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34Qatar TodayAPRIL 2009

Weatheringthe Crisis?


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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


3/13



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


4/13


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


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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


6/13


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.


7/13



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


8/13


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


9/13



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?


10/13


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.


11/13



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


12/13


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


13/13

Q T d


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

QT April Cover Story

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