With Qatar’s economy set to expand rapidly in the coming years, the Qatar Financial Centre (QFC) is attracting the attention of international financial corporations that can help develop the country’s market for financial services.

The QFC, which was established by the government of Qatar in 2005, consists of a commercial arm – the Qatar Financial Centre Authority (QFCA) – and an independent financial regulator – the Qatar Financial Centre Regulatory Authority. It also has an independent judiciary, which comprises a civil and commercial court, and a regulatory tribunal.

Massive infrastructure spending planned ahead of the 2022 Fifa World Cup is expected to result in strong economic growth, with gross domestic product forecast to increase 6.5 per cent this year and 6.8 per cent next year, according to Qatar National Bank. Asset management companies in particular have started setting up in the country, targeting large, government-owned firms and wealthy families.

Aggressive investor

A series of high-profile purchases in recent years has earned sovereign wealth fund Qatar Investment Authority (QIA) the reputation of being an opportunistic and aggressive player. That is also attracting bankers to Qatar, wanting to work on some of the world’s biggest deals.

Part of the QIA’s strategy has been to use its financial clout to get lenders to set up in the country. After the authority bought a stake in Switzerland’s Credit Suisse in 2008, the bank established a presence in Doha. It is now often involved in the QIA’s acquisitions, and established a joint venture with the fund this year named Aventicum Capital Management.

The UK’s Barclays Bank has also been strengthening its relationship with Qatar. Barclays Natural Resources Investments, the lender’s private equity division, moved its head office to Doha this year, following a $250m partnership with the QFCA and the QIA.

“Qatar’s economic picture plays a big part [in the increased global appeal of its financial centre],” says Mark Yeandle, lead author of the Global Financial Centres Index, created by UK commercial think-tank Z/Yen Group. “People are moving there because it has a competitive environment, whereas Dubai has had its troubles in the past and is not really growing as fast.

“[Spending] is certainly one aspect. Qatar’s activity in several key areas – Islamic finance, asset management, wealth management – has led to people having quite a lot of faith in it.”

The September 2013 edition of the Global Financial Centres Index ranks Qatar and Dubai nearly evenly in terms of competitiveness. Compared to half a year ago, it said Qatar’s rating rose mainly driven by the economy’s strong growth prospects, improving infrastructure, international connectivity, low employee taxation and commitment to human development.

Qatar’s economic picture plays a big part [in the increased global appeal of its financial centre]

Mark Yeandle, Z/Yen Group

“The Dubai International Financial Centre remains the frontrunner when evaluated in terms of the number of banks or level of infrastructure, but other jurisdictions have growth aspirations of their own,” says Arshad Ghafur, Middle East and North Africa president at the US’ Bank of America Merrill Lynch. “The Middle East continues to be very relevant for the global financial sector and what we currently see is a trend for jurisdictions looking to differentiate themselves – Qatar in terms of asset management, Dubai in terms of Islamic finance. The growth in Qatar over the past five years has been tremendous and there is no doubt in my mind that this will continue to grow.”

Matching Dubai

While international banks are increasingly targeting multinationals and government-owned companies in Qatar, some are quick to point out that the QFC still has some catching up to do if it ever plans to compete with Dubai.

“Much of the business in Qatar usually involves local banks, making it difficult for other lenders to enter the market,” says a Dubai-based banker. “The infrastructure is also much less developed and there isn’t always a lot of clarity around regulatory changes, making it hard to anticipate what is expected.”

Plans to establish a more comprehensive regulatory framework could tackle some of these issues. At MEED’s Qatar Banking Summit in September, government officials said they were looking to introduce a new banking sector regulatory strategy, a central credit ratings agency, and enhancing regulation for capital markets activities. Creating an environment that will attract more bankers and financial experts is another aspect that will need to be further developed.

The situation has improved from several years ago, however, says Yeandle. “I’ve heard that people from Europe and North America are now finding it a much more user-friendly place to work. The expatriate community is finding it a comfortable place to exist. I don’t think you can underestimate the importance of globally experienced people in a financial centre.”

If Qatar’s authorities manage to tackle these issues, that could clear the way for more financial institutions to set up in the country.