Ties with India

Qatar

Economic News

22 Jul 2010
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In its push to diversify its economy and expand its investment and business activities abroad, Qatar is reaching out to one of the newly emerging major world economies - India - and India is reaching back.



Within the past month there has been a flurry of activity in Qatari-Indian business relations, some in the more traditional field of energy but also in finance and other non-oil related sectors.



Qatar has long had close ties with the Indian economy, being the country's largest single supplier of gas, a position that is set to continue and to expand. India too is the home to many of the migrant workers employed in Qatar, remittances being a major contributor to the cash inflow to Indian finances.



However, with the growth of the Indian economy into a potential global powerhouse and Qatar's drive to spread its economic wings, the relationship is set to be further cemented. Currently, bilateral trade between India and Qatar has an estimated value of just $1bn, the majority represented by the export of $690m worth of Qatari liquid natural gas (LNG).



In mid-October, the Qatar National Bank announced it was seeking to break into the lucrative Indian market, with Ali Shareef al-Emadi, the bank's acting chief executive, saying that they were looking to expand into countries with whom Qatar had good relations.



"Entry is difficult but we are looking at different options for entry into India," he said in an interview with the local press on October 11.



Describing the prospects as "very exciting", al-Emadi said that the proposed move into India was part of a wider expansion plan for the bank.



In early October, another door opened for Qatari investment in India, with the country's National Thermal Power Corporation offering the Qatar Investment Authority a 40% stake in its gas-fired power project in the state of Kerala. NTPC is planning a major expansion of its plant at Kerala, lifting capacity from 350MW to 1,950MW and is looking for partners, Qatar being a natural choice as India's leading gas supplier.



The proposal came only a week after a call for Qatar to buy a stake in Indian gas company Petronet. Following a meeting with Qatar's finance minister, Yusuf Hussain Kamal, Petronet's managing director said that he had proposed Qatar buy a stake of up to 12.5% in the company through a soon-to-be-floated $100m foreign currency convertible bond issue. A delegation of officials from the Qatar Investment Agency is to visit India shortly to look into the proposal.



India has also announced that it is seeking a further long-term agreement with Qatar to provide an additional 10m tonnes of LPG annually, starting from 2010, yet another fillip to Qatar's strongly performing energy export trade.



In mid-September, on the sidelines of the Non-Aligned Summit in Havana, Qatar's Crown Prince Sheikh Tamim bin Hamad Al Thani met with Indian Prime Minister Manmohan Singh, with the focus of talks being further direct Qatari involvement in the Indian economy.



Though the full details of the discussions were not made public, a statement following the meeting said that Qatar was considering investments in India's infrastructure and energy sectors.



However, the move is not intended to be all one way. Speaking at a seminar in New Delhi on October 10, Doha Bank deputy chief executive officer R Seetharaman said there were many opportunities for India companies in Qatar, especially in non-oil sectors such as construction, transport, communication, oil related service industries, IT, education and banking.



"Qatar had a key role in the Gulf Cooperation Council (GCC) economy in respect of its high GDP growth, which is one of the highest in the world," Seetharaman said, highlighting the liberal investment regime, friendly governments and their policies, cost effective resources in terms of energy, skilled manpower and the infrastructure in the GCC and Qatar in particular.



However, there is a sticking point with Qatar's desire to become more deeply involved in India, one referred to by al- Emadi, that being the slow pace of opening up the market to overseas banks and financial institutions.



An example of this is Doha Bank's application to operate in India, which has been before the Reserve Bank of India since last year. It is important for India to further liberalise policies to promote trade to the maximum, Seetharaman said while in New Delhi.



"India must look at the bigger picture and since funds are required for infrastructure development, financial institutions and banks must be allowed to come in to speed up the process," he said.



In many ways, Qatar and India are natural business partners. Both are looking to expand their economies, with the emirate having cash to invest and India actively seeking investment. Qatar already has a strong position in the Indian energy sector as a major supplier, a position that appears set to be consolidated as India's demand for gas expands along with its economy. Qatar too has a need for a reliable partner to help boost its own infrastructure. If India lowers a few more barriers in its financial sector, the distance between the two countries across the Indian Ocean will narrow even further.

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