In the money

It may have been slower to take its place on the world financial stage but Qatar is rapidly catching up with its GCC neighbours. Indeed, Stuart Pearce, CEO of the Qatar Financial Centre, believes it could soon overtake them. Diana Milne meets him to find out the story behind the QFC.

“The QFC's vision is to establish itself as the financial centre of choice in the Gulf and Middle East region, with a commitment to investing in education, as well as a strong attachment to corporate social responsibility”
-Stuart Pearce

In 2005, shortly after retiring from an illustrious career as CEO of HSBC Corporate Banking, Stuart Pearce received a phone call offering him what he describes as the opportunity of a lifetime   the chance to help set-up Qatar's financial sector from scratch. It was the type of opportunity few bankers receive in their lifetime so Pearce decided to turn his back on retirement and grasp it with both hands. Three weeks later, in September 2005, he started the job as CEO of the Qatar Financial Centre with, he admits, plenty of trepidation about the task ahead of him: "There are not many times in your working life that you get asked to participate in the building of a nation state's financial services industry," he says. "QFC is a really unique animal because I haven't come across a situation where the government has set up a financial services sector from scratch before. My job was to translate its vision into reality. It's relatively easy to have a vision but converting that into action, building a strategy and persuading other people to buy into it is the challenging part."

Reputation building
QFC was set up with the aim of attracting international financial services and multinational corporations to Qatar to develop the market for financial services in the region. Consisting of a commercial arm, the QFC Authority and an independent financial regularity, the QFC Regulatory Authority, it is providing firms with US$140 billion worth of investment opportunities in Qatar over the next five years. Companies located in the QFC have 100 percent ownership rights and businesses can operate within Qatar and internationally. Those licensed by the QFC can be located anywhere in Doha and still pay local market rents.

Despite the lucrative investment opportunities and favourable business conditions offered to foreign firms licensed by the DFC, the fact that Qatar was a relatively unknown entity to multinational companies and a very late starter in the international financial services industry, meant that persuading them to come on board wasn't easy at first, says Pearce: "A big challenge was persuading the international financial services firms that have opened up here that Qatar actually meant what it was saying in terms of  its plans and that the QFC had the government support to achieve its targets. We had to persuade those firms to buy into the QFC vision and to put their human and financial resources into opening up offices here."

Today, that is no longer a challenge, with QFC having taken its place on the world financial stage by licensing over 111 firms, including the likes of Morgan Stanley, UBS, Credit Agricole Suisse and Deutsche Bank.

The success of QFC is tied in closely with that of Qatar itself, which, unlike some of its GCC neighbours, is currently enjoying an economic boom, fuelled by demand for its abundant gas supplies. The country's per capita income is now over US$70,000 a head, making it one of the world's richest countries and the IMF predicts economic growth for the country of 15 to 18 percent this year. This is in sharp contrast to nearby Dubai, which set up the Dubai International Financial Centre (DIFC) in September 2004. The emirate's economic growth is set to fall to minus 1.4 percent this year and in the property sector prices have plummeted by 40 percent in contrast. The development of the Qatar economy means it has come a long way from how it was once perceived as Dubai's poorer neighbour. "I think we've been all pleasantly surprised at the speed with which Qatar has morphed into a place which people perceive as standing on its own two feet and not being just a look alike. The biggest challenge now is to maintain that development and start to really embed it into the Qatari economy."

Different stories
Pearce says there are clear distinctions between the economic models adopted by Dubai and Qatar, which are now being borne out in the very different fates of their financial sectors. Qatar's greatest strength, he explains, is that unlike Dubai it is an asset-backed economy: "The Qatar model is completely different. Qatar is an asset-backed economy and the authorities have spent a lot of time building and developing the country's gas business, which underpins everything. So that strategy, to develop an economy around the gas industry, requires a completely different set of drivers in terms of this not just being a tourist destination or a property-driven model. So the differences between the QFC and the DIFC are really quite marked. They are an offshore centre, we are not. We are part of the state strategy for the diversification of the Qatari economy. Our model is, as some people have described it, transformational. DIFC's is very commercial."

When QFC was first set up however, Dubai was in the midst of an economic boom, and DIFC was the GCC's only financial services centre. This meant that establishing a competing operation, at a time when Qatar's international profile paled in comparison to that of its famous neighbour was, says Pearce, a risky step: "It was a bold move by the government to do this because the DIFC was the only game in town and what we did represented a challenge to the established belief that that there was only one place to go to in the Middle East – Dubai. But in hindsight the timing turned out to be very auspicious because Dubai now has significant challenges and people are questioning the model and whether they should be there or not."

QFC's timing, in terms of setting up its operation at a time when the world was close to the brink of a financial collapse was not, however, so auspicious. Pearce admits that the plans of some companies to open operations in Qatar have been delayed as a result: "Their plans may have slowed down a bit because of the current problems," he says, adding: "But they haven't been shelved. We've certainly found that there's a keen level of interest from international firms to have operations on the ground here." This keen level of interest, despite the global economic downturn, stems, he believes, from the fact that Qatar, with its robust economy, and attractive business environment, is increasingly viewed as a safe haven for international banks and financial services firms. Indeed, it has been dubbed the 'Switzerland of the Middle East'. So in some senses, he says, the credit crunch has proven fortuitous for QFC: "I think that even before the issues that the global economy faced, the Middle East was becoming more strategically important for many firms. For some of them the turmoil they've faced has reinforced the positive nature of the Middle East market and given the Middle East even more credibility and importance. The Middle East has not been completely immune from the world's major financial problems but the level of problems faced by most countries here is far less than those faced by other countries and other financial services sectors elsewhere."

People power
The key to the success of the QFC and to ensuring it does not fall victim to the risky financial practices responsible for the downfall of many banks is the recruitment of highly qualified banking professionals such as Pearce. He describes the process of attracting international banking professionals to what was at the time, an unknown entity. "At the beginning we had to talk to a whole pile of people, who in the first instance became friends then later colleagues, to persuade them that this was in fact a very interesting opportunity and something  that was truly unique. We had to persuade all sorts of people to come and join us and for many people, including myself, this was a big leap of faith. We're not a big staff, we've got 130 people but we've been extraordinarily fortunate to be able to attract the quality of people we have."

Pearce and his team are keen to ensure the long-term sustainability of Qatar's financial industry by creating a pool of highly qualified financial professionals that the QFC can draw on in the future. With this in mind, it has set up the Qatar Finance and Business Academy (QFBA) in partnership with the Qatar Foundation and Qatar University, which will provide recognised training and qualifications for financial services professionals. One of the main aims of the projects is to educate the local population so that the QFC does not rely entirely upon the expatriate workforce. "If you're going to build a financial services sector you are going to need human capital," says Pearce. "One of the biggest challenges in an emerging market is to create a mechanism that will attract quality people from the local population into that market and provide them with the ability to learn and to develop their careers. We can't continue to rely forever upon imported labour."

Another project Pearce has been very involved in has been the setting up of Qatar Insurance Services, which trades as Qatarlyst. The platform is designed to support trading between insurers, reinsurers, brokers and other insurance professionals. As such it is the only system of its kind in the world to cover the entire insurance transaction process. Similarly unique is www.QFinance.com – a banking and finance information resource which QFC has set up in partnership with the UK's Bloomsbury Publishing. "These projects are absolutely critical to the future of Qatar's financial sector and all the projects we've embarked upon are absolutely unique. For instance, there isn't another platform like Qatarlyst anywhere in the world. And although there are other business academies in the Middle East the QFBA is unique because it focuses on the provision of training and accreditation specifically for Qatar.

A day in the life
Because he is so involved in building the future of the QFC, Pearce says his typical day revolves mainly around meeting those who he hopes will be key players in its development: "We meet an awful lot of people. There's a substantial amount of interest in Qatar and that means meeting people from banks, investment management companies and insurance companies. We've already had 300 meetings in the first half of this year. Another large part of my day is spent making sure that the planning and the strategic approach that we are adopting is still on track."

It's a hectic schedule, for a man, who, when he took on the job, had effectively retired. But he says the rapid pace of change he is witnessing in Qatar and the QFC's role in this, have provided his career with a vibrant new lease of life.

"QFC has very much exceeded my expectations because the project is like a blank piece of paper. People ask me what it will look like in five years time. I have no idea because I didn't know what it was going to look like when I started. All I can say is that in five years this place will be really quite something. I've been here four-and-a-half years now and the changes I've seen have been quite dramatic. But I believe the second set of changes will make the first set look pedestrian."

In the Hot Seat:

Business Management quizzes Stuart Pearce on the hot topics in the qatar financial services industry.

How favourable a business environment is Qatar for international companies hoping to set up business there?
The QFC has attracted a wide range of local, regional and international financial institutions, largely due to the country's strong energy-based economy, but also because of its appeal as a platform for the region as a whole. The QFC's vision is to establish itself as the financial centre of choice in the Gulf and Middle East region, with a commitment to investing in education, as well as a strong attachment to corporate social responsibility. Firms coming to the QFC are able to introduce new products, a greater range of services and to contribute new employment opportunities for the Qatari workforce. The Emir of Qatar has submitted a vision plan for 2030, where all the government and business arms are working together to implement the core objective of the vision which is mainly on human, social, economic and environmental development. QFC is an integral part of the Qatar's strategy to create a sustainable and industrialised economy which will benefit generations to come.

How strong is business confidence currently in Qatar, against the backdrop of the global financial downturn?
We have partnered with Dun & Bradstreet in introducing the Composite Business Optimism Index for Qatar. The purpose of the composite business optimism Index is to capture the aggregate behaviour of all the six individual indices. Qatar is projected to register one of the highest growth rates in the world in the current year, a real GDP growth rate of 18 percent primarily backed by the natural gas segment of the hydrocarbon sector. In 2008, GDP from the gas sector (QAR 120 billion) overtook GDP from oil (QAR 100 billion) and grew 94 percent year on year over the 2007 figure. To curtail the impact of the global economic downturn, Qatar's government responded swiftly to improve the tight credit market conditions through liquidity support, capital injections and equity purchase. On the fiscal front, Qatar's 2009-10 expansionary budget of QAR 94.5 billlion has made large allocations for strategic infrastructure development projects to help the economy maintain its growth momentum.

This year QFC has launched several Arabic language communication channels in order to promote financial knowledge among the Arabic speaking population in the country. Why has QFC adopted this strategy and what are the main aims behind it?
QFC is witnessing continuous development. When we started in 2006, our objective was to improve the image of Qatar and QFC in the global market and this is why all reports and publications were in English, as they targeted an English-speaking audience. We have to remember why this centre was established. One of the main reasons was to enhance the image of Qatar and the capacity of the financial services sector, as well as encouraging companies to offer financial and non-financial services to set up their businesses in the country – all those reasons made it essential to issue publications in English, in order to communicate to the international finance industry and to firms that support that industry. Of course, the Arabic language is very important to expand our local audience their understanding of the QFC's objectives and achievements. Using more Arabic also reflects the growing contingent of local and regional firms which are now licensed by the QFC (some 40 percent of the overall total).