Post on 08-Apr-2018
8/7/2019 QT April Cover Story
1/13
34Qatar TodayAPRIL 2009
Weatheringthe Crisis?
8/7/2019 QT April Cover Story
2/13
APRIL 2009Qatar Today 35
Cover Story
ix months after the worst nancial crisis in memory
hit the other side of the Atlantic, the tremors are still
being felt in GCC, and much harder than expected.The governments, though initially conrming their
absolute immunity, would later change their minds
as bad news reverberated about the nancial turmoil
turning into an overall recession.
The after-effect will highlight the regions real
exposure, though in varying degrees, to the world
economy, which experts predict, has yet to see the
worst.
Qatar Today talks to experts from multiple sectors
in Qatar and the region to know what the last six
months have brought up is Qatar really immune,
or is it a myth of infallibility?
Wll QW
C?
s
8/7/2019 QT April Cover Story
3/13
36Qatar TodayAPRIL 2009
Weatheringthe Crisis?
In a recent study, the
World Bank estimated the
global economy to shrink
by one to two percent in2009, and so did the IMF.
The global fund projected
the world economy to
contract between 0.5-1.0
percent in 2009, marking
down its forecast of a 0.5
percent growth seen as
recently as two months ago.
The situation in the GCC
is no different.
The regions economic
growth is poised to slow byalmost half to 3.5 percent
this year as the Middle
East earns approximately
$300 billion less from
crude oil exports.
According to IMF, the
six Gulf neighbours are
likely to post scal decits
amounting to 3.1 percent
of gross domestic product,
compared to surpluses of
22.8 percent of GDP in2008.
This scenario of decreas-
es is likely to prevail in the
whole region, starting from
former boomtown Dubai
to the regions least oil-rich
Bahrain.
Lw xuAkram Michael, Managing
Partner, Ernst & Young is of
the opinion that Qatar has
limited exposure to foreignmarkets and hence, is im-
mune to the crisis.
Qatars banks and busi-
nesses, unlike all GCC
neighbours, do not have
signicant exposure to
European or US markets.
The economic fundamentals
of the State are strong, as
the development of the oil
and gas industry secured
positive cash ows, allow-ing local businesses to grow
condently.
In the last ve years, oil
and gas made 55 and 60
percent of the total GDP
of Qatar, respectively. Gas
output will continue to grow
as more LNG trains will be
commissioned.
Hence, the record low
prices will be offset by in-
creasing gas prices.We should not also forget
the value of the dollar
which had substantial gains
against the pound and euro
over the last six months
an added bonus for the
economy.
Qatar did not delay any
of its current investments
in the hydrocarbon indus-
try, which are already in
advanced stages. The States
insistence to keep on track
such investments is support-
ed by effective long-term
LNG agreements with xed
prices that are less suscep-
tible to market conditions,
he adds.
Qatar has also other giantnon-hydrocarbon projects
on track in the industrial
and transport sectors (the
new Doha Airport and Port)
and construction sector (The
Pearl, Lusail and Barwa)
the boon of diversica-
tion. These funds for such
projects are already secured
from the pre-crisis gains.
All in all, you can say
that Qatar governmentsresponse to the crisis was a
further acceleration of the
public investment policy.
i c lkl?Dr Ghassan Ayache, For-
mer Vice-Governor, Central
Bank of Lebanon believes
the economic slowdown is
already here, but the country
will not have to go through
further consequences.
There are indications
that the meltdown is here.
Take for example the sharp,
though unjustied, slump
on the stock market, the
slowdown in realty market,
the delay in starting new
construction projects... Al-
though tough, the economy
is doing well in minimising
the consequences.
The effect on Qatar will
be reduced to only a lower
growth, and with this, the
country is not likely to see
a recession at its worst. For
recession is simply a decline
in GDP over a straight
period, having a toll onemployment, industrial pro-
duction, the real income and
wholesale/retail sales, which
is unlikely in Qatar.
Lk dQatars total revenue, as
per a recent IMF report,
has been gradually increas-
ing over the past ve years.
Though its 2003-04 export
revenue amounted to only$20.6 billion, it reached
$81.1 billion in 2007-08 a
substantial increase coming
from record-high oil prices
and a rising LNG
contribution.
Qatars high income, in
the last few years, has been
reected in a considerable
GDP increase from $31.7 bil-
lion (2004) to $101.1 billion
(2008).
Forecasts, however show
that Qatars economy is
set to retain a relatively
dynamic growth, despite the
low estimates for the entire
Gulf.
Most international
nancial institutions agreed
the Gulf will see a decline
in growth rates in 2009, in
comparison with its impres-
sive results in the past ve
The effect on Qatar will be
reduced to only a lower
growth, and with this, the
country is not likely to see
a recession at its worst.
For recession is simply
a decline in GDP over a
straight period, having a
toll on employment, indus-
trial production, the real
income and wholesale/re-
tail sales, which is unlikely
in Qatar.
Dr Ghassan Ayache, Former
Vice-Governor, Central Bank
of Lebanon
Qatar has also other giant
non-hydrocarbon projects
on track in the industrial
and transport sectors and
construction sector - the
boon of diversication.
Akram Michael, Managing
Partner, Ernst & Young
By Ahmed Lotfy And
Sindhu nAir
8/7/2019 QT April Cover Story
4/13
APRIL 2009Qatar Today 37
Cover Story
years, says Dr Ayache, Yet
forecasts show that Qatars
economy will continue to
post high growth rates in the
coming years.
Luckily for Qatar, the in-
ux of foreign investments,
in the immediate years be-fore the credit crunch, made
it possible for its gas output
to double.
Other sectors, now up and
coming, will further contrib-
ute to its growth, notably the
nancial services, transport
and communications. This,
coupled with a remarkable
decline in ination from
once historic highs (15
percent in 2008) to about10 percent, give reasons for
Qatar to remain insulated.
Michael says 2009 will
bear good news for Qatar.
Though its GDP will be
lower than previous years,
it will be the highest in the
Gulf. Analysts assess that
Qatars GDP growth will
drop to about 10 percent
in 2009, but will still show
healthy signs, far exceedingits oil-rich neighbours.
C- bk cThe current credit crunch
and economic deceleration
have had their toll on the
worlds banking sector, yet
the magnitude and response
to the crisis varies from
bank to bank and region to
region.
But, luckily enough, Qatari
banks limited connection
to the US and EU along
with the prompt steps taken
by the Qatar Central Bank
to oust the crisis, made it
possible for the gas-rich
economy to remain aoat in
the worst global downturn
since the 1930s.
R Seetharaman, CEO of
Doha Bank, believes that the
Middle East has been least
affected in the current crisis,
as of now.
The IMF says the global
economic activity is esti-
mated to soften further in
the second half of 2008 and
early 2009 before gradual
recovery take place later in2009.
Slowdown has been seen
in advanced as well as
emerging economies in the
second quarter of 2008. All
major economies like the
Euro-region, Japan, Korea,
the UK, US and OECD coun-
tries, registered decelerated
growth in the second half of
2008 compared to the rst
half, says Seetharaman.The deceleration in
growth was also exhibited
by emerging and developing
economies like the Middle
East, Brazil, China, India,
Malaysia and Thailand in
the second half of 2008.
Going forward, however,
nancial markets are ex-
pected to be stressed, which
will in turn constrain global
growth.Emerging and developing
economies are expected to
grow only at 3.30 percent as
against 6.30 percent growth
in 2008. The Middle East,
including GCC, is expected
to grow positively only at
3.90 percent as against 6.10
percent in 2008.
rbu ulkGeorge Nasra, Managing
Director, IBQ, believes the
last few months have shown
that nobody is immune,
even though Qatars outlook
remains robust.
The projected growth of
Qatars economy will be
fuelled by growth in LNG
exports and expansionary
scal policy. The countrys
banking sector, with a
minimal reliance on global
markets, does benet from
recourse to public funds.
However, we did see a
decrease in cash reserves
reecting the unwinding of
speculative positions betting
on a de-pegging of the riyal.
Qatar Central Banks promptintervention helped ease li-
quidity conditions. Liquidity
has already improved and
lending has resumed.
GCC states, including
Qatar, have utilised the high
energy income and accumu-
lated strong scal reserves
since 2000. This is helping
these countries to maintain
growth, as they effectively
optimised scal surpluses byinvestment in future expan-
sion and diversication.
Qatar can now rely on
its ongoing mega projects
which will be operational
within three years in its
march towards the 2030
vision, Nasra says.
Md: Uvvulbl
A recent study conducted byHSBC expected the econom-
ic deceleration to continue
in the GCC, yet deemed
the surpluses accumulated
during the boom enough to
weather the crisis.
Although, we expect all
Gulf States to experience a
signicant economic decel-
eration throughout 2009,
the average weighted real
growth gure of two percent
masks signicant variation,
the study notes.
TitledAfter the Boom:
The Gulf in 2009, the study
was prepared by HSBCEconomist Simon Williams.
The strongest-grow-
ing economy in the region
will be Qatar, as it was so
throughout the oil boom
period. Although there may
be some easing of capital
spending as funding be-
comes more costly, Qatars
industrialisation pro-
gramme has momentum, a
strong competitive positionin the global economy and,
crucially, secured nance,
predicts Williams.
The development of the
non-oil economy may mod-
erate to a degree, but infra-
structure projects are well
advanced and have strong
government support. Real
estate projects are likely
to come under pressure
as prices ease and banksbecome more reluctant to
extend nance, he says.
On the other side of the
region, where economies
are not much dependant on
hydrocarbons in less oil-rich
countries, the situation is
mixed.
Nasra says that even
though all Middle Eastern
countries will continue to
feel the pinch of a tight
Emerging and developing
economies are expected to
grow only at 3.30 percent
as against 6.30 percent
growth in 2008. The Middle
East, including GCC, is
expected to grow posi-
tively only at 3.90 percent
as against 6.10 percent in
2008.
R Seetharaman, CEO, Doha
Bank
8/7/2019 QT April Cover Story
5/13
38Qatar TodayAPRIL 2009
Weatheringthe Crisis?
liquidity, with lower asset
values, FDI and capital ows,
and a general decline in
protability, many countries
will benet from the drop in
their oil bills.
Du ukwThe general economic slow-
down started in late 2007,
and took a dramatic turn
for the worse in last quarter
of 2008.
We saw oil prices starting
to tumble last July, and a
deceleration in real estate
investment started even
before that. So, it was clear
the global slowdown of
2008 will result in much
weaker conditions in 2009.
As shown by the dra-
matic changes in the global
economy in late 2008, the
severity and duration of
this recession are very
difcult to predict. It is too
Qatar can rely on its ongo-
ing mega projects which
will be operational within
three years in its march
towards the 2030 vision,
George Nasra, Managing
Director, IBQ
That is the right way to describe the scenario in Qatar dur-
ing these crucial times, says Rajesh Mirchandani, Chief
Executive Ofcer of Dun & Bradstreet South Asia Middle
East Ltd. Dun & Bradstreet, in collaboration with Al Khaliji
and Qatar Financial Centre releases the quarterly BusinessOptimism Index on Qatar.
Mirchandani talks about the current scenario and his take
on the nancial melt-down, the implications and the way
forward for the GCC countries.
|q| gven te worldwde economc cenro,wt, n your vew te outlook for 2009 n tereon? how doe Qtr fre n t cenro?
|a| The GCC region has been affected by the globaleconomic scenario in various ways mainly due to the sharp
drop in oil prices. The most obvious impact of the scenarioin the current year is a drop in ination levels. According to
IMF reports, Qatars ination rate is to drop from 15 percent
last year to nearly 10 percent in 2009. In the GCC region, in-
dustries may witness a consolidation phase, thereby benet-
ing from economies of scale, especially in the banking and
real estate sectors, since they have been the worst affected
by the economic scenario.
Moreover the GCC markets on the back of weak results,
started the current year on a subdued note with Qatar being
the most affected amongst other GCC nations declining by
36 percent till February this year. Currently we are cautious-
ly optimistic and look forward to a positive sentiment in thesecond half of 2009.
|q| Could you lt fve otve fctor tt wlltnd te reon nd te country n reltvelyood ted n te medum term?
|a| With a common thread entwining the GCC countries,the effect of the global meltdown has given them the op-
portunity to show their resilience. The region faces common
issues and the vigilant steps taken include:-
1) Prudent banking regulations by the central banks and
their proactive measures to ensure optimal ow of money
in the economy.
2) Continued support for infrastructure projects.
3) Seamless ow of trade between the GCC countries.
4) Revenues acquired through high oil prices over the previ-
ous years have given the GCC governments a lever to tide
through the current situation.
5) The vision of the GCC governments to shift their depen-
dence from the hydrocarbon sector to the non hydrocar-
bon sector.
|q| gven te downlde of ol nd rcen te nterntonl mrket, wt mct wll tve on te economc elt of te country?
|a| Global economic slowdown and the sharp decline inoil prices from $147 per barrel in July 2008 to around $50
per barrel in 2009 will affect the overall economic activity in
Qatar. Overall GDP growth rate of the country is estimated
at around 29 percent for the year 2009 and ination is esti -
mated to fall from 15 percent in 2008 to 10 percent in 2009
(IMF) as mentioned earlier. However, Qatar is still goingstrong, and hydrocarbon investments in the State are rm
and at various stages of implementation. The economy is
unlikely to be affected much as the LNG projects have been
committed under long-term contracts.
|q| how ccordn to you wll te follown ec-tor rect to te lobl cenro: Bnkn, retl, trvel, rel ette nd te otlty ndutry?and wy?
|a|Banking:
The ongoing crisis in the global banking sector and therapid growth of private sector credit in Qatar has introduced
several risks of non-performing loans, but government ef-
forts strongly underpin the sector.
Retail:
Growth of retail sector in the region is driven by the private
sector demand or the domestic demand. High population
growth and high government spending ensure a steady
growth for the local retail sector.
Real Estate and Construction Sector:
High population growth, high per capita GDP and abundant
resources entailing industrial expansion have been vital to
the growth of the real estate sector in Qatar. Government
spending is a vital factor impacting the growth and realisa-
tion of budgetary surpluses since past several years has
CaUtioUs, yet optiMistiC
8/7/2019 QT April Cover Story
6/13
APRIL 2009Qatar Today 39
Cover Story
early to call it a turnaround
in the US. Even those who
expected it by the second
half of this year, are turning
more pessimistic, adds
Nasra.
We might see some
emerging markets stabilis-
ing before the US, but most
are export-driven. I do not
expect a return to trend
before the US and Europe
come out of the crisis.
Fortunately, Qatar stands
on a sounder nancial
footing, and can expect to
emerge from the turmoil
without major problems.
t w uNasra believes that on a
global level, the different
monetary and scal stimulus
packages, presented to date,
are a step in the right direc-
tion, though inadequate.
This is why we are seeing
direct government interven-
tion to recapitalise major
institutions, whether nan-
cial or non-nancial, as well
as providing easier access to
short-term funding.
Countries such as Qatar
with vast gas and nancial
resources to fund economic
plans are well positioned to
boosted spending in the real estate sector. However, follow-
ing the slowdown and low levels of liquidity, the Planning
Council of Qatar expects that the contribution of the real
estate sector is likely to go down to about 9.7 percent of
GDP in 2009 from 10.7 percent estimated for 2008.
Travel and hospitality:
As a fallout of the global economic meltdown, the traveland hospitality sectors also faces a downturn. However, the
severity of the downturn is relatively lower as compared to
the other countries.
|q| Wt te outlook of te reon boure,ven te current tumble of te lobl tock mr-ket n te wke of te ue loe tt aig oted?
|a| To put things in perspective, a quantum movement offunds across the globe was being experienced in the past
few years on the back of a boom in international trade andnance coupled with easy ow of nance between econo-
mies. But, investor condence has been weakening since
the sub-prime crisis in the US and it continues to slump
further as the US plunges in a slowdown spiral (Q4 2008
GDP fall of 6.20 percent).
The regional bourses have been facing continuous selling
pressure as FIIs continue to pull out of the markets. During
2008, the seven GCC indices tumbled on an average 45 per-
cent, while the Dow and FTSE were down 34 percent and 31
percent respectively. But in the current year until February,
the regions average fall stands at 13 percent, while the Dow
is down 20 percent and FTSE is down 14 percent. So, thishints at a gradual build-up in domestic investor support and
a reduced effect of foreign outows and occurrences in the
global stock markets.
|q| Wt wll be te mct of te receon oncommodty rce n te reon?
|a| The global recession has dragged oil prices fromnear $147 per barrel in July 2008, down to the sub $50 per
barrel level. This has started to dent the budget revenues
of the oil-reliant GCC economies. With this reduction in
oil prices, the price of other goods and commodities face
a downward pressure. The hitherto buoyant real estate
sector with a huge appetite for cement and steel is facing
the heat of the liquidity crunch. This has led to a slackened
demand in these two industries thereby entailing a price
reduction in steel and cement (re-inforcement bars $60 per
tonne in January 2008, $1,540 in July 2008 down to $440 in
Jan 2009). Further, with proposed capacity expansions in
the cement industry expected to commercialise in the near
future, cement prices will face a further push (GCC cementproduction will double to 106 million tonnes in 2010 from
the current 50 million tonnes). But in hindsight, if the real
estate projects in the pipeline in GCC region go on track, by
2011, demand may outstrip supply.
The aluminum industry too has been hit as prices plunged
from $3,380 per tonne in July 2008 to $1,500 in January
2009, with capacity expansions on the anvil. Based on cur-
rent trends, commodity prices will trade in a narrow range.
|q| Wt mct wll te receon ve on tereon effort t dverfyn te economc b-
e, beyond enery deendence?
|a| The effect of the global recession has been pro-nounced in the construction and real estate sector.
According to market statistics, around 150 projects valued
at approximately $50 billion, have been put on hold.
Governments in all GCC nations have taken steps to re-
store market stability and ensure condence in the nancial
system. They are diversifying into infrastructure projects
which will help sustain the economy beyond the energy
sector.
GCC states are becoming increasingly vigilant in the face of
recession and putting in efforts to support the non-oil sector.In Qatar, 56 percent of the GDP contribution comes from
the hydrocarbon sector. Falling oil prices will not inuence
the hydrocarbon investments because of committed con-
tracts for liqueed natural gas (LNG).
The non-oil projects will remain buoyant because ongoing
projects have already secured nancing. The main invest-
ment is in the manufacturing sector aluminum, steel, pow-
er, petrochemicals, transportation (airways), building and
construction, other infrastructure plant and housing projects.
The banks in Qatar are adequately capitalised and the
banking system is poised to meet the liquidity crisis if need
be. Hence, the Qatar government is on course with a diversi-
ed economic policy to abate any impact that recession
could have.
8/7/2019 QT April Cover Story
7/13
40Qatar TodayAPRIL 2009
Weatheringthe Crisis?
ride out the uncertainties of
the next period.
The rest of the world will
look to Qatar and other
strong economies to in-
crease capital spending and
investments on infrastruc-
ture. Indeed, with globaldemand subsidising, now is
a good time to benet from
reduced costs of labour and
materials to push ahead
with growth plans.
t f lThe GCC countries have
mostly pegged on to oil and
gas for their economy and
the swift slide of oil prices
has affected all of them. Thedemand for oil declined and
the price has fallen from
$148 to around $40, shat-
tering the high dreams of
everlasting boom to a mere
bust.
A major fall in the oil price
took place by the end of
December 2008. The nan-
cial crisis has weakened the
sentiments of not only the
business or trading commu-nity, but also of the public
who are not ready to travel
much or spend money for
oil and automobiles. Most of
the oil consuming industries
are forced to make layoffs or
cut down production. The
net result is a fall of demand
for oil to the extent of 60
percent or above.
According to Dr Raju M
Mathew, Professor at AlAin University of Science
and Technology, in a recent
article in BMI, it is illogical
to attribute the present fall
of the oil price to mere an
oversupply of oil.
This is an incorrect ap-
plication of a normal market
phenomenon to an abnor-
mal situation like a Great
Depression being committed
by experts in the GCC andOPEC countries. The fall
of the price is the result of
a decline in the purchas-
ing power of end users or
consumers of oil, not only in
the US and other Western
economies, but also in India
and China. The end users
are experiencing a nancial
or credit meltdown such
that they cannot spare their
limited earnings for spend-ing on oil or travel and for
the purchase of oil-based
industrial products.
That is why the usual
strategy of OPEC and GCC
countries, of cutting oil pro-
duction, would not be very
effective in the long run.
For the next ve years,
predicts Dr Mathew, there
is no possibility of creating
new demand for oil in theglobal market and raising
the oil price above $45 per
barrel, except for a very
short time.
Oil price will stabilise to
around $40 until the general
purchasing power of end
users increases further, for
which global measures have
to be implemented. This will
put all oil producing and
exporting countries into agreat crisis for a very long
time, predicts Dr Mathew.
But Qatar, unlike the oth-
er GCC countries depends
not just on oil but on gas,
and the prices of these have
always been on long-term
contracts.
On how the historic lows
in energy prices affected
their current businesses
and future projects and onany slowdowns that they
might have encountered, a
Qatargas ofcial says, Qa-
targas has not been affected
by the current issues in the
nancial markets, but we
continue to monitor the situ-
ation closely. Financing for
all our ongoing expansion
projects was secured some
time ago and the majority
of money has been drawn
down from these loans. We
take additional comfort that
our shareholders in Qatar-
gas (Qatar Petroluem, Exx-
onMobil, Total, ConocoPhil-
lips and Shell) are some of
the most nancially robust
companies in the world.
On the energy demand
and the huge growth of LNG
industry, the ofcial says, It
is a fact that the energy de-
In a survey presented recently by Master-
Card, Qatars consumer condence for the
rst half of 2009, at 76.2, is posed to be
one of the most optimistic in the MiddleEast. Though dipping slightly from 88.6,
recorded in the last reporting period (sec-
ond half of 2008), the overall results show
that consumers in Qatar are still optimistic
about regular income, economy and quality
of life in the six months ahead, said Raghu
Malhotra, MasterCard Worldwide Area
Business Head (Gulf Countries). The main
reason for the short tumble in consumer
index is the pessimism found in the stock
markets, according to MasterCard.
With the average consumer condence in
the Middle East touching 78.7, a majority
of consumers in the Middle East do not
believe their expectations on the increase
in ination will affect their spendings. The
same sentiment is also felt in Qatar with a
majority of consumers not planning on cut-
ting back their expenses, Malhotra said.
More than half of the respondents in the
Middle East believe that saving is very
important, with a majority of consumers
planning to save between 11 percent 20
percent of their total income in the next 12
months. In Qatar, saving is also a top prior-
ity, with 64.8 percent of the respondents
deeming it very important and 85.6 percentplanning to save up to 30 percent of their
income in the coming 12 months.
As far as spending is concerned, in
Qatar, consumers remain rather optimistic
about the future, which is fairly signicant
given the economic challenges of today.
For purchasing priorities, it is interesting
that in Qatar childrens education, fashion
and accessories, dining and entertainment
emerged as some of the most important
priorities for consumers.
MasterCard pointed out that this survey
wasnt meant for banks, but instead for
hotels, restaurants, retailers or anyone
looking to start a business in Qatar, includ-
ing the business community. The Qatari
business community should see opportu-
nities in these results as consumers are
optimistic and plan to maintain their level of
spending.
The MasterCard ndings were based on
survey of about 3,200 consumers between
October 14 and November 11 last year.
optiMistiC ConsUMer
8/7/2019 QT April Cover Story
8/13
APRIL 2009Qatar Today 41
Cover Story
mand is growing. LNG has
a key role to play in helping
governments around the
world improve the diversity
of their energy supplies. It
is part of the energy mix for
the foreseeable future. The
LNG industry can help theworld meet its energy needs
by providing clean, safe and
reliable source of fuel. While
major industries suffer the
toll of the global slow down,
the energy industry remains
steady although there has
been an overall downward
shift in demand.
LNG has helped put Qatar
on the energy map, glob-
ally and there is no reasonto panic, Qatargas ofcials
foresee.
The majority of our gas
is sold under long-term
contracts to well established
customers and we expect
to see demand for gas to
continuously rise. This is
because of the role natu-
ral gas can play in energy
diversity and security for
different countries as wellas for its obvious environ-
mental benets. LNG is a
clean burning, reliable fuel
that can be used efciently
in power generation and by
industrial, commercial and
domestic consumers.
LNG is a long-term
business so we go into our
projects with this view. We
know that prices will go and
up and down over time but
we make sure our economics
stack up over the long term.
gud lDubai, the city of skyscrap-
ers has crumbled, like a city
of sand, media reports have
stated. Though it might not
be as dire as it sounds, the
country has been affected
badly. The construction and
the real estate market have
been most affected.
Real-estate markets
around the world will not
see a revival unless risk
aversion abates. That in turn
will not happen until the
global economy and world
nancial markets reach thebottom of the current down
cycle, according to interna-
tional property rm Jones
Lang LaSalle, in its latest
Global Market Perspective
report.
Qatar is not immune to
these predictions says David
Oayda, General Manager,
Asteco real estate rm,
though he rmly believes it
has the right fundamentalsto weather it.
Qatar is not immune to
the effects of the global
downturn. Strong market
fundamentals support the
real-estate market and con-
tinue to attract interest from
businesses and investors.
The launch of any new proj-
ects should take on a holistic
perspective by assessing
market fundamentals, targetclient group, cost-benet
analysis, etc.
Damac Holding, Chair-
man, Hussain Sajwani
believes the property sector,
around the region, has to
withstand the current condi-
tions.
The economy of Qatar
has the potential for growth
despite the slowdown. The
governments efforts to carry
on prime projects such asNew Doha International Air-
port (at the cost of $5.5 bil-
lion), Lusail property project
($5 billion), Al Khor tourist
project ($5 billion) and En-
ergy City ($2.5 billion) will
pull up the entire economys
growth, across several sec-
tors, says Sajwani.
The current conditions
are difcult globally, not just
locally.This provided many rea-
sons for projects delays. The
lack of liquidity and poor in-
vestor condence come rst,
of course. This hit smaller
developers in the rst place,
who had to push comple-
tion dates further. Trust is
always an important aspect
of conducting business and
today that trust has been
replaced by fear. The needof the hour is to prioritise on
the projects and for compa-
nies to look at their overall
timetables.
gw cuQatars property market
is expected to continue its
growth momentum albeit at
a slower pace in 2009, de-
spite the current slowdown
in sales rate, says Oayda.
Qatar market will be
backed by sound economic
fundamentals and govern-
ments plans to increase oil
and gas production, diver-
sify the economy, and im-
prove public infrastructure.So, mega projects offering
high quality residential and
commercial developments
at good value for money will
remain attractive for long-
term investors.
The crisis has made banks
increase their lending crite-
ria. Purchasers have simply
become more circumspect
and picky about what they
choose to support.The realty sales activity
in Qatar has considerably
slowed since the last quarter
of 2008, making it difcult
for sales-only agency to
survive. The lower levels of
market condence, as well
as the tendency of investors
and developers to wait-and-
see, brought about a wave of
project delays and perhaps
cancellations.A successful business
needs to be all things for all
people, servicing developers,
investors, banks through to
end users. This requires con-
stant monitoring and under-
standing of external market
forces, a willingness to think
long term, and to be able to
quickly adapt to change. In
the property market like any
other sector, it is survival of
the ttest.
In the current economic
climate, diversication
becomes a key factor to busi-
ness success, says Oayda.
n ccllDamac Properties is utilis-
ing opportunities offered by
the market such as falling oil
prices, lower material costs
and transportation expenses,
A successful business
needs to be all things for
all people, servicing de-
velopers, investors, banks
through to end users. This
requires constant monitor-
ing and understanding of
external market forces, a
willingness to think long
term, and to be able to
quickly adapt to change.
In the property market
like any other sector, it is
survival of the ttest.
David Oayda, General
Manager, Asteco
8/7/2019 QT April Cover Story
9/13
42Qatar TodayAPRIL 2009
Weatheringthe Crisis?
in delivering its projects
within the timeframe.
The current signicant
fall in construction prices
is a silver lining for all
developers. We are certain
that, by the time, the real
estate market regains its
former vigour, we will be
among the few who have
resisted the challenges and
remained stable.
Damac has not cancelled
any of its projects, says
Sajwani.
We have not cancelled
any projects. We currently
have over 18,000 units
under development at sites
across the GCC, from which
we handed over 2,300 to
customers, and expect other
7,100 units to be delivered
by end of 2010.
In Qatars lucrative
market with ample invest-
ment opportunities, we
launched, in 2008, our rst
commercial tower Busi-
ness Square. Our steady
construction here is evident
from the recent develop-
ments at Garden Heights
and The Terrace both
luxury residential high-rise
developments with innova-
tive design.
In the UAE, we have
recently handed over two
projects, Lake View Tower
and Terra Del Sol. Our
projects are moving ahead
as planned.
pful cd wll
Real estate has been the
second largest contributor
to the Middle East economy
after oil. Though the ups
and downs are part of any
growth cycle, the region has
Recession is also the
best time when new so-
lutions and bright ideas
come to the fore. It is thetime when the sustain-
able orgainsations, some
new and some which
have been around for
years, emerge as
winners.
A new report pub-
lished recently by
Barclays Wealth and the
Economist Intelligence
Unit (EIU), entitled
Family Business: In SafeHands? reveals that the
attributes of the family business model mean they are well-
placed to endure the economic downturn.
Family-owned businesses are the cornerstone of the global
economy and while common perceptions of the model are
that of dysfunction plagued with structural issues, it remains
a robust model that contributes to overall global economic
health. Attributes such as a strong relationship with their
community, long-term perspectives and a dynamic approach
to decision-making have made family businesses a signicant
part of the global economy.
Soha Nashaat, CEO, Barclays Wealth Middle East says,Family businesses and their long-term strategies need to be
examined to explore their longevity and viability during these
difcult economic times. Lessons learned from family busi-
nesses could prove to be very apt during this unprecedented
time and non-family owned business could take some strate-
gic insight from this most enduring model.
|q| W l bd ucc ffml bu ccumc?
|a| Family businesses are in a strong position to survive thedownturn due to a variety of factors mainly due to,
The close network of family members who control the
business and help with quick decision making, as well as
ensuing a dynamic and agile strategic approach to decision-
making, have made family businesses a signicant part of
the global economy.The presence of shared objectives, identity and ethos are
particularly important in the way business is conducted in
family owned businesses and in their direction and efcacy.
According to the survey undertaken by the Economic
Intelligence Unit (EIU) for The Barclays Wealth report
entitled Family Business: in safe Hands, clear and shared
objectives are essential for the family business, and were
identied as a key characteristic for success by 44 per cent
of respondents.
Philanthropy and a close relationship with society are key
motivations for a family business, and hence position these
families as cornerstones in many economies. In the EIU sur-vey, among the surveyed participants more than half of family
members interviewed see the ability to help others through
their wealth as important, compared to the 39 percent of
other survey respondents, and there is a similar difference in
opinion regarding the ability to increase social status.
Particularly in the Arab world, philanthropy is deeply
rooted and many families support initiatives involving the
underprivileged. Such families are beginning to formalise
their charitable activities by developing strategic plans,
programmes, funding and sustainability.
Most family businesses have a long-term focus and a higher
sense of risk aversion. This means that family businessescan exercise prudence during both upswings and down-
swings in the economy, and are less likely to pursue ad-
venturous growth strategies to satisfy short-term investors
during a boom. As a result of this conservative nancial
and business strategy, they are better positioned to survive
the periods of economic downturn.
Also in general, family businesses traditionally are not as
leveraged as non-family ones and often have family capital
outside of the business which can be drawn upon in case of
FaMiLy BUsiness:the way forward?
8/7/2019 QT April Cover Story
10/13
APRIL 2009Qatar Today 43
Cover Story
to resist and exist in this dif-
cult time, says Sajwani.
We have to take cogni-
zance of the fact that there
are several factors that have
led to the current setback,
which is not regional but
global. It is difcult to pre-
dict when exactly the market
will rise back.
Across the Middle East,
governments have been
actively involved in reviving
the market from the current
crisis, and are undertaking
timely initiatives to regain
investor condence and sta-
bility within the markets.
The current market cor-
rection presents an oppor-
tunity. The current scenario
seems painful in the short
term, but such uctuations
are part of the natural cycle
of a growing and maturing
property market.
No market can beat the
supply and demand battle.
The underlying demand for
property in the ME region
is very strong compared
to other parts of the world.
Hence, companies will con-
tinue to want to do business
here.
The Qatari market
will emerge strong when
economies stabilise, as its
economy continues to be
efciently driven by energy
production and related in-
dustries along with invest-
ments aimed at economic
diversication.
Mml mc lPanic and reduction in
spending would be the
automatic response dur-
ing recession. But not here,
for though all the various
sectors have shown a dent
liquidity issues. This means they are less under threat from
the current lack of funding.
|q| W ccd u u fml bu mu vcm d dd v ?
|a| Some family businesses must still overcome issuesrelated to governance and family succession.
Succession planning is the most important ingredient for
a successful family business. In many cases, the transition
from the family patriarch to the second generation is not
clearly outlined leading to internal conict as the remaining
family members try to appoint the new head of the business.
Part of the reason why succession is not dealt with is that
owners can be weighed down with the pressures of running
the business on a day-to-day basis. However, a major factor
is also the fact that succession is a delicate issue that is
closely related to psychological and emotional factors.Governance is also a potential problem area. To solve this
problem, family businesses should consider the full range of
tools available to them, such as a greater separation of own-
ership and control, and wider use of external management.
Planning for the next generation is an essential component
of success, yet all too often, plans for the transition of the
business are not made early enough.
It is important that shared values and ethos are extended
into clear and shared objectives among the family members
to avoid a potential overlap between the goals of the business
and the goals of the family.
|q| Bu v b umu cw fml-wd bu v l f- du lbl? W wuld u
bu ?
|a| This could be due to several reasons mainly not stickingto the basic tenets and shared objectives that were initially
established for the business and in some cases not hiring the
right talent.
|q| W Uae fd auu llw fml muc 70 c f fm u u f l ublc, wll m fml-wd bu ublc? Wll d d ucu d bf j fml-wd bu?
|a| These are quite challenging times and we are yet to seehow businesses family or otherwise will survive.
In times of the economic downturn and due to their low risk
approach and long-term focus, family businesses may appear
more attractive to outside investors.
However, we need to keep in mind that these businesses
may also be harder to purchase due to their commitment to
family legacy and staff. In an environment where non-fam-
ily businesses are less likely to fair well, outside investors
will be presented with interesting opportunities as they
would be able to acquire non-family businesses at greater
discounts.
|q| if d cm , w vlu fml-wd buuld wl ll mbc flcl?
|a| As mentioned earlier, outlining succession plans areprimordial to the success of family businesses. In addition
to that, creating a robust governance structure that sepa-
rates ownership and management is very important. Family
businesses need to continue to communicate clearly and
transparently with their staff and involve them in the decision-making processes. While in a boom, motivating and empow-
ering employees is important, it remains even more so as the
economic downturn hits.
It is also important that family values are extended into
clear and shared objectives among the family members to
avoid a potential overlap between the goals of the business
and the goals of the family.
These objectives should then be clearly cascaded to all
staff members.
8/7/2019 QT April Cover Story
11/13
44Qatar TodayAPRIL 2009
Weatheringthe Crisis?
in gures, if slight, the retail
scene seems to be
comfortable.
Landmark Group, Manag-
er Mall and Retail Develop-
ment, Praveen Methil feels,
It would be wrong to say
that we are not affected bythe slowdown. It is a global
happening that has affected
all the corners of the globe,
yet we in Qatar or as Cen-
trepoint itself, we are not hit.
The effect is still minimal.
While some argue that
the retail sector in Qatar, as
well as the entire region, has
been sharply hit by caution-
ary family spending, Methil
believes it is not the case.He believes this effect
itself was sector specic,
rather than generic.
Like any other sector, the
retail sector is also affected
but only certain segments
in the retail sector have
suffered set backs. Qatar, as
a country, has a strong eco-
nomic backbone; therefore,
recession has not been too
alarming here like in manyother countries.
Luxury and lifestyle seg-
ments have suffered a heavy
setback, as people have
started reserving funds in
anticipation of a crisis. But,
Qatar has been in a much
better zone during this
global economic slowdown.
Methil says that, despite
the slowdown, Centrepoint
still receives the same foot
falls, which sometimes over
the previous months, goes
up marginally.
We are not unduly wor-
ried about the situation, theway we do business fosters
strong relationship with our
patrons. And we operate
with immense commercial
intelligence.
The middle income group
or the common man consti-
tutes to a very large percent-
age of a nations demograph-
ics and as retailers we are
into providing value to the
common man.We have all our promo-
tions and sales happening as
per plan for the year, like it
happens every year.
Methil feels that the mar-
kets have already eased out.
The market is stabilising,
and as far as Qatar is con-
cerned, it is on a transforma-
tion phase. This is a natural
cleansing process of the
market to stabilise itself andto reach an equilibrium; it
may take a while may be a
year or two.
Hyatt Plaza, General
Manager, Feroz Moideen
asserts though foot falls
havent come down, there is
a certain caution reected in
the consumer behaviour.
We have, however, noted
some caution on the side of
customers.
In Hyatt Plaza, for exam-
ple, we have seen a 30 per-
cent growth (approximately)
in foot falls. Yet, we who are
in charge of creating events
and planning activities to
drive and leverage customer
visitorship. We advise our
tenants to be creative and
create special promotions.
Qatar should be recovering
very soon from the psycho-
logical impact especially on
the middle income segment,
while for other countries it
will take some time, says
Moideen.
Our shopping mall target
market is the middle-in-
come bracket who do not
generally invest in stock
market or speculate in
properties, and as such their
incomes are not affected,
especially when there is no
pay cut in Qatar for this seg-
ment. In fact if the rentals
and food cost decrease, they
will be spending more.
t vc f prMedia companies around
the world are facing tough
times. With a strict cut on
budgets, companies are
reducing their advertorial
inputs, media companies
are nding the path tougher
to tread.
While newspapers around
the world are re-looking at
their budgets, public rela-
tion companies are having
a tough time too, having
to take tougher stances to
meet challenges.
CreDit CrUnCh anDCoMMerCiaL ContraCts
By KhAwAr QureShi
In these uncertain times, there have been recent highprole examples of businesses terminating/suspending
performance of agreements in a way which indicates that
proper legal advice was not taken beforehand. The result-
ing litigation will, unfortunately (and too late), reveal to
these businesses the importance of doing a Legal Audit
before taking such steps, says Khawar Qureshi.
The fallout from the credit crunch has been most visible
in the areas of banking and property, and most notably in
the US and Western Europe thus far.
However, in the global village where economies have
become much more interlinked over the past decade - as
a result of increased activity on the part of multi-nationalcorporations, freedom of movement of capital and greater
cross-border investment, businesses all over the world
are increasingly being forced to assess whether contrac-
tual commitments are commercially viable in the present
economic climate.
Credit lines are drying up and projections of prots no
longer appear as realistic as they were six months ago
(assuming they were ever realistic in any event) - risk
aversion is the order of the day (perhaps belatedly but
nevertheless a welcomed development in terms of long
term stability for an economy).
When a business is considering its options, there aresome Dos and Donts which, if followed, can help mini-
mise the risk of litigation. These principles apply to any
party which has entered into a contract - whether a busi-
ness big or small, a State corporation or even a consumer
(who may have additional rights under the applicable law).
It would be wrong to say
that we are not affected
by the slowdown. It is a
global happening that ha
affected all the corners of
the globe, yet we in Qatar
or as Centrepoint itself, we
are not hit. The effect is
still minimal.
Praveen Methil
Manager Mall and Retail
Development
Landmark Group
8/7/2019 QT April Cover Story
12/13
APRIL 2009Qatar Today 45
Cover Story
According to Anna-Denise
Ioannou Mikati, Country
Manager of Action Qatar,
part of Action Global Com-
munications PR agency,
No one is immune to the
global problems and PR
is no exception. However,
out of adversity there are
opportunities and public
relations can provide an
excellent return on invest-
ment/value for money when
budgets are tight.
Grow, Managing Director,
Anthony Ryman says, In
times of recession, consum-
ers revert to the brands they
know and trust; where the
promise is clear and where
their experience matches
the promise. Companies
have to make sure that their
brand is easy to understand,
easy to trust and easy to do
business with.
In these times, those
companies that invest
in their brand and com-
municate the benets of
their brand (the promise)
increase their share of voice
(SOV) and when the market
turns positive again, they
will increase their share of
market (SOM) too.
Not all PR companies
share this thought, Hill and
Knowlton, General Manag-
er, Sara Gourlay says, Any
industry is affected by a
global slowdown but public
relations is one of the more
robust sectors. There are
two major reasons for this
rstly PR is a more effective
long term communications
strategy than advertising,
and its generally cheaper.
Secondly, when times
are bad, companies and
organisations need to keep
communicating appropri-
ately with their customers,
partners, shareholders and
employees.
t D:
Analyse the agreement very carefully as soon as possible
using lawyers who have knowledge of the applicable legal
system and consider whether:
The contract terms are exible enough to allow for varia-
tions in payment and performance.There is any argument which can be used against the
other party that it is in breach of the agreement - if the
agreement contains technical requirements (such as a
construction contract), obtain technical expert advice as
soon as possible.
If there is a breach of agreement or a risk of a breach,
consider very carefully whether the other party has any
available assets - can you try to obtain an order to freeze
the assets (there is little point in trying to litigate if the
other party has no funds which can meet a damages
claim).
If the applicable legal system allows (which may not bethe case in some civil law systems), try to communicate
a negotiated settlement with the other party on a With-
out Prejudice basis as soon as possible before litigat-
ing. Without Prejudice if properly invoked, creates an
immunity for all communications made to settle a dispute
- whatever is said cannot be used later on in the dispute
before a Court or Arbitral Tribunal to show that a party
has admitted liability.
If a dispute seems likely and the matter is subject to a
Courts jurisdiction, consider whether you can agree
mediation (fast and cost effective non-binding evaluation
by a neutral third party of both parties position to try toachieve a settlement), or ad hoc arbitration (meaning dis-
pute resolution outside the Court system so as to achieve
a faster result) - it will often be in the interests of the
weaker party to create delay and resist anything which
leads to a faster outcome.
t D
Never write any letter/e-mail or say anything to the other
party which concerns the agreement and could be used to
argue that you are not performing your side of the agree-
ment WITHOUT having consulted your in-house counsel
or an external lawyerAvoid communicating only by telephone - it is vital that you
keep a good paper trail of communications with the other
party. Memories fade, and documents recording what
is happening are the most powerful source of evidence
when a dispute takes place. Conrm important matters by
e-mail or fax and make sure your records are not lost of
destroyed.
If you must terminate an agreement or are in circumstanc-
es which require you to suspend performance. NEVER
write immediately to the other party - and ALWAYS take le-
gal advice. The reason you might give for termination/sus-
pension may provide no justication and expose you to alarge damages claim. However, it is not uncommon for a
review of the agreement and the relevant documents to
show that a good reason might exist to justify termination/
suspension. It is vital that any letter to terminate/suspend
an agreement is written very carefully so as to identify any
justication or defence which might exist.
Professor Khawar Qureshi QC is
Head of Chambers at McNair
Chambers. (www.mcnairchambers.
com). McNair Chambers providesadvice and advocacy expertise in
the areas of International Commer-
cial Law and Litigation, Interna-
tional Arbitration, Energy Law and
Public International Law.
Qatar should be recover-
ing very soon from the
psychological impact
especially on the middle-
income segment, while for
other countries it will take
some time.
Feroz Moideen, General
Manager, Hyatt Plaza
8/7/2019 QT April Cover Story
13/13
Q T d
Weatheringthe Crisis?
W d sarocSome are more realistic than
the rest too, with Mikati
commenting, At the start of
the year, we had a urry of
clients, most notably (andhardly surprisingly) in real
estate who terminated their
contracts with us. But this
was only a small percentage,
as Action provides PR coun-
sel for a wide range of indus-try sectors. The majority of
our clients are proceeding
with a business as usual
approach, but we would be
foolish to think that we areover the worst and I would
expect some trimming of
budgets still to come.
But Gourlay hasnt seen
much of the wait-and-see
approach. Companies in
Qatar have clear objectives
and targets to meet, and
theyre prepared to invest to
do so.
Ryman, believes that at
such times, we have to takeinputs from global market-
ing gurus, Brands need to
take note of gurus such as
Warren Buffet who have
made their fortunes by in-
vesting when others choose
to sit rmly on the sidelines.
plyn t downAs a PR agency, event man-
agement is another vital
part of their portfolio, andMikati feels, Event man-
agement has only a support-
ing part in the core business
and services and as such
they have not been notably
affected. Certainly, though,
there has been a tightening
of event dollars due to eco-
nomic concerns, but this has
resulted in an upsurge in
social media campaigns and
digital campaigns and thesetools are seeing growth as
clients seek alternative ways
to maintain their public
presence. In Qatar, it seems
that businesses are being
realistic regarding what
the market will and will
not bear as they tailor their
PR campaigns to maintain
visibility and manage mes-
sages. Certain aspects of PR
campaigns do not change
despite the economic envi-
ronment. Companies still
need to target key demo-
graphics, maintain skilled
crisis communications and
garner good press.
An interesting develop-
ment has been that we have
seen an increase in the
function of higher manage-
ment. They are putting
an increased value on the
companys communication
with its employees dur-
ing this turbulence, as the
company tries to soothe
concerns over net losses and
control the fear of job cuts.
While Gourlay feels,
Generally the market willsee some contraction and
I think there is evidence
of that already. However,
rms like Hill & Knowlton
that focus on meeting a
clients business needs rath-
er than just on delivering
column inches will continue
to perform well.
Mikati says, Public rela-
tions have been long mis-
understood as an importanttool in the marketing mix.
During these times, we are
working harder to demon-
strate to existing and poten-
tial new clients the value PR
can add to their business.
Rather than reducing
communications efforts,
this is the time to start beef-
ing them up. Now, more
than at any other time, busi-
nesses should be concen-trating on maintaining the
trust of their investors and
customers by regularly com-
municating with them and
letting them know how the
company is dealing with the
situation and the positive
steps the business is taking
to insulate and protect its
clients.
Gourlay reects similar
resourcefulness in thought,
saying that exibility and
resourceful attitude are
worth their weight in gold.
Ryman agrees, Not ev-
eryone automatically loses
out in a recession The ones
that change tactics come
out winning. Astute agen-
cies talk to clients about
retaining brand loyalty
with innovative strategic
options and lower-priced
value alternatives. This is
not a time for complacency
or cutting back, its a time
for investing in the future of
your brand.
secure dete odd
The hospitality sector is oneof the areas which show
absolute susceptibility to
changing global dynamics.
Around the Middle East, the
impact has been huge on
the sector in recent months.
A big list of the regions
tourism-dependent country
posted sharp declines in
tourism revenues. Egypt
saw a forty percent decline,
while Dubai, Morocco andTunisia talk about much
bigger percentages.
In Qatar, the situation
remains stable on the hos-
pitably part of the economy,
says Belal Al Kadry, Direc-
tor of Sales and Marketing
at Doha Marriott.
In recent months, we saw
a signicant drop in busi-
ness as travellers started to
be price shoppers, but thiscannot stay for long. The
whole situation will ease by
the last quarter of 2009.
In Marriott, we man-
aged to retain record high
revenues in Q4 2008, as
the whole situation in Qatar
was not affected in that
period.
In later months, we took
general cost measures to
overcome the slowdown
impact. In this, we made
sure the quality of services
and facilities offered to our
guests is not compromised.
I believe the hotel sector
in Qatar, compared to the
entire region and other
non-Gulf neighbours is less
affected in all areas, largely
due to the prudent planning
and strategy of the govern-
ment n
In Qatar, it seems that
businesses are being
realistic regarding what
the market will and will not
bear as they tailor their
PR campaigns to main-
tain visibility and managemessages. Certain aspects
of PR campaigns do not
change despite the eco-
nomic environment.
Anna-Denise Ioannou Mikati,
Country Manager, Action
Qatar
Brands need to adopt
the same approach when
faced with uncertain
market conditions. Brandsthat opt for the aggressive
approach now will benet
in both the short and long
term.
Anthony Ryman, Managing
Director, grow
Companies in Qatar have
clear objectives and tar-
gets to meet, and theyre
prepared to invest appro-
priately to do so. Sara Gourlay, General Man-
ager, Hill & Knowlton