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SMOKE ON THE WATER…
Throughout history the world’s oceans have been a critical arena for international relations. Before the world was privy to air travel and instantaneous communication, people, cargo, and ideas all travelled the world by sea. For centuries a strong maritime presence – both military and commercial – has been essential for states with great power aspirations. Today, even with advances in technology, seaborne commerce remains the linchpin of the global economy. According to the International Maritime Organisation more than 90 percent of global trade is still carried by sea. And beyond trade, a host of other issues, ranging from climate change and energy to defence and piracy, ensure that the oceans will hold considerable strategic interest well into the future. With numerous countries around the world increasing their ports capacity and international trade relations, the growing threat of piracy is a key area of concern. But the maritime community has also voiced concern in regard to the diminishing polar ice cap – melting fast and on pace to be seasonally ice-free by 2013; the relatively untainted Arctic Ocean is becoming open to fishing, international shipping, and the development of an estimated 22 percent of the world’s remaining undiscovered, but technically recoverable hydrocarbon reserves. In addition, there is a growing list of other emerging security, economic, and environmental maritime issues with important strategic implications for foreign policy, such as the rise of new naval powers like China and India, the delineation of vast amounts of ocean space on the outer continental shelf, and new commercial opportunities like deepseabed mining. Today more than ever, countries around the world face the formidable task of maintaining comprehensive security in the oceans. This is especially true in the Gulf region as it plays home to some of the world’s most important shipping lanes and strategic sea lines of communications. Further, as the Gulf region is experiencing unprecedented growth across a bevy of sectors and is expanding its capacity in both import and export trade agreements, there is call for concern in regard to: the threat of nuclear proliferation as a result of Iran’s nuclear ambition, increased security risks such as piracy and cargo crime, acute marine financial pressures, rigid timetables, fuel costs, regulatory demands and not to deny the impact that increased shipping activity will have on the marine environment in the region – all these factors create an environment where there is little room for error and disruption. Efficient and reliable operations at sea and in port have never been more important.
TheEDGE is printed monthly © 2009 Firefly Communications. All material strictly copyright and all rights reserved. Reproduction in whole or in part, without the prior written permission of Firefly Communications, is strictly forbidden. All content is believed to be factual at the time of publication. Views expressed by contributors are their own derived opinions and not necessarily endorsed by TheEDGE or Firefly Communications. No responsibility or liability is accepted by the editorial staff or the publishers for any loss occasioned to any individual or company, legal or physical, acting or refraining from action as a result of any statement, fact, figure, expression of opinion or belief contained in TheEDGE. The publisher (Firefly Communications) does not officially endorse any advertising or advertorial content for third party products. Photography/image credits and copyright, where not specifically stated, are that of Getty Images and/or iStock Photo.
A brief introduction to the specialised team of contributors, who regularly lend their expertise and insight to TheEDGE.
NEWS IN BRIEF .8.
A snapshot of the latest business developments affecting the business landscape within Qatar and the GCC region.
NEWS IN QUOTES & NUMBERS .10.
Powerful statements and important statistics that made an impact.
BUSINESS INSIGHT .14.
TheEDGE speaks with key professionals from in and around the region to uncover the latest news on the business front.
In the spotlight .22.
COVER STORY .34.
Jamie Stewart dives in to the issue of maritime security, reporting on how countries around the world are facing the formidable task of maintaining comprehensive security in the oceans.
ECONOMIC BAROMETER .41.
This month, Karim Nakhle explores the growing corporate appetite and capacity for the merger and acquisition market in the Gulf region.
ON THE PULSE .45.
Edward Jameson takes a look at the ‘green’ energy revolution and how Gulf states are realigning themselves in a bid to fit to the new energy landscape.
GREEN BUSINESS .49.
Leen Qablawi investigates the implications of Greece’s debt woes and the strained relationships in the eurozone.
Sam Pickering asks the important question: Is retrofitting solar panels a possible solution to reducing Qatar’s energy demand?
MARKET WATCH .27.
BUSINESS VIEW – REAL ESTATE .53.
Global Investment House looks at the challenging year that was 2009, and presents the finding from its Middle East North Africa Private Equity Outlook for 2010.
INSIDE EDGE .30.
Rajesh Mirchandani takes a look at the global job market in the post-economic crisis to see if employment is on the rise.
Edd Brookes takes a look at global occupancy costs and how Qatar fares in terms of regional and global competitiveness.
SPECIAL REPORT – OBG .56.
Daniel Moore investigates how strong government support and a healthy economic standing has helped Qatar’s banking sector to drive forward in a robust fashion in 2010. MARCH 2010
LEGAL INSIGHT .58.
Clyde and Co’s David Salt and Sarah Simms provide insight into Qatar’s labour law.
BUSINESS KNOW-HOW .61.
IT services company, Insite, lends its expertise and gives you the inside knowledge on IT infrastructure.
BEHIND THE WHEEL .64.
Tim Stevens reports on the Porsche/Volkswagen deal and reveals what Qatar’s stake in the business means.
INDUSTRY FOCUS - MOTORSPORT .67.
Simon Berger explores the rise of the motorsport industry in the Middle East.
HOW-TO GUIDE .71.
Networksolutions tells you why businesses should blog.
TECH TOOLS .75.
TheEDGE looks at the latest gadgets hitting shelves this month.
LIFE & STYLE .77.
TheEDGE takes to the paintball field this month.
EVENTS & CONFERENCES .81.
A round-up of key industry events taking place in February.
QATAR PROJECTS .82.
An update on key projects that are taking shape in Qatar. MARCH 2010
Senior business journalist – Middle East North Africa region Edward Jameson is a seasoned business journalist operating out of the GCC. Jameson’s editorial expertise extends to the construction, logistics and environmental sectors. After earning an MA in Journalism in the UK, Jameson traveled extensively throughout Australasia, South East Asia, the UK and, most recently, the Gulf region. Throughout Jameson’s career his work has featured in numerous global leading publications in both print and online mediums.
Edward Jameson |
Senior business strategist – Doha, Qatar Karim Nakhle, based in Doha, is a business strategist with more than eight years experience in financial advisory, M&A, investor relations, business development, strategic planning, corporate communications and banking, having worked with HSBC, KPMG, International Bank of Qatar and National Bank of Kuwait, in Europe, the Middle East and North Africa. He is a member of the Economist Intelligence Unit, and a consultant with Standards and Poor’s Society of Industry Leaders.
Karim Nakhle |
Rajesh Mirchandani | CEO – Dun & Bradstreet South Asia Middle East, Dubai, UAE Rajesh Mirchandani is a postgraduate from Indian Institute of Management Studies (IIM-C) and is currently responsible for the South Asia, Middle East and Africa (excluding South African bloc) operations of Dun & Bradstreet. Mirchandani led the management team responsible for the buyout and creation of Dun & Bradstreet South Asia Middle East Ltd. Mirchandani also serves on the board of directors for several companies in India and aboard.
Sarah Simms | Senior associate – Clyde & Co, Doha, Qatar Sarah Simms works in the Qatar Financial Centre branch of law firm Clyde & Co. Simms is a native of New Zealand where she obtained her Honours law degree in 1995. Since then Simms has practiced at leading law firms in New Zealand (Bell Gully), London (Freshfields), Australia (Arnold Bloch Leibler) and most recently in Doha. Simms has extensive experience in a range of commercial matters, including corporate and commercial, financial regulation, insurance and dispute resolution.
David Salt | Partner – Corporate and Commercial, Clyde & Co, Doha, Qatar David Salt re-joined Clyde & Co in March, 2007, having previously been a partner with the firm for 12 years. Based in the firm’s Doha office as a corporate and commercial lawyer, Salt has extensive experience advising on energy projects, as well as a broad range of corporate finance work. He has advised various international companies on ‘setting up in Qatar’, including in the Qatar Financial Centre and Qatar Science and Technology Park, and advised on the first ever debt/equity swap in the Gulf.
Journalist – Summit Communications, MENA region Nathalie Martin-Bea is a seasoned journalist and has been published in leading media titles around the world, including The New York Times, The Daily Telegraph, Capital, Wirtschaft Woche, Le Nouvel Économiste, Fortune and China Business News. Based in Doha since 2007 and working under the banner of Summit Communications, Martin-Bea has compiled three country reports on Qatar as published in The New York Times.
Nathalie Martin-Bea |
Simon Berger | CEO – IM2 Events, Lenzburg, Switzerland Simon Berger is the founder and CEO of Swiss-based IM2 Events GmbH, an international management and media company, with offices in the United Arab Emirates, France, Portugal, and the United Kingdom. Berger has more than 20 years experience in the creation, launch and development of exhibitions in countries in the Middle East, United States, Asia Pacific, Africa and Europe. Berger is a regular contributor to international media on the business and commercial aspects of international motorsport.
Automotive correspondent – Doha, Qatar Tim Stevens is a Doha-based senior contract manager for AECOM in the project management business division and has 25 years of experience in the construction industry under his belt. Stevens is also a committee member of the Chartered Institute of Building, Qatar Centre. However, he is also motorsport enthusiast. He is now retired from the racing circuit, but remains actively involved with Qatar’s racing community.
LEEN QABLAWI | Trainee solicitor – London, United Kingdom
Leen Qablawi is a London-based trainee solicitor specialising in international finance law. Qablawi’s core work encompasses business restructuring and cross-border insolvency. Qablawi holds a Bachelor of Arts in Economics and International Relations from McGill University. Qablawi is also a regular contributor for various leading international publications on geo-political and economic issues.
SAM PICKERING | Managing director – Bluu Green, London, United Kingdom Sam Pickering is managing Director of Bluu Green, a UK and Qatar-based sustainability consultancy. Pickering has worked within the construction industry in Europe for a number of years and was most recently chairman of European Sustainability with Watts Group Plc, prior to starting Bluu Green in 2009. Pickering is an expert on BREEAM and sustainable construction and has worked on many high profile projects within the UK. He is also a QSAS Accredited Green Professional.
Edd Brookes | Director – DTZ Middle East Operations, Doha, Qatar Edd Brookes, based in Qatar, is a professional member of the Royal Institution of Chartered Surveyors and a director of DTZ Middle East Operations. In addition to being head of DTZ Middle East Valuation, Brookes runs the Agency Department, which is involved in the sale and leasing of a number of key projects. The diverse calibre of Brookes’ work has seen him operate out of various MENA countries. He is a regular guest on the BBC’s World Middle East Business Report and a speaker at key regional events.
Editorial manager – Oxford Business Group, Doha, Qatar Daniel Moore is the Qatar editorial manager for Oxford Business Group. Moore has been operating out of Qatar for the past three years, as well as working in an editorial and research capacity throughout East and South Africa and Europe. Moore holds a Bachelor of Science in Marketing, with certification in international business, as well as a Bachelor of Arts in French from Texas A&M University in the United States.
Daniel Moore |
Jamie Stewart | International correspondent – London, United Kingdom Jamie Stewart is a senior journalist specialising in the field of energy with ICIS Heren in the United Kingdom. Stewart is also a part-time freelance journalist based in the East End of London. Throughout his career, Stewart has worked extensively across the Middle East, covering a vast array topics related to trade, industry and economics. Stewart holds an MA in Journalism and has been published in a number of highly respected international titles. Retraction: TheEDGE incorrectly referred to contributor, Leen Qablawi as a lawyer last month. Please note her correct title is trainee solicitor.
NEWS IN BRIEF BIOFUEL HOPE SEEN IN SALTWATER PLANT SEED As national carriers of Gulf Cooperation Council (GCC) countries continue apace with their ambitions to develop biofuel, researchers have identified salt-water plant as being a potential feedstock for alternative aviation fuel. Researchers said Salicornia seeds could be harvested and pressed to make vegetable oil or processed to yield agrofuel that may soon fuel aviation craft. “As the plant thrives in salt water, it can be cultivated intensively and irrigated in areas where the water and land are too saline for traditional agriculture,” one researcher said. The experts said that the introduction of salt-tolerant crop could utilise millions of hectares of unproductive arid land without using a single drop of freshwater. The Masdar Institute of Science and Technology (MIST), Boeing and Etihad Airways recently announced their plans to jointly establish a salicornia plantation in the United Arab Emirates to produce agrofuel for use in aviation. The project will engineer an ecosystem of fishponds, salicornia fields and mangrove swamps. The objective is to establish an experimental 200-hectare integrated seawater agricultural system on the salt flats near Abu Dhabi with commercial production expected to begin within five years. Salicornia oil will be processed for use in aviation fuel, while chaff will be used as livestock feed or burned to produce electricity. Qatar Science and Technology Park (QSTP), Qatar Petroleum (QP) and Qatar Airways recently announced a similar project in which they intend to develop “economically viable and sustainable” biofuels for the aviation industry. The group has not yet decided on a feedstock, but is reportedly exploring the possibilities of cultivating salicornia. Qatar is keeping quiet about which specific feedstock the airline will pursue in exploring biofuel solutions. However, there are reports that Seattle-based Verno Systems is working 8
on salicornia for Qatar. Talking to an international journal, Verno confirmed that salicornia was one of the feedstock that they were working on, but declined to discuss the specific feedstock studied in the Qatar project. Verno also noted that other feedstock such as waste biomass and residues may also play a role in the development of aviation bifouels. Qatar Airways and its partners have agreed to establish the Qatar Advanced Biofuel Platform (QABP), which will lead activities primarily in the area of advanced biofuel projects. Qatar Airways is the latest major airline to join the biofuel bandwagon. QATAR AND IRAN BOLSTER DEFENCE TIES Qatar and Iran have signed a pact to strengthen defence ties and bolster bilateral relations, Xinhua news agency reported. Qatar Armed Forces Chief of Staff Hamad bin Ali Al Attiyah and visiting Iranian Defence Minister Ahmad Vahidi signed the agreement in Doha late last month. Under the terms of the agreement, Qatar and Iran will exchange technical delegations, expand bilateral training projects and promote counterterrorism cooperation. The two officials also discussed strengthening bilateral relations between the two countries. Vahidi said promoting sustainable stability and security in the Persian Gulf was a key priority for Tehran. YEMEN COULD BE LINKED TO THE GCC RAIL GRID Discussions to build a railway to Yemen and link it to the proposed Gulf railway from Kuwait to Oman are to be thrashed out by the Technical and Finance Committee of the Gulf Cooperation Council (GCC) during a meeting at the GCC’s headquarters in Riyadh, Arab News reported. However, the committee will discuss
the Yemen link only after addressing various aspects of the multi-billion dollar GCC railway project, in particular the formation of a GCC railway authority. IRAN AND QATAR TO DEVELOP JOINT OILFIELD Iran and Qatar have established a technical group to supervise the development of the joint South Pars/ North Dome oilfield, SHANA news agency quoted Qatar’s state minister for energy and industrial affairs as saying. During a meeting with Iranian Oil Minister Masoud Mirkazemi in Tehran last month, Mohammed Saleh Al Sada said the joint technical group would hold regular meetings to supervise the development of the joint field. The South Pars/North Dome field is a natural gas condensate field located on the Persian Gulf. It is the world’s largest gas field, shared between Iran and Qatar. MARITIME ISSUES ON THE RISE A high-level delegation of maritime and logistics officials from Bahrain recently met senior industry leaders in Tokyo to promote Bahrain’s business environment and logistics and maritime credentials.
QATAR SET TO IMPLEMENT NEW SOLAR DESALINATION TECHNOLOGY THIS YEAR Qatar-based Sterling Water and Arrowhead Centre have concluded licence agreement negotiations to accelerate a low-cost, energy efficient desalination system, which has been developed by researchers at New Mexico State University. The zero-emission technology is capable of converting salt water to clean drinking water using minimal energy – so little energy that the waste heat of an air conditioning unit would be enough to power it. The system utilises the natural effects of gravity and atmospheric pressure to create a vacuum in which water can evaporate and condense at near ambient temperatures – 45 to 50 degrees celsius as compared to the 60 to 100 degrees celsius required by most distillation processes. Sterling Water aims to bring the commercial model, which is powered using solar panels, into full manufacturing this year. The visiting delegation included senior figures from the General Organisation of Sea Ports (GOP), Economic Development Board (EDB), APM Terminals Bahrain and the Bahrain Logistics Zone (BLZ). During a joint GOP-EDB seminar titled: Opportunities in the Kingdom of Bahrain’s Maritime and Logistics Sector held last month, more than 40 representatives of Japanese businesses interested in the opportunities presented by Bahrain gained insight into the latest developments in the kingdom. TOYOTA GETS A GRILLING Toyota Motor Corporation’s president endured three hours of questioning by United States’ (US) lawmakers, pledging to restore consumers’ trust without shedding new light on the company’s handling of safety recalls, Bloomberg reported. “My name is on the company,” Akio Toyoda, the grandson of the automaker’s founder, told the House Oversight and Government Reform Committee late last month, making his first US appearance since record recalls of around eight million cars and trucks worldwide for defects that may cause
sudden acceleration. Toyota is struggling to repair a reputation damaged by the recalls. The company was “more concerned with profit than with customer safety,” committee chairman Edolphus Towns said in opening the hearing. The Toyota City, Japan-based automaker has lost about US$35 billion (QR127 billion) in market value since January 21, when it recalled around 2.3 million vehicles in the US to fix sticking accelerator pedals. SAUDI AND QATAR BOOST TIES Saudi Arabia and Qatar have signed six agreements to strengthen cooperation between the two Gulf Cooperation Council (GCC) neighbours, particularly in the areas of health, agriculture, commerce, information and political coordination, Arab News reported. The agreements were signed following a meeting of the SaudiQatari Coordination Council in Doha last month. The meeting was cochaired by Second Deputy Premier and Minister of Interior Prince Naif and Qatari Crown Prince Sheikh Tamim bin Hamad Al Thani.
DRAKE & SKULL EYES MIDDLE EAST EXPANSION IN QATAR Dubai-based contracting company, Drake and Scull (D&S) International, has confirmed that it is seeking acquisitions in Qatar, Saudi Arabia and Egypt as part of its Middle East expansion plans, Maktoob News and Zawya Dow Jones reported. In a bid to combat the ongoing downturn in the United Arab Emirate’s construction industry and to boost the company’s financial position, D&S’s CEO, Khaldoun Tabari, said the company had earmarked UAE500 million (QR496 million) – part in cash and part through bank lending – to acquire one company in Qatar and a further two companies in Saudi Arabia. “We will be moving to our third acquisition in Qatar,” Tabari told Maktoob News, while on the sidelines of the Abu Dhabi Economic Forum late last month. He said that D&S had plans to acquire the Qatari company during the first quarter and the two Saudi companies within quarter two and three of 2010. “We’ll be looking soon at Egypt too, toward the end of the year,” he added. MARCH 2010
NEWS IN QUOTES & NUMBERS
news in quotes
news in numbers
“Once again the Americans have sent their agent to go around the Persian Gulf like a vagabond and repeat the same lies.”
The Supreme Leader of Iran, Ayatollah Ali Khamenei, said to Fars news agency in rejection to recent remarks by United States (US) Secretary of State Hillary Clinton, who wrapped up a tour of the Gulf region last month.
“We see that the government of Iran, the supreme leader, the president and the parliament, is being supplanted, and that Iran is moving toward a military dictatorship.”
US Secretary of State Hillary Clinton said, during a meeting during her visit to Doha last month, as she called for United Nations sanctions to pressure Iranian enterprises controlled by the Revolutionary Guard, which she said the US believed was, in effect, supplanting the government of Iran.
“We have US$420 million (QR1.5 billion) in assets identified for sale that we want to achieve in the next 12 months. We don’t want to be forced sellers, but we want to have an orderly sale and exit them gradually over the year.”
Gulf Finance House acting CEO Ted Petty told Reuters that the company plans to raise US$250 million (QR910 million) through asset sales this quarter, and has made layoffs to cut costs after a regional real estate boom ended. He added that the troubled investment house was also in talks to sell its stakes in Khaleeji Commercial Bank as well as its energy city real estate projects.
“We are trying to find the space that exists that international organisations or local media will not cover for whatever reasons. We can be pushing boundaries that I know other broadcasters for different regions would not do.”
While the final quarter of 2008 was financially grim, Gulf corporate earnings figures for the fourth quarter of 2009 appeared relatively rosy. However, when compared to the quarter-on-quarter figures, the picture is less attractive. With slightly more than half of Gulf companies having reported their earnings, Markaz, the Kuwaiti investment bank, told the Financial Times (FT) that profits slumped 44 percent in the last three months of 2009 compared with the third quarter. The earnings decline was particularly savage in the United Arab Emirates, where the total profits of about two-thirds of companies slumped 77 percent quarter-onquarter. Omani and Kuwaiti earnings dropped 38 and 32 percent respectively. On the other hand, FT said Saudi Arabia and Qatar had partially justified their billing as fund managers’ top picks in the Gulf region. Earnings there slipped just 19 and seven percent respectively.
Pic Of the month
The head of BBC Arabic, Liliane Landour, told the Daily Star the broadcasting body’s reputation for journalistic integrity would allow it to report on regional stories that are often overlooked by privately owned media outlets, but admits it will take time for Middle Eastern audiences to tune in.
“You will have more investments from the Gulf this year…we would expect a very good year.”
Khalid Al Rumaihi, managing director for placement at Bahraini investment bank Investcorp, told Bloomberg News. He said institutional investors in the Persian Gulf region were on track to pour billions into hedge funds this year, following similar moves by US investors last year.
- Iranian members of the Basij militia protest outside the French embassy in Tehran last month. Dozens of pro-regime militants demonstrated outside several EU embassies in Iran to protest Europe’s attitude towards Iran and its controversial nuclear programme. (Photo courtesy of Hossine Saleh/AFP/Getty Images). -
ON THE EDGE
SUCK IT UP
Peter Colat, a Swiss freediver, held his breath underwater for 19 minutes and 21 seconds, breaking the world record in breath-holding, according to a recent news report. Kelly Lewis investigates.
he freediver’s gasp-inducing feat outshone the previous world record by 19 seconds and put magician David Blaine’s once standing record of 17 minutes and four seconds, which he achieved on the set of Oprah Winfrey’s talk show in 2008, to shame. For the average human, the idea of someone being able to hold their breath for that long is extraordinary, but also absurd. Such a feat also raises questions about biology: Is it really possible and is it healthy? “It is, as a matter of fact, possible – with certain tricks,” Claes Lundgren, a physiologist at the University of Buffalo School of Medicine in New York, told Discovery News. However, he added that it is not an advisable feat for the majority of people to attempt, as the consequences can be deadly. “It’s not recommendable at all. Anything written about this should be accompanied by a strong admonition not to try this without someone knowledgeable present.” Obviously breathing is an essential bodily function, which keeps humans alive, however, when a person holds their breath, carbon dioxide builds up as their body uses up oxygen. After a minute or two for most people, the result is an overwhelming urge to breathe. “All sorts of alarms go off,” said Ralph Potkin a pulmonologist and hyperbaric physician at the University of California, Los Angles School of Medicine. “The brain tells the body to breathe. The diaphragm gets electrical signals to stimulate breathing.” To fight those powerful instincts, a competitive breathholder starts by hyperventilating for as long as 10 minutes, while breathing from a tank of 100 percent oxygen. Breathing hard and fast expels carbon dioxide from the body, buying time before the levels get too high. Likewise, boosting oxygen stores with pure oxygen buys time before the levels fall too low. After hyperventilating, if a person is not unconscious, they will probably feel dizzy and have extreme cramping in the arms and legs. The next step is to plunge into a tank of water. This stimulates a primitive, mammalian reaction called the diving reflex. When confronted with water, especially cold water, the body shunts circulation from the rest of the body to the heart and brain. The reflex, which even chickens have, probably helps babies survive the trip through the birth canal, Lundgren said. By lowering how much total oxygen the body is using, the diving reflex also allows people to hold their breaths for longer stretches.
JULY 2009 MARCH 2010
The record for breath-holding on land is around 10 minutes, said Lundgren, who himself can go eight or nine minutes without breathing. The new record-holder, Peter Colat, was able to last twice as long because he was in a tank of water. Training for competitive breath-holding often involves spending time in hyperbaric chambers, said Potkin, who helped David Blaine prepare for his Oprah performance. Like extreme mountain climbers, breath-holders want to get their bodies used to oxygen deprivation. Many competitors also practice Zen-like relaxation exercises to cope with a variety of discomforts, including the squeezing sensation of oxygen-deprived, deflating lungs. “Some people can drop their blood pressure like yogis (spiritual practitioners) and their heart rates as well,” said Potkin, whose personal record is four-and-a-half minutes without a breath. “There’s a lot of voluntary denial of pain. It’s really an out-ofbody experience in a way. You have to disconnect from your body.” Doctors used to declare patients brain-dead if they had not taken a breath in five minutes, Potkin said. Intentional breath-holding is slightly different because the blood is still circulating. Still, studies of freedivers have turned up abnormalities in brain scans and markers that suggest brain damage. No one knows what the long-term consequences will be of feats like these. “I wish I could tell you what their brains will be like in 20 years,” Potkin said. “The medical diving community is a little concerned about it.”
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BUSINESS INSIGHT – LAW & PRACTICE
BUILDING QATAR’S LEGAL INFRASTRUCTURE
As Qatar increases its appetite for economic growth, foreign investment and diversification across its business landscape, the state has recognised the need for its legal infrastructure to grow in line with its ambitions in both a transparent and robust fashion. Initially the government began with the establishment of the Qatar Financial Centre Authority (QFCA) and the QFC Regulatory Authority (QFCRA), and last year it completed the final phase of such development with the introduction of the new Civil and Commercial Court and the Regulatory Tribunal for the QFC. Kelly Lewis spoke with Malik Dahlan the Principal Institution Quraysh for Law and Policy, Special Advisor and Forum Director for the Civil and Commercial Court.
What does the formation of a commercial and civil court actually mean for Qatar and for businesses looking to establish their operations in the state? One of the most important and defining factors of any financial or corporate centre in the world is the legal environment that it guarantees. Certainly, the vision for Qatar was to look at courts that were already in place throughout the region, but in a bid to strike the right legal balance we went beyond examining other models, like the internationally respected Commercial Court in London and Court of Chancery in Delaware. The model will evolve, it’s taking its time, but it has the full backing of the leadership and the State of Qatar, and as it continues to develop those tendencies it will also focus on niche areas. In Qatar, I think when the decision was made to have a commercial and civil court, the state opted to attain the most senior judiciary it could – this includes the former Lord Chief Justice of England and Wales, the Right Honourable Lord Woolf of
- Malik Dahlan. -
Barnes, president of the court. He is not only known for his high standing in common law jurisdictions, but internationally he’s also renowned for his vision for legal reform. Qatar has been very successful in securing the buy-in of this man and also in this case the complementarity that is offered with Sir William Blair, the chairman of the QFC Regulatory Tribunal. The tribunal is both a regulatory adjudicative body and also an administrative body. In a sense, the court and the tribunal stand out to give the QFC a new meaning and a reason for existence. One would like to be in Qatar and establish a presence in Qatar, if only for the leadership of these two men. The judiciary itself is comprised of some of the most established judicial figures in the world and certainly we’ve got further additions in the pipeline, which we are looking forward to including. The Qatar Law Forum and other events have underpinned the recognition of the court, but most certainly by the presence of the President of the International
BUSINESS INSIGHT – LAW & PRACTICE
- Qatar Financial Centre. -
Court of Justice, the President of European Court of Human Rights, the Prosecutor General of International Criminal Court, which is indicative of what this court is supposed to be. Beyond that of course, there is the alternative dispute resolution (ADR) side of it that one can, through consensual jurisdiction, by consensus and the will of the party, adjudicate in the court and more importantly look at other methods of dispute resolution to adjudicate their disputes. Even if they elect not to use that dispute mechanism, they know that it is a guarantee in their contracts; it is the guarantee when they do business in the State of Qatar, but more importantly when they do business in the region. I think the single most interesting factor that makes this court stand out above other courts (that are defined by a specific jurisdiction or a free zone area) is that this is a national Qatari court established by amendments to Law No. 7 of 2005 (the QFC Law), affected by Law No. 2 of 2009, which means that the decisions are enforceable. Additionally, the enforceability of these judgements goes
beyond local or national enforcement, it guarantees Gulf Cooperation Council-wide enforcement. I think our registry will be one of the most interesting judicial organs worldwide. Our registrar currently has experience of more than 40 years and we are also in the process of hiring a deputy registrar – so far we have examined 165 different applicants from around the world – I am sure it will be a source of envy for all financial centres around the world. You said you are in the process of expanding the judicial capacity of the court and tribunal, but can you expand on some of the judicial members that you already have on board? Well, I have to be honest about this, if it was not for our fortunate situation of having the leadership and support of Lord Woolf and Sir William Blair, I’m not sure we would have been successful with securing esteemed names such as Lord Cullen of Whitekirk, who was Lord Justice General and Lord President of the Court of Session, the most senior
judge, of Scotland; Justice Aziz Ahmadi the former Chief Justice of India; Professor Francois Gianviti, who was General Counsel and director of the Legal Department of the International Monetary Fund, Ronald Sackville, who is one of Australia’s most esteemed federal judges, Barbara Dohmann QC our first female judge and a distinguished member of the English Commercial Bar and Michael Thomas QC, who has been Attorney General of Hong Kong and on the London Commercial Bar for 40 years. While we have a solid combination of common law and civil law judges, we are also very conscious of wanting to expand on that presence. Additionally, we are approaching some of the most eminent Arab judicial and legal figures from around the world, certainly from the International Court of Justice and other arbitration figures. So these things are already in the pipeline and we are underway with discussions with the Finance Minister and the Council of Ministers, which we are hopeful to be able to deliver tangible outcomes from this year. MARCH 2010
BUSINESS INSIGHT – LAW & PRACTICE Many commercial and civil court systems in the Gulf arena have been called into question in recent years for their failure to adequately provide transparency and hand down fair cases without bias. How will this court and tribunal prove that they are an independent body, while also adhering to international judicial standards? Excellent point. This is one of the very reasons why the Civil and Commercial Court and Regulatory Tribunal have been established and is also what makes it unique in the region. Firstly, the independence of the judiciary is guaranteed under the constitution of the State of Qatar. Secondly, in Law No. 7 of 2009, it guarantees the independence of the Civil and Commercial Court and the Tribunal as an individual institution or as two institutions respectively, as well as in the chairman and the president of both parties. Lord Woolf and Sir William Blair have strongly stressed the importance of maintaining independence throughout all phases of the court and tribunal system. Having said that, the QFC also is an organisation, through its regulatory authority and its authority, which emphasises its independence and its capacity to act as a regulator. What we have seen in the other states in the Gulf,
particularly in Dubai for example, is one’s interpretation, or a country’s interpretation, on how certain financial instruments should operate and be controlled and this is something that our court is perfectly geared to handle. As a belief and commitment to the rule of law, and through the establishment of the court we believe that solutions for such crisis should not only be handled by government and government-backed solutions, but that there must be a judicial and legal system available to deal with these issues. The backdrop of the crisis, which we saw unfold in Dubai, were laws regarding bankruptcy; most notably in regard to Chapter 7, Chapter 9 and Chapter 11, where it refers to the liquidation or financial restructuring of a company. Such laws are usually granted by court of law and I am very proud to say that we have the right people and it’s the right time for us to be able to deal with such problems without any awkwardness placed on our government. In considering Qatar’s multifaceted business environment, its social structure and its growing multicultural population, do you foresee its current legal infrastructure evolving to keep pace with the state’s ambition for all-round expansion?
It is very interesting that you mentioned this point. Since the beginning of the last decade, we have seen a serious shift, constitutionally, which has been accompanied by great vision and appreciation of the rule of law. I think the constitution of the State of Qatar has been a sentiment that is truly praiseworthy. But, whether or not we wish to talk about some of the democratic transitions, or what is required, we have to examine some of the prerogatives of Qatar and we need to look at some of the neighbouring examples so to understand what the limitations and the pitfalls are when a country rushes into institutional or legal changes. Having said that, all the constitutional jurisprudence and the legislative jurisprudence that we have seen historically, always related to human rights principles, to basic rights, the separation of powers, the role of powers, and so on. We have never seen a constitutional legal instrument that looked at the priorities of the 21st century; priorities such as progress, development, education, and economic prerogatives. Qatar is a booming economy, there is a vision, they want to achieve that vision, and you do not want to be placed in a position where that is limited. That is not say that guarantees are not going to be achieved whether they are political or constitutional to the contrary this is clearly there, but as I said at the same time no one wants the risk, no wants to see another boom and a bust somewhere else, and this is the difference between politics and statecraft. And I am proud to say that Qatar has focused carefully on statecraft and it is continuously looking at the strategy. While the court and its judiciary already been formally established, when will they take on a tangible and physical court presence? The physical court structure will take place within this year. I would say that within the third quarter is when people can expect to see a new and fully functional court in terms of the premises and the registry. However, we are open for business and we are happy in our tradition, we certainly do not want to promote disputes, but what I am saying is that if you need a doctor we are here.
BUSINESS INSIGHT – DISPUTE RESOLUTION
THE ART OF MEDIATION
To provide a well-rounded environment for businesses operating in Qatar to effectively handle commercial disputes, the Qatar Financial Centre (QFC) Civil and Commercial Court, and the Centre for Effective Dispute Resolution (CEDR) have partnered to develop better infrastructure in which to provide resolutions for commercial differences of opinion. Kelly Lewis spoke with some of the key delegates involved with the initiative to establish what the benefit of mediation services and training will mean for Qatar.
- QFC Civil and Commercial Court Chairman Lord Woolf (left) and CEDR’s CEO Karl Mackie sign an MOU for mediation training in Qatar. -
ommercial arbitration in the Gulf region has experienced significant growth in recent times, which has called for the need to implement alternative and amicable resolutions between disputing parties. In a bid to provide effective dispute resolution services, the QFC Civil and Commercial Court and CEDR signed a memorandum of understanding in January, which formally established Qatar as the mediation skills training hub for the region. “One of the great advantages with mediation is that, irrespective of an individual’s religious or personal beliefs, parties can come together to find an effective answer. Mediation is a marvellously flexible process, which depends on the individuals contributing and the mediator contributing to the negotiation process – mediators are able to be objective, they are able to see
what the parties really need and help to guide them to achieve that,” QFC Civil and Commercial Court Chairman Lord Woolf told TheEDGE. He added that, while the demand for mediation cases would “be slow to start with”, he predicted there would be “a very substantial demand” going forward, due to the growing number of local and international businesses establishing their operations in Qatar. Graham Massie, the director of Consultancy for CEDR said that mediation provides a beneficial option to formal legal proceedings: “This is not just because of time and cost involved and I don’t mean just in professional fees, but the cost that comes from the amount of distraction and wasted management time that occurs when a party is involved in a complex litigation case – this coupled with the uncertainty of how many years it can take before
you get a decision, whereas mediation can lead to much faster outcome for all.” So what is involved for people wanting to be trained locally in mediation? Massie said that people were not required to hold any formal education or professional criteria, but rather he said CEDR was “interested in training people from all walks of life”. “At the moment, the course is taught in English, so the comfort of being trained and being able to work in the English language is a necessity. “One does need to have a certain maturity and experience of life because of the types of people and situations they would be presented with. However, that does not mean to say that young people cannot be very capable mediators.” Massie said, while CEDR was training individuals in mediation, he also encouraged lawyers to undertake the training: “Clients in dispute are generally represented by lawyers and it can be very beneficial if their lawyers are also familiar with the process when representing them. I think, in due course, we will be offering specialised courses for what we call mediation advocacy skills training.” Massie said the current training arrangement that CEDR had was to conduct at least one course a year. “We would like to conduct more going forward...we completed the first five-day, Qatar-based skills training programme in January, but as yet, we do not have the next date for our training schedule here.” MARCH 2010
BUSINESS INSIGHT – SHIPPING & LOGISTICS
FULL STEAM AHEAD Qatar Gas Transport Company (Nakilat), the Qatari shipping company, was established in 2004 and now forms an integral link in the liquefied natural gas (LNG) supply chain for Qatar. The jointly owned stock company – 50 percent by its founding shareholders and 50 percent by the public – is currently building a sturdy fleet of vessels to transport LNG produced from Qatar’s North Field to global markets. Nakilat has under its banner a fleet of 54 LNG vessels, making it the largest LNG ship owner in the world. Managing director Muhammad Ghannam spoke directly with Nathalie Martin-Bea of Summit Communications to discuss the company’s ambitious plans, its successful international joint ventures, and how Nakilat has come out ahead of the global economic crisis.
- Muhammad Ghannam, managing director of Nakilat. -
CAN YOU TELL ME ABOUT THE ROOTS OF NAKILAT’S HISTORY AND ITS EVOLUTION? The main driver [of Nakilat’s history] dates back to 2002, when we clearly realised the importance of establishing full control of the LNG value chain, from production at the wellhead all the way to the end user. This vision helped all involved to focus on offshore production, on terminal and plant operations, in establishing long-term sales agreements with reliable partners such as ExxonMobil and Shell, and also in expanding our sales to the Far East, including utilities in Japan. This is all part of the strategy that will enable Qatar to supply 77 million tonnes per annum of LNG to the world’s markets this year. Historically LNG transportation was contracted to a third party. However, with the massive volumes of Qatar’s production and the critical importance of the commodity to our economy – which is heavily dependent upon the LNG industry – the need to establish full control was fundamental. Initially we expected that Nakilat’s participation would be more limited;
that we would simply partner with established shipping companies instead of totally controlling our involvement. Our vision for Nakilat clearly evolved as we examined the totality of our opportunities and the need to ensure the integrity of the value chain. Where we have shared ownership of vessels, we still maintain a degree of control with our foreign partners and further benefit from their longestablished experience and expertise. Initially, we acquired 29 ‘jointlyowned’ ships, where our participation is between 20 to 60 percent. Then in early 2006, before we completed the construction of our large LNG carriers, we asked ourselves a simple question: “Why can’t we be independent of these joint venture relationships and control our own destiny by having full ownership of vessels?” We answered this question in March 2006, when we acquired 100 percent of the first six Q-Max ships. This started an incredible chain of events, which brought us to where we are today. We started to look at prospects for another key industry. With 54 ships
BUSINESS INSIGHT – SHIPPING & LOGISTICS
- Nakilat has ambitious plans to expand its presence in the global LNG export market. -
in our inventory, it became clear that we would have a huge demand for large vessel maintenance and repair. After an extensive review of our options, we decided to partner with the Singaporean shipyard giant, Keppel Offshore and Marine. Late in 2008, Nakilat-Keppel Offshore and Marine (N-KOM) was incorporated. N-KOM will operate our world-class ship repair yard at Ras Laffan, in the northeast of Qatar, This new construction represents Phase 1 and 2 of a ‘Nakilat/Qatar Petroleum’ strategy to develop and operate facilities for the construction and maintenance of a wide range of marine and offshore structures. The overall strategy calls for the development of a 110-hectare site to be completed in six phases. The N-KOM yard will not only handle repair and maintenance for Nakilat’s LNG carriers, it will also offer a full range of services for other ship owners, to include the conversion of tankers to floating production storage and offloading units (FPSO), and to floating storage and offloading units (FSO). Ras Laffan is now the largest LNG
port in the world and part of Qatar Petroleum’s master plan for the port includes Nakilat’s ship repair yard and new liquid cargo berths. Additionally, we decided that it would be advantageous to build certain types of ships ourselves. Therefore, in March 2009, Nakilat signed a memorandum of understanding with Damen Shipyards Group, a world-class ship builder based in the Netherlands, to form a joint venture, which will manage a new state-of-the-art shipyard for the construction of high-value small ships. On January 21, 2010 the joint venture agreement was officially signed and Nakilat Damen Shipyards Qatar, Limited (N-DSQ) was created. We refer to this as our Phase 4 construction, which comprises building ships such as offshore supply vessels, pilot boats, tugs and coastguard patrol vessels, as well as ships for the Qatari Navy. Nakilat is responsible for construction of the Shipyard at Ras Laffan, and N-DSQ will market its services and manage construction of the vessels. We are creating a new, fully integrated, shipping industry in Qatar,
from owning and operating large ships to construction of small ships (up to 120 metres in length), and for the repair and maintenance of the full range of ship sizes and types. The shipyard will also include facilities for the fabrication of structures for the offshore oil and gas industry, and for land-based petrochemical and industrial plants. We are also providing all of the marine services we require, including towage. In the future, we want to extend and market these services beyond the borders of our own ports and terminals. WHAT GIVES NAKILAT THE DETERMINATION TO DOMINATE THE INDUSTRY? We are driven by a vision of sustainable development. Here in Qatar we did not have a shipping industry. We started with some control over shipping, but it soon became obvious to us that we had a golden opportunity to develop something much more comprehensive. The circumstances here provided us with the opportunity to develop into an industry giant within a very short MARCH 2010
BUSINESS INSIGHT – SHIPPING & LOGISTICS
period of time. We investigated and considered other opportunities for our shipyard. We took into consideration the stability of the country, the capital resources available, our geographic location – including access to the international shipping fleets that come into the Gulf to transport crude, gas and other products – and easy access to the Asian market. We explored our advantages over the European ports and other ports throughout the world. We looked at every possible opportunity and after a number of studies, identified potential developments. We selected what was best for Qatar. When you have the largest gas reserves in the world, you realise the wealth of opportunities to be considered. IS NAKILAT LOOKING TO DIVERSIFY THROUGH TOTAL HORIZONTAL INTEGRATION? Of course, anything Qatar needs we are going to provide from within Qatar – when it makes good business sense. This is our vision. Nakilat will be a leading provider to Qatar’s energy and marine industries when it makes economic sense. We have undertaken extensive market studies in the region and Asia and believe that with the quality of our partners, the technical knowledge they bring to the table, combined with the financial strength of ‘Qatar Inc,’ we can establish businesses, which will be competitive worldwide; that will be successful and sustainable enterprises. We will build our products
and market our services based on quality, reliability, competitiveness and customer satisfaction. YOU CHOSE TO ESTABLISH IN RAS LAFFAN INDUSTRIAL CITY, WHICH ALREADY HAS ITS OWN PORT AND IT WILL ALSO INCLUDE THE NEW DOHA PORT (CURRENTLY UNDER CONSTRUCTION). SO WHY DID YOU OPT FOR WHY RAS LAFFAN? Ras Laffan was identified by expert consultants as being the most logical location, both economically and commercially. The site also fits well with the master plan for the less developed zones of the country. The development is also aligned with our global LNG shipping business. The shipyard is in close proximity to where our ships load cargo. This means our vessels do not have to travel extra kilometres for maintenance and repair. When we did the cost analysis it made sense; Ras Laffan was the most economical location. IN REGARD TO FINANCING, HOW HAVE THESE MAJOR PROJECTS BEEN BACKED? Even though our shipping company was established, we knew that it was important to provide a return to our shareholders at ‘Qatar Inc.’ and offer the Qatari people the opportunity to invest through an initial public offering (IPO) in a secure way. When the concept was developed, we knew it had to make sense from an economical point of view and it did.
We negotiated the contracts for the construction of the vessels with the shipyards and fixed the price. We then entered into an agreement with our charterers: Qatargas and RasGas with which we established charter contracts based on 25-year agreements, with ‘five and five options’, or, more technically, 35-year contracts. We guarantee them a fixed charter rate for the 25-year period. Once we deliver a ship to our charterers, they are committed to the use of that ship for the entire contract period. By doing this, we guarantee our income, return on investment and cash flow for the entire period. The risk to the lenders is zero. Once the ship is received from the shipyard, it is immediately delivered to the charterer and they start paying the charter rate. During construction, the ships are insured and covered by guarantees from the yard. Fifty-one of our 54 ships have already been delivered. We have zero risk. When this was floated in the market during the IPO it was labelled as a continuity or social security investment for Qataris. Put simply, if you invested in the Nakilat IPO, you are guaranteed your money back plus a return for life. We have also strategically aligned ourselves with some of the best companies in the world, including ExxonMobil and Shell. For example, in 2006 we formed a joint venture with an industry leader, Svitzerwijsmuller (Nakilat-Svitzerwijsmuller), to operate our harbour towage services in the port of Ras Laffan. This, of course, is in addition to the relationship that we currently have with Keppel and the agreement we will hopefully soon conclude with Damen. In short, every company we work with is a world leader in its respective field. Nakilat has had no problem getting the funding required. Initially we raised US$4.2 billion (QR15.3 billion) in the world’s markets. During the second phase we raised US$1.5 billion (QR5.5 billion). For the third, we went to the market during the peak of the financial crisis for US$1 billion (QR3.6 billion) in June 2009. Perhaps surprisingly, we were offered US$2.2 billion (QR8 billion). Everybody has confidence in Nakilat. Even during the financial crisis when many others were concerned about a shortage of credit, for Nakilat it was business as usual.
IN THE SPOTLIGHT
CRISIS IN GREECE:
ONE FOR PLUTUS, AND MAYBE ZEUS TOO
IN THE SPOTLIGHT
Greece is no stranger to crises; it has had its fair share over its long history. Yet the latest financial upheaval that has hit stretches well beyond Greek national borders – it marks a new wave of the global financial crisis. Leen Qablawi investigates the finger pointing, the strained eurozone relationships and the implications behind Greece’s debt woes.
t first the crisis was about the solvency of banks, now the concern is about the solvency of sovereign states. In fact, Greece’s public-finance problems were brewing long before Wall Street darlings began to falter. When it joined the 16-nation eurozone in June 2001, its public debt was already more than 100 percent of its gross domestic product (GDP), and despite a long boom spurred by, among other things, low interest rates inside the Euro, Greece did little to tackle its persistent deficits. Today, Greece’s huge public deficit and high debt levels have prompted a crisis of confidence in the financial markets, and the European single currency is facing its biggest test since its inception. So what does this mean for Greece and the European Community?
LOSING THEIR MARBLES
Since adopting the Euro, Greece lost 25 percent in competitiveness, which has contributed to a widening in its external current account deficit to more than 10 percent of GDP. At the same time, Greece’s budget deficit has ballooned to 12 percent of GDP, while its public debt to GDP ratio is approaching 120 percent. Its debt is about EUR300 billion: the largest in Europe for an economy of its size and double the Maastricht criteria. Greece is also clocking up payments
- Europe cornered Greece last month into preparing drastic new action to rein in its bulging deficit and debts while Athens was hit by a new wave of strikes. -
of 11.6 percent of its GDP on debt servicing, and that has been moving in one direction only, thanks to its recent credit downgrading. Unemployment has hit a five-year high and this, combined with talk of passing the buck on to the people and tightening fiscal policies, has hauled out on to the streets in protest, trade unions and civil servants alike. Did the eurozone manage a lucky escape? Not quite. Economic growth in the eurozone is expected to slow to 0.3 percent during the January to March period, rising to 0.4 percent in the final quarter of 2010, according to a poll conducted by Reuters. Spain has been hard-hit by huge declines in its property markets and remains the last major economy in Europe
- A woman walks past a shop window advertising sales in central Athens. European finance ministers are pressuring Greece to improve the reliability of its economic statistics, after scathing criticism from Brussels. -
still in recession. Even Germany, the continent’s industrial powerhouse, has seen an unexpected stall in its economic recovery in the final quarter of last year, adding to the eurozone’s woes. As for the Euro, it has certainly taken a hammering by Greece’s debt crisis, trading near an 8.5-month low against the United States’ (US) dollar and having lost nearly 10 percent since the end of last year.
A BOLT FROM THE BLUE?
This was hardly the case. Upon joining Europe’s new currency union in June 2001 (albeit by the skin of its teeth), Greece suddenly found itself with a solid, reliable currency and with a strengthened foothold in financial markets. And so the haste kicked off, with years of unrestrained spending, cheap lending and a failure to implement financial reforms. So when the global economic downturn struck, Greece was badly exposed and bought to light were fiddled statistics, and actual debt levels and deficits that exceeded limits set by the eurozone. Some have singled out Wall Street heavyweight, Goldman Sachs, as one of the main culprits that allowed Greece to amass so much debt. Through creative accounting deals, which artificially reduced Greece’s debt with derivatives and enabled it to show a smaller budget deficit in order to meet European regulations, MARCH 2010
IN THE SPOTLIGHT
- Greek Finance Minister George Papakonstantinou during the Economist conference in Athens last month. -
it is argued that Athens was allowed to dig itself deeper into debt. There is no doubt that people were shown an optical illusion, but query how big an infraction this was in the grand scheme of total debt, and how unexpected such a deal was when all it took was the manipulation of a loophole that Brussels had itself helpfully extended in the legislation. Even the sceptics are back to gloat about their pre-Euro launch prophecy that the inherent mismatch between a single European currency and differing national economic conditions could eventually lead to tension and an ugly break-up. It was as clear then as it is now that the Euro was introduced prematurely and without a real coordination of debt levels, and fiscal deficits across the board. Although the economically more 24
powerful states such as France and Germany joined the club on the premise that their counterparts would establish more sound fiscal management regimes, the foundation of this creation ignored the region’s interconnectivity and the substantial risk and ripple effect that would materialise from the failure of one of its constituents.
BOUNCING THE BALL AROUND
The Maastricht Treaty prevents the eurozone from collectively bailing out Greece, but the debt crisis has forced European Union (EU) leaders to seek ways to help nevertheless. Of course the concern in Brussels is not just that Greece might need to be bailed out, but also that financial markets’ anxiety about Greece might spread to other Euro-economies in trouble, fuelling contagion.
As it stands, EU finance ministers have declared little more than the promise of a “determined and coordinated action if needed”. While there has been silence on the details of a possible financial rescue operation for Athens, Jean-Claude Juncker, who heads the eurozone finance ministers’ group, indicated that financial assistance, if it materialised, would probably take the form of bilateral loans or guarantees from individual governments to Greece. Greece’s Prime Minister George Papandreou would do well to get a peak preview of the aid package in store, not least to fend-off market attacks. Nonetheless, the cards are being kept close and EU policymakers have turned a deaf ear to Greece’s appeals (not least to avoid removing much-needed pressure on Greece to get its act together). Of course a bail out would not come without its pitfalls. Moral hazard is one obvious concern, especially as bailing out Greece might risk lessening the incentives of other troubled economies, such as Ireland, which has shown vigilance in respect of self-help measures. However, this would most likely be well addressed by strict conditionality measures attached to any aid package extended. Greece has already piped-up with an austerity plan, which aims to reduce the budget shortfall from 12.7 percent of GDP to less than three percent by 2012, by freezing public sector workers’ pay, improving tax collection, raising taxes, fuel duty and the average retirement age in an attempt to ease the pressure from the pensions system. However, with a public sector that is widely regarded as grotesquely inefficient, and riddled with widespread corruption and tax evasion, introducing change will be unlikely to come easy. Scrimping and saving may diffuse creditors’ concerns in the interim, but it would eventually translate into political suicide and too much of a fiscal tightening now would only worsen the downturn. On a practical level, how delighted would Germany and others be to lend a helping hand? Aside from tight legal, constitutional and political restrictions, public outrage will be no picnic, if German voters bare the grunt of their weaker counterparts and are left to settle the tab. Some have suggested that rather than the absurd idea of expulsion, which is
IN THE SPOTLIGHT
almost legally impossible in light of the constitutional framework in place; Greece should take a temporary leave of absence, with the right and the obligation to return at a more competitive exchange rate. However, a voluntary departure, if agreed with other members, might open the floodgates for other eurozone countries with large fiscal and trade deficits to also drop out, re-adjust, and come back when it suits them. And of course an exit would not be so simple: contracts would need to be rewritten in terms of new currencies and new monetary policies would need to be established and maintained. Legal challenges in international courts to rewrite contracts would also creep up, some of which would certainly constitute a default. Further, what about the International Monetary Fund (IMF)? Widely viewed as an American influenced institution, turning to the IMF would be nothing but a big blow to pride in the single currency. It brings with it a great deal of stigma and many see such interference as an invasion of Europe’s territory. Realistically speaking, there are too many conflicting interests at stake. If the IMF takes a view that the European Central Bank policies have been overly contractionary and inappropriate for member countries in the midst of financial collapse, it may choose to support weaker economies, and this would challenge the prevailing ideology among the Frankfurt dominated policy makers. Also, French President Nicolas Sarkozy has serious reasons to avoid bringing in the IMF to its home turf in any substantial way, particularly
given that the managing director, StraussKahn, is also a potential opponent in France’s upcoming elections.
PAVING THE LONG-HAUL EUROTRACK
Perhaps what the eurozone urgently needs is a deeper and bolder surveillance of its economic policies, including earlier detection and a tackling of imbalances. This would require structural reform, and a rethink of the economic architecture of Maastricht as a whole. An economic governance system for the eurozone could be established, with greater oversight over fiscal discipline and clout to coordinate fiscal planning in order to prevent eurozone members from drifting too far apart. Considering the inflexibility of the Maastricht criteria and the ease with which it can be circumvented, such a system would serve as a useful mechanism to maintain and police fiscal responsibility. The Treaty of Lisbon formalised the Eurogroup for the first time, but this needs to be used as a basis in which to build new eurozone governance mechanisms with serious bite. As it stands, the eurozone has a large European Central Bank in charge of monetary policy, but without the capability to govern and coordinate the economic stimulus packages of the member states. Some have suggested that an emergency system be established. Like the IMF, the European Monetary Fund (EMF) would act as a safety net to help EU member states in trouble. Practically, it would cover the whole EU
- Hundreds of protesters gathered in Athens last month for separate demonstrations called by civil servants and communist workers to protest the austerity measures proposed by the government to fight a debt crisis that has shaken Europe. -
and be funded by contributions from all EU member states. This would be a beneficial way of providing a tool to supply short-term liquidity and security for the financial system, and ultimately, a structured way to deal with a default when it cannot be avoided.
The current crisis has revealed that the European economic and monetary union is doubly flawed. Firstly, it forces diverse countries to live with a single interest and exchange rate that cannot be appropriate for all members. Secondly, combining a single currency with independent national budget policies encourages fiscal profligacy. The persistence of large cross-country differences jeopardises confidence in the Euro and threatens the cohesiveness of the eurozone. Additionally, the Greek situation is a manifestation of these flaws. Yet this is no time to write-off the EU. The next few months will prove how well its constituents can react to such crises and whether they can overcome the inherent tensions through cohesive measures. Greece will face the most stringent monitoring of any EU state as it attempts to balance its finances over the next few years. The European Commission is preparing for the most extensive intrusion into a member state’s economy ever. EU finance ministers decided in Brussels that they would wait until March 16 before deciding whether to order Athens to introduce more austerity measures. Nonetheless, there is a general sentiment of doubt that the measures outlined by Athens are sufficiently rigorous to stave off fiscal collapse. For the meantime, a bailout is the only likely solution, despite its shortcomings. Greece needs some cash now to meet upcoming debt maturities. However, once the dust settles, what will really matter is a long-term vision for the future of the countries’ economic and political architecture and a coordinated approach from the eurozone’s main actors to meet the challenges of a changing financial reality. As for Greece, this could present an opportunity for it to address structural characteristics, which have impeded its potential for growth…every silver lining has a cloud, after all. MARCH 2010
2009 presented the global economy with one of the most challenging environments ever witnessed. As with most other segments, private equity (PE) too was severely impacted. There was a dramatic drop in deal flow volume and a significant downward adjustment in valuations for portfolio companies. As a consequence, fund-raising almost stagnated. Global Investment House presents the findings from its Middle East North Africa (MENA) Private Equity Outlook in 2010 report. Middle East economies hit at a fundamental level…
The Middle Eastern economies are largely driven by oil. As a result of the global economic meltdown, oil prices plummeted and became the primary driver of a downward pressure on the economic performance of the region. Oil prices witnessed a sharp decline – from a peak of US$147 (QR535) per barrel in the summer of 2008 to around US$30 (QR109) per barrel at the beginning of 2009. This together with subsequent cuts in oil production significantly impacted all economic activity in the region.
…Resulting in a liquidity and credit-crunch driven investment environment…
With panic across global economies adding to the impact of this decline in oil prices, the region witnessed a sudden drying-up of capital inflows. This relative absence of foreign funds and the decline in domestic asset prices together put severe strains on the balance sheets of banks that had both borrowed externally as well as being heavily exposed to real estate and equity markets. A weakening of asset quality also impacted private sector credit growth,
leading to rising borrowing costs. Loanloss provisions at the same time depleted capital and restricting banks’ ability to extend new loans. This led to a striking slowdown of credit expansion. The reversal of fortunes in the previously buoyant debt markets and the changing relationship between PE and banks has been the primary driver of the challenges being experienced by the industry. As liquidity dried-up, the excess funds, which were previously directed into PE investments, were forced to use the funds for internal business requirements. Consequently, fund raising was deeply impacted
…And impacting exit opportunities for investments made
The difficult market environment and subdued investor sentiment led to a reduction in the number of exits for private equity firms. This directly affected the profitability of existing holdings and was a major contributor to the slow-down in the new fundraising market. The initial public offering (IPO) activity remained quiet throughout the year due to difficult market conditions. There were a total of 17 IPOs during the year in the region of which 11 were in Saudi Arabia alone as compared to 54 IPOs last year. With firms not being able to exit their portfolio companies at an acceptable level, many are now holding companies for longer periods than initially planned, leading to a significant drop in distributed capital for investors from exited investments in 2008 and 2009.
Early regional recovery is underway
The external environment is gradually improving: oil prices are rising, external financing conditions are easing and an early global recovery is under way. Despite the challenging environment that faced the MENA region, it will remain one of the fastest growing economies.
A new environment has emerged – diligence, vigilance and prudence to drive transactions…
Every crisis presents an opportunity and this crisis too has paved the way for better practices. Until now, most PE firms invested little time evaluating their target company. The deals were mainly focused on financial engineering; there was very little due diligence. As times have changed, PE firms are forced to reassess their strategies. Many distress assets are coming for sale making it imperative to do proper valuation of these distressed assets. Proper valuation can only be possible with proper due diligence. Nonetheless, this is a great time to buy because prices are fair and the regional economy has a bright future.
Infrastructure (transportation and utilities), healthcare and education to be PE targets…
Across the region, infrastructure – specifically utilities and transportation – is being developed. Very large aviation and logistics related infrastructure development is on the anvil. Large amounts of government spending on ports, free-zone airports and logistics parks have been announced. The creation of world-class infrastructure,
such as the Dubai World Central (DWC), Dubai Logistics Corridor (which will provide an integrated to between DWC – Al Maktoum International Airport, Al Maktoum International Airport, Jebel Ali Port and free-zones, with an integrated sea, air and land transport infrastructure) are expected to ensure continued expansion of players in the region and space. In addition to infrastructure opportunities, government efforts to diversify away from oil present attractive opportunities for investors. With a rise in the population and better infrastructure, investments are being made to expand basic amenities like healthcare and education. Most of the region is witnessing a rise in the number of private healthcare and healthcare service providers – which is a signal for the growth potential available in the sector. Privatisation of education and an increased presence of global education institutions across education levels – school, graduate universities as well as global brands like London School of Economics, and INSEAD are setting-up base in the region, in addition to several other institutions from Asia. Evidently, these sectors with their relative insulation from market volatility are on a growth trajectory.
With funds coming from sovereign wealth funds (among others)
Sovereign Wealth Funds (SWFs), despite having experienced heavy losses due to exposure to developed markets, are expected to become an even greater source of capital within the MENA private equity industry. According to a survey conducted by data provider Preqin, SWFs are anticipated to account for approximately half of all private equity funding originating within the region during the next five years as they look to invest a greater percentage of their wealth in local markets.
What goes down will go up – Good time to buy
2009 was a year of wait-and-watch wherein private equity funds and promoter groups were both in a state of flux regarding valuation expectations. While promoter expectations were reduced, PE funds went through a combination of either confusion 28
Middle East v/s World GDP Growth 2009*
Egypt UAE Saudi Arabia Qatar Oman Kuwait Bahrain Middle East EM US World (5.0)
regarding an equilibrium valuation or became hungry for cheaper assets and hence were unwilling to accept valuation expectations presented to them. Investments in the time of crises are historically known to give the
highest amount of returns. Now, with an apparent recovery, the a realism seems to have entered the market and a realisation that assets now purchased, are likely to result in significant upsides going forward.
Are Jobs Coming Back?
Some recent good news from the United States (US) and elsewhere suggests the global job market is nearing a bottom. Despite layoffs, the Gulf region labour market has held up fairly well and is bound to generate new jobs this year as businesses regain confidence in the economy. However, as the economic recovery remains fragile, employers across the world are cautious about hiring. Rajesh Mirchandani, CEO of Dun and Bradstreet South Asia Middle East, reports.
THE RISE IN GLOBAL UNEMPLOYMENT
The collapse of US investment bank Lehman Brothers in September 2008 led to a freeze in global financial markets, setting-off one of the worst recessions experienced worldwide since the Great Depression. For businesses, the credit crunch resulted in stricter borrowing conditions and reduced access to capital, stifling investment and growth. But for households, the disappearance of cheap money has been less of a concern than the fear of losing their main source of income: their jobs. In the past two years, layoffs have happened across most industries, occupations and regions of the world. As a result, global unemployment has surged at an unprecedented pace. According to preliminary estimates from the International Labour Organisation (ILO), the number of jobless worldwide rose by 34 million between 2007 and 2009. In the United States alone, more than eight million jobs have been lost. While the global unemployment rate for 2009 is estimated at 6.6 percent, some of the countries that have been most severely affected by the crisis, such as Spain, have seen their jobless rates approach the 20 percent mark. The labour market is typically seen as a lagging economic indicator, meaning it responds to other occurrences with a time lag. A main reason is that it takes time for companies to adjust their workforce to fluctuations in demand. As such, it is not surprising that despite a return to positive economic growth in many parts of the world, there has yet to be seen a pick-up in job additions. However, as the global recovery gains pace and gets well established, observers will look carefully at how many jobs are created.
consecutive month, bringing the jobless rate down to a five-month low of 9.7 percent. With US unemployment still near a 25-year high, US President Barack Obama has made job growth his top 2010 priority. Fuelled by sustained fiscal stimulus measures, the White House predicts that more than a million new American jobs will be generated this year. Although there have been signals indicating an economic turnaround in some countries, there is widespread concern that investment and consumption patterns may take a long period to recover to pre-crisis levels. The jobless rate may tick back up to 10 percent as discouraged workers come back into the market. More than a million people gave up looking for work as the job market deteriorated and are therefore not counted among the unemployed. It is estimated that at least 100,000 new jobs are needed each month just to meet labour force growth and keep the unemployment rate steady. The US government is currently working on a jobs bill, which, if passed, will provide tax benefit to employers and will support a broader economic recovery in the near term.
In early February, the Bureau of Labour Statistics announced that US unemployment had fallen for a third
Source: Dun and Bradstreet.
TEMPORARY JOBS SET TO RETURN FIRST
region shows the most upbeat outlook, with recruitment While a return to payroll expansion has yet to be plans at a pace similar to that seen prior to the global established in developed markets, recent data shows downturn. Indian employers boast the strongest hiring that many companies across the US, and elsewhere, have plans globally, indicating a return to optimism on the started adding temporary workers. Indeed, since reaching high-potential subcontinent. a low point in September 2009, US temporary help services employment has spiked by nearly 250,000. GULF REGION HOLDING UP The hiring of temporary workers is the first sign of The Gulf region experienced a significant slowdown in a jobs turnaround and typically precedes a wider and growth last year amid the global recession, sparking a wave stronger bounce-back in business. Adding temps is a way of job cuts as companies tightened their belts. Economic for companies to prop-up their workforce at early stages of expansion in the MENA region slowed to 2.2 percent last a demand recovery while maintaining flexibility in case the year, compared to 6.1 percent growth in 2008, according pick-up proves unsustainable. to the World Bank. The decline The return to hiring of has been largely attributable to temporary workers is one sign the fall in oil and commodity “Despite the slowdown, that employer confidence is prices, and a downturn in the the Middle East’s regional financial intermediation and strengthening as growth picksup again. According to the latest unemployment rate has not real estate sectors. forecast by the International Despite the slowdown, risen substantially during Monetary Fund (IMF), the the Middle East’s regional global economy is recovering unemployment rate has not the 2007-09 period.” faster than previously risen substantially during the anticipated, following the 2007-09 period. ILO estimates - Rajesh Mirchandani deepest global downturn in the regional unemployment rate recent history. Led by emerging at 9.4 per cent in 2009, up 0.1 markets such as China and India, the recovery broadened percentage points from 2007. While this statistic needs to to advanced economies in the second half of 2009. World be used with caution in view of large expatriate workforce growth is expected to bounce back from negative territory in the region, it is very likely that the swift policy in 2009 to 3.9 percent this year and 4.3 percent in 2011. measures taken by the Gulf Cooperation Council (GCC) In a sign that the growth revival is contributing to governments has helped contain the impact on jobs. better job prospects, the various private sector surveys have reported clear signs of improvement in global HOW DO YOU EXPECT YOUR LEVEL OF hiring intentions. Not surprisingly, the Asia Pacific EMPLOYEES TO CHANGE OVER THE NEXT
P: Preliminary, F: Forecast Source: International Labour Organisation, Global Employment Trends, January 2010.
Sample: 500 companies from across industry sectors. Source: Dun and Bradstreet.
As a result, things are looking up across the Middle East region. A recent survey shows that more than half of regional employers plan to recruit in the coming months. According to Dun and Bradstreetâ€™s latest Business Optimism Index, the oil and gas sector is the most upbeat reflecting a bounce-back in hydrocarbon prices and sustained investment in infrastructure throughout the crisis. Also financial and business services firms are increasingly optimistic about expanding their workforce. Confidence is highest in Saudi Arabia, where 56 percent of companies expect to increase their number of employees during the first quarter. Governments across the globe are currently reviewing policies to promote hiring. A return to job growth is especially important to boost consumer confidence, which should lead to increased spending and accelerate the economic recovery. The road back to restore employment is likely to be long and bumpy. But at least it seems the first steps have been taken.
From peanuts to pirates, the global shipping industry has faced unique challenges. As the sector clambers from recession, TheEDGE caught up with International Maritime Bureau director Pottengal Mukundan at the groupâ€™s London headquarters to find out how the industry will stay afloat in 2010. By Jamie Stewart.
- Photo courtesy of BAE Systems. -
“The fact that ships are still being attacked and highjacked is completely unacceptable.” - Pottengal Mukundan
- The Gulf of Aden was until recently a prime piracy hotspot. -
n 1975, the government of Angola ordered an entire shipment of peanuts – and received a boatload of empty shells. The “great Angolan peanut swindle” brought crime in international shipping to the attention of the world. Chances are that the government of Angola stuck to cashews from 1976 onwards, but either way, domestic action was insufficient: What was required, was a coordinated, international response to tackle what was becoming a debilitating thorn in the side of the global shipping industry. Crime. The International Maritime Bureau (IMB) was established in 1991 under the umbrella of the International Chamber of Commerce. It was intended as a central body where incidents
of crime in shipping and trade could be reported, information collated, and quickly disseminated to the appropriate law enforcement bodies. IMB director, and former ships captain, Pottengal Mukundan, is today based at the bureau’s United Kingdom (UK) headquarters in East London, on the north bank of the River Thames. It is a far cry from the waters of the Indian Ocean, the Arabian Sea and the Gulf of Aden. Although combating the scourge of piracy is as much a part of Mukundan’s work as it is anyone’s. “The fact that ships are still being attacked and highjacked is completely unacceptable,” he says.
“Typically a ship will be held for six to eight weeks before a ransom is paid and the crew is released,” Mukundan says. The scourge of piracy is by far the most high-profile issue facing the international shipping community in 2010. Last year there were 215 attacks off the Horn of Africa, including the Gulf of Aden and the East Coast of Somalia; 47 vessels were highjacked; 867 crew were taken hostage; four were killed. In the Gulf of Aden alone there were 116 attacks and 20 highjackings. However, in 2010 and to date, the industry has had what Mukundan describes as “a reasonably good run”. There have been five attacks in the Gulf of Aden with two highjackings – including the MV Rim – and, in the Indian Ocean there has been one attack, which unfortunately, was a successful highjacking.
- Ships are often held for six to eight weeks off the Somali coast until a ransom is paid. -
THE MV RIM
On February 2, the Libyan-owned cargo ship MV Rim was sailing through the Gulf of Aden, the sun-splashed stretch of water separating Yemen and Somalia, linking to the Red Sea via the Bab-el-Mandeb strait, and feeding into the Arabian Sea. The Gulf of Aden is one of the most important shipping lanes in the world; a vital industrial and commercial link through which 21,000 ships pass annually. For the 10-strong crew of Romanians and Libyans onboard MV Rim, en route from Eritrea to Yemen, February 2 was a day they would not forget. Somali pirates boarded the ship in the northwest of the Gulf, south of the Yemeni coast, and north of the internationally recommended transit corridor. It is believed that the ship, owned by Tripoli’s White Sea Shipping, was taken to the northern tip of the Somali coast, kilometres (kms) from the semi-autonomous Somali state of Puntland, from where the pirates were assumed to have originated. However, after exchanging fire with Puntland forces, the pirates were forced to turn and flee around the Horn of Africa, 450kms south to an area of the Somali basin between the towns of Garacad and Kulub. This is where the MV Rim was to be found, anchored five nautical miles off the coast, as of the end of February. Negotiations between the pirates and White Sea Shipping were ongoing, Mukundan confirmed, while near-by naval vessels kept the ship within their sites. 36
THE SOMALI QUESTION
Around half of Somalia’a nine million population live below the poverty line in the stricken nation, which has been ravaged by almost two decades of civil war. The socioeconomic ruin of a failed state that has become home to some of the poorest people on the planet, has led to some people adopting desperate measures. As the global economy begins to crawl out of the recessional doldrums of the past two years, industrial activity is again beginning to recover, and with such activity will come an inevitable increase in shipping traffic. With no end in sight for the current stage of the Somali conflict, with its government pitted against separatist rebel forces, a new generation looks set to grow into a hopeless future across the Horn of Africa. The gap between global industry and commerce, and a new impoverished generation of Somalis, may be immeasurable in economic terms; but in geographic terms, it is a short sail out to sea. Ultimately, this means piracy is not about to disappear into the pages of a Robert Lois Stevenson novel any time soon. According to the International Chamber of Shipping (ICS), 1500 seafarers were taken hostage for ransom in 2009 globally. “If a similar number of aircraft passengers had been taken hostage there would undoubtedly have been a more robust response,” says ICS chairman Spyros Polemis. “However, many governments seem oblivious to the fact that ships carry around 90 percent of world trade and that security of major seaways is strategically vital to the functioning of the global economy.”
April last year. The port has an initial capacity of one million From the Mediterranean Sea, the Suez Canal links to the TEUs a year, with the potential to raise this figure to 2.5 Red Sea, which passes through via the Gulf of Aden to the million TEUs. However, as APM Terminals admits, the Dutch Arabian Sea, and on into the wider Indian Ocean. The historic firm that runs the port, such a level of capacity is unlikely to be trade route is no less important to the global economy in required for many years. 2010 than it was 100 years ago. Qatar, however, may have been somewhat more fortunate As the geographical link between east and west, at the in its timing. The New Doha Port, with its proposed opening confluence where tens of thousands of vessels from hundreds date of 2014, will be constructed to an initial capacity of two of nations meet every year, the Gulf states occupy a vital million TEUs. By 2014, the global economy, and world trade, trade hub. may have recovered to the extent that such capacity is not left Middle East author and economist Doctor Christopher sitting idle beneath the desert sun. Davidson talks about the location and its fundamental importance to the vitality of the regional economy – if THE IRANIAN QUESTION exploited wisely – in the case of Dubai: “The ports are the The long-running game of international cat and mouse only sector in Dubai that have weathered the recession,” between Iran and the West over the former’s nuclear ambitions Davidson says. is an issue that may turn out to have far reaching consequences “They are Dubai’s lifeblood. It should be a port city, rather for a variety of sectors, including the shipping industry. than pursuing high-end tourism or financial services. It is in a The country’s uranium enrichment programme, in great geographical location; it is good for an airport; good for defiance of UN Security Council sanctions, saw world a sea port; these things in the long-term will be profitable.” powers gather last month to consider firmer measures to In 2005, Dubai Ports Authority announced its intended deter Iran from pursuing what many fear to be a covert push mega-expansion of what was already the Middle East’s for nuclear weapons. biggest port, the sprawling Jebel Ali. Stage one alone, was Israeli prime minister Benjamin Netanyahu, who has been intended to boost capacity by five million 20-foot-equivalent the staunchest critic of Iranian ambitions, said in February that units (TEUs). The expansion plan, originally scheduled for “what the world needs to do is not watered-down sanctions, completion in 2030, has no less than 14 stages. or moderate sanctions, but effective, biting sanctions that As has been the overriding story in Dubai throughout the curtail the import and export of oil into Iran”. past 18 months, however, the financial crisis highlighted – Iran is the world’s fifth largest oil exporter. Its oil sector is albeit it temporarily – the need for the expansion. While Jebel the country’s economic safety net – and “biting” sanctions, Ali may grow into a future of increased global trade, such a like the ones called for by Netanyahu, would have the future may not materialise for a number of years yet. potential to devastate the national economy, along with its “Ship owners hope that towards the end of this year shipping sector. they will see some kind of growth, but it will be some time before we get back to pre-recession levels,” Mukundan says. “The industry has excessive supply at present and the cargos are just not there. Ships are laid up as they cannot be employed at levels, which justify them being at sea.” In the same vein as Dubai, Bahrain – a natural location for a seaport given the country’s status as a Gulf island nation – has pumped development cash into its seaport facilities, with one eye firmly on a postrecessional future. The new Khalifa bin Salman Port, built at a cost of US$500 million (QR18.2 million) on reclaimed land in the north of the island, - Jebel Ali Port invested billions in its building capacity prior to the financial crisis. welcomed its first boat in MARCH 2010
“Imports and exports for the country are expected to increase by three and five percent year-on-year, respectively, in 2010.” Iran has the potential to cash-in on the back of increased global trade as the world economy clambers back to its feet, and a boost in Iranian trade could bring with it, over the midto long-term, an increase in business for the ports of Gulf Cooperation Council (GCC) countries – meaning that the likes of Bahrain’s Khalifa bin Salman Port may not be forced to suffer from over-capacity for as long as would otherwise be feared.
FUELLING THE FIRE
Any logistical industry is, by its very nature, highly susceptible to shocks in the price of crude oil. In summer 2008, as crude prices scraped the eye-watering US$148 (QR539) per barrel mark in the build-up to the financial crisis, the unprecedented price spike took its toll. Marine bunker fuel, the lifeblood of container ships, hit US$700 (QR2549) per tonne in 2008. This marked a 100 percent rise since the beginning of 2007. Latest figures had prices in the United Arab Emirates’ (UAE) port of Fujairah at US$474 (QR1724) per tonne. The fuel consumption of a large, modern container vessel with a maximum capacity of 7750 TEUs is around 217 tonnes per day, according to the World Shipping Council. Therefore, a typical 28-day round-trip voyage would come with a hefty fuel bill at February prices of a little under US$2.9 million (QR10.5 million). With oil being the main driver behind bunker fuel costs, it pays to look ahead. Last month investment bank Goldman
- The International Maritime Bureau is calling for the world’s navies to go after piracy mother ships. -
The United States (US), along with Britain, France and Germany, have been pushing for a fourth round of sanctions that would target Iranian shipping companies, including the country’s largest shipping firm, the Islamic Republic of Iran Shipping Lines (IRISL), on the grounds that such companies provide logistical support to Iran’s nuclear programme. The UK banned its giant financial services industry from doing business with IRISL last October. The US has been enforcing similar sanctions since 2008. The Iran Shipping Report Q1 2010, published by Business Monitor International in December, makes clear the potential growth for the sector, should it be allowed to function free of international sanctions: “We forecast an upturn in the country’s maritime sector, as trade volumes look set to begin to recover from the downturn of 2009,” the report said.
“We forecast an upturn in the country’s maritime sector, as trade volumes look set to begin to recover from the downturn of 2009.” - Iran Shipping Report 2010
Sachs predicted oil prices would reach US$85 to $95 (QR309 to 346) per barrel this year, driven by accelerating economic growth. This year to date, oil has been ranging between US$70 and $80 (QR255 and 291). The bullish Goldman Sachs prediction, should it ring true, will add further pressure to the shipping industry as it seeks to align itself to the state of the global economy. And next year, the situation could be set to exacerbate. “By 2011, the crude market is back to capacity constraints,” warns Goldman Sachs analyst Jeffrey Currie. “The financial crisis created a collapse in company returns, which has significantly interrupted the investment phase.”
- The Somali coastline is run by militia groups. -
Although the challenges facing shipping in 2010 are varied, piracy remains at the forefront of public consciousness. Last November, the United Nations (UN) passed resolution 1879, which, as Mukundan explains, “calls for the world’s navies to seize and dispose of vessels, assets and weapons used by pirates, or being suspected of being used by pirates. It’s a very wide ranging resolution,” Mukundan adds. The problem, Mukundan says, is that the resolution has not been translated from the UN level to the level of the rules of engagement, which are given to naval commanders by national governments. “That is a gap that needs to be filled,” he adds. Although the internationally recommended transit corridor has gone a long way to solving the problem of piracy in the Gulf of Aden, many of the pirates have shifted their actions to an entirely different theatre – the Indian Ocean. “It’s a vast sea area with random traffic patterns,” Mukundan says. “Even if we had three to four times the naval vessels we have now it would still be difficult to monitor traffic.” Mukundan says that, towards the end of last year, pirates were attacking ships 1000 nautical miles off the coast of Mogadishu. “It is an unprecedented criminal phenomenon,” he says. “They are attacking the ships going from the Persian Gulf down to the Cape of Good Hope, but the attacks have come down,” he adds. Piracy hotspots tend to work within two- to threeyear cycles, Mukundan explains. The initial reaction from governments is denial, before a coordinated response is developed, which disperses the situation. The problem with Somalia is that the country is a failed state; there is no cohesive government to formulate a response.
“There is no law enforcement and no central government,” Mukundan says. “The coastline is run by local militias. It took us nine months to get the international community to take notice.” On the response side, the ultimate solution is an accountable government in Somalia, but this could be decades away. “We are left with trying to contain the problem at sea,” Mukundan says. In this regard, the tactic favoured by the IMB is to encourage navies to go after the pirate’s “mother ship” from which raids are launched. “If you don’t take action the pirates will keep on extending the audacity and the violence of their crimes,” Mukundan states. “By taking the mother ship out, you prevent the next 10 to 11 attacks that may be launched.” Such action may also change what Mukundan terms the “risk-reward balance” for the pirates. “It’s a typical action against any crime…when the criminals find that the risk is greater than the potential reward, they stop,” he says. States across the globe would do well to fast track the adoption of UN resolution 1879 if they are serious about combating piracy. “The translation depends on the will of governments,” Mukundan says. “Resolution 1897 was obtained at very great effort…it’s a pity that we are not using it to its fullest potential.” The crew of the MV Rim, sat anchored five nautical miles off the coast of Somalia, not to mention the global shipping industry, would no doubt agree with the IMB director. If an industry that is responsible for transporting 90 percent of world trade is to operate free from the fear of crime, the global response must be as the industry itself is: truly international.
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GAME ON FOR THE MERGER AND ACQUISITION MARKET IN 2010 Just like the Great Depression in 1929, the year 2008 is now behind us and so too is the record number of financial losses and company failings, but while the year has passed, it did not fail to leave a permanent mark in the 21st century record books as the greatest economic depression on record to date. Karim Nakhle investigates.
owever, it is important to remain cautiously optimistic, and as it has been said, “one company’s misery can be seen as another’s opportunity”. More frequently optimists are now sighting opportunities in every calamity; hence why the global merger and acquisition (M&A) scene is expected to experience good momentum in 2010 as large corporate buyers, as well as private equity players, return to the market. The devastating effects of the crisis have cleared the market grounds making it a ripe field for M&A activity, with cash-rich firms scouting for out-ofmoney competitors or investors looking for high-growth, low-cash companies. While M&A activity showed signs of resilience in 2009, conditions improved in the year’s fourth quarter and companies increasingly found attractive deals, and also the means to complete them. This increase in activity appears likely to continue in 2010, if current trends continue. McKinsey research shows that M&A activity is shaping up strongly this year off the back of the economic crisis, which proved more resilient than many anticipated. “We expect that large corporate buyers will be particularly well positioned to take advantage of any new wave of M&A, but we also see privateequity firms returning to the market,” McKinsey said in its report. The report added, “If a wave of M&A does materialise, as many expect, large public companies should be particularly well positioned to benefit.”
The current year promises to bring some cheer and is likely to see dealmakers play an important role in the M&A market. However, dealmakers will have to deepen their search for cash as they will not be receiving major support, credit or loans from banks this time, due to their heightened level of risk aversion. Many reviews conducted throughout 2009 focused on the significant decline in volumes from 2007 and 2008. Indeed, with 5800 deals totalling US$2.3 trillion (QR8.4 trillion) announced in 2009, M&A volumes were at their lowest levels since 2004. However, according to McKinsey calculations, most of the reduction during the past two years came about because of weak credit markets and a 29 percent decline in market capitalisation, which led to smaller absolute deal sizes, as well as a sharp decline in private equity (PE) activity. When adjusted for market capitalisation, the level of deals by corporations in 2009 was on par with that of 2008, only slightly lower than that of 2007 and significantly higher than it was after the dot-com crisis at the beginning of the decade. Debt remains risk-averse, creating more demand on equity and potential business for PE funds. We are now in an era where many large business conglomerates are looking for financing through equity rather than debt. Various deals are being structured through equity, but with conditions and options that treat the deals more like debt, without much interference by PE funds in the business.
As economic conditions improve, we may see heightened M&A activity in many sectors, particularly fast moving consumer goods (FMCG), oil and gas, education and healthcare. PE players are now expected to play a crucial role after watching from the sidelines for much of 2009 and with a substantial amount of cash-in-hand.
BUT WHAT WILL THE REGIONAL MIDDLE EAST M&A MARKET LOOK LIKE IN 2010? DID THE CRISIS OF 2009 RE-MAP REGIONAL BUSINESSES?
Yes indeed, the crisis of 2009 did re-map business in the whole region. Currently what is taking place is the redirection of many investments out from the ‘hot markets’ of the Middle East, such as the United Arab Emirates (UAE) and Bahrain, and into other Middle East North Africa (MENA) countries such as Saudi Arabia and Egypt, this is, of course, besides the distressed M&A deals in the UAE. To comprehend the contours of the 2010 ‘deal-making’ landscape and to give readers a clearer view on the emerging M&A activities, TheEDGE spoke with some experts operating in the Middle East region. Paul Holborn, partner M&A at MENA Capital, believes this year will be a good year for M&A. He says this has come about as many companies – which have suffered from the onset of the crisis in 2008 and have been struggling to hold their ground since – simply cannot manage on their own anymore. Holborn says such companies
urgently need to inject capital, find new partners or simply sell-up. We started seeing this in the last quarter of 2009 and, therefore, Holborn says this will create M&A business for 2010. Adding his comments to the topic, Imad Gohari, CEO and founder of Bourouj Financial Capital says: “The deal-making landscape looks promising for 2010 on the back of global and regional economic uncertainty.” “2010 will signify clearing the mess, consolidating actions and making an attempt to move on. Although some sectors such as financial services and real estate offer more deal-making opportunities than others – as they appear more distressed – M&A activity will not be sector-biased because there are immense opportunities in every sector; too good to miss out on and it is just about finding the proper companies to go for.” Roger Joseph, partner and head of Corporate Finance at Inventure MENA, states: “There is a growing sense of anticipation about the regional M&A
environment. We expect acceleration of industry consolidation within the next 12 months, as a large number of conglomerates from Europe, China, India and South East Asia are eyeing the Middle East market, looking to exploit acquisition opportunities.” “In the coming months, there will be an increase in M&A activity as companies dispose of non-core, underperforming or distressed assets. Those in a position to buy will have the opportunity to capture market share and grow revenues in ways that were impossible two years ago. “In the Middle East, the most sought after sectors currently are oil and gas, FMCG, food and drink, healthcare and education,” Joseph adds. Gerard Perreira, CEO of Gulf Cooperation Council (GCC) Investments Holdings, believes that, “buying will not be an option for all” during the 2010 M&A scene. “We’re optimistic and ambitious, but we also need to be realistic,” Perreira warns. “Although we have been spotting opportunities for transactions left,
right and centre, the ability of many businesses to act is restricted by the lack of available financing. “Capital is no longer cheap; nor is it readily available. So if the acquisition is not a strategic fit, and is just a handsome opportunity smiling around the corner, it is best to leave it there,” he informs. Aidan Walters, the managing director of Oasis Capital Ventures states: “I have a few thoughts on PE in 2010...the number of players is starting to shrink, as previously predicted, and there are already rumours of some players facing difficulty.
PE houses with a solid track record will probably survive and will be able to raise money. Sectors that exhibit growth will attract PE. In addition to healthcare and education; logistics, transportation, retail and consumer goods, oil and gas and utilities may be the sectors that will witness growth in investment in 2010,” he says. “These sectors have a positive outlook either because governments will be spending on these projects or because consumption will resume at similar pace as before. I also believe that Egypt and Saudi Arabia will be the most attractive countries to invest in throughout 2010.” KPMG International’s Global M&A Predictor now forecasts increases in both M&A appetite and capacity for the coming year. The Global M&A Predictor forecasts corporate dealmaking appetite by comparing forward PE ratios from a year ago, to forward PE ratios currently, and corporate dealmaking capacity, by comparing next year’s forecast net debt to earnings before interest, taxes, depreciation and amortisation (EBITDA) ratios, with current levels. Following the volatility of the previous 12 months, forward PE ratios are now seven percent higher. The predictor numbers point to a slow, but assured improvement in the global deals market throughout the next 12 months, even though credit markets remain tight. David Simpson, head of Global M&A at KPMG and a partner in a United Kingdom-based (UK) firm, said: “To me, these results bear all the hallmarks of a market that has been reset for growth. So long as the analysts are not as mistaken again in their predictions as they were a year ago, the market has thus been recalibrated and we should now be able to look forward to a steady, if unspectacular, reawakening of the M&A market during 2010.” Looking at the regional numbers within the latest predictor, all of the geographical regions studied exhibit the ‘preferred’ combination of improving PE ratios (increasing appetite) and declining net debt ratios (increasing capacity). Latin America shows the highest increases in PE ratios, moving up 62 percent. Followed by the Asia 44
Pacific Region (excluding Japan) at 35 percent, Africa and the Middle East at 13 percent, Europe at seven percent and North America at four percent. On the net debt to EBITDA ratios, Africa and the Middle East are forecast for a 37 percent decline, followed by North America at 24 percent, Asia Pacific (excluding Japan) at 20 percent, Latin America at 18 percent and Europe at 15 percent. At a sector level, basic materials post an excellent combination of results with forward PE up by 17 percent and net debt down by 32 percent. We can also expect M&A in technology and noncyclical consumer goods to perform well with 20 percent and 16 percent increases,
respectively, in PE ratios. Healthcare and cyclical consumer goods look very good on the debt front posting 41 percent and 23 percent falls, respectively. In closing, David Simpson remarks, “it is important to note that our Global M&A Predictor is principally focused on corporate activity. Even though we have seen some resurgence in PE deals, that sector of the market will continue to be hampered by a shortage of debt putting it at a comparative disadvantage to corporations.” “The predictor shows that corporate appetite and capacity are expected to increase, therefore, we may confidently expect that corporate M&A will lead the way in 2010.”
ON THE PULSE
THE NEW ENERGY
REVOLUTION - Liebrose, Germany’s largest solar power plant. The European nation has left the Gulf region standing in regard to solar development. -
When oil hit US$147 (QR535) a barrel in summer 2008, the Gulf region experienced a mega-windfall, but the price spike served as a wake-up call for many nations. Gulf Cooperation Council (GCC) countries must now realign themselves to a new energy landscape. Edward Jameson reports.
ntil recently, a typical bon-mot was to stay away from the alternative energy sector, unless you wanted to gamble with your money,” said Denmark’s crown prince Frederik Christian, speaking at January’s World Future Energy Summit in Abu Dhabi. “However, that trend has changed during the last decade…green and clean technology is not only good for the environment – it is also good for business.” A point that is becoming increasingly evident across the GCC. The United Arab Emirates (UAE), so often the most overstated in developmental terms, has blazed a trail with the ongoing construction of Masdar City, billed as the
world’s first zero-carbon zero-waste city. The city’s Zone Authority Division director Ahmed Baghoum said in January that 50 renewable energy firms had already stated operations under the project’s free-zone banner, while a further 70 would begin operations this year. Some progress, considering the city’s foundations were laid as the financial crisis struck. Although some may have been surprised at the decision by the world’s fifth largest oil exporting nation to pursue a renewable energy agenda, the motive, and the business case, reflected sound judgement. Because in a region in which energy has played such a major historical role, in terms of domestic income, it makes sense for
ON THE PULSE
- Denmark’s crown prince Frederik Christian at the World Future Energy Summit, Abu Dhabi, in January. -
hydrocarbon dollars to be ploughed into the future growth area of the energy sector – renewable energy and clean technology. “Cutting energy costs in production and developing better, cleaner, and more efficient solutions is set to be the industrial revolution of the 21st century,” the Danish crown prince continued. “I believe green and clean technology will be as defining for the coming decade as the Internet was for the past decade. There is significant potential for future growth, employment and wealth within the growing global market for sustainable future energy solutions.” The UAE has made its intentions clear; so what steps has Qatar and the rest of the GCC taken, to bid for a place at the forefront of the new energy revolution of the 21st century?
for a cut in greenhouse gas emissions of 50 to 80 percent below 1990 levels by 2050. Some countries have set legally binding targets; some fall under legally binding targets as a result of membership of multi-national institutions such as the European Union (EU); while others have publicly pledged such cuts. With the burning of fossil fuels in the energy sector being the key contributing factor behind global carbon emissions,
Within the framework of the various domestic and international climate change agreements, the world is aiming 46
- A rendering of the Energy City project outside of Doha. -
the need for development of the renewable energy field is here to stay. Additionally, alongside the requirement to cut carbon emissions, stands the need for countries to strive for energy security. With parts of Europe, such as the United Kingdom (UK) and Italy, so reliant on Qatari and Russian natural gas imports, many nations are realising the long-term benefits of renewable domestic production.
ON THE PULSE
At the current rate of export, Qatar is believed to have 200 years of natural gas to fall back on – a substantial economic safety net. However, as European nations aim for the EU’s combined and legally binding target of a 20 percent contribution from renewable energy sources by 2020, Qatar’s income from natural gas will gradually be eroded. A fact that Doha must take into account in its long-term planning. With this in mind, small steps are being taken. The journey as a whole, however, is decidedly ambitious. Back in 2005, plans were announced for Energy City, a giant, US$2.6 billion (QR9.5 billion) project situated 20 kilometres (km) north of Doha within the Lusail development. However, progress has been slow and rumours were abound at the beginning of last year regarding construction being placed on hold as a result of the financial crisis. But the development’s CEO, Hesham Al Emadi, went on the record last April to quash such rumours: “A majority of our developers are real large-scale players and will not have difficulty raising finance,” he said. “Some smaller developers may be affected as banks tighten lending due to the global economic crisis, but only a handful of our developers are of that scale.” While Energy City is primarily aimed at the hydrocarbon industries, developer Gulf Energy has stated that only green buildings will be allowed within the development, further, an advanced renewable energy research and development centre will also be incorporated. In addition, Energy City deputy CEO Ahmad Al Abdullah said that buildings in all of the 92 plots at Energy City would be powered by alternate energy to the fullest extent possible. And as the bite of the financial crisis begins to ease its hold on developer’s pockets, progress does indeed appear to be resuming. On February 4, Energy City announced the award of a contract to Green Concepts Corporation to provide green building materials to the development.
Many question marks have hung over the relatively slow uptake of
solar power generation in the GCC. Additionally, progress has indeed been slow when held up against some countries, including Spain, Portugal, the United States (US), and even Germany, the latter not known for its sun-drenched climate. The reason behind the somewhat static progress may be quite simple: It is only now that the world has shown clear enough signals towards domestic renewable energy security, that the tipping point has been reached, signalling to the hydrocarbon exporting giants of the GCC that their wealth of
A report published in December by consultants AT Kearney, said that 100,000 jobs could be created across the Middle East within the solar power sector and that investment in solar energy could create annual revenues of US$90 billion (QR328 billion) for the region. Further, the findings of a 2007 research paper, by former International Solar Energy Society president Doctor Yogi Goswami and China’s Renewable Energy Society solar director Yuwen Zhao, were even more pronounced. The paper estimated that Qatar had the potential to produce 823 terawatt
- A map of the giant Desertec project concept. -
natural resources cannot be relied upon forever. As Arab Petroleum Research Centre director Nicolas Sarkis said last month, “after oil, Arab countries could start exporting solar energy”. Hence, the pace of development of the region’s solar industries is beginning to accelerate. According to some reports, a plan to build a mammoth US$1 billion (QR3.6 billion) solar power plant in Qatar has been mooted, with 25 local and international organisations alleged to be considering becoming partners in the project.
hours per year (TWh/yr) of electricity. To put this figure into perspective, Qatar’s total electricity consumption in 2009 was estimated at just 14TWh by the CIA World Fact Book. When compared with the consumption of other nations, Qatar has the ultimate solar power generating capacity to satisfy the annual consumption of Germany. In other GCC countries, the figures make for even more astounding reading. Saudi Arabia was estimated to have the potential to produce 125,260TWh/ yr – enough to comfortably power the entire globe. Admittedly, this would MARCH 2010
ON THE PULSE
- A model of Abu Dhabi’s Masdar City. The project is set for completion in 2016. -
involve lining the deserts of the country from border to border with solar panels – hardly a practical suggestion, but the potential exists.
END OF OIL?
In Saudi Arabia, the world’s primary oil exporting heavy-weight, development within the renewable energy field may not be top of the government’s agenda, but even in the Kingdom, steps are being taken to ensure the nation’s place on the future energy bandwagon. In January, the country announced it would join the Masdar City-based International Renewable Energy Agency, a cooperative body of nations established to drive research and development in green energy. The intergovernmental organisation now boasts 142 member states along with the EU. The award for the most ambitious project within the regional sector, however, goes to DesertTec. The group 48
established to drive the project forward, the DesertTec Foundation, aims to establish a network of solar- and windgenerated power plants across the deserts of North Africa and the Middle East to supply Europe with a large chunk of its energy needs. There are huge barriers to be overcome with regards to the project’s geo-political framework; it is difficult to see the nations of Western Europe in particular placing important chunks of their power generation infrastructure in the Middle East region at present. But perhaps DesertTec points to a more hopeful future. One where cooperative energy security and global environmental protection take priority over historical territorial squabbles, nuclear paranoia, and misunderstood issues of religion, race and culture. For the oil-based economies of the Middle East in particular, and to a lesser extent, the natural gas-based
ones, such a future is a necessary one to strive for, both for economic and political reasons. When oil hit US$147 (QR535) per barrel in the summer of 2008, the importance of alternative energy sources became abundantly clear to countries that were stung in the pocket by the imbalance in supply and demand. The well-respected Paris-based International Energy Agency is already predicting that increased fuel efficiency, combined with the increase in the use of renewable energy, means that demand for oil, from developed countries, will never again return to the record levels as experienced in 2006 and 2007. The US$147 (QR535) per barrel peak of 2008 may have seen the cups of the GCC’s oil exporting nations runneth over for a period of months, but it may also have been the first nail in the long-term coffin of the hydrocarbon industries.
A SOLAR SOLUTION
- Sam Pickering, managing director of Bluu Green. -
The construction industry in Qatar has been booming for some time and promises to do so for years to come. With the launch of the Qatar Sustainability Assessment System (QSAS) last year, consideration for the sustainability and energy efficiency of future building projects will have to be factored in by developers. The existing built environment stock, however, is incredibly energy intensive, with few producing energy from micro renewable technologies. With energy being so inexpensive in Qatar, developers and landlords will need to be given an incentive to produce green energy and reduce their carbon emissions. Sam Pickering, the managing director of Bluu Green, asks the question: Is retrofitting solar panels a possible solution to reducing Qatarâ€™s energy demand?
he Qatar government is committed to offsetting the large rise in the countryâ€™s energy use, with consumption rising by 800megawatt (MW) at a cost of US$600million (QR2.2 billion) in the last three years alone. The main export being liquefied natural gas (LNG), Qatar is now looking to safeguard its future income by producing its own energy through renewable technologies to offset the rise in domestic use. It should be noted this is not just electricity for lighting and cooling and so on, but also for the desalination to produce the water required for the population. The stateâ€™s government is currently negotiating with investors for a US$1billion (QR3.64 billion) solar power plant, which will invigorate the solar market. With an existing energy inefficient building stock, both domestic and commercial, the retrofitting of such solar technologies must be part of the future solution. It is important to understand the types of retrofitted solutions available. There are several alternative energy sources available and some more suitable to the climate in the Gulf than others. For example, it has been shown that wind turbines operating throughout the region are put under considerable pressure by dust, sand and high temperatures. This is exacerbated by unpredictable winds, especially within the existing cityscape, making the retrofitting of wind turbines on rooftops a nonviable option. On the other hand, 50
- Wind turbines are one of the many alternative energy sources available, however, due to the harsh climatic conditions experienced in many parts of the Gulf region the technology is not always a viable option. -
Qatar is in a prime position for solar panels, heat pumps The liquid that circulates through these thermal solar panels is and combined heat and power technologies. The latter heated by sunlight; this then passes through a coil in the water two, however, are more difficult to retrofit. The emphasis, tank, which in turn heats the water stored in the tank. Flat plate therefore, must be on solar technology, which includes cells are simple; robust; look better and are cost effective. They photovoltaic cells (PV) – producing energy and solar thermal do, however, require a marginally larger roof area. – providing hot water. The second type of solar thermal energy comes from Historically, all forms of solar energy have received poor evacuated tube collectors, which use the sun’s warmth to heat reviews in terms of efficiency and lifecycle costs. For instance, water. Unlike flat plane collectors, evacuated tube collectors are some believe that the cost of producing and installing PV made up of several parallel cylindrical collectors. These panels panels outweighs the gains from the energy produced. In can optimise the collection of solar energy as the cylinders reality, with the current technology available, the installation capture the sun from all angles. Another advantage of these of PVs reaches the break-even point after just three years. This collectors is that they are easier to retrofit and are better for decreases to just a little over a year for the film version of the technology. “To increase the adoption rate of micro-generated In the past 10 years, this has reduced from a 10systems across the board, as well as encouraging the year timeframe, which retrofitting of solar technologies, there needs to be illustrates the pace that research and development an incentive scheme in place.” into this technology are - Sam Pickering moving at. Photovoltaic cells produce energy by converting the sunlight into electricity. The use of PV panels industrial applications. However, their negative points are that with a battery, inverter and controller, can generate electricity they are tied to the vacuum life of the cells, less aesthetically for both domestic and commercial buildings. Although sympathetic and are expensive. relatively easy to install, the location, weather, amount of Whatever system a building chooses to adopt, it has been shade and tilt all have to be considered to ensure efficient shown that micro-generation can effectively save the building performance. PV systems can be used for a building with a money while reducing the amount of non-sustainable energy roof or wall that faces within 90 degrees south, as used. A recent report approved and partly long as no other large buildings or trees financed by the United Kingdom (UK) create shadow. The energy produced Government’s Department for can be utilised by the building Business, Enterprise and incorporating the system, with Regulatory Reform the excess sold back to the (BERR) explains that national grid. Those wanting the production of to produce energy for their energy by microown use can store electricity in generation could a battery for use later thereby contribute to a becoming an efficient microreduction of up generating building. to 30 megatonne Solar thermal comes in two (Mt) CO² by main types, each with its pros and 2030, equivalent cons. Solar Thermal applications of a five percent cut have the overall advantage in that in the total of the UK’s they are more flexible for both 2006 CO² emissions. This retrofitting and for use is the best-case scenario, but during construction. They as yet take up of micro renewable can be surface-mounted energy sources has been slow. for pitch or flat To increase the adoption rate of microroofs; incorporated generated systems across the board, as on A-frames; inwell as encouraging the retrofitting of solar roof and complete technologies, there needs to be an incentive roof installation; or scheme in place. Throughout history, incorporated on the governments have used incentives to influence façade. Flat plate solar the masses from promises of land and wealth thermal cells turn the heat for Roman conquerors to tax breaks for radiated by the sun into hot water. single child families. There are several ways to MARCH 2010
encourage the use of sustainable energy technologies including premiums for excess green electricity fed back into the grid; grants for the initial fitting of technologies; tax breaks for the energy saved; and more dogmatically, the introduction of legislation making reductions in CO² emissions a legal requirement. Likewise on the supply side, governments can offer grants for the research and development of technologies. Germany has been at the forefront of development and implementation of alternative energy sources for some time. The German government has used several forms of incentives to encourage the use of sustainable energy including a premium tariff for feeding energy back into the grid. Additionally, the government has already committed EUR14billion (QR69 billion) to this feed-in tariff (FIT). Likewise, it has supported the rollout of technologies such as PVs, which has the additional benefit of a burgeoning export market in such products and the all-important reduction in its national CO² emissions. Numerous studies have been undertaken around the world to assess the most appropriate route for governments to take to encourage reductions in CO², while maintaining the political high ground. The UK’s BERR report highlights the fact that there is no single policy or country that has successfully encouraged the up-take in all technologies. Therefore, it suggests a flexible approach to policy. Both the increased supply of new technologies and the growth in demand for such alternatives need to be addressed. A clear direction by government is needed to ensure that industry can allocate finance and training resources effectively. Therefore, an effective incentive scheme would come as a five- or 10-year plan outlining the financial benefits and legislative requirements. There is a ground swell in public support towards green energy and the generation of renewable electricity. In Switzerland the government introduced a remuneration scheme in 2008 for renewable energy projects that fed back electricity into the grid. The registration process was opened on May 1. Before the morning of May 3, 3500 applications had been received, causing the near saturation of the scheme within the first two days. Many neighbours here in the Middle East are focusing on developing solar as an alternative source of energy. Encouraged by three key factors: firstly the deterioration of energy deficits; secondly the diminishing oil reserves; and thirdly and most interestingly the environmental imperative that change must come. The United Arab Emirates (UAE) has taken the lead as the pioneer for solar within the region. The Masdar initiative, an offshoot of the Abu Dhabi Future Energy Company, has set the benchmark for clean energy development. Their aim is to provide the Gulf with an alternative to a fossil fuel dependent economy. Harnessing the abundance of solar energy in the Middle East is a certainty the way forward for future building projects. With the right focus in research and development of these technologies, the region will continue to dominate the world as a major exporter of energy. With large solar farms being planned and future construction projects considering the benefits of micro-generation, there promises to be a shift away from the dependence on fossil fuels. Likewise, with the 52
right incentives in place, there is potential for retrofitted solar technologies to contribute to this shift. Legislation could indeed call for a reduction in the current CO² emissions, which in turn would make solar energy a more competitive and infinite alternative to oil.
BUSINESS VIEW â€“ REAL ESTATE
As we edge further into 2010, most of the economic commentators are painting the picture that the worst of the global recession is now behind us, however, that does not seem to be the case for Greece or Spain as they are still relying on the financial support of other eurozone nations to pull them through. Certainly from a real estate perspective, spring is traditionally a time when Doha experiences a new impetus from firms looking to start-up or expand in the state. Edd Brookes investigates. - Photos courtesy of Fadi El Benni. -
BUSINESS VIEW – REAL ESTATE
ertainly in DTZ, we have witnessed a renewed occupier confidence, which has manifested itself in an increasing number of enquiries as well as, and of course more importantly, some excellent deals being completed. Multinationals looking at opening and expanding regional operations within the Middle East often choose a single regional base in which to house the majority of their staff, with a smaller network of offices feeding in to that central hub. Therefore, this month, with the publishing of DTZ’s Global Occupancy Costs, I thought it would be interesting to look a bit deeper into how such corporate relocation decisions are made, how important other factors than cost are and try to draw a conclusion as to where Qatar stands in terms of regional competitiveness. I will use the Middle East region as a starting point. When we calibrate data we look at all manner of factors, however for the purposes of this article, I will compare prime office rents, space utilisation standards per workstation and total occupancy cost per work station. Before getting into the ‘nitty-gritty’ let me take one moment to define these three categories. Total occupancy cost is defined as the average total cost of leasing prime net usable space. It includes rents and outgoings such as maintenance costs – normally borne by the occupier. It excludes fit-out costs and leasing incentives such as rent-free periods. Space utilisation standards, per workstation, are defined as the net internal area divided by the number of planned workstations for which the space is intended. It gives a comparison of the amount of space required in different business districts and although it does not change significantly year-to-year, it does evolve over time reflecting changing work patterns, style and building design.
Dubai accounting for the greatest change – a reduction of 34 percent – this is not totally surprising when one considers the impact that the global downturn had on Dubai, in particular on its real estate and financial services businesses, which play a huge role in the city’s economy. In 2009, Dubai was ranked as one of the world’s fastest 10 declining markets. Nevertheless, as I will demonstrate later in the article, Dubai retained its reputation as the most expensive location in the Middle East and Africa for occupying office space. The second most dramatic decrease was recorded in Doha, with occupancy costs reducing by 24 percent in the same period. I believe the biggest impact has been government intervention and in particular the introduction of the Rental Committee, established to approve ministerial office leasing. The committee set an initial rental limit of QR150 per square metre (sqm) per month (pm) at a time when prime rents were QR250 sqm/pm plus. The knock-on effect of this was a re-assessment of rental levels by other public and private companies and while rents rocketed by some 144 percent during the 2005 to 2008 period, the advent of more supply caused a pricing re-adjustment. In the medium- to long-term this can only be a good thing. Both Bahrain and Abu Dhabi experienced reductions in total office costs by 23 and 18 percent, respectively, while the average Middle East reduction was recorded at 13 percent. Turning now to consider total occupancy costs per workstation in the region, Figure 2 (below) visually represents this graphically.
- Figure 2 – total occupancy costs per workstation – Middle East and Africa. -
- Figure 1 – 2008 and 2009 (%) change in total occupancy costs per workstation – Middle East and Africa. -
The figure above clearly shows the dramatic change in total occupancy costs during the period 2008 to 2009, with 54
A mentioned previously, Dubai remains the most expensive location with an average annual cost of US$14,500 (QR52,800) per annum (pa) closely followed by Abu Dhabi at USD$14,400 pa (QR52,400). Doha comes in third, with an annual average cost of US$12,850 pa (QR46,800), which is ahead of the Middle East average of US$9250 pa (QR33,700). What this indicates is that there is an increased competition in the region to compete for regional and global
BUSINESS VIEW – REAL ESTATE
occupiers, with other factors such as tax regimes, quality of life for expatriates, available skills base and political stability becoming more and more important as occupiers consider staff recruitment and retention as well as overall costs. It certainly seems clear that occupiers throughout the region are taking advantage of the current market demand and increased leasing incentives from landlords – these may include more flexible lease terms, extended rent-free periods as well as landlord contribution to fit-outs. In terms of the World Bank Group’s Ease of Doing Business report, the Kingdom of Saudi Arabia (KSA) surprisingly leads the Middle East, with a global ranking of ranking at 13; followed by Bahrain (20), the United Arab Emirates (UAE) (34) and Qatar at 39. However, if one considers the World Economic Forum’s Global Competitiveness Report, published last December, Qatar leads the Middle East region and ranks 22nd globally (up from 26th position in 2008), with the UAE ranking at 23rd and the KSA and Bahrain at 28th and 38th, respectively. So what does this all mean? After all, statistics can of course be used to back-up any point of view. What cannot be ignored is economic diversification and certainly from Qatar’s viewpoint, this is happening incredibly quickly. Non oil and gas related economic contributions to gross domestic product (GDP) continue to rise from the 43.4 percent reported in 2007 (although with the onset of new liquefied natural gas (LNG) trains this may produce a blip to these figures) and the state is slowly being recognised for its educational, medical and the ever increasingly cultural offerings – culminating this year when Doha was officially endorsed as the cultural capital of the Middle East. Tax regimes too have recently been reviewed, therefore, since January 1, 2010, many businesses operating in Qatar, as well as groups looking to invest in Qatar, are now subject to a lower headline rate of corporate income tax and are able to benefit from a wider range of tax treaty structuring options than what was previously the case. Formerly, Qatar’s corporate tax regime consisted of a tax bracket system, under which the tax rate that applied to a particular company was determined by the amount of taxable income it generated. The rates varied from zero percent for
companies earning less than QR100,000 (US$27,500) in a particular year, to 35 percent for companies generating more than QR5,000,000 (US$1,373,600) in the same period. This system has now been substantially simplified – as of January 1, companies are taxed on their taxable profits at a flat rate of 10 percent, benefitting businesses with substantial interests and activities in Qatar. The flat rate regime potentially reduces the tax cost of doing business in Qatar, as well as reducing the administrative burden on companies and increasing certainty regarding groups’ taxation affairs. In summary, while Doha is not necessarily the cheapest
location on offer form the point of view of occupancy cost, it is certainly less expensive option than some of its more vocal neighbours, and it certainly ranks highly when considering competitiveness. With further economic diversification anticipated over the coming years, as well as a high profile role in International Politics and globally recognized economic stability, Qatar looks set to punch way above its weight for the foreseeable future and will no doubt continue to attract world class global operations to set up shop sooner rather than later. MARCH 2010
SPECIAL REPORT – BANKING & FINANCE
BANKING ON QATAR
Backed by strong government support and operating in an economy that recorded some of the fastest growth in the world last year, as well as being expected to expand by up to 18 percent in 2010, Qatar’s banking sector is poised to begin another period of accelerated growth. Oxford Business Group’s editorial manager for Qatar, Daniel Moore, investigates.
- Daniel Moore, OBG, Qatar. -
SPECIAL REPORT – BANKING & FINANCE
his is not to say that local banks spent the past year idling. Overall, the country’s banking sector appears to have weathered the global financial crisis far better than most, posting combined profits of US$2.7 billion (QR9.8 billion) in 2009, just 0.1 percent down on the previous year’s result. Qatar National Bank was responsible for almost half of that amount, having made a record US$1.15 billion (QR4.2 billion) in net profits, 15 percent up on 2008, with three other lenders, Doha Bank, Qatar International Islamic Bank and Al Khaliji all building on their profits from 2008. Of the country’s eight other domestic banks, only four recorded lower profits, one of which was Commercialbank, it posted a drop 10.4 percent in 2009, down from US$466 million (QR1.7 billion) to US$417 million (QR1.5 billion). According to Abdullah bin Khalifa Al Attiyah, the chairman of Commercialbank, 2009 was a challenging year, but thanks in part to state support the bank and the rest of the sector had risen to the challenge and would be looking toward stronger results in 2010.
“The strength of our regional franchise has enabled Commercialbank to absorb the challenges of last year and to also re-align the business, so that it is better positioned to capture the potential value that recovering markets will offer,” he told a meeting of shareholders last month. Though 2009 may have been a more difficult year than most for Qatar’s economy, gross domestic product (GDP) still grew by around 10 percent according to the governor of the Qatar Central Bank (QCB), Sheikh Abdullah bin Saud Al Thani. High levels of liquidity helped this figure. According to QCB lending by local banks rose by 11 percent last year against the figures for 2008. Despite this there have been complaints from the business community and consumers that access to credit has been restricted, with some suggesting the QCB has instructed banks to limit loan activity and enacted strict conditions on banking activity. The QCB’s Sheikh Abdullah has been swift in rejecting such claims raised in the local media, saying in mid-February that QCB had put in place a series of measures
- Qatar National Bank posted a record US$1.15 billion (QR4.2 billion) in net profits last year, 15 percent up on its 2008 profits. -
to ensure continued liquidity in the financial sector. These included providing funds to banks at low interest rates and pumping money into the system. There was no question of QCB having issued any new restrictions on credit, Al Thani said in an interview with the Qatar News Agency. “The central bank, with the full support of the government, has been working to enhance confidence and trust among the public and to provide sufficient liquidity for the banking sector through contributions to their capital and the purchase of some of their investment portfolios, as well as by providing real estate loans,” he said. This support, combined with the tight regulatory regime maintained by QCB, helped the sector avoid the worst of the global recession, said Qatar Islamic Bank chairman Sheikh Jassem bin Hamad bin Jassim bin Jabor Al Thani. “The initiatives taken by the government of Qatar, through acquiring as shareholder a stake in the national banks’ capitals via the Qatar Investment Authority, played a significant role in consolidating confidence in the Qatari banking sector, and therefore in the national banks’ financial positions,” Al Thani said in early February. The banking sector received more good news mid-February when Prime Minister Sheikh Hamad bin Jassim bin Jabor Al Thani announced the 2010-11 budget would be larger than the previous fiscal years and would be tailored to fuel further economic growth. The announcement was welcomed by the banking sector, with Abdul Hakeem Mostafawi, the CEO of HSBC Qatar, saying on February 11 that the proposed stimulus budget went a long way to building confidence in the economy. “The economic forecast for Qatar in 2010 is very positive and the government went about supporting the economy in a very responsible way, and the outcome was far better than in many other countries,” Mostafawi said. That forecast includes estimated GDP growth of between 16 and 18 percent, with the state committed to increasing spending and backing private sector expansion. Banks are looking forward to their share of this activity. MARCH 2010
E D LY
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MARCH 20102010 FEBRUARY
SL ’ R A QAT
LEGAL INSIGHT 5. As an employee, am I entitled to any public holidays like Eid?
probationary period of up to, but not exceeding, six months. During this period, if the employee cannot perform their job they may be terminated on three days notice.
3. As an employee, am I entitled to end of service benefits?
Under the Labour Law, if an employee has worked one year or more for the same employer continuously then they are entitled to end of service benefits. In the employment contract, the parties can agree the amount that the employee will be entitled to but, at a minimum, it must be three weeks wage for every year of employment (and fractions of any part years in proportion to the duration of employment). It can be more than this if the parties have agreed such in the employment contract.
4. As an employee, what is my annual leave entitlement?
The Labour Law provides that employees are entitled to paid annual leave after they have completed one year of service with their employer. Where the same employer has employed the employee for less than five years, they are entitled to three weeks paid annual leave. Where the same employer has employed them for more than 5 years, they are entitled to four weeks paid annual leave. The employer and employee can, however, agree that an employee will have more annual leave than the minimum stipulated by the Labour Law.
Employees covered by the Labour Law are entitled each year to leave with full pay on the following public holidays – Eid El-Fitr (three working days), Eid Al-Adha (three working days), Independence day (one working day) and three additional working days to be decided by the employer. If an employee is required to work on a public holiday (which will sometimes be the case), then the Labour Law may require the employer to compensate the employee by way of provision of a replacement leave day and extra salary for the day worked (such as time and a half). Whether this compensation requirement applies or not will depend on the type of work being undertaken – for example employees working in shift work situations are generally exempted from payment on a time and a half basis.
6. Is an employer entitled to hold onto an employee’s passport?
The law, which most directly answers this question, is actually Law No. 9 of 2009, which regulates the entrance, exit, residence and sponsorship of expatriates (commonly referred to as the new ‘Sponsorship Law’).
It states that a sponsor must return a passport or other travel documents to the sponsored person after the procedures for obtaining or renewing that person’s residency are concluded.
7. Are female employees entitled to paid maternity leave?
The Labour Law provides that female employees, who have been employed for one year by the same employer are entitled to 50 days paid maternity leave on full salary. The leave must be taken in the period immediately before and after delivery provided that the leave must include 35 days in the post delivery period. If the post delivery health of the employee hinders her return to work after the end of her maternity period then, provided that an adequate medical certificate is furnished, an employee may take unpaid leave for a period not exceeding 60 consecutive or staggered days. The Labour Law requires an employee to provide to their employer a medical certificate issued by a licensed physician stating the probable delivery date.
8. Can an employee work for anyone else during his leave?
The Labour Law, in Article 84, states “The worker shall not, during any of his leaves, work for another employer”. Under the Labour Law, this means that an employee is not allowed to undertake, for example, ‘part time’ work on a casual basis on their days off. This would include weekends, annual leave days, sick leave days or public holidays. If an employee breaches this provision, their employer may “deprive him from his wage for the period of the leave and recover what he has already been paid of that wage”. Note also that employees are also restricted by the new Sponsorship Law from working for persons, who are not their sponsors (subject to some limited exceptions).
9. As an employer, what breaks must I give employees when they are working?
Article 73 states, “The working hours shall include an interval or more for prayer, rest and taking of meals which interval or intervals shall not be less than one hour and shall not be more than three hours. The said intervals shall not be taken into consideration in calculating the working hours in fixing the rest interval but the worker shall not work for more than five consecutive hours”. This means that employers must provide employees with a break for prayer, rest and meals of between one and three hours, after every five hours of work. There are, however, exceptions to this. Ministerial Resolution No. 10 of 2005 provides that work can continue without breaks for rest in certain categories of activities. These include: • Telecommunication companies; • Management of machinery generating electrical and water power; • Hospitals and other medical treatment centres; • Bakeries;
- To make sure that you do not find yourself on the raod to nowhere, legally speaking, make sure you know your employment rights. -
• Pharmacies; • Airline offices, airports and seaports; • Activities where work continues without cessation by the shift system; and • Carriers of passengers and goods by land, air or sea. In these circumstances, the employer must still allow employees adequate time to pray, eat and drink, but the necessary time allocated for such is at the employer’s discretion.
10. When my contract finishes, IS my employer ABLE TO stop me from working for a competitor?
In short, the answer is yes – in specified circumstances. The Labour Law provides that if the nature of the work allows an employee “to know the clients of the employer or the secrets of the business”, then the employer can stipulate that the employee shall not compete or participate in any undertaking competing with the employer after expiry of the employment contract. Typically this restriction will be found in the employment contract and is known as a “non-compete” or “restraint of trade” clause. These clauses are quite common, particularly in employment contracts of professionally qualified employees. Employers cannot, however, impose non-compete restrictions unreasonably.
The Labour Law provides that such restrictions will only be valid if they are restricted as to duration, place and to type of work to the extent necessary for the protection of the employer’s legitimate interests. The restriction must, therefore, be reasonable and proportionate in its nature and scope. The maximum period of such a restriction is two years. An additional restriction on employees’ ability to move between employers is found in the new Sponsorship Law, which will apply to employees, who are expatriates. For example, a former sponsor may refuse to give a Letter of No Objection where one is required by the immigration authorities therefore preventing a former employer from moving to a different employer in Qatar. In many instances, this will have the same effect as a “non-compete” clause in an employment contract.
Note: This article is of a general nature only and is not legal advice, and, therefore, should not be relied upon as such. Other laws or matters not covered in this article may apply to a specific situation. Clyde and Co accepts no responsibility for any reliance on this article. Also, laws in Qatar (other than the QFC) are published in Arabic and Clyde and Co accepts no responsibility for any errors or omissions in translations upon which this article is based.
IT INFRASTRUCTURE OUTSOURCING:
IS IT FOR YOU?
More and more businesses are relying on effective IT solutions to give their business the ‘competitive edge’, but how do you know which solutions are right for your business? British-based IT services company, Insite, sheds some light on the importance of investing in the right IT infrastructure.
BUSINESS KNOW-HOW IT INFRASTRUCTURE: COST OR INVESTMENT?
All too often, IT infrastructure is regarded as a cost, not an investment. For this reason, it can be starved of funds. It is simply ‘below the radar’ for senior management and is not considered a business enabler. In fact, the only time it comes into prominence is when it fails. So it is hardly surprising that most people’s view of IT infrastructure is at best, ambivalent and at worst, negative. This situation is not helped by the fact that technology itself has become a commodity. These days, most homes contain computer systems which are so sophisticated that, up to a few years ago, they would have been hidden away in computer rooms and managed by expensive IT staff. As the technology has become ever more accessible, the expectation is that the systems will require reduced levels of administration and management. In reality, we find that the reverse is true. Given that the required skills are expensive to acquire and maintain, the question that many companies are asking is: Do we want to be an IT organisation or a business?
THE ISSUE OF COMPLEXITY
IT is pervasive and supporting infrastructures have grown at a rate that have been difficult or even impossible to predict. Already businesses are dependent on a homegrown, complex and sometimes unwieldy concoction of technologies. During the past few years, standards have emerged to help with the governance and management of IT infrastructures. However, when applied to today’s infrastructures, rather than solving problems, they are highlighting shortcomings. Good practice can be readily defined and described in theory. But all too often, the application of this good practice remains an elusive goal, due to the limitations and complexity of the IT infrastructure itself. Consequently, companies find themselves relying on the skills and expertise of their in-house IT staff to keep the service running – an approach that some may consider potentially risky.
THE MISSION-CRITICAL NATURE OF IT
No IT infrastructure – no business. This is the reality for the majority of businesses today. Going back to manual procedures is no longer an option; IT has to work. More than this, IT has to work predictably and in line with the changing demands of the business. Service Level Agreements (SLAs) are no longer a ‘nice to have’ – they are becoming a critical part of corporate governance and it is an imperative that these service levels are achieved and maintained.
FAULT DIAGNOSIS AND REPAIR
The complexity of IT infrastructure and the cost of support staff mean that detecting, diagnosing and resolving failures and intermittent faults in IT infrastructures can be expensive in time, service disruption and money. At times, the pragmatic approach can be to upgrade to the latest software level, rather than tracing and resolving the problem. However, this in itself can present a whole new range of issues as upgrades should be managed in a controlled manner, starting from a known good state that can be restored 62
should the upgrade be unsuccessful. But, if you are starting from a problem state, the stakes are inevitably raised and the risk of upgrading can become unacceptable to the business.
DIY IT INFRASTRUCTURE
Although technologies have progressed at a rapid rate, IT infrastructure is still at an early stage of maturity. The fact is you cannot buy IT Infrastructure off the shelf. Instead, you have to build it yourself and integrate any new additions into existing systems. Until it becomes a utility that can be sold as a product – like water, gas, electricity and motor fuel – IT will require specialist nurturing and management. For large enterprises that can justify in-house IT organisations with specialist skills and experience, this approach is acceptable. Indeed in some industries, it is the IT department that creates competitive edge for the business. However, for most mid-market companies the cost of in-house specialist skills is prohibitive. The result is IT infrastructure, which has evolved reactively to address short-term needs that deliver unacceptable, unpredictable levels of service.
THE COST DYNAMICS
The reduction in the cost of technology means operational costs now form the major proportion of the overall IT overhead. However, IT budgets frequently exclude power and facilities elements. In fact, for the first time, the cost of powering an IT server over its average lifecycle is greater than its initial purchase price. Clearly, any serious attempt to reduce IT cost should start with an appreciation of the total cost of ownership and operations – hosting and management – rather than on the purchase price of the servers, networking and storage components.
BUSINESS KNOW-HOW When viewed this way, it is clear that any serious attempt to manage down the cost of IT should not be focussed on the price of the servers, networking and storage components, but instead on hosting and management costs.
A LEGISLATIVE BURDEN
We live in a time of ever increasing regulation. All companies are now burdened with additional compliance requirements, of which IT has more than its fair share. The need to demonstrate adequate control of data management and service assurance creates additional demands in terms of process definition, implementation, monitoring, audit and corrective actions. The cost of these activities or, in many cases, the danger of failing to comply with their requirements, can seriously impact business operations – either by increasing business risk, or by diverting attention away from the core business towards non-profitable activities.
INVESTMENT IN STAFF
Having the right staff can mean the difference between success and failure for most businesses. But attracting and retaining good quality staff is a major challenge, due in the main to the shortage of current skills and the increased level of demand. It is enough for most small to medium enterprise (SME) companies to focus on core business staff, without the added burden of building a robust and competent IT organisation. Indeed, by reducing the liability of employing in-house IT staff, more effort can be concentrated on augmenting existing profitable employees with additional resource, rather than developing a new team of highly skilled IT experts.
DIY OR OUTSOURCE? THE CONSTANT DILEMMA
Who can you trust to host and manage IT infrastructure? Largely speaking, it is an easy decision for large enterprises; they have the scale and market presence to dictate terms and conditions to the major IT outsourcing companies. They have the power to negotiate very favourable rates and service levels as the main outsourcing players vie for control of the account. And, of course, they are mindful of the subsequent business opportunities that may arise from the relationship. However, things can be very different if you are not a big corporate player. Without the powerful negotiating position of the major players, you are met with a ‘take it or leave it’ ambivalence. While there are several smaller companies that will be keen to take your business, how can you decide if they are up to the task?
HOW DO YOU DECIDE? WHAT IS YOUR CORE BUSINESS? IS IT Included?
If you achieve a competitive edge through the innovative use of IT, then you may want to continue to invest in it. For example, the integration of Microsoft Exchange into core business processes may give some legal companies a competitive edge. Similarly, the ability to sense risk through the creative use of high performance processing may be the deciding factor for large investment bank. However, for most SMEs, IT is no more than a facilitator. It provides automation for generic business processes and aids communication, but there is no real opportunity for differentiation. Innovation in IT is not a requirement; rather, it is about service levels and the use and protection of valuable company information. In this case, it is often best to leave IT to the experts and concentrate your own efforts on running your business.
IT INFRASTRUCTURE HOSTING: THE OPTIONS
There are realistically four options for IT infrastructure hosting: • DIY: If you feel your current practices are adequately meeting your objectives, you may choose to continue as you are. • Server Hosting: This option is available to you if you have issues accommodating your IT infrastructure. Please note that it only works if you have excellent and cost effective IT operational skills and capability. • Managed Services: This is the choice for companies that need to augment their existing IT operations with such functions as Service Desk or remote monitoring. • Full Managed Hosting: Often the best choice for SME companies, this option takes away the requirement to build, host or manage the IT infrastructure, putting IT in the hands of the specialists. For further information visit: www.insite-europe.co.uk MARCH 2010
BEHIND THE WHEEL
PUTS ITS PEDAL TO THE METAL FOR PORSCHE A three-and-a-half-year, high-stake chess game has offered Qatar the opportunity to become the first external investor in Porsche and the third largest investor in the â€˜to be formedâ€™ Volkswagen (VW)/Porsche conglomerate. Tim Stevens investigates how Qatar grabbed the opportunity with both hands and why.
BEHIND THE WHEEL
orsche and VW have always shared close ties. In recent years, with VW becoming one of the largest car manufacturers in the world and amid worries of VW being bought and disseminated into the market, Porsche continued its vocal stance stating the increases in the shares it owned in VW were merely to protect its larger sibling. In October 2008, Porsche announced that it either owned or had options on 75 percent of VW; the takeover looked like it might just be possible as Porsche had the controlling stake and the writing was on the wall. However, to obtain this lofty position, Porsche had taken on enormous debts, both with the Piëch family (the owners of VW) and the German state of Lower Saxony (which
- Qatar’s Sheikh Jassim Bin Abdulaziz Bin Jassim Al Thani addresses the audience during Porsche’s annual general meeting in January this year in Stuttgart, Germany. -
maintained power of veto under special laws) opposing the takeover, therefore the process was delayed. Unfortunately for Porsche, this setback proved more difficult than first thought as the onset of the global financial crisis also started lapping at showroom floors, which spread to the overall shrinking of the global market for luxury cars. Porsche took a hefty blow and struggled to service the debt, with alleged debt levels reaching around EUR10 billion (QR49 billion), leaving Porsche’s underbelly exposed. To add to its burden, two senior executives resigned, Wendelin Weideking, CEO of Porsche and Holger Haerte, Porsche’s financial director. This led to the possibility of the reversal of the takeover bid and VW took-up the baton, and after many negotiations (it would have been good to be a fly on the wall during these discussions), on August 13, 2009, VW announced the approval of the VW supervisory board for VW and Porsche to “develop a corresponding basis for decision making on the future structure of the common group”, falling just short of describing a merger. VW formally took 49.9 percent of Porsche on December 8 for a sum of EUR3.3 billion (QR16.2 billion), to be funded by sales of preferred shares in VW in the first half of 2010 (subject to share holder approval). Porsche became part of the VW group that boasts marques such as Audi, Lamborghini, Bentley, Bugatti, Seat, Skoda, and of course, VW. The following day, Qatar Holdings paid a reported EUR7 billion (QR34.4 billion) for: • Ten percent shareholding in Porsche Holding company, bought from the Porsche and Piëch families, • The cash settled options in VW held by Porsche (20 percent), • Seventeen percent of VW ordinary shares. MARCH 2010
BEHIND THE WHEEL
- Former Porsche CEO Wendelin Wiedeking (2nd L) waves goodbye to workers as the new Porsche CEO Michael Macht, chief of Finance Holger Haerter, Porsche supervisory board chairman Wolfgang Porsche and Uwe Hueck, chairman of the workers council of Porsche, (L-R) applaud during a informative meeting about the deal with Volkswagen at the Porsche factory last July in Stuttgart, Germany. -
This historic agreement was signed in the Porsche Villa located on Killesberg Hill, outside of Stuttgart by the chairman of the Supervisory Board of Porsche SE, Doctor Wolfgang Porsche and Qatar’s Prime Minister, Sheik Hamad bin Jassin bin Jabir Al Thani, following this the share holders in the VW/Porsche conglomerate are now as follows: • The families – 35 to 40 percent • Lower Saxony – 20 percent • Qatar – 17 percent • Remainder owned by share holders Porsche will whittle down the EUR10 billion (QR49 billion) debt by selling shares in the first quarter of 2011 in a quantity, which could raise as much as EUR5 million (QR24.6 million) and the Piëch, and Porsche families will sell Europe’s largest auto distribution business to VW. So what does Qatar get from this? Qatar has bought voting shares in one of the largest automobile companies in the world and being the first external investor in Porsche, with the power to sit on the supervisory board, it is another first for Qatar coupled by all the worldwide exposure that comes with this. The lesser-known agreements that were negotiated as part of the investment were: • To provide Porsche with financing by contributing to Porsche’s existing syndicated loan facilities, • For Porsche to establish research and development (R&D) and testing facilities in Doha, • To explore other areas of cooperation in the fields of R&D, technical services and support. Continued additional income is assured from the financing agreement of course, but it is the last two agreements that spark the interest of the everyday person in Qatar, especially the die-hard Porsche enthusiasts. 66
On our doorstep will be a Porsche R&D laboratory, maybe designing the Porsche range for 2020? While details of this R&D are few and far between, to say the least, it is fairly certain that the new clean fuel, green cars will be developed here. So who knows…maybe we will see a prototype solar powered Carrera or similar driving along Salwa Road in the near future. This business deal marks a very exciting time for Qatar and Porsche, as Qatar provides a fertile culture for development, and for Qatar to be the champion of this is a great coup… time will tell where this will lead. TheEDGE contacted Porsche Qatar and Porsche Middle East for independent comment, however both parties declined to comment on the subject.
INDUSTRY FOCUS – MOTORSPORT
START YOUR ENGINES
It is eight years since the seeds of a motorsport industry were sown in the Middle East. In a remarkably short time, the region has seen the construction of five world-class venues that have attracted almost every major circuit racing series on two and four wheels, plus inclusion in the World Rally Championship. This is not a region for half measures, and that is why it continues to be the biggest area of opportunity in the global motorsport community. Simon Berger, founder and CEO of European-based exhibition and conference organising company, IM2 Events, explores the rise of the motorsport industry in the Middle East.
he Middle East has become one of the principal areas of investment in the sport, but not in a profligate manner. Looking back over the past eight years since the initial commitment by Bahrain, the State of Qatar and the Emirates of Dubai and Abu Dhabi, there is clear and logical structure throughout the planning and execution in developing the region’s influence in the sport, and its supporting industry. Of course motor racing is not indigenous to the Middle East – by its nature very few sports are. Yet, by taking on these large-scale partnerships with the global motor sport
industry, the decision makers in the region have effectively constructed the model for sustained growth of the business of motor racing for years to come. It is extremely valuable to compare the Middle East with the longest-established hub for the global motor sport industry in Britain, which has enjoyed pre-eminence for almost 60 years. Back in the 1950s the United Kingdom (UK) was by no means part of the establishment of international motor sport, which was generally a competition between the major French, German, Italian and American motor manufacturers taking place on closed public roads in Europe.
INDUSTRY FOCUS – MOTORSPORT
Yet grass roots support for designing, building and competing took light in Britain during the late 1940s and early 1950s as a plethora of venues became available in the form of disused wartime airfields and abandoned parklands. Here designers, constructors, competitors and organisers cut their teeth until reaching the peak of international success and domestic enthusiasm for motorsport in the late 1950s and early 1960s. In 2010, the UK still plays home to 26 permanent circuits, 18 sprint and hillclimb venues, 133 kart tracks, 13 short ovals, four drag strips and thousands of kilometres of rally stages – although in many ways these facilities are redundant within the present and future structure of the global motor sport industry. Neither do the vast majority of these venues contribute to the economic stability or growth of the business. Research conducted in 2001, by UK Motorsport Industry Association (MIA), claimed that it represented 2500 companies employing 25,000 employees and contributing more to Britain’s gross domestic product (GDP) than steel and agriculture combined. Despite subsequent recessions in 2001-02, and the existing financial crisis, the MIA believes its constituency has grown since its first report to number more than 40,000 employees and more than double the annual turnover – yet the numbers do not add up. Of greatest importance to the 194 permanent venues and their organisers and promoters, only 15,000 people regularly pay to attend their events – an average of less than 120 people per venue. With the ongoing contraction of the UK economy in which the population’s personal debt outstrips the national GDP, swingeing cuts in public spending are expected to tackle the recession and with a complete absence of political interest or support for the industry in Britain, new opportunities are needed to sustain the businesses that the MIA represents. It is of enormous significance that MIA’s figures detail that 80 percent of the total turnover of Britain’s motor sport industry was distributed between the top 20 companies
operating there. These companies span the professional sport – Formula One (F1), Indy Car, rallying, endurance racing, touring cars and junior formulae and stands with the other existing centre of excellence in the United States (US), which supports the domestic NASCAR and international drag racing arena with approximately one quarter the number of businesses, employees and turnover. The international motor sport industry leaders that are based in Britain cannot conceivably continue to rely on their traditional heartland as their major support base in the foreseeable future. When the combination of traditionally high labour, energy and property costs are combined with the fallout of the recession in Britain and absence of political support to protect it, the sad fact is that the next 10 to 15 years will be inexorable. What is more, when the industry leaders move, so too must the network of service industries, suppliers and investors on which they depend. Already it has started happening and it is the Middle East that has proved the catalyst through its eight-year programme to deliver the very best foundations for the future of the global motorsport industry. Very few of the grandee marques in motorsport are now without investment from the Middle East. In F1 Ferrari is now part-owned and sponsored by the UAE, McLaren is part-owned by the Bahrain national holding company Mumtalakat, Sauber is part-owned by Emirati and Qatari interests and Williams also has more than a passing interest from Qatar also. In the World Rally Championship in Abu Dhabi, the Emirate not only sponsors the Ford World Rally Team, but also has in place a programme of driver development aimed at putting Middle East drivers on the international stage; while in sports car racing, Aston Martin is part-owned by Kuwaiti investors. Furthermore, there is the commitment to bring every sector of the international motorsport community to the region and that has paid off for competitors, organisers, fans and hosts alike. The Dubai International Circuit is home to the GP2 Asia series, it plays host to the ADAC’s 24-hour racing series and FIA GT events and has created the successful Speedcar concept of celebrity races. Qatar’s Lusail Circuit is the regional host of the premier motorcycling series MotoGP, the Bahrain International Circuit brought F1, V8 Supercars Australia Championship Series, GP2, F3 SuperPrix, FIA GT Championship, Drag racing and the BMW World Final to the region, Jordan now hosts the World Rally Championship in the Middle East and Abu Dhabi has constructed its unique facility for F1, Australian V8 Supercars and other international events on Yas Island. Meanwhile in Riyadh the Reem Circuit is a lavish new international facility aimed at the burgeoning regional series for circuit and drag racing. The knock-on effect of these international events and top-quality venues has already been profound. Additionally, due to the enormous regional impact of the Australian V8 Supercars, General Motors (GM) in the Middle East supports the regional Chevrolet Supercars Challenge to provide extremely cost-effective regional competition. Meanwhile, Porsche has built on its enormous brand following in the region, together with the popularity of its GT and Supercup activities, to increase the portfolio of its Carrera Cup to include a pan-Arab series.
INDUSTRY FOCUS – MOTORSPORT
- The Australian V8 Supercars have become a popular motorsport spectacle in the Middle East in recent years. -
These series, together with the arrival of GP2 Asia and the importing of Top Fuel dragsters to Abu Dhabi, Qatar and Saudi Arabia as the top flight of their domestic categories, are the start of a second phase for the industry in the Middle East. It is the sustained and growing foundation of a new global industry hub providing employment opportunities for both international and regional talent. What is being seen in these first regionally based activities can accurately be described as the first shoots of what will become a flourishing industry for the future. With the arrival of championships and cars come the
need for preparation, design and construction, parts and fuel supply, race administration, promotion and marketing. Providing these basics on a scale compatible with, and at the same pace as, the growing uptake for motorsport in the region has a knock-on effect. Already there are regional offices for industry leaders such as KHP and PRISM in the promotion of the sport, Haymarket as the principal specialist media outlet, international driver management agencies and fabrication specialists. Just as has been the case within other industries migrating to the region, these pioneers have discovered clear benefits in moving to the Middle East, from the positive effects of the climate and lifestyle to a vast, dynamic and untapped local talent base. As the economic and political factors in the sport’s traditional heartland continues to turn against the global business of motor sport, increasingly the industry leaders are going to find more and more reasons to relocate to where there is genuine enthusiasm, support and infrastructure. Relocation to the Middle East could ultimately be the only option to develop and grow, not only individual businesses, but also the industry itself. It is clear that motor sport must evolve in order to maintain its relevance in the modern world. More than a century ago, it was the crucible of motorsport that underlined the promise of internal combustion engines against rival technologies such as steam and electricity. Increasingly personal mobility must look for the means to replace fossil fuel and just as with internal combustion, it is likely that motor sport will provide the test bed to develop the next generation of power systems. Facilities such as those already on offer at the Middle East’s venues – in terms of the quality of the tracks, the technology employed for data analysis and, of course, the clement weather – already make them the ideal locations for development by the motor sport and wider automotive industries. So too does the abundance of materials available and the willingness of governments to lend their support,
INDUSTRY FOCUS – MOTORSPORT
whether it be in assisting with the establishment of new premises to fully-fledged partnerships, within their long-term growth plans for the industry and the region. Quite simply, for anyone working in the global motorsport industry today there is nowhere like the Middle East. In regard to long-term development, the facilities currently available, the positive financial picture and the receptiveness for regional decision makers to adopt strong links with the motor sport industry, the Middle East stands out as a beacon of optimism for the future. Bahrain is already taking advantage of this position by taking the high ground with a demonstrable push to ensure that the Bahrain Grand Prix and other international events such as the Australian V8 Supercars Championship are used as platforms for the development of business networking. In 2008 the Bahrain International Circuit staged the inaugural Motor Sport Business Forum Middle East. The event was welcomed throughout the region and globally as a muchneeded medium through which businesses, with a common link in motorsport, could do business with each other. With more than 350 delegates and a further 60 exhibitors, the event was a huge success and underlined the value of such opportunities in a region that is clearly growing in importance to the sport. The knock-on effect of the first MSBF has been a call for more and a long-term agreement between the organisers and Bahrain’s Holding Company, the Mumtalakat, has cemented its position in the future; the inspiring design of which is to stage the event in different regional locations such as Abu Dhabi’s Yas marina Circuit, in the years to come. Business networking plays a pivotal roll in Bahrain’s International Circuit (BIC) strategy. As the stage for the region’s first Grand Prix in 2004, the circuit sees itself as the market leader not just in the development of the sport in the
- Abu Dhabi’s new Yas Marina circuit. -
Middle East, but in the delivery of a vibrant platform for a tangible and working platform for business networking. The Grand Prix alone in Bahrain generates upwards of US$550 million (QR2 billion) of annual direct and in-direct economic impact to the Kingdom, not bad for a week’s work, while Australian companies now use the V8 Supercars rounds in both Abu Dhabi and Bahrain as destinations for trade missions and the creation of new business. Creating a business environment in which to improve this and spread the message to businesses throughout Bahrain and the region is vitally important, as is gaining a strong following within the business community. Bahrain’s Economic Development Board and the Mumtalakat both enjoy radically new opportunities by working with the circuit. This month’s Bahrain Grand Prix will demonstrate the diversity of the track and it facilitates as a meeting point for regional business, global companies and the sport of F1. No longer is the Grand Prix just a centre for sporting acumen; it is now increasingly being seen as a stage on which global business can enjoy corporate entertainment with a serious difference. The global economic crisis has made companies consider their ‘entertainment’ activities very strongly. The currently frowned-upon use of sport as a business ‘jolly’ has given organisations such as the BIC an opportunity to develop serious packages allowing businesses to revaluate their activities at events such as the Grand Prix. In March, at BIC, businesses will take their place centre stage while the racing becomes the backdrop. Bahrain and the region are no longer just the focal point of the sporting world during the Grand Prix; through its use of sport, as the common denominator is now becoming the focal point of business opportunities too.
WHY BUSINESSES BLOG AND HOW YOU CAN TOO
If you have been too busy running your business these past few years to make the most of online marketing, it is understandable. When you spend every waking moment helping current customers, ordering inventory, handling paperwork, paying the bills, and so on, you do not have much spare time to teach yourself about things such as search engine optimisation, paid advertising, press releases and social media marketing. Of course, if you want more customers and more business, you have to do something online these days. Even if you are paying someone else to handle Web design and online marketing, you can do your part in building your online presence with blogging. By networksolutions.
WHY BUSINESSES BLOG In addition to costing next to nothing, blogs provide benefits that you cannot get any other way (unless your marketing budget is unlimited). Blogs done right can attract tech savvy readers to you and readers can turn into customers. The more readers you can attract to your blog, the more opportunities you will have for eventual sales. Blogs can make sales representatives out of your readers too. When you write a post on your blog, you ‘open it up for discussion,’ inviting participation from your target market. When readers comment on your blog, they spread the good news about your products or services. If handled right, blogs can be great for customer feedback. Instead of expensive market testing and surveys, you get real time responses from real people. Finally, blogs can function as central hubs. Since they are a
stable venue in a world of fickle social media marketing, they can be your business’s home base. From your blog, visitors can venture off to any social media tools you use, such as Twitter, Facebook and your own website. They can see how involved you are and what you are about.
HOW YOU CAN TOO When you choose a blog, make sure it can grow with your business. Whether you create a custom blog or use a hosted blog (such as Blogspot or Wordpress), you will want it to be able to accommodate features like comments, archives, feeds, widgets, plug-ins and anything else that the technical geniuses come up with down the line. One piece of advice encourages businesses to host the blog on their domain, in a sub-folder or page, since this is most direct and makes the most of search engine optimisation (SEO) benefits.
BLOG START-UP GUIDE THE ONE RULE: YOUR BLOG IS NOT YOUR WEBSITE
Here are some things you want to consider before your write your first post. 1. What are your goals for this blog? This is something you may want to flesh out even before you look for blog hosting. Having clear goals helps your blog stay consistent in its messaging and provides useful topic parameters for the blogger. 2. How will you brand your blog? Look at the competition and differentiate yourself. Make sure your blog’s appearance mirrors your website and other visual projections of your company. 3. How often can you commit to adding posts? Regular posting will keep readers coming back. A stagnant blog reflects poorly on your business since readers might assume the worst about your company if you have not posted in a while. 4. Who else will be on the blogging team? Many hands make light work and more than one voice is refreshing. 5. What will you put on the ‘about us’ page? You may be surprised to learn that the ‘about us’ page is one of the first places readers look when they arrive at a new blog. Make sure yours is ready to go (see below for help on this). 6. Did you provide a way for readers to contact you? If your readers cannot reach you, that is a missed opportunity. Make sure to provide an email address or phone number. 7. What about post delivery? Is there an RSS feed tool available to those who want it? Is there also (this is important) a way readers can provide their name/email address so new posts can be sent directly to their inboxes, in case they do not want to bother with RSS?
One of the hardest things about blogging is getting your head around the genre. Lots of accomplished business people have blogs that just do not do what they should. Understanding what blog readers visit blogs for is half the battle. Blogs are supposed to be a place where real conversations can take place. They should always be about: • Open dialogue (must go two ways) • The chance to network and share valuable information This is important to know, because if you have a blog that is not about these two things, you will not really have a blog. You will have another website, set up to sell and visitors will click away from your blog fast.
ELEMENTS COMMON TO GOOD BLOGS 1. Open to readers’ thoughts You can turn-off the comments feature on a blog, but ‘on’ is preferable. It establishes the back and forth, transparent feel essential to engage your readers. (Do not worry: You can review comments before letting them onto your blog to make sure they are not offensive, spam-ish or irrelevant.) 2. Relationship-centred Posts should invite readers to join in on the conversation. Think in terms of building relationships. Selling must always come second. Always. If it does not, your readers will smell it and leave your blog. 3. Transparent Your ‘about us’ page identifies the authors and provides the basics about your company. Include information that builds your professional credibility. Include pictures of the authors. 4. Chock full of delicious, nutritious content A good host serves up attractive, substantial posts that do not look too good to enjoy: • Provide new information that is relevant and timely (old news makes you look uninformed about your industry) • Let your readers know that you are listening and interested in their thoughts. Invite them to respond. Be direct and ask, “What do you think?” • Make your posts easy to look at (break up text with subheadings and add images) and never shout (all caps). • Take the plastic off the couch: Do not subject posts to the editorial department’s red pen. Fresh content in sentence fragments and run-ons is preferable to dry, grammatically correct corporate-speak. 5. Reciprocal Another part of blogging is commenting on other people’s blogs in your industry. Make sure your comments add value to the blog. You can include a link to your blog in the comment if what is on your blog adds to the conversation, but do not be a ‘user’. Additionally, you can add a summarising type of comment on someone else’s blog and then continue that thought on your own blog.
WHAT SHOULD I SAY? As you start posting, remember the number one rule in the blog start-up guide. Though you will want to stay within your area of expertise, you can and should infuse your posts with information and references to events, trends and information outside your industry. This keeps things fresh and connects your business to the bigger world in the eyes of your readers. Also, for the most part, be concise. Sometimes you will need to write a longer post. But usually it is best to remember that most readers are busy and will appreciate something that is short and sweet. Here are a few ideas for posts: 74
• Create a helpful guide related to your industry • Conduct a poll or write about a recent poll • Report on an event or conference you have recently attended, including what you found helpful and commentprovoking thoughts • Host a guest writer: Invite an industry notable to write on your blog • Review a related book/article/document/film • Embed podcasts or video clips, and add value by providing informed comments or transcripts • Provide lists of helpful info, like how-to guides as readers like lists
THE ease and BEAUTY OF THE BLOG As you read this, you may be thinking, “If I did not have the time to take care of my online marketing, I certainly do not have the time to create a perfect blog for my business.” But that is the beauty of blog and maybe it is why so many small business owners have started them and kept them going: Blogs are like pencils; they come with erasers. You can get started, add posts when you have a free moment here and there, and edit, delete, tweak and build your blog gradually. You do not have to open it up to the public until you feel it is ready. Once you are comfortable with what you have going on your blog, push it out into the world and watch what happens. For more information visit www.networksolutions.com
This month, TheEDGE features a collection of tools that are set to pave the way to a greener, safer and more convenient business lifestyle.
PIC’O’ THE BUNCH With the world’s focus now on a greener, more sustainable way of life, Pico has emerged with one of the most essential tools for everyday use, but with an environmentally friendly touch. The new Freeloader Pico enables users to power virtually any portable device for free – yes, for free. With the use of advanced solar cell technology and Li-Ion batteries to deliver power in all daylight conditions, the Freeloader excels at demonstrating how channelling natural energy can power modern life. Use is just a simple matter of connecting the Pico to one of the adapters provided, plugging this into your device of choice, and then you are good to go. The adapters include a mini USB for charging Motorola, Blackberry and most other smart phones, Gamin, and PDA’s. An attachment to suit G-series Samsung phones, all current Sony Ericsson phones and a small pin adaptor for Nokia phones comes included. With charge-up time of 10-hours from pure sunlight and a third of that when connected through a USB, at three-hours, your charging needs are satisfied depending on the pace of your business life. Just 30 minutes are necessary for the Pico to begin transferring the sun’s energy to your device; a mere half hour for a significant move into a greener lifestyle. www.ethicalsuperstore.com
SCANNER OF OUR HEARTS Doxie brings to the office the latest in modern paper scanning technology and with a great look to boot. The like-named company, Doxie, which focuses on scanning solutions and office gadgets to make both the office and home life a smoother affair, has released the little treasure. The Doxie is an ultra-portable, fully automatic, and an integrated device ready to use with your favourite desktop and web applications, and also ready to scan and share all of your paper at the touch of a button. The Doxie also scans directly to the cloud, for example it can send to applications like Google Documents, Scribd, Backpack, Flickr, Evernote, and more. The scanner also works with local applications, so scanning to programmes like Acrobat, iPhoto, Picasa, or right to the desktop is an easy feat. The Doxie even scans documents, business cards, receipts, and photos intuitively meaning fantastic quality can be scanned and sent to your device of choice, and material clutter can be reduced. As mentioned, use is as simple as pressing a button, therefore just plug-in the device, insert your desired document, and press the Doxie’s multi-action heart button to initiate scanning. The result is a PDF digital copy in seconds. At US$129 (QR470), with the price of organisation and your peace of mind, this is a bargain, to say the least. www.getdoxie.com MARCH 2010
SECURITY MATTERS Whoever said safety could not be stylish? Well whoever it was they were wrong and Kingston’s latest USB offering is testament to this. Featured in three little colourful fingers of top-notch protection and installed with cutting-edge FIPS 140-2 level 2 certifiable technologies, this USB is the solution to all your interoffice data sharing issues; particularly where security is concerned. By choosing the ultra-secure DataTraveler 5000 USB Flash drive, you will not only be putting yourself at ease in terms of possible discrepancies between interchanging computers, but you will also be ensuring a secure working environment. The aforementioned security features are also integrated with 256-bit AES hardware-based encryption in XTS mode. In plain English, your average USB is installed with Electronic Code Book (ECB), Cipher Block Chaining (CBC) mode encryption software; the DataTraveler 5000 is installed with the XTS, which is formally renowned as a much stronger encryption based software. In addition, the DataTraveler 5000 uses elliptic curve cryptography encryption algorithms (ECC), which, in case you were wondering, meet the Suite B standards approved by the United States’ Government. To ensure critical data remains unseen by prying eyes, complex password protection locks down the device after a number of failed attempts to enter the correct password. However, this little fortress is not all work and no play; the DataTraveler 5000 is a rugged make and is also waterproof, with a titaniumcoated, stainless steel casing for added data protection. It is also ready for immediate use, with no preinstallation requirements. It comes with a five-year warranty and 24/7 technology support – Kingston has all your security needs, and much more, covered. www.kingston.com
A HOT COOLING EFFECT We all know what it can be like working long office hours and still, at that point, have to take work home. We are also all pretty familiar with the burning sensation, which even the latest laptop models will cause while sitting in our laps for hours on end. And who are we kidding? With social media websites and business networking having largely transferred itself into the realms of the Internet, this is a common occurrence for any laptop owner. So who has come to the aid of such situations? Our friends at Belkin have – Belkin are manufacturers and suppliers of tools and gadgets that accompany, compliment and complete any superstar device. Belkin’s new Laptop Cooling Pad is built using the latest in unique patented wave design technology, which prevents laptops from overheating from the get-go. By using natural convection to enhance fan cooling, the pad ensures low power consumption from your laptop’s USB port, as an overheating protective measure. With knowledge of wrist strain caused by uncomfortable seating positions while typing, the pad has been moulded into a gentle slope, providing the utmost in comfort, for both your wrists and possible neck strains. Due to its aesthetically pleasing shape, size and weight, the pad fits into any laptop bag and hides a small storage compartment for your USB when not in use. Grip pads seal the deal, ensuring any laptop, no matter how heavy, does not slip off the surface. As always, it is Belkin to the rescue. www.belkin.com 76
LIFE & STYLE – LIFESTYLE TOOLS
This month TheEDGE takes a look at the most sought after products to hit the market, helping you make the most of your time abroad while staying in touch with home.
R P Y
S U O ECI
Inspired by the concept of time being as individualistic and unique as man himself, this must be one of the most distinctive pieces of art that we at TheEDGE have ever set our eyes on. This watch is one of a limited collection, which has been designed by infamous jewellery queen, Jacqueline Urbach. Despite her stature as the best at what she does, particularly in her native country of Switzerland and Europe in general, this is Urbach’s first venture on to the watch-designing arena. The ‘Precious Inspiration’ collection is helping expand this regional infamy and has transformed Urbach’s work overnight into the new must-have item for those who want to stand apart from the rest of the crowd. The collection comprises 24 different dazzling models, varying in types of gold, gem settings, diamonds, and wrist strap material. Regardless of which you may choose, keep in mind that in spite of the hefty price tags, this is a collector’s item, of which only a handful of people will own. The collection is not yet available at points of sale, but has been publicised for pre-orders, as demand is expected to exceed numbers of items produced. The standout features within these masterpieces lie in the depth of design, which sets a new standard among watchmakers worldwide. A combination of inspiration, rare materials, technical perfection and clear functionality all highlight what the lucky ‘Precious Inspirations’ owner can expect from their pieces. With a price tag exceeding the US$10,000 (QR36,000) mark for one of these luxurious and rare pieces, we assure you that this is an investment well spent. www.urbach.ch MARCH 2010
LIFE & STYLE – LIFESTYLE TOOLS
Iconic cufflink manufacturer, Armrevolution, is responsible for transforming the way people think about these little sleeve adornments. The team at Armrevolution understand the importance on keeping one’s eye set on the masterpiece, which should be the elite businessperson’s suit, while embellishing it perfectly with a touch of elegance, class and panache. The company’s cufflink feature for the month has made a particular splash in terms of design and modernity, with architecture seen as the core inspiration behind the design known as Number 8. With these pieces now dubbed ‘arm architecture’, comparisons have been made, particularly in reference to design Number 8, to actual buildings, found worldwide. The new China Central Television (CCTV) tower in Beijing has been compared to designs from the Armrevolution team and is therefore in itself an honour for the innovating team at the company; even though, mind you, this is a treat that can inspire, rather be inspired by. The Armrevolution design Number 8 reinvents the traditional cufflink by a patentpending innovative closing design, forming a square shape in order to attach a French cuff shirt, as exemplified in the accompanying image. Made from the finest Japanese stainless steel and gifted in a luxurious leather travelling case, the Armrevolution cufflinks will make the style-conscious businessperson feel a part of an elite club; literally. The cufflinks come accompanied by a membership, which includes central registration tracking of ownership, a warranty, special offer access to luxury partners and invitations to special member events, this is a lifelong relationship to relish. This is a revolution indeed, a style revolution. www.armrevolution.com 78
LIFE & STYLE â€“ SPORT
E â€˜ T OO
P U M
Are you looking for a great team building exercise for a group? Look no further than the sport of paintball. By David Wilson. In recent years, paintball has evolved beyond its somewhat paramilitary-esque roots. Todayâ€™s paintball games have almost no resemblance to combat sports, with the player wearing brightly coloured jerseys and playing on fancifully constructed fields. Instead, paintball has evolved into a fast-paced, teamoriented sport that can be enjoyed by everyone. In fact, it is this fast-paced, high-tension feel that makes it such a good team building exercise. Nothing brings people together like a little pressure and competition, and paintball is excellent at creating these feelings in your group. In order to win a game of paintball teams must work together, communicate, and be willing to take risks, all great attributes to instil. Of course, the first thing many worry about when choosing paintball as a team building exercise is the pain involved when getting hit by the paintball. Do not worry about this. While I am not going to tell you that getting hit by a paintball travelling at 300 feet per second feels great, but it does not hurt that much either.
LIFE & STYLE â€“ SPORT
In fact, during the excitement of the game, you will feel much more pain from the fact that you got hit and are out of the game than you will because of the pain caused by the paintball impact. The anticipation of getting hit adds an element of excitement to the game, which you do not get from many other activities. In short, the impact is nothing to worry about at all. Another place where paintball can hit you is in your pocket - it can be a costly experience price when you add up all the individual costs. There is field fee, if you do not own any equipment then you will have to fork out and hire it, then you will have to buy the paintballs, and finally, pay for any food or transportation. Combined, all these cost can add up quite heavily with a large group. However, group rates are available, which can help ease the financial strain a bit. On the bright side, playing is so much fun that you may forget all about the price. When you have your team assembled and show up to the field, you will almost certainly go through a safety orientation of some sort. Paintball is not that dangerous, but if you are not careful, it is possible to get hurt. In particular, you need to keep your goggles on at all time when not in designated safe zones. Also, you need to make sure that your gun is not shooting faster then the speed allowed by the field. You will be given your full set of equipment, and instructed on how to use it. Once all preparations are complete, a referee will take you out to the field; the rules of the game will be explained and then it is game on. My number one tip for playing a good game: take risks. Since you are an inexperienced group of players, most
MARCH March 2010
people will tend to sit behind a bunker and wait for the action to happen. If you take the opportunity to be aggressive and move up in the field, you will probably do quite well, as people will not be prepared for your quick action. If you are playing against more experienced players, you will not be able to do this as well, but with a recreational group, its a brilliant strategy. You also need to work together as a team. That is the point of this sport, right? Be sure to communicate, let others on your team know where the players on the other team are. The team that communicates well will have a clear advantage over the team that does not. As paintball appeals to peopleâ€™s adventurous side and forces good teamwork, it is a very effective option for your group development efforts. Call the Qatar Paintball Centre today and find out how you can get started and enquire about its annual paintball tournament later this year.
For more information: Phone: +974 656 62 19 or +974 668 22 80 Venue: Qatar Paintball Centre, Hyatt Plaza, Al Waab Street, Doha, Qatar Email: email@example.com Or visit: http://www.qatarpaintball.com/ http://twitter.com/QatarPaintball http://www.facebook.com/pages/Ad-Doha-Qatar/QatarPaintball-Centre/26694652849
EVENTS & CONFERENCES
THE WORLD ISLAMIC CONFERENCE FOR FINANCIAL RESTRUCTURING AND RISK MANAGEMENT 10 – 11 March, Radisson Sas Hotel, Manama, Bahrain This distinguished event will highlighting critical information surrounding elements of Islamic finance, which govern the way business is practiced in the Gulf and the Islamic world at large. The conference will cover a day of the two-day allocation, which will be followed by a private workshop. During the event, international and regional Islamic finance professionals will be invited to network and to share information with attendees. The exchange of ideas will also facilitate the achievement of a suitable view for the practice of Islamic financing on a global scale.
INTERIORS AND BUILDEX 2010 15 – 17 March, Oman International Exhibition Centre, Muscat, Oman Few countries globally have suffered as little as Oman, and certainly Qatar, in terms of the affects of the global financial downturn. On the contrary, due to the stability enjoyed by the two aforementioned countries, and the robust nature of Gulf development schemes, the Interiors and Buildex 2010 conference and exhibition will bring together individuals from all fields and divisions within the construction industry. Experts from building material companies, heavy equipment specialists, construction supplies and interior furnishings are encouraged to attend.
MIDDLE EAST NUCLEAR ENERGY SUMMIT 2010 21 – 24 March, Sheraton Amman Al Nabil Hotel and Towers, Amman, Jordan This event will bring together the region’s dignitaries and leading industry experts to discuss the future of nuclear energy in the region. Issues to be discussed during the three-day conference, include the need to identify robust regulative and legal framework to foster the implementation of a peaceful nuclear programme, the development of appropriate infrastructure to utilise nuclear energy and capacity building strategies, which include practices to be undertaken by human resource personnel and financiers, working within the field.
ARABNET 2010 25 – 26 March, Habtoor Grand Hotel Convention Centre and Spa, Beirut, Lebanon This is the first event to be held in the region for the Arab web industry, which will also be attended by international delegates. The conference will bring together leaders from across the Middle East and North Africa (MENA) region, Europe and the Silicon Valley, with the aim of discussing cutting-edge trends and emerging opportunities within the web industry. Through pitch sessions, the conference will host the region’s brightest thinkers and most promising Internet start-up ideas in order to facilitate a sharing and networking grounds for those in need of support. These include incubators, angel investors, venture capitalists, established Internet companies, NGOs and influential bloggers, with the potential to revolutionise the Arab web industry.
14th ANNUAL MEGAS SUMMIT 28 – 31 March, Radisson Blu, Yas Island, Abu Dhabi, UAE Claiming to be the region’s premiere source of accurate business intelligence for the gas industry at large, the annual MEGAS summit promises a more interactive and informative event than ever before. With an increased number of panel discussions, more roundtables and more ‘board-room style’ interactive activities, organisers expect stellar results this year. Other than reviewing progress made from last year’s summit, new topics have been introduced, including gas demands and trends in the international market, treatment storage and disposal of material and other issues that also touch on green business – a key event for all those involved in the industry to attend.
CONSTRUCTION & TENDERS
RENOVATION OF LOCAL MOSQUES The Ministry of Awqaf and Islamic Affairs called for the construction and renovation of more than 100 mosques across the country. Work is currently underway on various mosques throughout Qatar and just under half of the total projected number of sites are set for completion by the year-end. Previously, the ministry had launched a survey to assess the condition of all mosques in Qatar as part of the major overhaul and the construction boom, which has captured investorsâ€™ attention on a global scale. A team of engineers from the maintenance and construction division at the ministry remain a part of this ongoing survey, with 150 mosques already evaluated and 1400 mosques remaining â€“ there remains a bevy of groundwork left to completed and, therefore, alternative facilities will be temporarily established for minimum inconvenience. Head of Services at the ministry, Saad bin Omran Al Kuairi said cleaning and maintenance teams had been put in place for immediate care of renovated mosques including appropriate refurbishments, such as the projected 140,000 metres of carpet that will be required. The ministry also announced the launch of a water saving campaign, in a bid to raise public awareness about water usage in mosques. Installation of special taps and devices, helping to control the consumption of water, will make sure this campaign is both heard and exercised.
CONSTRUCTION & TENDERS
NEW ALUMINIUM PLANT SET FOR CONSTRUCTION The contract for the construction of Qatar Aluminium Extrusion Company (QAEC) has been awarded to Qatar-based, M/S Al Alia Trading and Contracting Company. QAEC chairman Abdul Rehman Al Ansari and general manager of Al Alia, Ayman Khaled, inked the deal last month. Under the terms of the QAEC contract Al Alia will be responsible for the construction of the main facility and other, not yet determined, associated infrastructures. The unit is backed by the support of Qatar Industrial Manufacturing Company (QIMC) and will be located in Qatar’s industrial area. The project will have a 10-month construction time frame. The estimated cost of the project is QR72 million, which will be spread across the various stages of the project. Other prominent business groups associated with the construction of the project include Salam International Investments, Qatar Real Estate, Alutech, Aluminium Gulf Ray, Qatar Oman Investment Company and Qatar Belgium Aluminium Company. Al Alia holds a reputable track record within the construction industry and is responsible both wholly and partially for a range of industrial ventures around the country. In effect, QAEC said its choice was indeed a strategic one in selecting a company with in-depth knowledge and familiarity with the local industrial estate development. QATAR NATIONAL CONVENTION CENTRE ON TRACK The Qatar National Convention Centre (QNCC) has received a great deal of local media coverage recently. Having promised to boost Qatar’s position as one of the world’s most inspirational
destinations and one in which to host exhibitions, and international conventions. The QNCC has also been named as the first platinum sponsor for the conventions 2020 strategic research study. Launched last week by industry founders and heavy weights, including the International Convention and Congress Association (ICCA), QNCC’s early involvement with the study does not appear to be an item of concern for senior officials. On the contrary, general manager Paul D’Arcy said that the centre had been progressing at an impressive rate and that construction was on track for completion. The first stage of the new convention centre building is now finished and work has begun on the fit-out phase, which will take around two months to complete – two sections of the auditorium have already been fitted with tiered seating. D’Arcy noted that this research was not only beneficial due to name attachments, but also in shaping the centre’s business model in a bid to reach its goal as an internationally recognised facility in the global meetings industry. He also expressed optimism surrounding the construction of the centre amid the current economic climate. D’Arcy claimed that the response from the global market had proven positive and upon completion of the centre’s “marketing platform”, were set plans to launch the project’s new website, brochure and numerous other e-marketing tools. In regard to sustainability, D’Arcy emphasised that the QNCC will be the first convention and exhibition centre of its kind to be built, meeting the internationally recognised green building rating system: Leadership in Energy and Environment Design (LEED). He added that the reality of the need for greener business solutions and sustainability within the construction industry are not forsaken for reputation and stature. MARCH 2010
Our Dream Team is built to succeed.
In construction, just as in business, the key to success is knowing how to decrease costs and increase productivity. As a world-leading manufacturer of construction and mining machinery, Komatsu offers a full range of powerful and outstandingly reliable machines designed to achieve those goals with respect for the environment. , All members of Komatsu s Dream Team feature superior physical and intellectual attributes that allow them to facilitate productivity at construction sites around the world. Komatsu has also succeeded in designing machines that are both kind to the earth and kind to their operators. , Behind the Dream Team is Komatsu s comprehensive customer support system, featuring cutting-edge IT and various other processes. It allows Komatsu to minimize downtime, maximize the availability of each machine and helps reduce operational expenses. And that adds up to better machine availability and an increase in your , productivity. Let s Win Together.
Models shown may include optional equipment.
construction & tenders
Description: Supply of reagents for Hematology for a petroleum company on call-off basis. Closing Date: March 14 Client: Qatar Petroleum Phone: (+974) 440 2000 Fax: (+974) 483 1125/ 449 1400/ 483 1995 Email: firstname.lastname@example.org Website: http://www.qp.com.qa Tender No. GT10MT0010 Bid Bond: QR60,000 Tender documents can be obtained from: Contracts department, Corporate Division, Royal Plaza, Doha, G wing, fourth floor, room G11.
Description: Supply of step frame tank carrier trailer (26 tonnes) and ISO framed de-mineralised water tank (22,000 litres) capacity for a petroleum company. Closing Date: March 22 Client: Qatar Petroleum Phone: (+974) 440 2000 Fax: (+974) 483 1125/ 449 1400/ 483 1995 Email: email@example.com Website: http://www.qp.com.qa Tender No. ST10MT0050 Bid Bond: QR14,000 Tender documents can be obtained from: Contracts department, Corporate Division, Royal Plaza, Doha, G wing, fourth floor, room G11.
Description: Need for consultancy services surrounding implementation of a secondary water network project. Closing Date: April 4 Client: Qatar General Electricity and Water Corporation (Kharamaa) Phone: (+974) 484 51111/ 555 5901/ 484 5555 Fax: (+974) 4845191 Email: firstname.lastname@example.org Website: http://www.km.com.qa Tender No. ST10100300 Bid Bond: QR600,000 Tender documents can be obtained from: Water Projects Department, Kahramaa, Dafna, Doha.
SOFTWARE-103 Description: Supply of marine engineering software for a petroleum company. Closing Date: March 22 Client: Qatar Petroleum Phone: (+974) 440 2000 Fax: (+974) 483 1125/ 449 1400/ 483 1995 Email: email@example.com Website: http://www.qp.com.qa Tender No. ST10100900 Bid Bond: QR5000 Tender documents can be obtained from: Contracts department, Corporate Division, Royal Plaza, Doha, G wing, fourth floor, room G11.
SECTION CONSTRUCTION & TENDERS
Halon System Replacement-1
Call Off Contract For Repair of Crude Oil Tanks
Centralised Fire Alarm Monitoring System
Description: Call for engineering, procurement, installation and commissioning for replacement of halon systems for a petroleum company. Closing date: March 28 Client: Qatar Petroleum Phone: (+974) 440 2000 Fax: (+974) 483 1125/ 449 1400/ 483 1995 Email: firstname.lastname@example.org Website: http://www.qp.com.qa Tender No. GT10102000 Bid Bond: QR1,200,000 Tender documents can be obtained from: Contracts Department, Operations Division, Royal Plaza, Doha, G wing, fourth floor, room G11.
Description: Call off contract for emergency repair of crude oil tanks at Halul Island. Closing Date: March 21 Client: Qatar Petroleum Phone: (+974) 440 2000 Fax: (+974) 483 1125/ 449 1400/ 483 1995 Email: email@example.com Website: http://www.qp.com.qa Tender No. GT10101000 Bid Bond: QR150,000 Tender documents can be obtained from: Contracts Department, Operations Division, Royal Plaza, Doha, G wing, fourth Floor room G13.
Description: Call for the purchase and complete installation of a centralised fire alarm monitoring system for a petroleum company. Closing Date: March 28 Client: Qatar Petroleum Phone: (+974) 440 2000 Fax: (+974) 483 1125/ 449 1400/ 483 1995 Email: firstname.lastname@example.org Website: http:// www.qp.com.qa Tender No. LT10101900 Bid Bond: QR100,000 Tender documents can be obtained from: Contracts Department, Corporate Division, Royal Plaza, Doha, G wing, fourth floor, room G11.
Fire Training Ground Upgrade Project
Storage Shed Construction Project
Description: Call for engineering, procurement and installation of fire training ground upgrade for a petroleum company. Closing Date: March 21 Client: Qatar Petroleum Phone: (+974) 440 2000. Fax: (+974) 483 1125/ 449 1400/ 483 1995 Email: email@example.com Website: http:// www.qp.com.qa Tender No. GT10101900 Bid Bond: QR250,000 Tender documents can be obtained from: Contracts department, Corporate Division, Royal Plaza, Doha, G wing, fourth floor, room G11.
Description: Call for construction of storage shed material warehouse for a petroleum company. Closing Date: April 4 Client: Qatar Petroleum Phone: (+974) 440 2000 Fax: (+974) 483 1125/449 1400/ 483 1995 Email: firstname.lastname@example.org Website: http://www.qp.com.qa Tender No. GT10101700 Bid Bond: QR150,000 Tender documents can be obtained from: Contacts Department, Corporate Division, Royal Plaza, Doha, G wing, fourth floor, room G13.
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SUBSCRIPTION FORM 2010 TheEDGE is Qatarâ€™s new monthly business magazine. TheEDGE incorporates a mix of industry news and analysis, in depth features, special interviews with key business decision makers, economic insight and market activity reports, and tips for how you can improve your day-to-day business operations. TheEDGE will not be available on the news stands, but will be delivered straight to the door of the targeted business community. To ensure you keep up-to-date, with what is happening in Qatarâ€™s business landscape, fill in the subscription form (below) to receive TheEDGE on a monthly basis. Subscription is FREE (in Qatar). Forms are to be addressed to the Subscriptions Department at: TheEDGE Subscriptions Department Firefly Communications 11th Floor, Jaidah Tower PO Box 11596 Doha, Qatar
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Published on Mar 8, 2010
The Edge is a business magazine targeting ambitious professionals operating within Qatar’s multi-sector business landscape. The Edge is read...