Roger Phillips: Qatar opens up new opportunities for Scots firms

The First Minister will find a country on the verge of a construction and infrastructure explosion, as projects get under way in preparation for the 2022 Fifa World Cup.

It is forecast the world’s greatest football tournament will cost host Qatar more than £100 billion and, while we hope Scotland will be present, in the shorter term there should be ample opportunities for Scottish and UK firms to benefit.

Qatar has the third-largest gas reserves in the world and, while hydrocarbon revenues have driven GDP growth – currently $52bn (£32.5bn) – the state is committed to diversifying its economy to dilute this dependence on energy resources.

One sector in which Qatar has taken significant steps to attract investment and expertise is in financial services and asset management, in particular.

Since its formation in 2005, the Qatar Financial Centre Authority regulator has pursued a far-sighted approach to create a regional hub in the Qatar Financial Centre (QFC) for the asset management sector. Strong liquidity as a result of high oil and gas revenues has traditionally led to large budgetary surpluses within GCC states and an accumulation of investable assets.

The International Monetary Fund forecasts that the GCC will see a surplus of $238bn by 2015. This would contribute to a $1.2 trillion cumulative surplus from 2010-15, of which a significant proportion will flow directly into Sovereign Wealth Funds (SWF).

Qatar’s SWF, the Qatar Investment Authority, has made some high-profile investments in recent years, notably in the London Stock Exchange, Volkswagen and Harrods Group, and it is the largest shareholder in Sainsbury’s.

It is not only the SWF that is an impetus for the development of asset management. The country also has a significant number of high net worth individuals – it is now estimated to have the highest income per capita in the world and this wealth is set to increase significantly – while pension funds are also looking for improved returns and new ways to invest.

The dynamic of the market is also changing, with a desire to allocate investments closer to home, a wider breadth of investable assets and growing investor sophistication alongside the continuing development of international standards of regulation. Early market entry and being a “local” player is recognised as a key advantage, offering opportunities to develop relationships.

In January, the Qatar Financial Regulatory Authority introduced regulations which made the operation and marketing of collective investment schemes more accessible. The modern rules allow for QFC-based operators to manage non-QFC schemes established in other jurisdictions – subject to regulation of their home state.

The rules also permit the marketing of non-QFC schemes in Qatar to retail customers, so it’s entirely possible we will see Scottish and UK funds dipping in to this market and taking advantage of opportunities, which had, until recently, been limited.

It is also now possible for independent depositories and trustees to set up in Qatar and to provide a very broad scope of administrative services with great flexibility. So again, we could see custodian depository businesses such as Royal Bank of Scotland viewing Qatar as a potential new market.

Incentives for businesses that are looking to establish operations in the QFC and have “people on the ground” include exemption from tax for asset management businesses – there is no personal taxation – and there are also “seeding initiatives’” to help grow local funds under management.

The First Minister is known for his love of horseracing, but I am sure that following his visit this weekend even he would not bet against Qatar succeeding in its quest to become a financial services powerhouse.

• Roger Phillips is a director in legal firm McGrigors’ regulation, compliance and public policy team, and is based in Doha, Qatar