Beguiles the Far East

Qatar

Economic News

22 Jul 2010
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South Korea and Malaysia have their eyes firmly set on increasing trade ties with Qatari businesses. Companies from both countries are keen to supply and participate in development projects that are estimated at $130bn over the next five years. Some of the areas they hope to expand collaboration are energy, construction, Islamic finance and information communication technology.



Many South Korean companies seek to expand cooperation with Qatar to advance into Middle East markets. Last week, Sheikh Hamad bin Khalifa Al Thani and South Korean President Roh Moo-Hyun signed an agreement on the prevention of double taxation and tax evasion. Trade between the two countries amounted to $7.8bn last year.



South Korea is Qatar's premier importer of liquefied natural gas (LNG) and last week, Ras Laffan 3 (RL3) signed with Korea Gas (Kogas) for a long-term LNG Sales and Purchase Agreement (SPA). Under the agreement, 2m tonnes per annum of LNG will be supplied to Kogas over a 20-year period beginning this year. 5m tonnes of LNG have already been delivered to Kogas in a previous deal concluded in 1995.



Another South Korean company, Honam Petrochemical is seeking a joint venture project with Qatar Petroleum in Mesaieed. The $2.6bn Mesaieed project, which is due to be completed in 2010, would have an installed capacity of 800,000 to 900,000 tonnes of ethylene-metathesis per year.



Malaysia is also courting Qatari businesses with similar aspirations as South Korea. Malaysia already has an important presence in Qatar thanks to its work on the New Doha International Airport (NDIA). They participated in the design and building of the airfield paving tunnel and water detention ponds for the NDIA.



Malaysia's bilateral trade with Qatar continued to register strong growth in 2006, with total trade increasing by 76% to $266m year-on-year. Exports rose by 93% to $185m. Electrical and electronic products accounted for 48% of Malaysia's total exports to Qatar while machinery, appliances and parts, wood products, metal products and iron and steel products made up the rest.



Malaysian imports from Qatar were valued at $80m, a 48% increase year-on-year.
Crude accounted for 68.7% with chemicals and chemical products accounting for a further 30.2 %.



Malaysia views the Qatari market as a lucrative home for its telecommunications equipment, total exports worldwide of which reached up to $13bn. Other areas of interest in Qatar would include halal foods, furniture, household electrical equipment and rubber products.



Malaysian Minister of International Trade and Industry Rafidah Aziz Aziz said, "I am confident that collaboration can be further enhanced between Malaysian and Qatari companies through joint participation in key areas in Qatar such as construction, facilities management, oil and gas."



Another important area that offers potential for participation between Qatari and Maylasian companies is Islamic financing and insurance. Since the liberalisation of Malaysia's takaful, re-takaful and Islamic capital markets, there has been a keen interest from Qatari Businesses. A Qatar Islamic Bank (QIB)-led consortium is one of the only three foreign Islamic banks licensed to provide Islamic banking services and products in Malaysia.



The liberalisation of Islamic banking allows the entry and licensing of new domestic and international players for carrying out business in international currencies, while fund managers enjoy tax benefits.



Standard & Poor's Ratings Services recently raised the long-term foreign and local currency sovereign credit ratings on the State of Qatar to 'AA-'from 'A+'. At the same time, they also raised the short-term foreign and local currency sovereign credit ratings on Qatar to 'A-1+' from 'A-1'. The upgrade reflects the Qatar government's acceleration of reforms and Qatar's strong financial performance, which partially offset geopolitical risks. Tariq al Malki, chairman of Al Khalij Commercial Bank told OBG, "Qatar getting the AA- rating goes beyond having liquidity, it also leads towards major reforms in each sector of life".

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