UK firms see abundant opportunities in Qatar

The Opportunities in Qatar event organised by the Arab British Chamber of Commerce (ABCC) attracted a strong turnout from a wide range of UK companies interested in either expanding or establishing business ties. Chaired by Abdeslam El-Idrissi, Director of Trade Services, ABCC, the panel of keynote speakers, including representatives from the UK Export Finance and UK Trade & Investment  (UKTI), shared their knowledge and expertise through a series of presentations and Q&As. Thomas Wigley, Partner, Trowers & Hamlins, who has advised on projects throughout the Middle East region, said that despite the problems caused by the drop in oil prices, Qatar was relatively well-positioned to ride out the downturn.He noted:  “Deutsche Bank recently published some research which assessed Qatar’s break even oil price (for its national budget) at $52.7; this is the second lowest in the GCC, with only Kuwait being in a stronger position.  Sovereign debt is around 30% of GDP and so there is plenty of headroom if oil prices continue to be weak.  The current levels of spending have also been inflated by the 2022 World Cup preparations and as we approach 2022, this expenditure will reduce.”Reflecting the global picture, Qatar has seen some projects cancelled or put on hold. These include the Al Karaana project ($6.5bn), the Al Sajeel Petrochemical project ($6bn) and Sharq Crossing. “But I don’t think this is particularly problematic,” said Wigley. “Petrochemical projects are being cancelled around the world and there are major transport, power and water projects which are continuing in Qatar.  MEED reports that the overall value of Qatari projects planned or under way as of 22 January 2016 is $282.3bn. Indeed, the Finance Minister, HE Ali Sherif al-Emadi, stated that the allocation for major projects in Qatar would go up by QR3.3bn to QR90.8bn in 2016.” He observed: “The picture in the rest of the Gulf is worse, with many more projects being cancelled. A good general guide is the MEED projects’ index which shows that compared to April 2015 Saudi Arabia currently has 15% less projects planned or underway and the overall GCC figure is 3% down.”He added that it was, however, apparent that most governments have chosen to keep spending on key public infrastructure projects. “They are choosing to run deficits rather than cut back on this vital spending,” he said.He sees as positive policy initiatives to reduce subsidies being implemented  throughout the Gulf region.“Subsidies are a very blunt tool and do not target help to those who really need it. They also lead to great inefficiencies as there is no incentive to reduce energy or water use.  Additionally, they are also extremely expensive. In 2014 Saudi Arabia spent $70bn on energy subsidies.  This is now reducing; in 2015 Saudi Arabia and Bahrain had energy subsidies of around 5% of GDP, Qatar’s percentage was lower at around 1.5%, but still significant,” he said.With regard to uncertainties surrounding the possible introduction of VAT, he said: “Currently, there is no certainty as to when or how VAT will be introduced.  Contractors are thus likely to be hit by VAT charges on projects which they are currently bidding for.  If they assume a certain uplift on their costs when they are bidding, they risk being losing out as the market is currently very competitive.”Brian Dent, |Senior International Trade Adviser, UK Trade & Investment London, said the UK had already secured substantial contracts related to the 2022 World Cup. “We consider that £200M in contract wins with 6 years to go to the event is an excellent performance,” he said.Asked what advice he would give to companies looking at doing business with Qatar he replied: “I would advise companies to consider how they can contribute to the legacy for Qatar. The 2022 World Cup is only a part of the overall plan for Qatar. Consider how you can add value beyond simply fulfilling the contract.”He added: “One of the great things about Qatar is the wide range of companies that can be successful there. We have seen successes in construction, consumer goods and financial and professional services. The key is to ensure that you reflect local needs and preferences and engage the market in an open and positive way. Be prepared to visit frequently and be committed to the long term.Archana Singh, Export Finance Adviser at UK Export Finance gave an overview of the support available to all exporters, large and small, and all types of UK exports (goods and/or services). She explained that exporters can go to their bank or to specialist financial organisations to help them get finance, and to credit insurers to get insurance against the risk of not being paid. But if some exporters are unable to get help from these private sources, UK Export Finance may be able to assist.Under the Bond Support Scheme, UK Export Finance provides partial guarantees to banks in support of UK exports. Where a bank issues a contract bond (or indemnifies an overseas bank providing the bond) in respect of a UK export contract, UKEF can typically guarantee up to 80% of the value of the bond. The guaranteed bank is protected against the failure of the exporter to reimburse it under its counter-indemnity if a bond is called and the bank is obliged to pay the beneficiary (buyer). The UK Export Finance does not charge the exporter a separate fee.