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Consolidation Accountant
Industry: Finance
Location: Dubai, UAE -
Finance Director
Industry: Finance
Location: Jeddah, Saudi Arabia
Can Qatar cut it?
by Anil Bhoyrul on Monday, 01 January 2007
Booming: Doha’s towering structures under construction throughout the city are evidence of its spectacular growth.
As we walk into his office, Yousef Kamal is busy on his calculator. Qatar's finance minister is man who likes figures. "I had dinner with an American friend of mine last night, and we were talking about the price of oil. Four years ago I told him it would cross US$50 a barrel. I was right. Now he wants me to tell him what the price will be in 2010," he says.
So what will it be? "How much will you pay me to answer that question?" Judging by his track record, it may well be worth paying Kamal whatever fee he wants. The minister's "vision" has certainly served Qatar well. At 25% per year, it is the world's fastest growing economy. By next year it will be the world's largest single producer of Liquid Natural Gas (LNG) - and by 2010 will have trebled its LNG output.
With billions of dollars of surplus cash, a staggering US$130bn has been set aside for investment between now and 2012, and an average of US$500,000 per Qatari citizen is being spent on numerous social and economic infrastructure during that period. But it is in financial services where the real challenge lies. Less than two years ago, the Qatar Financial Centre (QFC) didn't exist. Today, it has 71 staff, has granted 21 licenses, and by all accounts is giving the likes of Dubai and Bahrain a run for their money.
"If you want to buy a Mercedes you will look at a BMW as well. It is the same with the financial centres in Dubai, Doha and other places. They are all top class, but they have different features. People will choose the one that suits them best. If you don't have competition then you never have a challenge; you never try to be the best. If we think worldwide, not just about this region, then the market is big enough to accommodate everyone," says Kamal.
"The reason for our success is simple - it is our vision. Our vision is that we have to build an economy that is independent of oil," he adds.
That he has certainly done. Since its inception in May 2005, the QFC has wasted no time in attracting top talent. With Kamal also acting as the QFC chairman, Philip Thorpe, who was controversially forced out of the Dubai International Financial Centre in June 2004, has been brought in as chief regulator. And former HSBC boss Stuart Pearce came out of retirement to run the QFC Authority.
Dubbed the "dynamic duo", Thorpe and Pearce have set about establishing the QFC as an international player. And so far, they appear to be succeeding. "Unlike Dubai there's no property deal here. There's no free zone. This is onshore. That makes the whole equation a lot easier to explain to people, and frankly, a lot more attractive. If people come in and meet our standards then they can do great business with Qatari companies and they can do it in the Riyal," says Thorpe.
He adds: "To say that Qatar decided to do what Dubai and Bahrain had done is to misunderstand the proposition. What has been happening in Qatar is an amazing growth story and a relatively recent one. It's really only started to see the benefits of the huge gas sector in the last three to four years. We're taking about economic growth of 25% plus a year." But this has put a strain on everything, he says. "Until last year the gap had been filled in financial services by people flying in, doing business and flying out again. That worked well for a while but you reach a point in your economic growth when you need to have the resources on the ground to support the growth. We had to look and see what we needed to put in place, in terms of financial services, to reinforce the growth of the economy."
At the QFC's very start, Kamal, Thorpe and Pearce met for several days, along with senior Qatari ministers, to decide just how the financial services sector should be developed. Either to undertake wide scale internal reforms, or to import - lock, stock and barrel - financial standards from abroad. They had no hesitation in choosing the latter. "Setting up under local jurisdiction was simply not attractive to international firms. They wanted more confidence. The option was to transform international financial standards to Qatar and do that very quickly. It allows you to go from zero to sixty in no time at all. Our legislation was passed in the beginning of 2005 and we were operating by May 1st. Coming here is attractive, a good proposition. Our main purpose for existing is not to compete with Dubai but to serve the Qatari market," says Thorpe.
He adds: "If you are a foreign company that wants to enter the Gulf market then five years ago the only choice was Bahrain. Two years ago Dubai came on the scene. Now they have three options, but each option is quite different. Bahrain is established as an offshore centre. Dubai is quite restrictive - you can't do retail business or insurance. In Qatar we don't have those restrictions. But in any case when you look at the growth of the economies in the region there is plenty of room for everybody."
But Thorpe admits there is a fair chunk of "secondary" work coming Doha's way. "Quite often companies say we are already doing business in Dubai, but we think it makes sense to put a foot in Doha as well. What I am finding is that firms are paying a lot of attention to the underlying economics. And to that extent Qatar, with its oil and gas-based economy, has got the best agency ratings in the region," he says.
One of the biggest advantages Qatar has over its rivals is that firms only have to deal with one central government - there is no UAE-style federal structure. Also, from the outset the QFC has separated its regulation department, which is run independently by Thorpe. He says: "There are a few bits to the QFC puzzle but one of the key aspects was allowing Stuart Pearce and the QFC Authority to be responsible for promoting and running the show, while keeping me and the regulation side independent. It gives companies that want to come here much more confidence. They know that our checks and balances are very strong, and we won't just accept anyone doing any kind of business."
Thorpe says that several new licenses are in the pipeline, and the QFC's own staff intake is set to double within the next year. But as for the next five years, the numbers are simply staggering. It is estimated that foreign banks have targeted US$1 trillion of investment throughout the Middle East. It means that not just Doha, Dubai and Bahrain will benefit, but financial centres are likely to spring up in Kuwait and Saudi Arabia.
For Thorpe and Pearce, the hard work may only just be starting. Pearce himself says: "The temptation for some people now might be to put their feet up but it isn't for us. I think we are at the level now that we expected to be at two years down the road. But we still have a substantial pipeline of licenses that are being processed. We opened on May 1st 2005 but didn't really get going till November 2005. There were just eight of us then. Now we have 21 licenses and 71 staff, that's pretty impressive. I don't think any of us doubted the idea of QFC, and the concept was bought into very quickly by a lot of senior people. This is a unique offering, not a ‘me too'."
Just how big can the QFC really become? Pearce is in no doubt. "When you look at the figures you can't get away from the fact that we are in the centre of the action. I wouldn't have taken this job if I didn't think it was something very special that was happening here. After all, I came out of retirement to do this. And I'm looking at being here for some time to come - that's years," he says.
If Pearce is here for the long run, then so is Thorpe. The latter was controversially booted out of the DIFC two years ago, after a fall out with his bosses over the standards of regulation. Although Thorpe still feels hard done by in Dubai, he says all his energies are now focused on developing the regulations in Doha, and he is not concerned about the past.
"It's not something I have spent much time talking about. I spent many happy years in Dubai, and my regret is that I wasn't there to see the results of the work we did. So in a way I feel I've been given a second chance with what is happening here," he says. How long Thorpe and Pearce will stay in charge ultimately depends on finance minister Kamal. Both men have an excellent rapport with the minister, who himself sees the pair as crucial to Qatar's development.
Kamal explains: "I've said many times about having the right vision. You need the right people to implement visions, and in Stuart and Philip we have them. You see the real challenge for Qatar has been how to diversify. Yes we have all this gas, which brings us all this money, but then we have to use it properly. I think we have shown we can do that with the way the QFC has grown."
Thorpe is clearly enjoying his new lease of life. As he says: "I have a professional disposition to be sceptical about everything, and I was the same about Doha, especially after the way things ended for me in Dubai. I have my own very high benchmarks to measure success. So far, they have all been exceeded - it's fair to say I'm having a good time."
Most firms that have launched at the QFC, with the fast growing economy to underpin their investment, would agree.
Energy forecasts
• By 2008, Qatar is likely to be the world’s single largest producer of LNG, and by 2010 will have a production capacity of 77 million tonnes per year, about three times its current production.
• In the oil fields, current intensified development programmes are increasing with oil production set to exceed one million barrels per day (bpd) by 2011, which combined with LNG and GTL output, will total some 6 million bpd.
• Two gas super-trains are planned, each capable of producing 7.8 million tonnes a year. They are expected to supply 15.6 million tonnes a year to the US market from 2008. A similar amount is planned for the United Kingdom, also from 2008, with the world’s largest LNG import facility is currently being built at Milford Haven, a project which will bring 16 million tonnes of gas annually from Qatar into the UK gas transmission network.
• In September 2005 RasGas II signed a 25-year sale-and-purchase agreement with Chinese Petroleum Corporation of Taiwan to supply 3m tonnes a year of LNG. Japan, South Korea, India and Taiwan are already long-term buyers with Italy and Belgium committing to buy Qatari gas.
• To supply gas to its global customer base, Qatar will undergo a huge expansion programme growing its fleet of 20 vessels by another 60, at a cost of some US$15bn by 2009.
• Qatar launched the world’s largest LNG refinery project in November 2005, with production mostly for export to the US. In the US$14bn strategic alliance between the two countries, Qatar Petroleum has a 70% stake while ExxonMobil Ras Laffan III Limited, a subsidiary of the US oil major ExxonMobil, has the remaining 30%.
• On the manufacturing front, Qatar’s first helium plant came on stream in August 2005. In August 2005 Qatar Vinyl Company announced a plan to triple its ethylene dichloride production capacity. The emirate of Qatar aims to be a major producer of condensate, naphtha and lube oil by the end of the decade.
• Qatar Steel Company has embarked on a programme to increase its iron and molten steel capacity by a half while Qatar Petroleum is working on a joint venture with Norsk Hydro of Norway to set up an aluminium smelter plant. The future progress in the oil and gas sector will see the emirate become a world leader.
• By 2008, Qatar is likely to be the world’s single largest producer of LNG, and by 2010 will have a production capacity of 77 million tonnes per year, about three times its current production.
• In the oil fields, current intensified development programmes are increasing with oil production set to exceed one million barrels per day (bpd) by 2011, which combined with LNG and GTL output, will total some 6 million bpd.
• Two gas super-trains are planned, each capable of producing 7.8 million tonnes a year. They are expected to supply 15.6 million tonnes a year to the US market from 2008. A similar amount is planned for the United Kingdom, also from 2008, with the world’s largest LNG import facility is currently being built at Milford Haven, a project which will bring 16 million tonnes of gas annually from Qatar into the UK gas transmission network.
• In September 2005 RasGas II signed a 25-year sale-and-purchase agreement with Chinese Petroleum Corporation of Taiwan to supply 3m tonnes a year of LNG. Japan, South Korea, India and Taiwan are already long-term buyers with Italy and Belgium committing to buy Qatari gas.
• To supply gas to its global customer base, Qatar will undergo a huge expansion programme growing its fleet of 20 vessels by another 60, at a cost of some US$15bn by 2009.
• Qatar launched the world’s largest LNG refinery project in November 2005, with production mostly for export to the US. In the US$14bn strategic alliance between the two countries, Qatar Petroleum has a 70% stake while ExxonMobil Ras Laffan III Limited, a subsidiary of the US oil major ExxonMobil, has the remaining 30%.
• On the manufacturing front, Qatar’s first helium plant came on stream in August 2005. In August 2005 Qatar Vinyl Company announced a plan to triple its ethylene dichloride production capacity. The emirate of Qatar aims to be a major producer of condensate, naphtha and lube oil by the end of the decade.
• Qatar Steel Company has embarked on a programme to increase its iron and molten steel capacity by a half while Qatar Petroleum is working on a joint venture with Norsk Hydro of Norway to set up an aluminium smelter plant. The future progress in the oil and gas sector will see the emirate become a world leader.
Economic outlook
• Qatar’s national income primarily derives from oil and natural gas exports. The country has oil reserves estimated at 15 billion barrels.
• Qatar has the highest GDP per capita in the developing world. With no income tax, Qatar is also one of the two least-taxed sovereign states in the world.
• While oil and gas will probably remain the backbone of Qatar’s economy for some time to come, the country is seeking to stimulate the private sector and develop a ‘knowledge economy’. In 2004, it established the Qatar Science and Technology Park to attract and serve technology-based companies and entrepreneurs, from overseas and within Qatar.
• Qatar is aiming to become a role model for economic and social transformation in the region. The Qatar Financial Centre Authority (QFCA) provides financial institutions with a world-class financial services platform situated in an economy founded on the development of its hydrocarbons resources. Apart from Qatar itself, which needs to raise the capacity of its financial services to support more than US$130bn worth of projects, the QFC also provides a strong conduit for financial services providers to access nearly US$1 trillion of investment across the GCC as a whole over the next decade.
• Qatar’s national income primarily derives from oil and natural gas exports. The country has oil reserves estimated at 15 billion barrels.
• Qatar has the highest GDP per capita in the developing world. With no income tax, Qatar is also one of the two least-taxed sovereign states in the world.
• While oil and gas will probably remain the backbone of Qatar’s economy for some time to come, the country is seeking to stimulate the private sector and develop a ‘knowledge economy’. In 2004, it established the Qatar Science and Technology Park to attract and serve technology-based companies and entrepreneurs, from overseas and within Qatar.
• Qatar is aiming to become a role model for economic and social transformation in the region. The Qatar Financial Centre Authority (QFCA) provides financial institutions with a world-class financial services platform situated in an economy founded on the development of its hydrocarbons resources. Apart from Qatar itself, which needs to raise the capacity of its financial services to support more than US$130bn worth of projects, the QFC also provides a strong conduit for financial services providers to access nearly US$1 trillion of investment across the GCC as a whole over the next decade.
Social development
Qatar is investing the equivalent of US$500,000 per citizen over the next five years in the economic and social infrastructure. HH The Emir, Sheikh Hamad bin Khalifa Al-Thani said: “We want to be the centre of knowledge and learning in the Middle East. We want out children to have a better chance than we had in the past.”
A central feature is investment in education because, as the world moves towards a knowledge economy, the Qatar government recognises that education will increasingly be the key to business success. Already Qatar has set up local campuses in partnership with five American universities, including Cornell, Carnegie Mellon and Georgetown.
Qatar Science and Technology Park provides facilities for high-profile companies such as EADS, Microsoft, Rolls Royce, Shell, and most recently GE.
In healthcare, Qatar has set aside a staggering US$8bn for research — the largest cash endowment of its kind anywhere in the world. It is also creating a US$900m completely digital hospital in cooperation with Cornell.
Qatar is investing the equivalent of US$500,000 per citizen over the next five years in the economic and social infrastructure. HH The Emir, Sheikh Hamad bin Khalifa Al-Thani said: “We want to be the centre of knowledge and learning in the Middle East. We want out children to have a better chance than we had in the past.”
A central feature is investment in education because, as the world moves towards a knowledge economy, the Qatar government recognises that education will increasingly be the key to business success. Already Qatar has set up local campuses in partnership with five American universities, including Cornell, Carnegie Mellon and Georgetown.
Qatar Science and Technology Park provides facilities for high-profile companies such as EADS, Microsoft, Rolls Royce, Shell, and most recently GE.
In healthcare, Qatar has set aside a staggering US$8bn for research — the largest cash endowment of its kind anywhere in the world. It is also creating a US$900m completely digital hospital in cooperation with Cornell.
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