It is a venture that does not merely aim to attract more businesses
into the country. It hopes to change the business environment of the
country and set a precedent for business ethics in the region. With
high regulatory standards , the Qatar Financial Centre (QFC), opened
over a year ago and is attracting interest from diverse businesses both
regionally and globally. A new law was recently enforced to regulate
the QFC and allow it to have an internationally recognizable, business
and legal infrastructure run by a commercial authority (Qatar Financial
Centre Authority - QFCA) and an autonomous regulatory body (Qatar
Financial Centre Regulatory Authority - QFCRA). Bothbodies report
directly to the Council of Ministers. QFCA, chaired by the Minister of
Economy and Commerce, HE Sheikh Mohamed bin Ahmed bin Jassim Al Thani,
is the commercial and administrative body responsible for driving the
commercial strategy and developing relations with the global corporate
community. The QFCRA will function independently to oversee business
conduct and grant licenses. QFCRA Chairman and CEO Phillip Thorpe, in
an exclusive interview to Qatar Today, talks about what it takes to
make a financial centre a success and highlights the challenges that
Qatar needs to meet.

What kind of jurisdiction will the Qatar Central Bank (QCB) have over QFC and the regulatory authority?

We
are set up by our own law. And our functions and areas of activities
are intended to be separate from the Central Bank. It is effectively a
state within a state; we have our own law separate from the State of
Qatar. Our set of laws applies only for QFC institutions. However,
there has to be ongoing interaction with the QCB, especially in matters
of money laundering - antimony laundering, which is a very critical
matter in any financial activitythese days. The QCB houses the
Financial Information Unit, and you have only one of those in any one
country, so any reporting and coordination we undertake will go thro u
g h that. If there are institutions that are being regulated by QCB and
are also established in QFC then we would talk to the central bank
about those on a regular basis, just as we would talk to the regulators
in London or Bahrain or anywhere else. We expect to have quite a lot of
interaction with QCB.

What will set QFC apart from the
Bahrain Financial Harbour (BFH) and the Dubai International Finance
Centre (DIFC)? How different is it from the other centres?

There
are similarities and there are differences. The similarities are that
QFC recognizes that there is a need for greater financial services
capacity. The Dubai enterprise is obviously addressing the same thing.
Bahrain has been doing this business for many years and wants to keep
doing it. So to that extent I think everybody is keen to see financial
services grow in the region .And there is a really good reason to do
that. There is a lot more business being done, these economies are
expanding at a very fast pace. It's logical to see financial services
expand to keep pace with the development. But there are differences
too. And one of the critical ones is: this (Qatar) is not a land
development which is the case in Bahrain and Dubai. There isn't some
imperative for developing pieces of land, putting up building, selling
off space... that is not the point of it. I think the underlying target
business area is different. And it is peculiar to Qatar. There are over
a $100 billion worth projects in the pipeline between now and 2010.
There are significant funding needs. So the Qatar offering - Qatar
focus - is in bringing into Doha the type of institutions that can help
with that growth, with that economic expansion. It is not the same kind
of economy that exists elsewhere in the region. It is not a service
economy. It is an industrial and resource based economy. That means it
has a diff e rent risk profile ,it has different earning opportunities,
and the timeframe for many of these investments will be different .
These big projects span many years. Most of the supply contracts are 25
year contracts. So it is a different kind of economic climate to that
which exists in the other centers. Ultimately, everybody is trying to
achieve a broadly similar outcome, which is to improve capacity and
improve the ability of the markets to serve the economies in the region
. There is a very good chance for everyone to be successful. What will
happen as time goes on is that diff e rent centers will specialize in
different areas, in the same way as in Asia, Europe or US.

What kind of interaction do you foresee between the regional centres?

In
this day and age, all regulators build relationships with other
regulators, both regionally and globally. All financial service
business is international, and it's a critical aspect of our
functioning to deal with other regulators. If we have an institution
established here that is also operating in London or Mumbai or New
York, we need to talk to the local regulator or they will want to talk
to us about what is going on here, from time to time. So you have a
huge network of relationships which will develop over time.

You
mentioned that this is not a services economy. At the same time, the
local services sector is not a well developed one. Will that not pose a
problem?

It does have some specific consequences for
the QFC, but I think it has those same consequences for the growth of
Qatar in general. It is probably more opportunity than problem.
Everybody is aware that with such sustained and high levels of growth
there is a continuing need for resources. Human resources. It is great
having an economy that has such a vibrant economic engine that is based
on oil, gas and petrochemicals. But you need people as well. There is
an increasing need for more people to be brought in to service the
other elements of the economy. The fact that it is very hard to get a
hotel room most of the time, is a good symptom - it is the sort of
problem you want to have. But it is also an issue that needs to be
addressed. So, how do you go about getting the right resources? In
creating QFC, you need high quality, experienced financial services
professionals. And there are too few to go around globally. And there
are obviously too few in Qatar, to sustain the kind of growth we hope
will occur. So there will be issues relating to bringing those
professionals in. The good news is that there is no barrier to bringing
them in. The government is happy to see any QFC institution employ
anyone it needs. So there are no restrictions or quotas or other
constraints in that regard. You need to also recognise that QFC's
success will create needs in other areas. If you come in and set up an
investment bank or insurance company, you need people to do banking and
insurance business. But you also need accountants, lawyers, you need
people to provide data, back up services, IT services... There is a
consequential demand which is going to be a challenge for Qatar to
meet. But it will also be an opportunity. There will be a lot of other
business that benefit as QFC expands. Another core area that needs to
be developed is journalism. If you want to create a successful
financial centre , you need to have good financial reporting. Not just
by the companies, but by the press. The lifeblood of a financial centre
is good, timely, accurate information.

Visas are not freely available. Has this issue been addressed?

The
legislation does address this. It allows the QFC to establish its own
visa processes and there are no restrictions in that legislation. QFC
institutions will be able to employ whoever they need from wherever
they need.

At present there are only three foreign banks. How many more banks do you think will come in over the next few years?

I
don't do the business of predicting numbers. But the number of banks
that do business with Qatar is greater than the number that are
actually here. And most
of the major banks know of Qatar or do
business on the big projects. And I am very hopeful that a good
representation of those will commit to being here. It may not be a huge
presence - we don't need a huge presence - but it will be to their
advantage and the government message here is 'partnership'. They are
looking for institutions who will engage in a partnership with Qatar.
That means not just coming, doing a bit of business and going away. But
bringing the resource and interest into Doha. We will see high quality
institution, both global and regional. There are some very big banks in
the region... Some of the major trading partners for Qatar are from the
Far East - Japan, China, Korea... There is a huge logic in seeing
interest from financial institutions in those areas coming and
participating in this market place - if we can offer them the
environment they can have confidence in.

How will the QFCRA and QFCA operate together, maintaining its independence?

We
will interact as we are both part of the same project. The QFC. But we
are separate, because they are the people out there selling and we are
there to ensure that standards are met. It would be improper for us to
be deciding things together. There would be cases when the marketing
people would like to bring an institution in and we may have to say
'no, they don't meet the standards'. The independence of the QFCRA is
critical. We hope we will work closely enough. Then the marketing side
will know what will work and what will not.

QFC will be attracting Islamic financial institutions. What laws will regulate them. Is there a Shariah board?

Some
centres are structured in such a way that they have a Shariah board
that will rule on services and products. But we haven't done that. We
leave it to the
institutions to do it themselves. In terms of
regulatory environment, there is no Shariah component. But in terms of
requirements of institutions that wish to
describe themselves as
Islamic - yes. Because the main point of the law we have is to say if
you describe yourself as an Islamic institution, you should operate
according to the Shariah principles, you should have a Shariah board,
and systems in place to ensure that rulings of the board are adhered
to. It is not a huge difference for us. We regulate those institutions
the same way we regulate the others. We are still concerned about the
quality of management. We still look to see if they have good
compliance systems, money laundering controls... that they trade
properly. You mentioned accurate and timely information. A financial
centre needs to maintain transparency, but so do businesses in the
wider market place... The basis for establishing QFC is international
standard. One thing that any market worth its salt has to demand is
integrity from those who operate in it and transparency in respect of
dealings that they undertake. Our laws and our regulations are based on
achieving those objectives. And the standards we have set for
institutions that want to establish here demand that they meet those
requirements. We will not be licensing firms that cannot prove to our
satisfaction that they have the integrity to do the business they want
to do, and they will operate in a way which enhances the reputation of
Qatar. This is deliberate. There is no point in establishing a centre
with low standards. The world does not need another one of those. And
Qatar doesn't need one. In fact, the strong message that you get when
you talk to big institutions is that they are not interested in a place
where standards are low. They have too much at stake to do that:
Investors will be unhappy. Investors are increasingly aware that it can
be rather exciting dealing in a market that is opaque and difficult to
get good information about. But it can be dangerously exciting. If it's
your savings, your retirement money, your children's education money. .
. you cannot afford to have that invested in a marketplace that is not
operating fairly. It just doesn't make sense for the QFC to operate in
standards other than the best. If we need to see success out of this,
we need to create a marketplace where people will be confident of the
high standards. That is our task, to ensure that confidence is
established.

But the attitude will have to extend beyond QFC isn't it?

It
will in due course. One of the government's aims is for the QFC to act
as a catalyst for change. They would like to see that happen by QFC
illustrating business can make money and be successful in this kind of
environment. T h e re are some people who will say 'we don't want high
standards as we will not be able to do well'. But the fact of the
matter is that you can have those high standards and continue to do
profitable business. It is a leading by example approach. Not forcing
it on the rest of the market place. We will show what the QFC is about
and hope that it will influence the others. Some of the institutions
will not be able to meet the standards from day one. But we hope that
over a period of time they will realise that it is in their interest to

improve the way they do business. They can make money and they can do so in a way that is sustainable.

Will existing businesses in the country get an opportunity to shift to QFC?

Well
that really is not the aim. The government's intention in creating the
QFC is to encourage new businesses in Qatar. There is not a lot of
value in just seeing it shift around within Doha. Activity that is not
already undertaken and overall increase in capacity. The aim is new
business, not to see the same cards shuffled in a different order. We
are not established to simply give options to existing business.
However, we do think that there will be institutions already
established who may want to undertake new lines of business. We have
had some interest from existing businesses who want to expand what they
are doing. And the bit they want to expand is stuff we would like to
see coming into the QFC.

What are the new streams of revenue and businesses you expect to come to QFC?

From
the enquiries we are getting, it seems that our expectations are lining
up quite closely with what businesses want to do. Project finance - a
lot of interest from investment banks in this. Interest from firms that
would like to put together investment funds for these projects. We are
seeing interest from Insurance companies. This is a feeling that there
is a shortfall in capacity in insurance. As you would expect in a
country like Qatar, interest in wealth management, asset management,
private banking... These areas have been quite clearly of interest to
firms that are knocking on the door. It is less than a month since we
launched, and we haven't started marketing yet. So anyone who has been
knocking at the door is doing so because they have been self-selecting.


When is the first licensing likely to happen?

It
would be some months before we issue the first licence. We have this
internal target of turning around an application within 90 days. That's
working on the basis that when the clock starts, we have a complete
application in front of us. But my experience over the last 21 years
tells me that no one ever has a complete application on day one.

Have you started receiving applications?

We
have started issuing application material, and started discussions with
those who are interested... but the application requires a lot of work
and would involve a lot of dialogue with us. Quite often businesses are
uncertain about what they want to do. It is only as they go along in
the application process
that they narrow it down and get a fix on what they want to do.

Is there some kind of a target?

This
is not a numbers game, but a quality game. This is something that has
to have a long term benefit. Measure this in five years and 10 years.
What does the market place look like in five years time? How does it
perform in 10 years time? Is it providing the kind of support and
opportunity to the whole of Qatar and the region that everyone wants?
But personally is there a target or goal... Not in terms of timeframe.
I would see QFC's success like this: That the standards we require,
quality of operation we demand from firms, and the confidence that
firms and investors show in QFC, become the common situation for the
region. Then that would be a huge success. It is a lot to ask. But if
we can get to the point where investors and institutions have
confidence in the mechanism of the market place in the region then it
would be enormously valuable