerging’ market status, first by MSCI and then S&P, was undoubtedly the QSE’s most important 2014 development. Indeed, the MSCI upgrade, which took effect at the close on May 30, had been preluded by some historic highs on the exchange, as investors sought to strengthen their positions in the country ahead of the upgrade. Yet what goes up must come down, and some heavy profit taking at the end of the second quarter saw some USD6 billion (QAR21.8 billion) wiped off the QSE in the first three days of June. Also causing jitters from that point on were renewed allegations over the 2022 World Cup and the dramatically deteriorating security situation in Iraq. All these demonstrated the downside of increased global attention: the heightened international sensitivity

After the end-of-first half correction on the QSE the trading floor of which is pictures here, the market showed this added resilience – a factor investors should now consider, going into 2015.

that an elevated international profile brings. The QSE will have to be prepared for this international attention to continue into 2015, too, with disputes continuing over the 2022 World Cup, despite a FIFA report in November 2014 clearing Qatar of any wrongdoing. The situation in Iraq also looks unlikely to calm any time soon, with the conflict in Syria now entering its fourth tragic year. The QSE – even after the upgrades – is unlikely to escape the impact of these external factors entirely, although the exchange’s higher status should offer it more of a buffer. Indeed, after the end-offirst half correction on the QSE, the market showed this added resilience – a factor investors should now consider, going into 2015. In the third quarter of 2014, markets rebounded throughout the Gulf Cooperation Council (GCC), but with the two upgraded markets – the United Arab Emirates (UAE) and Qatar – taking the lead. Qatar’s main index thus


showed a 19.5 percent hike in the third quarter – the second highest in the GCC, after Dubai – with the QSE hitting a 52week high in September, at 14,350.50 points. This was higher than at the peak before the June correction. During the third quarter, S&P’s upgrade also came into play, along with a more generalised return of foreign investors and investor confidence to the region. The impact of the MSCI and S&P upgrades on volumes can be quite clearly seen when comparing the annual trading value for 2013 – which totalled QAR74.9 billion – with just one month’s recent trading: in September 2014 alone, the QSE saw QAR13.9 billion, or around 18.5 percent of the 2013 annual total. As this was being written, the QSE Index looked on course to close 2014 around one-third higher than it had started the year. The lesson for 2015 here is that despite periodic profit taking and the impact of external factors, the overall trend is clearly upwards, with an upgraded status bringing the additional security necessary to ensure a faster return to growth. Over time, the volumes and index numbers have reflected the longer-term fundamentals of the Qatari economy. These are widely expected to remain strong in the years ahead, with, for example, September 2014 seeing Qatar National Bank (QNB) forecasting gross domestic product (GDP) growth accelerating from some 6.8 percent in 2014 to 7.8 percent in 2016. The upgrades are also a reward for a longstanding strategy to increase international confidence and interest in the QSE, via moves to widen and deepen the market. These moves have not ceased either, with some important additional steps taken in this regard in 2014 that should also play out in 2015. One of these was the move

by the Qatari authorities to expand the maximum allowable foreign shareholder stake. In late 2014, changes on this were passed by the Cabinet and were awaiting final approval at the Shura Council. The maximum foreign ownership of listed companies is set to rise from 25 percent to 49 percent, with a further boost on this score likely to be a change in the way of calculating this limit – from a percentage of total free float to a percentage of total market capital. “As the QSE, we need to be multi-asset platform,” Rashid Al Mansoori, CEO of the QSE, recently told the Oxford Business Group. “We are working with the regulator to create more tools for the investor, such as margin trading, widening user-friendly borrowing, and other devices.” Many of these new tools are expected to be operational in 2015, including Exchange Traded Funds (ETFs). One of these is the Islamic ETF, QE Rayyan, highlighting the growing role shari’ahcompliant finance is likely to play in the capital markets going forward. At the same time, a further positive sign in expanding the market was the return of IPOs in 2014. The Mesaieed Petrochemical Holding Company (MPHC) IPO raised some USD881 million (QAR3.2 billion) for a 26 percent stake previously held by Qatar Petroleum – making this the country’s biggest IPO in five years. MPHC’s shares jumped five-fold on their first day of trading. In 2015, many investors will be watching to see if further issuances are made, with Barwa Bank and Qatar First Bank widely reported to be keen to list. Both are reportedly in the process of meeting the stringent requirements to do so – with Qatar First, a Qatar Financial Centre company, and thus subject to its particular

regulations. The MSCI and S&P upgrades should provide a much firmer framework for IPOs and the QSE’s expansion in the year ahead, with larger international funds available, thanks to the emerging market status. Indeed, while the major influx of new investment that was seen around the time of the upgrades themselves may have grabbed headlines, it will likely be this kind of less obvious, but equally important market strengthening that becomes the key legacy of the upgrades in the year ahead. Rashid Al Mansoori, CEO of the QSE, was recently quoted as saying, “We are working with the regulator to create more tools for the investor, such as margin trading, widening user-friendly borrowing, and other devices.”

The QSE is unlikely to escape the impact of external factors entirely, although the exchange’s higher status should offer it more of a buffer.

The trading floor at the Qatar Stock Exchange.

The Edge | 43


sectorstory cover name| |toward banner2015 heading

2014:Landmark

year in Qatari construction

While many of the projects pipeline are linked to Qatar National Vision 2030, FIFA’s 2022 World Cup has created a sense of urgency, catalysing the pace of these projects. (Image Corbis)

From 2014’s big numbers defining Qatar’s construction sector, to some key trends shaping the sector, QCN editor Farwa Zahra gives a roundup of the country’s construction market.

44 | The Edge

A

s of November 2014, the growth rate of Qatar’s population reached 9.7 percent year on year (YoY), according to the latest data released by the Ministry of Development Planning & Statistics. More precisely, this means that 2.26 million people are currently residing in the country. If one has to determine a single dominating factor behind this trend, it would most certainly be Qatar’s ongoing construction boom. In the first nine months of 2014, value of contracts awarded in Qatar’s project

market reached USD22.5 billion (QAR82 billion). The country’s active projects stand close to a value of USD285 billion (QAR1.04 trillion), according to Meeds Projects. With Qatar taking up the second slot in EC Harris’ country ranking for attracting infrastructure investment, the numbers will further go up, with a significant portion of national budget allocated for construction and infrastructure activities. In September, HE Jassim Saif Ahmed Al Sulaiti, the Minister of Transport, announced that Qatar has earmarked more than USD140 billion (QAR510 billion) for infrastructure projects (transport and


toward 2015 | cover story

THE CONSTRUCTION BOOM AT A GLANCE In 2014,

QAR

87

billion

was allocated to key projects; In September of 2014, HE Jassim Saif Ahmed Al Sulaiti, the Minister of Transport, announced that Qatar has earmarked more than QAR510 billion for infrastructure projects over the next five years.

other development work) in the next five years. Overall, 2014, according to Deloitte’s construction report which was published 2014, saw the biggest infrastructure budget in Qatar’s history. While many of the project’s pipelines are linked to Qatar National Vision 2030, FIFA’s 2022 World Cup has created a sense of urgency, catalysing the pace of these projects. Of the key construction projects, launch of the Hamad International Airport remained the highlight of 2014, reflecting Qatar’s efforts to position itself as a tourist destination, particularly in the realm of Meetings, Incentives Conferencing, Exhibitions (MICE) tourism. Among other developments,

USD

285 billion

Value of active projects in Qatar’s construction/ infrastructure market.

tunnel boring started at station sites of Doha Metro, along with a number of road projects announced by Ashghal. Towards the latter half of 2014, Qatar unveiled designs for three more stadiums proposed for the 2022 World Cup, while ground breaking started at the site of Al Wakrah Stadium. On the sustainability front, the country announced its first solar plant and its first green building directory; took its share of the Gulf’s green construction market to 16 percent, and most importantly, elaborated the details on implementing sustainable construction in the 2014 version of Qatar Construction Specifications, that had earlier only introduced green building as voluntary. Looking at the externalities impacting Qatar’s construction sector, major news remained Dubai’s winning bid for Expo 2020, further tightening Doha’s pool of resources for construction materials and labour. The trend was clearly reflected in Dun & Bradstreet’s Business Optimism Index for both Q2 and Q3, 2014. While construction emerged as the most attractive sector of the non-hydrocarbon market, competition repeatedly appeared as the key external factor hindering development in Qatar’s construction business. Adding to the growing pace of Qatar’s construction sector is the country’s winning bid for the 2019 Athletics World Championships. For 2015 and the years ahead, all this progress in effect means more projects to come, a further escalation in material prices, a shrinking pool of skilled labour, and a growing influx of expatriates. For the residents, of course, the increasing rents and traffic jams are here to stay in the short term.

An increase of

16%

from 2013 – 2014: the largest infrastructure budget in the country’s history. INFRASTRUCTURE PROJECTS: Roads

QAR

91 billion Stadiums

QAR

73

billion Railways

QAR

15

billion

QAR

30

Deepwater Seaport

billion MAJOR CONCERNS: Cost of materials

Labour

WHAT QATAR IS DOING Increase supply of certain commodities by:

Raising production levels

Stockpiling commodities before prices escalate

Source: Deloitte GCC Powers of Construction 2014, ECC Kuwait, MEED Projects

The Edge | 45


cover story | toward 2015

GCC: Can its nations integrate? For the first time in nearly 18 months, political tensions in the Gulf Cooperation Council (GCC) appear to be cooling, following a decision taken to return the ambassadors of Saudi Arabia, the United Arab Emirates (UAE) and Bahrain after their initial withdrawal in March 2014, writes Michael Stephens, deputy director, Royal United Services Institute in Qatar.

T

he politics of the GCC region have been turned upside down since the outbreak of the Arab Spring, and its ripples have made their way into the relative stability of the Gulf. The problem that broke out between Qatar and its neighbours was not one of dislike between individuals, but a direct result of competing visions of regional order, exacerbated by the forces released by the Arab Spring. Qatar’s positions on Egypt, and the status of Muslim Brotherhood exiles in particular, stood in stark contrast to that of Saudi Arabia and the UAE, who viewed Egypt as the frontline against the expansion of political Islam. After a number of difficult months, the hatchet appears to have been buried, and some accommodation between all sides reached. As such, there is no right or wrong way to look at the spat, merely the need to reflect upon a difference of approaches between Qatar and its neighbours and their deeply held views about the future of the region, and the GCC’s place within it. Now that the problems seem to be over, can we get back to business as usual? Well, in many ways business never really stopped; the general trend of the past three years has shown that despite the upheavals of the Arab Spring, the Gulf has continued to prosper. Certainly figures are looking positive, trade within the GCC has increased 20 times since 1983, from USD5 billion (QAR18.2 billion) to USD92 billion (QAR335 billion) by 2013 end and is expected to reach USD97 billion (QAR353 billion) by the end of 2014. Excluding the recent dip in relations, which saw a 1.12 percent fall in the value of the Qatari Stock Exchange following the March pull-out, the Gulf states appear to be slowly realising that the integration of their economies, particularly in 46 | The Edge

the financial sector, is mutually beneficial.

Impact of stability

This comes at a time when the Gulf really needs to begin pushing the advantage it has over the rest of the region, as instability reigns across large parts of the region. Gulf commentators have regularly argued that as the turmoil to the north continues, bringing the historical power centres of Cairo, Damascus and Baghdad to their knees, the cultural and financial power of the Arab world has moved south to the states of the Persian Gulf, and in particular Qatar and the UAE. There is some truth to this, and with the exception of Bahrain, the GCC has remained relatively stable, and capitalised on the movement of human capital and resources to more stable regions. The facts speak for themselves; in terms of gross domestic product (GDP) and

Qatar’s Foreign Minister Khalid bin Mohamed Al Attiyah (left) attends a Gulf Cooperation Council (GCC) meeting in Riyadh. (Image Reuters/ Arabian Eye)

per capita income, the gaps are growing rapidly. Iraq, with a population of 33.4 million, has a Gross Domestic Product of USD222 billion (QAR808.1 billion), in comparison to the UAE (an oil producer of similar levels), whose population of just 9.3 million enjoys a GDP USD405 billion (QAR1.5 trillion). Academic output from the Gulf now dwarfs the combined output of Egypt, Lebanon, Syria and Iraq, and it is looking increasingly like the

QAR

353.1 billion

Expected volume of intra-GCC trade by the end of 2014.


sector name | banner heading

The Gulf states appear to be slowly realising that the integration of their economies particularly, the financial sector, is mutually beneficial.” assertions of Gulf dominance are becoming true. Given the instability of the region in recent times, this is hardly surprising, so the more important question is whether these trends are sustainable in the long term. This is not a straightforward answer, because it relies heavily on the re-imposition of security across the Levant region and Libya, and the ability of the Egyptian government to solve a black hole of an economic problem. What is certain is that it is unlikely that the traditional power centres of the region will be able to redress the balance any time soon; the migration of human capital in the region to the states of the Gulf is a trend that will continue for some years to come. Underpinning this, of course, is the continued ability of the Gulf states (the UAE, Qatar and Saudi in particular) to finance largescale expansion projects with currency surpluses built during

the previous five years. Much has been made of recent drops in oil prices, but Qatar of all its neighbours is best placed to avoid this drop in revenues, with natural gas providing a bulk of Qatar’s hydrocarbon revenue. QNB has stated that the price would have to drop to as low as USD67 (QAR243.9) a barrel to have any impact on Qatar, noting: “Oil prices would have to fall considerably further to have any impact on the infrastructure investment programme that is expected to drive economic growth over the next few years.” As such, it is sensible to expect that as Qatar’s economy moves forward with huge infrastructure projects, crossborder trade with its GCC neighbours will increase to meet the state’s growing needs. More generally, long-term integration of the economies makes strategic sense. To diversify away from oil and gas, the GCC’s disparate parts will

need to better facilitate the flow of people and resources across borders; proposed rail and road links will assist in this endeavour, but the political will has to be there first, which places extra importance on the direction the GCC moves from here on. The preference for the Gulf is still to look further afield to Europe, the United States and increasingly East Asia. But as Dubai in particular opens its markets to sub-Saharan Africa, the diversity of goods moving through the Gulf is rapidly multiplying. It is an important moment for Qatar to build on its links with its neighbours, and considering only one percent of its trade is currently with the rest of the GCC, a realignment of its trade strategy towards intra-gulf trading could reap big benefits. No one is stopping the GCC integrating other than itself. The truth is that small city states operating as islands can work to a point, but the future

only points to one direction: economic integration equals better chances of survival. If the GCC is to become a true force in the global economic arena, it must ultimately devise a strategy that works over decades and takes into account the potential re-entry into the game of Iran, Iraq and Egypt, should political conditions allow those countries to come back to anything close to their former strength. These are dominant players with large populations, abundant stocks of natural wealth and resources that sit on the crossroads of global trade, the Gulf in a more peaceful moment of history should never be able to compete. The key is to get it right and get it right now, the 2022 World Cup and Dubai’s rapidly emerging status as a global city offer the perfect opportunity. The question remains whether the Gulf can grow to capitalise fully on this moment in history or not. The Edge | 47


cover story | toward 2015

Qatar’s rent inflation: A problem to solve What are the key factors driving Qatar’s rental inflation in 2014, and what are the expectations on the rent scene in the country’s real estate sector in 2015? Based on market trends and forecasts, Mark Proudley of DTZ offers some insights.

R

ising rental inflation has become a hot topic in Doha over 2014, with data from the Ministry of Development Planning & Statistics (MDPS) indicating that Consumer Price Inflation (CPI) for rent and utilities rose by 8.1 percent over a 12-month period to the end of September 2014. That is the highest annual increase since the 19.7 percent recorded over 2008. DTZ’s own research indicates that rental rates for residential property have been rising steadily since early 2011. Prime two-bed apartments

48 | The Edge

in the Diplomatic District or The Pearl-Qatar, that could be rented for approximately QAR 12,000 per month at the end of 2010, are now leasing at rates closer to QAR15,000 per month, equivalent to a 25 percent increase over a four-year period. It is worth noting that this is still well below the peak of the market in 2008, when rents for two-bed apartments in some prime towers reached as high as QAR21,000 per month. In comparison, rental rates across the commercial office markets have remained relatively stable since the start of 2011, though the first signs of rental increases have been recorded in 2014. In particular, rates for international quality accommodation and small suites that are limited in availability have witnessed strong rental growth over the year. The primary drivers of rental inflation


toward 2015 | cover story

A statement that we hear frequently is, ‘There are a lot of empty buildings in Qatar, so there must be a lot of availability’. Most of these buildings are awaiting final approvals or utility connections.

are twofold. Strong economic performance and high levels of domestic investment continue to generate work and employment opportunities in Qatar. That creates inward migration and demand for real estate across all demographic levels and asset classes. In conjunction with high levels of demand, Qatar is also suffering from slow growth in new supply and limited availability of stock. The expanding population is reflected in data produced by the MDPS, which indicates that the population in Qatar reached 2,216,500 by the end of October 2014, an increase of 516,000 people from the population of 1.7 million recorded at the end of 2011. That equates to population growth of 30 percent over a period of 34 months to the end of October 2014. Stating that growth in supply is slow and availability limited is probably a surprise to many people, given the high level of construction activity, and also what appears to be numerous buildings standing empty. DTZ’s research indicates that an additional 700,000 square metres (sqm) of prime office

In the absence of a rental cap in the residential sector, DTZ expects that the recent rental inflation trends will continue in the short to medium term, subject to population growth. (Image FotoArabia)

accommodation was completed and brought to the market in a three-year period between January 2009 and the end of 2011. In comparison, the level of prime office stock has only increased by 340,000 sqm from 1.38 million sqm at the end of 2011 to reach 1.72 million sqm over the last three years. That equates to 50 percent less new supply of prime stock than the preceding three-year period. Growth in supply for the prime residential apartment market is slightly more balanced, with 5000 new units completed in West Bay and at The Pearl-Qatar over the period 2009– 2011, compared to 4900 units over the period 2012–2014. However, when population expansion is considered in conjunction with data on new supply, it becomes clear why rental inflation has been prevalent in this sector of the real estate market. While new supply grew at a comparable rate over both three year periods, the population in Qatar only grew by 150,000 people in the three year period up to the end of 2011; in contrast, as outlined above, it has risen by more than 500,000 people in the following three years. Obviously not all of the additional 500,000 people that have arrived in Qatar over the last three years are looking to rent an apartment in West Bay or the Pearl-Qatar, but assuming an average occupancy of 2.5 people per apartment unit, only 12,250 people, or less than three percent of the population growth recorded, will be required to fill up all 4900 apartments added over the same period. A statement that we hear frequently is, “there are a lot of empty buildings in Qatar, so there must be a lot of availability”. This is a common misperception and the reality is that most of these buildings are either not ready for occupation and are still awaiting final approvals from Civil Defence or for connection to utilities/ other infrastructure, so are not technically completed; or they have already been leased out, but are not currently being utilised by the tenant. DTZ research estimates that the vacancy rate for office accommodation has fallen from a peak of 21 percent The Edge | 49


sector name | banner heading

Inelasticity of supply in the real estate market is partially to blame for the current rental inflation scenario. (Image Corbis)

at the end of 2011 to approximately eight percent in the current market. Availability of residential, while more difficult to measure, is even more limited with most towers in West Bay and the premium compounds across Doha running at full occupancy levels, with waiting lists in some cases. According to data produced by the Ministry of Justice, average land prices in Qatar increased by 52 percent in the first seven months of 2014. There

have been a number of reports in Qatar recently, citing that the rising land prices are an additional factor driving rental inflation. In our view, this is contrary to the way the market operates. The price that developers are willing to pay for land should be reflective of the end value of the completed development, which is usually determined by the anticipated rental income. Rents will continue to be primarily dictated by

QATAR’S REAL ESTATE AT A GLANCE Consumer price inflation for rent and utilities rose

RESIDENTIAL MARKET

The highest increase since 2008 at

8.1%

19.7%

over the past year.

Prime two-bed apartments in West Bay or The Pearl-Qatar in 2010 cost

QAR

12,000 The housing shortage in 2014 is at

in 2014 costs

QAR

15,000

that is approximately

37% 47,500

homes.

this is, however, below the 2008 highs where prices reached as much as

QAR

21,000

By 2018, the shortage is expected to increase to

85%

Source: DTZ, Colliers International, Qatar Statistics Authority

50 | The Edge


toward 2015 | cover story

There have been a number of reports in Qatar recently, citing that the rising land prices are an additional factor driving rental inflation. In our view, this is contrary to the way the market operates. supply and demand for built stock. The current surge in land prices appears to be mainly based on speculation that rents and end values will continue to increase significantly into the future. Land prices only impact on rental rates over the longer term if the price of land reaches a point that it becomes unfeasible to develop it and make a return to reflect the risk of development or because higher returns can be derived from continually selling the land in a rising speculative market. In these scenarios, commencement of

construction is often put on hold and the land remains undeveloped, leading to a shortage of completed stock in the future. Most real estate projects in Qatar take at least three years from initial consideration through to completion. Due to the time lag of development, the potential shortage in new supply caused by excessive land prices now is unlikely to be felt in the market or impact on rents for several years. Inelasticity of supply in the real estate market is partially to blame for the current rental inflation scenario. Few new developments commenced over 2009-2010, due to the downturn in the real estate market over this period. Rental rates being achieved at that time made anticipated financial returns from development unattractive, with developers uncertain of the future and putting projects on hold leading to the shortage in supply that is being felt now. The current boom in demand has increased rental rates but the significant time lag required to design a project, obtain permits and construct the development mean that supply is unable to react to meet this demand. So besides the obvious increase in living and operational costs being incurred by residents and business, what other real estate trends are being driven by rental/price inflation? Demand for apartment accommodation will remain strong with more people relocating to Qatar without their families due to the high costs of living, but also a lack of available school places. DTZ has witnessed an upturn in demand for three bed apartments from young professionals willing to share accommodation to reduce costs. More low-to-middle-income housing will develop on the outskirts of Doha in locations like Wukhair and Al Kheesa as rising land costs make development of lower income producing property in central areas prohibitive. In terms of the market outlook, DTZ expects the recent rental inflation trends will continue in the short to medium term, subject to population growth being sustained due to the inelastic characteristics of supply.

There have been a number of reports in Qatar recently, citing that the rising land prices are an additional factor driving rental inflation. (Image Corbis)

The Edge | 51


cover story | toward 2015

Growing Qatar’s entrepreneurial scene with QBIC The entrepreneurship scene in Qatar is in no shortage of support organisations, so when another cropped up, The Qatar Business Incubation Center, earlier this year, it was met with a tepid welcome. However, things quickly started to change once the scope and approach of the organisation was revealed. Set up with the tag line, build QAR100 million companies, the organisation would focus on supporting entrepreneurs and startups with the potential to scale quickly. by Shehan Mashood

T

he centre, located on the edges of the Industrial Area, in Salwa, is a sprawling 20,000-metre complex, and the largest of its kind in the Arab world. The facility, which was officially opened in September by HE Sheikh Abdullah bin Nasser bin Khalifa Al Thani, is one of the most ambitious investments made yet, to kickstart an entrepreneurial culture in Qatar. Abdulaziz bin Nasser Al Khalifa is the chairman of QBIC and the chief executive officer of Qatar Development Bank, one of the founding partners of the initiative 52 | The Edge

Entrepreneurs at one of the first sessions of the lean start-up programme.

(the other being the Social Development Center). In addition to funding the construction of the incubator, another QAR27 million has been allocated to support the incubated projects and offer all the facilities and services entrepreneurs need from a project’s inception to its operation. What has really set QBIC apart, however, is its adoption of the lean startup methodology, “This is what sets us apart,” says Aysha Al Mudahka, CEO of QBIC. “With the lean methodology we get entrepreneurs to focus on the product and customer validation before working on their business plan and operating their businesses.” Ahmed Abdulwahab, the head of

Cash is the bottom line, everything else is nice to have.” Ahmed Abdulwahab the head of innovation, QBIC.


toward 2015 | cover story

With the lean methodology, we get entrepreneurs to focus on the product and customer validation before working on a business plan.” Aysha Al Mudahka, CEO of QBIC.

Abdulaziz bin Nasser Al Khalifa, chairman of QBIC and the chief executive officer of Qatar Development Bank says QAR27 million has been allocated to support the incubated projects and offer all the facilities and services entrepreneurs need from a project’s inception to its operation.

innovation at QBIC, who is in charge of the lean start-up programme, which runs twice a year, told The Edge, “It is a 10-week programme where we have entrepreneurs turn an idea into real startup businesses by entirely focussing on what is most important in any start-up, which is customer development.” The organisation has also created a new method of smart financing, which is the first of its kind in the region, says Al Mudakha. “This is something we are really proud of,” explained Abdulwahab.“ In the beginning, once we incubate the entrepreneur, they will get QAR100,000 as starting capital.” Entrepreneurs do not need a business plan, nor are they required by QBIC to incorporate the company. The idea being to make sure start-ups are focused on perfecting a product that will sell to customers. Abdulwahab was keen to stress this point, saying cash is the bottom line, and that everything else is simply nice to have. This is a mantra he repeats regularly to entrepreneurs during the 10-week programme. Al Mudakha believes this is the best way forward for entrepreneurs, and says in terms of legality in Qatar, there is no grey area when going out and testing an idea. “They just go and talk to customers and partners before they start working on the final product development, so there is no legitimate issues there. I think it is important that they go through the customer validation, and develop a minimum viable product before investing so much into a business.” After the validation and incorporation of the idea, QBIC will invest an average of around QAR200,000 in addition to the initial investment made, not as a loan, but as equity financing. So far, those that made it through the first wave of the lean start-up programme are seeing great progress. Said Al Mudakha, “We have board meetings, which we attend as investors, on a monthly basis. In between the board meetings, we have coaching sessions that are run by our incubation team so every month you see progress, you see the energy growing and it is really exciting to see what they are doing, and where they have reached in the business.” Currently there are 18 start-ups, four scale up and four workshops. “One of the great things about QBIC

Aysha Al Mudahka, CEO of QBIC, says, “With the lean methodology, we get entrepreneurs to focus on the product and customer validation before really working on their business plan.”

is that everybody is involved,” added Al Mudakha, “from HR, and marketing, to finance, so we have a commitment from everyone to contribute 10 or 20 percent of their time to spend it with the entrepreneurs.” Al Mudakha believes that since joining the start-up scene in 2008, she has seen significant changes in the entrepreneurship scene: “I see more collaboration between stakeholders, and am more optimistic about what is coming next,” she concluded. Next year, the entrepreneurial eco-system is likely to see more changes. In a major announcement, HH the Emir Sheikh Tamim bin Hamad Al Thani, addressing the 43rd ordinary session of the Advisory Council, recently said the government is in the process of merging Enterprise Qatar and Qatar Development Bank, two of the premiere organisations focused on SME development in the country, to “further strengthen the private sector.” The Edge | 53


cover story | toward 2015

The impact of Qatar’s expansive cyber crime bill In September of last year, a sweeping cyber crime bill was passed in Qatar, which according to Qatar News Agency, contained some 54 articles. Cyber crime bills are not uncommon, and indeed a necessary part of legislation today and enacted in most countries. However, many analysts have been concerned about the scope of Qatar’s cyber crime bill. by Shehan Mashood

Qatar hosted its first digital security conference early last year, Cyber Security executive director at Qatar Computer Emergency Response Team (QCERT), Khalid Al Hashimi, said, “I hope that in the next five years, we see Arab graduates from Arab universities who can protect Arab data that is being circulated on the internet.” (Image Flickr/ ictQATAR)

54 | The Edge

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n most countries, cyber crime bills represent ways of addressing crimes specifically committed using a network or a computer. In most cases, legislation is a way to address issues such as fraud committed online, identity theft, child pornography and criminal infringement of copyright. Qatar’s new cyber crime bill will be able to address such issues; for example, the

law imposes a three-year jail term and a fine of up to QAR500,000 on hackers accessing an “information system of any state agency, institution, authority, or related company.” However, the reach of the cyber crime bill extends beyond this, with the bill also placing stiff penalties for ‘content crimes’, which make it illegal to violate the ‘social values and general order’ or the spread of ‘false news’. The ambiguities of the law, and the vagueness of language used, has drawn criticism. Speaking at the time of the launch, Said Boumedouha, deputy director of Amnesty International’s Middle East and North Africa Programme, said, “The new cyber crimes law is a major setback for freedom of expression in Qatar. It contains broad and vaguely-worded provisions that fly in the face of international standards.” In fact, Qatar is not the only state to include such provisions in its laws. Both the United Arab Emirates and Saudi Arabia have included similar articles in their cyber crime bills. Article 6 of the Saudi Anti Cyber Crime Law passed in 2007, states, “[The] production, preparation, transmission, or storage of material impinging on public order, religious values, public morals, and privacy, through the information network or computers,” could result in jail-time of up to five years and fines up to SAR3


toward 2015 | cover story

Qatar’s cyber crime bill has drawn some criticism for its attempt to legislate content online. (Image Flickr/ictQATAR)

CYBER CRIME IN NUMBERS The global cyber security market will be worth

USD

120

billion The Qatari authorities should repeal all articles in this law which curb press freedom.” Sherif Mansour, Committee to Protect Journalists. million (QAR2.9 million). The UAE, which was the first country in the Gulf to pass a cyber crime bill also has similar articles in it. Sherif Mansour, Middle East and North Africa coordinator of the Committee to Protect Journalists, said that while the law passed by Qatar is ostensibly aimed at stopping cyber crime, at least two of the

articles would severely restrict freedom of expression, adding, “The Qatari authorities should repeal all articles in this law which curb press freedom. Failure to do so will chill public discourse between the Qatari government and the citizens it serves.” Cyber crime itself is a major problem for Qatar. Its foreign policy, post Arab Spring, has made it a target for more than just hackers and organised criminals. Statebacked actors such as the Syrian Electronic army that support Syrian president Bashar Al Assad, have attacked numerous Qatari websites. Late last year, they claimed responsibility for taking control of Qatar’s .qa domain name and shut down numerous government websites. Cyber crime is on the rise around the world. Richard Turner, a cyber security expert, and vice president of FireEye for Europe, Middle East and Africa, told The Edge, “We are spending more on cyber security than we have ever done, yet we will probably see more breaches this year than last year and probably more next year than this year.” As for what the law will mean for journalists online and on social media, time will tell how it is chosen to be enforced. Qatar’s foreign policy, post Arab Spring has made it a target for more than just hackers and organised criminals. (Image Corbis)

by

2017

The estimated annual cost of cyber crime globally is

USD

100

billion The victim count:

556 million 1.5 million 232 million

Per year

Per day

Identities exposed More than

600,000

Facebook accounts compromised every day

71%

63%

Major motivations behind cyber attacks Cyber crime

40%

Cyber warfare

3%

Hacktivism

50%

Cyber espionage

7%

The Edge | 55


cover story | toward 2015

Impending changes to Qatar’s labour law Ever since Qatar was awarded the 2022 World Cup, the spotlight has brought with it criticism of its labour rights practices and the kafala sponsorship system, which over the past year has mounted, both at home and abroad. Human rights organisations such as Amnesty International and trade unions such as the International Trade Union Confederation have criticised Qatar heavily over the past few years, as the country scrambles to overhaul its system, and mitigate a PR crisis. by Shehan Mashood

Allegations of migrant labour abuse is most rampant in the Qatari construction sector which have been pointed out by leading human rights organisations. (Image Corbis)

56 | The Edge


toward 2015 | cover story

Salil Shetty, secretary general of Amnesty International holds up a report titled, Qatar:The Dark Side of Migration: Spotlight on Qatar’s construction sector ahead of the World Cup, during a news conference in Doha. (Image Reuters/Arabian Eye)

M

uch has happened in the past year, starting in March 2014 when the Supreme Committee for Delivery and Legacy released a 50-page report that it said would ensure the welfare of all workers involved in the projects related to the 2022 World Cup. Speaking to The Edge, at the time, Nicholas McGeehan, a researcher with Human Rights Watch (HRW) focusing of Qatar, said, “The standards are detailed and thorough and the Supreme Committee deserves credit for its efforts to improve standards on the projects within its control.” The issue, however, was as many analysts pointed out, the welfare standards alluded to in the document, would only cover projects directly linked to the World Cup, such as the stadiums. The majority of migrant labourers that would be working on the massive infrastructure and other developments in the country would not be covered under the new laws. Organisations such as Qatar Foundation have also implemented strict worker welfare standards in order to stem abuse. According to a statement from the Qatar Foundation, “Among the

many unfair employment practices that Qatar Foundation is determined to curb are overcrowded living conditions, and unethical recruitment processes. The organisation seeks to create an exemplary model for the ethical treatment of workers by guaranteeing that all contractors and subcontractors, such as labour suppliers,

The Supreme Committee deserves credit for its efforts to improve standards on the projects within its control.” - Nicholas McGeehan, Human Rights Watch. The Edge | 57


cover story | toward 2015

In perhaps the biggest development last year, in May of 2014, the Ministry of Interior along with the Ministry of Labour and Social Welfare announced labour market reforms.

labour agencies, and other service providers, adhere to strict regulations and comply with guidelines.” In perhaps the biggest development last year, in May of 2014, the Ministry of Interior along with the Ministry of Labour and Social Welfare announced labour market reforms. Following the announcement, most human rights activists expressed their disappointment in the suggested reforms, stating they did not go far enough in addressing the systemic issues with Qatar’s labour policies. Speaking to The Edge, at the time, Dr. David Roberts of King’s College London said, “Abolishing the kafala system in its entirety would be an expensive proposition for Qataris and Qatari businesses alike.” Among the proposed changes is the implementation of employment contracts as a replacement for the kafala system. Replacing the current exit permit system was an automated one run by the Ministry of Interior, where an employee can apply for an exit permit three days before travel, during which time the employer would have the ability to contest it. Another reform suggested lifting the two-year ban required to rejoin Qatar’s labour force and the improvement of living and working conditions of those coming to work in Qatar. There is also expected to 58 | The Edge

2015.

It is expected that announcements about the new labour law will be made in early


sector toward name2015 | banner | cover heading story

be an increase in the penalties for confiscating worker travel documents from QAR10,000 to QAR50,000 per passport. While no mention of the timeline for implementation was suggested, it is expected that announcements about the new labour law will be made in early 2015. What is clear, is that Qatar is keen to address deficiencies in its labour law. HH the Emir in the past year alluded to it twice, including during an interview on CNN with Christiane Amanpour saying, “I don’t accept it personally to see labourers, poor people, coming from other countries to come and help us develop our country and the atmosphere and the environment is not helpful for them.” Even with the proposed changes, criticism has continued to mount, with human rights organisations suggesting what is being done is not enough. Most recently, a report released by Amnesty International, titled, Qatar: The dark side of migration: Spotlight on Qatar’s construction sector ahead of the World Cup, that was severely critical of the progress Qatar has made. “The world’s spotlight will continue to shine on Qatar in the run-up to the 2022 World Cup, offering the government a unique chance to demonstrate on a global stage that they are serious about their commitment to human rights and can act as a role model to the rest of the region,” said Salil Shetty, secretary general of Amnesty International.

Organisations such as Qatar Foundation have implemented strict worker welfare standards in order to stem abuse

2012 SURVEY OF LOW-INCOME MIGRANT NUMBERS

90%

of migrants said their employers held their passports

44%

low-income migrant workers signed contracts before coming to Qatar

78%

of those who did sign a contract before coming were required to sign another contract when they arrived in Qatar.

20%

said their salary was different to what was promised in their home country. Median income:

QAR

764

Average of income sent home

QAR

1000

Source: A Portrait of Low-Income Migrants in Contemporary Qatar, a study funded by Qatar National Research Fund.

The Edge | 59


cover story | toward 2015

Qatar’s ecological footprint challenge In 2014, Qatar was dislodged from its top position by Gulf neighbour Kuwait as the country with the largest ecological footprint in the world. While this is a movement in the right direction, it ostensibly will remain some time before Qatar’s standing reaches that of its biodiversity ranking, which is a far more respectable 66th out of 152 countries. by Sybrandus Adema, a South African environmental journalist.

60 | The Edge

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atar’s environmental impact, per person, remains a concern, The World Wildlife Fund (WWF) Living Planet Report 2014 has found. Slipping from the number one position it held in the last report in 2012, Qatar’s footprint is now the second highest in the world, as Kuwait has overtaken it to become the worst offender of the 152 countries that were measured in terms of the goods and services used by an average person, and the efficiency with which resources are utilised in providing these. Third was the United Arab Emirates, with Saudi Arabia, the world’s largest oil producer, in 33rd position. The biannual report investigates biodiversity and ecosystems, as well as the demands on natural resources, and what this means for humans and wildlife. According to it, if all people on the planet had the per capita ecological footprint of the average resident of Qatar, 4.8 planets would be needed to sustain the total population. By comparing the total footprint with the planet’s biocapacity – its capacity to generate an ongoing supply of renewable resources and to absorb waste – the report, based on 2010 data, concludes that the average human’s per capita footprint already exceeds the planet’s capacity by 1.5. Qatar’s footprint, measured in global hectares (gha), is 8.5, but down from 11.6 in the 2012 report. Only Kuwait fared worse, with a footprint of over 10. Given the countries’ small size, however, as the measure is based on per capita figures, their total impact is still relatively small and indeed are perhaps not an accurate reflection theoreof, given the massive contributions from much larger countries such as China or the United States. Nevertheless, there is clearly work to be done. Alman Zafar, founder of ecoMENA, an organisation that promotes sustainable development in the Middle East, blames the situation on, among other things, a lack of environmental awareness among the local population, lavish lifestyles and a strong dependence on fossil fuels. “The huge influx of workers from across the world has also put tremendous strain on already stressed natural resources. Migrant workers, who make up a huge chunk of the population, remain in the country for a limited period of time and are not motivated enough to conserve natural resources and protect the environment,” he says. As for Kuwait, Zafar adds the growing ecological footprint may

be attributed to its flourishing oil and gas industry, an increase in desalination plants, the presence of hundreds of landfills, excessive use of water, energy and goods, a huge expatriate population and the absence of concrete environmental conservation initiatives. Of the 25 countries with the largest per capita ecological footprint, most were highincome nations. For virtually all of these, carbon was the biggest component, in Qatar’s case 70 percent. Carbon, specifically the burning of fossil fuels, has been the dominant component of humanity’s footprint for more than half a century, according to WWF; in 1961, it formed 36 percent of the total footprint, but by 2010, this had increased to 53 percent. In terms of Qatar’s biocapacity, the country ranks 66th globally in terms of its biocapacity per capita and its fishing grounds make up 92 percent of that total. As in other Gulf region states, it can operate with an ecological deficit by importing products, thus using the biocapacity of other nations, and/or, by using the global commons; for instance, by releasing carbon dioxide emissions from fossil fuel burning into the atmosphere, states the report. Qatar’s heavy reliance on gas and oil, its subsidised


toward 2015 | cover story

Eco facts and figures relating to Qatar

12%

Rise in electricity demand in Qatar from 2013 to 2014.

4.8

The number of earths needed to survive if the whole world had the same ecological footprint as Qatar.

water and electricity, and the huge amount of energy needed for water desalination and air-conditioning make it unlikely that the country’s per capita standing in terms of the ecological footprint will improve much in 2015. On top of this, huge building projects form part of the runup to the 2022 FIFA World Cup. Salman Shaban from the metal recycling company Lucky Star Alloys, regards the report as only highlighting Qatar’s current rapid development. “It is not fair to come to any conclusions at this stage when the construction, transport system and population boom is taking place. Any place that will go through such a fast

development will initially have its impact on the ecological systems.” He foresees a gradual carbon footprint reduction once the construction and development phase is completed. “Having said that, it is still every resident and citizen’s moral responsibility to conserve energy and protect the environment,” added Shaban emphatically. “Recycling should be a standard part of every household culture.” Although Qatar has initiated plans to reduce its footprint and live more sustainably, the latest electricity demand figures from Qatar General

Electricity and Water Company show a 12 percent rise over the past year. This is in line with the country’s population growth, meaning that there has been no reduction in the per capita consumption, which is still under the top 15 countries in the world. Its water consumption per capita is also one of the highest in the world. According to Zafar, grassroot level environmental education, the removal of subsidies on water and energy, sustainable waste management practices, effective laws, awareness programmes and mandatory stakeholder participation are some of the measures that may

improve the environmental scenario in Qatar.

2 Qatar’s position on the 2014 WWF environmental footprint ranking.

The Edge | 61


cover story | toward 2015

From Doha to Rio Qatar-Brazil 2014 Year of Culture was deemed an overwhelming success. by Aparna Shivpuri, The Edge contributor

Artistic exchanges were a major focus of the Qatar-Brazil 2014 Year of Culture. Apart from culture, it is also hoped that increased awareness and mutual respect garnered during the year will increase trade and business dealings between the two countries in 2015 and beyond.

62 | The Edge


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toward 2015 | cover story

he Qatar-Brazil Year of Culture was a year-long exchange programme aimed at connecting the two nations through culture, community and sports. It was held under the patronage of Qatar Museums Authority’s (QMA) chairperson, HE Sheikha Al Mayassa bint Hamad bin Khalifa Al Thani, in partnership with Qatar’s Ministry of Culture, Arts and Heritage. Speaking about this experience, Viviane Rios Balbino, Chargée d’ Affaires, Embassy of Brazil, said, “Brazil has been honoured to be chosen as a third partner in Qatar Museum’s series of bilateral Years of Culture - after Japan in 2012 and the United Kingdom last year. During the numerous activities that took place during the last 12 months, both in Doha and in Brazil, the public was able to realise just how much the two countries, which at first could seem worlds apart, have in common.” She further added that there are 15 million Arabs and Arab descendants living in Brazil today. The Arab culture is very familiar to Brazil and there is a kind of natural curiosity about the region. That is part of the reason why all the events organised in Brazil by the Qatari government drew a huge audience - besides the quality of the events. It was also a great opportunity for Brazil to showcase its culture in Qatar. Brazil has been mainly known for a passion for football, which the country shares with Qatar. However, this event showed that there is also a connection when it comes to art, cinema, photography and music. Early in the year, Qatar-Brazil 2014 and the National Museum of Qatar hosted Kheit, an international fashion design competition, for students from Virginia

There are 15 million Arabs and Arab descendants living in Brazil today. The Arab culture is very familiar to Brazil and there is a kind of natural curiosity about the region. That is part of the reason why all the events organised in Brazil by the Qatari government drew a huge audience.” – Viviane Rios Balbino, Chargé d’Affaires, Embassy of Brazil.

“A ‘year of culture’ is more of a concept that deepens the understanding between people and the respective cultures,” says Rashed Al Qurese, director of marketing and promotion at Qatar Tourism Authority (QTA).

The Edge | 63


sector name | banner heading

Qatar-Brazil 2014 year of culture logo at the Qatar International Food Festival held at the Museum of Islamic Art Park in Doha.

Commonwealth University in Qatar and the Centro Universitário Belas Artes de São Paulo in Brazil. Brazil was also wellrepresented during the Qatar International Food Festival in March at the Museum of Islamic Art Park. Each month, Doha Film Institute and Qatar Museums screened Brazilian movies as part of the Brazil Cinema Showcase. With Qatar being an upcoming host of the World Cup in 2022, there was also an opportunity to highlight the attachment to the sport, shared by both the countries. We Speak Football, planned by the QMA in association with the UK’s National Football Museum, opened in the Northeastern Brazilian city of Joao Pessoa, in May 2014. In June, the photography exhibition, QatarBrazil: A Journey from the Amazon to the Desert, opened at Katara, featuring the works of two Qatari photographers from the Qatar Photographic Society as they travelled across Brazil with Qatar Museums, as well as works from two 64 | The Edge

Brazilian photographers’ trip across Qatar. Qatar Museums and the Ministry of Culture, Arts and Heritage also hosted Qatar Week in Sao Paulo, Brazil, where numerous Qatari artisans travelled to showcase Qatari cultural traditions, including music, coffee, henna and ardha. Elaborating on what 2015 holds for these two countries, Viviane, remarked, “The Embassy is currently in the process of discussing the legacy for Qatar-Brazil Year of Culture, together with the Qatar Museums and the Ministry of Culture. There are a few activities which will last until the first weeks or months of 2015, such as the ‘Huna Hunak’ exhibition opening up in Doha in early December as well as Mona Hatoum’s ‘Turbulence’ opening in São Paulo in mid-December. There are a few options for permanent activities that could be promoted by the two countries yearly. It´s a matter of selecting the ones of greater mutual interest.”

The Embassy is currently in the process of discussing the legacy for Qatar-Brazil Year of Culture, together with the Qatar Museums and the Ministry of Culture.” – Viviane Rios Balbino, Chargé d’ Affaires, Embassy of Brazil.

The Years of Culture initiative is a key part of QMA’s vision in establishing cultural ties between Qatar and countries around the world and with the mutual love for football and art shared by the two countries, this platform has played its role in cementing the relationship further Qatar-Brazil Year of Culture officially came to an end on December 4, with the Qatar Museum Gallery Al Riwaq showcasing “Here There”, a display of work by artists from Qatar and Brazil, which will run from December 4, 2014 to March 30 next year. 2015’s Year of Culture Qatar-Turkey officially began on the same day.


product & reviews

Reviews Lexus RC F Sport

T

he 2015 Lexus RC F Sport is an enhanced and aggressive looking model when compared to the sleeker looking RC 350. The design features its own version of the Lexus signature spindle grille that adorns the front of the vehicle, with one single F pattern in its mesh from the hood line to the lower lip. The RC F’s air-cooling intakes and aerodynamic curves are reminiscent of the iconic LFA. The F Sport features a combination of Adaptive Variable Suspension and the Lexus Dynamic Handling (LDH) with rear-wheel steering technologies. The LDH system,

available for F Sport rear wheel drive only, is designed to help enhance maneuverability and reduce steering effort at low speeds; help increase steering responsiveness and intuitive steering feel at medium speeds; and enhances control at high speeds. It does so by integrating electric power-assisted steering to control steering torque, variable gear-ratio steering to control front-wheel steering angle and dynamic rear-wheel steering system to provide the benefits of four-wheel steering while maintaining the feeling of a conventional two-wheel steer vehicle.

Engineered as a stand-alone model, rather than as a two-door derivative of a sedan, the F Sport is also distinguished by exclusive interior features. The RC F’s instrument meters are based on the LFA, referencing aircraft cockpit design to show a wide range of information easily, including a G-Force meter depending on the drive mode being used. The Lexus V8 engine is an all new five litre 32-valve engine, equipped with an eight-speed Sports Direct Shift (SPDS) transmission, which lets the driver better feel the torque and power as it is applied.

The Edge | 65


products & reviews How To Ma ke Big Mone y Trading In All Finan cial Conditi ons

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The markets are going thro ugh a perio but even in d of turbulen periods of low ce right now market vola asset, somewh , tility there’s ere in the worl always som d, that oscil sufficiently e lates in price to offer trade rs opportun money. The ities to mak trick is to know e big wha whether it’s t the asset i trading high er or lower than is, to identify and to have it should be, the skill, spee d of thought take advantag and tenacity e of it. to In the follow up to his book Everything You Know About Making Serio Need To us Money Trad Markets, Simo ing The Financial n Watkins cove rs changing patterns, riskvolatility on/risk-off tradi ng, how to emerging mark nd value in ets and long -term global He outlines economic cycle more fundame ntal principles s. your trades and trading that should methodologie guide s to help you Fully illustrated succeed. with detailed use technical charts, the book analysis to mak shows how you can e your decision risk and how to take out hedge positions s, how to manage your to offset poss Simon Wat ible losses. kins worked for many year Forex trader s as a senio and is now a r consultant to the world's a number of biggest hedg e funds, so well-placed to pass on he is his expertise written exte to you. He’s nsively on Fore x, equities, commodities bonds and for many publ including: The ications worl dwide, Financial Time s, Euromoney, The Emerging FX-MM, Markets Mon Magazine, Worl itor, Global Finance d Finance Mag azine and FTSE Glob al Markets.

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The Power of Life Mastery

Anthony Rizk, the author, has been a student and researcher of human behaviour patterns, lateral thinking, behavioural change and NeuroLinguistic Programming for many years. A master in business administration, Rizk is a peak performance strategist and coach, and has engaged in several motivational events where he introduced the concept of edutainment, a mixture between education and entertainment. An expert in the science of personal transformation, Rizk has helped thousands of people realise their full potential. He has combined some of the most powerful mental techniques available into a clearcut system that you can use to take your life to the next level. In The Power of Life Mastery, Rizk unveils the secret of visualising when one’s dream car is not materialising. The way out, according to Rizk is to take a look inside by taking matters in your own hands. 66 | The Edge

the world’s major central banks since the world’s financial system nearly collapsed.” As a piece of workable advice, Watkins tells investors to “develop your own set of key indicators that you have learnt to combine in such a way that you can trust yourself to interpret them sufficiently well to make money more often that you lose it. Do not stick every available indicator on a chart, as you will just confuse yourself and lose money”. In the book, Watkins outlines what he considers a likely winning trade: knowing where the correct support and resistance levels are located over different trading periods (one hour, one day, one month, one year are a good start); picking out the overall longer-term trend to follow, as dictating one’s overall strategy; talking to a select group of other traders; knowing everything one can about the fundamental economic and political situations in countries the currencies of which one will be trading and those outside (in trading, everything is connected); monitoring developing trends in all the major asset classes, in order to anticipate coming trends in the particular markets in which you are focused. With this backdrop in place, Watkins’ guiding investing philosophy is to manage orders sensibly. Simon Wat kins

This is Simon Watkins’ second book after Everything You Need To Know About Making Serious Money Trading The Financial Markets. Watkins takes us through the various factors that can guide the informed investors in making sound investment decisions, across everchanging volatility patterns, especially in the context of the financial crisis of 2007-08. According to Wakins, “There is always some asset, somewhere in the world, that is oscillating in price sufficiently that you can trade it to make serious money every day of the week that a market is open.” The trick is to know what the asset is, whether it is trading generally higher or lower than it should be on a fundamental and technical basis (and for what reasons) and to have the skill, speed of thought and tenacity to stick it out, through hedges where appropriate, when everybody else thinks that you are wrong. Watkins offers that in broad terms, the first thing to be aware of is that ever since the onset of the global financial crisis in 2007-8, broad market volatility has settled at much lower average levels than was the case before the crisis. According to Watkins, the role of central banks all over the world has changed since the financial crisis. He writes, “The reason for this – and this is still a key factor of which to be aware, as it forms the backdrop to the current trading environment – is the changing role of

The Power of Life Mastery is an easy formula for creating longlasting and measurable change by learning how to surpass perceived limitations and step into one’s inborn capacity for greatness. It is a straightforward and easy-to-understand guide to getting the very best out your life. The Power of Life Mastery is an explosive course in accelerated learning and personal mastery that really works. You will learn how to end self-sabotage and release your full potential, by applying proven strategies for maximising your results. It covers a step-bystep, comprehensive training programme in creating outstanding breakthroughs in every area of your life. The book walks readers through, hand in hand, the process of developing and recapturing the essence of one’s truest self, uncovering time-tested and proven strategies for getting much more of what one wants, and less of what one does not. The book gives little-known distinctions that make all the difference. It is your passport to happiness, well-being and personal fulfillment.

Available at Virgin Megastores in Doha.


products & reviews

Epson TM-P20 The TM-P20 mobile receipt printing range features small, light printers for retail staff, hospitality employees and anyone who needs ticket or receipt printing on the go. The TM-P20 BT and TM-P20 Wi-Fi are under half the size of Epson’s previous model, around two-thirds lighter and come with a battery life of up to eight hours. Their intelligent ePOS technology allows the printers to communicate with web browsers for direct printing from any mobile device without the need to install or update drivers.

Panasonic 4K LED Panasonic Marketing Middle East & Africa has unveiled its latest 4K technology products and display solutions. These include its new large 4K LED LCD professional display and new 4K UHD TV. The professional series will have the 98” TH-98LQ70 and 84” TH-84LQ70 in their line-up, equipped with the company’s next generation of image enhancement technology. This technology converts non4K source to 4K resolution to create a higher level of picture quality.

Bang & Olufsen True360 B&O PLAY by Bang & Olufsen has announced the launching of the BeoPlay A2 bluetooth speaker. With omni-directional sound solution, True360 ensures that everyone listening to the ultra-portable speaker enjoys equally good sound – no matter where they are placed. The speakers have enough battery power to keep the music going for up to 24 hours on a single battery charge. The new BeoPlay A2 is now available in Qatar.

Samsung Galaxy Note Edge Vodafone Qatar has announced that the latest Samsung Galaxy Note Edge is now available at its stores in Qatar, priced at QAR4499. The new smartphone features the Edge Screen with a unique curve providing quick access to frequently used apps, alerts and device functionality, making multitasking easier. The Galaxy Note Edge will be available in ‘Charcoal Black’ and ‘Frost White’.

App Reviews QTickets If you want to skip the hassle of waiting in line for tickets at Qatar’s cinemas, Q-tickets is a convenient way to do so. The app not only shows you movie timings and cinemas, but also gives you the ability to book tickets from within the app. They also have a website through which you can book tickets. While the navigation within the app is cumbersome, the convenience in booking tickets early is a trade-off worth making.

Pennies There are a lot of apps that help you manage finances, but this simple budgeting app is probably one of the better designed ones on the app store. Simple and clean animations help you quickly set up a budget for food, travel, entertainment or anything else you like. More importantly, it lets you quickly add an expense and gives you a look at how much left for you have to spend this week. If you are looking for a manual budget tracker, this is the app for you.

Inbox

Inbox by Google, is the company’s attempt to rethink how we consume email. The app comes with a great user interface that employs Google’s material design, and it brings functions that users are most likely to use, such as reply, snooze, delete or add a reminder to the fore. It also unifies the user experience of using Gmail on your desktop or your phone. You can try Inbox by requesting an invite from inbox@google.com

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The Edge is international

International Sales Representatives Asia Sonney Media Networks Tel: +852-2783-1603 / +8522151-2351 E-mail : hemant@sonneymedia.com

The Edge currently has a growing network of international media sales representatives across numerous jurisdictions. To reach Qatar’s thriving business markets from any location, please contact your closest representative to inquire about advertising in The Edge, Qatar’s Business Magazine.

For sales enquiries please contact: International Sales Director:

Julia Toon

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Nesreen Shalaby

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Manu Parmar

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