development > coverstory

Getting ready for

cover story
52 > qatar today > may 2013

2022

Qatar is about to be ploughed up and the 2022 World Cup seeds to be sown. Plans are being made, tenders launched and contracts signed. Its like the phoney war period between the declaration and the opening battle, as parties prepare and brace themselves for the inevitable. the country now faces nine years of construction, disturbance headaches and traffic chaos.
By Rory Coen and Sindhu Nair

But out of this chaos will come fantastic opportunities for entrepreneurs who want their slice of the World Cup pie. The Qatari government, which is shouldering most of the cost and the responsibility, is serious about getting the private sector involved. The World Cup is more than just the four weeks in 2022, it's also a chance for small to medium-sized enterprises here to gain traction, grow, diversify and ultimately export their products and services to a much broader market. Its a chance for them to learn from the larger and more experienced international companies that will be bringing their expertise here. Qatar Today talks to one of the organisations heavily involved in the infrastructural side of things, Qatar Rail, as well as getting insights from representatives of the London Chamber of Commerce and Industry about how businesses there leveraged the 2012 Olympics. Meanwhile, Project Qatar has its tenth exhibition at Doha Exhibition Centre this month, and this will give stakeholders a forum for exchanging information.
qatar today > may 2013 > 53

development > coverstory

atar has been given more time than any previous host nation to prepare for a World Cup. It has been two and a half years since the FIFA announcement in December, 2010 and were still over nine years away from the opening ceremony. Any nation that has hosted a major sporting event, such as the Olympic Games or the FIFA World Cup, will stress that preparation and proper planning are key to a successful event, getting the right decisions made early so that everyone has ample time to carry out their tasks. Many of the infrastructure plans were announced in 2010 and 2011, but the award of contracts has been slower than many business people and investors expected perhaps reflecting caution as well as bureaucratic delays. The government argues that most World Cup projects were planned in the 2030 National Vision anyway but the announcement has made them shift some milestones and deadlines. According to the Tender Price Index for Qatar prepared by MEED Cost Indices, Qatars construction industry will have to deal with soaring construction costs as the country gears up for the staging of its biggest event. But these are not the only challenges as 2022 approaches. Construction costs in 2017 will be 18% higher than current price levels, putting strain on Qatars supply chain, and will ultimately have an impact on the value of contract awards from 2013 onwards, reaching a peak of QR 145 billion ($40 billion) in 2017.

Accelerated development Winning the World Cup has certainly set the country on a course of accelerated development. Infrastructure and real estate projects worth QR820 billion ($225 billion) are planned between 2011 and 2016, of which QR455 billion ($125 billion) is earmarked for construction and energy projects alone. Most of the big infrastructure projects will now have to be finished by 2022. Aside from preparing 12 new world-class stadia, upgrading its domestic transport system is among Qatars investment priorities, with funding of at least QR250 billion ($70 billion) worth of projects that have already been planned. The biggest chunk of the infrastructure spending will be poured into the countrys new rail and metro network, where more than QR125 billion ($35 billion) will be invested in the next ten years. In addition, Qatar plans to modernise its road system through an extensive expressway network worth a total of QR72 billion ($20 billion) in contracts. The transport master plan includes an upgrade of 400600 kilometres of existing roads at an estimated cost of QR30 billion ($8 billion); as well as expansions for Qatars three main ports Ras Laffan City, Mesaieed City and Doha Commercial Port and further expansion plans for the QR45 billion ($12.5 billion) new Hamad International Airport. In 2012, one of the biggest contracts awarded was for QR4.5 billion ($1.2 billion) for an affiliate of United Development Co. to dredge a 20-kilometre approach channel for the port. 2013 has seen some contracts signed by Ashghal and a major chunk by Qatar Rail. These large infrastructure projects will

Qatar has the pick of the world coming here, and well have to fight and well have to be a partner instead of just coming here and selling something. Theres a stiff market and stiff competition.
Colin Stanbridge Chief Executive of the London Chamber of Commerce and Industry (LCCI)

The time to start delivering for the World Cup is now, says Robin Butteriss, Head of Financial Advisory Services, Deloitte Qatar. He feels that preparations for the World Cup are ultimately an accelerator for the Qatar 2030 Vision and will keep everyone focused.

54 > qatar today > may 2013

Beyond the World Cup

atars World Cup honeymoon period coming to an end, and the task of delivering on its 2022 promise is moving closer every day. The biggest challenge is getting the infrastructure in place. As a relatively young and developing nation, Qatar is pretty much starting from scratch in this regard and is spending billions of riyals to put it all in place. But is it a sustainable project? The 2022 World Cup in itself is not the reason why the country is building its infrastructure, says Robin Butteriss of Deloitte Financial Services. Qatar is building its infrastructure to support its 2030 National Vision and beyond." There is lot happening in the infrastructure space, such as the Qatar-Bahrain causeway, the Aspire Zone area, the roads, the ports development, Msheirebs development of downtown Doha, and Lusail City. But other than these construction activities, the other tangible signs of the impending 2022 World Cup are the influx of population on the back of large infrastructure companies coming to set up branches here. The residents of Qatar are already feeling the effect of road development. The next tangible sign of development is likely to be seen through large contracts signed in the next few months associated with rail projects, says Butteriss. Ashghal and Qatar Rail will take the large slices of the World Cup 2022 projects pie, but what will be the opportunities arising from these massive projects for small and medium-sized enterprises? There will be significant opportunities for local businesses through partnering with international business. Then there will also be direct opportunities through the supply of raw and manufactured materials, labour or even local know-how, he says. What needs to be leveraged is the huge amount of expertise that will be here as part of the project, feels Butteriss. It would be a shame not to leverage the knowledge-base that will be here for some time to build the city, he says. The challenge is not unique The task that Qatar has to deliver for the 2022 World Cup is by no means small, and thats not unique to Qatar; any country that has to be ready for a huge event goes through the same challenges. But a challenge it is, nevertheless, Butteriss agrees, and one that can be delivered with a labour force that is skilled and efficient, where supply chain requirements are met and a recruitment process that is efficient is in place, and a system whereby international players who are required to support the development of the country are able to do so without major hindrances. Qatar must keep in mind is that the country is playing in the global arena for scarce resources and accordingly laying the foundation to attract the best of these resources will be the key sucess factor, he argues. When would be the best time for the country to begin in earnest the work towards completion of large

projects to be in time for the big event? Carpe diem The time is now, says Butteriss, There are already a lot of skilled workers in residence, and the challenge is to engage these resources in an effective and efficeint manner. The scale of the task ahead will challenege all involved, and these challenges will evolve as the projects develop. While huge investments will be made by international firms, it should also be kept in mind that these firms must deliver not just on short-term but on long-term goals. Long-term partnerships that lead to knowledge transfer are the best for any developing country and should be the norm for any large projects. It is important for the international community to interact with the local authorities, and they should be ready to support the transfer of knowledge and expertise, he says. Irregular payments, a lack of transparency in deal-making, weak enforcement of the law and occasional political turmoil have left some companies badly burnt in the Middle East, according to another consultancy firm. The average value of disputes in the construction industry in the Middle East doubled to QR407 million ($112 million) in 2010, bucking a downward global trend, according to global consultancy firm E.C. Harris. There has also been widespread sense of foreboding with complaints about contractors not paying subcontractors on time, thereby reducing the appeal these firms have for the country with huge projects in the pipeline. How true are these rumours? I do not believe Qatar is looking to short-pay or under-pay any contractors, clarifies Butteriss, qualifying the reports. Qatar is holding itself to the promises that have been made for the 2022 World Cup, and will do so by delivering the projects too in all transparenct manner. There are procurement norms within the country, as there are with any country, which need to be fully understood. Failure to comply, will typically result in delayed payments which is how it should be. So many of these complaints are merely a matter of misunderstanding and miscommunication, he stresses. Looking ahead There is far too much negative press around what is going on in Qatar, believes Butteriss. The best way to meet the challenges of the World Cup 2022 is first to dispel the myths and improve communications around the programme, thereby fostering a more collaborative approach to embrace the task together with the private partnerships. The vision is understood and now the task is to make the delivery is as clear as the vision. There is considerable time for the delivery, but the challenge is to begin without delay and to coordinate all the various factors to make this whole process a cooperative effort, says Butteriss.

qatar today > may 2013 > 55

development > coverstory

The new rail networks must be built from scratch at the same time as the nations new highways, cities and sea and air transport hubs, driving up demand for people and equipment, and putting pressure on project deadlines.
give small and medium-sized enterprises (SME)s a real boost in the coming years, and Qatar Rail feels that although the Qatar government is stumping up most of the capital, its a great opportunity for private sector investment. Qatar Rail is one of the major stakeholders in the big push towards 2022. Its total budget for the next decade stands at approximately QR145 billion ($40 billion). Over 104 business opportunities have been identified from across the areas of rail infrastructure, transport and rolling stock and other business support, a Qatar Rail spokesperson says. The biggest areas identified are in construction and installation, and services and maintenance. Over half of the identified business opportunities can be captured in Qatar, raising some QR73 billion ($20 billion) over the next 20 years. There are a number of quick win opportunities for the private sector within areas of the rail projects, including infrastructure provision, operations, rolling stock provision, transport operations, maintenance and management services, with revenue potential beyond the completion of the Qatar Rail projects. Some of these revenue figures run to over $1 billion (QR3.64 billion), such as provision of frameworks for stations at QR4.4 billion, the supply of liquid concrete at QR3.64 billion, project management services at QR13 billion, the provision of elevated structures at QR12 billion, or the supply of steel reinforcing bars and billets at QR7.6 billion, and many more related business avenues, the spokesperson adds. The rail projects will be worth 0.3% of the Qatari economy each year and an annual increase of 0.7% for the private sector, but this, Qatar Rail insists, along with these fantastic opportunities, will bring enormous challenges. The Qatari private sector will have the opportunity to partner with international companies, Qatar Rail says, since local companies have the required expertise in

Qatar Rail

Projects news

QR billion

2.35

3.53
deal was awarded to South Korea's Hyundai Engineering & Construction for the Lusail Expressway. According to MEED Projects, spending on future projects will significantly increase this year as more than 30 highway projects, valued at QR100 billion, are awarded.

QR billion

I80
Contractor Drake & Scull International won a QR180 million contract to deliver mechanical, electrical and plumbing works for a housing development in Qatar.

Qr million

Qr million

225

deal was awarded to the UAE's Al Jaber Group for package 13 on the Doha Expressway.

Engineering consultancy Hyder won a QR255 million contract from Ashghal to design and supervise construction of a new section of the Doha Expressway project. (April 2013)

56 > qatar today > may 2013

the existing regulations and local projects and logistics. However, the international companies have expertise in establishing railways, so there will be integration between the two, which will give the executing companies more abilities and power. Qatar Rail has set stringent norms for the big tenders, stating it is a must to have a partnership between the foreign partner and local companies. The challenges in executing any project of this scale are clear: time, money and expertise. The new rail networks must be built from scratch at the same time as the nations new highways, cities and sea and air transport hubs, for example, driving up demand for people and equipment, and putting pressure on project deadlines. Piece of the pie Qatar is still a developing nation in every sense of the phrase but leaders here are pragmatic in their approach to 2022, as evidenced by Qatar Rail above. They know they dont possess the expertise to prepare for such an event as a World Cup, and that they need to leverage any advice and assistance they can get. This of course brings other pressures, as every city and nation on the planet will feel they can provide this advice better than the next one. London saturated itself with event planning expertise in the run-up to the 2012 Summer Olympic Games, and it now has dozens of companies brimming with intellectual capital. But this knowledge is now virtually redundant in a city which has no plans for hosting large-scale events in the near future. Part of the legacy plans put forward by the London Organising Com-

As Qatar moves forward and as small businesses start to come forward to compete for contracts, the important thing is that they have an opportunity to engage with large international corporates, and this is an experience in itself.
Will Tyler, CEO of Octlink Ltd

mittee for the Olympic Games (LOCOG) was to help these SMEs export this expertise post-2012. Indeed, LOCOG maintains that without these SMEs diversifying their products and services to meet the needs of the London Games, its success would have been compromised. To stimulate the SME sector in the UK in the run-up to the Games, LOCOG introduced a free service that enabled businesses to compete for contract opportunities linked to major public- and private-sector buying organisations. The idea became so popular across the UK than more than 50,000 companies registered on www.competefor.com. It acted as an electronic brokerage service, matching buyers with potential suppliers, and had a particular focus on opportunities in the supply chains of major organisations, which are often not visible to smaller businesses, although they usually offer smaller and more achievable packages of work. The types of business opportu,ni-

ties available ranged across all sectors of the economy. Examples included specialist construction plant hire, cleaning and catering services, kennelling for police dogs and the design of the London 2012 mascots. Colin Stanbridge, Chief Executive of the London Chamber of Commerce and Industry (LCCI), which was in Doha last month to drum up business for members of the Chamber in Qatar, said they were very concerned to provide for small businesses in the lead-up to the Olympic Games. Its all very well the big companies benefiting from it, said Stanbridge, but we were concerned that we represented all sizes. We convinced the Olympic Delivery Authority and [LOCOG] to publicise their opportunities [on the CompeteFor website] for smaller companies. We felt that one of the key elements was that the Olympics should be used as an opportunity for companies to be able to think about gaining an international reputation, and indeed one of the great benefits for any

QR Billion

I2

II.49
Qatar Railways recently signed contracts worth QR1,490 million for its planned QR130 billion Metro. The company awarded a contract for consulting engineering services and project management to US firm Jacobs Engineering Group to manage the metros Red Line. Qatars planned metro project will include four rail lines and will link stadiums for the 2022 tournament, with an underground component in the centre of the capital, Doha. It is expected to employ more than 20,000 workers during the peak of construction. A team comprised of US-based Louis Berger and Frances Egis Rail will manage the Gold Line and main stations, and US firm Hill International will manage the Green Line. The three contracts are worth QR1.14 billion. An enabling works contract worth QR288 million was also signed with PORR-SBG-HBK Group, a division of Qatari firm HBK Contracting Co. Britains Lloyds Register won a contract for independent safety assessment worth QR55 million.

QR Billion

A wave of new contracts are set to be awarded at Dohas New Port project as work progresses throughout 2013, says Tim Verdon of AECOM. The project has three of the largest contractors signed up already, and weve got another three to sign within the next few months. The level of contracts set to be awarded to contractors by the end of the year is likely to reach around QR12 billion. A tender for a 1.3 km-long bridge linking to the naval base will be floated soon.

qatar today > may 2013 > 57

development > coverstory

country or city holding a big sporting event is that it allows the world stage to come to the small company. It allows them to be part of something that they wouldnt normally have a chance to be part of. We hope that in years to come these companies will grow because they have been part of a big sporting event, and indeed this should also happen in Qatar, he says. Stanbridge explains that there is so much more for a company to cope with in the helter-skelter world of major event planning than just getting the job done. What these small companies in London learned is how to deal with the bureaucracy and officialdom that goes with any big sporting event, he says. Thats a huge skill for a small company to achieve and its almost as important as the fact that theyre good at what they do. They can do the job, but they can also deal with the many hurdles and barriers that they observe. And its important that the companies in Qatar will gain this as well and sell these skills to the world, just as we are doing now. Will Tyler, Chief Executive of Octlink Ltd, which was a large-format printing company before the Olympics, found they could diversify its offering once it realised the vast opportunities that an event like the Olympics could provide. Octlink is a London-based distributor for construction fencing and barrier protection products, and it worked with London 2012 to deliver such products as graphics and signage. It was part of the LCCI mission to Qatar last month to promote its portfolio of products, looking for distributors alongside sales opportunities. The construction side of our enterprise very much came from the amount of construction that we found ourselves doing as a result of the Olympics, says Tyler. We are a good example of a company that diversified because of our interaction with 2012. As Qatar moves forward, and as small businesses start to come forward to compete for contracts, the important thing is that they have an opportunity to engage with large international corporates, and this is an experience in itself. It will take away the fear factor to start exporting in the future, which youd feel is going to be a key goal for those companies to grow, he adds. Smaller projects Next month, Project Qatar will host its tenth annual exhibition at the Doha Exhibition Centre, where buyers, suppliers and decision-makers will meet to network, share knowledge, negotiate and forge deals. So aside from the major infrastructure projects that will be ongoing across Qatar in the next decade, what are the smaller projects that SMEs might be interested in? Will they be able to diversify their products and services to meet the needs of the World Cup 2022 Supreme Committee? George Ayache, General Manager of IFP Qatar, says: All eyes, especially those of small and medium-sized contractors, are on Qatars construction sector, which is expected to grow 12.5% over the next decade. Around QR220250 billion is expected to be spent on hotel, leisure, tourism, sports, recreational and infrastructure projects, Ayache continues. Some other key projects on the minds of those attending our exhibition are the 433,000-square-metre Doha Festival City mall and the 271,000-square-metre Barwa Al Doha project. Contractors will need to be agile and responsive to market demand. Bringing products and services that meet rapidly evolving demand to such a booming market is one major, albeit welcome, challenge. Another, broader, economic challenge was that the construction sector suffered a decline in 2009, following the global economic crisis, but this was temporary and even non-existent in resilient countries like Qatar. In general, the construction industry in the region started recovering in 2010 due to the huge public expenditure on infrastructure made possible by the revenue increase from rising oil and gas prices worldwide. In general, the construction sector remains very promising in the region for the next 10 to 20 years, he says

All eyes, especially those of small and medium-sized contractors, are on Qatars construction sector, which is expected to grow 12.5% over the next decade. Around QR220250 billion is expected to be spent on hotel, leisure, tourism, sports, recreational and infrastructure projects.
George Ayache, General Manager of IFP Qatar

Powering the World Cup

Kahramaa is currently trying to forecast the Qatar 2022 needs for electricity and water in order to secure very high reliability of transmission and distribution systems. The country has more than 2,700 MW in excess installed electricity capacity and is in the process of launching a new tender for water desalination to increase the countrys water capacity to meet growing demand. So its 2022 plan can be summarised as supplying enough electricity and water capacity from gasfired and renewable plants in addition to securing electricity and water transmission and clean redundant distribution systems at the supply points to all the stadiums and main event locations. This will be coupled with a coordinated contingency and emergency plans tailored to meet the needs of the organisers.
58 > qatar today > may 2013