While the West languishes in recession, Qatar is enjoying strong growth and offering attractive opportunities, writes David Sandham.

During a period of recession it makes sense to pay more attention to areas of the world which are still enjoying strong growth. In the general global economic gloom, the Gulf region stands out as a ray of light. In the fourth quarter of last year, gross domestic product (GDP) declined by a frightening 6% in both the United States and the euro zone. Japan was even worse (down 13%). This year, the US and Europe and Japan will suffer GDP decline. The Gulf region, by contrast, is one of those parts of the world (others are China and India) which will show strong growth, though not as strong as last year.

The Gulf region is not uniform. Dubai, whose oil reserves have run down, has until now pursued economic growth most aggressively, particularly through property. But the bubble has burst. On 22 February the central bank for the United Arab Emirates came to Dubai’s aid by purchasing $10bn of its bonds, enabling the emirate to meet its obligations.

Dubai’s strategy contrasts with the more conservative strategy of Qatar. Qatar’s capital Doha (‘Dull Doha’ as it is sometimes called), is sitting on vast hydrocarbon wealth. Its relative financial conservatism now looks decidedly canny. It has more than 5% of the world total reserves of natural gas, the third largest in the world after Russia and Iran. It earns huge sums in foreign currency, and with a relatively small population, is one of the richest countries in the world in terms of GDP per head.

The Qatari government is applying this natural resources wealth to development in other areas, including finance. In 2005, it set up the Qatar Financial Centre (QFC), a business centre to attract foreign companies and develop the market for financial services. Qatar has plans to become a regional hub for insurance. One investment is Qatar Insurance Services, a state of the art technology-based insurance system, currently being tested by companies such as Aon, Robert Fleming, AIG and Axa. Another investment is the Qatar Finance and Business Academy. Qatar is also investing in its regulatory and supervisory infrastructure.

But Qatar is not immune from the financial crisis. The Qatar Investment Authority has recently been buying equity in local banks to support them. A planned unification of its three financial regulators - the Qatar Financial Centre Regulatory Authority, the Qatar Central Bank, and the Qatar Financial Markets Authority – has been delayed. With a currency pegged to the dollar, inflation has also been a problem.

Qatar is surprisingly culturally diverse. Visitors are often struck by the international outlook and sophistication of its people. The media is free by Middle Eastern standards. Links with the UK are strong. The Emir, Sheikh Hamad bin Khalifa Al-Thani, attended the Royal Military Academy Sandhurst. Many key positions are held by British ex-pats.

Lloyd’s of London is currently looking for somewhere to site an office in the Gulf. It was rumoured to have been considering Dubai, but the decision has been delayed, and some think Qatar’s strong showing, as well as the recent economic troubles in Dubai, may be tempting Lloyd’s to reconsider.

David Sandham is Editor of Global Reinsurance

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