Kuwait’s drive to diversify and open up its economy, attracting international investment and making its own companies international brands, has created opportunities for the public relations sector, which some observers expect will double its activities over the next year.

With many of Kuwait’s companies going international over the last decade, spreading the base of their operations around the globe, there is a greater need than ever to get the corporate message across to an expanding audience, be it the public, institutions or governments.

This was one of the key messages of a two-day conference that wound up in Kuwait City in December 2006, on the role of public relations staged by the Gulf chapter of the International Public Relations Association (IPRA).

Working under the title of The Engineering of Human Relations, the conference focused on the need for greater understanding of the importance of PR in the region and the benefits it offered across a broad spectrum, ranging from promotion to risk management.

Campaigning the PR sector

There is an increasing interest in Kuwait and the region in the value of PR as a management tool, according to Iatidal al-Aiar, the chairperson of the committee organizing the conference and a member of the IPRA-Gulf Chapter’s board.

“The recent advances in the PR sector in Kuwait in particular and the Gulf in general can be attributed to the increasing awareness by senior managers of major firms and organizations of the risks and challenges that face them, and how PR could be used as a strategic tool in addressing these issues,” said al-Aiar.

However, while the PR sector has been developing in Kuwait, it still had a long way to go, both in terms of public and institutional acceptance and with regard to meeting international standards.

“Everyone knows that we are still at the beginning,” al-Aiar said. “Although PR sections have existed at our public and private institutions for decades, there is still so much work to be done to develop it, in its modern and genuine concepts.”

Another reason for the predicted boom in the public relations and advertising sectors is the government’s sanctioning of a massive increase in the number of players in the media market. In mid-November 2006, Information Minister Mohammad al-Sanousi approved the license applications submitted by 15 advertising and publishing companies to launch new newspapers. Another four applications are in the pipeline, ministry officials said.

Main players

One of the firms that has recognized the coming growth in the sector in Kuwait is advertising and PR company, Memac Ogilvy, which used the IPRA conference to announce a major upgrading of its operations in the Emirate.

According to Ken Allsopp, Memac Ogilvy’s regional PR director, there is a high level of expansion in the sector and an increasing demand for quality services.

“We are seeing particularly strong growth in financial, corporate and healthcare practice areas,” he said.

Memac Ogilvy is just one of many international agencies to set up shop in Kuwait, along with an even larger number of advertising firms working in both the domestic and international markets. The two sectors have been drawn by the increasing expansion and openness of the Kuwaiti economy and the potential it offers.

Both sectors are to be given a significant boost by another government initiative announced by Waleed al-Wehaib, the secretary general of Kuwait’s manpower restructuring program, in November 2006.

In response to a recent government study that showed less than 2% of employees in the domestic media were Kuwaiti nationals, al-Wehaib said that a special team had been established to boost the number of Kuwaitis employed in the advertising and news sections of local newspapers. Under the scheme, 10% of the staff of the advertising and editorial departments of papers should be Kuwaiti nationals, with this figure eventually rising to 25%.

On December 9, King Abdullah opened the 27th Gulf Cooperation Council (GCC) summit in Riyadh with a speech firmly endorsing greater economic and political unity for the region.

He stressed regional political and security issues, particularly the challenge of maintaining unity amongst Arabs. He compared the situation in the wider Middle East to a barrel of gunpowder that could explode any moment with a single spark.

All Gulf countries are well aware of the knock-on effect of situations in Iraq, Palestine and Lebanon deteriorating further – none more so than Saudi Arabia. The economy would likely suffer, but the main worry would be a higher risk of civil unrest should the Kingdom appear not to be acting in support of Arab neighbors in the region.

As elsewhere in the Gulf, the Saudi government treads a tight-rope between supporting the broader Arab cause, while maintaining strong relations with the West, notably the US.

King Abdullah was clearly emphasizing the link between regional security and long term economic prosperity with his opening remarks. He reccommended the notion of a Peninsular Shield – a united GCC military action force to strengthen the region’s security.

Controversial move

Saudi Arabia has traditionally been a keen proponent of Gulf unity and has in the past been critical of moves it sees as damaging this ideal. It has been particularly critical of the separate Free Trade Agreements (FTAs) member countries like Oman and Bahrain have signed with the US, claiming that they undermine the ability of the GCC to act in the interests of the whole group. Indeed, relations between the Kingdom and Bahrain were noticeably strained after it signed an FTA in 2004. Saudi was particularly concerned that being directly linked to Bahrain, its markets would be flooded with cheap imports.

In addition to the ongoing crises in the Arab world and the findings of the Baker-Hamilton report – the US government’s inquiry into the future of their involvement in Iraq – the two day summit also touched on the stand-off between Iran and the West over its nuclear ambitions. Saudi Arabia, both as an individual nation and through the GCC, has maintained a non-interventionist approach, but also voiced its concerns regarding its apparent aspirations and interference in Iraq and Lebanon through the funding of Shia organizations.

In a potentially controversial move the Council announced that it was considering developing a shared civilian nuclear capability. This would be for peaceful purposes. “It is an announcement so that there will be no misinterpretation of what we are doing,” said Prince Saud al-Faisal. The Gulf Arabs have long maintained their right to develop nuclear energy for non-military use. “We want no bombs,” said a Saudi delegate.

Economic developments within the GCC took a slightly less prominent place in discussions than the pressing political issues. Nonetheless important matters were tabled. The news that Oman would not be joining the EU style monetary union in 2010 came as a blow to the aspiration of forming a single GCC currency. Unofficial sources have said that the Sultanate will not be ready to join at that date as it will not be in a position to meet the criterion specified by the council – the limitation of budgetary deficit, public debt, inflation and interest rates to specific benchmarks and adequate foreign currency reserves.

Common initiatives

The acceleration of the GCC common market and the lifting of trade barriers, the opening up of transport and insurance sectors, and a proposal limiting the time expatriate workers can spend in GCC countries to six years were some of the common initiatives tackled. It is reported that some see this as a way for governments to stave off pressure from international rights bodies to give migrant workers more benefits. There are some 12 million such workers within the GCC and reports put the number in Saudi Arabia in the region of between five and seven million.

The GCC was formed between Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Oman and Kuwait on May 25,1981, at a meeting in Abu Dhabi. The goal was to effect coordination, integration and inter-connection among the member states in all fields in order to achieve unity building on the strong existing ties of kinship and religion on the Arabian peninsular. The Council’s central mandates are to further economic development and maintain regional security.

Saudi International Petrochemical Company (Sipchem) recently announced the development of a plastics production complex in Jubail, which should ensure the company and the country remain at the forefront of the industry.

Sipchem chairman, Abdulaziz al-Zamil, said that the entire project would cost in excess of $7 billion and encompass 20 international standard individual plants. The planned fully integrated olefins and derivatives plant will have the capability of producing 1.3 million metric tons per annum (mtpa) of ethylene and propylene. In turn, these will be used to manufacture 800,000 mtpa of various polymers. The total production of the complex will amount to three million mtpa in 18 different product categories and should secure Sipchem’s regional primacy in the sector.

Due to begin initial operations in 2011, al-Zamil explained that the plans are in line with the company’s expansion plans and broader vision of further developing the kingdom’s industrial base, particularly in terms of adding value to its rich natural resources. Al-Zamil estimates that the complex will create some 3,500 jobs.

Shifting focus

The development of downstream, value added, industry is a cornerstone of the government’s efforts to diversify the economy away from hydrocarbon reliance. The new complex in Jubail will provide the raw material base for many other products, particularly various types of plastics. At present, the kingdom accounts for roughly 1% of plastic production in the global market and expects to increase its share to at least 15% by 2020.

Sipchem was established in late 1999 and has grown rapidly. Phase-I saw the development of two world scale methanol and butanediol plants that are currently producing at their maximum capacity. Butanediol is widely used in the manufacture of plastics, vinyl fabric coating, floor polishing, pesticides and packaging. Phase-II consists of the development and construction of acetic acid, vinyl acetate monomer, and carbon monoxide plants. It is estimated that these will begin full-scale operations in late 2008 with a total capacity of 1.15 million mtpa. Acetic acid and related chemicals are used in the manufacture of soft drinks bottles, photographic films, glue and textiles.

Last week, at an energy conference in Dammam, the executive president of Sipchem, Ahmad al-Ohali, told the press that in order to raise the necessary capital for Phase-III – the olefins complex – the company plans to create a joint stock company. Sipchem will invest $6.67 billion in the complex and intends to list half the capital on the Tadawul All Share Index (TASI). He explained that 70% of the cost would be raised by debt and 30% through equity. He conceded, though, that “the cost will probably be higher at the time we set our final estimate.”

Al-Ohali said that 50% of the capital would form a new company to own the complex and is likely to be created in the second half of 2007. Sipchem will retain the other half. HSBC has been appointed as financial advisor. The olefins complex will increase Sipchem’s output to five million mtpa, al-Ohali said, adding that revenues could exceed $5.7 billion per annum.

Sipchem announced that it had awarded US firm Worley Parsons the project management contract. The Houston based company will be responsible for the front-end and detailed engineering and will manage the project from their offices in the US and Al-Khobar. In a project of this scale it is likely that there will be ample opportunity for other firms to win contracts.

Worley Parsons estimate the total value of their ‘In Kingdom’ and ‘Out of Kingdom’ contracts to be in the region of $250 million.

While the announcement of the main Phase-III is significant both in terms of the size of the project and the potential impact it could have on broader downstream industry, 2006 saw other major developments for the company. April saw the announcement of the Phase II projects – the acetic acid and vinyl acetate plants, with an investment to the tune of $1.1 billion. However, the most high profile event was the initial public offering (IPO), which took place in September.

Sipchem floated 30% of its capital issuing 45 million shares to the public. Despite the turbulent market conditions, which have seen the TASI drop about 50% from the beginning of the year, the $660 million IPO was oversubscribed by 70%. However, when the stock began trading on November 11, the price per share fell below the IPO price value of $14.7. This shocked local analysts, as it was the first time this had happened to a debuted company and said more about the market than Sipchem itself, which recently posted record third quarter growth of $84.8 million.

The recent decision to open up Qatar’s telecom market doesn’t appear to concern the Emirate’s only telecommunications services provider, quite the reverse in fact, with QTel apparently raising the bar that any potential competitors will have to vault over.

To date, there have been no public expressions of interest by other firms to set up shop in opposition to QTel after Emir Sheikh Hamad bin Khalifa Al-Thani issued new legislation in early November 2006 ending the company’s monopoly status.

According to Hessa al-Jaber, the secretary general of Qatar’s Supreme Council of Information and Communications Technology, opening up the telecommunication sector will serve to drive the Emirate’s economic and social development.

“We can look forward to investment from an array of new industries, brand new jobs across the economy and innovative ways of doing business in the public and private sectors,” he said.

QTel itself has welcomed the liberalization of the domestic telecommunications sector, with Nasser Marafih, the company’s chief executive officer, saying that with Qatar being an important and fast growing market it was appropriate that competition be introduced.

Though QTel will have lost its monopoly status, it will retain the exclusive rights on its existing networks, meaning any newcomer will have to construct the infrastructure necessary to provide services.

Preparing for the worse

While there may not be any potential competitors on the horizon, QTel has been behaving as if it is in a do or die battle with rivals. Over the past few weeks it has been busy unveiling new services, reducing the rates on international calls and announcing an expansion of its already wide scope of operations.

On November 21, 2006, QTel announced that it had acquired a 38.2% stake, valued at $28 million, in AT&T’s business data service Navlink, further strengthening the Qatar firm’s already solid ties with the US telecom giant. The two firms already announced they would co-operate in the establishing of a world-class data center in Doha as part of AT&T’s global network.

 “The deal is a major step forward in our strategy to become a significant player in the region’s Enterprise Data Market and to provide our customers with true world-class solutions,” Marafih told a press conference at the announcement ceremony.

QTel has already started trials of handheld video services, with plans to launch full commercial broadcasting on the new medium next year. During the trial phase of Digital Video Broadcast-Handheld (DVB-H), QTel offered up to 13 channels of sports, entertainment and news as well as coverage of the Asian Games in Doha. Qatar will thus become the first country in the Middle East to have a DVB-H service and one of the first in the world.

On November 21, the company’s chairman, Sheikh Abdullah bin Mohamed bin Saud Al-Thani, said that they were looking to expand into markets other than those in the Arab world.

Saying that there would be some good news very soon, Sheikh Abdullah confirmed that QTel’s strategic plan included investments both within the country and internationally. Citing QTel’s operation in Oman, where it has a stake in the emirate’s second telecom service provider, Nawras Telecom, he said that there were new expansion plans in the offing.

The company’s most immediate challenge was providing smooth communication services for the recent Asian Games, which was opened on December 1. Having ploughed $137 million in new investments ahead of the event, including the provision of terrestrial trunked radio (Tetra) – a professional mobile radio system that linked more than 6,500 officials during the games – QTel considered the event as an international platform on which to promote its wares.

Though the Gulf media has been giving increasing coverage to a possible easing in the region’s real estate market and falling share values of some of the Middle East’s leading property developers, it seems that Qatar isn’t taking a lot of notice.

Almost every week, one of the emirate’s growing number of developers either unveils a new project or announces the completion of a stage of an ongoing real estate scheme. One of the country’s highest profile developments – The Pearl-Qatar – has just seen another of the key elements of $5 billion project put in place, the filling of three marinas built on a series of man made islands off the coast.

When completed in 2009, The Pearl, a project of Qatar’s United Development Company, will offer a range of hotels, recreation facilities and luxury residences for 5000 people as well as adding about 400 hectares to the landmass of the Emirate.

In early December 2006, Abu Dhabi Investment House (ADIH) announced it had already raised half of the $500 million it had targeted as the start up capital for its new $3 billion development, the Qatar Entertainment City to be build to the north of Doha.

Ambitious goals

The new project’s name may be a bit misleading for, in addition to hotels, theme parks and shopping facilities, it will also have extensive residential complexes. The Qatar Entertainment City is just part of a much larger development, known as Lusail City, that will ultimately house 200,000 people, representing a quarter of Qatar’s current population, when finished in 2010.

Along with the Entertainment City, there will also be Energy City, a $2.6 billion project that its developers hope to see serve as a residential and business hub for those in the energy sector.

Launched on December 5, the second stage of the scheme encompasses the residential arm of the project. ADIH chairman, Esam Janahi, said that Qatar was fast emerging as an investment hub in the region and that the development was tapping into the inherent growth potential of the country and the region.

“Qatar’s booming economy had prompted the development of Energy City and the speeding up of the residential component of the project,”said Bob Moore, Energy City’s CEO.

Finding suitable, high-quality and affordable accommodation for staff is one of the major obstacles for international companies moving into an economy developing as rapidly and successfully as that of Qatar, explained Moore.

Scoring big

Qatar’s property boom is being driven at different levels, with the demand for tourism, residential, office and retail accommodation all contributing. With official projections tipping a 150% rise in tourist arrivals, spawning a 300% increase in hotel room numbers, within the next four years, along with a potential addition of 500,000 to the country’s population by 2012 – mainly additional workers to keep the economy’s wheels turning – all forms of property are going to be at a premium.

However, there has been a downside to the property boom, with rents driven up as demand outstrips supply and adds fuel to Qatar’s inflation rate. This has hit at the residential, professional and retail markets, negating the government’s efforts to rein in rental increases by mandating a ceiling of 15% annually. Many landlords have circumvented the legislation by only agreeing to one-year leases, freeing them to hike rents to meet market conditions when the contracts expire.

Rents soar out of bounds

Another factor that has sent rents spiralling has been Qatar’s staging of the Asian Games, which brought a scramble for retail space that was made even more hectic by the demolition of parts of some shopping districts to make way for sporting facilities or as ongoing redevelopment projects.

Rents in some established central retail areas of Doha have risen 300% in two years, while those in newly constructed shopping complexes are even more expensive. However, while there may be an easing of demand, and subsequently of the increase in rental rates, there is little indication that retailers will see a fall in tariffs.

While it might be tight for those renting in the Qatar property market, the good times seem set to continue for both developers and investors. Many of the country’s premier residential projects have already been sold out, even before the foundations have been laid, the properties having been bought off the plan.