The emirate sees growing interest from Asian asset managers
Yousuf Mohamed Al-Jaida, chief executive officer of the Qatar Financial Centre (QFC), speaks to Asia Asset Management (AAM) about prospects for the centre, and for the emirate.
AAM: What are the current prospects for growth and economic expansion in Qatar? How is the current macroeconomic climate affecting the emirate?
Yousuf Al-Jaida: The prospects for Qatar’s economic growth remain exceedingly positive. Indeed, the International Monetary Fund recently projected Qatar’s gross domestic product growth at 2.6% in 2019, and 3.2% in 2020. Qatar’s economic performance is robust and continues to strengthen, with non-hydrocarbon output growing by 6% during the first half of 2018, including the financial sector.
Additionally, overseas institutional investors were net buyers of approximately US$2.3 billion of shares traded on Doha’s bourse in 2018, more than triple the foreign flows into neighbouring countries, making the Qatar Stock Exchange the best performing stock market in the world, with 20% returns. This is a clear indicator of the level of confidence and trust that international investors have in Qatar’s financial institutions and infrastructure.
Qatar’s economy is in fact resilient and has a decidedly long-term approach to policy, which enables it to weather the regular macroeconomic fluctuations that affect regional and international markets. Qatar’s banking system also remains robust with ample liquidity, high asset quality, strong capitalisation, encouraging credit offtake and healthy profitability, thus faring much more favourably than others in the overall bearish market run.
What do you consider the most attractive and interesting business and investment prospects in Qatar and the region?
For a number of years now, the State of Qatar has been boasting a mega-pipeline of investment and business projects, including an extensive infrastructure development investment programme valued at over $200 billion, which consists of a number of projects that are transforming the private sector. To add to this, the government has established a multi-billion-dollar incentives programme aimed at attracting multinational corporations to establish a presence in Qatar.
Qatar also offers businesses access to regional markets that are part of the New Emerging Belt Initiative (NEBI), including Kuwait, Oman, Pakistan, India and Turkey. These markets are valued at over $2.1 trillion, with total foreign direct investment from NEBI countries estimated at over $150 billion in 2016. Qatar already has strong historic relations with these countries and will continue to build on this to further develop the existing economic ties via key strategic alliances. Having said that, Qatar still also enjoys solid bilateral relations with countries around the world such as the UK, US, Germany, France, China and many others.
As an onshore business and financial centre, the QFC’s platform offers businesses several unique benefits. These include up to 100% foreign ownership, 100% repatriation of profits with no withholding tax, only 10% corporate tax, trading in any currency, a transparent operating environment based on English common law, and 81 double taxation agreements with countries around the world.
What is your China and Asia strategy?
The QFC has always placed great emphasis on the Asian market, as it holds significant opportunities across a variety of industries. We are of course actively engaging potential clients in China and held face-to-face consultations and networking events during [fourth quarter] 2018 with professionals from Chinese corporations across the country, including in Xiamen, Shanghai, Beijing and Tianjin.
This of course is aligned with the visits of H.H. Sheikh Tamim bin Hamad Al Thani, Amir of the State of Qatar, to several major Asian countries including South Korea, Japan and China, where key memoranda of understanding were signed to further cement these important relations. Asia remains a major target for us when it comes to the digital and fintech [financial technology] sectors as well as financial services in general.
Qatar was actually the first country in the region to host a renminbi clearing centre, which underscores our wider commitment to developing our relations with China. China is in fact Qatar’s third largest trading partner with the value of bilateral trade reaching $10.6 billion in 2017, accounting for 10.92% of Qatar’s total foreign trade. Qatar and China continue to strengthen economic and bilateral trade ties, with a 45% increase in trade volume between Qatar and China recorded in the first quarter of 2018 compared to the same period in 2017.
Collectively, China, Japan, South Korea and India are Qatar’s primary trading partners, with total bilateral trade exceeding $52 billion, so clearly Asia is an extremely important market for Qatar and the QFC. Of course, trade flow with these countries is primarily dominated by Qatar’s energy exports, and the QFC’s strategy is to stimulate non-hydrocarbon inbound trade with these economies, leveraging Qatar’s worldwide position as a logistics and transport hub to do so.
As such, the QFC is working closely to proactively engage and attract companies from Asia, and we have already seen a 33% increase in the number of Asia-based companies registered on our platform since 2018.
The QFC is also home to a number of large Chinese companies, including the Bank of China Qatar, which is of course one of the five biggest state-owned commercial banks in China, and the fourth largest in the world. Other major Chinese entities include the world’s largest bank, Industrial and Commercial Bank of China.
As you can see, we have been actively pursuing clients from Asia and China for several years now, and our efforts have been quite successful so far. As such, we will continue engaging with our Asian stakeholders and have plans this year for another roadshow to the region.
How much interest is shown by Asia-based fund managers and asset managers in Qatar and in your centre?
We have seen considerable interest from Asia-based fund managers, in particular after hosting productive discussions in various countries in the region. We remain committed to offering best-in-class services and unique benefits that ensure that Qatar and the QFC remain their top choice for the region.
As mentioned previously, accompanying increased trade and economic activities are many opportunities available in Qatar for Asia-based asset management. Capital always follows real economic activity, and with so much robust activity onshore in Qatar, there are valuable opportunities that can be utilised. Asset management is an opportunity area because the Gulf region has more assets than management. If you look at the wealth structure and how assets are typically managed, it is mostly offshore, so there are many opportunities for Asia-based asset managers to establish themselves onshore, particularly on the QFC platform, which is designed to enable businesses to do just that.
What are your business priorities?
Our recently-announced strategy perfectly encapsulates our business priorities, which include a renewed focus on specific industries such as media, digital, sports, and financial services, as well as a focus on further developing partnerships as part of the NEBI.
These focus industries have been identified in line with their incredible potential for future growth and Qatar’s already established presence on the world stage in these fields. For example, the market size of the sports sector in Qatar is expected to reach $20 billion by 2023. Additionally, Qatar has made tremendous progress in the digital field as well thanks to the launch of two satellites – Es’hailSat 1 and 2 – that provide television, telecommunication, corporate and government services across the MENA [Middle East and North Africa] region and beyond.
What subsectors of the finance and money management sector do you target – insurance, asset management, wealth management, etc?
As an onshore financial centre, the QFC is of course committed to attracting companies from across different subsectors of the industry. This includes fintech, asset management, capital markets and Islamic finance, as well as several others. We have already made major strides in developing these sectors, which are sizeable and poised for significant growth in the future.
For example, Islamic finance assets are forecast to be worth $3.2 trillion by 2020, according to Thomson Reuters, while Qatar’s Islamic finance sector is expected to see spectacular growth, ranking 46.31 compared to the global average of 10.45, according to the Thomson Reuters Islamic Finance Development Indicator. So clearly the industry on a global and local level has incredible promise.
The QFC recognises this, and in fact has a vision to cover the entire globe’s Islamic financial transactions – estimated at $2 trillion – between three financial centres: Qatar, Turkey and Malaysia. Under the plan, Turkey would cover Islamic finance needs in Europe, Qatar would serve the greater Middle East, and Malaysia would cater to Asia.
Fintech is another sector that the QFC is strongly committed to developing, especially since global funding in the industry has seen 120% growth in 2018 to reach $111.8 billion, an unprecedented increase. To this end, we are working closely with key local and international stakeholders to ensure the successful development of Qatar’s burgeoning fintech landscape. For example, in 2018, we partnered with B-Hive, a European collaborative innovation fintech platform that brings together major banks and other stakeholders, to develop the industry in Qatar. Additionally, the QFC is home to Goals101, India’s leading fintech and big data technology platform, which is in talks with leading domestic lenders for its machine learning and artificial intelligence solutions.
So we have very clear and concise focus, targets and strategy that are aligned with the greater national agenda and development plans that fall in line with the Qatar National Vision 2030. This ensures synchronicity and active partnerships with local and international stakeholders that businesses on our platform can access and leverage to their advantage.