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The Fund, The Country and Football – part one

Carnegie Mellon University in Qatar
Carnegie Mellon University in Qatar

Qatar has for a long time been off most people’s radar, but when the FIFA crisis erupted earlier this year, the former British protectorate was thrown firmly into the spotlight. So it seemed an opportune time for Neil Martin to have a chat with Nick Wilson, Chairman of Qatar Investment Fund plc on how the fund is doing and also learn more about Qatar itself. The first part appears below.

Part I: The Backdrop

Qatar might not be one of the loudest voices in the Gulf region, but when it comes to economic might, it has to be one of the most powerful countries in the world.

Blessed with oil reserves of 25 billion barrels (60 years production at current rates) and gas supplies which are the third largest in the world (set to last for 160 years), Qatar is building for its people a prosperous future, away from reliance on just oil and gas. It has a vision that extends way into the 21st century.

Qatar used to be a British protectorate and gained independence in 1971. It is an absolute monarchy and has at its head Emir Sheikh Tamim bin Hamad Al Thani. The Al Thani family has ruled the sovereign Arab state since the middle of the 19th Century. After Saudi Arabia, it is said to be one of the most conservative countries within the Gulf Cooperative Council (GCC) and most of the nationals follow a strict Wahhabi interpretation of Islam. In 2014 the population was just over two million, of which only 12% are Qatari nationals, the remainder being expatriates.

It measures 4,467 square miles and sits on North Eastern coast of the Arabian Peninsula. It’s only land border is with Saudi Arabia in the south. The rest of the country is surrounded by the Persian Gulf.

Football World Cup 2022

Ask most people in the West about Qatar and they might know one fact, that it will, all things being well, host the Football World Cup in 2022. It will be the first country to do so in that region. Most people will also know that FIFA’s decision to choose Qatar as the host to the world’s premier football event has not been without criticism, not only questioning the process which saw the country win the bid, but whether players and fans are ready for such a novel and hot location. There have also been concerns raised over the rights of migrant workers who have flocked to the country to benefit from the boom in construction.

Nick Wilson Chairman Qatar Investment Fund plc
Nick Wilson Chairman Qatar Investment Fund plc

But those issues to one side, you only truly appreciate the magnitude of the country’s economic might when you talk to someone like Nick Wilson, the current Chairman of Qatar Investment Fund plc.

Initially listed in London on AIM in 2007, it joined the main market in 2011 and has steadily attracted the attention of institutional investors who are looking to enjoy a share of the wealth that comes from a flourishing economy. If you want to directly invest in Qatar it is very hard, explained Wilson, saying you not only need a custodian, but also there are high charges attached.

Qatar Insurance Company

Whereas Qatar Investment Fund has the advantage, said Wilson, of having the Qatar Insurance Company, the biggest insurance company in the GCC, as its manager since 2007. This gives Qatar Investment Fund an active management team on the ground and one which has valuable insight into what’s going on with the country’s companies.

Some of the facts and figures about this country are amazing. Starting with the fact that it has the highest GDP per capita globally of $143,000. That’s twice that of the US and three times the UK.

Like Saudi Arabia, Qatar seems determined not to panic about the oil price which has dropped dramatically from its plus $100 high. The reason for Qatar’s relaxed attitude is simple: it costs just $10 a barrel to lift it out of the ground, so even at today’s prices of just under $50 a barrel, the gross profit is significant. This headroom allows them to budget with some confidence. Wilson said: “Yes, at current levels they can hold out indefinitely. Last year, when they were doing their budget for this year, even though the oil price was $110 at the time, they actually based their budget on $65, they always take a pretty conservative view. And at $65 they were going to show quite a good budget surplus. Well the average for the year is still over $70, so they’ll probably show a small surplus this year, next year they’ll just pitch their budget to think what the oil will be.”

As for its future strategy, Wilson explained: “What they want to do is create in Qatar alternatives to oil and gas. They also have a lot of overseas investments, not just in London, but they are buying in America and Asia, so that they have got a secure income from investments from around the world.”

Big Buyer Overseas

The Qatar Investment Authority has been a big buyer overseas. In London alone it owns The Shard, Chelsea Barracks, Harrods, 1 Hyde Park (a large development), the Olympic Village (and much of the land around it ear-marked for affordable housing), The Berkley Hotel, The Connaught (a controlling interest), Claridges and The Savoy.

Internally this strategy manifests itself in long term infrastructure projects. Wilson said: “At the moment there is a lot of infrastructure spend and this is driving the economy like mad, over next seven years. Project spending is estimated to be in the region of $200bn and it’s the highest planned project spend per capita in the region.”

This includes an entirely new City which is being built. Called Lusail, it will have eventually a population of around 400,000, the size of Edinburgh. A new airport, opened last year, is being further expanded and is set to have an annual passenger capacity of 50 million, making it probably the largest hub airport in the region. They are also building a new sea port.

But, for Wilson, the project that most interests him is the new metro underground system in Doha, the country’s capital. With a 402km track length, it’s roughly half the size of the London underground, but whereas that took 150 years to complete, this new system will be ready in four years.

Population Growth

Population is growing at a rate of about 10% per year and the country is seeing a lot of white collar workers coming into middle management posts which, said Wilson, is good for the economy.

Part of the future for the people of Qatar is improved education and health systems. Wilson said that the Government is moving onto the human capital of the country, and they have said they will spend by 2018 $60bn on 85 schools. The Qatar Foundation also finances a development on the outskirts of Doha called the Education City. Situated on 14 square kilometres it houses six leading universities, including Texas A&M, Cornell, University College London and the Qatar University Facility of Islamic Studies.

The Government is also spending a huge amount of money on hospitals said Wilson, hoping to become a centre of medical excellence for the region.

Read Part Two.

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