KMPG’s first ever Arab global board member from Qatar

by  — 21 June 2013

Managing partner, KPMG Qatar, Jamal Fakhro has recently been appointed as a board member of KPMG International, the first time that an Arab national has joined the global board of the multinational auditing company. In an exclusive conversation with The Edge, Fakhro talks about his reaction to this appointment as well as the transition that he sees local companies going through as far as sharing information and transparency are concerned.

Local clients are asking global audit firms like KPMG to review their corporate governance practices, says Jamal Fakhro managing partner for the firm in Qatar and its first Arab global board member.
What exactly does your appointment as a board member for KPMG International mean for the Middle East and for KPMG in general?

In the global context, the appointment means that the Middle East has been recognised as an important market within KPMG. In the past, in many of the global organisations you would hardly come across anybody on the board from this part of the world. The transition has happened because the region has been changing for the past 15 to 20 years, because the economies of this region started becoming really successful, mature and international. All these factors have made this region a very important market, not only for KPMG but also for the world at large. To put things in perspective, today, KPMG makes approximately USD300 million (QAR1.1 billion) worth of revenue from the
Middle East. 

For us in Qatar, it means a lot to have somebody from the KPMG Qatar practice to be appointed on the board of KPMG International. This is clear recognition for the success of the country, and it is a way of showing the world that the people who lead in Qatar are top-class, international quality people. 

If you were to sum up five important lessons from your experiences here in Qatar, what would they be?

First of all, there was a great vision by the government to invest seriously into petrochemicals. That was really a big decision to come in the last 20 years, to start investing in the hydrocarbon resources of the country. Number two is that the money that was generated in Qatar was spent in Qatar; it was invested in and for the country. We see that in terms of infrastructure, businesses, and industries. Third, there is a huge focus on Qataris, enhancing and developing and making them to be the preferred employees and leaders. It will take some time for the policies of Qatarisation to take full effect, but the ball has started rolling and Qataris are now being seen occupying important positions in Qatar, not simply because they are Qataris but also because they deserve the position.

There is a big focus on education, a big focus on giving the Qataris the chance to excel. Fourth is the nature of the economy and the way it has transformed itself from being a closed economy until 1995 to the open economy that you see today, by virtue of which many global companies want to come to Qatar, and those companies will never come to a market unless it is an attractive investment. Fifth is that the lifestyle in Qatar is becoming much more open, you will see all of the nationalities of the world, you will see the availability of recreational places, golf courses, tennis, etcetera. So the quality of life is excellent. This again is very important for the professionals who look for the quality of life when they decide they want to relocate to Qatar.

“People in Qatar have started realising that sharing information is important because if you want to be part of this growing economy, you have to respond to the demands of the globalising economy.”

What is your take on the way the economy is diversifying? 

Diversifying the economy, not only in Qatar but in the whole region, is a subject that has been talked about for the last 20 to 25 years. I would say that very few countries have been successful in diversifying their economies, and this would require some time to do that even in Qatar, though the country has started to focus really on non-oil and gas related revenues or participants in the gross domestic product (GDP), so that they can diversify the economy. But whether we like it or not, for the coming 15 to 20 years, oil and gas will continue to be a major contributor to the Qatari economy. It will also continue to play a major part in funding the government expenditures, though diversifying the economy is one key pillar of the Qatar National Vision 2030.

My own take is that it will take some time. I would say that gradually the gap will narrow between hydrocarbon revenues and non-hydrocarbon revenues. Today, oil and gas contributes 56 percent of the gross domestic product, the rest make up the remaining 44 percent. The highest of the non-hydrocarbon sector is financial services and manufacturing, and they will continue to be the highest for the foreseeable future.  

With hydrocarbon production and exports levelling off for the next few years, what is your take on the way Qatar will have to manage its growth expectations? 

The chances of economic growth being double digit are brighter when the economy is small, and this is what happened in Qatar over the past years. The state of the economy was growing by 15 to 18 percent until Qatar became a sizeable economy. Now with a critical mass being achieved in terms of the size of the economy, we cannot say that seven or eight percent is low because they are fantastic rates compared with Europe, where they hardly reach one or two percent. So our economy will continue to grow by seven or eight percent, not only because of the oil and gas but also because of the contribution and fast growth of other sectors. 

With the international energy market at the current level, if the market went down, that would have a major effect on our economy. Historically, we have seen how the prices of oil and gas were fluctuating over the past 20 years. No one had expected that the oil prices in 2008 to 2009 would reach USD147 (QAR535) but then now, it has come down to USD100 (QAR364) on certain days, though it stabilises around USD110 (QAR400.4) and if that continues, Qatar’s growth rate at seven to eight percent per annum will be achieved. 

What is your take on the business processes of local clients?

The local clients are changing, and they are moving from the thinking of the owner-managed businesses to professionally-managed businesses and a more corporate structure. We are seeing lots of our local clients asking us today to review their corporate governance practices. Even small family businesses are talking about corporate governance, let alone the large ones. We are seeing local clients starting to talk about having independent directors on their boards while in the past and until recent years people would not see the value of an independent director. Soon, they will accept the fact that the chairman should be an independent director, because history is telling us that we need to segregate between ownership and management, and this is happening today. We are seeing lots of changes in family-run businesses, which is a major part of the business ownership pattern.

QAR1.1 billion - The revenue that KPMG makes from the Middle East annually.

The percentage of corporations in this region is very small – they may be big in size but in number they are very small. The private sector today is limited in number but the family businesses are really the backbone of the economy. The wealth is in their hands, and we have seen over the years that they are the ones that have built this country and will continue to do so.

With financial recession now hopefully out of the way, what is your take on the way risk is perceived in the region?

Risk is not only associated with recession. Risk is an issue that we have to consider in everything we do. This is a new term in our business language in this part of the world and it has come in the last 10 years. In the old days, maybe a few entities talked about risk, and for them risk was only financial risk. Today, risk means a lot and one of the most important subjects is reputation risk. In the past, people did not care about that, but today because it is a global economy, you need to protect the brand of your organisation and apply this at every single decision you take within the organisation. Today you find that banks, large companies, public companies have started to form board committees which look after internal audit and risk. Medium-sized companies have started to look into how they can minimise their risk by introducing the internal audit department and introducing more controls.

I believe risk is associated with both recession and boom time. Really people tend to take more risks when there is higher growth in the market. When there is a decline in the economy, they would definitely take better care and longer time before they take any decision. I would say that the high risk is always associated with higher growth because you want to grow faster than your competitors so you will take decisions that will give you more profit despite the fact that it is higher risk.

“Qataris are now being seen occupying important positions, not simply because they are Qataris but also because they deserve the position.”

How fast are these companies learning as far as transparency goes?

Transparency is still an issue, people still believe their figures are confidential and they should not be shared. But even this is changing. In the past, if you asked any Qatari businessman to file his financial statements at the ministry, they would question that and fight not to do it. Today, the new tax law forces the national companies including the Qatari family companies to file their financial statements and they file them without any hesitation. This is part of the change as far as the private sector is concerned.

If you go to the public companies you see the amount of transparency in their annual reports. The kind of information being shared, whether it is on the director’s report, the corporate governance report, the management report, the financial statements was unheard of. Recently, I was in the Annual General Meeting of Aamal and I was surprised by the exhaustive disclosures. If you read the financial statement, it goes into 50 to 60 pages. So people have started realising that sharing information is important, because if you want to be part of this growing economy, you have to respond to the demands of the globalising economy and grow with the wave of change and be part of it. 

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