IR has some way to go at Qatar's the 42 listed companies in a region where IROs have to adapt to cultural peculiarities
Emerging markets mean different challenges for different businesses, and the Gulf region – with its booming economies – is only just beginning to get to grips with IR. Qatar, a tiny peninsula jutting from Saudi Arabia into the Gulf, has one of the richest populations and one of the fastest growing economies in the world. It is a veritable boomtown, with GDP in 2007 growing at over 17 percent.
But working in a boomtown means things can be a bit different. ‘Having worked for a publicly listed company in the UK and attended quarterly analyst meetings, press briefings and the AGM, you have an idea of how it all works in the UK,’ says Richard Turner, who was appointed CFO of Mannai Corporation, one of Qatar’s large public companies, in January. ‘Do not assume the same situation will exist in Qatar. You have to learn very quickly how things are done out here.’
In some ways, IR is nothing new for companies in Doha, Qatar’s capital, where a small but wealthy native population, as well as regulation that ensures every foreign business has a Qatari partner, means almost everyone has business interests of some description. But in an emerging market seeking its place among the international big boys, IR is also a relatively new discipline.
The Doha Securities Market (DSM), Qatar’s stock exchange, which today lists 42 public companies and has a market cap of about QR360 bn ($98.9 bn), was established only in 1997.
To list on the exchange, companies require a minimum of 30 shareholders and minimum paid-up capital of QR40 mn. Once listed, they are required to publish quarterly financial statements in two newspapers – one Arabic and one English language – as well as on the DSM website.
Cultural divide
Those requirements are easy enough to fulfill, but IR executives in Qatar have plenty of other issues to deal with. The year ending is set by the Ministry of Economy & Commerce, so all companies finish their financial year at the same time, on December 31. This leads to a yearly run on auditors and a rush to book one of Doha’s five-star hotels for the annual meeting. ‘Our AGM is being held on the same day as four other companies we know,’ says Turner. ‘It doesn’t sound a lot but there are only 42 companies on the DSM.’
Aside from the run on places to hold the AGM, IR chiefs have a cultural difference to take into consideration. Qatar is an Islamic country and prayer time is announced five times a day from the minarets of its many mosques. While observance is left up to the individual, IR chiefs have learned not to schedule AGMs over prayers.
Mannai listed on the DSM in August last year, turning what had grown into a very large family business – established in 1951 as a small auto parts firm – into a flourishing public company that counts auto-trading as just one division of its business. As an illustration of its early successes in the auto market, a sleek 1959 Cadillac Fleetwood sits in the company’s Doha showroom; ‘the pride of the royal family since its arrival in Qatar’, announces a sign next to it.
Full-year profits last year for Mannai were QR100.5 mn, up 56 percent on the previous year. Those are the kind of results investors like to hear, and in Qatar they need to be conveyed in two languages. ‘Every single letter, every single notice has to be in both English and Arabic,’ explains Turner. This means the local papers are regularly packed with congratulatory press releases.
A common complaint, however, and one made mostly by local economists, is that annual reports often surface as late as May. But an official at the DSM, who asked not to be named, says the exchange chases each company individually for its financial statements. ‘We write to them, we email them, we call them; it’s only 42 firms so it’s not that difficult to manage,’ he says, shrugging. ‘It’s a small country.’
Small is bountiful
At only 11,400 square kilometers, Qatar is small. Official results, based on a census from 2004, suggest its population today is about 980,000, though unofficially it is thought to be over a million. Only about one quarter of the population is native to Qatar, however. Most of the rest comprise a migrant workforce who have only temporary residency.
Despite its small size, Qatar means big business. With natural gas reserves estimated at 910 tn cubic feet, the economy is booming. Huge oil and gas projects are coming on line, expensive real estate developments are rising – one, the Pearl, quite literally from out of the sea – and the local population is one of the richest in the world, with research from Qatar National Bank forecasting that GDP per capita could easily reach $68,467 later this year.
These days Qatar is seeing some big developments, and IR is expected to undergo some fairly major changes, too. Foreign institutional investors will soon be allowed to trade on the DSM for the first time. There will also be a single financial regulator, a move ‘aimed at creating a best practice legal and regulatory environment for Qatar’s financial sector,’ says Qatar’s minister of finance, Yousef Hussain Kamal, who announced the initiative in July last year. ‘We are very excited about this work and expect to witness a sea change in the depth and sophistication of Qatar’s financial sector in the near future.’
Ruling classes
The regulator is due to be set up later this year and will combine the QFCRA, the existing regulatory body of the Qatar Financial Centre (QFC) – the institution under which a number of international businesses have set up in Qatar – with the regulatory function of Qatar’s Central Bank and the still-emerging Qatar Financial Markets Authority (QFMA). The QFMA is the body intended to regulate the DSM, though in practice the DSM at this point still regulates itself.
Mark Morley, head of communications at the QFCRA, says the process to combine the three institutions into a world-class regulator is well under way. ‘The minister announced the government’s plans in mid-2007, and the firms and current regulatory bodies have been working toward the creation of a single regulator sometime in 2008,’ he explains.
The new rules are likely to feel pretty familiar to western businesses, and Qatar has promised ‘no rude awakening’; once the single regulator is established, businesses will begin to come under its jurisdiction within a couple of years. ‘QFC firms and others are aware of the forthcoming changes, as is the wider community,’ says Morley. ‘There will be no sudden switch to a single rule book. This will probably take two or three years.’
The DSM has professed its readiness to fall under the regulator and Qatar’s investors have generally been unmoved, mainly because the region’s booming economy means their companies have been recording huge profits.
As an emerging market, Qatar’s businesses have yet to experience activist shareholders. Generally speaking, the investors appear pretty contented, even if many were shocked in 2005-2006 – when regional markets were swept by a serious correction – to find that prices could go down as well as up.
Overall, though, the DSM has made a lot of local people a lot of money. As one senior economist at Qatar National Bank puts it: ‘The thing to remember is that returns have been very good. People tend not to complain too much in that kind of situation.’
