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Local Qatari banks are the bedrock of World Cup financing and private sector growth

Article - March 16, 2015

The economy is confidently diversifying away from oil and gas, and Qatari banks are providing the extra impetus required


It’s a new day in Qatar. After decades of relying on its energy resources to fund the ambitious development plans which have turned the tiny nation state into a world showcase in so many fields, the country’s leaders are working hard to wean the economy off its dependency on oil and gas and striving to boost the non-hydrocarbon sector for the benefit of future generations.

The efforts appear to be working. According to figures from the Ministry of Development Planning and Statistics, non-hydrocarbon economic activities grew by more than 11 per cent in a recent quarter, while the oil and gas sector dropped by more than 2 per cent.

And as the non-hydrocarbon sector accelerates at double digits, it will help fuel the country’s total economic growth from 6.8 per cent this year to an expected 7.8 per cent in 2016, even as the energy sector growth slows, says a report by the Qatar National Bank.

So what industries will benefit most? Construction and manufacturing, both of which are already on a roll with the former benefitting from the billions of dollars being spent on Qatar’s hosting of the World Cup 2022, and the latter sector being driven by a government plan to ramp up investments in such activities as petrochemicals.

Qatar has been able to reach out and offer a compelling proposition to sporting organisations around the world” Ali Al-Kuwari, CEO of Qatar National Bank

At the same time, the service industry, such as tourism and hospitality, is growing and private sector credit is on the upswing as companies both large and small involved in this sector, along with construction and real estate enterprises, turn to banks for funding.

Financial institutions like Qatar Development Bank, Commercial Bank of Qatar and Qatar National Bank are at the forefront of these initiatives, with Qatar Development Bank (QDB) particularly active in assisting small and medium enterprises, or SMEs, in taking care of business.

“Supporting SMEs is at the heart of our development, our economy and our ecosystem in general,” explains QDB CEO, Abdulaziz Bin Nasser Al-Khalifa. “QDB and the whole entrepreneurship and private sector ecosystem are putting the pieces together to ensure a vibrant and sustainable economy that is well balanced.”

QDB offers the Qatari small and medium-sized businesses a one-stop-shop for products and services – and not just financing, but also business education, training and guidance in the skills and resources entrepreneurs need to successfully compete in the local and international markets.

These include business development advice to help owners create their own feasibility studies, conduct market research and select appropriate technology. Also on offer is business counselling for start-ups and existing firms, tools for enhancing entrepreneurial skills, and contacts with financial and non-financial support agencies.

“In 2014, we doubled down on our commitment to enhance opportunities for Qatari SMEs and entrepreneurs,” the CEO says. “A total of 262 SMEs benefitted from QDB advisory services, with 200 individual counselling services held, and we launched more landmark strategic initiatives, conducted more market studies and hosted more workshops and training sessions for Qatari industries than we ever did in previous years.”

Also last year, the bank launched the Qatar Business Incubation Centre, a 20,000-square-metre mixed-use business incubator, which is the largest in the Middle East and North Africa.

The World Cup is an opportunity for international investors to come and put their money into infrastructure projects” Abdulla Al-Raisi, CEO of Commercial Bank

One specific sector in which the bank has been particularly active is tourism, working to identify the gaps in the industry and helping private operators to fill those gaps with achievable business opportunities.

“Tourism is a strategically important component of developing a non-hydrocarbon economy,” Mr Al-Khalifa notes. “In December, the QDB and the Qatar Tourism Authority signed four agreements which enabled the start up of four new projects in the emerging sector – a major milestone and one of many important local business promotion initiatives across the public and private sectors.”

Each year, an increasing number of visitors from around the Middle East and further afield come to enjoy Qatar’s delights, from its astounding deserts and coast, to the world-class museums, shopping and other attractions.

And those numbers will swell astronomically when the country stages the premier global sporting event in 2022, the World Cup football championship, with local banks as the vital ingredient in preparing for the extravaganza.

Qatar’s government has earmarked around $140 billion over the next several years for infrastructure projects linked to the World Cup, and further projects to be completed before 2020 include a new railway-metro at a cost of $44 billion, new highways, roads and a new airport for $28 billion and an $11 billion new port.

In 2014, we doubled down on our commitment to enhance opportunities for Qatari SMEs and entrepreneurs” Abdulaziz Bin Nasser Al-Khalifa, CEO of Qatar Development Bank

Even though these projects and others will be paid for out of the government budget, another $160 billion is to be funded in the market, fuelling increased domestic credit activity by private sector companies, which will turn to local banks like Qatar National Bank (QNB).

“QNB Group has always played a pivotal role in supporting the economic development of Qatar and its national strategic projects,” explains CEO Ali Al-Kuwari. “This commitment to invest in Qatar’s future continues today with significant financing support deployed on major projects.”

Implementation of large construction and infrastructure projects, complemented with higher population growth, have boosted the aggregate demand, further stimulating buoyant economic activities across all sectors.
“QNB group has developed in-depth expertise in financing this type of activity and will continue to finance high-profile projects,” the CEO adds.

Mr Al-Kuwari points out that the Qatari capital of Doha has undoubtedly become the sports capital of the Middle East through hosting major international athletic events and encouraging sport among its own citizens.
“Sport is one of the catalysts for Qatar to promote itself and its growing capabilities to an increasingly interested and diverse global audience,” he says. “Through an effective combination of focused economic development and appealing tourism destination, Qatar has been able to reach out and offer a compelling proposition to sporting organisations around the world.”

Echoing those comments is another banker, Commercial Bank of Qatar CEO Abdulla Al-Raisi, who sees his institution’s support for sport as an investment in both business and social responsibility of which it has long experience.

“We have backed a number of educational events and supported special facilities for certain segments of Qatari students,” he says. “And in health we have donated a lot of money to bring the latest medical equipment here for Qatari patients.”

In sport, Mr Al-Raisi says the country’s leaders want to create an identity for Qatar to be known around the world as a sporting hub through its first-class facilities, sport clubs and golf courses, all of which have played host to such events as the Asian Games and other major tournaments.

“Why do you think Qatar is investing in all of this? Yes, Qataris have to get more involved in sport so we can qualify to lead internationally in some sports. But also to tell the world who we are,” he says. “Also, the World Cup is an opportunity for international investors to come and put their money into infrastructure projects as well as for us to get to know these investors and provide them with the services they need.”