Given to fly
Qatari outward foreign direct investment (FDI) in 2013, according to UNCTAD’s World Investment Report 2014, exceeded QAR29 billion. This is of course, largely due to the international forays of large state-owned or majority-owned entities such as Qatar National Bank (which now operates in 26 countries outside Qatar); Ooredoo (81.6 percent of whose revenue now comes from outside of the country); or Nakilat (which is looking at increasing its current investment portfolio of QAR54.6 billion). But what of Qatar’s small and medium enterprises (SMEs)? Do they have the ambition or means to expand their operations beyond the country? And if so, what is the government’s role in aiding these entities to move beyond the borders of Qatar?
Due to its central location within the Gulf Cooperation Council (GCC) countries, and its proximity to the lucrative growing markets of Africa and Asia, as well as the established markets of Europe, Qatar could ostensibly become an ideal location for local SMEs to grow internationally.
It can also be argued that in the medium to long-term, this impetus is essential for fostering growth in the SME sector, given Qatar’s market size, and the saturation level that any new product or service is likely to experience here.
However, given this backdrop, it needs some introspection, are the authorities looking beyond deliberate efforts of moving the country to a knowledge-based economy or setting up support organisations such as Enterprise Qatar (EQ)? Is it taking measures to encourage and support the countries SMEs to venture beyond the borders of the country?
Indeed, besides the above-mentioned well-backed government and semi-government organisations, most local firms that conduct business beyond Qatar’s shore have done so on their own cognisance.
One such company is Qatari multi-sector conglomerate Aamal. “We started our investments outside of Qatar in the early 2000s, by which time our group had been successfully operating inside Qatar for four decades,” says HE Sheikh Mohamed bin Faisal Al Thani, vice chairman of Aamal Company, adding that since the company is a 100 percent privately-owned business, “expanding outside of Qatar was our initiative and realisation of our vision…we had laid the foundations required to be able to expand oversees as we had established a leading market position.”
Qatari entrepreneur Khalid Al Jaber, chairman of the Innovation Group agrees that the government plays an active role in promoting expansion in listed entities such as Ooredoo or QNB, Qatari Diar and Barwa. But when it comes to entrepreneurs, commensurate measures are yet to happen.
“I was hoping to see an event organised by the government of Qatar that represents the young entrepreneurs abroad,” he tells The Edge. “I have been to one of those conferences in Europe and I was disappointed to see that SME owners were neither present nor invited.”
Zeyad Al Jaidah, managing director, TechnoQ is categorical that any out-of-the-border business activity happens at the sole initiative of the entrepreneur. His firm has set up a business arm in Oman, and he says, “I have not got any government support in opening our Oman branch. The only push I can think of is the good diplomatic ties between the two countries.”
Analysing the reasons for this apparent dearth of government support to SMEs setting up operations beyond Qatar, Bassam Yousef Al Ibrahim, CEO of Innovation Films and member of Entrepreneurs’ Organisation Qatar Chapter, rationalised, “There has been no direct support for SMEs to expand outside Qatar as the focus is purely to create a local system that would grow and expand in time.”
With little obvious direct government initiatives to help grow local SMEs beyond Qatar, what prospects do these companies have, if they want to expand?
Both Sheikh Mohamed bin Faisal Al Thani and Al Jaber opine that with the rapid economic development, the country has been experiencing over the last two decades, Qatar itself has been an attractive investment environment. This has motivated many Qataris eager to enter the
business world establish their own private businesses to service the local market.
Reflecting on how SMEs in Qatar can naturally progress to other markets in the GCC countries to begin with, Sheikh Al Thani says, “Expansion to the GCC is a natural progression given the attractive investment facilities given to GCC citizens as part of the GCC trade agreements. Several of the forward-thinking entrepreneurs have already expanded their operations outside the borders of Qatar, to GCC countries and beyond, looking at new, more dynamic, and relevant trends that can further enhance their investment portfolios.”
Giving another perspective, Al Jaber comments, “It is rare to see Qatari entrepreneurs expanding outside the borders of Qatar since the country needs SMEs to grow and consolidate their presence within the nation.”
For Al Jaidah of TechnoQ, the most important factor behind local SMEs not moving beyond Qatar lies in the commonplace businesses that local entrepreneurs own. He adds, “I believe if the product is right, the sky is the limit. We need more innovation, we need
On a similar strain of thought, Ben Aissa of QPAY says that currently most of the entrepreneur success stories are bound to industries that produce physical assets such as real estate development, manufacturing, food or farming, etcetera. “The problem with technology entrepreneurism,” he says, “is that though technology can be easily scaled and exported outside Qatar, there is very little capital for technology entrepreneurs since they do not produce a real ‘physical asset’ to guarantee the capital needed to grow their entrepreneurial venture. This creates a huge obstacle for entrepreneurs with great business models to start companies in Qatar, let alone export to the GCC.”
What might help?
Given these challenges, what recommendation would local entrepreneurs make to the government or the Chamber of Commerce or businessmen’s associations so that they become more receptive to expansion moves by Qatari entrepreneurs?
Al Jaber says that getting SMEs involved in the Chamber’s or Enterprise Qatar’s regular activities is a productive way of starting a symbiotic process. Citing reasons behind his recommendation, Al Jaber says, “I believe they are isolated somehow, or there is a gap between them. It is a good starting point to form a committee of local entrepreneurs to encourage SMEs to grow faster and cross the border of Qatar.”
He recommends that these entities should also be more involved in constructive roles when it comes to international activities and given priority treatment when it comes to licences, company registrations, and memberships of the Chamber of Commerce, “There should be regular meetings with large businesses to find possible cooperation between them.”
Al Jaber’s colleague Al Ibrahim says that the government and businessmen’s associations could support local SMEs by providing them with potential projects outside Qatar through their business ventures. “For entrepreneurs, this support could provide guidance to launch into external markets and learn from their experience,” he says.
Tarek Coury of Silatech recommends that, given Qatar’s prominent focus on hydrocarbons, it is useful to look at diversified, knowledge-based economies. He explains that Singapore’s manufacturing sector for example accounts for about one-third of its gross domestic product (GDP) and the services sector accounts for 64 percent of its GDP. Seventy-three percent of the United Kingdom’s GDP is in the services sector.
“These numbers suggest that a successful economic diversification strategy will reduce the size of the hydrocarbon sector in the overall economy by increasing the size of the services and manufacturing sectors in the non-hydrocarbon economy,” says Coury.
In order to stimulate SME growth in the manufacturing and services sectors, Coury also recommends that Qatar should endeavour to develop a comprehensive national SME strategy that allows local companies to plug into regional and global supply chains. He emphasises, “Elements of this strategy involve increased capacity to attract foreign entrepreneurs to incorporate and operate from Qatar, including changes in ownership laws; the development and activation of properly-designed economic zones, including increased logistics and warehousing capacity feeding into the transport network (seaport and airport); and changes in labour laws to allow knowledge workers to transfer to high-productivity, high-growth sectors.”