Public Private Partnership and Financial Stability are Driving Forces for Qatar’s Banking Industry

The Business & Investment in Qatar Forum

The Business & Investment in Qatar Forum was held at Waldorf Astoria Hotel, Newyork – USA on 6th and 7th April 2011.Top International and Arab Bankers, economists and business professionals participated in this event. Mr. R. Seetharaman, Chief Executive Officer – Doha Bank attended the panel discussion on “Finance and Banking.

Speaking on the panel Mr. Seetharaman explained the current scenario prevailing in the global economy and the basic challenges economies face in moving from crisis to stability.He stated that “Global economy is expected to grow at 4.4% in 2011.In Feb 2011 the G20 agreed indicators for measuring imbalances include public and private debt and level of private savings. The sovereign risks are mainly at Euro zone. In March 2011 the European Union announced of a permanent $700-billion safety on concerns from Portugal.”

Mr. Seetharman focused on the regulatory reforms in GCC financial industry. He state that “ In Jan 2011 Qatar Investment authority acquired another 10 percent of the promised 20 percent stake in Qatari banks reflecting Government’s continued support for Qatari bank to strengthen their financial positions. This measure puts Qatari banks at the forefront of banks that are working to implement the requirements of the Basel Committee Qatar already has plans to implement Basel 3 by 2013 five years ahead of stipulated deadline. Qatar is also working towards the single regulator. With this initiative, Qatar follows an international trend toward an integrated approach to the regulation of different financial services products and activities. In GCC we have seen the single regulator in Bahrain.”

Mr. Seetharaman gave his economic outlook on Qatar Economy. He stated that “The National development strategy 2011-16 will balance challenges of Qatar’s National vision 2030.Qatar economy is expected to grow have a robust growth in 2011 and broadly favourable in next 5 years. Beyond 2011 real GDP growth can drop as current investment in hydrocarbon decrease gets completed. Aggregate GDP growth in 2012-2016 is expected to average to 6.9%, out of which Hydrocarbon GDP growth is by 4.4% and Non- Hydrocarbon GDP by 9.1%. Overall fiscal position is expected to healthy with surplus of 5.7% of GDP by 2016 and current account balance will remain high at 15% of GDP by 2016.Even if oil average price is at $74 per barrel, average Nominal GDP level of Qatar would shrink to 2% by 2016 and with Govt planning to diversify its income over period, adverse fiscal impacts would be dampened.”

Mr. Seetharaman while highlighting the industrial trends in Qatar stated that “Services is going to be the major driver. By 2016 service sector could account for 40% of total output up from 36% in 2009.Transport and communications, financial services, could grow vigorously. Potential seen in construction and manufacturing. FIFA world cup 2022 may provide oppurtunities in tourism and other areas. World cup will create opportunities to form strategic alliances externally and to connect to global value chains.”

Mr. Seetharaman provided his opinion on the investment and savings trends in Qatar and stated that “During 2011-2016, total gross domestic investment might be about QR820bn out of which Private non-hydrocarbon sector is expected to be QR 389bn. Investment of Q-based companies of next 5 years is QR 130bn. Non hydro- carbon investment also driven by Qatar government companies. After 2012 5% points of additional public sector investment spending would be needed to generate 0.5 % point temporary acceleration of growth in non-hydrocarbon output.Gross investment is expected to average 25% of GDP over 2011-16.Gross national savings are likely to remain above 40% of GDP through 2014, but might edge down in the later years. Population expected to be steady – grow at an average of about 2.1% in 2011-16.The rapid population growth of the recent past is not expected to continue. Qatar’s budget 2011-12 has a surplus of QR 22bn and focuses on education, health care and infrastructure projects”

Mr. Seetharaman also gave his opinion on recent banking trends in GCC” In Qatar lending and funding in foreign currency has increased in recent times. Private sector has shown revival in recent times. Qatar and Oman banking sector reflected healthy trend in 2010. In the near future improvement in Net interest income and decline in provisioning is expected in GCC banking industry. Banks in Kuwait, Oman, Qatar and Saudi Arabia to benefit from infrastructure development”

Mr. Seetharaman also gave insight on investment opportunities in GCC “The Price earnings and Price Book multiples of Qatar exchange are still attractive when compared to emerging economies. Abu Dhabi and Qatar banks provide good investment opportunities. Petrochemicals are also good segment to consider for investment apart from banking due to higher capacity utilization in the industry. Insurance industry is also should be watched in Qatar, Kuwait and Saudi Arabia”

In his concluding remarks, Mr. Seetharaman said “The public-private partnership model and measures towards financial stability will be the key drivers to GCC Banking industry“