Focus on Qatar

The MEA held a well attended and lively breakfast briefing on Qatar on Tuesday 24^th April, which provided advice to British companies looking to benefit from the opportunities arising from Qatar’s meteoric development and its preparations to host the World Cup 2022.  It was chaired by Dr Ranald Spiers, Middle East Association, presiding over his first event since taking over as Director General. Speakers were Andrew Jeffreys, Oxford Business Group; Alex Lambeth, British Expertise; Stuart Curtis, Links Group; Suzannah Newboult, Eversheds Qatar Office; and Michael Hodges, HSBC.

Over the past decade Qatar has emerged as a globally significant player in the energy market, an  emerging international force in sovereign investment, and regionally as an influential diplomatic broker.

As a result of its investment in LNG, Qatar has the highest per capita wealth in the world and a GDP of over $100 billion. Qatar is now the world’s largest exporter of LNG, and accounts for a quarter of the UK’s natural gas imports.

The Emirate’s wealth has been channelled primarily into two areas – overseas investment and domestic diversification. Qatar Investment Authority (QIA) investments range from the Harrods Group and Chelsea Barracks in the UK to Paris St Germain Football Club, as well as minor shareholdings in some of Europe’s top brands, while closer to home Qatar is investing heavily in North Africa.

Economic diversification has focused on areas such as tourism, education and financial services. In education Qatar has led the way in attracting partnerships with leading universities in the US and Europe, while the Qatar Foundation is playing a key role in aiding Qatar’s transition to a knowledge economy.

Foreign investment in Qatar itself has grown as foreign companies look to benefit from opportunities in the most rapidly expanding economy in the Gulf, with GDP rising by 16.6% in 2010 and 9.6% in 2011.

Qatar punches above its weight politically and has played a key role in regional diplomacy in leading the Arab response to the Arab spring and promoting democratic change (although some might question the extent to which the power structures within Qatar itself are democratic).  Qatar will play a pivotal role in shaping global attitudes to the region when it hosts the World Cup in 2022.

There are huge opportunities arising from Qatar’s preparations for the World Cup as well as the pursuit of its 2030 vision, and the Qataris are keen to maximise legacy.  $60 billion in infrastructure projects are planned, to include new stadia, development of the transport network and new cities, eg the 35 sq km Lusail mixed use project, as well as the regeneration of downtown Doha. Transport projects include the international airport, a new deep sea port, and railway and metro network, the latter potentially revolutionary given the hitherto total reliance on road transport.  80,000 hotel rooms are needed.  There are opportunities in healthcare and education to serve the growing influx of expatriate workers. Investment is sought not just in high net worth projects but also in niche areas.

Can Qatar fulfil its ambitious plans? Is the focus on meeting the minimum requirements for hosting the World Cup, or will a longer term vision be pursued? There is a high level of confidence locally in the vision and foresight of the Emir and a strong feeling that the mega projects can be pulled off, despite the challenges. However there are some questions over capacity and scepticism as to whether deadlines will be met (it is unlikely for example that the entire metro network will be completed in time for 2022). The provision of budget accommodation does not appear to have been addressed, which could in turn present an opportunity. It is clear that substantial international assistance and expertise is needed and the emphasis now is as much on quality as on price, with expertise and quality credentials sought.  British companies, such as WS Atkins, Arup and Halcrow, have a significant involvement and are highly respected.

Companies looking to do business in Qatar need to be aware of the challenges as well as the opportunities – for example, restrictions on the movement of labour and visas, and increasing competition – with many more companies now in the market than there were a few years ago.

Companies should also consider the most appropriate vehicle for doing business in Qatar – whether through a trade office, which acts as a shop window only and is not permitted to conduct business in Qatar; a branch office (linked to specific contracts and limited to the duration of contract); a limited liability company (LLC) with up to 49% foreign participation, a common way of doing business; or a commercial agency.   Establishing in the Qatar Financial Centre (QFC), an option for firms engaging in or directly supporting the financial sector, allows for 100% foreign ownership. Elsewhere, 100% foreign ownership is possible in certain industries, but is subject to approval from the Ministry of Business and Trade.  It should be noted that agency laws are favourable to the Qatari agent and the termination of agency agreements can be problematic.

As for dispute resolution, it was noted that the Qatari courts lack transparency. However the Court of the Qatar Financial Centre is an option for international-style proceedings. Parties can also elect for disputes to be resolved by arbitration, either locally or internationally. There are two local centres for arbitration – the Qatar International Centre for Arbitration, which is modelling new ways of dealing with disputes as the country moves towards 2022, and the Qatar Financial Centre Tribunal.  Any party can opt to use the QFC Tribunal for arbitration.

Qatar has a flourishing banking sector which is characterised by its international outlook, with many Qatari banks having branches abroad. There is a high loan to deposit ratio with a growing demand for loans, project finance etc, and banks are expected to become more conservative. QIA is allocating $1 billion to be placed with asset managers in Qatar.

The event concluded with a lively question and answer session which raised some practical business issues such as getting paid and tendering for projects, as well as Qatar’s role within the GCC.