OBG talks to Jaber Al Hedfa, Partner, The Advisors RSM

Interview: Jaber Al Hedfa

How would unification of financial regulations across the GCC countries benefit investors?

JABER AL HEDFA: It is very important to have a common financial policy for all GCC countries, and I believe this is something investors would very much welcome. Common regulation would allow investors to move freely around the GCC region without the need to hire local professional advisors in each country. This would be a cost-effective measure for businesses and investors alike. Governments would also benefit from improved clarity and a reduced burden when it comes to processing taxes. I believe we are close to a shared financial policy among GCC countries; steps have been taken to form a Customs union, for example. A common currency is also being discussed.

What are the challenges to growth for small and medium-sized enterprises (SMEs)? How could government policy encourage their development?

AL HEDFA: There are a number of challenges facing the SME business environment. Competition is definitely one of them. When a segment becomes popular, you see too many start-ups, regardless of how big the market is here. There needs to be more information available to support businesses so that they are aware of the potential of a particular segment.

Financing for small businesses is also an issue, with terms and rates often unfavourable for SMEs. Another major challenge is reporting and sound governance mechanisms. Because companies with no foreign ownership are not obligated to pay taxes, bookkeeping tends to be an issue. This can have adverse affects on companies further down the line when they look into joint venture partnerships, apply for loans or even bid for some government contracts. In this respect, the accountancy firms and government are trying to raise awareness among SMEs to emphasise the importance of sound bookkeeping.

On the whole, I am of the opinion that Qatar, and more generally the GCC countries, have supported the development of the SME segment. For example, Qatar Development Bank has implemented the Al Dhameen programme, which insures up to 85% of financing for SMEs. In addition, Enterprise Qatar has set up a programme that works with auditing firms to provide accountancy services for SMEs.

Have foreign ownership limits discouraged investment? Should these rules be relaxed?

AL HEDFA: I believe foreign ownership caps are favourable for the long-term growth and sustainability of the economy. Plus, it is important to remember that there are exceptions. For example, Qatar and some other GCC countries have established financial centres where companies offering financial and consultancy services can operate with 100% foreign ownership. In addition, firms that conduct research and bring technology to the country are also entitled to 100% foreign ownership. It is important to attract this type of investment because it supports Qatar’s transition to a knowledge-based economy.

However, foreign ownership caps in sectors such as construction and real estate are essential to help protect the local economy, providing security and ensuring that companies are here for the long run.

Some foreign investors may have been deterred, but in sectors such as real estate, such limits can help minimise the threat of an economic bubble and inflated prices. Moreover, Qatari partners can also be helpful because they provide local know-how when it comes to issues such as logistics. In sum, I believe the current balance is very beneficial for the economy.

What are the most significant trends in Qatar’s current corporate finance environment?

AL HEDFA: The primary trend has been towards protection of the financial environment and the broader economy. Regulation is prudent, with lessons from the economic crisis of 2008 having highlighted the importance of and need for sustainable mechanisms.