Interview: Sheikh Faisal bin Abdulaziz bin Jassem Al Thani
What do you identify as the most significant impediments to industry consolidation?
SHEIKH FAISAL BIN ABDULAZIZ BIN JASEEM AL THANI: It is unfortunate that we have seen limited merger and acquisition activity in the GCC, despite the cracks global economic performance has created in the market. In my opinion, the most significant barriers are threefold: lack of a visionary board, lack of capital market rules on mergers and acquisitions, and government protectionism.
How exposed is Qatar’s banking sector to the European debt crisis? How can the effects be limited?
SHEIKH FAISAL: There is limited exposure, if any, to the ongoing European debt crisis, as most Qatari banks have focused on extending their balance sheets in the domestic market. Exposure to Europe may have occurred in investment portfolios, but the rules of the Qatar Central Bank regulate against any concentration of investments, in preference to a wide spread of investment instruments in the portfolio.
As the US Federal Reserve hints of further quantitative easing, how do you view Qatar’s decision to keep its currency pegged to the US dollar?
SHEIKH FAISAL: As long as Qatar’s main revenue is generated from oil and gas, there is very little incentive to float or de-peg the currency. Qatar has been cutting domestic interest rates steadily since 2011, despite US rates remaining unchanged, and the Qatar Central Bank is managing excess liquidity wisely. Furthermore, Qatar’s high growth rate in 2011 reached 20% due to investment in its energy sector, and inflation for 2012 is likely to be lower than 4%.
Is it fair to assume sharia-compliant financing is taking on an increasing role in project finance, and what does this mean for conventional institutions?
SHEIKH FAISAL: Before answering this question, we need to establish the reason for the increased trend in sharia-compliant project financing. Is it because it’s the wish of the project owner or because it is intended to widen the investor’s funding platform? In both cases, conventional institutions will continue to play a major role in leading project financing, as they are able to participate in all branches of the financing structure. Qatar is showing rapid development and economic growth and this is having a positive impact on all banks. I don’t see any reason why conventional institutions cannot grow and expand while maintaining a commitment to quality services and products.
What impact would an MSCI upgrade have on the role of the stock exchange in the economy?
SHEIKH FAISAL: There is an advantage if the Qatar stock exchange receives an MSCI upgrade. However, foreign investors were significant and active in the Qatar stock market long before talk of this upgrade. Especially when compared with the performance in most major and emerging economies around the world, the Qatar market offers the prospect of solid returns. In addition to an MSCI upgrade, there are a number of initiatives that could be implemented to strengthen the stock market, such as improving corporate governance or encouraging cross-listing.
Independently from the MSCI upgrade, Qatar is very attractive for international investors. In the World Bank’s “Global Competitiveness Report” 2012-13, Qatar was ranked 11th globally for economic competitiveness. Qatar has introduced numerous initiatives intended to bolster entrepreneurial ventures, such as access to finance and a comprehensive business support system. There is also wide-ranging support for the country’s massive, state-funded infrastructure developments. Furthermore, to attract foreign investment, Qatar is offering many incentives – including subsidised or nominal rates for gas and electricity, zero import duty on machinery, equipment and spare parts for industrial projects, tax exemptions on corporate tax for predetermined periods and no export duty. What you see today is a redesigned Qatar, with a new infrastructure.
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