CONTENTSw w w . t h e e d g e - m e . c o m JUNE 2011

42

46

markET waTChGlobal and market analysis by Dheeraj Shahdadpuri.

INSIdE EdgEA snapshot of the country’s economy based on GDP data of the last decade.

SpECIal rEpOrT Qatar’s medical research plans.

balaNCE ShEETBusiness continuity management.

ECONOmIC barOmETErKarim Nakhle on Portugal’s bailout.

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FINANCE & ECONOMICS

bUSINESS INTErvIEwExxonMobil’s Alex Dodd talks to Rachel Morris about the company’s success in Qatar and the future of the Barzan project.

fEaTUrE STOryWhat does the future hold for Qatar’s expatriate community?

SpECIal fOCUSJamie Stewart looks at how the shipping industry has become a lifeblood for Qatar’s economy.

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FEAturES INNOvaTION CUlTUrE Why Qatar’s budding entrepreneurs need specialised assistance.

bUSINESS maNagEmENTThe case for lateral thinking.

Small bUSINESS kNOw-hOwThe power of bookkeeping.

lEgal INSIghTQatar’s Free Zones.

markETINg & dESIgNThe world of augmented reality.

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CONTENTS

1TheEDGE

ON ThE COvErWith the International Monetary Fund disclosing that Qatar is well on track to be the best performer in the region, and that its gross domestic product growth is sustainable, Edward Jameson takes a closer look at the country’s diversification aims beyond reliance on oil and gas. (Page 42).

KNOWLEDGE & EXPErtISE

TheEDGE2

frOm ThE EdITOrCONTrIbUTOrSNEwS ETCETEradOha dIarymIddlE EaST maTTErSCOUNTry fOCUSThINkEr’S COrNErOpINIONlIfE & STylE10 ThINgS

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bUSINESS INSIghT INTErvIEwSIn-depth interviews with Texas A&M University Qatar’s Dr. Mark H. Weichold and M:Communication’s Nicholas Lunt.

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CONTENTS

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27775icon TheEdgeQatar270x420_CNN_icon_TheEdgeQatar 14/02/2011 14:15 Page 1

27775icon TheEdgeQatar270x420_CNN_icon_TheEdgeQatar 14/02/2011 14:15 Page 1

FROMTHE EDITOR

Much has been said and written of the concept of ‘diversification’ in Qatar and the country’s need to move away from

dependence on oil and gas revenues, to a more ‘knowledge-based’ economic future.

That Qatar simply must utilise its vast current hydrocarbon resources to ensure its future prosperity and sustainability is without question. The medium-term economic benefits of the 2022 FIFA World Cup aside, just how this small country – with minimal natural resources such as fresh water or agricultural crops, for example – will do so, is the main topic of discussion. In page 42’s In the Spotlight, Jamie answers some tough questions on the subject, and concludes that the country is well on track so far.

Moreover, partly by design and partly due to the highly topical nature of diversification, the subject appears repeatedly in this issue. For example, in our regular Special Report on page 34, Greg Harris takes a closer look at research in the medical sector, which has been touted as having huge growth potential for the country.

Beyond this, in our exclusive interview with Texas A&M CEO, Dean Mark. H. Weichold, on page 70, he discusses the groundbreaking research work being done on their campus in the sustainable energy sector, and how important it is to produce young Qatari engineers, as they will be one of the strongest components of the knowledge-based country Qatar is striving to become.

Of course, this future ideal will not come without challenges, and on page 50, Rachel Morris focuses on the sometimes-contentious issue of expatriate workers. While there are some hardliners, not just in Qatar, but also in many parts of the world, who for various reasons would like to see their countries

FROM

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theEdgE is printed monthly © 2011 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 Shutterstock and/or iStock photo.

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K ABOUT YOUR IM

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PLEASE RECYCLE THIS M

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PuBLICAtIONS DIrECtOr Mohamed Jaidahm.jaidah@firefly-me.com

MANAGING EDItOrMiles Mastersonm.masterson@firefly-me.com+974 66080447

COPY EDItOr Megan Masterson

rEGIONAL SALES DIrECtOrJulia Toonj.toon@firefly-me.com+974 66880228

SENIOr SALES MANAGErEmma Land e.land@firefly-me.com+974 33197446

SALES EXECutIvERita El Khouryr.khoury@firefly-me.com+974 33685817

MArKEtING ADMINIStrAtOr/DIStrIButION & SuBSCrIPtIONSAzqa Haroona.haroon@firefly-me.com+974 55692471

CrEAtIvE DIrECtOrRoula Zinati Ayoub

Art DIrECtIONLara Nakhlé

DESIGN COOrDINAtIONCharbel Najem

DESIGNErSSarah JabariTeja Jaganjac

FINALISErMichael Logaring

PHOtOGrAPHErHerbert Villadelrey

PrINtED BYAli Bin Ali Printing Press, Doha, Qatar

expatriate-free, it is widely accepted that foreign labour and skills are required to help Qatar achieve its numerous goals. However, just how many expatriates are allowed to work here and the manner in which they are permitted to do so is still a work in progress.

Finally, not to ignore the hydrocarbon sector, which will remain at the core of Qatar’s economy for the foreseeable future, on page 46 we chat exclusively to ExxonMobil’s Qatar chief, Alex Dodds, about the much-anticipated Barzan project, among other topics.

In conclusion, whichever way you look at it, Qatar’s aim to ‘diversify and prosper’ is looking bright. Enjoy the issue.

TheEDGE6

THE EDITOR

about TheEDGE:theEdgE is an ambitious business magazine targeting professionals operating within Qatar’s multi-sector business landscape. printed monthly, theEdgE was launched in July 2009 to fill the market void and to provide the business community with insight into the latest business trends and market developments. theEdgE is distributed 11 times yearly to a readership base of more than 7500 professionals, providing advertisers with the needed additional reach and frequency to their most important and affluent audience. theEdgE is an authoritative business resource serving both large and small business operators.

Miles Masterson, Managing Editor

P.26DHEErAj SHAHDADPurIAnalystDubai, UAE

P.38KArIM NAKHLESenior Business StrategistDoha, Qatar

P.32 PHIL StrANGEChief Financial OfficerDun and Bradstreet South Asia Middle EastDoha, Qatar

P.34GrEG HArrIS Editorial ManagerOxford Business GroupDoha, Qatar

P.36SuBASH SHANMuGAMManager: Performance and TechnologyKPMGManama, Bahrain

P.22MArtIN Á POrtAChief Executive OfficerSiemens WLLDoha, Qatar

P.42EDWArD jAMESONSenior Business JournalistMiddle East and North Africa RegionLondon, United Kingdom

P.62LOrI LOvEAccounting InstructorCollege of the North AtlanticDoha, Qatar

FEAturED CONtrIButOrrACHEL MOrrISRachel Morris is a regular contributor to TheEDGE and has been living in Doha for more than four years. With nearly 20 years’ experience in journalism and communications in Australia and the Middle East, she was previously managing editor of The Peninsula in Doha. Morris currently writes for newspapers and magazines around the world, including The Daily Telegraph and Sydney Morning Herald in Australia and Oryx in-flight magazine.

CONtrIButOrS

All contributors to TheEDGE are well-regarded leaders in their respective industries. If you are interested in joining the esteemed panel of contributors, please contact the editor, Miles Masterson at m.masterson@firefly-me.com

P.54jAMIE StEWArtInternational CorrespondentLondon, United Kingdom

P.64NIKK BONDSenior Legal Consultant DLA Piper Doha, Qatar

P.64BrENDA HILLSenior Legal ConsultantDLA PiperDoha, Qatar

P.58KAMAL HASSANPresident and CEO Innovation 360 InstituteDubai, UAE

P.60juLIAN BIrKINSHAWBusiness Management Consultant London Business SchoolLondon, United Kingdom

TheEDGE 7

CONTRIBUTORS

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NEWS Etcetera

NEWSETCETERa

EXtrAOrDINArY LEADErSHIP SuMMItThe Doha Extraordinary Leadership Summit was held at the Doha Sheraton in May. Attended by more than two dozen Qatar business people, the summit aimed to educate, train and motivate those participating to become better leaders. The event was hosted by eminent human resources (HR) expert and psychometrician, Dr. Joe Folkman, who along with his partner, Dr. Jack Zenger of Zenger Folkman, has developed a unique ‘360 degree feedback’ process in order to identify the weaknesses and strengths of leaders via an online questionnaire, completed beforehand by their work peers and associates. Their feedback was then presented to the attendees in order to identify their leadership competencies, and through a series of workshops, they worked on ways to enhance them. They were also given an informative

talk on the topic of leadership in the Middle East by Egypt-based HR consultant Todd Cummings, who said that good leadership is a universal trait. “Though there are cultural differences to the West, the leadership qualities we can develop are the same,” he said. TheEDGE’s digital manager Charles Vincent attended the event. “I believe that Dr. Folkman has succeeded in creating a comfortable ambiance, in which the attendants felt comfortable talking about themselves,” offered Vincent afterwards. “Everyone participated in a friendly way and helped to get interaction going and objective ideas and advice from each other. Anyone that works within a team, across departments, or is a senior or top manager should definitely go for this method, as it offers a unique perspective for leaders to evolve and increase their potential.”

HAMAD trAuMA SErvICE rECOGNISED

The World Health Organization (WHO) has recognised the Trauma Service at Hamad General Hospital in Doha as an international success story in improving care for the injured. In a report entitled Strengthening Care for the Injured: Success Stories and Lessons Learned from Around the World, the WHO highlighted the hospital’s achievement in initiating a new, formalised trauma service in Qatar.“[Qatar] is one of the first countries outside the United States (US) to have a complete trauma system. This means we do not only

have acute care, but we have pre-hospital care, acute trauma care, critical care service, rehabilitation, an injury prevention programme, and a trauma registry,” said Dr. Ahmad Zarour, consultant trauma, critical care surgeon and director of Trauma Intensive Care at Hamad General Hospital.The WHO report cited trauma as a major cause of death and disability in Qatar, with the country having one of the highest road traffic death rates in the region at 19 deaths per 100,000 population. Falls, which occur mostly at construction and other worksites, are cited as the second most common cause of death and permanent impairment. According to the report, the demographics for trauma patients in Qatar are unique compared to the US, Australia or Europe, with the population of trauma patients about 94 percent male and six percent female, rather than a balanced mix. This is attributed partly to culture and partly to the booming economy and construction being done in Qatar and also throughout the Gulf area. Hamad Medical Corporation (HMC) established the Trauma Service at Hamad General, the main hospital caring for the injured in Qatar, in November 2007 as part of a range of actions being instituted throughout the country in order to address the increasing numbers of severely injured people. The Trauma Service is a specific, dedicated multidisciplinary service designed to optimise the outcome for the injured patient.

The Trauma Service system at Hamad General Hospital has been recognised as a world-class unit thanks to the skills of its medical staff, pictured here.

NEWSETCETERa

9TheEDGE

AAMAL SEt tO LISt IN LONDONQatar firm Aamal Company QSC, one of the country’s longest standing and most diversified companies, announced in late May that it would be offering the company’s ordinary shares in the form of Global Depositary Receipts (GDRs) to be listed on the London Stock Exchange in June of this year.“This will be the first international equity offering by a major Qatari diversified company, and the next step in Aamal’s strategic plans, which I believe will deliver an enhanced international capital markets profile and liquidity commensurate with our scale and status as one of Qatar’s largest and fastest growing companies,” said Tarek El Sayed, managing director of Aamal.The offering will comprise up to 118.8 million shares held by HE Sheikh Faisal bin Qassim Al Thani as the selling shareholder, representing up to 24 percent of Aamal’s share capital, to be offered in the form of GDRs to institutional investors outside the United States.An application has been made to the United Kingdom (UK) Financial Services Authority and the London Stock Exchange respectively for the GDRs to be admitted to the standard segment of the Official List of the UK Listing Authority and to trade on the London Stock Exchange’s regulated market for listed securities.The proposed offering is expected to further enhance the liquidity and profile of Aamal’s shares among international institutional investors seeking high quality exposure to Qatar’s rapid economic growth. The company’s existing listing on the Qatar Exchange will be maintained.

vODAFONE LAuNCHES LOCAL E-COMMErCE POrtALAt the opening of QITCOM, Qatar’s communications and information technology exhibition on May 24, Vodafone Qatar launched their new online market place, www.SouqIt.com. Billed as an eBay-style commerce portal for Qatar, SouqIt will be an online community where users will be able to buy and sell almost anything through a secure platform. The website will also include real estate listings, job-boards and other services. Free to join and featuring fixed price auctions, traditional time-based online auctions with starting prices, minimum bids and standard classified ads, the website will also feature a premium listing service that will including personal assistance, photography and a listing consultancy. This will eventually cost QR100, but to celebrate the launch of the site, the latter, as well as all transactions conducted on the site, will remain free until July 31, 2011.

NEW EXPAtrIAtE SMArtCArDThe Qatar Ministry of Interior (MOI) has announced the availability of a new ‘smart’ identity (ID) card for expatriates in the country. The new smart ID card comprises an electronic chip in which the bearer’s personal data will be stored. According to the MOI, this data cannot be accessed without entering a PIN or matching fingerprint stored in the chip, and the new cards will offer a variety of new electronic services unavailable on the previous version, including e-gate services at Doha International Airport and transactions relating to residence permits, exit and return permits, driver’s licenses and more. Transferring to the new cards is not mandatory and will cost QR350, with further fees applicable for the activation of e-gate services.

QtEL EXPANDS FIBrE NEtWOrKQatar telecommunications company Qtel has become the first in the sector in Qatar – and one of the first communications providers in the region – to reach internet trial speeds of up to 100 megabits per second (Mbps) for consumers. From May 18, Qtel has been enabling customers within the company’s trial fibre footprint to receive home internet broadband at speeds of up to 100 Mbps. As Qtel’s next generation fibre network continues to extend, the company will be well positioned to offer this service to customers throughout Doha and other urban areas. The deployment of Qtel’s next generation fibre network is advancing rapidly, with fibre deployment occurring zone-by-zone and a commercial launch set to start in the second half of this year.

HE Sheikh Faisal bin Qassim Al Thani will be offering 118.8 million Aamal shares, representing up to 24 percent of Aamal’s share capital, in the form of GDRs to international institutional investors, in June 2011, a first for Qatar.

Qtel is expanding its high speed fibre communications network to both private and commercial customers throughout Qatar in 2011.

“I have discussed it with French companies and stressed the need to organise clusters and a better kind of solidarity between large groups and the SMEs, and possibly organise clusters around sectors in which small companies will come to Qatar.”French minister of foreign trade, Pierre Lellouche, stated in Doha in May, on the need to promote small business development and commerce between the two countries.

“A default is a distinct possibility…We think the size of the government’s debts will eventually prompt the markets to turn their sights on Italy.” Capital Markets managing director, Roger Bootle, and chief European economist, Jonathan Loynes, stated in a recent report, as reported on Bloomberg.com

2011events calendar

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june 4-13 Doha Trade Fair, Doha, Qatar

88th Annual Media and Telecommunications Convergence Conference, Amman, Jordan

8-9 2nd Annual World Islamic Banking Conference: Asia Summit, Singapore

22-23 Safety and Security Summit, Doha, Qatar

26-29 Click 5.0 – Digital Marketing Event for the Middle East, Dubai, UAE

September 17-19 ecoQ (Qatar International Environmental Protection, Technology & Sustainable Energy Expo), Doha, Qatar

1940th Anniversary of the State of Qatar, Doha, Qatar

26-29 24th World LP Gas Forum, Doha, Qatar

October 5-8 International Furniture and Design Exhibition, Doha, Qatar

9-13 GITEX Technology Week, Dubai, UAE

25-29 Doha International Film Festival, Doha, Qatar

“We missed the industrial revolution. We did not invent any technology, and the more we go, the more we see that it would be difficult to catch up with [the Western world]. But maybe with this move to the digital era, there is the possibility for this part of the world to catch up.” Osman Sultan, UAE telecommunications company CEO, commenting on the fact that Gulf states are the world’s most frequent users of YouTube, to delegates at the 4th Arabian Business Forum in Dubai.

PIC of the month

NEWS in numbers

PLEASE, GNO MOrE!

The Barwa City development in Doha, currently being built on a 2.7-million-square-metre plot in Mesaimeer and which will offer accommodation for 25,000 people, is nearing 80 percent completion, and is being developed in two phases. The first phase, at a cost of over QR7.1 billion, is expected to be completed by the end of 2011. This phase of the development includes the construction of 128 residential buildings that will offer tenants nearly 6,000 apartments to accommodate up to 25,000 people. Ready for occupancy by the middle of 2011, this will also include

Gnome lawnmower racers compete in the Gnomeo & Juliet ‘Mow-down Showdown’ lawnmower race celebrating the film’s Blu-ray Disc and DVD release at Berrien County Youth Fairgrounds

on May 21, 2011, in Michigan in the United States. (Photo by Tasos Katopodis/Getty Images for Touchstone Home Entertainment)

schools, kindergartens, mosques, a bank, a health club, food and sports courts, a shopping mall, a multipurpose hall and other amenities that are all expected to be in place by the end of 2011. The development also will include district cooling for cold water and climate control. The second phase will include major additional projects including further schools, a 250-bed hospital, kindergartens, residential and commercial complexes, and a hotel. In addition, Barwa Commercial Avenue, which is currently around 65 percent complete, is a groundbreaking kilometre-long mixed use development close to Qatar’s industrial area targeting Qatar’s young entrepreneurs and investors, and will offer 547 retail spaces and 460 residential units and offices, with a total area of one million square metres.

11TheEDGE

25,000

NEWSETCETERa

people

CArtOON corner

WEB watchWWW.QBuSNEt.COMThe Qatar Business Network (QBN) was established as a forum for business people to meet on a regular basis with the objective of exchanging views and opinions about existing and potential business opportunities in Qatar. The QBN also provides opportunities for members to enlarge their social contacts through the medium of a varied social calendar. Highly active on LinkedIn, current QBN membership runs into hundreds. Most are professionals representing a diverse range of business disciplines, all of whom have ties with Qatar.

‘CrOWDSOurCING’'Ctowdsourcing’ has become a business and marketing buzzword. In its purest form crowdsourcing is the practice of outsourcing a task or contract requirement to a large number of people through a public platform, such as a website or other online viral means, either for altruistic reasons or for some sort of notoriety, remuneration or reward. The term is largely credited as originating in a 2006 article in Wired magazine by American journalist Jeff Howe. The technique is now used by companies and marketers to find solutions to problems or create a buzz around a certain product or brand and has spawned a variety of spin-off terms. These include ‘crowdfunding’ – largely a method of funding projects by garnering small amounts of money from many people.

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WWW.EINNEWS.COM/QAtArMany international online news portals contain old or stories already widely reported, and few manage to compile enough content of direct interest to business people keen on finding out more useful information about what is happening in any thriving economy. Global digital news provider EIN News seem to be acutely aware of this problem and claims to provide access to breaking news across 300 countries sourced from more than 35,000 news sources, including a great many on the Qatar-specific section of the site.

WWW.QFrADIO.OrG.QAThe official radio station of the Qatar Foundation, QF Radio aims to establish the medium for broadcasting the Qatar Foundation’s core mission and values. They do this through providing extensive coverage of QF events, providing listeners with a means of connecting with QF’s centres, institutions and employees, and showcasing Qatar’s cultural heritage through QF initiatives and achievements. They also aim to deliver unbiased, modern media coverage. For those unable to listen to the station directly, the website provides both the ability to download recordings of all their shows in English and Arabic or to listen online.

DOHa DIaRY

14 TheEDGE

achieve high performance buildings, but is not necessarily concerned with notions of appropriate technology or lessons learned from traditional design. It relies on high performance materials, efficient cooling systems, and renewable energy to achieve its energy goals.

This school of design emulates the engineer-oriented approach to energy efficient design, which places less emphasis on the building form and more on the systems inside it.

Practitioners of the hybrid approach combine the use of passive cooling strategies with efficient cooling systems and materials to create a combination that has the highest potential to reduce energy use.

The emergence of the hybrid approach as a mature approach to energy efficient design in the Middle East is a positive development. However, there are great challenges that must be overcome before it can become part of the region’s mainstream practice.

As one might expect, the region’s environmental challenges top this list.

Moderating indoor environments effectively in hot and dry climates requires a substantial reduction in heat and solar gains and an optimisation of cooling. This often depends on a combination of passive and active cooling strategies, ultimately producing designs that are driven by these strategies.

Unfortunately, these designs are not always possible for programmatic or economic reasons. The challenges posed by the climate often leads to the design team abandoning its goals and ultimately resorting to the use of standard mechanical cooling systems. Limited water resources

also complicate strategies such as evaporative cooling to moderate air temperature.

In addition to these environmental challenges, there are also economical challenges when designing energy efficient buildings. But as the industry streamlines its practices, adopts efficiency standards, and creates supply chains for better building materials, the increased costs are expected to diminish and be replaced by financial savings generated from reduced energy use.

Additional challenges are posed by the lack of an encouraging regulatory environment in the region. However, this trend is in reversal as many governments are making the effort to incentivise energy efficiency measures and to make them commercially viable.

Examples of these efforts are commissioning pilot projects, introducing energy efficiency standards, and encouraging industry bodies to develop – or import and adapt – rating systems to benchmark green buildings. Qatar’s Green Building Council oversees the development and adoption of a concept’s sustainable development, life cycle costs and neutral carbon footprint.

The challenge will be on maintaining the momentum, certainly in Qatar where major construction on infrastructure projects, housing and stadiums will commence over the next couple of years.

The eyes of the world will be watching as one of the warmest cities on the planet gears up to deliver carbon neutral stadiums.

As the region finds its steps towards sustainable development, it is hoped that change will accelerate, ultimately creating cleaner and greener cities for a more sustainable living.

J ust as we all have our own opinions about a piece of art, the same is true with respect to the shining glass towers that dot the West Bay area. Building design has evolved

dramatically over the past 50 years, and there are plenty of examples to be found which demonstrate the various results of the challenge of designing energy efficient buildings, suitable for our testing climate.

Qatar, like other hot and dry climates, has a heritage of traditional architecture that features a number of passive cooling strategies. For example, wind towers incorporated into buildings allow air to be drawn down and provide some relief to occupants. The huddled nature of the buildings helps prevent the impact of the scorching solar radiation on the inhabitants.

Even the streets of Doha were designed to be narrow to provide shading and reduce the impact of dust and sand being blown around.

In the 1980s and 1990s, two new approaches emerged, one as a result of new materials and technology (the progressive approach), and one which combined the opportunities provided by new technologies with characteristics taken from the revivalist – a hybrid approach, if you like.

The progressive approach uses the latest technologies to solve design problems and

Edd Brookes looks at the varying approaches and philosophies for designing buildings in the harsh climate of the Middle East.

architecture

16 TheEDGE

how far into the future should an organisation be thinking about and planning for? In the past, it was common to plan with a minimum of a

three- to five-year time horizon. Yet, with the speed of change taking place in the emerging markets and the attempts to maximise the post-global financial crisis opportunities, many organisations have limited their outlook to the next 12 to 18 months on a rolling quarterly basis. Is this good or bad?

Over the past couple of years, I have become a proponent of short-term planning given the global market shift and the need to have the speed to quickly align. But it looks like short-term planning is too shortsighted.

This shortsightedness could have a complicated impact on major projects in the region, like the development of Qatar in preparation for the World Cup, Kuwait’s redevelopment plans, Saudi Arabia’s Economic City plans, etcetera.

While these are long-term projects, planning consideration needs to be taken into the next decade as the turn of the calendar is projected to see the greatest transformation since the industrial revolution.

Booz and Co argues that we are moving into ‘Generation C’, which is the connected generation’s transformation of the consumer

and business landscape. This is more than a generational change, it is genesis of a new era. In light of this, as investments are being made in the region, it would be wise to be thinking about, and planning for, tomorrow’s tomorrow.

The developing world is increasing in connectivity and sophistication creating a huge new audience of people who have not yet been exposed to consumerism. Within a decade they will be constitute the single largest cohort of consumers in the world.

What does this mean in practical terms? Consider the World Cup, they will be more than passive viewers in front of a screen; they will want to actively interact with the 2022 World Cup through connectivity.

Qatar needs to plan for this now as connectivity is no longer an addendum. Businesses can longer think of social media as simply an addition to traditional approaches. It has the potential to significantly disrupt traditional business models.

The global audience is going to move beyond being distant, as virtual communities make it easier for individuals to be present in the local venue and enjoy personal interactions.

As an example, let us look at the current impact of Facebook. One out of every eleven people on the planet has a Facebook profile. Every 60 seconds, Facebook users send 230,000 messages, update 95,000 statuses, write 80,000 wall posts, tag 65,000 photos, share 50,000 links and write a whopping half million comments.

But Facebook today is not a good depiction of connectivity tomorrow. Qatar’s

Al Jazeera is a connectivity pioneer with The Stream, its attempt at aggressive integration of social media into a livenews programme.

So what will it take to succeed in the era of i-everything and social animal 2.0? It requires business intelligence, imagination, and simplexity.

Business intelligence is the ability to seek information from diverse and relevant sources, to build an information base that can inform the business about the future beyond local understanding.

Imagination is the ability to see the big picture and to think conceptually. It requires forming new images that have not been previously experienced. Organisations need to look beyond their current hypotheses and explore causal factors with the purpose of constructing an appropriate solution.

Simplexity is the ability to make the complex simple. We are living in a very complex time period, and this transition from industrial to connectivity is blurry for many organisations. They need to take the complexity of the unknown and present it in a simple and easily interactive manner.

It would be wise to plan for the era of connectivity. Can you imagine what would have happened if you made aggressive long-term plans and significant investments in manual labour and draft-animal-based economy, when the world shifted into the machine-based industrial era?

This is exactly what is happening now as the world shifts before our eyes from the industrial revolution to the world of connectivity.

The world is rapidly changing to one of connectivity. Dr. Tommy Weir warns organisations with global audiences to plan for this future before it is too late.

MIDDlE EaSTMaTTERS

TOMORROW

COUNTRYFOCUS

The similarities between Qatar and Singapore are plentiful. Both are small but exceedingly wealthy city states. Both have undertaken extensive reinventions of their economies, and, says Singaporean ambassador to Qatar, Umej Bhatia, both are important gateways to their respective regions.

So important is Singapore to Qatar’s economic diversification plans, that in 2005, HH the Emir Sheikh Hamad bin Khalifah Al Thani established with his Singaporean counterparts, the Qatar-Singapore High Level Joint Committee. “The only other high Level Joint Committee Qatar has established is with Saudi Arabia,” Bhatia points out, underscoring the significance of the move.

The committee, which is chaired from Qatar’s end by HH the Heir Apparent Sheikh Tamim bin Hamad Al Thani, meets yearly to discuss and implement investment and trade between the two countries. The

ambassador says the committee is also there to give what he calls a nudge to any stalled projects or agreements.

“The aim is to to provide strategic direction to advance Singapore-Qatar relations and to help facilitate the implementation of projects covering a broader scope,” Bhatia says. “Over time, through these interactions, both sides have established links, built trust and developed a sustainable long-term strategic relationship.”

To facilitate trade between Singapore and the Gulf Cooperation Council (GCC), in 2008, a Free Trade Agreement (FTA) was signed between the two regions.

“This is the first-ever FTA to be signed by the Arab trade bloc,” says Mr Bhatia, citing the still-stalled European Union-GCC agreement. “This really helped things along and many tariffs were dropped after this was signed.”

INGAPOrE: QAtAr’S ASIAN PArtNEr

With nearly four years as Singapore’s man in Doha, outgoing ambassador, Umej Bhatia, reveals to Rachel Morris that the special relationship between the two small but powerful countries is as strong and vibrant as ever.

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Tiny Singapore (the ambassador says the area of King Fahd Airport in Dammam, Saudi Arabia, is bigger than his homeland) is one of the world’s most technologically and economically advanced countries. With low unemployment and a highly educated and mobile workforce, it is the envy of many larger and older nations. Its growth rate rivals that of Qatar, recording 17 percent growth in the first half of 2010 alone.

Singapore was one of the first in Asia to recognise and capitalise on Qatar’s extraordinary economic growth. Since 2001, Singapore companies have secured more than QR14.5 billion in high profile projects inside Qatar.

Bilateral trade is dominated by imports from Qatar (94.9 percent of total trade in 2009) into Singapore, including crude oil and refined petroleum products. Top Singaporean exports to Qatar include refined petroleum products, civil engineering equipment parts and measuring instruments. The interest of Singapore companies in contributing to Qatar’s growth and development is expanding significantly, particularly in sectors such as construction and real estate services, environmental services, oil and gas supporting infrastructure.

Singapore’s commercial interests, reveals Bhatia, are well represented in Qatar. The biggest player is Keppel, one of the world’s largest providers of gas and petroleum services, engineering and telecommunications and transportation. With a raft of key contracts, aside from the core industries of oil and gas as well as construction, this makes the Singaporean company one of the highest profile in the country.

Keppel has scored a QR4.5 billion 20-year contract to build, maintain and operate an Integrated Domestic Solid Waste Management Centre (DSWMC) in Qatar. Keppel is also involved in a QR3.8 billion project to build the largest waste water treatment plant in Qatar.

The country has also lent its support and expertise in the technology arena, with the Infocomm Development Board of Singapore (iDA Singapore), the city state’s statutory board to develop, promote and regulate Singapore’s information and communication technology (ICT) industry, establishing an office in Qatar. iDA Singapore is working with Qatar’s Supreme Council for Information Technology on development of the country’s ICT industry.

Meanwhile, Singapore is very clearly in Qatar’s sights, with the Emir visiting twice – in 2005 and 2010 – and the so-called ‘Q companies’ scoring big contract and economic wins in Singapore.

In January 2009, Qatar International Petroleum Marketing Company (Tasweeq) set up a liaison office, its first overseas office, in Singapore. Similarly, Qatar Petroleum Company (QAPCO) set up its representative office in Singapore in March 2009.

Qtel has a 25 percent equity stake in Singapore’s Asia Mobile Holdings with ST Telemedia, and, in 2009, it opened an office in the country to further expand its presence. On the financial services front, both Qatar National Bank and Doha Bank both operate branches in Singapore.

On the acquisition front, Qatari DIAR, a wholly-owned real estate investment arm of the Qatar Investment Authority, bought Saudi Arabia Kingdom Holdings’ share of Singapore’s much-loved Raffles Hotel in April 2010. Later that year, it upped its stake and is now the majority shareholder in the postcard masterpiece.

Tourism is also on the increase between the two countries. Singapore-Qatar tourism flows have steadily increased over the last five years. Visitor arrivals more than doubled from 3,227 visitors in 2004 to around 5,381 visitors in 2009. And the numbers are growing. In 2010, Singapore received 6,522 visitors from Qatar to Singapore, a 21 percent increase over 2009.

The ambassador, a graduate of both Oxford and Harvard and a former print journalist, says the Singaporean population in Qatar is growing as the two countries enhance their relationship.

“We have around 600 red dotters, as we call ourselves – as Singapore looks like a ‘red dot’ on the map – in Qatar,” he says.

“While many are looking to 2022 for opportunities and development in Qatar, Singapore is very much looking beyond that, to 2030,” he continues.

“We don’t take anything for granted and we will continue to keep working on this relationship.”

COUNTRYFOCUS

Singapore is one of the world’s most advanced countries with low unemployment and a highly educated and mobile workforce, and a growth rate that rivals that of Qatar.

a wOrk IN prOgrESSThe list of projects Singapore has a direct or indirect hand in on Qatari soil grows seemingly by the day. This includes:• A QR1.8 billion contract by Singapore’s Keppel to build a

shipyard in Ras Laffan as part of a joint venture with Qatar Gas Transport Company (Nakilat),

• Keppel’s facilities management wing scored a contract to provide facilities management expertise to manage the existing airport terminal buildings and to train existing staff in preparation for the new terminal building at the New Doha International Airport scheduled to open in 2012,

• A QR80 million contract awarded to Singapore’s township development company Surbana for the urban master planning of two strategically important satellite cities in Qatar – Al Khor and Al Wakra. The AlWakra masterplan has already started construction with the redevelopment of the coastal city’s port and moves to build a town centre. And also,

• A QR20 million contract awarded to Singaporean technology company Crimson Logic by Qatar Ports and Customs Authority for the development and implementation of a state-of-the-art e-customs clearance system.

start a business in the next year and describe their current financial situation as comfortable.

While these percentages may seem small, they are on par with the rest of the world; opportunity-driven aspiring entrepreneurs are a rare breed.

In the Arab League countries, men are also more likely to aspire to start a business at all, whether out of opportunity or necessity; 14 percent say they have thought about it compared to nine percent of women.

These realities document what the Global Entrepreneurial Monitor (GEM) calls a significant disadvantage for the region – one of the largest gender gaps in entrepreneurial activity in the world.

Increasing the number of women who participate is one of several variables the GEM considers critical to increasing entrepreneurial activity

They are few in number, but young women in the Middle East and North Africa who aspire to start a business out of something more than necessity, share a number of characteristics that may make them engines of economic growth.

Across 21 countries that Gallup polls for The Silatech Index: Voices of Young Arabs, two percent of young women can be considered opportunity-driven aspiring entrepreneurs, compared with four percent of men. A young person is classified as an opportunity-driven aspiring entrepreneur if they said they plan to

THINKER’SCORNER

by Dalia Mogahed and Lymari Morales

THE RaRE (BUT pOWERFUl) opportunity-drivEn young fEmalE

tHE BOSS

ENtrEPrENEur

THINKER’SCORNER

21TheEDGE

rates around the world. In other words, there’s reason to increase the number of women entrepreneurs beyond just achieving gender equality. More women starting businesses will result in more entrepreneurial activity overall and, in turn, greater economic stimulation and job creation.

For Arab societies to foster an environment where more women aspire to start their own businesses, they must first understand what makes female opportunity-driven aspiring entrepreneurs unique. Gallup’s analysis finds that young, female, opportunity-driven aspiring entrepreneurs have an advantage over their peers on several important dimensions of intellectual and social capital.

For starters, these women are more than twice as likely as their male and female counterparts in every entrepreneurial category to have a post-secondary education. This suggests that higher levels of education can be very empowering for these women – both in terms of achieving financial comfort and aspiring to a career as a business owner.

It also means these women are, arguably, in a better position than any of their peers to contribute to their economy with regard to knowledge gained from education.

These women also appear to have strong social networks they can draw upon to succeed. While women in general are less likely than men

SUrvEy mEThOdSResults are based on face-to-face interviews with roughly 32,000 young adults, aged 15 to 29, conducted in the spring and fall of 2009 and 2010. Surveys were conducted in 21 Arab League member states: Algeria, Bahrain, Comoros, Djibouti, Egypt, Iraq Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Palestinian Territories, Qatar, Saudi Arabia, Somaliland Region, Sudan, Tunisia, United Arab Emirates, and Yemen. For results based on the total sample of young adults, one can say with 95 percent confidence that the maximum margin of sampling error is ±3 percentage points. The margin of error reflects the influence of data weighting. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

to say they have someone they can trust as a business partner, nearly three out of four female opportunity-driven aspiring entrepreneurs say they have such a person in their lives – even more than their male counterparts.

Young women classified as opportunity-driven aspiring entrepreneurs also express a high level of civic engagement, in terms of their willingness to volunteer time to help others. They are far more likely than women who are neither financially comfortable nor interested in becoming entrepreneurs, to say they volunteered their time in the past year. Volunteering time may help young women develop the practical skills necessary to build a strong career.

Women who are opportunity-driven aspiring entrepreneurs are also more likely than other young women and their male counterparts to report having helped a stranger. This tendency could point to a specific personality trait – perhaps a sense of empowerment or the ability to support others. Whatever the cause, it suggests that the qualities shared by women who are opportunity-driven aspiring entrepreneurs are likely to trickle into the community more broadly.

Together, the data suggest young women in the Middle East and North Africa who have both the desire and means to start a business out of opportunity rather than necessity, are uniquely positioned to serve as economic catalysts in their societies.

In addition to being more educated than their peers, they appear to have stronger trusted social networks and to be more civically involved. This suggests that education, social networks, and community involvement may help foster entrepreneurial aspirations in women. It also means that the rare female opportunity-driven aspiring entrepreneur is uniquely positioned to contribute to economic growth, entrepreneurship, and job creation. The less rare she becomes the better.

This Silatech Index analysis is conducted by Gallup scientists and researchers pursuant to the Silatech-Gallup partnership. In addition to systematically measuring the perceptions of young people across the region on the challenges related to employment and entrepreneurship, Gallup analysts lead the effort in disseminating the findings of the Silatech Index to regional and global leaders and institutions engaged in addressing the challenges surrounding young people and employment in the region.

OpINION

Imagine a Doha with far less traffic and a foolproof guide to finding that empty parking space, all accomplished in a manner that benefits the environment. Entirely possible, says Martin à Porta, who espouses a concept known as the ‘art of mobility’.

gOOdbyE

Cities are evolving. They are growing substantially enough to form, through population growth and physical expansion, a collection of cities combining to make one continuous urban and industrially developed area or conurbation. In turn, these conurbations are growing

into megacities, which are defined as a metropolitan area with a total population in excess of 10 million people. This is having wide-reaching impact on the transport infrastructure demands of people living in these areas.

Since the end of the last decade, more people live in cities than in rural areas for the first time in the history of humanity. According to forecasts, the share of urban populations will grow to 60 percent of the total, and in the Gulf region, urban centres will embrace over 90 percent of the population. Kuwait City, Jeddah, Mecca, Riyadh, Doha and Abu Dhabi are being rapidly transformed into conurbations that have international appeal.

The accelerating process of urbanisation, however, is also presenting major challenges. Above all, growing volumes of private transportation are having a negative impact on life and work in cities. Every day, people have to cope with hours of traffic jams. This hampers economic development and diminishes the quality of life. And the increasing air pollution is also a growing burden for residents.

The need for mobility and transportation will continue to grow in the future.

gridlock

OpINION

TheEDGE 23

gOINg ElECTrICOne viable solution is enhancing and developing electric vehicle

technology as a sustainable solution. Efficient urban transportation systems play a key role in a city’s economic viability, and systems based on electric vehicles powered, if possible, by renewable energy sources like solar and wind power, are the ideal solution. This is even more pertinent in the Gulf region, as there is an abundance of these sources, especially the abundant sunlight.

As electric transportation systems such as metros, trams and high-speed trains reduce energy consumption and help protect the environment, they are the only sustainable alternative to traditional vehicles with combustion engines. Electric cars will become increasingly important in the coming years.

TraNSpOrT NETwOrkS Of ThE fUTUrEGovernments in the Gulf region are tackling the challenges

posed by demographic trends by increasingly depending on environmentally friendly technology when implementing their visionary plans. This naturally also applies to the Gulf region’s highly advanced transportation concepts for shifting traffic from the road to rail systems.

Qatar, for example, plans to build a passenger and freight rail system and a high-speed rail link to neighbouring Bahrain as part of their vision for 2030. The entire infrastructure will be completed before the start of the 2022 World Cup. The four metro lines for the capital of Doha alone will have a total length of around 300 kilometres.

Another ambitious project in challenging terrain is the planned integration of the nations of the Gulf Cooperation Council with a rail network stretching from Kuwait City through Saudi Arabia and the United Arab Emirates to Muscat, capital of Oman, with branches to Bahrain and Qatar.

This cross-border network is a welcome plan, since the Gulf states are increasingly developing into a logistics hub between Asia, Africa and Europe. Major harbours and airports are already being built or expanded. In all these developments, urban planners and transport experts must ensure that the economic competitiveness and attractiveness of cities are secured and further enhanced. The answer here is to intelligently network and integrate traffic flows by rail and road, in the air and on the water.

The task ahead is to develop and implement future-viable solutions for the entire transportation infrastructure. Companies are stressing sustainability in their infrastructure and mobility projects. With its ‘Complete mobility’ concept, for example, Siemens offers a comprehensive package of measures for providing a networked, highly versatile transportation infrastructure – from analyses and consulting, to the construction of complete multi-modal transportation systems for rail and road.

In order to integrate all transportation modes as efficiently as possible, optimal connections are necessary. For example, a traveller arrives by plane and continues his journey without delay from the airport to the city centre via a fully automated metro system or electric taxi. Or he continues his trip with a direct high-speed train.

TraffIC aNd parkINg SOlUTIONSAnother important aspect of a state of the art mobility concept

is intelligent traffic solutions. In a first step this includes intelligent management of traffic signals and overall control of the traffic flows. In a second step this may also include a combination of e-mobility & parking systems.

Today’s frequently used car parks are totally congested, so here the use of a proper information system, which present drivers with dynamic information on parking within controlled areas, can save hours of cruising and searching of a parking lot and will help the driver maintain a balanced blood pressure.

Intelligent lane management can also go a long way in combating congestion and delays, as fast lanes or special purpose lanes, for example, for buses and taxis, can help to enhance the smooth traffic flow. In Qatar, the highly populated area is in and around Doha. Traffic in this area is on the rise again and without a proper intelligent traffic solution, it will be very difficult to move around in the coming years.

With the implementation of the intelligent traffic solutions, drivers will spend at least one hour more with family and friends rather than behind the steering wheel.

Solutions for combating congestion in mature countries have seen the development of tolling systems for cities, highways and bridges, which in turn generate revenue for governments to maintain, improve and construct new roads and bridges. However, tolling solutions can do much more than merely aid in refinancing expensive infrastructure. They can also serve as an instrument to reliably guide traffic into less blocked channels, restore mobility to chronically congested areas, and provide relevant value-added services to operators and commercial transport firms.

A prime example of this is the congestion charge zone in London, United Kingdom, which utilised such technology for the automated recording of all vehicles entering the zone and for fee calculation. Since its inception, the number of cars in the toll zone has been reduced by 18 percent, traffic jams by 30 percent and particulate matter pollution by 15 percent.

Seamless mobility is possible only with a coordinated transportation infrastructure supported by electric vehicles that protect the environment. This is why the future of cities lies in networked and electric mobility.

Martin à Porta is the chief executive officer of Siemens, WLL, Qatar.

Every day people have to cope with hours of traffic jams, which hamper economic growth and quality of life.

Al Gassar Resort, Doha’s Newest Luxury Waterfront DestinationExpectation launch in Q4 2011 with the opening of Al Gassar Resort Residences and St. Regis Hotel

alongside the magnificent St. regis Doha, is the residential element of the al Gassar resort consisting of three grand towers, offering a unique living experience that reflects the luxury services offered by the famous St. regis hotel.

Mohamed Sleiman, assistant chief Operating Officer for resorts Development company, the company behind developing the al Gassar resort, said: “With the al Gassar resort, we are building an entirely new luxury destination for Qatar, which will bring together the unique hospitality traditions of St. regis hotels with the luxury hotel-like service that will be offered in the al Gassar resort residences. We’ve invested a huge amount of time and energy in refining the exterior and facilities of this incredible resort, and we believe it will be an iconic destination when the development opens its doors in late 2011.”

Demand for residential space in Qatar has grown significantly in 2011, driven in part by the increase in the number of businesses looking to expand in one of the world’s most dynamic economies. the promise of the 2022

excitement is building across Qatar as more details emerge about the iconic al Gassar resort that is set to open in 2011.

Since work began on the development three years ago, the development’s distinctive towers, unique architecture and fantastic waterfront location were immediately considered as a landmark destination sparking excitement across Qatar as this amazing development continuously evolved during its different project stages.

Now, as the luxury development counts down to its opening, set for the end of 2011, more details are emerging about al Gassar resort. the St. regis Doha – the centrepiece hotel for the resort, renowned for its reputation in providing the highest levels of luxury service, exhibited the hotel’s development elements, facilities and services during this years arabian travel Market in Dubai which was held at the beginning of May. the St. regis Doha – which is already receiving positive reviews across the travel trade industry, prides itself on its distinguished characteristics; privilege, authenticity and originality.

Developed by RDC

Circular TowerTwin Towers

Restaurant

Restaurant

Private Beach Front

Pool & Recreational Area

Ballroom

Private Access To Hotel

Tennis Court

World cup in Qatar – which it is estimated will drive uS$100 billion worth of projects and investments between now and 2022 – is adding to demand for residential space.

Situated in Doha’s premium real estate area, directly at the waterfront with breathtaking views of the arabian Gulf, the development of al Gassar resort can be seen from almost all directions in the city. al Gassar resort enjoys close proximity to the key business hubs of Qatar, including the West Bay Business District and Doha exhibition centre, and is equally close to a number of premier leisure areas such as the Katara cultural Village, the Pearl Qatar and Doha city centre.

however, the developers believe that the real attraction of the resort will be the enviable lifestyle supported by the facilities and unparalled services provided for residents and guests. the al Gassar resort has been designed to become a major social hub in Qatar, and the preferred choice for residents looking for a hotel-style living experience and customized service in their own home.

With a range of executive apartments available, from business bachelor quarters through to opulent family spaces with as many as five bedrooms, the al Gassar resort will provide choice and value as well as unmatched luxury.

Leisure facilities include a large pool with sunbathing area, tennis courts, landscaped gardens, children’s area and a fully-equipped gym. there will also be a selection of restaurants on-site, dedicated to providing room and restaurant services, and a range of shops and service counters.

About Al Gassar Resort With its roots in the historic al Gassar area and links to the new commercial centre of Qatar, al Gassar offers the perfect

blend of tradition and modern facilities. an exclusive waterfront destination, with a considered mix of style, luxury and service, life in al Gassar resort is how life is meant to be. Developed by a team with a deep understanding of the traditions of Qatar, and supported by expertise from around the world, the residences of al Gassar resort have been designed to exceed the expectations of guests and residents. comfort, convenience and a fantastic location are available whether you are just visiting Doha or making your home in one of the world’s most dynamic cities.

About St. Regis Hotels & Resortscombining classic sophistication and modern luxury, the St. regis brand remains faithful to its commitment to excellence. Founded by John Jacob astor iV, with the opening of the first St. regis hotel in New York city over a century ago, the St. regis brand of hotels is known for its unique luxury, customized service and refined elegance in the best destinations worldwide.

Plans for the brand to globally continue its legacy include long-awaited St. regis properties in Bahia Beach, Puerto rico and Bal harbour. in Latin america, the St. regis brand will unveil new hotels and resorts in Buenos aires, and the riviera Maya. in asia, the St. regis brand has also announced plans to open properties in Bangkok, chengdu, Kuala Lumpur, Lhasa, Nanjing, Osaka, Sanya Yalong Bay and tianjin. in africa and the Middle east, the St. regis brand will continue to expand in abu Dhabi, cairo, Doha and Mauritius.

the distinctive traits of the St. regis experience include customised service and attention, coveted locations and luxurious design.

POrtuGAL & tHE EurOZONE (P.38)

fINaNCE &ECONOmICS

ALSO IN tHIS SECtION:• Market Watch: As the global economic recovery gains significant momentum, Dheeraj

Shahdadpuri takes a macro market overview (P.28).• Inside Edge: D&B’s Phil Strange parsed Qatar’s GDP data for the past decade and

provides a thorough snapshot of the country’s economy (P.32).• Special report: OBG’s Greg Harris takes a look at Qatar’s medical research and

development plans through its National Health Strategy (P.34).• Balance Sheet: Considering recent global disasters, KPMG’s Subash Shanmugam explores

the topic of business continuity management (P.36).

MarkeT WaTCh • InsIde edge • speCIal reporT • BalanCe sheeT • eConoMIC BaroMeTer

Brought to you by:

First Greece, then Ireland and now Portugal. Karim Nakhle looks at the culture of denial surrounding the struggling economies of

Europe, the state of the region’s common currency, the euro, and the repercussions of successive financial bailouts, and who might

follow – which may yet again include Greece.

according to the latest World Economic Outlook report by the International Monetary Fund (IMF), the global economy is projected to grow by 4.4 percent in 2011, with the growth rate for advanced economies projected to touch 2.4 percent, whereas emerging nations will

continue to outpace these with a predicted expansion of 6.5 percent. In advanced nations, the economic drive is slowly shifting from

public to private demand, which has reduced concerns that declining fiscal policy support might bring a new wave of downturns. With demand being seen as increasing, investments have also made a gradual comeback, further benefitting from low interest rate regimes. Consumption patterns are also expected to continue recovering on improving employment conditions, as previously postponed purchases of durable goods will also ostensibly make a return.

Conversely, while demand in many emerging economies has stayed robust, stubbornly high inflation remains the prime policy concern. Thus, we should continue to see the governing and central banks of many emerging economies increasing their headline interest rates, in order to depress escalating price rises, which pose the greatest risks to their real economic growth rates.

UNITEd STaTES rEalITIESThe outlook for the world’s biggest economy, the United States

(US) is looking broadly positive, as the IMF has maintained its growth projection of 2.8 percent advancement this year, compared to its January estimate. Although the first quarter growth rate of 1.8 percent (preliminary figure) is lower than the previous quarter growth of 3.1 percent, the US Federal Reserve has stated that this is a temporary soft patch and is mainly on account of higher gasoline prices and a 11.7 percent drop in government expenditure on defence.

However, the Reserve estimates have also put economic growth in the range of 3.1 percent to 3.3 percent. Even though the credit growth is still relatively weak as compared to pre-crisis levels and, at the time of writing, there was a large degree of market uncertainty due to issues

MaRKET WaTCH

global market OpTImISmThe global economic recovery has gained significant momentum in recent months and there are encouraging signs that liquidity in many nations around the world has started improving, which in turn is reviving aggregate demand, reports Dheeraj Shahdadpuri, who this month, takes a macro regional overview of the current global financial and market situation.

surrounding the US debt limit and bank lending targets, financial conditions are gradually improving, as many banks have started adjusting their tight bank lending conditions, not only for large firms but also for small and mid-sized firms.

In a further definite sign that the recovery in the US has solidified, the Purchasing Managers Index (PMI) for both the manufacturing

MaRKET WaTCH

Stubbornly high inflation remains the prime policy concern in many emerging economies, thus we should continue to see the governing and central banks of many emerging economies increasing their headline interest rates.

and service sectors have peaked to multi-year highs recently. For the month of March, the manufacturing index reading stood at 61.4, which is the highest since 2004, whereas the PMI for the service industry was recorded at 57.3 points, only slightly lower than previous month’s record peak.

US consumer spending has also improved for seven straight quarters in a row (up to March 2011) and is a clear indication that improving economic activity is supported by private demand. However, the unemployment rate which currently stands at nine percent, is expected to decline very modestly as many jobless people might rejoin the labour force, which will initially push the rate higher before a decline is seen. It is widely believed that until employment generation picks up pace in the US, the Federal Reserve will ensure that their monetary policy is accommodating. But on the other hand, further fiscal policy adjustments might not materialise, as the fiscal deficit is projected to reach 10.7 percent this year – the largest among the world’s more mature economies.

ThE EUrOpEaN pICTUrEEconomic recovery in the so-called ‘euro area’ is projected

to remain uneven with overall real activity well below its potential level and unemployment rates still hovering near its peak. According to the IMF report, gross domestic product of the economic bloc is expected to expand by 1.6 percent, despite renewed financial turbulence in the peripheral countries.

Although the bond spreads of peripheral countries had reached levels not seen before, strong policy response through extraordinary liquidity support and funding from European Financial Stability Facility contained the contagion from spreading at an alarming rate, which allowed to spread unchecked, could naturally severely destabilise the entire economic bloc.

Recently of course, Portugal became the third European nation to seek bailout aid – which could total US$107 billion (QR390 billion) – on concerns that a dwindling sovereign balance sheet might make its liquidity crisis more severe. But this time around, the reaction of investors has not been as elevated when compared to last year, when Greece and later on Ireland asked for a similar aid.

Another encouraging sign is that the euro has continued to strengthen against the US dollar, which clearly shows that expectations of Portugal seeking any aid was already priced-in by the investment community. However, if the crisis deepens, the downside risk to the euro area could come from weakness in financial institutions and their sovereign exposure, which would again make investors risk averse and lower equity prices and bond yields. Apart from this, higher than expected commodity prices are further emerging risk factors which could decelerate real economic recovery, as the European Central Bank will be left with no other option but to raise benchmark interest rates.

ThE aSIaN OUTlOOkIn Asia, broad based recovery is expected to continue on robust

domestic demand, strong export growth and rapid credit uptake. Even though the growth rates have moderated from the highs witnessed last year, Asia will continue to outpace other regions. In fact, signs of overheating have started to materialise in a number of nations, as continued expansion on strong fiscal and monetary support meant that some economies were performing above their potential levels, due to

TheEDGE 29

The outlook of the entire Middle East and North Africa region is facing an uncertain environment on account of the continuing political unrest, which has made economic recovery extremely uneven in the short-term.

accommodating policy structure created by central banks at the peak of the crisis.

By far, this phenomenon is most clearly visible in China, where the country’s central bank has increased interest rates aggressively to suppress inflation, which in the month of March reached a 34-month high. On the back of changing monetary stance, the IMF is of the view that the Chinese economy will expand by 9.5 percent this year, 0.75 percent lower than the level their economy achieved last year.

Furthermore, the IMF also foresees that the Indian economy, which is facing a similar situation as China in terms of escalating prices, will grow by 8.2 percent this year, and its central bank might compromise on short term economic growth to tame inflation by increasing interest rates.

Former Asian economic leader, Japan, is estimated to have grown by 3.9 percent in 2010, which still makes for of the highest growth rates among advanced nations. However, for 2011, the IMF has sharply cut Japan’s projected growth rate to 1.4 percent, largely due to uncertainties associated with the recent earthquake, which has caused massive destruction, and calls for continued fiscal support. Japan is facing a pressing situation as, on the one hand, it will be required to provide massive fiscal support to rebuild the economy, but on the other hand, debt levels, which have ballooned to around 200 percent of gross domestic product (GDP) will require tightening measures.

To make things worse, credit ratings agency Standard and Poor’s has downgraded the sovereign ratings of the country twice this year and has highlighted the need for them to adjust fiscal position at a time when this seems most difficult. This is the reason why Japanese policymakers face an uphill task in choosing a fiscal strategy that can

decrease public debt over the medium term while addressing the need for additional reconstruction spending at the same time.

mENa UNCErTaINTy Closer to home, the outlook of the entire Middle East and North

Africa (MENA) region is facing an uncertain environment on account of the continuing political unrest, which has made recovery uneven in the short-term. Revolutions and rebellions of varying intensity and success in a number of countries have directly impacted the price of crude oil, mainly on expectations of disruption in supply, and have also increased the sovereign risk premiums.

Based on these factors, the IMF has reduced growth expectations of the whole MENA region to 4.1 percent from the previous estimate of 4.6 percent. However, the growth rate of oil exporting countries is expected to pick up to a level of at least five percent this year. Qatar is predicted to be the strongest performer as real GDP is expected to expand by 20 percent on continued investments in natural gas production and large government expenditure for the 2022 FIFA World Cup.

On similar lines, the biggest economy in the Arab world, the Kingdom of Saudi Arabia is expected to grow by 7.5 percent on infrastructure spending by government, which will also be backed by soaring hydrocarbon revenues. The United Arab Emirates on the other hand is seen to be growing by 3.3 percent, this on the back of a pickup in its non-hydrocarbon economy and improved consumer and investor sentiment after the successfully restructured debt of Dubai World.

Outside of oil exporters, the major impact of the political unrest will probably be visible in Egypt, where economic activity is seen falling sharply to around one percent (against growth rate of five percent in the previous year). The country is expected to face a significant slowdown in capital inflows and one of its key economic contributors, the tourism industry, will only recover very gradually over the coming years.

Although the current account surplus of MENA region is expected to widen this year on soaring hydrocarbon revenues, prolonged political unrest is seen as the biggest downside risk.

For oil importers the biggest challenge will be to rebuild their economies by carefully crafting set of fiscal and monetary measures, which could also efficiently address the perennial problem of high unemployment. The problem is further pressing due to the fact that financial markets have severely suffered and credit default swaps and bond spreads have widened.

For oil exporting countries, the focus will be to continue the diversification drive, which may limit the impact of any similar global downturn in the future.

Note: All estimates provided in the above article are sourced from the International Monetary Fund.

MaRKET WaTCH

TheEDGE30

INSIDE EDGE

Phil Strange parsed Qatar’s economic data for the past decade and, factoring in GDP growth, foreign investment, and the spectre of inflation, provides a thorough cross-sectional snapshot of the real state of the country’s economy at present.

StatE of tHE NAtION

on March 31, 2011, the Qatari government unveiled its largest ever budget for the fiscal year beginning April 1, 2011. It estimated

revenue growth of 27 percent compared to the previous year, with expenditure expected to increase by 19 percent. Qatar’s gross domestic product (GDP) (at current prices) has registered a compound annual growth rate (CAGR) of 21.89 percent during the 10 year period between 2000 and 2010.

Over the same period, the mining and quarrying (hydrocarbon) sector grew at 20.91 percent, while most of the other (non-hydrocarbon) sectors have grown at rates higher than the GDP growth rate.

Among other sectors, transport and communications led the growth chart with a 29 percent CAGR, while building and construction, finance, insurance, real estate and business services, and manufacturing sectors followed closely, with CAGRs of 26.47 percent, 25.72 percent and 25.56 percent respectively. The total hydrocarbon and non-hydrocarbon sectors mentioned account for close to 99 percent of Qatar’s GDP.

After more than a 30 percent annual growth rate since 2004, the Qatari economy’s

growth rally hit a roadblock with the onset of the global financial crisis, which led to an 11 percent decline in GDP for 2009. From a more than 60 percent proportion of GDP in 2000, the hydrocarbon sector’s contribution to national GDP dipped to 46.2 percent in 2009, as oil prices weakened on demand concerns.

But 2010 witnessed a confluence of favourable events as risk appetite rejuvenated on improved global economic scenario along with a build-up in oil and gas demand. With major gas projects coming online at this juncture, Qatar was well poised to capitalise on the available opportunities.

In 2010 Qatar achieved a production capacity of 77 million tonnes per annum of liquefied natural gas (LNG) production capacity, which led to the hydrocarbon sector’s contribution jumping to 55.71 percent of 2010 GDP. This also resulted in the GDP spiking 30.8 percent from QR357.86 billion in the year 2009 to QR468.08 billion in the year 2010.

STaTE bUdgET INflUENCEBreaking down the State of Qatar’s budgets

of recent fiscal years reveals that total revenue has grown at a CAGR of 13.12 percent in the four-year period from the financial year (FY) 2006/07 to FY2010/11. But what is most interesting is the

fact that revenues from oil and gas have grown at 11.52 percent, while the investment and other revenue streams grew at a faster pace of 14.87 percent and 17.88 percent respectively.

Oil and gas revenues accounted for 64 percent of total revenues in FY2006/07 and dipped down to 49 percent in FY2009/10, but crept up again to 61 percent in FY2010/11. During the relevant fiscal years, the Qatari government’s total expenditure has grown at a CAGR of 16.78 percent and the government’s focus on development initiatives is highlighted from the fact that the development expenditure has grown at a CAGR of 23.98 percent. Total expenditure in FY2009/10 and FY2010/11 stood at QR115 billion and QR125 billion respectively, and development expenditure amounted to QR39 billion and QR41 billion respectively.

The proportion of development expenditure to total expenditure has witnessed a rise from 26 percent in FY2006/07 to 33 percent in FY2010/11.

Despite the huge expenditure outlays, the budgets have yielded surplus in the past five fiscal years due to the fact that they are drawn based on a conservative oil price expectation. If market price of crude oil remains constantly

INSIDE EDGE

With one of the highest GDPs in the world, multiple projects underway, growth in many sectors beyond oil and gas, an enviable lifestyle for most of its inhabitants, and 2022 to look forward to, Qatar is doing well by anyone’s standards.

above the budget estimate, the oil revenues tend to be much higher than the budgeted revenues, thus pushing up the surplus.

The budget surplus leaped nearly 2.8 times from QR19 billion in FY2006/07 to QR54 billion in FY2009/10. But, also noteworthy, is that a significant increase in budget expenditure and moderation in global crude prices during FY2010/11 brought the surplus down to QR16 billion.

fdI aNd INflaTIONData on foreign direct investment

(FDI) flows, as per the United Nations Conference on Trade and Development’s World Investment Report 2010 shows that FDI inflows into Qatar in 2009 amounted to US$8.72 billion (QR32 billion) as compared to US$4.11 billion (QR15 billion) in 2008 and US$4.7 billion (QR17 billion) in 2007. The three-year CAGR of FDI inflows between 2006 and 2009 stood at 35.58 percent.

Conversely, the Qatari government stepped up its foreign asset acquisition efforts in those three years. The FDI outflow from Qatar surged at a CAGR of 209.69 percent. In 2007, Qatar’s FDI outflow was in excess of US$5 billion (QR21 billion), but in 2008 – when assets across

the globe traded at attractive valuations amid a dearth of investors – Qatar expanded its foreign investment portfolio, resulting in FDI outflow of more than US$6 billion (QR22 billion)

When it comes to inflation in Qatar, the Consumer Price Index (CPI), which is calculated considering 2007 as the base year, stood at 15.18 percent in FY2008 on the back of high oil prices, which led to an increase in input costs across the globe. This, in turn, had an effect of ‘imported inflation’ on the Qatari economy. As prices of Qatar’s imports increased due to the high inflationary trends witnessed across the global economy, the dollar peg caused this inflation to be ‘imported’ into the Qatari economy proportionately.

But, over the past two years, domestic inflationary trends have eased, with FY2010 inflation standing at -2.44 percent, which is higher than the FY2009 inflation of -4.89 percent. The producer’s price index (PPI), which was introduced for the first time in December 2010 and uses 2006 as the base year, shows that the index climbed to 119 points at the end of 2010.

a gCC pErSpECTIvEComparing the above figures to other

nations of the Gulf Cooperation Council

(GCC), Qatar according to SHUAA Capital’s GCC: 2011 Macro Outlook report, Qatar is on track to take over Kuwait’s position as the third largest economy in the bloc. Arguably, this is possible and achievable in 2011 itself on the back of a robust growth rate in the Qatari economy, while the Kuwaiti economy continues to be impacted by the non-decisiveness of economic reforms, given a lack of political consensus.

However, if we look at the break up of oil and non-oil GDP in the top four economies in the region – Saudi Arabia, United Arab Emirates (UAE), Kuwait and Qatar – Qatar and Kuwait despite their efforts, have not been able to break away from hydrocarbon domination. In 2009 for instance, in Saudi Arabia, the hydrocarbon sector contributed to 17.84 percent of GDP and in UAE the proportion was 28 percent.

But, a like-with-like comparison reveals that the proportion was 46.2 percent in Qatar and 45 percent in Kuwait. Nevertheless, Qatar showed resilience in trying times, as GDP contraction in 2009 amounted to 11.2 percent as compared to more than 20 percent each for Saudi Arabia and Kuwait. Also, the annual growth rates in 2007 and 2008 were in Qatar’s favour. Qatar’s GDP grew 33.48 percent in 2007 and 37.10 percent in 2008, while Saudi Arabia clocked eight percent and 24 percent respectively, and Kuwait reported 11 percent and 23 percent for the same periods.

a pOSITIvE pICTUrEIn conclusion, while it can be seen that

Qatar has gone from strength to strength in the past few years, the government still needs to monitor and manage inflation. Indeed, the huge expenditure outlays and a potential increase in inward foreign investments may ostensibly add to demand-pull inflation, which may call for economic moderation in the future.

However, taking cues from the past, it can be also be surmised that the state will take timely corrective action if the situation so demands. Moreover, high GDP growth rate, strong budget surplus, moderate inflation and sustained FDI inflow and outflow in many ways make Qatar nothing less than an ‘economists’ paradise’, a situation which bodes well for the considerable future ambitions of this small but financially robust Gulf state.

TheEDGE 33

SpECIal REpORT

QaTar: By Greg Harris

on April 3, 2011, Qatar officially launched the National Health Strategy (NHS) 2011-16, the government’s plan to upgrade and improve the country’s healthcare sector. Based on principles originally outlined in National Vision 2030, Qatar’s long-term development

programme, the NHS has the potential to bring about substantial changes to the sector.

In addition to improving services at home, the government hopes the NHS will help turn Qatar into a centre for medical research in the Gulf.

This is not a new objective – the state has been working to improve its medical research facilities for almost two decades now, as part of a broader research programme. The NHS is the latest in a long line of development plans that have included a medical research component.

The main vehicle for investing in this segment is the Qatar Foundation (QF), a government-funded non-profit organisation that is involved in education, research and community development projects. Since 1995, the Foundation has taken the lead on a number of major research projects, including the Qatar National Research Fund (QNRF), the RAND-Qatar Policy Institute, the Qatar Science and Technology Park, and the Qatar Computing Research Centre.

The QF is in the process of developing a major medical research cluster on the outskirts of Doha, the first phase of which is already in place. In 2002, Weill Cornell Medical College in Qatar (WCMC-Q) opened its doors in Education City, a QF development that houses a number of educational institutions, including branch campuses of a handful of leading international research universities.

A joint partnership between US-based Cornell University and the QF, WCMC-Q offers medical degrees and a variety of nursing and health-related training programmes in a 31,000-square-metre facility.

“The Qatar Foundation, by attracting international universities to the country, has positioned Qatar as a centre for local and international talent development,” Dr. Hanan Al Kuwari, the managing director of the Hamad Medical Corporation (HMC), told Oxford Business Group.

Carrying out medical research is central to WCMC-Q’s mandate. The institution is currently implementing a five-year plan to build research capacity, including five core facilities that can be used by researchers to obtain preliminary data for grant applications, as well as for carrying out projects.

These core facilities include, among other things, a genomics laboratory, microscopy equipment and a vivarium.

medical research on the rise

According to Dr Javaid Sheikh, the college’s dean, WCMC-Q has so far received 33 research grants from the QNRF. Medical research in Qatar will receive a major boost when the Sidra Medical and Research Centre begins operations next year.

Launched in 2004 with an endowment of QR28.7 billion from the QF, Sidra is expected to be a cornerstone of the country’s healthcare sector. Facilities will include a 400-bed teaching hospital (expandable to 550 beds) with a focus on care for women and children, as well as a forward-funded research programme.

The overlapping research areas between Sidra and WCMC-Q are no accident – the two institutions are situated adjacent to each other and will share facilities and collaborate on projects. Medical students at WCMC-Q will benefit from training at the hospital, and doctors at Sidra could potentially teach at the school.

According to Dr. Sheikh, WCMC-Q already enjoys a strong relationship with HMC, and is expanding its ties with Sidra. The two medical centres will work together and develop complementary research agendas.

Once Sidra is operational, it will employ around 5000 people, including doctors, nurses, technical staff, biomedical researchers, administrators and support staff. Only five to 10 percent of the nation’s existing healthcare workforce is Qatari. In the long run, the government hopes that locals will make up the majority of the Qatar’s growing research workforce.

The nursing school at the University of Calgary-Qatar, where the faculty is Canadian and some 23 percent of students are Qatari, is a good example of international partnerships working to develop the labour pool with a focus on national talent. According to Dr Carolyn Byrne, the dean and chief executive officer, the university has a strong relationship with HMC for clinical placements for students. The university is also host to research projects.

Given the facilities already in place and those on the way, Qatar looks to be making steady progress towards its ambition of becoming a regional centre for medical research.

In addition, the country’s healthcare system is likely to benefit as local educational institutions train tomorrow’s medical professionals, with these developments helping to keep Qataris – and the wider economy – in good health.

Greg Harris is the editorial manager at Oxford Business Group.

BalaNCE SHEET

Knowing

Recent events are driving many organisations to revisit their business continuity plans, so that they are not caught off guard by disasters and upheavals. Subash Shanmugam advises

thE

TheEDGE 37

As a result, many businesses are revisiting their disaster recovery capabilities. Some are simply reviewing and updating their existing recovery plans and are investing time and resources to improve them, while others are in the process of rolling out enterprise-wide BCM initiatives.

SETTINg rEalISTIC ExpECTaTIONSAny organisation contemplating an

company-wide BCM initiative should consider a project charter that clearly defines its scope, expectation and limitations.

The BCM project charter would include:• The objectives of the BCM initiative, clearly

documenting the stakeholders’ expectations,• The scope of the exercise, necessary in the

case of subsidiaries and group companies,• Roles of the stakeholders involved, during

and after the project (including the role of project management, project sponsor and review and signoff signatories), and

• Limitations and exclusions (if any).Although it is impossible to mitigate

all the risks to an organisation, BCM helps identify those that could be mitigated, thereby highlighting the potential risk level (inherent or otherwise) that is to be accepted by the senior management.

dETErmININg ThE COST Of a dISaSTEr

The costs of a disaster to any organisation can be classified as financial or non-financial. Financial impact can be measured in ‘dollar’ terms such as loss of revenue, opportunity loss, reduced margins, fines imposed by regulators, and lawsuits.

Non-financial impacts include loss of reputation, erosion of customer base, operational outages, non-compliance to legal regulations, etcetera, which cannot be quantified objectively. However, they are equally important aspects to be considered.

Getting into a huddle with the finance team is probably one of the easiest ways to get a handle on the organisation’s revenue streams across the existing business units. Using this as a starting point, the revenue that could be lost in case of a disaster can be determined, based on discussions with the respective business unit representatives.

BalaNCE SHEET

We have been in operation for many years and have never had a major natural or man-made disaster,

impact our business, so do we really need to invest in planning for one now?”

This question used to be asked in board meetings across our region, but not anymore. It seems that most business leaders understand that globalisation has lead to an interdependency that exposes the business community to events throughout the world.

The diversity and complexity of issues that need to be considered as part of business continuity management (BCM) has increased significantly. The impact of the earthquake and subsequent tsunami in Japan was felt across the world. The supply of vehicles and automotive components impacted production lines in the United States and other regions, and delayed vehicle deliveries worldwide.

Similarly, man-made disruptions, such as the political unrest sweeping the Middle East, have had a profound effect on both local business operations and on businesses across the region. The speed and breadth of change and its consequent disruption caught many organisations off-guard.

IdENTIfyINg bCm rEQUIrEmENTS One of the key challenges of any BCM

initiative is to ensure contribution and subsequent consensus from all units when finalising the key business operations.

An organisation’s recovery requirements are based on the potential value of an impact a disaster could have on individual business units, and thereby mandate recovery within certain specified timelines agreed by senior management. Therefore the list would feature the ‘A list’ of functions, key to an organisation’s survival.

“So do you mean that if my business function does not figure on the list, I get to take that day off?” That’s the kind of conundrum you might have to encounter from your colleagues at the other end. It needs to be emphasised that there is certainly a part that everyone plays, especially in small- to mid-sized organisations.

maINTENaNCE Of plaNSOften preparation of business continuity

plan(s) for the organisation and business units is the easy part. The difficulty is in the periodic maintenance of the plans.

Plans are ‘live’ documents that need to be aligned with organisational changes in terms of structure, changing roles and responsibilities, business lines, products, services, etcetera.

There are no fixed periods for reviewing and upgrading plans, but at the very least, an annual review is recommended to ensure that contact details of the recovery team have been updated.

Subash Shanmugam is manager forKPMG IT Advisory in Bahrain.

A legitimate attempt should be made to compute the financial and non-financial impact of a disaster.

STraTEgIC rECOvEry OpTIONS Decisions on strategic recovery options are often driven by a trade-off between investment value and the availability achieved. The types of questions management will want to answer include:• How much do we need to invest for

the disaster recovery to ensure 90 percent availability of our business?

• How much do we stand to lose if we forgo this investment?

• Recovery options should ensure recovery of at least the following four elements:

• People (real assets of the firm)• Business functions (critical ones)• Physical infrastructure (office premise,

branches, etcetera)• Technology (to support critical

business functions).

ECONOMIC BaROMETER

Portugal is the latest country to be rushed to the eurozone’s emergency room, where the banking surgeons of the International Monetary Fund and the European Central Bank are trying to revive its economy. Karim Nakhle looks at the issues that led to the fall of Portugal, and postulates on the ostensibly bleak future of the eurozone itself.

uNDEr QuArANtINE:

This file photo shows a giant sign for the European common currency, outside the headquarters of the European Central Bank (ECB) in Frankfurt, Germany. Economic bailouts in Greece, Ireland and most recently Portugal, as well as fears for Spain and most most recently, Italy, as well as concerns of a second round of bailouts for Greece, have once again focused doubt and debate on the viability of the eurozone. (Photo by Ralph Orlowski/Getty Images)

ECONOMIC BaROMETER

TheEDGE 39

POrtuGALa SCOUrgE Of dENIal

According to the dictionary, denial is a defence mechanism postulated by well-known psychoanalyst Sigmund Freud, in which a person who is faced with a fact that is too uncomfortable to accept, rejects it instead, insisting that it is not true, despite what may be overwhelming evidence to the contrary.

Using this hypothesis, some modern European leaders arguably ought to be crowned modern ‘Kings of Denial’. This phenomenon of shying away from their financial problems in the face of impending doom all began with Iceland, which used the most common form – called simple denial – in other words, rejecting the reality of the unpleasant fact that its banks were facing imminent bankruptcy in 2008.

Though not a member of the eurozone, the events in Iceland both precipitated the global financial meltdown and were in many ways, the harbinger of things to come. Indeed, as the world financial system was slowly correcting, within the European Union (EU) economic alliance and currency bloc, the authorities in Greece followed in early 2010 with another form of denial called projection: admitting the fact they were in serious trouble but denying any direct responsibility.

Then, when asked about the rumours of a bailout, Ireland used a third form of denial – called minimisation – in admitting the fact the writing was on the wall for their economy, but refuted its seriousness.

However, arguably the worst form – total denial – recently came from Portugal, when it capitulated and admitted it needed help, after a year-long denial and struggle to solve its problems without outside assistance. To add humiliation to the misery, the Portuguese

AND THE EurOZONE

Portugal’s now-resigned prime minister Jose Socrates ponders the cause, effect and future of his country’s fragile economy after the country requested bailout assistance from the European authorities. (Photo by Michael Reynolds-Pool/Getty Images)

When the now-former Prime Minister’s cabinet took office in 2005, it was not able to forecast that the country was on the verge of bankruptcy. By the time the cabinet realised it had to take action, in March 2011, it was already too late. A further blow came when Prime Minister Sócrates resigned on March 23, after opposition parties voted against the austerity measures he had proposed – which included a wide-ranging plan of tax rises and spending cuts – in an attempt to cut Portugal’s deficit and retain market confidence.

Portugal fought hard against a rescue, saying it was a different from Greece and Ireland. Economists quickly warned, though, that the country would have to stick to the latest reforms announced by the cabinet, otherwise the country would have to beg the

prime minister, Jose Socrates, who had said that a Greek and Irish style bail out would be a “last resort”, told his people in a televised address that Portugal had reached an especially grave moment, and things will only get worse if nothing was done immediately.

ThE pOrTUgUESE dEClINEBetween the 1980 and 2010, Portuguese

governments encouraged over expenditure and investment bubbles, through murky public-private partnerships, by funding numerous ineffective and utilising unnecessary external consultancies and advisory committees.

The net effect was to allow considerable denigration of state-managed public works, the inflation of top management and head officers’ bonuses and wages, and a persistent and lasting recruitment policy that boosted the number of redundant public servants. Along with the help of risky credit, public debt creation, and mismanaged European structural and cohesion funds across more than three decades, this led to their current situation.

To add to their woes, Portugal also fell victim to successive waves of conjecture by pressure from bond traders, rating agencies and speculators. Ironically, in the first quarter of 2010, before the current market pressure, Portugal had one of the best rates of economic recovery in the EU. Portugal’s industrial orders, exports, and entrepreneurial innovation matched or even surpassed its neighbours in Western Europe, but unemployment had risen to a 30 year of more than 11 percent, education levels had fallen well below the eurozone average and the country had began depending heavily on industries such as textiles, where competition from powers such as China is fierce.

TheEDGE40

ECONOMIC BaROMETER

EU for a bailout. It was subsequently difficult for Portugal to persuade investors to continue to fund them and thus yields on Portuguese government debt have reached record highs, with the 10-year bond trading hitting 7.6 percent – widely seen as an unsustainably high cost of borrowing – and eventually had to succumb to the pressure from financial markets.

Cry fOr hElpPortugal still needed to repay bond

investors more than EUR4 billion (QR29.3 billion) in April and almost EUR5 billion (QR26 billion) in the middle of June. But though Portugal raised EUR1 billion (QR5.15 billion) in T-Bills, or short-term debt, it paid a massive interest of 4.652 percent premium.

If a country can’t afford to fund itself, and can’t cut costs internally to pay off debts, it needs help. Ratings agency Fitch estimated that Portugal needed EUR60 billion (QR309 billion) in funding through to the end of 2013. That figure has since risen, as the crisis was bigger than expected, Portuguese banks were also on the verge of collapsing and needed an additional amount to be bailed out too.

In the middle of last year the eurozone bloc established a EUR440 billion (QR2.2 trillion) fund called The European Financial

Stability Facility (EFSF), to assist member countries in financial strife. The fund was established after Greece received a EUR110 billion (QR556 billion) bailout in April 2010, followed by a EUR85 billion (QR438 billion) bailout for Ireland in November. This fund came in handy as Portugal then officially asked for a financial assistance bailout worth EUR78 billion (QR400 billion) in May 2011.

European leaders, who are expecting a deepening economic crisis within Europe, with the possibility of more bailouts, have recently established a permanent stability fund that will replace the current fund when it expires in 2013. The permanent fund will be able to lend up to EUR500 billion (QR2.5 trillion), and is designed to reassure markets that the bloc is serious about supporting its members.

The crucial issue of an interest rate that Portugal will be charged will not be set until later in June, but the Portuguese prime minister said that under the terms of the deal, Portugal would be given more time to reach its budget deficit targets than had previously been expected.

The deficit will have to be cut to 5.9 percent of GDP this year, 4.5 percent in 2012 and three percent in 2013. Portugal had previously aimed to reduce their deficit to 4.6

percent this year, three percent in 2012 and two percent in 2013.

The International Monetary Fund (IMF) has insisted on a lower average interest rate on the bailout loans for Portugal than Greece and Ireland initially received, and wanted the aid to last four rather than three years to give the Portuguese economy additional time to recover. It said richer European nations were resisting the idea, fearing a public backlash at home.

In return for the loan, which includes EUR12 billion (QR62 billion) of support for the country’s banks, Portugal has had to agree to a number of measures to increase tax revenue and reduce spending.

These include:• a cut in the public sector wage bill by

freezing wages and limiting job promotion,• an increase in sales tax on items such as

cars and tobacco,• the privatisation of stakes in national

energy companies and the sale of national airline, TAP Air Portugal,

• a reduction of the most generous state pensions and the freezing of others, and

• the maximum length unemployment benefit can be paid to be cut from three years to 18 months.

ThIrd baIlOUT ImpaCTPortugal accounts for less than two per

cent of the eurozone’s total economy, but the bailout nevertheless entails possibly dramatic repercussions for the entire bloc.

Portugal needed the backing from all 17 eurozone nations to tap Europe’s stability facility for cash. Its bailout faced some challenges from Finland, which originally opposed the idea. Finland wanted a guarantee that bailout donors will get their loans repaid before private investors, but many market watchers expect some sort of debt restructuring over the next few years. Finland will require collateral from countries seeking assistance from the EFSF after Portugal.

Moreover, the loans have effectively spread the cost of supporting struggling economies across Europe, and there are political and financial implications. The countries that are taking bailouts face severe austerity measures,

A woman holds her umbrella as she walks past a branch of Portugal’s leading bank Banco Espirito Santo in Lisbon, Portugal, the broken sign and gloomy weather indicative of the grim economic climate of the country at present. (Photo by Jasper Juinen/Getty Images)

ECONOMIC BaROMETER

TheEDGE 41

while those providing the bulk of the loans risk a political backlash.

In Greece, people took to the streets in protests at the austerity measures, while Ireland voted out the government that negotiated its bailout package.

Growth in the eurozone averaged 0.8 percent in the first three months of this year, compared with a sickly 0.5 percent in the United Kingdom, shocking recent figures showed. Germany, Europe’s powerhouse economy, grew by 1.5 percent, while France exceeded forecasts to grow by one percent in the first quarter. The strongest growth was in Lithuania, whose economy expanded by 3.5 percent in the period.

The greatest fear in the eurozone is that Portugal’s bigger neighbour, Spain, the EU’s

fourth-largest economy, will also soon need bailing out, which the EU may not be able to afford. Spain has long been seen as the economy that is too big to fail, given its huge size relative to those already bailed out.

Other countries have exposure to its debt, and any admission that it could not meet its obligations would have an enormous knock-on effect.

Ironically, Spain’s minister already came out to claim Spain is not Portugal, Ireland or Greece, echoing the mislead defiance initially put forth by all three.

This combination of denial, delay and investor doubt causes a self-fulfilling deterioration in financial markets, which consequently led to the downgrade of most of

the Spanish banking sector ratings by ratings agency, Moody’s.

Beyond the specifics of the Portuguese bailout and the current Spanish situation, the eurozone itself also appears deeply fractured, despite the best efforts of its leaders to settle the crisis.

The IMF has warned that the debt afflicting the so-called PIG economies (Portugal, Ireland, Greece) at the margins of Europe could infect the health of the entire eurozone. In a stark statement to Eurozone leaders, added a “shock of confidence could spread quickly throughout Europe”.

Indeed, the end game of this great experiment – having a common currency across such different economies – is not yet clear.

What some of Europe’s leaders said prior to being bailed out:

“The European Union is not going to bail us out.” - Greece’s prime minister, George Papandreou, as reported on www.news.bbc.co.uk, after Davos 2010.

“We have every confidence that we will be able to manage this economy. It’s been a very hard-won sovereignty for this country and this government is not going to give over that sovereignty to anyone.” – Ireland’s minister for Enterprise, Trade and Innovation, Batt O’Keeffe, speaking to Irish national broadcaster RTÉ in November 2010, as reported on www.irishtimes.com

“(Now-former) IMF chief Dominique Strauss-Kahn said yesterday that Ireland can manage its fiscal affairs well, and the fund has had no request for aid. ‘I have not been in contact with Ireland,’ he told reporters on the sidelines of an Asia-Pacific summit in Yokohama, Japan. ‘So far I have not had a request, and I think Ireland can manage well.’” – Also as reported on www.irishtimes.com, in November 2010.

“[Portugal] won’t ask for any financial help because it’s not necessary”. - Portuguese prime minister, José Sócrates, in January 2011, at a press conference in Lisbon, as reported by www.guardian.co.uk

“Greece is not holding any discussion on any new aid package. Such reports about discussions on new aid are not true.” – A senior Greek finance ministry official, as told to Reuters news agency, in May 2011…

Greek prime minister, George Papandreou, speaks to the media after talks with German Chancellor Angela Merkel in February 2011. Papandreou was seeking Merkel’s support for the repayment period of Greece’s crisis loan beyond 2016 and a reduction of the interest rate, as well as to discuss revised proposals to help eurozone members who run into financial hardship in the future. (Photo by Sean Gallup/Getty Images)

SAILING ON DENIAL?

miSSion Qatar: DIvErSIFY AND PrOSPEr

SPECIAL COvEr StOrY

IN THESpOTlIGHT

The International Monetary Fund disclosed that Qatar is on track to be the best performer in the region, and its gross domestic product growth is sustainable on the back of an expansion in hydrocarbon production and an increase in investments. But are Qatar’s diversification aims beyond reliance on oil and gas, as per the National Vision 2030, going to light up the country’s future? So far, so good, reports Edward Jameson

The presence of world-renowned tertiary education institutions, such as Carnegie Mellon, in Doha’s Education City complex are at the very heart of Qatar’s vision to shift the country from one that is dependent on hydrocarbons, to one that is being rebuilt on the strength of a ‘knowledge-based’ economy.

43TheEDGE

IN THE SpOTlIGHT

For almost a decade now, the share in Qatar’s gross domestic product occupied by the hydrocarbon sectors has been, on average, 57 percent.” This statistic, published last year by global thinktank, GLG Research, opened a window onto the historical reliance of Qatar

on its hydrocarbon export industry.Being able to boast the world’s third largest natural gas reserves,

behind only Russia and Iran, is the economic blessing that has in recent years seen Qatar punch far above its weight on the global stage and has, ultimately, allowed the Emirate to accrue the funds necessary to secure the rights to host sport’s most lucrative global tournament – the FIFA World Cup, in 2022.

But such fortune brings with it a challenge that will reach across generations of Qataris. In order to maintain the position that the country has assumed in recent years, the state must look beyond the hydrocarbon boom, particularly in light of the planet’s need to shift towards a global energy policy based more on renewable sources, and less on fossil fuels.

This means a mass programme of economic diversification for Qatar, which is already well underway, along with other Gulf countries that find themselves in a similar position.

Qatar has a brief moment in time – a golden opportunity – to diversify its economy over the next 20 years away from hydrocarbons. But what does this really mean for the state over the coming decades? Such a programme entails an enforced paradigm shift on a number of levels. It must start at the beginning, with education, and predict what will follow, while maintaining the foundations on which the future will be built.

a ThrEE prONgEd apprOaChQatar is pursuing a three-pronged approach in its long-term quest to

secure a prosperous economic future, as spelt out in its National Vision 2030. These are:• A knowledge-based economy characterised by innovation,

entrepreneurship, and excellence in education,• The expansion of industries and services with competitive

advantages derived from hydrocarbon industries,• The design and development of economic activities in which Qatar

can specialise, including the technical and human requirements of these activities.

STraNd ONE: graSSrOOTS EdUCaTIONOver the past decade, Qatar has made its diversification intentions clear

with the commissioning of a mega-project that constitutes the ‘grassroots’ of its long-term strategy, and provides the foundations on which the first strand of its strategy – a knowledge-based economy – must be built: Education City. The sprawling 14-square-kilometre campus already houses a number of progressive organisations and research centres, alongside internationally renowned establishments including Georgetown University, Carnegie Mellon University and HEC Paris, to name but a few.

The Qatar Foundation for Education, Science and Community Development (QF) is the driving force behind the mega-project.

The magnitude of the task before the foundation, which formed in 1995, is immense.

In 2008, the World Bank published a report entitled The road not travelled: Education reform in the Middle East and North Africa, which said:

TheEDGE44

Research and development, particularly in the fields of science and technology, is the cornerstone of the Qatar Science and Technology Park and as well as the primary focus of many of the adjacent institutes of learning at Education City in Doha. (Image courtesy of Texas A&M University Qatar)

“Countries in the Middle East and North Africa need to overhaul their education systems to meet the demands of an increasingly competitive world and realise the potential of their large and growing youth population. The education systems must be changed to deliver new skills and expertise necessary to excel in a more competitive environment.”

Since the inception of the QF, Qatar has experienced a seismic shift in its education landscape, one that was ongoing at the very time that the World Bank report was published. At the centre of this shift has been Qatar University, which flies the flag as the state’s oldest higher education institution. Tellingly, the university is aiming to develop its own policies within the framework of the state’s 2030 vision.

“We embrace our responsibility to play a key role in the dialogue on quality education in Qatar; an education that will help shape the future of the country,” professor Sheikha Abdulla Al Misnad, president of the university, said last month at the launch of the Qatar Education Conference and Exhibition, an event designed to promote the work of the QF and Education City across Europe. In its emphatic push to live up to the standards promoted by the World Bank, Qatar is not doing things by halves. Indeed, the economic future of the nation depends on it.

STraNd TwO: bEyONd hydrOCarbONSThe path to long term prosperity over the next two decades will be

arduous and, by its very nature, a diverse one. Beyond the cornerstone of education, the state must also put in place the infrastructure to enable its people to fulfil their – and the country’s – potential within

the dimensions of a rapidly evolving global economy. This will require ensuring that the newly educated workforce has a selection of economic sectors that can be infused by its talents.

This is where the second strand of Qatar’s 2030 vision comes into play: the expansion of industries and services with competitive advantages derived from hydrocarbon industries.

This will involve the application of the immense amount of knowledge and skills built up within the energy sector into a diverse range of sub-sectors. Far from continuing its reliance on hydrocarbon exports, the state is aiming to use its energy industry as a macroeconomic catalyst – literally the fuel behind phase two of its diversification programme.

At the centre of this phase are energy intensive industries such as aluminium production, spearheaded by projects such as Qatalum – one of the largest aluminium plants ever launched; Industries Qatar, one of the Middle East’s industrial giants with interests in the international petrochemicals, fertiliser and steel markets; and a wealth of firms that work within what is the next natural step in the evolution of Qatar’s hydrocarbon industry – the clean energy sector.

In April, Qatar Science and Technology Park (QSTP) inked a deal with the US Department of Energy aimed at promoting collaboration on the development and deployment of sustainable energy technologies. “By bringing our scientists and engineers together to pursue joint research, we‘ll be able to develop the next generation of clean energy technologies more quickly,” United States deputy energy secretary, Daniel Poneman, said. “These innovations will help us to grow our economies and to build a more secure, prosperous and sustainable clean energy future.”

IN THESpOTlIGHT

SPECIAL COvEr StOrY

Over the past 10 years, Qatar has made its diversification intentions clear with the commissioning of a mega-project that constitutes the ‘grassroots’ of its long-term strategy, and provides the foundations on which the first strand of its strategy – a knowledge-based economy – must be built: Education City.

Part of the Qatar National Vision 2030’s diversification is to establish the country as an international hub of research and development, particularly in the science and technology fields. The following are just a few of the cutting-edge technologies under development in Qatar:

• advanced Cooling Technologies, including next-generation cooling technologies, systems integration and building controls;

• Renewable power Generation, for example, cost-effective integrated photovoltaic systems and coating technologies to reduce the effect of weather conditions;

• Energy Storage, including high energy density electric storage and thermal storage for combined heat and power systems;

• Carbon Capture and Sequestration, including improving the efficiency of existing and next-generation technologies and methods for the safe and efficient storage and transportation of high-pressure carbon dioxide;

• Water Treatment Systems, including efficient desalination techniques and effective water purification.

Sources: Qatar Science and Technology Park/United States Department of Energy

45TheEDGE

Besides the myriad of economic opportunities Qatar’s securing of the FIFA 2022 World Cup holds for most sectors and an associated boost for the state’s diversification aims, the event also provides Qatar with the ideal opportunity to invest in and become a world leader in advanced cooling technologies and stadium construction. (Al Khor Stadium, artist’s illustration courtesy of Getty Images)

QSTP executive chairman, Dr. Tidu Maini, offered an insight into what direction the QSTP will steer the deal, saying it provided an opportunity “to collaborate with leading international laboratories, in technology areas that are a priority for QSTP’s future development”.

This is precisely what the second strand of the 2030 Vision looks like in real terms. This is evidence of that idea coming to fruition – this is what economic diversification really means in the Qatari sense.

STraNd ThrEE: a NEw ECONOmyThe third strand of economic diversification as per the National

Vision 2030 takes the basic principles of strand two – taking the skills from within an area in which Qatar already specialises – and extending those skills to a far greater variety of economic sectors, creating a more diverse spread of expertise.

Rather than taking what it already knows and extending it, Qatar is taking the new knowledge that it is building up, and extending this further into areas in which it should naturally specialise, due to environmental, societal or economic reasons.

For example, Qatar has an opportunity to become a world leader in advanced cooling technologies through the design and construction phases of its air-conditioned stadiums, which will play host to the 2022 World Cup. And also for environmental reasons, Qatar now has every reason to invest not just cash but also expertise and human capital in water treatment systems, including new, energy efficient desalination techniques and water purification.

IN THESpOTlIGHT

Within the energy sector, but outside of renewable energy, Qatar has every incentive to push the field of carbon capture and storage (CCS). The reasoning here is economic, as opposed to environmental: if gas-fired power plants can be equipped with CCS technology, then nations can burn gas without fear of increasing their carbon emissions, and the potential market for Qatar’s proven gas reserves will begin a whole new boom.

This may not appear to constitute diversification away from gas at first glance, but the same technology can also be applied to coal-fired power plants. Coal is an abundant source of fuel the world over. Qatar would not be in a position to cash-in through exporting coal, but it would be in a position to export CCS technology, further diversifying its economy.

Each of these areas was mentioned in the deal struck between the QSTP and the US energy department (see box).

According to official estimates, Qatari GDP growth, between 2012 and 2016, is expected to average 4.4 percent within the hydrocarbons sector – and 9.1 percent within the non-hydrocarbons sectors. And even more reflective of Qatar’s progress towards permanent diversification, the share held by hydrocarbons in total output is expected to decline to about 42 percent by 2016.

This will mean the share held by hydrocarbons will have been cut from an average of around 57 percent per year over the past decade, to 42 percent in 2016 – while at the same time maintaining growth. Economic diversification will be a long journey for the nation, but it is a vital and exciting one, laden with opportunity.

For Qatar in 2011, it is a case of so far, so good.

QAtAr: A HuB OF tECHNOLOGY

ExxonMobil Qatar’s investments in Qatar stand at almost QR60 billion with the development of the country’s biggest energy venture to date, the Barzan project. As the oil and gas giant’s president and general manager for Qatar, Alex Dodds explains in an exclusive interview with Rachel Morris, the partnership between Qatar and ExxonMobil is one of the industry’s strongest and most unique.

BUSINESS INTERvIEW

thE road toBArZAN

TheEDGE 47

BUSINESS INTERvIEW

oil and gas multinational ExxonMobil has been in Qatar in one form or another since 1935, when Doha was little more than a sleepy

village. Today, as Qatar stands on the verge of a new phase in its development, ExxonMobil is the biggest foreign investor in Qatar’s liquefied natural gas (LNG) business, with a stake in 12 of 14 plants associated with the country and its partner Qatar Petroleum (QP).

It was ExxonMobil’s superior technology and experience in similar fields and environment that made them the obvious choice, says Dodds.

“The reason we came here was because BP had elected to remove themselves from the North Field Development, he explains. “At the time it was a discovered gas resource that was stranded too far away from the traditional markets for natural gas at the time. The Emir had a vision to try and commercialise natural gas at the time. We were invited because of our experience in Indonesia to come and talk to them about how we could get an LNG venture off the ground.”

A BENEFICIAL PArtNErSHIPQatargas 1 – which was the first LNG

venture with Qatargas, French oil and gas giant, Total, and Exxon – was then formed, explains Dodds. “In return for what we delivered, we were given the rights to the next 10 million tonnes of development, which became RasGas.”

Dodds feels that the partnership between ExxonMobil and QP has established Qatar as a major player on the international LNG market. “Over the years what we have done in partnership with QP is to turn the geographic disadvantage that Qatar had into a huge advantage for the country globally,” he says.

Iran, Iraq, Saudi Arabia and the United Arab Emirates (UAE) all have large gas reserves, which, for various reasons, they have failed to exploit efficiently. Qatar, with the world’s third-largest gas reserves after Russia and Iran, has recently emerged as the global leader in LNG exports, but has been reluctant to export gas to Gulf neighbours that have traditionally resisted paying international prices for the fuel.

Dodds says the companies were able to develop new technology together offshore and onshore, which resulted in greater and more efficient production techniques. “The wells offshore in the North Field are capable of producing five times more than the traditional North Sea or Gulf of Mexico gas wells,” Dodds reveals. “It’s a combination of the size of the reservoir and the completion technology that we brought from Indonesia…The North Field has 900 trillion cubic feet (of natural gas). It’s high quality gas. It’s a complex reservoir.”

To put this into context you can compare [the North Field with] the very successful Arun LNG project in Indonesia, which was considered large – it had around 14 trillion cubic feet. “That gave us the option to build big,” Dodds says, explaining that the size of the reservoir means ExxonMobil can employ economies of scale. “We were able to put technologies in place that allowed the Qatar LNG to compete economically with Indonesia, Malaysia, and Brunei – all the traditional LNG business countries. Historically, the LNG supply industry was predominantly in North Africa and Southeast Asia, with a small volume coming from Alaska. The main customers were countries such as Japan, Korea, and Europe.”

Enter Qatar and ExxonMobil.“We were able over time to change the

commercial structure of the LNG business,” he continues. “Traditionally you would secure a market then develop the supply source with financing support over a 25- to 30-year contract. And that is where we started off initially [in Qatar].

Dodds explains that in a low price market, Qatar now has the flexibility to sell the LNG elsewhere in the world depending on demand. “It gives the State of Qatar much more options in terms of getting the best price for its LNG,” Dodds says.

“But because of the size of the reservoir, because of the way were we were able to quickly develop it and get the LNG positioned globally, we were able to leverage our traditionally liquid markets in Western Europe and the United States (US) and secure sales contracts.”

Dodds explains that in a low price market, Qatar now has the flexibility to sell the LNG elsewhere in the world depending on demand. “It gives the State of Qatar much more options in terms of getting the best price for its LNG,” he says.

And Dodds is a man who should know the global markets. He has more 24 years experience in the oil and gas sector of which 20 years have been with ExxonMobil and its affiliates. In addition to working in Qatar and Canada, he has worked in Brazil, the United Kingdom’s (UK) North Sea, the US, Europe and Indonesia. He has headed up ExxonMobil in Qatar since 2006.

According to ExxonMobil’s own forecast released last month, rapid growth in emerging economies will drive global energy demand up by 70 percent by 2030 from its level in 2005. Fossil fuels – oil, gas and coal – will continue to meet most of the world’s energy needs during this period, with gas showing the highest growth in global consumption.

BuILDING CAPACItYMuch of the partnership’s success is

also attributed to the stable and supportive political and economic environment engendered in Qatar. “I don’t think you can point to a partnership in the energy sector that

TheEDGE48

has been as successful as the one between QP and ExxonMobil. It really has leveraged ExxonMobil strengths and QP’s strengths.”

ExxonMobil and Dodds are also mindful of the potential community tension arising from a company like theirs taking profit out of the country. With US$16 billion (QR59 billion) in investment in Qatar alone (compared to ExxonMobil’s US$39 billion/QR142 billion) globally), the dividends are huge. According to Dodds, the company works hard to balance this.

“We took a huge risk coming here (to Qatar). At the time it was by no means certain that there would be 77 million tonnes. It was by no means certain that there would be six million tonnes,” he says. “Our business is all about managing risk. Our business is all about making long term outlooks for your decisions. We don’t make decisions based upon oil prices on a daily basis. We make decisions based on the quality of a resource, the outlook that we have…we design the business to survive the highs and lows of the price cycle. We were able to build high quality ventures here in partnership with QP, and that [took] a significant amount of money to make happen. And we were able to enjoy the benefits of that. We don’t just take money out.”

Dodds points to a soon-to-be-finalised “long term legacy project” with Qatar

Museums Authority as part of their commitment. “That’s to recognise what we have achieved as a company but also to show the community that we are not just here to make money,” he says.

Aside from the so-called ‘Q’ companies, ExxonMobil is one of the most high profile supporters and sponsors of social, sporting and research programmes in Qatar. “We partnered with Qatar Science and Technology Park very early on and built a research lab there that is carrying out real research,” Dodds says. “This is to help build capacity in the country in terms of economic development and environmental programmes…it’s not just about people.”

Dodds describes this as working to build the next set of opportunities for the future of the company. “It’s a unique environment. We are going to spend around QR218 million by the time 2014 comes around on research programmes designed to address issues around the environmental emissions that come from the LNG business, as well as things like water discharge into Ras Laffan Harbour,” he adds. “[Water discharge] is an issue that needs to be kept on a regular monitoring basis. The research that we have done shows there has not been any real detrimental impact.”

It is, in fact, the only research facility the company has of this type outside of the

US. The centre does research on relevant technologies for the State of Qatar, and for the LNG business. Currently it has two main research focus areas: LNG safety and the environment. But, says Dodds, the company through its research arm, is committed to studying this and other important issues in the long term.

ExxonMobil is also active in supporting the government-sponsored Social Development Centre, as well as issues including the advancement of women as part of the company’s desire to, as Dodds explains, give back to the country. Dodds says ExxonMobil has benefitted internationally from the partnership in terms of technology and expertise.

“All the way from safety to cost effectiveness,” he furthers. “We always try to take lessons learned and leverage them globally. We are an organisation that is driven by functional excellence.”

tHE BArZAN PrOjECtJust as Qatar is ready to step into a new

phase of infrastructure development ahead of its 2022 World Cup destiny, ExxonMobil is about to embark on a massive project to fuel this demand. “We have come to the end of this phase of the development of LNG, the 77 million tonnes celebration that was held last year was a celebration of that journey,” Dodds says, calling it a “proud moment”.

ExxonMobil has built LNG terminals in the UK, Italy and US as part of the LNG value chain development. “The next phase of the development of the North Field will be the Barzan project with QP. The Barzan project’s primary purpose is to build a gas processing facility to send gas to power stations and the chemicals projects in Messaieed.”

The size of this project cannot be underestimated, opines Dodds. “It’s a critical project in the development of the infrastructure for the country. Not only leading up to the World Cup, but also for the vision of where His Highness the Emir wants the country to be in the year 2030,” Dodds explains.

The project will help Qatar meet its growing internal demand for electricity. By 2030, the world’s demand for electricity

BUSINESS INTERvIEW

ExxonMobil’s partnerships with the Qatar government and companies such as Qatargas - one of their LNG trains pictured here - have created a unique precedent and set a high standard in their development of the country’s hydrocarbon potential.

TheEDGE 49

The Barzan gas project is Qatar’s most expensive energy venture energy since the Pearl GTL plant. Barzan will produce 1.4 billion cubic feet of gas a day once its two production plants are completed in 2015, and will help Qatar meet its demand for electricity.

plans to boost domestic production of gas to four billion cubic feet by 2015, up from 2.8 billion cubic feet a day.

QP and Exxon Mobil in early 2009 decided to delay the Barzan scheme by up to a year in a bid to reduce costs, which had soared after prices for raw materials, equipment and labour reached record highs due to supply constraints amid strong economic growth. Dodds admits the completion date for the project is “depending on how Japan recovers”. The main contractors for building phase are Japanese and the country is reeling economically from the earthquake earlier this year.

Dodds says the future looks good, but the next steps are up to their partners. “Beyond that it’s really what QP wants to do...There is a moratorium on offshore development on the North Field at least until 2014.”

Dodds explains this was put in place as QP wanted to check the reservoir to ensure that the completion plan and future projects were efficient. “Also…Ras Laffan was getting too busy and it was a prudent step,” he adds.

Dodds, pictured far left at the award ceremony of the recent Qatar ExxonMobil Open tennis tournament, says his company is committed to investing back into Qatar in many different ways. (Photos courtesy ExxonMobil)

will increase by more than 30 percent compared with 2005. The US$8.6 billion (QR31 billion) Barzan gas project is Qatar’s most expensive energy venture energy since Royal Dutch Shell announced the Pearl gas to liquids plant (GTL), now budgeted at US$19 billion (QR69 billion). Barzan will produce 1.4 billion cubic feet of gas a day once its two production plants are completed

in 2015. Qatar Petroleum owns 93 percent of Barzan, with ExxonMobil holding the remainder. The project is located in Ras Laffan Industrial City.

“This project will play a critical and strategic role in sustaining the high growth rate of the Qatari economy,” Qatar’s then-energy minister HE Abdullah Al Attiyah said earlier this year. At the time he said Qatar

BUSINESS INTERvIEW

tHE EXPAtfaCtor

whErE do EXpatriatE worKErS CurrEntly fit into Qatar? thEEdgE invEStigatES

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With a booming economy, Qatar is undergoing a hiring frenzy, from construction labourers through to upper management positions. However, with calls from some quarters for a cap on the number of expatriates in Qatar, officials have had to strike a delicate balance between feeding development and ensuring their citizens do not feel marginalised. Rachel Morris looks at the challenges facing expatriates working in the country and the difficult decisions facing Qatar on this often-contentious subject in the future.

Foreigners with temporary residence status make up around three-quarters of Qatar’s small and growing population. Foreign workers comprise about 90 percent of the total labour force, ranging from CEOs to pizza delivery boys, and therein lays the challenge, as the expatriate workforce is so diverse.

NECESSItY AND NuMBErS“Labour demand in both growing and

emerging economic sectors is outpacing the supply of local populations’ workforce skills,” says a recent report, Facing Human Capital Challenges of the 21st Century by the RAND-Qatar Policy Institute. In other words, in small but rich countries like Qatar, large numbers of foreign workers are needed just to keep the country running. This has also been acknowledged by the Qatari leadership through the National Development Strategy, released in April. The NDS is the forward plan for implementing the Qatar National Vision 2030, which at its very core, seeks to establish a vibrant knowledge-based economy that will “benefit all in Qatar”.

Tellingly, the NDS also alludes to the failings of the current system: “A rigid labour market hampers the development of a workforce commensurate with aspirations for a knowledge economy,” the supporting document says. “The transition to a more diversified economy requires more high-skilled labour.”

Foreigners with temporary residence status make up around three-quarters of Qatar’s small and growing population. Considering there are only around 250,000 actual Qatari citizens, it is no wonder they sometimes feel marginalised. Indeed, foreign workers comprise about 90 percent of the total labour force. Most are South and Southeast Asians, as well as Europeans and North Americans; but those of Arab and/or Middle Eastern

ISSuES AND CHALLENGESThere are obvious issues and challenges

that arise from such a varied mix. Not all nationalities integrate or deal with the challenges of life in Qatar. For example, in an interview with TheEDGE earlier this year, the Vietnamese ambassador revealed that many workers from his country struggled to adapt to Qatar’s climate and culture and returned home. Other expatriates experience homesickness, illness and other problems and do not last long either.

Qatar’s Gulf Cooperation Council (GCC) neighbours have faced both similar and different challenges. Not blessed with the bountiful natural resources of Qatar, Oman has designated certain jobs (notably taxi drivers and hospitality staff) as ‘Omani-only’. However, the balance of expatriates versus citizens in the country is very different and sits at around 70 percent Omani and 30 percent expatriate. The United Arab Emirates (UAE) meanwhile, has a government committee on population policy, with its expatriate headcount growing 18 percent in 2010 alone, fuelled mostly by Abu Dhabi’s rapid growth.

Closer to home, according to recent statistics, only six out of 100 employees in Qatar are Qatari citizens and with rapid growth, particularly in infrastructure, driving labour-force expansion. The percentage of foreigners in the manual workforce stood at 94 percent in 2009, the most recent year from which complete statistics are available.

origin, including Egyptians, Palestinians, Lebanese, Syrians, Yemenis, and Iranians also make up a large and significant portion. The vast percentage work in low-paid unskilled and semi-skilled labourer jobs on the city’s myriad of building sites or in other equally low-paid service industry positions.

Yet the life of an expatriate working in Qatar is of course not at all bad, and is often very good. If you are not labouring in the summer heat on one of country’s dozens of building sites, of course. And therein lays the challenge – the Qatar expatriate workforce is diverse – ranging from the extremely wealthy to those just subsisting, and thus this is a very real issue facing Qatar and other countries in the Gulf, and indeed the rest of the world.

TheEDGE52

Another source of tension is the seemingly high salaries handed to western expatriates who come in as ‘consultants’ or high level executives, who are seen, according to one senior Qatari businessman as “mercenaries”.

These views are reflected in recent statistics that show salaries in Qatar are among the highest in the region, according to GulfTalent.com’s sixth annual review of labour market trends in the region. Another finding of the survey was of Qatar’s rising importance as a destination for professionals. This trend, the report says, was boosted at the end of 2010 with Qatar’s unexpected selection as the host country for the 2022 World Cup.

“While the UAE remains the most attractive destination for professionals, Qatar is closing in fast and, based on current trajectory, could well overtake the UAE in 2011 as the Gulf’s most popular destination for expatriates,” the GulfTalent.com study reports.

Immigration experts say the number of those looking for sponsorship as individuals, rather than working for a company is also increasing. “We are also seeing bigger numbers of people heading to Qatar to look for a job or to set themselves up as consultants,” said one immigration specialist. “This would have been unheard of four or five years ago. Now people are willing to take the risk and give it a try.”

GOvErNMENt POLICY Meanwhile, the government department

charged with guiding the country towards 2030 has admitted Qatar continues to face labour market challenges in country’s journey to diversification. According the General Secretariat Development Planning’s director of social development, Dr. Richard Leete, there are two key challenges. One is how to change to an incentive structure that encourages the private sector to import low-wage and low-productivity expatriates from the global market, rather than investing in skills and technology.

This is important, he said, as some Qataris continue to pass on low wage jobs and working conditions not commensurate with their expectations, and in many cases

Of course, Qatar isn’t the first country to grapple with balancing immigration with the national interest. The United States (US), United Kingdom (UK), France and Australia are all in the midst of sometimes-heated debates about immigration and citizenship.

Looking east, the issue has also been raised in Singapore, Hong Kong and China, to name but three, which are all also grappling with how to find a balance between attracting foreign workers, particularly skilled ones, with developing the working potential of their own populations.

QAtAr’S CONuNDruMHowever, in a country as young and

as ambitious as Qatar, this debate is still relatively new, but it is becoming more intense. This population imbalance, and the fact that Qataris are vastly outnumbered by expatriates, many of whom don’t speak their language, as well social issues in that they do not practice same the religion nor have the same values, can no longer be ignored.

In fact, Qatari commentators angered by the situation are starting to question the imbalance and the country’s commitment to redressing it. Both English and Arabic Qatar newspapers have regularly featured commentary from local writers about lack of opportunities and jobs in the public and

private sectors, as well as other expatriate-related issues.

One article in particular piece forced real attention on the debate. In a comment piece published in The Peninsula newspaper in April, a well-known regular contributor accused expatriates of “looting” her country and wrote, “the billions spent on expatriates are the rights of our country, our citizens.”

It seems these opinions, though considered extreme by the majority with a more moderate point of view, are not isolated. The “looting” alluded to is ostensibly the billions of riyals in remittances sent home every year from Qatar to expatriate home countries.

Figures suggest that remittances routed by expatriates overseas amounted to QR29 billion in 2011, which had more than doubled from 2006.

The bulk of this money is going to Asian and South Asian countries with many Western expatriates holding offshore savings and other kinds of investments.

Yet, with expatriates unable to buy homes in all but the exclusive and expensive Pearl area of Doha, this is often the only option for those looking to invest locally. Financial analysts estimate that around 50 percent of money repatriated overseas could remain in Qatar if the property ownership laws were altered to allow foreigners to buy property.

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TheEDGE 53

their education. Statistics indicate that the majority are drawn to the public sector where the salaries and conditions, including working hours and vacations, are better. They also receive pensions from these jobs – a significant factor in any country.

The second challenge, Leete pointed out, was how to improve the education and training outcomes of Qataris - especially males - consistent with needs of a knowledge-based economy.

According to him, the NDS sets out the transition from low-skill, low-productivity and low-wage to high-skill, high-productivity, and high-wage jobs through appropriate incentive structures (such as pensions and other opportunities) to stimulate both public and private sector employment options.

tHE CurrENt rEALItYYet, while the infrastructure of this

transition is under development, what does this mean for expatriates in the country now?

The life for the expatriate executive in Qatar can appear to be cushy. But it is also one of significant risk – involving moving entire families and their lives to a new and foreign country for what could be a very short-term contract, should they be retrenched quickly and unable to get a letter of no objection, or indeed another decent position in good time. Western expatriates aside, there are many others, especially South Asian and Arab expatriates who have called Qatar home for a generation, yet cannot receive citizenship or other perks because they are not Qataris.

“What many executive-level expatriates can’t always grasp is that coming to any country in the GCC, there is a risk associated with it. Job security is not like it would be in our home countries. It’s not a job for life. We trade that when we take the big salaries, nice cars and school fees for our kids,” said one Doha-based C-Suite executive who, due to the ongoing sensitivity of the topic, wished to remain anonymous.

“I don’t think a lot of people calculate that risk because there is still a bit of arrogance associated with taking a job in this part of this world – this idea that ‘they need us more than we need them’.”

But for many, this temporary status is starting to becoming even harder to endure. Just last month the Qatar Central Bank announced new moves to stop expatriates taking their cars across the Qatari border if the vehicle was under loan from a bank. This mostly affects Arab expatriates, many of whom drive home for extended vacations in the summer or to travel to Saudi Arabia on a pilgrimage to Mecca.

The Qatar Ministry of the Interior has also clamped down on the documentation required for a residency visa. Previously nationals from some countries were exempt from having to obtain a police clearance. This changed in late 2010 and now embassies and missions in Qatar are busy stamping and authorising dozens of documents for their citizens each day.

Meanwhile, there is the burning issue of exit permits, which many expatriates find frustrating and unfair. Like many GCC countries, expatriates in Qatar must in effect obtain permission to leave the country, whether it be for business or on vacation, a restriction ostensibly put in place to minimise fraud and effectively monitor cross-border movement.

Yet despite persistent rumours, and recently for the first time, some official indication that the current system was going to be revised (further enhanced by the country securing the 2022 FIFA World Cup), so far no concrete changes have been proposed.

Qatari commentators angered by the ‘expatriate’ situation are starting to question the imbalance and the country’s commitment to redressing it. Both English and Arabic Qatar newspapers have regularly featured commentary from local writers about expatriate-related issues.

Nevertheless, other, more positive, changes are in the offing. Qatar National Vision 2030 acknowledges the importance of expatriate workers at all skill levels. And, according to the executive, Qatar will soon be considering granting expats the right to permanent residency if they meet “pre-determined criteria”, including their qualifications and experience.

“For the foreseeable future, Qatar will not have a sufficient number of citizens to manage the complex systems, infrastructure and other requirements of a rapidly growing, diversifying and technologically sophisticated economy,” the Qatar National Vision document says. “The transition to a more diversified economy requires more high-skilled labour. Due to the size of Qatar’s economy relative to its population, a significant share of high-skilled workers will have to be expatriates.”

While no time frame has been allocated to effect this decision, which is part of a series of measures aimed at attracting a superior workforce into the state, it is aimed at addressing concerns that the current employment sponsorship rules are a hindrance to the labour market. This is arguably a step in the right direction, most might agree.

In the meantime though, the expatriate debate will ostensibly continue to rage in the majlis, cafés and on the opinion pages of Doha’s newspapers.

FEaTURESTORY

SpECIalFOCUS

With the nation built on pearl diving origins, the ocean has played a defining role throughout the history of Qatar. And in 2011, the emirate’s primary industries must continue to set sail in order to fuel the state’s growth plans, writes Jamie Stewart

In the wake of the devastating earthquake and tsunami that struck Japan in March, the world’s third largest economy was pushed to the verge of an energy crisis, as its Fukushima nuclear plant began a partial meltdown.

In anticipation of the country’s dire need for fuel in order to generate power, the globe’s liquefied natural gas (LNG) producers began to rally round, with Qatar among the first to offer assistance to the Japanese.

“Qatargas stands ready to provide all the support to its long-term partners and foundation customers in Japan to meet any increased requirements for LNG at this time,” a spokesperson for the giant natural gas production firm said.

The situation offered an insight into the vital role, played not just by the energy industry in the global economy, but by a closely related sector: shipping. Indeed, in many ways, the world of shipping is the very definition of big business. According to The Round Table, a coalition of international shipping associations, more than 50,000 merchant ships, which transport an immense variety of cargo, are trading internationally.

LNG delivery remains paramount among Qatar’s maritime exports, but the increasingly important ports and shipping sector in the country is set for major growth in coming years, especially as the New Doha Port comes on line. (Image courtesy Ras Laffan)

QATARSHIPPING:A LIFEBLOODFor

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TheEDGE 55

The world fleet is registered in over 150 nations, and manned by over a million seafarers of virtually every nationality.

In fact, around 90 percent of world trade is carried by the international shipping industry. The United Nations Conference on Trade and Development estimates that the operation of merchant ships contributes about QR1.4 trillion in freight rates within the global economy, equivalent to about five percent of total world trade.

Understandably, the shipping industry is also a vital part of the Gulf countries’ economies: the region’s geographic location, at the point where East meets West, means it is a natural focal point for maritime commerce. And shipping is the very lifeblood of many of the region’s energy export-led economies, including Qatar.

The state is of course the world’s largest exporter of LNG, most of which is transported on the high seas. Last year, Qatar exported 49.44 billion cubic metres of LNG, according to the Statistical Review of World Energy. However, of the world’s vast global LNG shipping fleet, only eight ships fly the Qatari flag – a relatively small amount. But the state’s export industry controls a far greater capacity.

“Tankers are often registered in countries all over the world for tax reasons,” RBI energy analyst, Simon Ellis, has said. “Many of the ships that service Qatar’s industry are registered to the Marshall Islands, Bermuda or Panama, but they will be contracted out to Qatari producers for periods of up to 25 years.”

INvESTINg IN INfraSTrUCTUrE Doha Port is at present the main commercial seaport for Qatar. It is

home to 12 berths up to 300 metres in length, with a draft reaching to 12 metres deep. The total length of its berths is 3644 metres. The port includes a little over 20,000 square metres of enclosed storage space, with a further 100,000 square metres of open storage area.

Other Qatari seaports are based at Ras Laffan, which is home to the country’s LNG export terminal; Messaieed Seaport, which is Qatar’s main oil export terminal; and Al Wakrah Seaport. However, Qatar has plans for more in the Al Wakrah area – much more.

Approximately 30 kilometres to the south of New Doha International Airport, a huge project is beginning to take shape. The New Doha Port, currently under construction, is expected to begin operations in 2014. The construction contracts for the sprawling complex, which will cover an area of some 20 square kilometres, are valued in the region of QR25 billion.

Earlier this year, China Harbour Engineering Company (CHEC) landed the QR3.2 billion contract for the first phase of works, including the foundations and breakwater construction. The master plan was developed by engineering services firm, Scott Wilson. “The objective for the new port is to overcome expansion constraints of the existing port in the Doha urban area,” the firm explained in a statement.

According to Scott Wilson, phase one of the project includes a 1200-metre, three-berth container terminal, a 1200-metre-long general cargo terminal, and separate terminals for grain, car carriers, livestock and offshore supply vessels. Phase two will include the expansion of the northern basin and a new 1200-metre-long container terminal, as does phase three, with basin deepening and widening works.

The mammoth investment that the state of Qatar is putting into the New Doha Port gives an indication of the importance of the shipping sector to the wider economy. It is indeed vital for Qatar to maintain the health of its import and export industries.

Capacity in container transportation is measured in twenty-foot equivalent units (TEU). In line with the Qatari government’s growth trajectory, it is expected that Qatar will require over six million TEU/year by 2030. The first phase will give the port a capacity of two million TEU/year by 2014. The completed port will eventually be linked to the mainland by an 8.5-kilometre trestle bridge. It is forecast that the entire project will be completed in the first half of 2023.

marITImE INCOmEThe mammoth investment that the state of Qatar is putting into the

New Doha Port gives an indication of the importance of the shipping sector to the wider economy. It is indeed vital for Qatar to maintain the

TheEDGE56

health of its import and export industries in order to finance its long-term economic diversification plans.

Only last month, Qatargas, the world’s largest LNG producer, signed a contract to supply long-term Japan-based firms with four million tonnes of LNG over the next year, chief executive officer (CEO) HE Khalid bin Khalifa Al Thani said in a statement recently. The first of these cargoes was discharged whilst the Qatargas CEO was still in Japan – an impressive reaction time for such a large-scale industry – and Al Thani continued that he anticipated further sales. The volumes equate to more than 60 conventional-sized cargoes, Qatargas said, the equivalent of one-half of the output of the company’s 7.8 million tonne per annum mega-trains.

These volumes would be enough to generate power equal to just less than three percent of Japan’s 2010 power consumption, from gas-fired generation, Qatargas added.

In March, Japan’s regional utilities raised the amount of electricity generation from thermal power plants by 10.9 percent year on year to compensate for damage to nuclear reactors, indicating the importance of the deal to all concerned – particularly the people of Japan.

fUEl prICE ShOCkAny logistical industry is susceptible to shocks in the price of crude

oil. In summer 2008, as crude prices scraped the US$148 (QR539) per barrel mark in the build-up to the financial crisis, marine bunker fuel, the lifeblood of container ships, hit US$700 (QR2550) per tonne.

At the time of writing, the latest figures had prices in the United Arab Emirates (UAE) port of Fujairah not far short of this figure, at US$648 (QR2359) 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 fuel bill, at today’s prices, of more than US$3.9 million (QR14 million).

With oil being the main driver behind bunker fuel costs, it pays to look ahead. Investment banking giant Goldman Sachs has said that it expects the market to experience critical shortages as early as next year. While the US-based Energy Information Administration says in its latest Short-Term Energy Outlook that oil consumption will threaten new highs in 2012 – all of which is bullish news for crude markets, but bad news for shipping operators.

UNlOCkINg QaTar’S pOTENTIalDespite the hefty fuel costs, the shipping sector could be a lucrative

one for Qatar – particularly if Australia presses ahead with its plans to introduce a carbon tax. The link may appear tenuous, but it is very real, and could provide a boon to the Qatari economy.

Although Qatar is comfortably the biggest LNG shipper in the world at present, a host of Australian natural gas infrastructure projects are scheduled to come on line in the next decade. However, the country’s ruling Labor government has plans to introduce a tax on carbon emissions. Such a move would hit the domestic energy sector hard and, rather than absorb the cost themselves, the country’s LNG

MErCHANDISE trADE MAttErSOne measure that relates to the size of a nation’s shipping industry is merchandise trade. The system measures trade in goods – both imports and exports – but excludes services, capital transfers and foreign investments. According to the World Bank, Qatar’s merchandise trade totalled 65 percent of gross domestic product (GDP) in 2010. Although this was down from 73 percent the previous year, the figure is far from bad news, because it reflects the ongoing state-led economic diversification programme. Sectors such as financial services and tourism account for a larger share of GDP compared to the income from exported gas than they did previously. However, diversification can also add to the share of merchandise trade. As QNB Capital explained in its most recent economic review, “Qatar’s successful diversification efforts are being realised, with increased export revenues coming in from natural gas, chemicals and related products, alongside iron and steel.”

producers would most likely pass them onto their global customers, predominantly in Asia.

If the price was to be pushed up by an unsustainable degree, the giant Asian economies are likely to look elsewhere to fuel their growth plans, and where better to look than Qatar with its proven flexibility and reliable source of supply? Qatar’s plans for infrastructure development are designed to allow it to pursue its own growth plans, with shipping and logistics playing a central role. Should the Asian giants come knocking, as it was in the tragic case of Japan – Qatar plans to be ready.

Around 90 percent of world trade is carried by the international shipping industry. The United Nations Conference on Trade and Development estimates that the operation of merchant ships contributes about QR1.4 trillion in freight rates within the global economy.

SpECIalFOCUS

ALSO IN tHIS SECtION:

tHE rOutE tO SuCCESS (P.58)Start-ups need specialised information and support if they are to find their way to success. But i360’s Kamal Hassan believes that, unless they are structured to teach entrepreneurs how to build innovative businesses that offer differentiated products and services, the region’s nascent business incubators will not help them reach this vital goal.

kNOwlEdgE & ExpErTISE

• Business Management: Julian Birkinshaw states the case for a lateral thinking approach to business planning and organisational alignment (P.60).

• Small Business Know-How: Entrepreneurs and SMEs must not underestimate the power of effective bookkeeping, advises Lori Love (P.62).

InnovaTIon CulTure • bUsiness ManageMenT • sMall BusIness knoW-hoW • legal InsIghT • MarkeTIng and desIgn

• Legal Insight: As Qatar opens up more to foreign investors seeking full business ownership, Nikk Bond and Brenda Hill look at Free Zones (P.64).

• Marketing and Design: Charles Vincent investigates how ‘augmented reality’ is set to change the way consumers interact with brands (P.66).

INNOvaTION CUlTURE

like art, innovation requires creativity. However, the process of creating a work of art is different than creating an innovation. An artist can sit at a

canvas and make something beautiful, or at least unique. It doesn’t have to be technically good or make the artist famous. It just has to fulfill the artist’s vision.

Innovation, on the other hand, requires that the end result meet certain criteria. Real innovation must solve a problem, create new value, work better than other solutions and be affordable to produce (we’re talking about innovation, not invention. Inventions can afford to be merely clever or creative, with a bit of problem-solving thrown in; innovation cannot).

None of this is meant to disparage artists or inventors, only to remind us that innovation must go beyond creativity to be successful. In a similar vein, businesses must go beyond the ‘basics’ to be successful in the long-term. A business becomes economically viable because it offers better or more affordable solutions than the competition, and also creates new value. The most successful companies in the world – Apple, Facebook, Coca-Cola, GE, BMW, to name a few – are also world class innovators.

In Qatar, and the Gulf region as a whole, we have a passion for business. Statistics show there is one company here for every 25 residents. This means lots of small to medium sized enterprises (SMEs), and lots of people going into business for themselves.

Along with this trend, it’s not surprising to see business incubators popping up all over the place. From the Qatar Science and Technology Park (QSTP) to Ibtikar in Abu Dhabi, there are dozens of incubators set up to help entrepreneurs understand how to start and run a business. It’s not a bad thing at all, to teach the basics of business. What concerns me, however, is the assumption that this influx of incubators will somehow increase the region’s innovation capabilities. I don’t believe it will unless we structure them correctly, and teach entrepreneurs how to build innovative businesses that offer differentiated products and services.

WHY BuSINESS INCuBAtOrS FALL SHOrt

There are many reasons that start-ups and entrepreneurs struggle to survive in this region – access to capital, bureaucracy, lack of business education. Many business incubators are designed to help start-ups overcome these specific challenges. However, without taking steps to ensure their clients add real and sustainable value to the region, they are only doing half the job.

Another challenge in the Gulf, which most incubators have not addressed, is the lack of market research. In other parts of the world, innovators have complete access to data on business and societal needs – information that spawns ideas that, with the help of business incubators, turn into innovative solutions.

In the Gulf, lack of research on business and social needs means that many entrepreneurs go into business without specific goals in mind. This results in the ‘falafel shop syndrome’, as I call it, where every business looks like every other one. There is no differentiation, which leaves businesses at the mercy of fickle consumers and commoditisation. There is also a lack of specialisation, which means many needs go unanswered.

A recent Booz and Company survey found that the most innovative companies in the world are inspired by either technology or needs. Those who use needs to drive their innovations look for unmet customer or market expectations, and find ways to fulfill them. This is a focused approach to innovation, and one that has proven to lead to long-term business success.

tECHNOLOGY PArKS ArE NOt INCuBAtOrS

Another key point we need to make in this region is the distinction between a start-up business incubator and a technology park (the terms are often used interchangeably here, but they are not the same). First, incubators

thE Start-up rOutEto SuCCESSStart-ups need specialised information and support if they are to find their way to success. i360’s Kamal Hassan argues the case for business incubators that go beyond the basics.

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INNOvaTION CUlTURE

are dedicated to small, early stage companies; technology parks typically house companies of various sizes and maturity, and even government and research facilities.

Second, incubators are designed to provide a temporary space for new businesses; technology parks boast more long-term projects and participants. The technology park business model is to host (lease offices) for big research and development (R&D) and technology companies as long as possible.

Incubators, on the other hand, are meant to provide support for start-ups for a certain period of time before pushing them toward the door, which supports the incubator business model of keeping new businesses, and revenue, coming in. Much like a premature baby grows and gets stronger in a newborn incubator, the point of a business incubator is to make a new business strong enough to leave the incubator and survive in the ‘real’ world.

Technology parks, such as QSTP in Doha, play a key role in inspiring innovation and supporting regional R&D. But technology is not the only area that can benefit from innovation. Every new business – regardless

of industry or size – should be asking, “How does our product/service create new value?” And incubators should be helping them answer this question – and then kindly showing them to the door.

SPECIALISED INCuBAtOrS WILL SPur INNOvAtION

Here is where incubators in the Gulf can take a different approach. In addition to providing the basic business knowledge and general support that start-ups need, if each incubator focused on a specific niche – business, social or environmental – it would add much-needed direction to the process. Such specialised incubators could conduct scientific and

market research in their niche, and provide complete transparency and opportunities for entrepreneurs to come up with ideas that solve specific problems.

For example, what if we had an incubator that focused on water shortage issues? One problem this incubator could tackle is the amount of water it takes to grow the beans for only one cup of coffee – 140 litres! Coffee consumes two percent of the world’s water, yet the answer may not be to cut coffee consumption, but to decrease the amount of water needed to produce coffee beans. Imagine the innovative solutions that could be developed by an incubator full of entrepreneurs focused this problem.

By creating incubators that work with entrepreneurs on the front end of innovation, sharing research and information so that problems can be addressed in the open, we not only create innovative businesses, but also contribute to the welfare of society.

To make such an approach feasible, we also need to address a few other areas.

One, incubators need staff appropriate for the niche they are in. Depending on the focus, this could include scientists and

engineers, teachers and educational experts, manufacturing and supply chain leaders – whomever fits the needs of the specialised incubator. Office support staff, including business development and marketing, may also need specific expertise. An incubator that tries to specialise without recruiting specialised talent will not provide adequate support for the start-ups there.

Two, the approach to incubator funding needs to change. Instead of giving money to start-ups and letting them decide how to spend it, incubators need to hand-hold new businesses to help them spend it wisely. Too many new businesses make mistakes in this area, investing in costly research without projecting return on investment, or approving expensive marketing campaigns to outdo the competition. It’s the incubator’s job, as an experienced business advisor, to keep start-ups from making such financial blunders, and instead use their funding to acquire the talent and infrastructure needed to support the start-up once it leaves the incubator.

Three, start-ups need to have exit plans and incubators need to encourage start-ups to leave the nest. An incubator’s profit typically comes from start-ups exiting the incubator through a sale – a merger into a bigger company, an acquisition by a private equity or venture capital fund, etcetera – or through a public offering (listing the business on the stock market). Without a solid plan for incubators to profit from their investments in start-ups, many incubators will fail, and those that stick around will become money pits. Yes, the venture capital and private equity market in the region is small, but there are many companies from outside the region who would likely invest in our start-ups – if they were truly innovative.

In my opinion, we have enough general business incubators in the Middle East. What we need now are specialised incubators that work with entrepreneurs to create new value for business and society. Incubators can foster innovation if we structure them correctly and incubate real innovation instead of just another falafel shop.

Kamal Hassan is the president and chief executive officer of Middle East innovation culture company, Innovation 360 Institute.

WHErE arE YOu GOING?

The ability to set goals is a basic management skill, and there is only one correct way to set them so that everyone in the organisation is aligned. Right? Not so fast, says Julian Birkinshaw, who, in the first of a two-part series, asserts that alignment may not be the best course for your company.

some business principles are so deeply ingrained in our way of thinking that they are almost unassailable. Alignment is one such principle. Every corporate

plan, every measurement system and every project review is built on the assumption

that alignment – the notion that all people in an organisation should be moving together towards a common goal – is a good thing.

I believe we should challenge this assumption. Corporate objectives can be developed according to the principles of

alignment, and many times that will indeed be the best way forward. But corporate objectives can also be developed using a lateral, or oblique, approach that explicitly encourages people to move in a direction that does not take them directly towards their end goals.

BUSINESSMaNaGEMENT

problem with the Anglo-American capitalist system is not only that objectives tend to be short-term and financially oriented, but also that they serve the interests of shareholders at the expense of others stakeholders. As stated by John Mackey, CEO of Whole Foods, “The best way to maximise long-term shareholder value is by managing the interdependent system [so] that all the stakeholders are linked together…This is the best strategy to create the most value for customers, the most value for your team members and the most value for the communities; but it is definitely the best strategy to maximise shareholder value as well.”All of which suggests the rowing team

metaphor is of limited value in making sense of how people work together in large organisations.

A more useful metaphor is a jazz ensemble. Jazz musicians work together to achieve a worthwhile outcome, blending initiative and creativity with discipline and structure. Moreover, they also have fuzzy objectives. Do jazz musicians want to make beautiful music? Do they want to have fun? Do they want to do something no one else has done before? Do they want to make a lot of money?

Of course, it is some combination of all these things, and the most critically acclaimed or the happiest musicians are not necessarily the ones who earn the most money. It is easy to see the parallels to the business world.

None of this is to suggest that alignment is a bad thing per se. But it underlines the need for greater care in deciding when an alignment-driven approach to goal setting is appropriate.

There are many contexts in which our existing ideas about alignment work fine; but there are many others – typically those that require greater creativity and initiative on the part of employees – in which the alignment principle gets firms into trouble.

In Part Two in July we will explore the lateral approaches to setting objectives in today’s business environment.

Julian Birkinshaw is professor of Strategic and International Management, senior fellow of the Advanced Institute of Management Research, and deputy dean for Programmes at London Business School in London.

TheEDGE 61

It is easy to see why managers find the concept of alignment so attractive. But you only need think about the companies in which you’ve worked to recognise that the metaphor, although evocative, is somewhat misleading.

Here are four limitations to the principle of alignment: • Individuals in companies often have

very different agendas – and with good reason. What gets a PhD-level researcher out of bed in the morning? It is the excitement of pushing the boundaries of knowledge and the possibility of creating new society-changing technologies? His time is directed primarily toward the pursuit of knowledge for its own sake, rather than toward the immediate commercial priorities of the company. Large technology companies understand and accept this, and they know that they would fail to attract top researchers if they put too many restrictions on them,

• Measures and incentives are blunt instruments. The alignment model assumes that executives are able to set clear, quantifiable objectives to ensure that every division contributes effectively to the company’s overall goals, and that these can then be cascaded down through a set of Key Performance Indicators (KPIs) for each sub-unit. But it is difficult to establish KPIs that really work, especially in settings requiring employees to show creativity and initiative. How would the researcher in the example above be able to show that the new technology she’s been working on for years – which may never result in a commercial product – is contributing to the company’s profitability?

• Short-term targets drive out long-term objectives. In the Anglo-American capitalist system, the pressure to deliver on-target quarterly earnings – largely to satisfy shareholders – is immense. Frequently, such pressures lead companies to do things that are inconsistent with their long-term vision. True alignment – between the efforts of employees and the organisation’s ultimate objective – therefore ends up being compromised,

• Shareholder demands are satisfied at the expense of other stakeholders. A broader

A number of progressive business leaders are doing just that:• Vineet Nayar, chief executive officer (CEO)

of Indian information technology services group, HCL Technologies, uses the concept, ‘Employees First, Customers Second’, to underline his focus on engaging the company’s employees as a first priority,

• John Mackey, CEO of Whole Foods Market, argues that, like happiness, profits are best not pursued directly, but as a by-product of other objectives – higher purpose, service to customers, developing employees and improving the wellbeing of the community,

• Eric Schmidt, CEO of Google, sees a clear distinction between the company’s goals and its shareholders’ demands, saying, “What is the number one goal of the company? It’s end-user happiness with search. Number two? End-user happiness with advertising. Three? The construction of the Google network of partners to effectuate the first two. And four is to scale the business… None of the things that I’m supposed to be doing as CEO – maximising revenue and shareholder value – are the goals of the company.”

ALL tOGEtHEr NOWA lateral approach to setting corporate

objectives is used in many organisations, but rarely in a conscious or proactive way. Let us shine the spotlight on some of these examples and suggest the conditions under which a lateral, rather than an aligned, approach to setting objectives is superior.

In a business context, the principle of alignment means that all employees are working toward the same common objective. In their book, Alignment: Using the Balanced Scorecard to Create Corporate Synergies (Harvard Business Press, 2006), Robert Kaplan and David Norton paint a nice picture of alignment through the metaphor of the rowing team – eight oarsmen, all pulling together in perfect harmony, moving straight as an arrow toward a goal. The rowing team members share a common objective, they are skilled professionals, they work together as a team and they know each other’s strengths and weaknesses.

BUSINESSMaNaGEMENT

SMall BUSINESS KNOW-HOW

The time-consuming task of organising and maintaining financial records is often seen as tedious and at odds with the creative and logistical sides of being an entrepreneur or small and medium enterprise (SME) business owner. Yet, efficient management of financial records is one of the primary components of achieving business success, and the importance of doing so should not be underestimated, says accounting expert Lori Love

managing FINANC

ensuring you have all of the data to prepare your financial reports will enable you to monitor your business’s performance and budget for

the future, and help you to plan your business effectively. Reviewing cash flows in particular is imperative, as many new businesses are often cash poor because their profits are on paper and not in the bank. Lending institutions will want to review your company’s financial reports and prospective buyers will also require this information should you decide to sell your business. Maintaining financial records is also required to meet legal and regulatory requirements in company law and for tax purposes. The following are a few simple steps you can take to turn that messy pile of paperwork and computer files of disorganised and ineffective spreadsheets, into a far more comprehensive means of record keeping.

SHOEBOX FOLLYThe first step towards competent small

and medium enterprise (SME) financial management is avoiding the ‘shoebox’ approach. During my years in public practice accounting I saw many clients who did not understand the importance of managing records for their businesses. They would often

show up in my office with a shoebox full of haphazard receipts and statements.

After the client was billed, they were often surprised by the higher than expected amount. I would then draw their attention to how much time, a substantial part of the cost of our service, had actually gone into sorting and organising their records before the data could be entered into the computer correctly.

A ‘shoebox’ client does not have a system for managing their records and it would be impossible for them to have a clear financial picture of their business at any given time.

FILE rECOrDS IMMEDIAtELYThe first step in getting organised is to get

into the habit of dealing with bill receipts and records right away. As soon as you purchase something, write on the receipt that it is for business purposes, especially if the bill does not have your company name on it. If the receipt does not provide a clear indication of what was purchased, record those details as well. It is often frustrating to try and remember this information when you are dealing with a large number of documents many months later.

CrEAtE A FILING SYStEMIt is paramount to have an organised

system in which to file and store your receipts and documents. Binders, box files, large

envelopes and accordion files are different types of storage ideas. Create categories for your most frequent expenses and label each envelope or file accordingly. Find a method that works for you and is easy to use. Critical documents such as loan papers, contracts and property titles should be kept in a fireproof box or safe. This is also a good place to keep backup disks with copies of your computerised records, which you should update regularly.

OPEN A BuSINESS BANK ACCOuNtHaving separate bank accounts for your

business and personal transactions is one of the best ways to keep organised, even for the smallest business. Keep copies of all of the bank statements and cleared cheques together in your filing system. Using cheques can be a better way to pay for your expenses than cash as it helps to create referable documentation. If you make cash purchases and then lose a receipt, you have lost the documentation. You will also need to be able to substantiate your expenses with receipts from your records. Cash is often a weak point for businesses as there is often inadequate control. Many expenses are now being paid with a credit card due to ease of use and reward programmes, but credit card statements alone are not enough to substantiate an expense, it is very important to also keep the receipts.

TheEDGE 63

SMall BUSINESS KNOW-HOW

IAL rECOrDStHE BENEFItS OF GOOD rECOrD KEEPING

Effective Financial Management will:• Determine the financial status of your business,• Give you knowledge of how much cash is coming in and how much is going out,• Make more effective use of time and money,• Ensure critical documents are safe and readily available,• Maintain control over important aspects of your business,• Provide documentation to substantiate transactions,• Project an image of professionalism and quality.

KNOW YOur BuSINESS rEQuIrEMENtS

When setting up your system, you should know the types of reports you will need and what records will be required. You may need to complete reports for licensing or provide payroll information to the government. Financial records are also usually required dating back many years, for example, financial statements, commercial registrations, contracts, employee files, invoices and receipts. When you register your business you can enquire about these requirements or you can seek advice from an accountant. If you plan to expand your business into other countries, also make certain that you know how long you are required to keep your financial records for each country in which you intend to operate.

APPOINt A QuALIFIED rECOrD KEEPEr

There are several options in this regard when it comes to managing your financial records. You can manage your records yourself, use a qualified family member, or hire aprofessional to assist you. If you decide to do it yourself be realistic about how much time you will be able to commit as there may

be other tasks needing attention when starting up your business. However, there are several accounting software packages on the market today that come with tutorials and templates that may be adequate for your needs.

Beyond that, you can hire an employee to keep your records at your office. These are usually called bookkeepers or accounting clerks. A bookkeeper will help sort and file your records and enter data into your business journals or computer. Alternatively, you can hire an external bookkeeping service. Reviewing the nature and number of your business transactions may help you to decide whether you need to hire an employee.

Whether you decide to do it yourself or acquire some assistance, it is a good idea to hire an accountant. Accounting offices also have staff that can enter your data, but this is generally more costly than hiring a bookkeeper. An accountant will review and analyse your records and can lend credibility to your business when you are dealing with government agencies and lending institutions. Make the most effective use of the time with your accountant, and remember that you are being charged by the hour, so the more organised you are and less time you waste, the more cost effective this will be.

Make certain to thoroughly check the qualifications and references of who will be keeping your records, and don’t simply rely on a word-of-mouth referral from a friend or associate. Also check the qualifications of your accountant to determine if they hold a professional accounting certification.

BE INvOLvEDKnowledge is power. Hiring someone

else to manage your financial records does not mean that you should not be involved. Every business owner should understand their financial systems and be able to read their financial statements. Accounting is the language of business. Taking a course in financial accounting can help provide you with the knowledge you will need.

Ask for reports such as a cash flow statement, income statement and a balance sheet on a regular basis. Also review payroll reports and accounts payable reports to ensure that you are able to meet your commitments. It is important to ask a lot of questions. After all, it is your business and you are the one ultimately responsible.

As stated in the beginning, well-designed and maintained financial systems at the start of a business will lay the foundation of your business success. The financial reports generated from these systems will provide important information that your business requires during its lifespan.

A final tip is to make certain that these reports project both professionalism and quality for your business, and you won’t look back at that old shoebox with any regret.

Lori Love, BBA, CGA, has worked in public practice accounting, industry and government. She is currently the lead accounting instructor at the College of the North Atlantic-Qatar.

lEGalINSIGHT

Qatar has opened its doors to foreign investors seeking to retain 100 percent ownership of their businesses. Nikk Bond and Brenda Hill take a closer look at the country’s Free Zones.

frEE ZONES IN Qatar

The Qatar National Vision 2030 and 2022 World Cup means there is an abundance of opportunity and demand for international companies

to assist in the construction, building and development of Qatar’s infrastructure. However, international companies wishing to assist in this development must have a proper legal presence in Qatar. The regulations governing foreign investment and the ability to do business in Qatar is very prescriptive and can leave the investor with little in the way of investment options, particularly when the investor is ideally seeking 100 percent ownership of a Qatari registered entity.

INvESTmENT OpTIONS fOr ThE fOrEIgN INvESTOr

The Commercial Companies Law No.(5) of 2002 (‘Companies Law’) provides for various different vehicles from which to carry on business in Qatar, but only a limited number of these are available to foreign businesses.

The most popular type of vehicle is the limited liability company (‘LLC’). The Foreign Investment Law No.(13) of 2000 (as amended) (‘FIL’) generally permits foreign

Zones’), specifically designed to increase foreign investment in a country by relaxing the usual economic and legal constraints.

Qatar has also passed laws under which Free Zones have been set up or can be set up in order to make Qatar a more enticing option for the foreign investor.

Law No.(34) of 2005 (Concerning Investment Free Zones) (the ‘Free Zone Law’) came into force on January 29, 2006, and gave power to the Council of Ministers (‘Council’) to create Free Zones in certain designated areas. The only qualifying factor for a foreign business is that it must have the purpose of promoting and attracting investments in the fields of agriculture, industry, technology and tourism. The Council, subject to proposals of the Ministry of Business and Trade, (‘MOBT’) determines the rights and exemptions and

investment in all business sectors of Qatar (except banking, commercial agency and real estate unless special dispensation is obtained), but only through an acceptable legal entity, and only provided that at least 51 percent of the shares in that entity are held by a Qatari national (individual or company), while the remaining 49 percent can be held by a foreign company or individual.

There are a number of exemptions to this, and additional exemptions were introduced in Law No.(1) of 2010, enabling a foreign investor to hold 100 percent of the shares in a business that, for example, carries out its activities in the sectors of health or tourism or sports and entertainment. In practice, these appear to be used very rarely (unless it is a specific contract with the government and is limited in duration).

It is worth noting that Gulf Cooperation Council (GCC) nationals have a special one percent dispensation so they are able to hold 50 percent of the shares in an LLC.

ENCOUragINg fOrEIgN INvESTmENT

Many GCC countries have enabled the establishment of free investment zones (‘Free

lEGalINSIGHT

65

OThEr frEE ZONESIn 2007, Decree No.(6) of 2007 announced

the establishment of three additional Free Zones: i) New Doha International Airport, which will include the activities of light industries, legal and financial services and trade and engineering consultancies; ii) the Industrial Area, which will include the activities of manufacturing, high tech industries, warehousing and transport companies; and iii) Mesaieed Industrial City, which will include downstream industries (for example plastic manufacturers who receive input products from petroleum processors to make a final product).

The Free Zones are still under construction and the anticipated completion date is believed to be sometime in 2013.

bENEfITS fOr fOrEIgN INvESTOrSThere are a number of benefits for an

investor setting up in the Free Zone, including the following:• Any business can be owned by foreign

investors, whether or not they live in Qatar, • If the requirements of the Free Zone

Law are met then no additional licence, authorisation or approval is necessary to operate the business in Qatar,

• The Free Zone is exempt from all taxes for twenty years, which is renewable for another twenty years with an authorising resolution from the Cabinet. QSTP is different as the exemption from tax currently has no time limit and its tax exempt status is ongoing,

• There are no duties for import into the Free Zone or outside of Qatar on all equipment, tools, means of transport, commodities, raw materials and accessories and spare parts and any other materials or components imported, stored, manufactured, produced, developed or processed by the licensed entity,

• Profits and capital can be freely repatriated,• Licensed entities have the right to employ

their own workers,• There is no risk of the funds or activities

of the business being nationalised or subject to private ownership restrictions,

• Licensed entities can determine their own prices for their products and services, and

• The licence of the entity operating in the Free Zone can only be cancelled if the licence is violated.

frEE ZONE rESTrICTIONSThe following goods are not allowed to be

bought into any Free Zone:• Flammable goods (except permitted fuels)• Radioactive materials• Weapons of war, ammunitions and

explosives (unless authorised by relevant authorities)

• Goods that contravene legislation relating to the protection of intellectual property

• All drugs and their derivatives• Goods produced in states subject to an

economic boycott• Goods prohibited to be imported

into Qatar.

ThE ECONOmIC fUTUrE aNd frEE ZONES

The introduction of Free Zones is a positive step forward in the future economic development of Qatar by providing an alternative option for encouraging external investment. Once the Free Zones at New Doha Airport, the Industrial Area and Mesaieed are operational, they should provide greater access into Qatar for all types of industry, as the facilities will be in place to accommodate their business sector needs.

Free Zones benefit the international investor by allowing them to set up and run their wholly-owned companies under more relaxed rules than the existing foreign investment rules in Qatar. At the same time, Free Zones benefit Qatar as they encourage economic development and expansion, thereby enabling Qatar to move closer to realising the goals of its National Vision 2030.

NOTE: This article should be used for information purposes only. It is not legal advice and should not be relied upon as such. If any reader requires legal advice, this should be obtained from an experienced lawyer, who can provide advice which is tailored to the relevant facts and circumstances. For any information in respect of legal issues, please contact Nikk Bond (nikk.bond@dlapiper.com) or Brenda Hill (brenda.hill@dlapiper.com).

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lEGalINSIGHT

any other privileges that each Free Zone will enjoy.

QSTp, QaTar’S fIrST frEE ZONETo date, various Free Zones have been

legislated for in Qatar, but only the Qatar Science and Technology Park (‘QSTP’) has been completed and is fully functioning.

QSTP was established via Law No.(36) of 2005 and was created to attract foreign companies who want to carry out research and development in Qatar. It aims to attract a varied mix of organisations including multi-nationals, new start-ups and research institutes, and is currently home to 30 members such as Cisco, ExxonMobil, Microsoft, Williams F1 and Rolls-Royce.

While companies cannot buy land or buildings at QSTP, they are able to lease premises for up to 15 years in multi-user buildings, or for longer periods of time with leaseback arrangements for single user buildings. They can also commission their own buildings for design and build by QSTP. Notable benefits to the foreign investor of QSTP include being able to incorporate their own local company or branch with full ownership, trading without a local partner or agent, and having no obligation to pay taxes.

There are no fees for registering or licensing within the QSTP other than usual operational charges such as rent, telephone charges and services charges. The benefits listed below also apply to QSTP.

bETTEr ThaN

reality

In the April 2011 issue of TheEDGE, we discussed how Augmented Reality (AR) is being used by marketers to enhance the customer experience and improve sales.

To refresh, AR is a term for a live direct or indirect view of a physical, real-world environment whose elements are

augmented by computer-generated sensory input, such as sound or graphics. The example we used was of a swimming telecast, where a line can often be seen added across the lanes to indicate the position of the current record holder as the race proceeds, allowing viewers to compare the race to best performance.

This indicates how AR technology enhances one’s current perception of reality. Modern mobile augmented reality systems use one or more of the following tracking technologies, each of which offer varying levels of accuracy and precision:• digital cameras and/or other optical sensors,• accelerometers,• global positioning systems,• gyroscopes,• solid state compasses,• wireless sensors, and• radio frequency identification

Since its inception, AR has appeared in many different guises. Besides telecasting, it has also proven extremely useful in object recognition, where, for example, the spare parts of a car’s engine are described to a mechanic.

In fact, in the not-too-distant future, it may be possible to slip on a pair of AR goggles when trying to repair a car engine, instead of being confused by a manual. An AR system being developed at Columbia University in the United States (US) was tested on US Marine Corps mechanics, and appeared to help them find and begin a maintenance task in almost half the usual time.

Marine mechanics currently have to refer to a technical manual on a laptop while performing maintenance or repairs inside a vehicle, which has many electric, hydraulic and mechanical components in a tight space. The Columbia researchers gave mechanics an AR headset when performing light repairs to armoured vehicles. The AR system provided assistance by providing three-dimensional (3-D) arrows that pointed to a relevant component, text instructions, floating labels and warnings, and animated 3-D models of tools. An Android-powered smartphone attached to the mechanic’s wrist provided touchscreen controls for setting up the next sequence of instructions.

MaRKETING & DESIGN

No longer a special effect in a futuristic James Cameron movie, Augmented Reality is a tool which can enrich a consumer’s brand experience. Charles Vincent takes a closer look.

for extremely detailed statistics of knowing which performers are most popular and when. The company says it has already signed a contract with a sports management agency.

ENrIChINg aNd ENablINgUnsurprisingly, AR could also impact the way we shop. In

TheEDGE’s April 2011 issue, we outlined how the software enabled furniture retailer, IKEA, to help customers visualise how the new PS range would fit into their homes.

Similarly, British retailer, Topshop’s branch in Moscow will feature an AR-enhanced shopping experience through a Kinect-enabled dressing mirror. Outfitted by Russian agency, AR Door, the high-tech mirror allows shoppers to virtually try on clothing without having to go into a dressing room and change clothes.

While Topshop’s implementation does not factor in size and measurements, the Kinect camera is capable of analysing video input for accurate size calculation, and this innovative application seems likely boost sales by speeding up the purchase process.

From helping give navigation information to pilots and maintenance guidance to mechanics, to changing the way we buy clothing and watch live events, AR has the potential to radically alter how we interact with the world, professionally and personally. It also offers businesses a unique opportunity to provide consumers with information relevant to where they are, what (or who) they are interested in, and even what they are looking at, bringing an end to one-size-fits-all marketing.

Charles Vincent is the digital media director at Firefly Communications and can be reached at c.vincent@firefly-me.com

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MaRKETING & DESIGN

a whOlE NEw wOrldAR has shown terrific potential for both practical and

entertainment applications. And while the first commercial applications are beginning to appear in mobile phones (thanks to cheaper, smaller computer chips, cameras and other sensors), these have so far been limited to tasks such as providing directions. Researchers are working on practical solutions that will change the way consumers live, shop, and even meet each other.

A new application developed by The Astonishing Tribe (TAT), a Swedish mobile software and design firm, allows users to point a smartphone at a stranger to learn more about them. The prototype software, called Recognizr, which combines computer vision, cloud computing, facial recognition, social networking and AR, “takes social networking to the next level”, says Dan Gärdenfors, head of user experience research at TAT.

Recognizr works on a phone with a five-megapixel camera and runs on an Android operating system. When the user points the phone’s camera at someone, software created by Sweden’s Polar Rose, detects the subject’s face and builds a 3-D model. Providing the subject has opted in to the service and has uploaded a photo and profile, the server then sends that person’s name, links to their profile on several social networking sites, including Twitter and Facebook. Andrew Till, vice president of United Kingdom-based mobile software consulting company, Teleca, says, “You start to move into very creative ways of pulling together lots of services in a very beneficial way for personal uses, business uses, and you start to get into things that you otherwise wouldn’t be able to do.”

Similarly, the CrowdOptic application for iPhone offers users a completely fresh live event experience. Be it at a concert or sports event, the user is able to visually enhance the event experience. For example, sports fan attending a basketball game will be able to access and view vital statistics surrounding a player without even taking an eye off the game.

CrowdOptic works by sensing the iPhone’s GPS location, compass heading, and time of day, to know which object is most likely being viewed through the iPhone screen. It does require at least one other user looking at the same object in order to triangulate the position. CrowdOptic then overlays the screen with data such as the name of a song being played at a concert, or a point guard’s free throw percentage at a game.

Instead of marketing to consumers however, CrowdOptic is able to charge event organisers, sports managers and advertisers a premium

Researchers gave mechanics an AR headset that provided instructions, floating labels and warnings when performing repairs to vehicles.

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SUBSCRIpTION

SUbSCrIpTION fOrm 2011

TheEDGE is Qatar’s dedicated 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 is delivered straight to the door of the targeted business community. To ensure you keep up-to-date, with what is happening in Qatar’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:

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bUSINESS INSIghTInsIde The MInds oF leadIng BusIness FIgures

ALSO IN tHIS SECtION:• Middle East Mergers and Aquisitions: TheEDGE

interviews Dubai-based M: Communications managing director, Nicholas Lunt, to find out more about the contents of February’s 2011 M&A Barometer survey, which

was compiled by his company and Zawya, and included investment bankers from Qatar, and the decision to conduct a follow-up report conducted in March, following the spread of popular uprisings in the region (P.74).

CELEBrAtING HIGHEr LEArNING (P.70)In May, Texas A&M Qatar celebrated the graduation of its 200th alumni and 100th Qatari

graduate. The awarding of an honorary degree to HE Abdullah bin Hamad Al Attiyah, deputy premier of Qatar, further highlighted the ceremony. TheEDGE speaks exclusively to Texas A&M Qatar’s chief executive officer and dean, Dr. Mark H. Weichold about the

award ceremony and TAMUQ’s role in promoting engineering education in Qatar.

How important has the support of HE Al Attiyah and other Qatari officials been in the ongoing progress of tAMuQ and it achieving these significant graduations awarded at the ceremony in May?

The graduation ceremony that we had is going to be a hard one to ever top again. That was a very unique ceremony and the awarding of the honorary degree to minister Al Attiyah made it even more so [as] he was involved in us coming here from the very beginning. He was part of the small team that made the first trip to College Station [in Texas, United States (US)], and met with some of our folks and convinced them to consider the possibility of having a branch campus over here, and then subsequently, although he was not at the negotiation table, he was certainly supporting all of our efforts from behind the scenes. Significantly, when our negotiations had finished and we had a document that Her Highness [Sheikha Moza] would sign and our president would sign, HE Al Attiyah was at the signing ceremony, and so they would see he come to the closure.

Afterwards, you know, whenever Texas A&M had some need that he could address as the minister or chairman of Qatar Petroleum or something like that, he never hesitated a moment. For instance, he was the speaker at our first commencement ceremony and made time available for any questions. He was very instrumental in making sure that people had internships and employment opportunities, [and] supported our students with sponsorships. He has been a really strong friend of Texas A&M and our students and faculty, so we appreciate that.

Texas A&M University Qatar reaches milestone graduation numbers and honours HEAbdullah Al Attiyah with awardIn early May of this year, the Doha campus of Texas A&M University Qatar (TAMUQ) in Education City held a graduation and award ceremony. This event was significant in many ways, not only because it celebrated the graduation of 55 new engineers, but also the 200th alumni from the engineering education institution and research facility, but moreover because among these was the 100th Qatari graduate. The ceremony was also further highlighted by the awarding of an honorary degree to HE Abdullah bin Hamad Al Attiyah, deputy premier of Qatar, for his crucial role in supporting TAMUQ. Miles Masterson spoke exclusively to Texas A&M Qatar’s chief executive officer and dean, Dr. Mark H. Weichold, about the ceremony, the business of running a university and its important role in developing the future potential of Qatar.

Qatar Higher Education

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“the graduation ceremony that we had is going to be a hard one to ever top again and the awarding of the honorary degree to minister Al Attiyah made it even more so as he was involved in tAMuQ coming to Qatar from the very beginning.”transferred and some of those did not. So I guess, a simple answer to your question is maybe the biggest challenge that we had was just our naiveté about doing business abroad. But the plus-side is that we had some very talented people, they went to work on the problem and sorted it out and fixed it.

What do you consider to be some of tAMuQ’s most noteworthy achievements so far?

I think as far as milestone accomplishments in my short time here, seeing our first students complete their course of study. We only had two that finished their course of study, and that was December of 2007...we had a little ceremony for them. But that was very satisfying, because I have been involved with this programme from the beginning – although I was not a Dean at the beginning – but to actually see students complete things and come to fruition, it was very satisfying.

The following spring, in 2008, we had a formal graduation ceremony. We wanted to recognise those [first] two girls for their accomplishments. And it was interesting, the first two students who completed their course of study were two chemical engineers, they were Qatari and they were females, so that was definitely a big thing.

So that was a good milestone. Another milestone we are still in the process of unfolding is our research programme. We have had a lot of success based on the hard work of our faculty; they have produced research grants that have yielded over US$70 billion (QR255 billion) in research funding commitments. Out of 100 projects, we have got seven, eight patent disclosures…the final one has moved to provisional patent stage…

Is that in the uS?That one happens to be in US. We have

got one faculty member that is working with Qatar Science and Technology Park (QSTP) to basically start up a company.

I think we have started to see the beginnings of what Her Highness had in mind

It sounds like from what you are saying, he drove the present from the start, no doubt because he identified that there would be a need down the line for engineers in Qatar?He did. Petroleum and chemical engineers in particular, but he also had the wisdom to say we need electrical and mechanical engineers as well.

Beyond that, why do you think the Qatari authorities are so supportive, creating Education City, especially the research and development side, and attracting all of these world-class institutions here?

I think in large part it goes to what Her Highness has been consistent in saying about the country’s greatest resource being its people and not necessarily the oil and the gas. That was one of the things that sold me on the idea of having a branch campus over here, and I think it was also a big factor in convincing the leadership in Texas that this was more than just sort of passing ideal in the country. At the very highest levels, it had a commitment to education.

Then as those discussions occurred we began to learn more about Her Highness’s vision and that of the State of Qatar. That is when we began to learn more about the ‘post-hydrocarbon economy’, something that would outlast oil and gas. We have seen that come to the fore as the knowledge-based economy. Well, if we are going to have that, then education has to be front and centre and, moreover. it cannot be just a good ‘K-12’ or even a good higher education programme, it has to include research because knowledge is not something that you import. You have to have people that are indigenous to the country whose knowledge and skills are part of that knowledge-based economy.

What were the challenges for texas A&M in setting up a campus in Qatar?

I think one of the challenges that we had was [that] we had never set up a branch campus either within Texas or outside. Now, we have a branch campus in Galveston, Texas, and it has been in existence for decades. But nobody at College Station had any experience in setting that up, so there was a lot of learning that we had to do. We thought we knew how institutional higher education worked.

A lot of that changed once we came over here because the assumptions that we made about infrastructure, about logistics, about doing business, were all based on our experiences in the West, and some of those

BUSINESSINSIGHT

[when] she was talking about a knowledge-based economy, I think that is another milestone. The third that I would share is one that is not quite a milestone yet because we haven’t passed it, but this fall we are going to start our graduate programme and we have got the first set of admission letters that went out just last week and a very good cohort of incoming students, so we are looking forward to that.

How important do you think the presence of an institute such as texas A&M in Qatar, is being that you hail from an area that is arguably the hub of the uS hydrocarbon industry? Is this creating a lot of knowledge transfer to and fro between the two locations, not only in the education, but also in the research component?

I think there are a lot of similarities in the experiences that Texas has had in developing its oil and gas industry and then what Qatar is experiencing, but the scale of oil and gas enterprise here in Qatar is so much bigger than something experienced in Texas. But the petroleum engineering department in College Station has an outstanding reputation, it is usually the first or second or third depending on who measured it, that is one thing. But it is a programme that is respected around the world, and so we are doing our best to transfer those experiences and that knowledge over here, that we have learnt.

The chemical engineering programme at College Station, similarly, is very highly ranked. A lot of people do not fully appreciate the great job petroleum engineering does in getting the oil and the gas out of the ground.

But after it is out of the ground, you have to do something with it, you make it into diesel or manufacture plastics or whatever, and so then you have a whole industry that needs the support of chemical or electrical or mechanical engineers. We have had those experiences in Texas and I think we have done a good job of bringing them here.

that has very little connection to university, our faculty is overseeing the research projects. I worked for a provost at one point in time and he used to like to say that what makes an institution like Texas A&M is that things that are discovered in the laboratory in the morning are taught to the classes in the afternoon. It is little bit of an overstatement… but it literally is a situation where the faculty who are teaching the class have probably also written the textbook of that level of knowledge and skills.

Can you continue a little more on the research aspect? We were talking earlier about the interesting patent research, and possibly some of the more important aspects of research being done on the campus and the partnerships you are forging through this?

We have 30 research laboratories in this building…supporting all sorts of research. We have, of course, an engineering faculty that is engaged in research. But we have to offer the entire curriculum, so we have a faculty in chemistry, mathematics and physics and so forth and we have research projects in all of those disciplines. In fact, the patent that I mentioned, the one that has reached provisional stage, is held by one of our chemists. But the research for the most part is done here in this building, although we have

BUSINESSINSIGHT

You also have exchange programmes to facilitate this transfer of knowledge between the two locations, with local students being able to go to texas. How important do you think it is to encourage even more young Qataris, especially women, to study engineering and get involved in these programmes?

We have that happening routinely. We also have study abroad opportunities, so students can come here and spend the semester…but your question about female students going and pursuing a higher education, in particular, engineering, I think it is very relevant here in Qatar, I think any time half of the population does not have access to, or is discouraged from having access to education, is a very bad thing.

You are also seeing an increase in students of both genders?

Yes. About four years ago our entering class was 60 or 70 students; since then we have ramped that up and the last few classes have been [more than] 100 students. So four years from now, if we are having this same conversation, we will probably talking about 185-190 students walking across the stage.

Do you follow the progress of the students after graduation?

Certainly we do. We want to understand how they are doing of course, but we also want to

understand what the strengths and weaknesses of our engineering education are. So if there are some issues that can be addressed by changing our curriculum and changing our syllabi or something like that, we want to know.

One would imagine that engineering, like most fields these days, is also evolving rapidly and you need to keep pace with that?

Oh yeah, that it is very true in engineering, things do change very rapidly, but what we have to accept is we have to make sure that our students have a solid grounding on the fundamentals, because the physics, the chemistry or the mathematics behind whatever field of engineering you are in, those are not going to change. But that is another reason that we maintain contact with our students and we also reach out to our corporate partners here. So we have external advisory reports for each of our four programmes, we want to hear from them what specific strengths or what specific skills their newly hired engineers should have.

How much is the research aspect of tAMuQ linked to what is taught in the university?

That is something that is very unique to the North American model for higher education. Unlike other parts of the world where research is done by a research institute

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“Knowledge is not something that you can import and make a success of it, you have to have people that are indigenous to the country whose knowledge and skills are part of a knowledge-based economy.”

BUSINESS INSIGHT

partnerships with universities and research institutions from all over the world: Europe, the UK, Asia, North America, and of course our home campus in College Station as well. We probably have two or three-dozen other universities and research institutes that we have different types of partnerships with. Even across the street at Qatar Science and Technology Park, we have partnerships with Qatar universities.

Can you provide some examples of the kind of research projects being conducted currently?

We have some folks that are working on some proof of concept projects for desalination. The unique thing about that would be that the water – normally when the desalination process is at work, a lot of discharge water is produced. It is pretty salty, it is a brine actually, and so what they developed is a zero liquid discharge process. In principle you can take one of these desalination plants to the middle of the country and there is ground water there and you pump that ground water, which is otherwise brackish, and then run it through this plant and produce potable water. [We also] we have two groups that are looking at the jet fuel that is produced through the gas to liquid (GTL) process. One is working at the physical characteristics of it to ensure that when the plane is flying at altitude, where the temperatures are very cold and you do not want the fuel to turn to a sludge, you want it to continue to flow… so we are looking at the physical properties like that, we are also looking at the combustion properties like when the fuel reaches the engine it burns in a way we expect it to flow, the stimulating start-ups and turnoffs that altitude and stuff like that, so it is pretty interesting.

So it sounds like much of the research being done at tAMuQ is energy-based and sustainability-orientated?

A lot of it is. We have some other work in electrical engineering: we have got some folks looking at wireless communication, coding theory and that sort of thing… But we have another faculty member that has a partnership with the Fraunhofer Institute in Dresden [Germany], and what she has done is develop a design for a solar reactor that would take solar energy and then expose methane to the solar energy and crack the methane to produce hydrogen and pure carbon from the

methane. So the hydrogen obviously could be used as a fuel combustion or something like that, and when it burns it just produces water as the exhaust, which is not bad, and then the pure carbon can be used for all sorts of things, like the carbon black in the printer cartridges or to make tyres out of it, all sorts of things.

How is the revenue generated from such research and patents shared among those involved in their culmination, as commercially viable concepts to be sold or profited from?

Every institution of higher education that is involved in research has some sort of intellectual property (IP) sharing plan and Texas A&M has that and the Qatar Foundation (QF) has that…we have entered into an agreement with QF and I think it is a very generous IP agreement in that once the costs are recovered for prosecuting the patent, then if there is licensing revenues or revenues or commercialisation revenues of some sort they are shared among the inventors of the technologies. The professor, maybe the post doctorates, would get a portion of those revenues, QF will get a portion and Texas A&M will get a portion.

Can you discuss the concept of tAMuQ as a business? Do the enrolment fees sustain you, or do you depend on donations and funding from government, etcetera?

It is a mix of a variety of sources of revenue, we have got, like I said, a very substantial research funding commitment and have funds to research enterprise. Qatar Foundation also funds a portion of the research enterprise by providing infrastructure funding and all sorts of things, but as far as our fundamental model for operational behaviour, it depends…our existence over here depends on Qatar Foundation funding. As an institution that is a state institution in Texas, we cannot spend state of Texas money over here. So Qatar

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Foundation has to ensure that and you asked about tuition, Qatar Foundation collects any tuition revenues that are generated [to] offset their cost.

tAMuQ are also community outreach as well, so how does fit into the overall picture, of what do you do, and how is it implemented?

I think a large part of this goes back to what I call the fundamental charter of Texas A&M University as a land-grant institution. From its very beginnings Texas A&M University, like all other land-grant institutions that were established in the US, basically have three missions, teaching, research and what we used to call service, is now being called engagement or outreach. So this notion of outreach to the community goes back to one of the founding roots of our organisation. What it means here is to be a good partner within the community and maybe that can manifest itself as sponsoring symposia or workshops, it may manifest itself as offering continuing education for engineers to remain on top of their field. It could be for instance our activity in trying to stimulate young people to pursue science and engineering as a career. We have done things like E-Day just a couple of months ago at Villaggio, we were out there for a whole day having little science and engineering demonstrations, trying to get kids excited about going into engineering; going into high schools and working with the teachers to help them be better teachers and prepare the students for careers in science and engineering. Another example in the US, in many parts of the world, Australia, UK and so forth once you graduate with an engineering degree you can certainly go out and practise engineering, but the profession highly recommends that individuals become registered as professional engineers. So we are working with the Qatar Society of Engineers to put a professional engineering mechanism in place here in Qatar, so these are some of the examples.

BUSINESSINSIGHT

Mergers And Acquisitions

The 2011 M&A Barometer was the second annual survey of its kind compiled by Dubai-based corporate public relations agency M:Communication, in association with Middle East online business intelligence platform Zawya, and was initially released in February 2011. It comprised interviews with 30 local, regional and international investment bankers, all at managing director level or above – including a handful based in Qatar. However, thanks to the upheaval in the region, the 2011 edition had to be followed by a supplementary update, published in late March, in which many of the original bullish banker’s assessments had to understandably be revised.

The ongoing unrest and revolutionary fervour, which, from late January 2011, has gripped much of the Middle East and North Africa (MENA) region, influenced much of the revision in the optimism – albeit cautious – expressed in the 2011 report’s first incarnation. This was further reflected in quarterly Middle East M&A activity data to the end of March 2011, released in the April edition of Gulf Business magazine, which also indicated a marked decline in overall activity in the region’s M&A sector to date.

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The world of mergers and acquisitions, also known as ‘M&A’, is the primary subject of the 2011 M&A Barometer, a comprehensive snapshot of activity and most importantly predictions for growth for the coming year in this sector in the Middle East. TheEDGE’s Miles masteson spoke to M:Communications managing director (MD) Nicholas Lunt to find out more about the contents of the 2011 M&A Barometer and a follow up report, conducted following the spread of popular uprisings in the region. Lunt expounded on what conclusions could be drawn with regard to this often-underestimated sector, activity in which is widely regarded as a strong indicator for the vibrancy of national and regional economies.

M&A Barometer and 2011 subsequent March update reveal interesting insights fromMENA investment bankers

thanks to the upheaval in the region, the 2011 M&A Barometer had to be followed by a supplementary update, published in late March. “It is quite clear this region is going to be focused on other things for the next six months or longer.” - Nicholas Lunt, MD, of M:Communication, who compiled the survey.

BUSINESS INSIGHT

M:Commincation’s Nicholas Lunt described how after the first 2011 M&A Barometer had been published, it soon became clear that a revision was absolutely necessary. Indeed, contrary to the early predictions of many of the investment bankers, the ripple of unrest already emanating in the region in the first months of 2011 did not in fact subside as many thought it might. Lunt recalled how while in China in late January he had completed 15 interviews for a client in Europe, who was considering an acquisition in Egypt, and not one of the financial experts he spoke to predicted what would happen there.

“[They] all said in fact nothing will happen, without exception,” he said. “And what is really interesting is everyone in this region has called it wrong all the way down the line, which is really fascinating to me. Anyway, that aside, the reason we did the special situation report is because I came back and said look this is ridiculous you know, it is quite clear this region is going to be focused on other things for the next six months or longer.”

Of course, it is hardly surprising to learn that the overwhelming majority of investment bankers interviewed were even more cautious the second time around than they had been in the first 2011 survey. Moreover, what is interesting to note at this point, furthered Lunt, referring to the 2010 survey, was that though many of the investment bankers interviewed last year had been relatively optimistic for the 2010, and the second half (H2) of that year in particular, many later expressed disappointment in the actual level of M&A activity in 2010. This no doubt influenced their more cagey approach to 2011, even before 2011’s so-called ‘Arab Spring’ began to dawn.

“I think my rationalisation of 2010’s report, is that 2009 had been so bad that by the time we got to interview them in 2010,” said Lunt, “I think they were talking up their books.” He paused and then to explain his perspective on the motivations of those surveyed. “A lot of it is about projecting confidence and talking about their pipelines and all the rest [so] I can understand why psychologically they would want to do that,” he added. “They were so desperate to get away from was such a hideously ghastly year in 2009. And clearly when we talked to them in 2010 they were probably being optimistic about what the year would bring, [but] the global crisis didn’t ease as people thought it would.”

Playing devil’s advocate, it seems the above comments might however indicate that the data and opinions gleaned in a survey of this kind might not necessarily be wholly scientific.

However Lunt countered that while he feels that though much M&A activity in the region is in fact driven by sentiment and emotion – a point which we discussed next – he also further justified the motivation for creating the first M&A Barometer, which was released in early 2010, and its sequel.

“I think investment bankers loved being asked their opinion about anything financially,” Lunt continued, “and what happened certainly within the region was we would have to make do with little snippets of information based on interviews a journalist had done with one or possibly two investment bankers. What that doesn’t tell is what the trends are and I think we were just trying to see if there were any trends…what the majority are thinking – and also what is the significant minority it thinking, which is equally valid.”

Then the subject of emotion, it is clear that on many levels merging with or acquiring a company is a political process that requires a level of negotiation skill to rival the best diplomats. However, whilst Lunt concedes that both business and national politics, and indeed of course financial mechanics, all play important roles in this sector, emotion is often an unheralded component of both confidence and contracts and the frequency of M&A activity.

“The bankers are relating to data to support the assertions that they make when they respond to us,” he told TheEDGE. “But I think, clearly what underpins this and what underlies the Barometer, and what is actually for me is interesting, [is] if there is a feeling of relative confidence looking forward and when the market is as difficult as this one has been for the last few years, then an awful lot of that is based on aspiration.

“A lot of the bankers that we have been talking to haven’t had a lot of deals recently, some of them haven’t had any deals for years, so when they are talking about a future they are basing it on a desire of how they would like

see the market down the road, so I think that is why we are saying that [the Barometer] is an insight into the financial minds of some of the key players.”

In light of the recent and ongoing political unrest in the region, and their already conservative yet upbeat outlook, it may then come to a surprise to some that whilst they revised their estimates of 20 percent growth in regional M&A for the rest of 2011, most of the investment bankers interviewed for the update either disagreed (42 percent) or strongly disagreed (33 percent) that all M&A business in the region should be written off, especially into H2.

“What has happened in the region has interrupted activity and some transactions will be put on hold,” commented one confident pundit in the survey update (all comments published are anonymous). “However as soon as this period of political unrest passes, things will get back to normal and are even likely to improve.”

Another was not as positive, however. “I am not sure how eager investors are going to be to jump into scenarios until they have some visibility as to how this is all settling. We are likely to see political conflicts flaring up across the region for some time, so the uncertainty will persist…things are not going to clarify themselves within the next couple of weeks, rather it is going to take months, and so much of the 2011 activity will be dampened.”

One ray of hope identified by the investment bankers to potentially inject some economic stimulation into the region is the cash rich sovereign wealth funds (SWFs). More than 60 percent said these will affect M&A activity in some way, and according to the barometer, there is a strong feeling that they will repatriate some of their investments to play a larger role in local development.

“What we saw in the second round is bankers placing quite a lot of hope, perhaps more hope [in SWFs] than they had done before,” confirmed Lunt, “on the resilience of the

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regional SWFs to withstand the effects of the political shocks, and as some of these funds are the largest in the world, I think the feeling is that in that sector of investor in M&A the medium to long term future for the region probably lies.”

Nevertheless, only 17 percent of those surveyed in the follow-up said there will be more M&A volume in the region than 2010, with 25 percent feeling it would be flat and the same number feeling it would decline (33 percent declined to comment on this subject).

“I still think that M&A activity in 2011 will increase compared to 2010 because I think that many of the deals that didn’t close in 2010 and were delayed should still happen,” said one local investment banker. “For instance, there is nothing that indicates that the large transaction between Zain and Etisalat will not happen because of the political situation in the region. Some of the deals may see slippage because people are worried about implications, but optimistic deals will still take place. Those strategic transactions that are underway or were planned will continue to happen.”

Apart from a few large local and international deals, much of the intra-regional M&A activity predicted for 2011 and into 2012 has been touted by the pundits to be in the mid-market range. Interestingly though, the most revealing topics in the 2011 M&A Barometer and its update are the level of challenges that face the region’s M&A sector, both due to the global economic situation and the political uncertainty that has dominated headlines this year.

Compounded by negative perceptions of the region internationally, in the initial survey many of the bankers felt that international companies seem unwilling to commit to major investments in the region because of the difficult legal and regulatory environment in the Middle East, though only a third felt that the financial credibility of the region needs to improve before M&A activity can really pick up.

“Most of these markets are frontier,” said Lunt who added that region is still on the periphery of global M&A markets, “I think what the bankers were saying is just that, [though] bear in mind it is really important that these are the opinions of bankers, rather than necessarily our opinions, so it is important to add that caveat. This remains a challenging part of the world to do business, because the level of transparency and the rigour of the sort of due diligence that you would get in more established markets is not yet here in many cases.”

Indeed, lacking due diligence and the reluctance of many family companies to allow

larger companies to invest in their operations, lest they lose control, are further factors investment bankers say will have a noteworthy influence in M&A activity in the region. A widely expressed sentiment is that many second, third or even fourth generation companies in this part of the world want to run their own companies and not be managed by external funds and they don’t want external systems as they say can hire managers to do it for them internally.

Nevertheless, it seems most investment bankers are of the opinion that family businesses present a great area of potential activity in M&A in the region, with an added feeling that there are many of these companies are trading at up to 50 percent of their real market value and present great opportunities for investors.

However, crucially, just under a third of those surveyed singled out financial services as the sector most likely to suffer due to the regional unrest, which they said, may have a serious effect on M&A activity due to a lack of availability of finance capital for deals. The financial services sector was also identified as the one most in need of consolidation in the February M&A Barometer due to lower valuations and loss of credibility and confidence.

“Consistent with the first report and the interim special situation update is the availability of finance,” affirmed Lunt. “What the bankers were saying is that although there are regulatory issues, although there are other uncertainties... the single biggest factor without any doubt that they identified was the availability of finance.”

This, added Lunt, is also one of the main indicators for potential growth in this sector. As indicated by the bankers themselves, consolidation in the Middle East banking sector will ostensibly be necessary in order to create adequate funding for deals. However, this is a double-edged sword when hedging against a future banking collapse, and thus there should also be some measure of guarding against too much consolidation and having only a few large banks operating in individual countries or across the region.

“The smaller banks, none of them are too big to fail,” agreed Lunt. “And that is a reasonable argument. But the counterpoint the bankers said to us on in the survey, is [that] there are too many weak institutions fighting for space and it is [too] crowded. So it is not that the bankers are saying there should be only two to three serious Middle East regional players, I do not think that was what was being suggested, I think what they are saying is there are far too many small weak institutions that maybe are surviving because of special support, without being more specific than that, and the investment bankers’ professional view is that if they are going to survive over the medium to longer term, then only way they are going to do that is if there is consolidation.”

Finally, there was still a great deal of optimism for H2 when those surveyed were asked to indicate what sectors and countries they thought would show the most M&A activity in the countries included in the report, which were Qatar, United Arab Emirates, Egypt, Kuwait and the Kingdom of Saudi Arabia.

“Health is seen as a very important sector, financial services obviously, telecoms, those are the top three,” confirmed Lunt, adding that while Qatar is certainly seen as a prime target for more M&A activity, and there is still surprising optimism regarding M&A activity in Egypt, in terms of volume, Saudi Arabia presents the most potential.

“The fact is very clear that Saudi is seen as the key market for M&A activity going forward, particularly in the mid-market,” Lunt continued. “And the reason is that there has been very little consolidation over the last 10 to 15 years versus a huge number of relatively small but growing family-owned businesses that are reaching this third generation maturity, and for that reason Saudi Arabia is seen as a particularly valuable market…The Saudi government is going to put a huge amount of money into the Saudi economy and the feeling from my Zawya colleagues certainly was, or their interpretation of what the bankers were saying, was that this should have a positive effect on our Saudi market in general and then probably on M&A activity as well.”

While Lunt concedes that both business and national politics, and indeed of course financial mechanics, all play important roles in this sector, emotion is often an unheralded component of both confidence and contracts and the frequency of M&A activity.

BUSINESSINSIGHT

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ALSO IN tHIS SECtION:

lIfE& STylE

AGGrO-tOurISM (P.78)Kick your civilized, city self to the kerb and go blow off

some steam with one of these unconventional breaks.

• Snack attack: If you’re chowing down on doughnuts and crisps to tide you over between meals, it’s time to take control of your unhealthy habits. We suggest work-friendly, quick and easy snacks to pack for the office (P.79).

• Get into photography: Canon releases an exciting new model ideal for beginner enthusiasts (P.79).

• Enchant them: Guy Kawasaki’s new book urges you to enchant others instead of merely trying to get your way (P.79).

• 10 office etiquette rules: From bathroom behaviour to what you eat in an open-plan office, here are the workplace’s worst etiquette offenders (P.80).

Aggro-tourism

TRavEl

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Shoot somethingThe next time you’re in Cambodia, why not toss a grenade at your troubles? There are several semi-legal firing ranges outside Phnom Penh, the most famed of which is called Thunder Ranch, where you’ll be presented with a ‘menu’ of ways in which to express your anger: Uzis, M16s, 12-gauge assault shotguns, even an M79 grenade launcher. While there are no websites to pre-book your visit, any taxi driver will be able to get you there. Itchy trigger fingers can also get their fix at Las Vegas’ Gun Range and Firearm Center, perfect after a frustrating day at the tables.

Crash madnessDemolition Derby Madness is the perfect opportunity to get into

an ancient sedan and crash into another one. From March through September, in small towns in Kentucky and Tennessee, tourists and locals alike line up to release endorphins by smashing metal into metal. It may be nicknamed ‘a redneck riot’, but when even cars that catch on fire are merely extinguished and allowed back into the fray, a demolition derby sounds like a terrific grown-up game of bumper cars.

this is Sparta!Unleash your inner Maximus at the Scuola Gladiatori, or gladiator

school, in Rome. For US$135 (QR490), the two-hour course covers protocol and manoeuvres, and helps you give free reign to those fantasies of fighting hand-to-hand, ancient-Rome-style. The school is manned by Italians who are fanatical about gladiator history, and attendees are set loose with wooden swords, armour and real metal weapons with blunted edges.

Get into a dogfightThis is the perfect way to spend a guys’ weekend with your buddy.

Air Combat USA, based in Fullerton, California, will put you in a single-engine Italian warplane with simulated cannons and laser sensors, giving you the adrenaline rush of a full-on dogfight. You’ll start off with basic lessons in air combat strategy, an experienced pilot will sit beside you to handle take-off and landing, and then you are handed control of the stick.

Go covertIf you ever watch 24 and wish you had some of those Jack

Bauer skills, then sign yourself up for one of the three-day Covert Ops programmes run by Incredible Adventures. While they offer programmes in Russia, the Arizona option is based at an actual old CIA training camp in the desert, and all staff are former military professionals.Be tutored in ‘close-quarter disarming’, the art of evading an ambush while in a convoy of cars, and the correct way to fire a nine millimetre Glock, ending with a mission to rescue hostages in deserted buildings.

When a tropical vacation just won’t cut it, and you’d rather go blow off steam and blow something up, then one of these completely unconventional holidays may just do the trick.

lIFESTYlElIFESTYlE

If you’re anything like us, a quick snack to tide you over until your next meal is likely junk from the closest convenience store. Here, then, is a list of goodies that can be stashed away for that next hunger attack.

Snack Away

the new Canon EOS 1100DCompact, lightweight, and the perfect high quality camera to begin your journey into photography, the new Canon EOS 1100D features the technologies developed for more advanced models. As the gateway to Canon’s EOS System, this model grows with you, allowing you to experiment with more than 60 different lenses and accessories such as Speedlite flashes. It also features a 720p HD video camera, Creative Auto, with which you can darken or lighten an image or even blur the background, a large 6.8 centimetre LCD screen, wide viewing angle, and 12-megapixel image quality.www.canon.com

read itEnchantment by Guy KawasakiGuy Kawasaki, keynote speaker at Doha’s QITCOM and author of The Art of the Start, releases Enchantment: The Art of Changing Hearts, Minds and Actions. Considered the entrepreneur’s entrepreneur, Kawasaki turns his attention to the mystery of influence, offering a compelling take on how it drives any successful interaction. The message of Enchantment is that the goal of a transaction is to bring about a voluntary and enduring change of heart in others. Advice includes how to achieve rapport and trust, overcoming resistance, and how to enchant employees.Available at Virgin Megastore for QR105.

• A 100g bag of natural or plain popcorn. Divide in two for two separate snacks, and add a little salt.

• For sweet and spicy cravings, peel and slice a mango, squeeze some lime juice and shake chilli powder over it.

• Grill a slice of halloumi cheese, top with olive oil and herbs, and enjoy it on top of crackers or toast (or eat it as is).

• Pour a ¾ cup of vegetable juice, and stir in a teaspoon each of horseradish and Tabasco.

• Top a toasted bagel with some cream cheese, sliced cucumber, chopped tomato, sliced mushroom and two slices reduced fat or fat-free Emmental cheese (only five grams of fat!).

• Slice half of a small apple into 110 grams of cottage cheese. Top with cinnamon and some honey.

• Slice an Asian pear in half and eat with a little blue cheese for a great protein kick.

• Skip sweetened yoghurts. Instead, stir honey or grate an apple into a cup of fat-free plain yoghurt.

• With a little planning in the morning, chop two hard-boiled eggs, mixed with diced pickles, a spoon of olive oil, mayonnaise, spicy mustard and a little cayenne, making a low-fat egg mayo that would be great eaten in a cos lettuce wrap.

• Baby carrots eaten with four tablespoons of hummus has only five grams of fat.

• For a cheese snack, try a wedge of Laughing Cow medium-fat cheese with rye crackers.

• To satisfy a craving for crisps, try rice crackers.

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10TEN THINGS

ThE ELEvATOROn the ride up to your office every day, you no doubt encounter The Mobile Phone Shouter (“What? Sorry, I can’t hear you. I’m in the elevator. The elevator!”), and The Weather Reporter (“50 degrees today. Better start hydrating!”), and The Crasher, the guy who sprints to the elevator and thrusts an arm or leg through the shutting doors to make it upstairs 30 seconds sooner. Why doesn’t he just ask us to hold the door?

ThE MORNING GREETINGComfortable silence has become a lost art. How else to explain the colleagues who start talking business as you walk the last steps toward your building? In a civilised world, no one would say a word until the first coffee has been consumed.

ThE E-MAIL ExChANGE, PART ONEDo not use high-priority flags when sending emails about the shortage of paper towels in the bathroom, or when trying to gather votes for your campaign to have soya milk sponsored by the company. Be discriminate about how, and how often, you communicate.

ThE E-MAIL ExChANGE, PART TWOMisspellings, cute emoticons, using all lower-case letters or all upper-case letters – nothing is more irritating than receiving a mail that reads something like, “w7 ok tue” or “lts tlk thrusday how teh kidz????”. Although mistakes are bound to happen when racing across a phone’s keyboard, when it comes to a proper email, try not to communicate like a 12-year-old mallrat.

ThE TELEPhONEApparently uncomfortable speaking into a receiver attached to a cord, many professionals have started using the speakerphone. Not for conference calls, but for one-on-one conversations. They even use speakerphone to dial numbers, a habit that is about as rude as yawning in the middle of someone else’s presentation.

ThE OFFICE ChATWhile the office banter rules vary from office to office, there are three topics that are safe to assume just shouldn’t be brought up, and definitely not in an open-plan workplace – sex, religion and politics. No matter how relaxed your environment, when it comes to the office chat, be mindful of volume, subject matter and whether you are sharing too much information.

ThE WORk SPACEDirty, smelly gym clothes, bare feet stretched out… These are offences that put you at the front of the queue come redundancy time. One of the biggest issues facing the professional today involves conflict over shared space. A well-mannered member of the office community will keep it tidy and adhere to the rules of basic cleanliness.

FOODAah, sardines on toast. Recommended for cardiovascular health, but not the best option for a pong-free office. If you lean towards smelly meals that stink up the workplace, take it somewhere else, or you’ll be faced with colleagues conspiring against you.

BAThROOM BEhAvIOURBathroom rules are always worth revisiting. In the men’s loo, a ‘safety zone’ is required – put a respectful space between you and the guy from accounts. Also, stick to the ‘I don’t exist, you don’t exist’ philosophy when at the urinal. In the women’s loo, basic primping is practically expected – hair removal is not. Keep it neat and discreet.

MAkING MISTAkESDon’t be the know-it-all who refuses to acknowledge making a mistake – there is no quicker way to alienate your co-workers. Take responsibility, apologise and correct it. The most important part of that last sentence was ‘apologise’, especially if you are clearly in the wrong. If in doubt, apologise anyway – it’s no big deal.

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Open-plan offices, ever-present mobile phones and increasing informality in the workplace have created an etiquette minefield. Here are the worst offenders:

oFFICe eTIqueTTe NIghTmarES