QATAR InsideA 40km bridge linkingQatar with Bahraininspires mixed feelings,writes Digby LidstonePage 5

FINANCIAL TIMES SPECIAL REPORT | Thursday November 19 2009www.ft.com/qatar­2009

Propelled to the top of the rich list

The last time oil prices bot-tomed out in the late 1990s,Qatar was on the verge ofbankruptcy. But the new

emir, Sheikh Hamad bin Khalifa Al-Thani, took a gamble.

Aware that his emirate straddledthe world’s third-largest gas reserves,he borrowed heavily on bond marketsto fund export facilities that couldchill natural gas into liquids thatcould reach hitherto unreachable mar-kets in Asia, Europe and the US.

The extent of his pay-off willbecome apparent next year as theemirate doubles its liquefied naturalgas exports to 77m tons a year, propel-ling the largest LNG exporter to thetop of the world’s per capita rich list,alongside Luxembourg and Norway.

The gradual rise in gas exports thisdecade has given Qatar a comfortablefiscal cushion as its gross domesticproduct ballooned 300 per cent duringthe six-year petrodollar boom thatended last year. Yet despite itswealth, Qatar knows it cannot relyonly on hydrocarbons. Small, buteager to secure a place on the globalmap, Qatar has been attempting todiversify the economy, developingeducation, finance and healthcare.

“By 2012 we will reach a plateau,especially in oil and gas,” saysYoussef Kamal, the finance minister.“And if we want stability and growth,our main challenge, we have to havediversification,” he says.

Real GDP growth, the InternationalMonetary Fund estimates, could reach18.5 per cent next year, four times theaverage growth recorded by other oilproducers in the Middle East.

Some of the estimated $35bn-plusrise in revenues next year is ear-marked for infrastructure and cul-tural and educational initiativesaimed at creating a dynamic economyfor a growing youth population. Partof that drive lies in initiatives such asthe Doha Tribeca Film Festival, whichhopes to develop a local film industry.

The move on Hollywood underpinsthe scale of the emirate’s financialambitions, which have appeared unaf-fected by the crisis and are designedto raise Qatar’s profile further as itmakes more overseas acquisitions andinvestments.

Using the darkest days of the finan-cial crisis to re-evaluate its strategy,the Qatar Investment Authority, the$75bn sovereign wealth fund, hasreturned to prominence as the worldeconomy swings out of recession,helping recapitalise Credit Suisse andBarclays and taking stakes in VW/Porsche.

Sovereign wealth, focused on creat-ing a long-term nest-egg, has alsobeen channelled into the Qatari econ-omy. The QIA spent the early days ofthe global financial crisis bailing outbanks’ toxicequity and real estate

portfolios, but now the government isredoubling infrastructure spending.

“We are forecasting the highestlevel of spending in the region as thegovernment plays catch-up on infra-structure,” says Monica Malik, aneconomist with EFG-Hermes in Dubai.

The surpluses are also being chan-nelled into longer-term issues ofnational security.

The arid peninsula is becoming anactive food-security investor, buyingstakes in foreign companies in a bidto secure preferential access to sta-ples. “Agriculture is now a priority forus,” says Mr Kamal. Hassad, the $1bnstate-backed food security company,has already made more than $100m ofinvestments in Sudan and has estab-lished itself in Mozambique, he says.

There could also be a push to boostdefence spending amid tensionsbetween world powers and Iran as theIslamic republic – with which Qatarshares the world’s largest gas field –pursues nuclear technology.

The emirate may in public be themost dovish of the Gulf states in itsdesire to talk peace with Iranianpowerbrokers, but privately it sharesthe concerns of its harder-line neigh-bours about Iranian ambitions.Qatar’s gigantic gas export terminalRas Laffan is, some fear, an obvioustarget for Iranian retaliation given theUS regional military headquarters inal-Udaid.

Concerns over Iran may be behindDoha’s emergence as an unlikelychampion of the Gulf Co-operationCouncil, which had been hoping tointroduce a single currency next year,

but saw Oman pulling out for eco-nomic reasons and the United ArabEmirates dropping out after SaudiArabia blocked Abu Dhabi from host-ing the central bank headquarters.

Mr Kamal says his emir is pushingfor even deeper economic unionacross the Arabian Peninsula. “TheVision of His Highness for the GCC isthe unification of the currency andone central bank, but we are askingfor more: one stock exchange,” he toldthe FT in an interview.

While championing better relationswith his closest neighbours, SheikhHamad, who took over in a palace

coup in 1995 and has now consoli-dated his power, is slowing down themove to greater democracy, which hepromised on his arrival in power.

But as bumper hydrocarbons reve-nues allow him to bulk up lines ofpatronage to local society and mem-bers of his sometimes-fractious Al-Thani family, there is less of a need totalk of democracy.

Though political liberalisation isnot high on the agenda, there is nolet-up in the drive towards more intel-lectually-curious developments, a

theme of the experimentation forgedoften by the Qatar Foundation, a cul-tural and educational developmentvehicle formed by the emir’s wife,Sheikha Mozah bint Nasser al-Misned.

From BBC debates about the natureof Arab society, to top academic insti-tutions in the government-backed uni-versity campus of Education City,Doha has been taking a more maver-ick approach to dealing with age-oldproblems of the Middle East, such asyouth unemployment.

“You’re informing, you’re educating,you’re opening up parameters, andideally you’ll have a response thatinspires and provokes, that causesdebate and questions,” says Geoff Gil-more, Tribeca’s chief creative officer.

But as trilby-adorned New York hip-sters descended on Doha last monthto smooth the organisation of itsdebut year, many locals werebemused. “Film stars? No, I will be onmy boat, fishing,” said one govern-ment official.

Some observers wonder whethersome of these cultural, philanthropicand educational initiatives have man-aged to carry the population withthem.

The contradictions between the rul-ing family’s ambitions and more con-servative elements of society havebeen illustrated in other initiativesthat went awry. The controversialhead of a media freedom centreflounced out of the country this year,claiming obstruction from officials.

The elite are increasingly educatedand open to worldly ideas, yet muchof the fast-growing population

remains conservative. “This isincreasingly a two-tier society,” saysone political analyst. “

There are the western-educatedones, who might dine at the Italianrestaurant after their classes, and themajority who not interested in thisworld,” he says.

An episode in this cultural clashplayed out this year in Doha’s limitednumber of watering holes. When someyoung local women were discoveredhanging out at bars, the authoritiesmade presentation of a passport com-pulsory for entry.

Just as the city was starting to shedsome of its “Dullha” reputation forsomnolent lifestyle, the backlashexposed unease about the expatriatelifestyle that comes with promotion offinance hub, and tourism.

It is one of several contradictionsthe emirate faces as it builds another30,000 hotel rooms and bids to host biginternational events such as theOlympics and the football World Cup.

Practising the same strain of con-servative Islam as Saudi Arabia,Qatar seemingly wants to blend toler-ance with cultural limits, but hasalways set a course different fromfreewheeling Dubai.

“Our tradition is not focused onalcohol, but part of our tradition is tounderstand and to be hospitable,”says Hassan al-Thuwadi, chief execu-tive of Qatar’s bid to host the WorldCup in 2022.

“We need the right mix, whereyou’re hospitable and at the sametime you’re maintaining your tradi-tion.”

Simeon Kerr reportson the country’sdifficult pathto modernity

Inside this issueThe economy A doubling of gasoutput by the end of next year isset to shore up finances, writesSimeon Kerr Page 2

Banking An extraordinary level ofsupport from the central bank(above) has ensured institutions areamong the most robust in the world,says Robin Wigglesworth Page 2

Education Much store has been seton a parallel university system aimedat increasing creativity, writesAbeer Allam Page 3

Oil and gas Qatar has become animportant operator in global markets,shipping LNG to Europe, Asia andthe US, writes Andrew EnglandPage 4

Gas light: some of the estimated$35bn­plus rise in revenues nextyear is earmarked forinfrastructure and cultural andeducational initiatives Archival

The elite is increasinglyeducated and open toworldly ideas, yet much ofthe fast­growingpopulation remainsconservative and aloof

Crisis provides breathingspace to rethink strategy

The grand plan was laid out afew years ago by Hamad binJassim, Qatar’s influentialprime minister and most visibleinternational dealmaker. TheQatar Investment Authoritycould, with the right decisions,secure the wealth of the countryuntil well after the last tankerof liquefied natural gas hassailed from Ras Laffan port.

Since then, the QIA hasbecome one of the world’s high-est-profile institutional inves-tors, rubbing shoulders with theother leading sovereign wealthfunds, such as Abu DhabiInvestment Authority and Sin-gapore’s Temasek.

But the QIA also engaged in asomewhat haphazard strategy,building relationships with dif-ferent partners while pursuingunfocused investments that cul-minated in the pilloried last-minute failure to complete theacquisition of J Sainsbury.

Then the financial crisis camelast year, allowing the fund toslow down and rethink its strat-egy. As global markets slumped,they wiped off about $10bn fromthe $60bn of assets under man-agement that bankers estimatedwere held by the QIA a yearago. Bankers now reckon that,after the recovery in global mar-kets and new investments, theQIA’s portfolio is about $75bn.

“We’ve been reviewing ourstrategy: What should we doand where should we go and

where should we put our moneyduring the crisis?” says Ahmadal-Sayed, the chief executive ofQatar Holding, the direct invest-ment arm of the QIA that han-dles the fund’s stakes in publicand private entities.

Despite the fall in oil prices,excess revenues have continuedto flow from the finance minis-try into the fund, includingequity injections into Barclaysand Credit Suisse, as well asimportant investments inVolkswagen and Porsche and,more recently, the UK’s Song-bird Estates.

As gas exports double, theserevenues will jump further andthe QIA will be the recipient of

those funds, which flow fromthe ministry of finance accord-ing to allocations drawn up bythe supreme committee foreconomy and investment.

The QIA is only one of severalfunds that receive budgetarysurpluses: there is a healthcarefund, an education fund and astabilisation fund attached tothe finance ministry. But theQIA is the steward, saysYoussef Kamal, the finance min-ister. “You only see them sepa-rately inside Qatar, but out-side…they go as one body.”

Qatar Holding is responsiblefor directing the investmentsinto both public and privatecompanies for the QIA, but alsohelps manage similar invest-

ments from the other, less high-profile funds. The asset manage-ment arm is responsible for theQIA’s allocation to global funds.

Hamad bin Jassim, vice-chair-man of the QIA and the emir-ate’s leading businessman, oftenco-invests in QIA deals throughvarious units, such as Chal-lenger. But his principal invest-ment vehicle, which underpinsthe most deals, is known as Spe-cialised Projects Company Hold-ing, bankers say.

As the country’s future long-term gas contracts are expectedto be sealed with Asian, espe-cially Chinese, customers, soQIA and Qatar Holding are look-ing to boost their Asian portfo-lios. Infrastructure is anothertheme for the fund, say bankers.Exposure to the financial sectoris reaching its limit, they say.Opportunistic investments arealso blending with those thatare seen to benefit the domesticeconomy. The QIA has takenequity stakes in several banksin lieu of their depressed stocksand real estate portfolios. Thefund will also make investmentsthat can help diversify the econ-omy while also generatingfinancial returns.

Qatar Holding is building upits management team as it seeksto bring in expertise that cansource and manage investmentswhile, in line with broader gov-ernment aims, passing on finan-cial acumen to a new breed ofQatari employees.

“We are building for thefuture by creating a school ofexpertise for new generations,”says Mr Sayed. “We are also car-rying the responsibility of play-ing our role to train Qataris toenhance their ability to becomeinvolved in international trans-actions for the future of Qatar.”

Doha makes newfriends and enemies

It is not easy for a small MiddleEastern country to have anindependent foreign policy. It iseven harder when that stateconsiders its security bestserved through controversialfriendships and policies thatsometimes alienate the moretraditional powers in the region.

But Qatar, wealthy and ambi-tious, has been determined toguard its independence. Led bya maverick ruler, Sheikh Hamadbin Khalifa al-Thani, it hasmade a name for itself as a skil-ful mediator, and, to some of itsneighbours, an irritating trou-blemaker.

Though some of its initiativeshave faltered – a deal it helpedforge between the Yemeni gov-ernment and rebels has col-lapsed – it is actively working tobring peace to Sudan and itscored a big success last yearwhen it reconciled warring Leb-anese factions, pulling Lebanonback from the brink of civil war.

With a hyperactive prime min-ister and foreign minister –Sheikh Hamad bin Jassim – anda hard-hitting news channel –the popular al-Jazeera – Dohahas juggled seemingly conflict-ing alliances, maintaining goodrelations with both the US andIran, and remaining on goodterms with Israel while at thesame time supporting the Jew-ish state’s most bitter foes –Hamas and Hizbollah.

Over the past year, Qatar’spolicies have earned it a newfriend but also left it with a newenemy. While patching up rela-tions with its larger neighbourand long-time rival, Saudi Ara-bia, which it accused of plottingagainst it when the emir pushedhis father aside in 1996, Dohahas seen its ties with Egypt,another traditional Arab heavy-weight, dramatically deterio-rate.

No one thinks that the acri-monious past between Doha andRiyadh has been forgotten orthat tensions will not flare upagain. But both the emir andSaudi Arabia’s King Abdullahhave been making concertedefforts to turn the page.

Criticism of Saudi Arabia has

been noticeably toned down onal-Jazeera. Before his trip toIran early this month, the emirheld talks with the Saudi mon-arch, amid speculation thatDoha is trying to mediatebetween Tehran and Riyadh.

Speaking to al-Jazeera thisyear, Sheikh Hamad bin Jassemdescribed ties with the Saudis as“quite excellent”. Referring tothe allegations of past Saudiinvolvement in a coup, he said:“There had been a misunder-standing…such issues havebeen clarified by the two sides…

we in the state of Qatar haveaccepted the Saudi clarifica-tion.”

“The Qataris are now kickingthe ball in the same direction asRiyadh,” says Mustafa Alani, ananalyst at the Dubai-based GulfResearch Centre. “They reacheda point where they have interestin joining Riyadh.”

Closer ties with Riyadh, how-ever, have not prevented Qatarfrom falling out with Egypt, theArab world’s most populouscountry and a strong Saudi ally.Though Doha’s foreign policyambitions have exasperatedCairo in the past, evidence of amore serious breakdown washighlighted during Israel’sDecember Gaza offensive.

Al-Jazeera had a field dayberating Egypt’s resistance toopening its border with Gaza forthe besieged Palestinians. Andthe Qatari government wasaccused of bolstering Hamas,which controls the Gaza Strip,and undermining Egyptian andSaudi efforts to move the Islam-ist group towards compromise.

As Arab states fought amongthemselves over whether theyshould hold an emergency sum-mit for Gaza, Qatar went aheadand held its own. It wasattended by the leaders of Iran –but not Egypt or Saudi Arabia.

Observers say that Egypt’sproblems with Qatar run deeperthan the crisis over Gaza.“Egypt sees Qatar as a smallcountry stealing the light fromCairo, especially on Sudan andGaza,” says Mr Alani.

Its main grievance, he adds, isthat it considers Qatari influ-ence on Hamas to be workingagainst Egyptian interests andsuspects that Doha has worked

to bring Hamas and Iran closer.The Egyptian press has added

fuel to the fire by accusingQatar of involvement in a plotled by Lebanon’s Hizbollah andaiming to undermine security inEgypt.

Some analysts suspect thatthe unprecedented tensionsexplain the curious rumours ofa coup in Qatar that swirled inthe Arab media in October butwere deemed fabricated byDoha’s western allies.

People close to the Qatari gov-ernment say Cairo’s frustrationsare a sign of insecurity. In pub-lic, Qatari officials say that theyare not looking for trouble withCairo. Reacting to charges ofconspiracy with Hizbollah, theforeign minister told al-Jazeera:“I wonder what has led ourbrothers in Egypt [to level sucha charge], for which we blamethem.”

Although Saudi Arabia hasstepped in to try to reduce thetensions between Doha andCairo, there is no sign yet that arelationship that has spun outof control is being contained.“The Qataris feel persecuted bythe Egyptians,” says a westernobserver in Doha.

“They want to play a big rolein Palestine but are constantlyblocked by Egypt. But it is apuzzle why relations havereached the state they are in.”

FOREIGN POLICY

Roula Khalafreports on Qatar’smaverickdiplomacy

Al­Jazeera, popular TV channel

While patching uprelations withSaudi Arabia, Dohahas seen its ties withEgypt dramaticallydeteriorate

As gas contracts areset to be sealed withAsian customers, theQataris want to boostportfolios in the region

SOVEREIGN WEALTH FUND

Simeon Kerr on theQatar InvestmentAuthority’s effortsto come up witha more coherent plan

2 ★ FINANCIAL TIMES THURSDAY NOVEMBER 19 2009

Qatar

ContributorsSimeon KerrGulf BusinessCorrespondent

Roula KhalafMiddle East Editor

Andrew EnglandChief Middle EastCorrespondent

Robin WigglesworthGulf Correspondent

Abeer AllamRiyadh Correspondent

Edwin HeathcoteArchitectureCorrespondent

Digby LidstoneBahrain Correspondent

Stephanie GrayCommissioning EditorSteven BirdDesignerAndy MearsPicture Editor

For advertising details,contact:Mark Carwardine on:+44 (0) 2078734880;e­mail:mark.carwardine@ft.com

Gas output set to shore up state coffers

Much has been madeof Qatar’s so-called“recession-proof”economy. Bolstered

by oil exports and an increasing-ly-complete gas export infra-structure, the tiny emirate hasbeen able to weather the globalfinancial crisis well.

Despite losses of as much as$15bn on its portfolio of interna-tional assets, the country’s sov-ereign wealth fund managed tostep in and save the financialsector from the ravages of thecredit crunch, pumping billionsto alleviate the banks’ toxicstocks and real estate portfolios.

“Qatar is still one of the fastestgrowing economies in the world,”says Simon Williams, chief econ-omist with HSBC in Dubai.

Yet Doha was not immunefrom the global shock. With fall-ing oil prices, real gross domes-tic product headline numbersare showing deceleration, fallingfrom 12.7 per cent in 2008 to 6.4per cent this year, according toinvestment bank EFG-Hermes.Nominal growth is expected tocontract by 8 per cent this yearas a result of the hydrocarbonsslowdown.

However, these numbers mayend up being a mere blip. Thedoubling of natural gas outputby the end of next year, alongwith the demand increase conse-quent on a global economicrevival, should further shore upthe government coffers.

The International MonetaryFund sees 2010 real GDP growthof 18.5 per cent and a nominalincrease from $92.5bn this yearto $128.2bn in 2010. EFG paintsan even brighter picture, pre-dicting a 37 per cent expansionin real GDP next year.

The real pain this year hasbeen felt in the non-oil sector.

As the global economyslowed, so did Doha. The realestate sector collapsed and therewere lay-offs.

“The long-term story is good,but make no mistake, the last

nine months have been toughand the mood is still subdued”says Mr Williams. “Asset pricesare down and domestic demandis much weaker than during the2006-2008 boom when the econ-omy was firing on all cylinders.”

Non-oil GDP growth is fore-cast to halve from 16 per centlast year to 7 per cent in 2009,says EFG.

The huge export projects arealmost complete: from next Sep-tember liquefied natural gasoutput will have risen to 77mtons a year, before long propel-ling the tiny emirate into being

the world’s richest nation.Economists are now looking

to strong government spendingto help the non-oil sectorrecover from its funk.

“If we want stability andgrowth and this is actually ourmain challenge, we have to havediversification in our economy,and one of the elements actuallyis to have enough infrastruc-ture… I’m talking airports,ports, roads, all these things,”says Yousef Kamal, the financeminister.

Oil and gas continue to makeup the lion’s share of the gov-

ernment’s revenues, but MrKamal says that the countryremains set on diversification,especially into finance, health,education and small enterprises.

Qatar is to open a $14bn inter-national airport in 2011 withcapacity for 24m passengers.

New port and roads infra-structure will later be comple-mented by a rail system, includ-ing a metro linking Doha to thenew city of Lusail, further outfrom the new central businessdistrict of West Bay.

As the country prepares to bidfor more international sporting

events, such as the footballWorld Cup in 2022, it will alsoinvest in building hotels andtourism projects, earmarking asmuch as $17bn over the nextfive years to raise the number ofrooms to 30,000.

No stranger to capital marketsin the past, the emirate is lead-ing the region in returning tothe bond market as it picks upafter being frozen out by theglobal financial crisis.

After launching its firstsovereign issue of $3bn inApril, Qatar’s finance ministrycherry-picked five top banks

to run a second bond thatcould target as much as $5bn.

Thanks to strong interna-tional investor appetite, theemirate seems intent on borrow-ing as much as it can, followingthe maxim of borrow when youdo not need any money, as wellas setting a benchmark for itscorporate sector. The financeministry is working on thegrowth it is targeting for thenon-oil sector.

“We cannot deny that oil andgas will be reduced as a percent-age of our GDP, because it ishuge. But it is good to use it asa catalyst to expand the othersectors of the economy,” saysMr Kamal.

The government is also usinglegislation to encourage foreignbusinesses, pushing throughthe changes needed to giveentrepreneurs and foreign busi-nesses a boost.

It has opened up three sectors– consultancy and technicalservices, information, technol-ogy and distribution – to 100 percent foreign ownership.

Outside the Qatar FinancialCentre free zone, where finan-cial institutions, lawyers andconsultants have set themselvesup, businesses have to be 51 percent controlled by a Qatarinational.

The foreign portions of thesebusinesses have been paying taxat a rate of 35 per cent a year,but the government is to slashthat rate to 10 per cent fromJanuary in another move aimedat boosting investment by level-ling the playing field.

At the same time, the taxbreak on QFC-registered com-panies is expected to end inJanuary, with companies thenpaying the same 10 per centtax as would be due outside thecentre.

The hydrocarbons sector,where the lion’s share of foreigninvestment into Qatar takesplace, remains tax-free, so themove will have less of an impacton state revenues, but will hope-fully attract businesses and helpspeed diversification.“When youmarry the relaxation of owner-ship with tax changes, there isclearly a general encouragementof foreign investment takingplace,” says Kapil Chadda, headof investment banking at HSBCbank in Doha.

ECONOMY

The real pain has beenin the non­oil sectorbut this may havebeen a blip, writesSimeon Kerr

The emirate is leadingthe region in returningto the bond market asit picks up after beingfrozen out by theglobal financial crisis

Gas platform: huge export projects are almost complete – from next September liquefied natural gas output will have risen to 77m tons a year Sasol

Questions raised by sizeof carte blanche bail­outs

Qatar is the largest depos-iter, lender and shareholderin the domestic bankingsystem, so when the finan-cial crisis worsened in thewake of Lehman Brothers’bankruptcy last year, thegovernment was not shyabout propping up itsbanks.

Qatari banks lookedsomewhat stretched afteryears of hyperactive lend-ing and rapidly swellingbalance sheets – bankingassets grew at an annualrate of 40 per cent between2003 and 2008.

The government swiftlyincreased its shareholding,and has continued to pumpmoney into the sector. Theextraordinary level of gov-

ernment support hasensured that Qatar’s finan-cial institutions are nowamong the most robust inthe world, analysts andbankers say.

“Liquidity is back to rudehealth, and we’re seeingmajor transactions comeback,” says Kapil Chadda,head of global banking atHSBC in Qatar. “Thedomestic banks are return-ing to the position theywere in in early 2007.”

A precipitous decline inthe Doha stock marketearly this year spurred thegovernment to offer to buythe entire local equity port-folios of local banks at thevalue they were held at onbalance sheets, preventinginvestment write-downsfrom damaging capital ade-quacy rates. The cost esti-mates vary between $1.8bnand $6bn.

Concerned that lendingwas still being curtailed byloan impairment worries,the authorities in May saidthey would buy domesticreal estate assets and loansworth up to $4.1bn.

“It was the bazookaapproach,” says DanielCowan, a regional bankinganalyst at Morgan Stanley.“The authorities wanted todraw a line, and make surethat there would be no con-cerns whatsoever overQatari banks struggling.”

If asset prices recover,banks will be allowed tobuy back both their equityand real estate portfolios atthe price they were sold for,effectively capping thelosses of banks and guaran-teeing an upside.

Overall, Qatari banksnow have some of the high-

est capitalisation andreturn-on-equity rates of allemerging markets, and oneof the lowest non-perform-ing loan ratios, Mr Cowansays.

Although non-performingloans are expected to con-tinue to rise until earlynext year, the governmentand state-related entitiesare underpinning the assetquality of Qatari loanbooks. Morgan Stanley fore-casts that the impaired loanrate will peak at 1.9 percent in 2010 – among thelowest in the Gulf andindeed the world.

“Because they aren’t fac-

ing the severe indigestionproblem that some otherbanks have, they have awhole different level of con-fidence,” says Cyrus Behbe-hani, chairman of invest-ment banking at MorganStanley Middle East.

The extent of governmentassistance has led someobservers to raise the ques-tion of moral hazard. Statesupport is implicit acrossthe Gulf, but the size andnature of the carte blanchebail-outs could encourageQatari banks to run exces-sive risks, some bankersfear.

“Qatar has shown it canbuy off the toxic invest-ments in the banking sec-tor, but in future it will

have to make sure itdoesn’t get into a situationof moral hazard, as seen inKuwait,” says MonicaMalik, chief economist ofEFG-Hermes. “The bankingsector should not rely onbeing bailed out by the gov-ernment in the future.”

However, this may be anunavoidable consequence ina paternalistic, wealthyregion, many suggest. “TheQataris will always benefitfrom that dynamic,” says asenior regional banker.“They will give bad loans,they will make mistakesand, if they run into trou-ble, they will be helped.That is just the nature ofthe beast.”

With plenty of capitalunder their belt, Qataribanks will start to look out-side the relatively smalldomestic market for expan-sion opportunities, bankerspredict.

Qatar National Bank andCommercial Bank of Qatarhad already started toexpand outside the coun-try’s borders before the cri-sis. QNB already ownsstakes in banks in Jordan,Tunisia, Iraq and Syria,while CBQ owns minoritystakes in banks in Omanand the United Arab Emir-ates.

Mergers and acquisitionsbetween Gulf banks haveremained a rarity, despitemyriad financial institu-tions across the region,because of bumper profitsduring the boom years andshareholders who are reluc-tant to lose control overprestigious finance houses.

However, bankers saythat the financial crisis mayfinally force some consoli-dation.“Qatari banks havebeen growing rapidly andare starting to reach theircapacity domestically,” saysBassam Yammine, co-chiefexecutive of Credit Suissein the Middle East.

“I think more and morewill be looking to expandexternally in two ways. Itcould be via more interna-tional investment andengagement, or it could bethrough expanding theirpresence in the region. Iexpect to see more of thesecond.”

BANKING

There has been ahigh level of statesupport, says RobinWigglesworth

Central Bank: bail­outs might encourage excessive risk

‘They will makemistakes and,if they run intotrouble, theywill be helped’

FINANCIAL TIMES THURSDAY NOVEMBER 19 2009 ★ 3

Qatar

Phone operator with big ambitions

Qtel is a leading fixed­lineand mobile telecoms Qatarioperator. It has a presencein 17 countries, with 53mcustomers, in the MiddleEast and North Africa andAsia. The company is 55per cent owned by Qatargovernment, with theremainder in the hands oflocal and internationalshareholders. It has beenlisted on Qatar stockexchange since 1998.

Here, Abeer Allaminterviews Nasser Marafih,chief executive.How has Qtel coped withthe global financialslowdown?

There were concerns thatthere would be a reductionin consumption but in factduring the crisistelecommunications servicesbecame more criticalbecause many businessesused telephones instead oftravelling.

The crisis has alsocreated many opportunitiesfor us. Mobile licences inEgypt and Saudi Arabiawere very expensive – thecrisis has brought senseand created opportunities inthe market at good prices.Is Qtel now looking atnew markets forexpansion?

We look at things that willadd value at the right price,some licences are stillexpensive but we arewaiting for the right time tomake those investments. Ifwe will do something, wewill do something big, andit has to achieve synergywith our existing operations.

We are more interested inAsia than other regions. Wehave learned from themistakes of othercompanies. We will not justgo to any market. In Qatarwe also have a pilot projectcalled fibre­to­home. Insome of our Asian marketsand in Oman we are lookingto use Wi­Max technology.Are you consideringentering the Iranianmarket?

Yes, but we have to waitfor the right time. Welooked at Iran as a veryinteresting market. But ithas challenges…we need tolook at the political situation…in Qtel we look at thepolitical risk because thegovernment is a majorshareholder in the company.Are you interested inacquiring the Africanassets of Kuwait’s Zain?

No, we are not interestedin Africa. We think there aretoo many players already.The market has moreoperators than necessary.What criteria do you usewhen choosing a market?

Our focus was on theMiddle East and NorthAfrica – that is where westarted. Then it becameclear to us that the regionhad become congested andprices had gone up. Wewere interested in thirdlicence in Egypt and SaudiArabia but we decided notto bid because the pricesbecame very high. Toachieve our vision, it isimportant to go beyond theregion. We looked at Asiaand Africa, Asia is betterfor us because it hasgrowth potential. We do nottake on operations that areoverstaffed or problematic.

We still focus on Asia,especially south­east Asia.In the Philippines we aredoing Wi­Max, in Pakistanthere is a huge potential forbroadband. In Indonesia wewill provide voice and dataand try to push otherservices. It is a growingeconomy with hugepotential.With Vodafone enteringthe Qatari market, areyou concerned aboutlosing market share?

We already have 120 percent penetration. Everyonein Qatar is our customer.We are pleased to seeVodafone here because it isa rational player. It hasdone well so far, and it hasto share our customers. Webelieve it is important forus that someone shares theburden…to provide services.It is healthy for the sectorbecause people willcomplain they do not havemuch option.

Abeer Allam

Nasser Marafih, Qtel CEO

Government struggles to sell school reform

The futuristic glassand steel buildingssprawling in theDoha desert reflect

the magnitude of Qatar’swealth and ambition. Thismulti-billion dollar Educa-tion City project houses aScience and TechnologyPark, as well miniaturecampuses linked with UScolleges, including WeillCornell Medical College,Georgetown School of For-eign Service and TexasA&M engineering school.These educational outpostsare part of a long-termvision to transform gas-richQatar into a diversified,knowledge-based economyby 2030.

“The emir decided thecountry needed a majoreducation boost and so heset up a parallel scheme,”says Tidu Maini, chairmanof Qatar Science and Tech-nology Park, referring tothe emirate’s ruler, SheikhHamad bin Khalifa Al-Thani. “Research-focuseduniversities are the way togo.” Before Qatar launchedthe science park, he wenton, it needed a research pro-gramme in parallel with theindustry, adding value tothe oil and gas sectors.

The $600m centre isbacked by a $1bn endow-ment from Qatar Founda-tion, the education reformvehicle headed by SheikhaMozah bint Nasser Al-Mis-sned, wife of the emir. Itbrings together interna-tional researchers focusedon meeting Qatar’s urgentneeds, including healthcare,the environment, informa-tion technology and solarenergy to prepare the coun-try for the day when itsmassive hydrocarbonswealth runs out.

The reforms are part ofQatar’s National Vision2030 of human, social, eco-nomic and environmentaldevelopment. Flush withexcess hydrocarbons reve-nues in recent years, the

country has created a sys-tem that will focus onincreasing creativity andresearch to equip youngQataris with the skillsneeded for employment.But it has also launched aprogramme to upgrade thestate-run Qatar University,bringing English-speakingprofessors from all over theworld, introducing newcourses and encouragingmore debate.

With advice from RandCorporation, a US think-tank, the wider educationsystem is also beingreformed. Teachers arebeing retrained, stateschools privatised, and therote learning typical in theregion phased out. As inother Gulf states, Qatar’seconomy remains heavilydependent on expatriates inboth high- and low-end jobs.The government is hopingit will eventually replaceexpatriates in high posi-tions with skilled Qataris.

The education strategy,however, has its critics.They note that opulentcampuses cannot guaranteethe development of theskilled workforce needed todrive the country forward.The costs of this western-ised higher education isamong the highest in theworld, putting it out ofreach for many Qataris.Families who are liberalenough to send their chil-dren to mixed-genderschools, moreover, mightopt instead to ship themabroad at a fraction of thecost.

“It is a good system, butthe issue they have to focuson before graduate schoolsis the pre-university andquality of teachers,” saysHatem Samman, director ofIdeation Centre, a Gulfthink-tank. “In the shortterm, you can borrow talentand research, bring big uni-versities, and pay billions[of dollars] in endowments.In the long term you needan economy with a strongprivate sector. The govern-ment has to ease controlsand let small- and medium-sized businesses takecharge to change the mind-set of depending on govern-ment jobs.”

For all its investment in

higher education, Qatarmay face a lengthy struggleto reap the fruit. In theTrends in InternationalMathematics and ScienceStudy (TIMSS), rankings of2007, Qatar was placed lastin the Gulf and the widerMiddle East with 307 pointsout of 500. Saudi Arabia andKuwait were placed nearthe bottom, with 329 and354 points respectively butahead of Qatar.

Furthermore, Qatar faces

a unique challenge with itsyoung male population.Men tend to favour jobswith the security forcesstraight out of secondaryschool, as the careers arelucrative, stable, and pres-tigious. The result is thatmore than two-thirds of uni-versity students are women.

Some of the students feeloverwhelmed by the gov-ernment’s reforms. The

swift change of the system,as well as the extravaganceof the schools and the focuson mixed-gender US pro-grammes, have alienatedparts of the conservativesociety. Qatari culture isdominated by the samepuritan Wahabi tradition asSaudi Arabia, but it doesnot share the radicalism ofthe Saudi clerics. And,unlike Saudi Arabia, thereligious establishmentplays a much less overbear-ing role in government.

Still, in Qatar, mostwomen voluntarily wearthe black cloak or abayaand cover their faces. Arecent questionnaire atQatar University found that80 per cent of parentsopposed co-ed education atthe institution. The univer-sity remained segregatedbecause educators fear that,if they forced a mixed gen-der rule, parents would stopsending their daughters.

Some Qataris, includingliberal professionals, arealso questioning some ofthe high-profile culturalevents at the campuses ofthe Education City , includ-ing flying in pop singerEnrique Iglesias to enter-tain the May 2009 graduates

of the American universi-ties in the Education City.

There were organisedonline boycotts of theevent, not necessarily out ofconservative rejection ofthe festivities, but out ofanger over turning the aca-demic institution into whatsome said was show busi-ness. “Some AmericanisedQataris are excited thatthey are bringing Americanschools here because theythink it is fun, while someconservatives say ‘they areAmericanising us now’,”says a young western-edu-cated Qatari woman. Giventhat Education City isbacked by the emir’s wife,however, “no one daresquestion it in public”.

There are other concerns.The government has shiftedto lessons in English ratherthan Arabic for almost allsubjects at Qatar Universityand at schools. It is alsogradually turning publicschools into so-called inde-pendent schools. While theprivate sector welcomessuch reforms, the educationestablishment has been lessenthusiastic, with some pro-fessors complaining about aheavy academic burden andnew research requirements.

“Teachers in their 30s areat home without jobs, whilethe university professorswho built Qatar were forcedto resign,” says Moza alMalki, a columnist andformer professor. “This 2030vision [the government’sstrategy] is foggy at best.”

The English languagemandate has also provenproblematic, particularly atschools where neitherteachers nor parents speakthe language.

“Japan and China bothadvanced while keepingtheir languages,” says one

Qatari professor. “You haveteachers who do not speakfluent English trying toexplain complex matters tokids who do not speak Eng-lish. When the kids gohome, their parents cannothelp them because theydon’t speak English either.”

EDUCATION

Abeer Allam looksat a policy that hasgenerated criticismin the community

The extravaganceof the schools hasalienated parts ofthe conservativesociety

High­end education: teachers are being retrained and rote learning phased out Charlie Bibby

4 ★ FINANCIAL TIMES THURSDAY NOVEMBER 19 2009

Qatar

An important operator in global markets

In spite of finding itself atthe heart of one of theworld’s most hydrocar-bons-rich regions, Qatar

still manages to stand outamong its peers.

Its proven oil reserves – 15.2bnbarrels – are not spectacularcompared with the likes ofSaudi Arabia or Kuwait, and itscrude production of about791,000 b/d make it the secondsmallest Opec producer afterEcuador. But when it comes togas, Qatar finds itself in an envi-able position.

The country is endowed withproven natural gas reserves of910.5 trillion cubic feet, a figuremore than three times SaudiArabia’s gas reserves and onlybettered by Russia and Iran. Itaccounts for about 15 per cent ofglobal reserves, is the biggestexporter of liquefied natural gasand home to the world’s largestnatural gas field, the NorthField.

By contrast, the Gulf’s otherhydrocarbons producers are indanger of facing serious gasshortages, as they attempt tomeet soaring energy demand.For years, gas was considered oflittle value and something of anuisance, but it has become anincreasingly valuable commod-ity.

Qatar, which is alreadyexporting 2bn cu ft a day to theUnited Arab Emirates, is theonly Arab Gulf state with spareresources.

It has invested billions of dol-lars in increasing its productionand has become an importantoperator in global markets, ship-ping its LNG to Europe, Asiaand the US.

LNG, which is super-cooled sothat it can be transported bytanker, provides about 7 percent of the world’s gas supplyand has become increasinglyimportant in meeting marginaldemand. Most LNG is sold onlong-term contracts, but some isalso sold on spot markets.

Overall, the country plans toincrease its capacity from about54m tons a year to 77m tons bythe end of next year.

This year, it inauguratedQatargas 2, a $13bn project withan annual capacity of 15.6mtons of LNG. The development –the world’s largest LNG project– is targeting the UK market

and will be capable of supplying20 per cent of the UK’s gasneeds.

Two other projects – Qatargas3 and Qatargas 4 – are expectedto go onstream next year, witheach adding an extra annualcapacity of 7.8m tons with afocus on the US and Europeanmarkets. In October, Qatar

delivered its first LNG cargo toresource-hungry China, part ofa 25-year deal between ChinaNational Offshore Corporationand Qatargas, one of two state-controlled gas companies.

However, the capacity expan-sion is coming at time whendemand has dropped because ofthe global economic crisis, caus-

ing industry experts to predict aglut that may put further down-ward pressure on prices, partic-ularly in the US and UK.

Qatar officials acknowledgethat prices and demand will beunder pressure for the next twoyears, but remain positive aboutthe long-term outlook.

“This is a long-term business

OIL AND GAS

Trade may be underpressure in the shortterm but the outlookis bright, writesAndrew England

On the boat: Qatar has the advantage of huge new ships, which means it can accept lower prices because of the economies of scale of transporting its LNG Reuters

– a 25 to 40 years investment –and when we put forward ourfirst economic model, we knewprices would come down andprices would go up ... over thislong period,” Faisal al-Suwaidi,chief executive officer at Qatar-gas, told the Financial Timesearlier this year.

“Our outlook for the longerterm has not changed. We stillthink the fundamentals are thesame. There will be enoughdemand for all types of energy,or fuel, including gas and,because of the quality of gas,you will see more demand forgas, mainly for power genera-tion, than any other fuels.”

Qatar has the advantage ofhuge new ships, which means itcan accept lower prices in mar-kets such as the US because ofthe economies of scale of trans-porting its LNG. It has also usedflexible contracts to divert somecargoes to markets where thereis still demand.

Yousef Kamal, the financeminister, recently said that 5mtons of Qatar’s LNG exports hadbeen shifted from western mar-kets to China, which is recover-ing faster from the economicdownturn.

“We have to sell it accordingto the price of the market, andthen we have flexibility of what-ever market is best for us,” hesaid. “We have the price linkedto oil, and we have the pricewhich is linked to the, let ussay, geographical location ... Wehave this flexibility and wedon’t think that this is going toaffect our revenue too much.”

Analysts agree the countryfinds itself in a favourable situa-tion.

“Qatar is in a position whereit has exposure to many of thekey markets around the worldand it’s sensible for them tohave diversified their positionwith different types of contractsand different geographical loca-tions,” says Andrew Pearson atWood Mackenzie. “At the end ofthe day, this isn’t a short-termgame for Qatar.”

Future projects, however, willdepend on a study of NorthFields reservoirs. Qatar put amoratorium on new projects inthe field in 2005, and the reviewwas expected to be finished by2010. It is now not expected tobe completed until 2013 or 2014.

Qatar has deliveredits first LNG cargoto resource­hungryChina as partof a 25­year deal

FINANCIAL TIMES THURSDAY NOVEMBER 19 2009 ★ 5

Qatar

A bridgebetweendifferingcultures

The fishing village ofAskar is one of themore picturesquespots in Bahrain.

Low pastel-coloured housesflank a tidy, palm-linedhigh street, with little signof life on a Saturday after-noon besides the occasionalstray cat. On the shoreline,a handful of fishermentinker with engine partsand clean their boats.

This sleepy spot is aboutto receive a rude awaken-ing.

A few hundred metres tothe north, work will beginnext year on the landingstage of a causeway beingbuilt from neighbouringQatar.

When the FriendshipBridge opens in 2014, up to12,000 cars and lorries willpour across it each day.Few will be stopping to buyfresh fish.

“Maybe it can give usjobs, and give us moremoney,” says Abdullatif, aresident of Askar in his 20s.He shrugs. “But also morepeople. Some people are nogood.”

The bridge from Qatarinspires mixed feelingsamong Bahrainis.

Their country is alreadyconnected from its oppositecoast to Saudi Arabia, via a

causeway built in the 1980s,and more than 5m Saudiscross the bridge to Bahrainevery year, drawn by itscomparatively relaxedsocial atmosphere and itsprofusion of cafés, restau-rants, shops and bars.

Thanks to its “bachelortourists,” Manama hasdeveloped a reputation forsleaze that embarrasses thegovernment, which hasbeen quietly clamping downon prostitution and shut-ting down its seedier barsin recent months.

In private, many Bah-rainis say they worry aboutmore of the same trafficfrom Qatar.

Yet the new bridge willgenerate much-needed busi-ness for the small Bahrainieconomy.

A $6bn luxury coastalresort, Durrat al-Bahrain,has been built several kilo-metres south of Askar,partly in anticipation of thenew arrivals from Qatar.

Business parks haveopened in the past yearnear the new deepwaterport at Hidd, north ofAskar, which intend to cap-italise on Bahrain’s links toits neighbours.

“We expect a big share ofour visitors will be Saudis,but the new causeway willgive us access to one-and-a-half million people inQatar,” says Nicola Pero,chief executive of @Bah-rain, a $3.5bn mixed-usedevelopment being built atSakhir, in the centre of theisland.

Its indoor arenas, exhibi-tion halls, technology park,

cinemas and hotels will bemarketed to Qatari inves-tors, tourists and businesstravellers alike, she says.

“Logistics” is a wordincreasingly bandied aboutby the Economic Develop-ment Board, which marketsBahrain as a regional basefor foreign transport andtrading companies.

The second causeway willin effect turn the kingdominto a corridor connectingthe gas-rich peninsula ofQatar in the east to theindustrial heartland ofSaudi Arabia, the region’slargest economy, in thewest.

Where it cannot compete

with the likes of Qatar interms of financial or indus-trial muscle, Bahrain hopesits cheaper rents, bettertrained workforce and more

liberal investment environ-ment will persuade busi-nesses to move to the westend of the FriendshipBridge.

“I think they [the Bah-raini government] arebeginning to make a virtueof their small size and cul-ture, rather than trying tokeep up with the neigh-bours,” says a Europeanbanker based in Manama.“It’s certainly a nicer placeto live.”

It will be an unusual com-mute. At more than 40 kilo-metres, the Qatar-Bahrainbridge will be the longestmarine causeway in theworld.

A recent proposal to addtwin rail tracks to the struc-ture will also connect Bah-rain to a planned Qatarirailway and onwards to a

proposed Gulf rail network.First proposed in 1999, the

project has weathered theups and downs of politicalrelations between Qatarand Bahrain, which havebeen marred by territorialdisputes.

The ruined town of Zuba-rah, near where the cause-way will make landfall onthe Qatari peninsula, wasonce home to the Al-Khalifafamily, now rulers of Bah-rain.

A related dispute overZubarah and the nearbyHawar Islands was resolvedin 2001, when the Interna-tional Court of Justiceawarded the islands to Bah-

rain and the town to Qatar.The jointly-funded Friend-

ship Bridge, which will bebuilt by a consortium led byKBR, a US engineeringcompany, has also beendelayed for more pragmaticreasons. Work was due tobegin in early 2009, but waspostponed yet again after arailway was added to theoriginal road bridge.

Rising to about 40 metresat its peak to allow com-mercial shipping to passbeneath, the bridge hasbeen elongated and itsincline softened to enabletrains to make the climb.Estimated project costsrange from $3bn to $4bn.

As one of the largestprojects ever launched in aregion known for its engi-neering extremes, theFriendship Bridge hasattracted some breathlesscoverage from the regionalpress.

According to Mena Infra-structure, an industry jour-nal, the causeway will be1,215 times the length of ablue whale, and take ninehours to cross by foot.

Yet for the residents ofAskar, who saw many ofBahrain’s traditional fish-ing grounds awarded toQatar in the 2001 ruling, itis just another intrusionfrom the outside world.

QATAR­BAHRAINCAUSEWAY

Digby Lidstone onan ambitiousengineeringproject

When the bridgeopens in 2014, upto 12,000 cars andlorries will pouracross it each day

Spanned: a computer­generated image of the Friendship Bridge – one of the largest projects launched in the region – which will connect Qatar with Bahrain AP

6 ★ FINANCIAL TIMES THURSDAY NOVEMBER 19 2009

QatarQATARPolitical structureOfficial name:State of QatarForm of state:EmirateLegal system:The 2005 constitution provides for an independent judiciary that should be answerable to ‘no power but the law’. Judges may only be dismissed ‘in cases to be defined by law’Legislature:Qatar’s current Advisory Council was established in 1972, and is wholly appointed. It can issue advice on policy matters, but has no formal legislative role. The 2005 constitution makes provision for a two-thirds

elected, 45-member parliament to be formed, which will have the power to draw up laws and question ministers. However, the parliamentary election has been repeatedly delayed, and the inauguration of the new body is not expected within the forecast periodExecutive:Cabinet, headed by the prime minister, who is appointed by the emir. In April 2007 the first deputy prime minister and foreign affairs minister, Hamad bin Jassem bin Jabr Al Thani replaced Abdullah bin Khalifa Al Thani as prime ministerHead of state:Sheikh Hamad bin Khalifa Al Thani Main political parties:Political parties are not permitted

20 km

Fuwayrit

Al Jamayliyah

Al Kiranah

Al Wakrah

Umm Said

Ar Rayyan

Dukhan

Umm Bab

Doha

HawarIslands(BAHRAIN)

QATA R

SAUDIARABIA

T H E GU L F

Ar Ruways

Al Khuwayr

Al Khawr

Economic summary 365100

13.458,762

13.22.5

12.514.124.910.00.4

11.215.155.725.130.6

41611424.5

71,7243.71.7

33.13.19.5

20.50.58.3

19.458.023.434.7

329909.2

60,640-0.41.9

12.33.93.2

17.00.53.73.8

37.420.916.6

Total GDP (Qr bn)Total GDP ($bn)Real GDP growth (annual % change)GDP per head ($)Inflation (annual % change in CPI)Agricultural output (annual % change)Industrial production (annual % change)Services production (annual % change)Money supply M1 (annual % change)Foreign exchange reserves ($bn)Unemployment (%)Budget balance (% of GDP)Current account balance ($bn)Exports of goods ($bn)Imports of goods ($bn)Trade balance ($bn)

2008 2009(est)

2010(forecast

Sources: EIU, IMF, Thomson Reuters Datastream, WTO

11,521 sq km

Arabic; English widely used

Qatari riyal (QR)

US$1=QR3.64

US$1=QR3.64

1,553,729

Doha

410,494

Area

Language:

Currency:

Exchange rate:

2008 average

Latest figure

Population (2008, Qatar Statistics Authority)

Capital

Population of Doha (World Gazeteer 2009 estimate)

Sovereign credit rating

Standard & Poor’s AA- Moody’s Aa2

0 5 10 15 20 25 30 35

Main trading partnersShare of total trade to world 2008 (%)

Japan

EU (27)

China

S. Korea

Singapore

USExports

Imports

In search ofhousing thatcan becalled home

Qatar’s Pearl developmenton reclaimed islands justbeyond the chi-chi WestBay area of Doha havefinally been handed over tobuyers, the first of manydevelopments that haveopened the emirate’s once-closed property market toforeigners.

The reclaimed islandswith their towers and villas– a $20bn project by UnitedDevelopment Co – willunveil more urban ameni-ties over the coming year inwhat has become the capi-tal’s highest-end commu-nity, combining up-marketapartments with retailspace devoted to fashionand luxury brands.

Real estate agents say thedevelopment is becoming apopular addition to the leas-ing market, especiallyamong new expatriates whohave found work in the stillfast-growing economy.

“There is nothing else tocompare with, so tenantsare looking there for luxuryunits,” says Janet Parry ofDirect Real Estate, withone-bedroom apartmentsgoing for rents of about$50,000 a year.

“The negative is the latehandover, but that’s par forthe course everywhere inthe Gulf,” she says.

That has helped thedevelopment buck the restof the market, where bothrentals and house price val-uations have slumped onaverage by about 20 percent.

Some residential andcommercial projects havefallen on hard times as themore leveraged developershit problems with theirbanks.

Many of the towers thathad been shooting up in thecommercial centre of WestBay have been stopped intheir tracks, the freneticpace of building fading overthe past year.

But as more units arehanded over to the inves-tors who bought off-planover the past few years,developers are facing thetest of delivering on theirpromises.

Widespread delays acrossthe sector are also testingthe patience of buyers.Some investors are fumingover delays to Dubai-basedDamac Properties’ develop-ment at Lusail, a new citybeing master-planned byQatari Diar, the real estatearm of the Qatar Invest-ment Authority.

One buyer, who bought in2006 with an estimated com-pletion date of April 2010,had been offered a refundbecause of changes to theapartments, but has yet toreceive compensation.

But the developer’s Qataroffice says delays – causedby confusion over whetherit could sell small studios toforeigners – have beenresolved and constructionwill go ahead, with a targetcompletion date of the firstquarter of 2011.

For some unfinished tow-ers at the Pearl develop-ment, other buyers are com-plaining about late hando-ver of properties and alsoabout hidden charges forconnection to air-condition-ing units at properties soldby sub-developers, not UDC,on the reclaimed island.

The Pearl’s master devel-

oper, UDC, says it has nohidden charges and is trans-parent.

Some agents say the lackof a liquid secondary mar-ket is making it more diffi-cult to get a clear view onproperty values in the emir-ate.

Residential sales continueon the Pearl, real estatebrokerage Asteco says in itslast quarterly report, withlittle change from the sec-ond quarter.

The secondary market islower than the prices foroff-plan sales demanded bydevelopers, who are notdropping prices but are eas-ing some of their paymentterms.

Buyers are increasinglyexpressing interest in re-sales, Asteco says.

And despite surging confi-dence across the economy,the glut of projects hasdriven concerns aboutwhether the greaternumber of expatriate work-ers can satiate a possiblehousing oversupply.

While estimates on over-supply are hard to come by,deflation in the emirate, ledby housing, is a good indi-cator.

Inflation fell by 2.9 percent year-on-year in the sec-ond quarter. The thirdquarter saw deflation wid-ening to negative 7.4 percent.

Mohamed Rahmy, econo-mist at EFG-Hermes inDubai, is forecasting overalldeflation of 5.2 per cent thisyear, led by housing.

A structural imbalance inthe property market is

aggravating matters asmany developments in thegood years were skewedtowards luxury apartments,rather than housing suita-ble for the larger middle-in-come segment.

“In housing, the focus hasbeen on high-end, wherethere is limited demand.Low and mid income shouldbe the next focus,” saysAhmed al-Hammadi, vice-president of asset manage-ment at EFG-Hermes.

Some companies, such asgovernment-owned Barwa,are focusing on thisneglected part of the mar-ket – arguing that Qatarneeds to ensure that expa-triates see the emirate asmore than a place to work,but rather a place to calltheir home.

The company plansBarwa Village, a residentialarea for families located outof central Doha as olderbuildings make way fornew, as well as a massiveout-of-town development ofliving quarters for 53,000workers by 2011.

Eyeing 16 per cent growthin housing demand, thecompany is positive aboutits prospects.

“Barwa is committed toensuring that everyone whohas chosen to make Qatartheir home while workinghere has access to highquality housing,” it says.

REAL ESTATE

Simeon Kerr onlimited demandat the top endof the market

Banks knocking on the door

Compared with rival finan-cial hubs in the Gulf, theQatar Financial Centre’sheadquarters in Doha

seems fairly somnolent, despitethe country’s lively economy.

More than four years since itwas established, internationalbanks prefer to keep most region-al staff in places such as Dubai,while Qatar has remained an out-post – albeit an important one.

But that is changing. Somebanks, which tried to operate askeleton staff away from theirheadquarters, have been warnedby the centre that they need tomeet the terms of their licencesby basing staff on the ground.

Dubai, with its opulent lifestyle,may be the place of choice forbankers, but with most of theregion suffering from the after-shocks of the financial crisis, thecontinued roar of gas revenue hasreinvigorated interest in theQatari capital, bankers say.

Most institutions increasinglyrealise that suitcase banking fromother hubs does not allow them tocreate the relationships they needto win mandates.

The attraction for banks is

clear. Standard & Poor’s estimatesthat, propelled by a rapid expan-sion of gas production, Qatar’seconomy will grow by more than15 per cent a year in real termsfor the next three years.

Meanwhile, the value of itsannual exports will nearly trebleto $114bn by 2014, according tothe Economist Intelligence Unit.

“The implications of the gaswealth are huge. The degree ofwealth generation that Qatar isabout to experience on a sus-tained basis is so fundamentalthat it will unquestionably propelQatar to be a major financialplayer on the global economicstage,” says Cyrus Behbehani,chairman of investment bankingat Morgan Stanley Middle East.

“It is likely that, while a sub-stantial amount of that capitalwill be destined for domestic use,a significant proportion will bechannelled into foreign use by vir-tue of investment and other mech-anisms,” he says.

Some of Qatar’s hydrocarbonrevenue finds its way out of thecountry, generating valuable reve-nue for international banks thatadvise on these investments, suchas stakes in J Sainsbury,Volkswagen-Porsche and Bar-clays. Bankers also hope Qatar’sbenchmark sovereign bond issu-ance this year will spur more gov-ernment-related entities to tap thedebt markets.

So far, Abu Dhabi, another Gulfstatelet that has proved relatively

resilient, has dominated regionaldebt sales, but Qatar has becomeincreasingly active.

RasGas’s $2.3bn bond, managedby HSBC, Credit Suisse and Citi-group, attracted orders of $18bnand Qatar Telecom’s $1.5bn bond,arranged by Royal Bank of Scot-land and managed by BarclaysCapital, BNP Paribas, DBS Bank,JPMorgan Securities and RBS,attracted a $13bn order book.

“There is still voracious appe-tite for debt due to the ongoingprojects and government plans,”says Kapil Chadda, head of global

banking at HSBC in Qatar. “Thereis increasingly a focus on bonds,as banks are reluctant to lendlong term any more.”

However, Qatar’s recent secondsovereign bond issuance of theyear has highlighted a commoncomplaint.

The influx of internationalbanks, and the presence of localbanks and investment houses, hasmeant competition is heating up,but business has usually gone tothe same banks.

“There are a number of interna-

tional banks that have made aninvestment in Qatar but are notnecessarily seeing a return, andare grumbling about it,” says aDoha-based banker.

Nonetheless, internationalbanks that have ambitions in theregion cannot afford to ignore thegas-rich peninsula.

In addition to outbound advi-sory work, there are domesticopportunities.

While there are few knownrestructurings in Qatar, the gov-ernment seems intent on consoli-dating, and has ordered themerger of companies in which it,directly or indirectly, ownsstakes.

“There is limited scope forrestructurings, as Qatar hasn’tbeen as badly hit as many othercountries, but there is somedomestic consolidation going on,”says Mr Chadda.

“The government wants compa-nies that can compete internation-ally.”

HSBC Middle East is advisingon the merger between QatarNavigation and Qatar Shipping.

Goldman Sachs is advisingBarwa Real Estate on its proposedmerger with Qatar Real EstateInvestment Company, which isbeing advised by JPMorgan.

The rude health of the economyhas also spurred the establish-ment of several local start-ups,such as QInvest, an offshoot ofQatar Islamic Bank.

This year it acquired 47 per cent

of Panmure Gordon, UK stockbro-ker and investment bank, andadvised Qatari Diar, a stateinvestment fund, on the purchaseof the US embassy in London.

On the domestic equity side,opportunities remain limited.

The stock market is the third-largest in the Gulf – behind SaudiArabia and Kuwait – but has acapitalisation of only $88bn.

Bankers are sceptical whether itwill benefit from its rebranding tothe Qatar Exchange, in whichNYSE Euronext owns a 20 percent stake, without a regulatoryoverhaul.

Nevertheless, institutions haverushed to knock on the doors ofthe QFC. Banks such as CreditSuisse, Barclays, Standard Char-tered, Morgan Stanley, DeutscheBank, Royal Bank of Scotland andGoldman Sachs were among thefirst to be licensed in 2007.

Since then, institutions such asUBS, State Street, Sumitomo Mit-sui Banking Corporation, Nomuraand Bank of Tokyo–MitsubishiUFJ have been licensed.

The QFC Tower is full: banksare starting to open offices else-where in Doha.

“Obviously this is an interest-ing market for internationalfinancial institutions,” says Bas-sam Yammine, co-chief executiveof Credit Suisse in the MiddleEast.

“Qatar is a very important mar-ket and will continue to be impor-tant for many years to come.”

INTERNATIONAL FINANCE

The roar of gas revenuehas reinvigoratedinterest, says RobinWigglesworth

Dubai, with its opulentlifestyle, may be theplace of choice forbankers. But that isbeginning to change

‘The focus hasbeen on high end[property], wherethere is limiteddemand’

Ahmed al­Hammadi,EFG­Hermes

Weakness of regulatory architecture stands in way of Exchange’s regional ambitionsThe battle between Gulfexchanges heated up thisyear when the Qatari stockmarket launched itslong­awaited partnership withNYSE Euronext, theinternational operator.

In June, the DohaSecurities Market wasrebranded as the QatarExchange, a joint venturebetween an investment armof the country’s sovereignwealth fund and Euronext,which took a 20 per centstake for $200m.

However, while Qatar’seconomy is one of the mostrobust in the world, theexchange’s ambitions tobecome the region’sdominant trading hub facefierce competition.

Dubai has kept its statusas the pre­eminent centre,despite the crisis, andalready has its own jointventure with Nasdaq. Oil­richAbu Dhabi has a comparablyambitious exchange, andFinancial Technologies, anIndian operator involved inone of Dubai’s commoditiesexchanges, is launching amarket in Bahrain. Saudi

Arabia, the Arab world’slargest stock market andeconomy, is slowly openingup and modernising.

Meanwhile, Arab stockmarkets have lost some oftheir lustre. MSCI Barra’sArabian Markets Indexremains relatively flatcompared with 12 monthsago, lagging far behindemerging markets whichhave powered to a 70 percent gain over the sameperiod.

The Qatar Exchange’smarket capitalisation ofabout $88bn makes it smallby international standards,but the third largest in theregion, after Saudi Arabiaand Kuwait.

Still, the United ArabEmirates has threeexchanges – two onshoreand one offshore, NasdaqDubai – that together dwarfthe Qatari stock market.

Nonetheless, André Went,its new chief executive, isconfident the exchange willmanage to elbow its way tothe top of the bourse pile.“We definitely haveambitions to become an

international and regionalplatform able to attract theother companies from theGulf, and potentially fromEurope and the US as well,”he says.

“NYSE Euronext is herefor the longer term, and alot of focus will be on usingthe expertise and theirknowledge to develop themarket into an internationallycompetitive one.”

The plan is to first roll outits Universal TradingPlatform technology by nextSeptember, beforeintroducing more brokersand new products such asconventional and Islamicbonds, and exchange­tradedfunds, Mr Went says.

Once liquidity on the cashequities side is improved,the exchange plans tointroduce clearing, which willenable the use of derivativeproducts such as optionsand futures, probably in2011, he says.

However, senior bankersand asset managers are lessconvinced. While NYSEEuronext’s technology islauded, the paucity and

weakness of the regulatoryarchitecture will continue toprevent seriousimprovements of theexchange, they say. “Thechallenge is very much onthe regulatory side, not thetechnology platform side,”says a senior, Qatar­basedbanker.

“Frankly, without thatbeing addressed it’s hard toget excited about a hightechnology exchange.”

Similar to most countriesin the region, Qatar’sregulatory framework hasnot kept up with its pace ofdevelopment. Bankers list alitany of problems: insidertrading and marketmanipulation are widespread,the mergers and acquisitionsrulebook is weak, shorting isnot permitted, transparencyis poor, minorityshareholders are notprotected, foreign ownershipis capped and there are stillno laws allowing derivatives.

Mr Went says the QatarExchange is aware thatregulations will need to beoverhauled, and emphasisesthat there is a “long­term

strategy” to develop thestock market.

“Regulatory reform is animportant element of thetargets for the next 12months, so a number ofthings need to be developedand reviewed,” he says.

“But the regulator . . . isactive in addressing theseissues, and . . . I’m quiteconfident that the regulationwill not limit our ambitions.”

The government has saidit wants to unify theregulatory bodies of thecountry’s three mainfinancial watchdogs – thecentral bank, the QatarFinancial Markets Authorityand the Qatar FinancialCentre Regulatory Authority– and improve its legalframework.

However, reforms seem tohave been paralysed sincethe financial crisis broke,and the merger of the threewatchdogs has been quietlypostponed.

Yousef Kamal, the financeminister, admits there havebeen delays but says he isconfident that the unificationcan be tied up in the coming

months, pointing to realquestions of strategy in lightof the regulators’ role in theglobal economic meltdown.

“Because of whathappened, everyone wasbusy with the crisis, but theaim is there, the law isthere, and I hope that withina few months we will have asingle regulator,” he says.

Meanwhile, the QatarExchange’s main rival,Nasdaq Dubai, thoughplagued by limp trading andfew listings, already has amodern, western­basedregulatory framework inplace, has introduced theregion’s first derivatives andis developing a reputation asan able watchdog.

The Qatar Exchange feelsthat it still has the edge,however.

“I think the advantage ofbeing rooted in a domesticeconomy – especially aneconomy as strong as Qatar– is a much biggeradvantage than a temporaryregulatory advantage,” saysMr Went.

Robin Wigglesworth

FINANCIAL TIMES THURSDAY NOVEMBER 19 2009 ★ 7

Qatar

Patronage puts democraticreform on the back burner

The Qatari emir, SheikhHamad bin Khali fa AlThani, has drawn up twogrand visions for externalconsumption since he roseto power in a palace coup in1995: Qatar as the world’sbiggest gas exporter and abastion of democracy in theGulf.

Progress towards becom-ing an economic power-house has been swifter thanpolitical liberalisation andit may be this financial sta-bility that has delayed dem-ocratic reforms.

Mehran Kamrava, interimdean at Georgetown Univer-sity in Qatar, argued in anacademic article this yearthat promises of liberalisa-tion were aimed at boostingthe legitimacy of SheikhHamad’s rule in the after-math of the coup, whichhad prompted regionalunease and opposition fromsome of the more conserva-tive elements in the state.

To embed his reign,Sheikh Hamad, with hiswife Mozah pursuing loftycultural and educationalgoals for the emirate,pitched his rule as oneembracing modernity anddemocracy, appealing toboth the US – which hadbeen urging democratisa-tion among its Gulf allies –and also to Qatari nationalslooking for a change ofdirection.

After municipal electionsin 1999 and the successfulreferendum on a new con-stitution, the move towardsgreater political participa-tion via national electionshas stalled.

Planned since 2005, thedates keep slipping back.“The polls seem to be per-ennially around two yearsaway,” says one Doha-basedpolitical analyst.

At an anti-corruption con-ference this month, Abdul-lah al-Attiyah, energy min-ister, sidestepped the ques-tion of continual delays inhis typically charming man-

ner by reaffirming that – forsure – elections would takeplace because the constitu-tion stipulates it be so.

While he may be correct –and polls might take placeeventually – academicsargue that the drive for lib-eralisation has gone.

Another academic in theemirate says the combina-tion of problems over themechanics of setting up afunctioning parliamentarysystem has combined withalarm at the parliamentar-ian systems in Kuwait andBahrain, where sometimesrestive parliaments canblock government policy, toslow down the movetowards political reform.

Both elites and citizensare co-opted into the tradi-tional system of patronage,so there is no popular pres-sure for reform yet.

“Despite significant gainsin Bahrain and Kuwait, fornow, meaningful stepstoward liberalisation,whether in Qatar or else-where in the Gulf region,remain halted and tentative

at best. The prospects foranything even remotelyresembling democracyappear further still,” MrKamrava concluded in hispaper, published by theMiddle East Journal.

The emir’s rule has beenconsolidated largelythrough the largesse thathe has been able to deliveras oil prices spiked and thefruits of his gamble on gasinfrastructure have comegood.

Patronage among the AlThani clan, leaders of Qatarsince the 1860s, was boostedin 1997 via a formalisedwage list for royals, buteven more important hasbeen the effective provisionof services and financialsupport for the general pop-ulation.

“You’ve got to rememberthat the first state of theunion address given by theemir was all about provi-sion of services to Qataris –health and education –rather than the foreign pol-icy agenda,” says the politi-cal analyst.

The supreme councils ofeducation and healthcareare frontline battlefields inthe provision of whatQataris regard as their mostimportant state-providedservices.

The diwan, or ruler’scourt, has placed some toptechnocrats in importantpositions as the crownprince, Sheikh Tamim binHamad Al Thani, increaseshis influence in the day-to-day running of the emirate.

There is widespreadgrumbling over reform ofthe schools education, inwhich schools were grantedindependence and most ofthe curriculum moved fromArabic to English, but fewsee the issue emerging as asignificant one for the gov-ernment as the countrymoves towards becomingthe richest per capita in theworld.

“The wealth levels arehigh and the private sectoris doing OK – there are stillopportunities when you fin-ish school,” says one aca-demic.

“Graduates generally arequite happy that the coun-try is better than the rest ofthe world.”

POLITICS

Elites and citizensbenefit from theemir’s largesse, saysSimeon Kerr

Power couple: Sheikha Mozah with Sheikh Hamad, the emirTom Stoddart

The move towardsgreater politicalparticipationvia nationalelectionshas stalled

A blend of traditional and contemporary

Qatar has seemed deter-mined to provide acounterbalance to theturbo-charged skylineof Dubai which, before

it fizzled out into a prickly lineof unfinished skyscrapers, hadovershadowed the whole Gulf.Recent headlines have beendominated by Qatar’s foreigninvestments, most notably inLondon’s property marketswhere the city’s three most visi-ble and occasionally controver-sial schemes, the Shard, ChelseaBarracks and One Hyde Park,have been Qatari-backed.

At home, however, instead ofallowing the country’s develop-ment to be driven solely bydevelopers and the rentalinvestment market, Qatar hasled with ideas and culture. Theopening of the Museum ofIslamic Art, a commission thatdrew veteran architect IM Peiout of retirement to create hisfinest building for decades,began to awaken a realisationthat Qatar was searching forsomething different from thesuperficial flash of the Emirates.

The nature of its set-pieces,from the ambitious EducationCity and French architect JeanNouvel’s Beautiful Doha Tower(currently under construction)to the Museum and the rebuild-ing of its city centre, demon-strated a commitment to thecity as cultural artefact as wellas economic generator.

That is not to say that mis-takes have not been made.Doha’s skyline is spiked withthe clusters of second-rate tow-ers that have characterised Gulfcityscapes for a decade. Butthere are also these extraordi-nary experiments.

The first to attract attentionwas the vast Education City, auniversity quarter that aimed toestablish Qatar as the region’scentre for learning. A directriposte both to the rapaciouscommercial nature of Dubai andthe intense religiosity (and itsattendant neglect of women’s

education) of Saudi Arabia,The site has been master-

planned by Arata Isozaki. TheJapanese architect is alsoresponsible for the most visibleand striking landmarks on thesite, the conference centre withits distinctive and bizarrely lit-eral tree-shaped structure andthe outpost of Cornell (the WeillCornell Building) with its curi-ous pod-shaped lecture halls.Carnegie Mellon and George-town Universities have outpostshere too, the former a strangecocktail of Mayan and Babylo-nian by Mexican architectsLegoretta & Legoretta. The vastsite remains dusty and unre-solved, but the dedication withwhich it is being pursued isastonishing.

Education City has beendriven by one of the most influ-ential figures in the region,Sheikha Mozha Bint Nasser Al-Missned, the most publicly

active of the emir’s three wives.It is Sheikha Moza who isbehind the reconstruction ofDoha’s city centre, a £3.5bnscheme known as “Heart ofDoha” as a commercial develop-ment to provide an endowmentfor the Qatar Foundation forEducation, Science and Commu-nity Development.

In a quarter adjacent to theEmiri Diwan, Qatar’s seat ofgovernment and the ruler’s pal-ace, as well as the the soukh,the intention is to rebuild thecentre of the city using adenser, more traditional planthan is usual in the region. Mas-terplanned by Arup and Aecom(formerly Edaw) the schemebrings together a team of mostlyLondon-based architects, includ-ing Allies & Morrison, Mosses-sian & Partners, Adjaye Associ-ates and John McAslan andPartners along with JordanianDar Al Omran.

Taking its cue from tradi-tional plans with their irregularstreet patterns and relativelylow, tightly-grouped buildings,the architects are constructing acity that is neither exclusivelytraditional nor contemporary,rather a blend of elements fromboth.

Issa M Al Mohannadi, chiefexecutive of Dohaland, a subsid-iary of the Qatar Foundationand developer of “Heart ofDoha”, says: “This is the firsttime a country in the Gulf hastaken such action to ensure that

its unique heritage and culturecontinues to be alive, despitehuge growth and globalisation.We have done a comprehensivereview of the local climate, her-itage, traditions and people.

“We have based our founda-tions on learning from ourancestors about sustainablebuilding, and have adaptedthese techniques for the presentday – many of these techniquesare related to building for themicroclimate.”

The façades are depicted asstone-clad, slotted, perforated,solid – these are not the glass-walled behemoths and skyscrap-ers that have become the con-temporary Gulf vernacular. Butbuilding on Doha’s historybrings with it its own peculiari-ties. Its built heritage datesfrom the 1940s and its formderives from the most unlikelyof origins.

Architect Tim Makower of

Allies & Morrison says themeandering route of the city’sshopping thoroughfare, KahrabaStreet, takes its shape from theirregular course of the country’sfirst electricity cable, laid by acareless British army engineer,a memory that survives in itsname meaning “Electric Street”.The other organic line in themasterplan is given by the oldwadi.

These informal lines are over-laid with a more conventionalgrid to form a complex clash ofgeometries. Allies & Morrison isresponsible for a triumvirate ofcivic buildings, an annexe to theDiwan, a barracks for the Emiriguard and a building to house anew national archive.

At the heart of the vision ofthe new quarter is a grand newcivic space designed by MichelMossessian, Barahat Al-NaseemSquare. Mr Mossessian says thespace is based on the idea of an

urbanised version of the Majlis,the public room in an Arabhouse used to receive guests.

It has been conceived as aspace with six faces, its floor asa kind of carpet, the arcadedbuildings that frame it, and a“flip-up” shading structureabove, that can allow more orless sun in. The shoppingarcades are characterised by anelegant concrete vault sculptedinto an orientalising ogee sec-tion.

The design is reminiscent ofLouis Kahn’s Kimbell ArtMuseum in Fort Worth, Texas, aspace for a similarly harsh cli-mate that is all about the lyricalcharacter of light and shade,solid and void. Inspired by theproportions of London’s Burling-ton Arcade, this new space sub-stitutes the northern Europeanglazed roof with concrete, slitdown the middle to provide ashaft of light, picking up on thetypologies of the adjacent SoukhWaqif.

The soukh provides anintriguing model. Often dis-missed as pastiche and kitsch, itis nevertheless the liveliest andmost attractive part of the exist-ing city. It remains a testamentto the wisdom of traditionalbuilding models and scales. The“Heart of Doha” represents anattempt to develop these princi-ples and meld them with suc-cessful Middle Eastern andwestern tropes to create some-thing local, new yet familiar.

The plan and the architectureappear intelligent, restrainedand distinctive. Many develop-ments in the Gulf have caughtthe eye, from the breathtaking160-storey Burj Dubai to AbuDhabi’s cultural behemoth,Saadiyat Island, eco-city Masdarand Qatar’s own vast PearlIsland complex but the “Heartof Doha” looks the most matureand serious of all.

It is a rare approach in aregion where the default modeis to start from scratch. There isalways the possibility with acommercially-biased scheme,such as this, that it may tilttowards the banality of theinternational, but such effortsare being taken to root thearchitecture in context, climateand culture that, if there is onescheme in the region to keep aneye on, this is it.

ARCHITECTURE

Edwin Heathcotereports on a Gulfconstruction projectwith a difference

The façades arenot the glass­walledbehemoths thathave become theGulf vernacular

Heart of Doha: efforts are being made to root the architecture in context, climate and culture, creating something new yet familiar

8 ★ FINANCIAL TIMES THURSDAY NOVEMBER 19 2009

Qatar

Locals overshadowedby foreign workforce

Why do Qatari offi-cials prefer foreign-ers to nationals?asked Mariam

l-Saad, a columnist writing fromQatar for the independent web-site Ekhbariat. “Why do theygive them the highest salaries,free housing, and luxuriouscars, while Qataris watch bit-terly?’’

The column expresses the sen-timent of many Qatari nationalswho make up only 20 per cent ofthe 1m population, at a timewhen the country’s fortunes areattracting an increasing numberof foreigners.

Though the economy needsthe foreign workforce – indeedthe government’s NationalVision for 2030 for human,social, economic and environ-mental development relies on

the import of hundreds of thou-sands of workers, ranging fromlow-skilled labourers to seniorexecutives – some locals areresentful about sharing thehydrocarbons wealth.

The ratio of Qataris to foreign-ers in the workforce remainsone to eight, and the vast major-ity of nationals – 90 per cent –are employed by the govern-ment. Some locals, meanwhile,have trouble finding jobs: theunemployment rate is about 4per cent.

The government is hopingthat, through investment in newtechnology, it will create condi-tions for higher-paying jobs, andmore opportunity, for Qataris.But employers say that part ofthe problem lies with the poorwork ethic and high expecta-tions of locals.

The government is pushing onwith its so-called “Qatarisation”policy, which, like similarschemes throughout the Gulf,seeks to replace foreigners withnationals. The pressure is onprivate sector companies to fillat least 20 per cent of their jobswith locals.

Yet many employers are reluc-tant to hire people they regardas poorly educated. The factthat employers can assertalmost total control over foreignworkers they sponsor alsomakes appeasing the demandsof Qatari workers a low priority.

One executive in a financialinstitution complains that,given their sense of entitlement,many Qataris show up late andleave work early, while their

foreign managers avoid givingreprimands that might raiseproblems later on.

Like the rest of the Gulfstates, Qatar is studyingimprovements in vocationaleducation and training, andplans to develop a NationalQualification Framework to link

the education system with jobmarket needs.

Qatar also has launched afund intended to tackle unem-ployment, including a $100m ini-tiative led by Sheikha Mozahbint Nasser Al Missned, wife ofthe Emir. The new emphasis ondeveloping a skilled nationalworkforce fits with World Bankrecommendations, which sug-gest that Qatar should develop aknowledge-based economy.

According to one recent bankreport: “There has historicallybeen a vicious circle betweenlow education outcomes ofQataris, their resulting reluc-tance to be employed in low-skilled, low-wage or poor work-ing condition jobs in the privatesector, and the pressure on thegovernment to act as anemployer of last resort.”

The country’s top companiesare broadening their search forqualified Qatari recruits by vari-ous means. RasGas, a liquefiednatural gas venture majority-owned by the government,organised a jobs fair in Britainto attract Qatari students.

Qatar National Hotels Com-

pany, a state-owned enterprise,is hoping to reach its target of20 per cent Qatari employeeswith programmes, includingscholarships for university stu-dents, extensive trainingcourses for nationals with sala-ries paid by the government,and other initiatives. Other big

foreign companies seeking toenter Qatar have offered exten-sive employee perks intendedfor Qataris.

Meanwhile, the country hasalso expanded the capacity ofthe administration responsiblefor controlling the foreign work-force, although officials say that

the increasingly strict entry andimmigration regime is intendedprimarily to preserve security.

“Many Qataris grumble aboutthe best jobs going to foreign-ers,” says one western analyst.“They feel that the jobs Qatarisactually take aren’t even realpositions.”

LABOUR

Abeer Allam on thetrouble finding Qatariswith the right skillsand a work ethic

One executivecomplains that, givena sense of entitlement,many Qataris show uplate and leave early

Workforce: the ratio of Qataris to foreigners remains one to eight and most nationals work for the state

Dream toscore forthe region

When Qatar hosted theAsian Games in 2006, thecity of Doha felt it hadfinally made its mark onthe world. It was a coming-out party that has merelyfuelled the country’s ambi-tion to put on even larger,more celebrated events.

A bid to host the 2016Olympics was cut shortwhen the committee failedto place Doha on the short-list that included Chicago,Tokyo and Madrid butended up going to Rio deJaneiro, Brazil. But thesense of disappointment atfailing to make the cut,alongside Baku and Prague,has quickly been replacedby a new bid to host thefootball World Cup in 2022.

Doha’s strengths willcome from the first Arabbid for a sport that is anobsession for much of theGulf and the broader MiddleEast. National teams havehad limited success on theglobal stage, though theregion’s largest team, SaudiArabia, regularly qualifies

and teams such as Egyptalso compete internation-ally. But the oil-rich inves-tors of the Gulf haveemerged as large financialinvestors in the game, mostnotably the Abu Dhabi rul-ing family’s purchase ofManchester City FootballClub.

But Doha seems deter-mined to promote the stateof Qatar as an ideal locationfor a compact World Cup,according to Hassan Abdul-lah al-Thuwadi, chief execu-tive officer. “Transportationand economically speaking,the compactness of Qatar isquite an advantage,” hesays, pointing out that visi-tors would be able to stayin Doha, the capital, andtravel to group matches inthe smaller towns aroundthe country. He also saysthat Doha is a short hopfrom other regional destina-tions, such as Dubai andBeirut. “We are showcasingthe whole Middle East.”

Chaired by the son of theemir, the bid is seeking toraise Qatar’s status as aworld centre of footballing

excellence while also rais-ing awareness of the city asthe home of a diversifiedeconomy with a strongallure to the more discern-ing tourist. “We’re going todevelop the stadiums with alegacy in mind. We’re notjust going to build stadiumsand leave them as whiteelephants,” he says.

At the moment, that is atall order. Qatar is upagainst South Korea as theonly two countries biddingpurely for the 2022 tourna-ment, but others – includ-ing Australia and England,are bidding for both 2018and 2022.

The first challenge forQatar, and any Gulf state,remains the weather. InJune and July, Doha isimpossibly hot, with tem-peratures soaring as high as45 degrees.

The country’s Olympicsbid, which failed partlybecause the organisers hadsuggested moving the eventto October to avoid theworst of the summer heat,has left officials slightlysensitive to the suggestionthat the soupy summeratmosphere could workagainst the bid. “Therehave been previous WorldCups where the weatherhas been a lot worse thanit’s been over here,” heclaims.

But the technologyalready exists for coveredstadiums that can keepplayers and fans in an arti-ficially-created atmosphereof about 26-27 degrees, wellbelow the expected temper-ature during the searingGulf heat.

The bid team is also hop-ing that Qatar’s gas reve-nue bonanza can be chan-nelled into designing envi-ronmentally-friendly airconditioning systems foruse at the 12 to 18 stadiumsthat have to be built accord-ing to Fifa regulations, aswell as at fan zones andtraining facilities.

“The World Cup will be agreat initiative to helpdevelop these technologiesand the benefits won’t bejust for us,” he says. Thecity’s Qatar Science & Tech-nology Park will be ropedin to work on some of thesetechnologies.

Mr Hammadi dismissessuggestions that Qatar’ssole bid for the World Cup,rather than a joint bid witha neighbouring country,such as the United ArabEmirates or Bahrain, is aweakness.

For example, Belgiumand Netherlands are jointlybidding for the rights tohost either the 2018 or 2022World Cups, as are Portugaland Spain. Similarly, SouthKorea and Japan co-hostedthe 2002 World Cup.

“We have the time, theability, and we’re readyright now to go with ourown bid,” he says. Neigh-bouring states are also sup-porting Qatar’s bid, headds. “It’s part of our vision...we think we have the abil-ity to host the World Cup.”

2022 BID

Simeon Kerr onQatar’s campaignto host thefootball World Cup

‘There have beenprevious WorldCups where theweather has beenworse than here’

Hassan Abdullahal­Thuwadi