The Qatar Financial Centre is to move from the West Bay area. Randi Sokoloff / The National
The Qatar Financial Centre is to move from the West Bay area. Randi Sokoloff / The National
The Qatar Financial Centre is to move from the West Bay area. Randi Sokoloff / The National
The Qatar Financial Centre is to move from the West Bay area. Randi Sokoloff / The National

Business

New Qatar financial city will be open to non-licensed foreign firms

The Qatar Financial Center is to move to new complex in Doha where overseas businesses will not be required to attain local licences to operate.

Reuters

September 20, 2016

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The Qatar Financial Center (QFC), which licences foreign companies to exempt them from local ownership laws, will move to a new complex next year shared with non-licensed foreign and local firms, its head said on Tuesday.

The QFC is one of two authorities under which 100 per cent foreign owned companies can operate in Qatar. Without licences from these entities, foreign firms typically require a local partner to own at least a 51 per cent stake.

Yousef Al Jaida, the head of the centre, said the QFC would relocate in mid-2017 to Msheireb Downtown Doha.

“Unlike other financial zones in the region, this new financial city will be open to all businesses, local and international, and will not be exclusively restricted to QFC licensed firms,” QFC said.

The QFC said Qatar’s foreign ownership rules will not change.

Mr Al Jaidah said the relocation was “to support Qatar in its efforts to diversify national income sources by facilitating the incorporation of new companies in a competitive business environment and helping local companies expand”.

The QFC, currently located in Doha’s West Bay financial district, has about 300 firms registered, including international banks such as Citigroup and Deutsche Bank. Firms are covered by QFC’s own regulatory authority.

Msheireb is 6km away from West Bay and is situated closer to the international airport and government district.

The world’s top LNG exporter and one of the richest countries per capita in the world, is also trying to mitigate a projected 46.5 billion Qatari riyal (Dh52.54bn) budget deficit for 2016.

Qatar has also sought to boost other areas of its economy to mitigate the shortfall. In June, a draft law was approved by Qatar’s cabinet setting up three special economic zones that will allow for 100 per cent overseas ownership.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”