Financial hub

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Shashank Srivastava, CEO of Qatar Financial Centre

The Qatar Financial Centre Authority (QFC) is a business and financial centre located in Doha providing legal and business infrastructure for financial services. It has been created with a long-term perspective to support the development of Qatar and the wider region, develop local and regional markets and strengthen the links between the energy based economies and global financial markets. Inside Investor talked to CEO Shashank Srivastava to learn more about the financial sector in Qatar.

Q: QFC recently won an award for “Best Financial Centre in the Middle East”. What makes QFC outstanding in comparison to other financial hubs in the region such as DIFC in Dubai or Bahrain? Do you see the pace of regional rivalry quickening?

A. We’ve won this award from Global Investor magazine for two years in a row, and we’re honoured by this recognition of our continued progress in building a world class financial centre. I believe that Qatar and the Qatar Financial Centre offer investors and firms established in the QFC or considering setting up here some very distinct advantages. First, credit is very much due to the State of Qatar’s far-sighted National Vision 2030 and its policy of diversification towards a knowledge-based economy, enriching Qatar’s human capital and improving economic competitiveness. This is a fast-growing economy in a fast-growing region and Qatar has an open and competitive environment in which businesses can thrive.

Second, the QFC is an integral part of Qatar’s financial services sector. It is not an offshore centre or a free trade zone. This makes the QFC distinctive.  It’s significant that almost half of the firms we licensed last year were Qatari.

Third, we have robust legal and regulatory environments which provide firms a high degree of certainty. The QFC’s legal system is modeled on English common law. The Qatar International Court and Dispute Resolution Centre QICDRC)  is an independent court to resolve disputes between licensed firms and others who agree to bring their case before it. The QICDRC is an alternative dispute resolution centre as well. And the QFC Regulatory Authority provides a principles-based regime which follows international best practice. And the QFC Tribunal, another independent entity, hears appeals against decisions of QFC entities such as the QFC Regulatory Authority.

What all this adds up to is that our standard of corporate governance is on a par with best practice globally. The QFC’s ownership and tax requirements are also attractive. Companies can be 100% foreign owned, all profits can be repatriated and firms are free to hire the people they want – the QFC has its own immigration service and can process visas quickly. The tax regime is competitive. The tax rate for QFC licensed firms is 10% on profits made in Qatar. There are no capital or social taxes.  And I’m sure people like to hear that there is zero personal income tax.

In addition, Qatar makes a first class base from which to operate. Transport links by air are excellent and growing, and regional road and rail links are in the pipeline. We have world class office and residential accommodation. Perhaps most important, given events in the wider Middle East and North Africa (MENA) region, is Qatar’s financial and political stability. For all these reasons, plus Qatar’s favourable demographics, Qatar’s financial services are growing rapidly. The country’s development as a global financial centre will only complement the work of the various other centres in the region and contribute to the region’s competitiveness.

Q: Do you see increased capital inflow from the West, especially since the EU is grappling with its debt crisis? How is this reflected in activity in Qatar?

A. I think there’s a big change taking place. There was a tendency for many years to regard the Gulf Region as purely a source of capital. This is understandable because it is obviously true that countries such as Qatar run large balance of payments surpluses and have accumulated substantial foreign exchanges reserves and overseas assets. But the region and in particular Qatar is increasingly a destination for investment.

As the West still grapples with the aftermath of the 2008 financial crisis in the shape of slow growing or stagnant economies, Western investors are seeing the opportunities for investment in Qatar. At the same time, Asian investors also increasingly recognise the potential of countries such as Qatar – although for different reasons, for example that their economies are booming and they have surpluses to invest.

Take infrastructure. Qatar plans to invest about US$140 billion over the next five years. Total infrastructure investment including the 2022 FIFA World Cup will be about US$200 billion over the coming decade. These are substantial sums by any standard. The rail and metro project, for example, is among the largest of its kind in the world. The new airport will be among the most advanced anywhere. Lusail City is an entirely new urban development over 34 square kilometers for 200,000 inhabitants.

Apart from projects and infrastructure, there is a wide and expanding variety of medical, scientific, educational and manufacturing – not to mention financial services – sectors which are becoming increasingly attractive to investors from outside the region. Capital flows tend to follow trade flows. Trade between emerging markets, particularly with Asia, has for some years grown faster than trade between mature economies, which dominated world trade for decades after World War Two. The Gulf, with an economy whose gross domestic product is about US$1.5 trillion, ranks among the 20 biggest in the world. Qatar, with the world’s third largest reserves of natural gas and a clear road map for its development, is well positioned to benefit from the shifting pattern of world trade and capital flows.

Qatar Financial Centre BuildingQ: Doha has become increasingly important to international asset managers and has been ranked in the global top six asset management centers of the future. What is this particular attraction based on, in your opinion?

A: It’s important to understand the background. Qatar’s economic strength, proactive government support of the domestic banking system and increase in public spending helped sustain high growth rates throughout the global crisis. And the country’s fundamental attractions are as compelling as ever in the current volatile financial climate. For example, as we’ve already touched on, Doha has an ideal geographical location between Europe and Asia which allows managers to work closely with financial centres such as London and Singapore. Doha and the QFC form a natural base to access the growth markets of the broader MENA region and Sub-Saharan Africa.

At the QFC, we’re continuously updating our regulatory regime in line with global developments and the needs of firms. The Collective Investment Schemes Rules and Private Placement Schemes Rules allow licensed firms either to sell funds to retail investors, or create funds for qualified investors, in Qatar. The regime provides retail customers with a range of investment options that balance returns against risk while ensuring the investment remains liquid. The qualified investor schemes are designed for those investors able to assess and bear greater degrees of risk, and the requirements are more flexible and principles based, modeled on UCITS.

And remember that the Government is also committed to regulatory enhancement. In December 2012, The Qatar Central Bank (QCB), the QFC Regulatory Authority (QFCRA) and the Qatar Financial Markets Authority (QFMA) welcomed the enactment of The Law of the Qatar Central Bank and the Regulation of Financial Institutions, which will strengthen the oversight and regulation of financial services in Qatar.

This in turn will inspire greater confidence amongst international investors, whilst potentially spurring exciting new growth opportunities for domestic and international financial services providers in Qatar. It also lays the foundation for increased co-operation between regulatory and supervisory bodies as they develop and apply regulatory and supervisory policy and implement international standards and best practices to deliver the objectives of the Qatar National Vision 2030 and Qatar National Development Strategy 2011-2016.

The increasing number of licensed firms operating under the QFC (138 as of 1 March 2013) and healthy pipeline of those looking to set up operations here are testament to Doha’s attractive business environment. Among those who established themselves in the QFC last year were Allianz Worldwide Care, Al Rayan Holdings, BoozAllen Hamilton, Daman Health Insurance, MasterCard, NEXtCARE Lebanon, QIC Capital, and Zurich Insurance.

In 2012, the QFC Authority announced the creation of the Qatar Asset Management Company (QAMC), a collaboration between the QFC Authority and the Qatar Investment Authority; QAMC then formed a partnership with Barclays Natural Resource Investments (BNRI).  In November 2012, the establishment of a new asset management firm, Aventicum Capital, a joint venture between Credit Suisse and Qatar Holding, was announced. Looking all those companies which set up in the QFC last year, I am confident that a similar broad range will follow.

Q: What further reforms and developments are still needed for the QFC to open the markets to more institutional investors, especially in the light of large upcoming infrastructure investments in Qatar where sophisticated financial instruments can play a role?

A: There are a string of initiatives Qatar has already taken to develop the country’s financial sector. I mentioned the prospect of an integrated regulator a minute ago. Measures have also been taken to deepen and broaden capital markets. Sovereign bond issues by the State of Qatar have helped to build a yield curve. A Treasury bill programme has been started. The Qatar Exchange has announced initiatives to increase liquidity and price discovery. Among the initiatives are the listing of T-bills, a proposal to allow stock lending and borrowing, listing of ETFs and REITs, margin trading, work to introduce market making, adding to the number of custodians and adjusting settlement rules to encourage trading. The exchange has also launched the QE Venture Market for small- and medium-size enterprises.

The growing depth and range of services and products which QFC licensed firms can offer strengthens the ability of Qatar’s financial system to help meet the considerable financial requirements of the State of Qatar’s infrastructure plans. For example, Public-Private Partnerships, which QFC licensed firms could enter into, have encouraging potential for funding projects in Qatar.

Q: The QFC has recently introduced new regulations to attract special purpose companies and single family offices. What do you expect from these new regulations in terms of new activities at the QFC?

A: These are important development for the QFC. The regulations will offer new opportunities for family offices and for businesses wishing to launch special purpose vehicles and build their operations in the QFC. If I may explain, a single family office (SFO) is a private company dedicated to the investment, legacy and financial needs of a wealthy family.  Interest in SFOs has grown over the last decade as wealth has increased around the world and, of course, here in Qatar.  An SFO may take a variety of different forms, but its primary purpose is to manage the investments and finances of a wealthy single family.  These services may include accounting, fiduciary, investment, property management, governance and related services. The Single Family Office Regulations (SFOR) allow SFOs to provide services to a “single family”.

The regulations create an attractive legal, regulatory and business environment which is attractive to family offices. The regulations will also help succession planning and conflict resolution by providing improved corporate governance. Under the new regulations, family offices can be run in accordance with Shariah principles – a major consideration for some families.

The Special Company Regulations (SCR) provide the legislative framework for special purpose companies and holding companies. Special purpose companies (SPCs) are entities created to fulfill specific or temporary objectives. They can typically be used in transactions involving the acquisition and financing of particular assets.  SPCs are usually subsidiary companies with an asset and liability structure and legal status that make their obligations secure, isolating risk and minimising the danger of insolvency even if the parent company becomes insolvent.

SPCs are granted a number of exemptions which would not ordinarily apply to conventional companies in the QFC. For instance, SPCs are exempt from certain provisions of the QFC Companies Regulations including exemption from the requirement to audit or file accounts or hold annual shareholders’ meetings. In addition, corporate and administrative services can be provided to SPCs by a Support Service Provider licensed either in the QFC or in another jurisdiction, subject to approval.

The SCR also seek to more clearly define, explain and clarify the activities in which Holding Companies may engage, such as: holding subsidiaries; granting security interest over assets; providing an indemnity; guarantee or similar support to any third party for the benefit of any of its subsidiaries; and the acquisition and holding of any interest in any asset whether tangible or intangible for the benefit of any of its subsidiaries.

 

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Reading Time: 8 minutes

Shashank Srivastava, CEO of Qatar Financial Centre

The Qatar Financial Centre Authority (QFC) is a business and financial centre located in Doha providing legal and business infrastructure for financial services. It has been created with a long-term perspective to support the development of Qatar and the wider region, develop local and regional markets and strengthen the links between the energy based economies and global financial markets. Inside Investor talked to CEO Shashank Srivastava to learn more about the financial sector in Qatar.

Reading Time: 8 minutes

Shashank-Srivastava-new
Shashank Srivastava, CEO of Qatar Financial Centre

The Qatar Financial Centre Authority (QFC) is a business and financial centre located in Doha providing legal and business infrastructure for financial services. It has been created with a long-term perspective to support the development of Qatar and the wider region, develop local and regional markets and strengthen the links between the energy based economies and global financial markets. Inside Investor talked to CEO Shashank Srivastava to learn more about the financial sector in Qatar.

Q: QFC recently won an award for “Best Financial Centre in the Middle East”. What makes QFC outstanding in comparison to other financial hubs in the region such as DIFC in Dubai or Bahrain? Do you see the pace of regional rivalry quickening?

A. We’ve won this award from Global Investor magazine for two years in a row, and we’re honoured by this recognition of our continued progress in building a world class financial centre. I believe that Qatar and the Qatar Financial Centre offer investors and firms established in the QFC or considering setting up here some very distinct advantages. First, credit is very much due to the State of Qatar’s far-sighted National Vision 2030 and its policy of diversification towards a knowledge-based economy, enriching Qatar’s human capital and improving economic competitiveness. This is a fast-growing economy in a fast-growing region and Qatar has an open and competitive environment in which businesses can thrive.

Second, the QFC is an integral part of Qatar’s financial services sector. It is not an offshore centre or a free trade zone. This makes the QFC distinctive.  It’s significant that almost half of the firms we licensed last year were Qatari.

Third, we have robust legal and regulatory environments which provide firms a high degree of certainty. The QFC’s legal system is modeled on English common law. The Qatar International Court and Dispute Resolution Centre QICDRC)  is an independent court to resolve disputes between licensed firms and others who agree to bring their case before it. The QICDRC is an alternative dispute resolution centre as well. And the QFC Regulatory Authority provides a principles-based regime which follows international best practice. And the QFC Tribunal, another independent entity, hears appeals against decisions of QFC entities such as the QFC Regulatory Authority.

What all this adds up to is that our standard of corporate governance is on a par with best practice globally. The QFC’s ownership and tax requirements are also attractive. Companies can be 100% foreign owned, all profits can be repatriated and firms are free to hire the people they want – the QFC has its own immigration service and can process visas quickly. The tax regime is competitive. The tax rate for QFC licensed firms is 10% on profits made in Qatar. There are no capital or social taxes.  And I’m sure people like to hear that there is zero personal income tax.

In addition, Qatar makes a first class base from which to operate. Transport links by air are excellent and growing, and regional road and rail links are in the pipeline. We have world class office and residential accommodation. Perhaps most important, given events in the wider Middle East and North Africa (MENA) region, is Qatar’s financial and political stability. For all these reasons, plus Qatar’s favourable demographics, Qatar’s financial services are growing rapidly. The country’s development as a global financial centre will only complement the work of the various other centres in the region and contribute to the region’s competitiveness.

Q: Do you see increased capital inflow from the West, especially since the EU is grappling with its debt crisis? How is this reflected in activity in Qatar?

A. I think there’s a big change taking place. There was a tendency for many years to regard the Gulf Region as purely a source of capital. This is understandable because it is obviously true that countries such as Qatar run large balance of payments surpluses and have accumulated substantial foreign exchanges reserves and overseas assets. But the region and in particular Qatar is increasingly a destination for investment.

As the West still grapples with the aftermath of the 2008 financial crisis in the shape of slow growing or stagnant economies, Western investors are seeing the opportunities for investment in Qatar. At the same time, Asian investors also increasingly recognise the potential of countries such as Qatar – although for different reasons, for example that their economies are booming and they have surpluses to invest.

Take infrastructure. Qatar plans to invest about US$140 billion over the next five years. Total infrastructure investment including the 2022 FIFA World Cup will be about US$200 billion over the coming decade. These are substantial sums by any standard. The rail and metro project, for example, is among the largest of its kind in the world. The new airport will be among the most advanced anywhere. Lusail City is an entirely new urban development over 34 square kilometers for 200,000 inhabitants.

Apart from projects and infrastructure, there is a wide and expanding variety of medical, scientific, educational and manufacturing – not to mention financial services – sectors which are becoming increasingly attractive to investors from outside the region. Capital flows tend to follow trade flows. Trade between emerging markets, particularly with Asia, has for some years grown faster than trade between mature economies, which dominated world trade for decades after World War Two. The Gulf, with an economy whose gross domestic product is about US$1.5 trillion, ranks among the 20 biggest in the world. Qatar, with the world’s third largest reserves of natural gas and a clear road map for its development, is well positioned to benefit from the shifting pattern of world trade and capital flows.

Qatar Financial Centre BuildingQ: Doha has become increasingly important to international asset managers and has been ranked in the global top six asset management centers of the future. What is this particular attraction based on, in your opinion?

A: It’s important to understand the background. Qatar’s economic strength, proactive government support of the domestic banking system and increase in public spending helped sustain high growth rates throughout the global crisis. And the country’s fundamental attractions are as compelling as ever in the current volatile financial climate. For example, as we’ve already touched on, Doha has an ideal geographical location between Europe and Asia which allows managers to work closely with financial centres such as London and Singapore. Doha and the QFC form a natural base to access the growth markets of the broader MENA region and Sub-Saharan Africa.

At the QFC, we’re continuously updating our regulatory regime in line with global developments and the needs of firms. The Collective Investment Schemes Rules and Private Placement Schemes Rules allow licensed firms either to sell funds to retail investors, or create funds for qualified investors, in Qatar. The regime provides retail customers with a range of investment options that balance returns against risk while ensuring the investment remains liquid. The qualified investor schemes are designed for those investors able to assess and bear greater degrees of risk, and the requirements are more flexible and principles based, modeled on UCITS.

And remember that the Government is also committed to regulatory enhancement. In December 2012, The Qatar Central Bank (QCB), the QFC Regulatory Authority (QFCRA) and the Qatar Financial Markets Authority (QFMA) welcomed the enactment of The Law of the Qatar Central Bank and the Regulation of Financial Institutions, which will strengthen the oversight and regulation of financial services in Qatar.

This in turn will inspire greater confidence amongst international investors, whilst potentially spurring exciting new growth opportunities for domestic and international financial services providers in Qatar. It also lays the foundation for increased co-operation between regulatory and supervisory bodies as they develop and apply regulatory and supervisory policy and implement international standards and best practices to deliver the objectives of the Qatar National Vision 2030 and Qatar National Development Strategy 2011-2016.

The increasing number of licensed firms operating under the QFC (138 as of 1 March 2013) and healthy pipeline of those looking to set up operations here are testament to Doha’s attractive business environment. Among those who established themselves in the QFC last year were Allianz Worldwide Care, Al Rayan Holdings, BoozAllen Hamilton, Daman Health Insurance, MasterCard, NEXtCARE Lebanon, QIC Capital, and Zurich Insurance.

In 2012, the QFC Authority announced the creation of the Qatar Asset Management Company (QAMC), a collaboration between the QFC Authority and the Qatar Investment Authority; QAMC then formed a partnership with Barclays Natural Resource Investments (BNRI).  In November 2012, the establishment of a new asset management firm, Aventicum Capital, a joint venture between Credit Suisse and Qatar Holding, was announced. Looking all those companies which set up in the QFC last year, I am confident that a similar broad range will follow.

Q: What further reforms and developments are still needed for the QFC to open the markets to more institutional investors, especially in the light of large upcoming infrastructure investments in Qatar where sophisticated financial instruments can play a role?

A: There are a string of initiatives Qatar has already taken to develop the country’s financial sector. I mentioned the prospect of an integrated regulator a minute ago. Measures have also been taken to deepen and broaden capital markets. Sovereign bond issues by the State of Qatar have helped to build a yield curve. A Treasury bill programme has been started. The Qatar Exchange has announced initiatives to increase liquidity and price discovery. Among the initiatives are the listing of T-bills, a proposal to allow stock lending and borrowing, listing of ETFs and REITs, margin trading, work to introduce market making, adding to the number of custodians and adjusting settlement rules to encourage trading. The exchange has also launched the QE Venture Market for small- and medium-size enterprises.

The growing depth and range of services and products which QFC licensed firms can offer strengthens the ability of Qatar’s financial system to help meet the considerable financial requirements of the State of Qatar’s infrastructure plans. For example, Public-Private Partnerships, which QFC licensed firms could enter into, have encouraging potential for funding projects in Qatar.

Q: The QFC has recently introduced new regulations to attract special purpose companies and single family offices. What do you expect from these new regulations in terms of new activities at the QFC?

A: These are important development for the QFC. The regulations will offer new opportunities for family offices and for businesses wishing to launch special purpose vehicles and build their operations in the QFC. If I may explain, a single family office (SFO) is a private company dedicated to the investment, legacy and financial needs of a wealthy family.  Interest in SFOs has grown over the last decade as wealth has increased around the world and, of course, here in Qatar.  An SFO may take a variety of different forms, but its primary purpose is to manage the investments and finances of a wealthy single family.  These services may include accounting, fiduciary, investment, property management, governance and related services. The Single Family Office Regulations (SFOR) allow SFOs to provide services to a “single family”.

The regulations create an attractive legal, regulatory and business environment which is attractive to family offices. The regulations will also help succession planning and conflict resolution by providing improved corporate governance. Under the new regulations, family offices can be run in accordance with Shariah principles – a major consideration for some families.

The Special Company Regulations (SCR) provide the legislative framework for special purpose companies and holding companies. Special purpose companies (SPCs) are entities created to fulfill specific or temporary objectives. They can typically be used in transactions involving the acquisition and financing of particular assets.  SPCs are usually subsidiary companies with an asset and liability structure and legal status that make their obligations secure, isolating risk and minimising the danger of insolvency even if the parent company becomes insolvent.

SPCs are granted a number of exemptions which would not ordinarily apply to conventional companies in the QFC. For instance, SPCs are exempt from certain provisions of the QFC Companies Regulations including exemption from the requirement to audit or file accounts or hold annual shareholders’ meetings. In addition, corporate and administrative services can be provided to SPCs by a Support Service Provider licensed either in the QFC or in another jurisdiction, subject to approval.

The SCR also seek to more clearly define, explain and clarify the activities in which Holding Companies may engage, such as: holding subsidiaries; granting security interest over assets; providing an indemnity; guarantee or similar support to any third party for the benefit of any of its subsidiaries; and the acquisition and holding of any interest in any asset whether tangible or intangible for the benefit of any of its subsidiaries.

 

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