Have the international financial downturn and recent regional turmoil had any tangible effects on the economy of Qatar?

MENON: I would think that Qatar has weathered both the financial downturn and the region turmoil quite effectively. We haven’t seen any tangible negative impact on the economy. In fact, all the macroeconomic indicators of the country have grown substantially. Whether its GDP growth, headline inflation, all of these factors, including the current account surplus and the fiscal surplus, have all shown that there has been very little impact on Qatar whether it’s coming out of the economic downturn or, for that matter, the regional turmoil. I would say a lot of that comes down to the country’s wealth, which is serving a smaller population and that has helped Qatar insulate itself from some of these shocks. The general economic outlook remains very buoyant. Everything is pointing toward growth and we are expecting double digit growth, even in 2012, driven by high hydrocarbon prices which are expected to remain stable, which will mean that Qatar as an economy will continue to grow. Growth is also expected in the non-hydrocarbon industries where the government is investing and there are plenty of opportunities to grow the non-hydrocarbon economy as well. All the headline news, whether it’s the GDP growth, inflation, current or fiscal surpluses, all are looking very positive. So my overall take on the economy is very positive.

In what ways are family companies becoming more sophisticated in Qatar today?

MENON: We’re seeing a lot of initiatives, at the family company level, to improve in a number of areas, whether its governance, efficiency, productivity, or profitability. A lot of it is driven out of the fact that if you need to remain in business and remain competitive and profitable, you have to change. There is need for capital and this brings into play the need for transparency. If you have to attract funds, whether it’s in the form of capital or debt, you have to be transparent and that demands that you have to have better governance standards, better reporting standards, you have to have better efficiency, and you have to make every dollar count. There is a lot of work that we are seeing, especially in improving the governance at the board level with initiative such as independence of boards, bringing in independent directors to the board, and separation of ownership and management, which is a key thing because in family organization what you tend to see is that both the decision making at the management level and the family level gets a bit mixed up.

You’re seeing a lot of changes and that’s probably more driven by the fact that all of these family businesses who run large businesses are looking to corporatize themselves. If you’re looking to corporatize, some of the best practices that you see in large corporates have to be brought into your family organization, which demands a big shift in the way you operate. We’re definitely seeing that and the government has taken certain initiatives. For example, the launch of the junior markets in Qatar is an excellent initiative in that direction because it gives an opportunity for family organizations to take the business to the public, get it listed, and get the public involved. But it also bring along the question of better governance and transparency. Your listing rules would actually force you to do some of these things; otherwise you wouldn't get listed on the stock exchange. So we are seeing a regime change in that aspect.

How is the junior market going to impact the growth potential for SMEs and family businesses?

MENON: The thinking behind the junior market is actually to allow the small and medium enterprises and the family organizations, which probably don’t have the immediate ability to get listed on the main stock exchange, to bring them to the stock exchange. The listing rules are probably a little more relaxed than the main stock exchange but still allow you to come to the market because these are smaller businesses, their capital requirements are a lot smaller than what a large corporation would need. It’s basically to attract capital, and to allow them to list that organization on the stock exchange where people can freely trade their shares. It’s also an opportunity for people to increase the value or the wealth in that organization because it allows you to put a value for the share price. It creates wealth, whether it’s within the organization or at the country level. It’s a great initiative.

How much interest is there on the part of investors for junior market listings?

MENON: It’s too early to say. I mean, junior exchanges have had mixed successes all over the world, whether you take the London one or any other one in the world. You've seen mixed success. It has not been a sure shot success. All the constituents in this effort, whether it’s the exchange, the SMEs sector, the advisors, the banks, all have a part to play to bring this together. The benefits are not going to be seen in the first few years. But after, when you have a well settled exchange, where you've taken a few of these companies to get listed, they've performed well on these stock exchanges, and they’ve improved the quality of their earnings because of the listing process, then you start to see the benefits coming through. Then automatically, you’re setting up a good number of organizations which are ready to move to the next level, which is the main stock exchange listing. It’s a great process to take the organization from one level to the next.

What are the main challenges that companies and investors looking to enter the Qatari market are likely to face?

MENON: Over time, Qatar has opened up the economy. A lot of the sectors which were not available for foreign investment are now available for foreign investment, although the percentage of ownership varies from sector to sector. Having said that, there are still some challenges around setting up a business and one that you would have to keep in mind as an investor is that the hydrocarbon sector, which is the main stay of the Qatari economy, is a regulated sector. The regulations currently allow you to invest anything from 49% even up to 100%, subject to certain approvals and in certain sectors. Where you don’t have the ability to control the majority stake, you still need to find a Qatari company with whom you can partner. That means you have to get into a tie up with one of the Qatari companies to set up that business. So identifying your best joint-venture partner, getting into a relationship, and then driving the business forward together, is obviously one critical challenge for any potential investor. You’re coming into a new country. You've got to find the right partner, your chemistry and business aspirations should work, and you have to be able to move that forward. So that’s one challenge. That’s probably one challenge but we've seen numerous companies coming and operating brilliantly here because there is so much appetite within the country to find new initiatives and to set up new business where there are opportunities. It’s not a major hurdle, but that’s one thing to think about if you’re coming to Qatar to do business.