Gas-rich Qatar is set to borrow $10 billion in international capital markets to support an aggressive international acquisitions strategy – despite being awash with liquidity – Doha Bank chief executive officer R Seetheraman revealed yesterday. With the cost of funds still low, Seetharaman said the new borrowing – details of which have still to be formalised – would help the small Gulf state radically to restructure its economy, which is now dominated by oil and gas.
Seetheraman saw no reason to fear any international reaction to the emergence as aggressive players in industrialised economies of sovereign wealth funds such as the Qatar Investment Authority and other Gulf investment vehicles. Qatar’s aim is to reach a position where, by as early as 2011, 60% of GDP would come from non-hydrocarbons sources, reversing the current ratio.
A key generator of the shift would be fixed income from investments such as the redevelopment of Chelsea Barracks in London and other choice European property, and the purchase of J Sainsbury, the UK supermarket chain. All this is on top of a huge hydrocarbons development spend, which will consolidate its position as world number one in the liquefied natural gas (LNG) market and an innovator in bringing gas-to-liquids projects on stream.
Projects now underway will raise LNG output from 30 million tonnes per year to 78 million tonnes per year, all already committed in long-term sales contracts.
Proceeds from natural gas and oil sales will finance the Qatar’s Future Generations Fund, its Oil Fluctuation Fund, and the state education and health funds, which are awash with cash – and could soon be earning even more, as Seetharaman forecasts $100-per-barrel oil this winter. Qatar’s new borrowing will help acquire more foreign assets that can be made to work for long-term benefit by providing fixed, non energy-related income.
“This is a trend across the Gulf, which by last year had foreign investments of about $500 billion”, said Seetharaman, a high-profile member of the powerful Qatari delegation attending the Annual Meetings. Other governments have nothing to fear, he added.
“Sovereign funds in this region [the Gulf] are transparent and have put corporate governance in place. Their governance capacity is vastly underestimated in the West. There are plenty of measurable disclosed numbers, and disclosure procedures.
“Who adopted corporate governance and Basel II first? It was the Gulf Cooperation Council region”, Seetharaman said. “Of course you can’t adapt Citigroup’s corporate governance to the Middle East – it must be customised. These are traditional family businesses, with ruling family owners.”
But the problem was overdramatised, concluded Seetharaman, who was named Doha Bank’s chief executive in September. He was promoted from deputy CEO to replace ruling family member Abdulrahman bin Mohammed bin Jabor al-Thani.