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Qatar Today Editorials - On a Roll
There is a reason why some companies do better than others. Just as why some people succeed and some don’t.
It would be simplistic to attribute the positive performance of Qatari companies to the general buoyancy of the market. No doubt, it plays a role. A very crucial one.
But companies succeed and sustain their success with leadership and visionary management. That is how companies around the world mark their place at a global level.
Qatari companies, relatively speaking, are still at a nascent stage. But they have been doing well, building on available resources and consolidating their position with finely honed business sense and forward thinking.
SUCCESS THROUGH CONVERGENCE - INDUSTRIES QATAR
Industries Qatar (IQ) was designed as a holding company for a broad cross-section of downstream petrochemicals and steel industry companies. Of the authorised share capital of 500 million shares, 30 percent was floated on the local stock exchange (DSM) and thereby made available to nationals. The resulting public interest was phenomenal and the shares were quickly over-subscribed. From the offer price of QR16 per share, the share price grew by such an extent that by March 2005, the price was QR237 per share and IQ shares are the most heavily traded on the bourse. M S M Al Sherawi, Chief Coordinator of IQ, speaks to Qatar Today about the rationale behind this convergence and the developments planned over the next few years.
What was the reason behind bringing the Q-Companies under one umbrella? IQ is one of the largest integrated industrial holding companies in Qatar and the GCC markets. Industries Qatar, as you know, is a benevolent gesture from HH the Emir, aimed at privatising some of the very successful and prosperous companies. The company has been established for the purpose of owning operating companies and projects in Qatar that are involved in the production and processing of industrial products, including petrochemical, agrochemical and metal products, as well as other companies or projects which could add value or are deemed beneficial to its business.
What was the biggest challenge in making such a move? The principal subsidiaries face many challenges and obstacles in operating and pursuing their strategies. Key factors affecting the results of operations of the principal subsidiaries include market conditions, production costs and efficiency, environmental matters, exchange rates etc. One of the major challenges is that all the group of companies are in expansion mode with regard to their capacities and facilities. These expansions require additional funds and this will put pressure on IQ's cash flows. The expansion strategies of the group companies are in the best interests of the Company and will eventually result in better value to the IQ shareholders in the medium and long term. Other challenges include, for example, the increasing competitive pressures in anticipation of and following Qatar's entry into the World Trade Organization and operating in a domestic market, which is increasingly subject to the volatility of oil and gas and petrochemical prices in the international markets.
What are the main advantages in bringing it under one administrative umbrella? The operations of the subsidiary/joint ventures remain independently managed by their respective management teams. Our responsibilities are to therefore oversee the efficient running of the IQ holding company, including financial, human resources and administrative services. We ensure that IQ operates according to Qatar laws and regulations, as well as though stipulated by the DSM and International Standards. We also provide shareholders/investors, the DSM and other interested parties with the necessary information on the company and its continuing activities. At a higher level, the major responsibilities for the IQ management team are to explore opportunities for participation in various other projects and services. The company's strategy is to maximise shareholders' value by capitalising on the principal subsidiaries competitive advantages, location and position in global markets in relation to the downstream petrochemical industry and in the regional markets for steel manufacturing, while pursuing opportunities for organic growth through an expansion in capacity, market reach and quality and variety of products. The company intends to maximise the overall value and return to shareholders by: 1) Continuation of decentralisation at the Principal Subsidiary level all day-to-day decisions and other operational matters which continue to be carried out independently by the respective management teams of the Principal Subsidiaries while closely monitoring the implementation of all strategic plans of the Principal Subsidiaries. 2) Evaluating other affiliated entities of QP or other organisations and deciding whether to combine/merge such businesses within the corporate structure of the Company, hence providing shareholders with the benefits of added diversification and enhancing their overall revenue stream. 3) Monitoring the cash management operations of the Principal Subsidiaries on a regular basis and providing counsel and advice on optimal cash allocation and cash utilisation with a view to enhancing the funding capabilities of the Principal Subsidiaries in order to meet their respective investment and other capital expenditure requirements and to determine the level of annual dividend distributions, if any, by the Company. 4) Considering widening the shareholder base of the Company, at appropriate time, by offering additional Shares to new investors through regional and/or international capital markets thus creating an active market and a large "float" for the Shares and increasing both the liquidity and exposure of the stock to sophisticated investors.
Are there plans to include more companies, or start new companies under IQ's auspices? As previously mentioned, one of the continuing objectives of IQ is to evaluate other affiliated entities of QP or other organisations and decide whether to combine/merge such businesses within the corporate structure of the Company, hence providing shareholders with the benefits of added diversification and enhancing their overall revenue stream. The QAFAC II expansion project is currently underway, which will be a new company in its own right. The companies themselves have also begun many initiatives to increase operational capacities, including: QAFCO 4, a $470 million project, went on-stream in 2004. The production train has boosted QAFCO's annual production capacity of ammonia by 50% (to 2 million tonnes) and of urea by 65% (to 2.8 million tonnes). QAFCO and Yara International A.S.A., have signed a letter of intent (LOI) with Qatar Petroleum for QAFCO 5, creating the platform for the construction of a 1 million tonne ammonia and 1.1 million tonne urea plant. The agreement allows additional growth for what is already one of the world's largest fertilizer plants. Heads of agreement signed for the QAFAC II project with the foreign shareholders of QAFAC. The project is for the commissioning of an additional plant, which will produce methanol and ammonia. IQ will hold a 50% stake in the project and future company. QAPCO Ethylene Expansion (EP2 Project) is a US$220 million expansion project designed to increase ethylene plant capacity by 37% to 720,000 metric tonnes per annum (MTPA). The project is scheduled for completion by early 2007. QAPCO, in joint association with Total Petrochemicals (formerly Atofina), is also developing the QATOFIN project, to construct a Polyethylene plant for production of 450,000 MTPA of LDPE. Start-up is estimated late 2008. Ras Laffan Cracker, a joint venture between Qatofin, QP and Q-Chem 2 for the production of 1.3million MTPA of Ethylene is expected to be completed in 2008. QASCO Expansion Project activities are currently underway, to significantly increase production capacity by building new plants in Mesaieed. Total project costs are forecast in the region of QR 2 billion. QASCO recently signed a memorandum of understanding with Essar Global Ltd to build a new steel plant costing $1.25 billion in Mesaieed Industrial City. These projects highlight our positive outlook for the future.
What is the major factor behind the company's success? IQ has put up an impressive performance in a very short period of time. The current market prices are good indicators of the Company's popularity in the eyes of the investors. The fact that the share value rose by nearly three times in its first year speaks for itself. The phenomenal rise in the value of our Company's share price bears testimony to the high level of confidence in the economic philosophy of the government and in its privatisation strategy under the wise and dynamic leadership of HH the Emir as well as in the excellent performance of the subsidiary and the three joint ventures (group companies) of the Company. The subsidiary and all the three joint ventures of IQ (group companies) have performed, as well as managed their businesses very well, in terms of revenue generation and cost control and the effect of these is well demonstrated in the overall results of IQ. We are proud of the performance of all the group companies and are confident that they shall do even better in the coming years. All the group companies have ambitious expansion programmes with regard to their capacities and facilities that are mainly designed to take advantage of the demand, price and other market conditions relating to their products. Overall, the performance of IQ is solely dependent on the performance of its group companies. The group companies are all performing very well and this fact is well demonstrated in IQ's financial statements as well as in IQ's share prices at the Doha Securities Market. IQ and all its group companies enjoy a sound and stable financial position and are planning for greater success in the coming years. A recent report by the DSM highlighted that IQ was one of the most traded stocks on the DSM (by trading value), showing its continuing popularity.
While dealing with such a large workforce – the largest in the country – how do you bring about employee motivation? The operations of the subsidiary/joint ventures remain independently managed by their respective management teams. All the group companies of IQ have good management teams in place and therefore perform very well in this respect.
What is your personal 'success line' or 'inspiration'? Success is a subjective matter. There are different types of success and everyone has their own perspective of what constitutes true success. Religiously, I believe success lies in doing things to the best of your ability, honestly and compassionately and then putting your trust in God to take care of the rest.
In a climate of liberalisation is consolidation the best option? There are obvious benefits from consolidation, as can be seen from the growth of most multi-nationals. But it doesn't necessarily mean that all companies can benefit from consolidation. It is a matter of having the right climate, resources and timing. Most importantly, it requires the right strategy and an efficient management team capable of implementing that strategy.
How do you maintain overall productivity, while maintaining decentralised administration? As you have mentioned, our strategy is that of decentralised administration. The operations of the subsidiary/joint ventures remain independently managed by their respective management teams. All the group companies of IQ have good management teams in place and therefore perform very well in maintaining maximum productivity.
LEADING THE WAY IN PRIVATIZATION - QTEL
It has been the trendsetter in privatisation, taking a lead in bringing about the highest levels of professionalism in both its management and operations. Qtel, despite the monopoly it enjoys, continues to keep up with fast-paced changes in telecommunications technology and bringing it to the market on a run. Qtel is also one of the largest public companies in the country with about 1,900 employees. It was listed on the DSM in 1998, on the London Stock Exchange in 1999 and on the Bahrain and Abu Dhabi Stock markets in 2001 and 2002 respectively. It was also one of the first companies in which non-Qataris could trade. It is now undergoing extensive transformation programme to develop its already advanced telecommunications network, to achieve world-class operational efficiency and seek international investment opportunities. Dr Nasser Marafih, CEO of Qtel, speaks to Qatar Today about the growing opportunities in the region and the telecom-provider's readiness for competition. How has Qtel's foray (through Nawras) outside of Qatar affected its outlook locally? Nawras has added significantly to Qtel's strength through an increased subscriber base and our ability to deliver improved financial performance into the future. It has demonstrated Qtel's operational expertise in being able to establish a mobile network in a new market and provides an important stepping stone from which we can continue to build regional presence. Are there any other markets that Qtel hopes to enter in the next couple of years? Though our home base Qatar is an important market and our core focus, we are continuing our expansion projects like that of Nawras. We are looking at opportunities that arise and judge each one on its merits. Our vision is to be one of the top three telecom companies in the region. We have established a dedicated department to explore and investigate the regional market for further suitable investment opportunities that will maximise our future earnings potential. This underlies our commitment to taking our expertise beyond borders.
As Qatar proceeds towards opening up the ICT sector, what are Qtel's plans in tackling competition? What kind of changes do you foresee when there are two or more players in the field? As you know, the Government of Qatar has established the Supreme Council for Information and Communication Technology, the regulatory and policy making body for ICT in Qatar. The question of competition and liberalising the market is up to them. The key to being competitive lies in ensuring that our abilities and performance levels are at least as good as, if not better than, other telecommunications companies. This is an important focus of our Qturn transformation programme which was launched two years ago. Because of Qturn, we operate as if we are in a competitive market through our pricing strategies and the innovative products and services that we offer our customers. We are well placed to meet the country's growing telecoms needs. Our service and customer satisfaction levels are currently in line with industry norms for the region, and our goal is to increase these levels significantly. We shall continue to focus on our core business, developing our competencies in areas of service provision, customer service, technology innovation and financial performance.
What are the technological advances you expect to implement in view of the upcoming Asian Games? As the official telecommunications partner for the upcoming Doha Asian Games, we will ensure the availability of all advanced telecommunication services not only to accommodate the needs for spectators and guests visiting Qatar but to exceed their expectations. Qtel is actively involved in an ongoing programme for improvement to cater to the overwhelming demand for Wireless and Internet communications. We plan to introduce services like 3G in time for the games and upgrade our GSM and Internet networks. We have already commenced work on the technology transfer and exchange of technical support needed to assist DAGOC in organising the best ever Asian Games by signing agreements with several partners to ensure the highest levels of technological support. We believe that partnerships in all fields are important as we strive to apply best practices in everything that we do. We are not a company that is shy of seeking third party expertise to ensure the smooth roll out of our services. The bottom line is that our customers should have access to the very best and latest in telecommunications products and services.
Globally, how do you see pricing headed in DSL and mobile telephony sectors? Qtel strives to price appropriately in the market. We benchmark all our services and we look at a price that is right for our customers. Regionally, Qtel is in fact much more competitively priced than realised. For example, we are the leaders in both pricing and penetration with our DSL services. As for our mobile telephony, we offer very competitive prices on the latest range of advanced and innovative value added services to meet the needs of a rapidly evolving market.
A Financial Free Zone, stock market opening to expatriates and foreigners and ongoing liberalisation – what does this mean to local companies? What are the core competencies that they need to work on? Local companies should look at all of this as a very positive indicator that the economy is growing and that the market is opening up to a lot of opportunities for inbound investment with more potential investors in stock and property markets. With more opportunity for competition, this will force local companies to ensure that they are offering world-class products and services at competitive prices.
As the premier Qatari company that has spread its operations abroad, what are the key experiences you would like to share with other local companies? Our success abroad, ie Oman, had a lot to do with our commitment to understanding the specific needs of the market. We designed our packages and marketing campaigns in Oman based on our expertise and knowledge of the Qatari market and adapted to that of the Omani market. However, each market has its specific needs, and it is important to assess these needs and study how you can cater to them.
What is the single most important factor, in your opinion, that local companies need to focus on or have not paid attention to? Better customer service. Should a company wish to perform well and stay at the top, the most important thing is quality customer service. Our customers are important to us and they are what keep us in the market. Having said this, to allow for better customer service you also need to provide more growth and development opportunities for your staff through quality training and reward programmes. The people who represent your company, should be motivated, happy, confident and positive, to allow for a better customer experience. It makes a huge difference. Customer Service is something we are taking very seriously at Qtel especially with the recent launch of our customer services section as a separate business unit. We are taking big strides in improving our customer care services, opening more customer service centres and to provide more training for staff who deal with customers.
What has been Qtel's strategy in Corporate Governance? Qtel has enhanced its corporate governance system to ensure that the company is directed and controlled in the most efficient manner and in line with international practices. Our Board of Directors are committed to best practices in corporate governance particularly through the transparency through which we communicate with our investors/shareholders and regulatory authorities. Our policies and practices are, and continue to be, developed to ensure that the company is focused on the responsibilities to our shareholders so that the Board of Directors can oversee the management of the business while ensuring all major strategic policy decisions are taken at its direction.
With a large workforce, what are the motivational exercises carried out, to ensure utmost productivity? Thanks to our transformation programme, Qturn, we have come a long way in ensuring maximum productivity among our staff. We have achieved a lot in a short span of time and have introduced new salaries and enhanced our career and performance management systems. This has paved the way for higher salaries and bonuses, better allowances and benefits. We have focused a lot on training and have developed training programmes both in-house or with specialised institutions both at home and abroad. Training and career development are topmost in our agenda to build a strong base for us to remain an employer of choice. Our staff enjoy telephone concessions, are part of a discount programme called Al Massa whereby they can avail discounts in leading retail outlets across Doha. We also provide enhanced staff loans and leave encashment. We encourage staff gatherings and social events amongst the various departments so that staff get more opportunities to get to know each other and their managers in a relaxed and friendly environment. We believe this leads to a better working relationship amongst staff. We want our staff to look at Qtel as a place where personal integrity, teamwork and performance are rewarded. There are great opportunities for those who strive to succeed and deliver results.
INNOVATIONS - THE KEY TO ITS GROWTH - DOHA BANK
Established in 1978, Doha Bank in the last few years has experienced a major turn around, expanding its customer base and activities, and making strategic changes in management. Recently adjudged the 'Best Commercial Bank in the Middle East' by The Banker, Doha Bank has been gathering momentum. R Seetharaman, Acting General Manager, Doha Bank, talks about the strategies the bank has adopted to re-define its services and structure, to compete in a mature market.
How has the banking sector evolved in recent years. How has Doha Bank coped with that? The face of financial services is changing. It is the changing dynamics that is redefining banks. We drew a strategy for three years in 2002, and we achieved that in two years time. Essentially, we said our assets should reach more than 10 billion, our equity should reach a billion. It did. The question remains, how we are going to re-define ourselves over the next five years. In the first three years, we didn't manage it – We redefined it. If it's a conventional management, we would not have achieved what we have today. Doha Bank has been a force to reckon with in the entire ME. Transformation strategies are different from conventional wisdom. Our half year profits will reveal that our assets have not grown, but our profits have, our efficiency has, our return has, and our customer service has improved. Our assets have not grown by more than 20 percent. Because we wanted to optimise. We know what we have to manage in terms of risk. We had an issue on asset quality in the past. We want to make sure that there is a right asset mix. Risks are leveraged in such a fashion, it is optimised. We have now redefined our strategy for the next five years. We understand globalisation, the vital role of technology – that you don't need a physical outlet to survive here. There are reasons to believe that cross-border expansion is a must. There are reasons to believe that the market is getting deregulated and in-market acquisitions or mergers or new cash structures will emerge. We have recognised all this, if not we will not be able to tailor our products.
What kind of expansion are you looking at? Scope of expansion, in terms of international expansion, we have certain strategies. This bank has multiplied shareholders wealth and never resorted to taking money from them. Our approach has been optimisation within the market, within the capabilities, within our strength and weaknesses. We can't squander money. When we are convinced that we have done the best with existing wealth locally, we will look at investing outside, without burdening our shareholders.
How do you wish to expand? Branching out, acquisitions or alliances? A combination really. An organic growth makes more sense. Tie-ups and alliances make sense. If I am going to acquire someone, I need to keep in mind that I am not in the scale of Citibank or Chase Manhattan, where I can deploy a team of managing agents. If it's a local market I can consolidate and merge. That is possible. That is an option. But I am not going to go and acquire a private banking unit outside the country, but look at a smaller percentage of acquisition. An outright acquisition is an operational risk. Our road map is clear. Optimise, play within your capacity, and don't burn the shareholders' wealth. We have to leverage on our strengths.
A Financial Free Zone, stock market opening to expatriates and foreigners and ongoing liberalisation – what does this mean to local companies? What does this mean to banks in terms of scope of investments? Globally, all countries with developed financial market environment have one common trait. They have developed multiple markets providing multiple investment avenues. Be it capital market, banks, real estate etc. Having multiple avenues for investment is good for country and good for investor. On the same lines, we can see that Qatar will witness multi dimension growth towards maturity and stability. As far as Banks are concerned, the growth in banking sector has a strong linkage to economic development of the country. Banking sector is expected to maintain its momentum with expansion of Qatar economy and opening up of multiple avenues.
What will be the effect of international financial institutions entering the local market through QFC? Any competition brings the best performance from competing institutions and consumers ultimately gain. We have to ensure that customers see the best wholesome value in his relationship with us. As far as Qatar is concerned, we expect the financial market expansion as a positive signal with proactive participation of Government and QFC regulators. We welcome any competition, which results in increasing overall efficiency of banking system and value proposition to customers and are geared to face it. We are committed to deliver maximum value to customer in form of one stop financial solution provider, personalised service, competitive rates and maximum convenience on 24X7 basis through deployment of best of breed technology. We have identified niche segments, and matching products and services where we will excel and become market leader. We have launched a whole lot of segment focused products and services in our drive to become a one stop financial supermarket.
Once QFC institutions come in, how will the market play out? QFC is an important decision. It makes so much sense. If you look at the combined commercial banks' ability to expand, it is limited. To finance the projects that are emerging in the economy. Ten years ago the country borrowed billions and invested in its industries, in a new technology GTL. Now the revenues are kicking in. Billions of dollars have been committed as captive consumption by Japan, India, Korea and UK. It means, if we project the budget for several years, it will continue to run in surplus, even if oil dips to less than $10. Because you have the revenues taken care of. Now, the challenge for the economy is to allocate expenses, prioritise expenditure – towards industrial expansion or infrastructure creation. Who is going to finance this? Which local bank has the capacity to finance the required billions of dollars. It has to be funded in billions. Not a single local bank figures in funding partners for the $5 billion new airport project. The combined lending capacity of the local commercial banks is limited. So you need project financing specialists. As a local bank we have our constraints in terms of specialised financial management, investment management on a large scale. If we have to synchronise economic development, we need what QFC will provide. It is an intrinsic economic expansion for the scale of projects planned. It has become inevitable to have a full fledged financial centre.
What are the core areas local banks need to concentrate on to compete with international institutions? I would feel, even today, our products and services are second to none. We compare very well with international institutions in terms of technology, customer service, products and services. What we need to ensure that we are always up-to-date in terms of customer care, technology, product range, technology, practices, regulatory reporting and risk management practices.
Where is competition between banks headed? Services or Products? In the final analysis, the organisations which can provide best wholesome value to customers come out winners. We need to create differentiators both on products and services. We have taken lot of effort to introduce many pioneering products and services in Qatar, differentiating ourselves clearly. Our comprehensive range of loan products, 'free for Life credit card', Al Dana Savings scheme, Al Jana Long term deposits are all well thought out products which has become extremely popular. Our e-remittance service is one of its kind in Qatar. We have already created a niche with Bancassurance both at corporate and retail level. We have always been a trendsetter in deploying consumer centric technology and new delivery channels. Our SMS Banking has literally empowered a customer to transfer funds and pay utility bills from finger tips any time from any location. Our Bank-on-wheel can provide banking service in any part of Qatar. These are some of the unique services only Doha bank offers, providing immense value to customers.
Comment on the growing trend of conventional banks launching Islamic products and services? We have seen that Islamic Banking have grown slowly and steadily and there is a strong market for it emerging not only in Qatar, but globally. Conventional banks are naturally expanding to offer Islamic banking because their existing customers want it, and, also there is good opportunity to be part of an emerging market.
What are the other regions or areas of business that Doha Bank hopes to enter? In terms of financial services we are committed to create a one stop solution for our customers. We have been progressing very satisfactorily on that with a series of new services like Bancassurance, wealth management, Islamic Banking, e-remittance. Further services are in the pipeline. In addition, we have also tied up with leading banks in home countries of expatriates to offer complete banking service in their home country through Doha bank. We are continually reviewing our products and ensure that they always remain customers' first choice. In terms of international presence, we are strategically looking at various options.
What has been Doha Bank's strategy in Corporate Governance? Ours is a completely professional institution fully complying with international best practices in terms of banking and management practices, standards and disclosures. We are moving towards Basel II compliance, addressing multi dimension risk parameters very scientifically. Our disclosures to shareholders, regulators and public is of highest international standards.
With a large workforce, what are the motivational exercises carried out to ensure utmost productivity? Is there an in-house Qatarisation target? The success of any organisation lies in the level of synergy between staff and departments. In the absence of it, all the efforts will be counter productive. We are very conscious and proactive in human resource development such as team building and motivational aspect. We are taking many initiatives towards this. We have awards every month on various aspects, which motivates every one to perform better. We are very proactive in increasing our Qatari workforce and are well in line with stipulated target. We have special programme to groom promising Qataris.
CROSS BORDER ALLIANCES AND BEYOND - COMMERCIAL BANK
The first private sector bank in Qatar, Commercialbank last month ventured outside the country to accomplish one of the most talked about strategic alliances in the region. National Bank of Oman and Commercialbank have now signed an agreement formalising the alliance. Established in 1975, and celebrating its 30th year, the Bank is Qatar's largest credit card point-of-sale terminal network provider and issuer of Diners Club, Visa and MasterCard credit cards. With a long term deposit rating of A3 (on review for possible upgrade) from Moody's, Commercial bank's sustained track record of profitable operations for 30 years has been supported by diversified revenue structure, good asset quality, diversified funding sources and a strong capital base. Andy Stevens, Chief Executive of Commercialbank, talks about recent expansions and local strategies that aid the bank in capitalising on its position.
How will Commercialbank's expansions outside of Qatar affect its operations here? If you are referring to our strategic alliance with NBO then the answer is that it won't. Under the terms of our agreement Commercialbank will provide Management Services to NBO. That doesn't imply a mass movement of people, either way, or at least in the short term, the restructuring of either bank's operations.
Are there other regions or areas of business that the bank hopes to enter? Commercialbank holds the exclusive franchise rights of Diners Club International in Bahrain, Egypt, Syria, Sudan, Iraq, Iran and Yemen in addition to Qatar. NBO also has presence in Egypt and UAE in addition to Oman.
What are the most looked forward to aspects of business in Oman, which is a much larger market than Qatar? Commercialbank will further strengthen its position of leadership with this partnership which is a first between banks in the region. Shareholders will see higher share values from stronger profit and growth potential. The board members and management of both banks will be able to contribute their valuable experience and be involved in the execution of a very exciting growth strategy. Employees will have wider career development opportunities and even greater job security. Last but not least the customers will have the benefit of better and broader product offerings.
What has been Commercialbank's strategy in Corporate Governance? Broadly speaking we would regard Corporate Governance as referring to the processes by which the Bank is directed, controlled and held to account by the various stakeholders in our business, including shareholders, regulators, employees and customers. In organisational terms we comply with the recommendations set out by Qatar Central Bank, which deal for example with the structure of the Board and Board committees, and the respective roles and responsibilities of the Board and of executive management. However our goal is to treat these regulatory requirements as a minimum, and to match in as many areas as possible international best practice. For Commercialbank the key elements of corporate governance are the transparency of corporate structure and operations, the implementation of effective systems to manage and control risk, and the accountability of the Board and Management of the Bank to our various stakeholders.
With a large workforce, what are the motivational exercises carried out to ensure utmost productivity? Fortunately we have an organisation of people who are self-motivated and eager for further professional and personal development. We have instilled a meritocratic approach so that people know that performance will be acknowledged and rewarded and that gives opportunities for personal growth.
What will be the effect of international financial institutions entering the local market through QFC? The establishment of the Qatar Financial Centre is certainly an interesting development, and in my view a necessary one if Doha is to develop into a regional financial centre to match Bahrain and Dubai. It is too early to judge what sort of companies will come to the QFC; we assume that it will attract international financial institutions with particular interests in major project financings, insurance, and international wealth and asset management, none of which are core activities for the local Qatari banks. There will certainly be an element of competition in some areas of our business, but the increased exposure to world-class best practices, together with the development of Doha as a regional financial powerhouse, can only be beneficial to local banks such as Commercialbank.
What are the core areas local banks need to concentrate on to compete with international institutions? A local bank like Commercialbank responds to challenging circumstances such as global banks with energy and enthusiasm, by redoubling our efforts to meet and surpass the demands of our customers. Our employees firmly believe that we are capable of giving customers across Qatar and the region an integrated offering of financial services that uniquely addresses their objectives. Delivering on this pledge will significantly and positively benefit us as we increase the amount of business existing customers want to do, whist also attracting new customers. Indeed, as the competitiveness of the financial marketplace, particularly among international institutions, has increased, we have sharpened our focus to realize our vision of always earning the right to be our customers' first choice of bank.
Where is competition between banks headed? Services or Products? I don't know about most banks, but I can tell you that we are focused on the customer.
A Financial Free Zone, stock market opening to expatriates and foreigners and ongoing liberalisation – what does this mean to local companies? What does this mean to banks in terms of scope on investments? The development of Capital Markets in general is a necessary pre-requisite to support Qatar's booming and diversifying economy.
Comment on the growing trend of conventional banks launching Islamic products and services. There is a strong demand for transparent Islamic financial solutions that are value-packed on one hand and match customers' religious beliefs on the other. Customers expect financial solutions to finance their basic requirements such as vehicles, goods as also their real estate purchase through offerings that are competitive and Shariah compliant at the same time. Islamic banking is a phenomenon that cannot be ignored by any country, government or regulator, and Qatar is making necessary regulatory amendments to support this initiative.
READY FOR COMPETITION - QATAR ISLAMIC BANK
Qatar Islamic Bank, the first Islamic bank in Qatar, is the only Islamic institution to appear on the top 10. It was established in 1982 to provide Islamic banking services and investments in compliance with the Shariah principles. QIB has been taking an active role in financing both public and private sector projects in compliance with Islamic Shariah, with local investments exceeding 70 percent of its gross investments. Salah Mohammed Jaidah, General Manager of QIB, talks about the increasing competition in Islamic finance and the bank_s plans to meet it.
There is an increasing trend of Multi-National Financial Corporations coming up with Islamic products and local banks with Islamic identity. Is this a good trend? Is QIB ready for such a competition? We are definitely ready for the competition now. The competition will in fact help us re-polish and re-position ourselves. I think the area of concern for new comers (to Islamic finance) is going to be on the retail side. Our operations are more mature; we are more into corporate structure finance and trade. And capitalising on these advantages will be our focus in the coming months. An important point is that I feel the competition is not going to be on service and on pricing. The competition is going to be on how flexible the Shariah committee of each bank is. Competition is going to be on Shariah findings and Shariah scholars giving advice to new comers, which will change the method of competition. This is something we have to continuously address to the QCB to come up with standards. We need to compete on price, service, quality...
In Malaysia where Islamic Banking is highly popular, is there a Central Bank regulated Shariah Board? I don't know. Lately I hear that the Central Bank went to the conventional banks that have Islamic windows and asked them to close it. They cannot have a window. You can either be a full-fledged Islamic or conventional bank. So they are enforcing subsidiaries, which will be full-fledged Islamic institutions. On equity. On position.
What about the growing interest from non-Muslim clients in Islamic banking? It is critical for us as traditional Islamic banks to tackle the issue of non-Muslims banking with us. We have no restrictions. But we have to be more attractive to them. We saw our capabilities in the commercial area _ Corporate Commercial and investments. We managed to attract them. They were institutions and were easier to handle. When it comes to individuals, it is an area that we are trying to explore and give it our attention going forward. To me as a General Manager, the proof of our success will be when non-Muslims deal with us. Then it gives an indication that the bank has a certain quality of service. Having said that we are not going to reduce the focus on our existing customer base, but we will widen it and continue improving delivery channels.
Do the Corporates have a mind-block when it comes to Islamic financing. When there is a huge investment potential, does it affect a commercial transaction? Being a conventional banker, coming to an Islamic structure of finance, I believe for many of the Corporates there are a lot of advantages in dealing with an Islamic bank and the packages of Islamic banking services within the Corporate area. If they understand it, they will be more interested in the Islamic finance structure. I am saying this, because we (Islamic banks) tend to evaluate a transaction from the business point of view. Conventional banks tend to evaluate from the risk point of view. That gives the businessman, who is establishing and venturing in a new area, a chance to evaluate or present his case easier to the Islamic bank because they visualise it from the business and the profitability of the transactions. Having said that, we don't rest from doing our diligence on the risk evaluation. We are not cowboys. We venture, but do evaluate risk. Conventional banks tend to put the obstacle of risk and forget about the business part of it.
Which are the sectors you are looking at in terms of fresh investments? Definitely we are going to revamp our retail banking. We are going to improve our customer service, re-polish existing products and introduce new ones. Introduce call centres, for 24-hour customer service. On the Corporate side, we are trying to attract more clients by introducing better pricing, by improving on service and deliveries _ the time required to conduct a business transaction. We are big in Real Estate Developments. We are going to look at putting a portion of our investments in real estate development. And we are also going to have equity participation in some of the potential developments coming up in the country. The new area we are concentrating on going forward is corporate advisory and investment banking within the Islamic structure. We will work as advisor for medium to large transactions, with participation from ourselves; and assisting clients to raise money from the Islamic market. This is an important area that I believe we need to venture in and assist local Corporates.
What diversifications are already underway? The share capital of QIB, as at the end of 2004, stood at QR663 million, with a shareholders' equity of QR1462 million. Apart from providing banking and investment services, QIB has been diversifying its investments. During the past three years it has launched five Islamic Property Investment Funds. It has invested in two Qatari companies in a big way, one of which is the Aqar Real Estate Development and Investment Company, a joint-venture between QIB (40 percent), the Endowment Department (34 percent) and the Inheritance Department (17 percent). Apart from specialising in real estate investments in the Qatari market, Aqar also invests in several Qatari companies whose transactions do not conflict with the provisions of the Islamic Shariah. The other investment is in Al Jazeera Islamic Company, established in 1992 with a capital of QR20 million, as a joint-venture between QIB (80 percent) and the Ministry of Endowments and Islamic Affairs (20 percent). QIB is currently involved in the foundation of Arab Finance House in Lebanon (a new commercial and investment bank) in partnership with Gulf Finance House and other Gulf investors. The Bank is also a co-founder and partner of Solidarity Insurance Company, Bahrain. It has now taken the initiative to establish three finance houses in Europe, Asia and USA. It already has the licence of the Malaysian Central Bank for the incorporation of Asian Finance Bank, which is to commence operation anytime now. QIB holds 70 percent shares in Asian Finance Bank, while Rasad Investment Bank will have 20 percent and Global Investment 10 percent.
What about wealth management for individuals? We do have a unit that structures Islamic investment products. And we are very successful in advising clients in investing in real estate funds abroad. We are going to continue doing that and also introduce local funds. Which will hopefully happen in the first quarter of next year.
The entry of international financial institutions, through QFC, will bring in a different level of competition and operations. How do local companies rise to the challenge? There will definitely be more transparency. Local bankers have to consider this. At present, we should take advantage of the boom and form sound financial structures that will stand us in good stead in the future. We also need planned expansions.
There are three ways of doing it. By branching out, by opening subsidiaries or by joining hands with existing companies in that particular country.
Branching out doesn’t work as your expertise and module is based on an environment that can’t be duplicated elsewhere.
We are looking the third strategy, which is joining hands with existing companies.
QIB has the highest Qatarisation rate amongst financial institutions. What kind of training programmes are in place, and what are the motivational efforts?
We have a six month familiarisation programme and a three-month on the job training. We attract newcomers and give them the required training. We expose our frontline officers to relationship and marketing programmes. We have our own training center and trainer. All our employees, locals and expatriates, get an opportunity to go regionally and abroad for training.
SAILING SMOOTH - QATAR SHIPPING COMPANY
Qatar Shipping Company (QShip) is the largest ship owning and operating company, with interest spanning the manufacturing and service sectors – shipping, offshore support service and construction. Efficiency has been the foundation of QShip’s growth. Effective planning and maintenance enabled the company to reduce off hire and idle time resulting in a fleet utilization of 95 percent, despite drydocking of two vessels. Nasser Al Romahi, Chief Executive of QShip, speaks about the tremendous growth in 2004, and the expansion of fleet in the coming year.
What were the most important deliveries taken by QShip in 2004? How did its operations expand? During 2004, QShip owned and operated a deepsea fleet comprising of eight vessels with an aggregated tonnage of 376,549 DWT. These are the two aframex tankers, four product carriers and two newly built LPG carriers. One 1991 built product tanker was sold in April 2004. The induction of LPG vessels into the fleet marked for first time that QShip owned and operated gas tankers and the vessels have traded successfully since delivery.
The company continued to successfully execute the Qatar Petroleum (QP) contract of providing Harbour Towage services at Mesaieed port with fully owned four Tugs, two Pilot boats and 50 mooring crew. Further, the company took delivery of their new tug “ Wassit” in March 2004 and deployed as tanker berthing assistance tug at Halul Island terminal, under another long-term contract with QP.
2004 has turned out to be the most successful year for the revenue generation by the company’s ocean-going vessels. Many voyages fixed by QShip vessels were all time highs for that particular sector and trade. This was primarily because the vessels, except the LPG Almarona on prior commitment for a time charter, traded in the spot market at high spot levels as compared to moderate amounts that we would have achieved if more vessels on time charter. The idle days were kept at an absolute minimum due to astute fixing of the vessels, including good backhaul voyages, which reduced the ballast periods.
The clean/ Product tankers, Alnoman, Jinan and Dukhan traded mainly in the USA, Carribean, South America and European markets. The crude tankers Loulwat QATAR and Joharat Qatar mainly traded in the Gulf, Australia and Far East markets.
The company-controlled vessels performed a total of 89 voyages. Vessels controlled by the company transported 3.86 million tons during the year.
The performance of the fleet has been excellent, with no significant down time during the year. The two aframex tankers were dry-docked to complete their scheduled third Special Survey and these vessels’ structural condition was enhanced so as to meet the CAP 2 (Condition Assessment Programme – Rating 2) rating that is required by the oil majors and each of the product/ chemical tanker has been credited with four or more approvals, in addition to the United State coast Guard acceptance. The vessels have passed all port state control inspections without detentions.
The very fact that the vessels operated on the US coast without any restriction is in itself the proof of quality standard of our fleet. As in previous years, there was absolutely no pollution incident of any nature involving the QShip fleet and we are proud of this achievement and remain ever vigilant to maintain this record.
What about off-shore services? Due to the rapid expansion at Mesaieed port, our Tugs and Pilot boats assisted in over 1,500 movements, which were far in excess of the 800 movements envisaged by our contract with Qatar Petroleum for the provision of harbour towage and Pilot boat services at Mesaieed. The four tugs and two pilot boats operated flawlessly throughout the year with no breakdown/off hire periods. Two tugs completed their first periodical dry-docking with minimal downtime. This year also saw the induction of another new building tug "Wassit" from March 18 2004. This was immediately deployed as a tanker berthing assistance tug at Halul Island terminal, under another long term contract with QP. Halul Offshore Services Company also has plans to build 12-15 vessels in the next three years. Halul Offshore, jointly formed by Qatar Shipping Company and Qatar Navigation, owns and operates a fleet of vessels consisting of Diving Support Vessels, Anchor Handling Tugs, Safety Standby Vessels, Dynamic Positioning Vessels and Crew Boats. The company's fleet of vessels increased to 22 in 2004 from 19 in 2003. Halul handles over 40 percent of the country's offshore requirements.
What has been the response to ship-building efforts at the fabrication yard? The QShip Fabrication Yard successfully executed one major project and completed various small to medium sized projects. The major project was a landmark as it consisted of construction of the largest offshore platform sub-structure and interconnecting offshore platform bridges to be fabricated in Qatar to date. Another historic project involves construction of two Anchor Handling Tugs (AHT) for Halul Offshore Services Co. The vessels will be the first ever to be built in Qatar. Each vessel will be 64M long, 15.5mt wide and 7mt deep. Bollard pull designs 65 Tons. Scheduled delivery of the vessels is in the second quarter of 2006.
What kind of expansion have you planned by the end of the year? So far, in the first half, we have taken delivery of one LNG vessel. In April. We are part of a consortium with some Japanese companies, in which QShip has 30 percent stake. This ship is chartered to RasGas for 25 years. In September we will take delivery of one crude tanker. It is the first of six tankers. All six will be delivered between Sept 2005 to June 2006. It is being built in Hyundai heavy industries in Korea. There are three other LNG vessels in the pipeline. One will be delivered in September and another in November. And the third in April 2006. All three are being build in Korea too. Once we take delivery of the ships, by the end of the year, we will have nine LNG, two LPG, eight crude tankers and five clean tankers.
Is there a particular market or region you are eyeing? We would like to enter the bulk market. We used to have two combined carriers _ to carry crude and bulk. We then went into a programme to replace them with tankers. The market at that time wasn't ripe for dealing with bulk. Now we feel it is the right time and we are examining possibilities.
Will there be a duplication of services with the newly formed gas transportation company, Nakilat?
We hold 15 percent stake in Nakilat. The new company is concentrating in LNG and they have announced that they would consider dry docking facilities too. They have ambitions for LPG tankers.
As far as we are concerned – we are a major investor in Nakita – it is our best interest to see them expand in all theses areas. It is important that they do well, and make good our investment.
What about competition between the two companies?
No there will be not be. It will be in our best interest to co-operate more than compete. We want to compete with the rest of the world, not with each other.
Are there chances of more companies coming in to set up operations here?
They are most welcome. We go to other countries and compete with them.
PILLARS OF STRENGTH - QATAR NATIONAL CEMENT COMPANY
They are building the nation – literally. The Qatar National Cement Co (QNCC), established in 1965, is today one of the most profitable companies in the country.
It was set up to produce Ordinary Portland Cement in sufficient quantity to meet the demand of cement in the State of Qatar.
Today, the company is not only a major producer of Ordinary Portland Cement, but also of Sulphate Resistant Cement, Hydrated Lime and Calcined lime in Qatar. The manufacturing units of the company are situated at Umm Bab, close to the rich raw material deposits, 82 km away from the Doha, western coast of Qatar.
Mohammed Ali AL Sulaity, General Manager of QNCC, talks about the growing demand for cement and plans to meet it.
What has been the growth in production of cement? Commercial production from the first line erected and commissioned by Franco Tosi of Italy started in May 1 1969 with a capacity of 100,000 tpa (tones per annum).
With the growing cement demand in the State of Qatar, another production line of 100,000 tpa capacity was installed in 1974. However, as cement demand was still rising a third kiln of 100,000 tpa capacity based on the same technology was erected in 1976 by Buhler Miag, Germany making combined clinker production both OPC and SRC Cement.
With a view to keep pace with the growth of nation, a most modern and separate cement plant of 600,00 tpa clinker production was commissioned in 1998.
Another plant is also underway and after the plant becomes operational by middle of 2006 the total production of cement will rise to 900,000 tpa.
How have you been able to cope up with the huge demand for the supply of cement due to the boom in the construction industry in Qatar?
After the completion of the cement plant II in 1998, the company was meeting the demand of cement in the local market and also exporting around 25 percent of its production to the neighbouring countries in the years 2000 and 2001.
We are currently producing 3500 tons of cement per day.
But the huge boom in the construction business was unprecedented and the company could not meet the huge demand and hence stopped its exports. The current requirement in the construction industry is less than 10,000 tons per day (tpd). The company has started initiating more cement production and in addition to its increased production, the company is also importing cement from the GCC and overseas market to cover the deficit in the market. With the additional cement imported we are now just about meeting the country’s demands but there are additional facilities incorporated which would make the company self reliant by the end of 2006.
By end of 2006, we will be producing around 10,000 tpd.
Have there been any additional facilities incorporated to meet this shortage? On June 2004, a contract was signed with FCB. Ciment of France for a 4000 tpd clinker plant for a total amount of QR581 million. The civil work for the cement plant III is already underway and by the end of 2005 the first phase of the plant will also be operational. The first phase will produce about 3000 tpd of cement. The second phase will be operational by the middle of 2006 and this plant will produce another 3000 tpd of cement. This added facility would generate 10,000 tpd of cement in the market, which will solve the problem faced by the construction industry in the country.
How has the import of cement from other countries affected the pricing of the cement supplied here? Due to the high demand in cement the company is forced to buy cement from the GCC and overseas market. Though the international prices of cement and the shipping cost are quite high, QNCC is covering the market demand with reasonable rates.
Are there any plans to export cement? With the impending Doha Asian Games the construction activities have already increased and reached a crescendo. The need for cement will be more during the initial period of construction like piling and the column building. After this the amount of cement required reduces, so by end of 2006, when the final phase of Plant No III gets completed there will be surplus of cement and like before, the company can export the surplus quantity.
What are the new production units introduced by QNCC? The washed sand plant, the fly ash blended cement and Slag Cement plants have all been commissioned in Umm Bab. The washed sand plant is used for ready mixes of cement in the construction industry as a plastering application. The fly ash blended cement imports fly ash (ash of coal) from South Africa and this variety of cement is used for special applications. The slag cement is also used for special applications in the construction industry.
FULL HOUSE - QATAR CINEMA AND FILM DISTRIBUTION COMPANY
Entertainment does pay. Qatar Cinema and Film Distribution Company (QCFDC), established in the year 1970 as the sole and primary Qatari company for film distribution, started with a just three theatres. Now it has 20 theatres spread across the city. A Mohsen El Mokadem, General Manager of QCFDC, speaks about the diverse range of film tastes Qatar caters to and how it is being met.
What has been the growth in the last three decades and was this something that was planned for? At the time we started, there were four small cinemas, which were bought by the company along with the land for the Doha and Gulf Cinema. We constructed the present structure in 1976. The Umm Said Cinema was bought in the year 1990. Initially the business was doing fairly well and then from the middle of 80s, there was a slack in the cinema business. This was when watching movies from a videocassette became a perfectly normal affair as families preferred to watch movies in the safe confines of their homes. From 1995, the board of directors started to encourage families to come to the theatre, keeping in mind the changes in the society. The Gulf Cinema was also renovated. By the then, the hypermarket concept had also caught on. We opened one cinema theatre at the Mall and encouraged by the success of this theatre we opened three more theatres at the complex. Three cinema theatres were opened at Landmark. The Amir Cinema was also upgraded. We began to deal with the film industry to bring in good quality movies at the right time. There was good progress for the company due to all this. At that point of time, the industry was also monopolised, which ended in 2002 and the Bahrain Film Distribution Company came to the market and opened at the Cineplex-City Center. Though this affected the business at that time, we also made some changes in our systems and at this stage the competition has been good for us, as we are now more quality and time conscious. We could also say that we have won the challenge.
What are the steps you will be taking in the future to augment the profits of the company? We will be opening new theatres in the Royal Plaza. The Doha and the Gulf cinema are going to be renovated. This renovation will not interfere with the general working of the cinemas, as it will be done in parts.
Has the monopoly aided in the growth and now that there is competition, how will you be dealing with it? The monopoly did do us good initially. But the competition has also made us aware of our shortcomings and we have corrected them to emerge as winners! As we have theatres all over the places, we have more reach to the masses here in Doha. Both of us deal with the same distribution company. We have also reached an agreement wherein both the companies release the same movies at the same date and time. But we own the distribution rights of all Indian movies in Qatar; hence we have an upper edge over the Bahrain Distribution Company.
Which theatre attracts most audience? The Doha and Gulf Theatres attracts crowds mostly due to its huge size, it has a seating capacity of 1000, while the theatres at Mall can accommodate only around 400. But some people do prefer the theatre along with the shopping malls as they can shop and drop over for a movie.
Is there a delay in releasing the international movies here in Qatar? Now for American movies, there is no delay whatsoever. Initially, there was a small delay, but now around 70 percent of the movies were released here on the same day that it was released internationally. Movies like Star Wars-3, Batman were all released on the same day. The problem is with the Egyptian and Indian movies- the distributors make only some prints of the films to save money and wait till the movie is shown in their country and after that send it to Qatar or to other Middle Eastern Countries. By this time, pirated cassettes would have already hit the market, thus affecting business. During 80s 60 percent of our gross income was from Indian movies, but now due to the delay in the release, only 20 percent of the income is from Indian movies. The pirated version of Indian movies gets released faster and hence our business is affected. The censor board here is very liberal. We are the only country in the ME, who has screened Fahrenheit 9/11. The summer season is our peak time though half of the population have gone for their holidays. Rest of the people here are always flocking to theatres to vile away their time all hence we make profits during this period.
This article is reproduced with special permission from Qatar Today - Qatar's only news, business and lifestyle magazine
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