Qatar supports entrepreneurs and start-ups

 

The Qatari government has increasingly shifted its focus to small and medium-sized enterprises (SMEs) and start-ups as it moves to expand economic diversification and non-oil growth in the state. Start-ups and entrepreneurs will benefit as a result, with the state launching new support mechanisms for the sector, including the recently established Qatar Business Incubation Centre (QBIC), the largest mixed-use incubator facility in the MENA region. Offering a series of targeted training programmes, facilities and financial support, the 20,000-sq-metre QBIC will join existing programmes offered by various stakeholders and government entities in nurturing growth through provision of facilities, training, low- or zero-interest loans and mentorship.

According to the Global Entrepreneurship Monitor 2014 Global Report, an annual survey of entrepreneurial activities, intentions and attitudes across 73 countries, 50.4% of adults in Qatar say they plan to start a new business within the next three years. This is helping Qatar stand out as the developed country with the highest level of entrepreneurial intentions. According to the report 16% of adults – also the highest rate among developed economies – in the state are engaged in “total early-stage entrepreneurial activity”, which means they are in the process of starting a venture or running a business in fewer than three years.

However, the report noted that only 3.5% of adults in Qatar own and manage an established business. This rate is below any regional average rate of established business ownership, and it suggests that high entrepreneurial intentions and early-stage activity do not necessarily translate into long-term business success.

FACILITATING GROWTH: Despite the fact that SMEs comprise an estimated 90% of Qatari companies, small business owners have frequently complained that barriers to doing business have hampered SME expansion and wider economic diversification.

“SMEs can play a vital role in the economic reform and development of the country. However, the government is not giving priority to this segment. There is no focus on supporting existing local companies and helping them to grow. Local SMEs encounter numerous issues surrounding labour and the general ability to facilitate business in a productive manner,” Trilok Sharma, managing director of Sendian Group, told OBG.

Recent developments have helped remove the obstacles facing SMEs, however, with a number of support agencies and incubators established over the previous decades, including the Social Development Centre (SDC), Qatar Development Bank (QDB), QBIC and Silatech. Established in 1996 under Qatar Foundation for Education, Science, and Community Development, SDC is focused on grassroots development of SMEs in Qatar. The centre offers a wide array of services including financing, consulting, counselling and training, most recently moving to launch QBIC, in partnership with QDB.

Enterprise Qatar was established as an independent body in 2011 by the Ministry of Economy and Commerce, with a mandate to boost SME growth. Now part of QDB, it supports SMEs through provision of education, guidance, research and financial facilities, including free office space, and subsidies of up to 70% for services including consultancy, feasibility studies, performance and advisory services, and assistance in listing on the Qatar Stock Exchange’s Junior Venture market.

Silatech runs initiatives to support young people’s employability and foster entrepreneurship. A number of its services are run via the Bedaya Centre, founded in partnership with QDB, which offers a walk-in location for young people to access employment support. The agency also provides a range of online services, including the Ta3mal employability portal, launched in 2013, and the Tamheed career guidance programme.

QBIC: Founded by SDC and QDB in 2011, QBIC opened its doors in March 2014 as a first-of-its-kind, mixed-use incubation facility that aims to support development and commercialisation of new business ideas and companies. QBIC’s approach emphasises rapid project implementation through services designed in partnership with local and international experts, including training, office space, industrial workshops, administrative services, and technical and financial assistance.

QBIC is pre-dated by several smaller facilities in the state. The Ministry of Information & Communications Technology (ictQATAR), for example, has a Digital Incubation Centre in its portfolio. The Qatar Science and Technology Park, located in Education City, provides fully furnished, ready-to-occupy offices starting at 45 sq metres, in its Innovation Centre business incubator.

The QR100m ($27.4m) QBIC, however, offers significantly scaled-up operations and mixed-use facilities, enabling underserved industrial segments to gain a stronger foothold in the market, and providing the necessary space for non-tech start-ups. Although the centre is focused on fostering local talent, any entrepreneur can apply to join QBIC, including entrepreneurs willing to relocate to the state. Applicants do not need to be Qatari at the time of company registration, although all non-Qataris must enter into a joint venture with a Qatari partner.

The centre aims to develop QR100m ($27.4m) worth of new start-ups, implementing a branded training and development methodology known as LeanStartup, which runs multiple sessions throughout the year. QBIC offers shared infrastructure and operations resources, with the goal of enhancing start-ups’ professional business development, allowing new firms to align their offerings with the needs of major development projects, including the 2022 FIFA World Cup and the Qatar Rail Development Programme. The company reported receiving 200 applications for the first wave of the LeanStartup programme, graduating 22 teams from the project, and announcing in September 2014 that 15 of these projects had continued to the centre’s second stage, LeanScaleup, which encourages sales development and assists in sourcing capital investment. At the announcement, QBIC officials revealed the centre had allocated QR27m ($7.4m) in funding to support incubated businesses, in addition to pre-existing investments to fund and support the incubator itself.

QBIC FACILITIES: QBIC’s facilities are spread across 20,000 sq metres of space and divided into stages, with the largest stage situated 23 km from central Doha in the south-western New Industrial Area. The centre’s first stage is located at Al Bidaa Garden in Doha, with capacity for 35 potential start-ups. Its second stage, located in the New Industrial Area, can host 209 start-ups, with space provided across a range of sectors.

Facilities include 3100 sq metres of industrial workshops for SMEs, ranging from 110-280 sq metres, 1300 sq metres of Zone Manager space, reserved for entrepreneurs launching projects under Qatar National Vision 2030, as well as the 2022 FIFA World Cup, in under-served segments including water, food, renewable energy, education and sport. An additional 2200 sq metres of retailer space is available for up to 66 companies, with units ranging from 155 sq metres to 265 sq metres, catering to businesses including travel agencies, banks, food and beverage outlets, and pharmacies. All incubated projects’ rental costs are 100% subsidised by QBIC for the first two years of operation.

TRAINING: Entrepreneurs at QBIC enrol in the 10-week LeanStartup Programme, the curriculum for which focuses on real-world experience. Teams then pitch their start-up ideas to judges and potential investors, with successful projects advancing to the LeanScale-Up accelerator programme. The accelerator programme provides support in the form of market access to public and private sector customers, human resource procurement for management and technical talent, access to debt and equity capital, and provision of advisors and professional service providers. Training is provided in sales, entrepreneurial finance, and cash-flow management, with teams pitching to potential investors and lenders in a drive to raise growth capital. According to the QBIC website, 22 entrepreneurs have graduated so far, with follow-up support provided.

FINANCING SMALL BUSINESS: QBIC also offers a financing programme which follows the market progress of graduated start-ups and scale-ups. Nominated start-ups are entitled to a conditional seed fund of QR100,000 ($27,410) during their first three months of incubation. On successful attainment of a number of benchmarks, companies can then apply for an additional QR200,000 ($54,820), in exchange for a maximum of 30% equity shares in the new company. Companies are not required to repay seed money if they retain QBIC as a shareholder, and are permitted to buy back their shares for a flat, one-time rate of 5% at any time. QBIC also provides two-year loans of up to QR4m ($1.1m), which can be renewed for one additional year at a discount rate, while its partner, QDB, also offers financing options for start-ups and SMEs through its Al Dhameen programme. The scheme assists start-ups and existing companies working to raise collateral for establishing or expanding their business, in high-priority sectors including agriculture, fishing and livestock, non-oil mining, wholesale retail trade, financial and insurance, and real estate sectors. Unlike SDC’s finance programme, these loans charge nominal interest (QDB will generally cover up to 75% of interest payments), and offer scaled-up financing with lending limits. Rather than provide financing directly through QDB, Al Dhameen connects SMEs with one of 14 partner banks, offering guarantees for loans to new businesses capped at 85% of the total project value, to a maximum of QR15m ($4.1m).

Targeting micro-businesses and entrepreneurs, SDC moved in 2003 to launch a finance scheme called Rasameel. “The scheme provides zero-interest loans capped at a maximum of QR250,000 ($68,525) for Qatari nationals. Loans are repaid over 36 months, with a six-month grace period, and require a business plan and third-party guarantor for approval. Rasameel’s total working capital stands at QR15m ($4.1m), with an estimated QR12m ($3.3m) in loans already disbursed,” Amal Al Mannai, executive director of the SDC, told OBG.

EQ has also moved to improve and diversify funding options for start-ups: in February 2014 it announced the launch of a $100m private equity fund for SMEs in June of that year. The fund will make investments of between QR500,000 ($137,050) and QR2m ($548,200).

FUTURE GROWTH: New projects launched across various government ministries targeting SME growth are expected to further bolster start-ups. The Ministry of Economy and Commerce, for example, moved to expand the number of logistics and storage options available to SMEs, announcing in June 2014 that it planned to allocate over 1.5m sq metres of land to logistics developments reserved for SMEs, and offering open and cold storage options (see Transport chapter).

Qatar is planning to launch three special economic zones (SEZs) which will benefit SMEs and local industry, and offer benefits and exemptions. The first SEZ, Ras Bufontas, will be located near the new Hamad International Airport (HIA), while the second, Um Alhoul, will be situated close to the new Hamad Port, formerly known as the New Port Project, and the third SEZ, Al Karaana, between Doha and Abu Samra. Developed by Manateq, a state-backed organisation established in 2011 which offers infrastructure, services and policies to boost SME development, these SEZs will provide a base of a home-grown private sector mainly comprised of SMEs (see Trade & Investment chapter).

“The government does not want the economy to drop off after the 2022 FIFA World Cup,” Fahad Rashid Al Kaabi, CEO of Manateq, which is behind the zones, told OBG. “The idea is to encourage local industrial capacity. The overall aim is to target locals to set up across a wide range of sectors, while attracting international tenants to be the main anchors in the zones.” The Ministry of Energy and Industry (MEI) also plans to offer projects targeting SMEs. In June 2014, Mohammed bin Saleh Al Sada, minister of energy and industry, announced the MEI had prepared a list of 30 SME projects in under-served areas, including pharmaceuticals, chemicals, environmentally-friendly projects and high-tech industries. The MEI plans to exempt taxes and fees on inputs and equipment used to develop these projects, and to assist in arranging QDB financing.

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The Report: Qatar 2015

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