Interview: Richard J. Keery, head of commercial banking, HSBC Qatar
In an exclusive conversation with The Edge’s Aparajita Mukherjee, Richard J. Keery, head of commercial banking, HSBC Qatar, gives his views on the opportunities that infrastructure investments open up for financial institutions, especially for relatively uncommon funding mechanisms in the region, such as export credit agencies. He also shares his recommendations on why free zones should be actively considered by the Qatari government.
As head of commercial banking for HSBC in Qatar, Richard J. Keery has served in several geographies including Egypt, Indonesia, and the United Kingdom and Ireland. “In Qatar, I am responsible for the coverage teams which, in HSBC, is large corporates and large family groups in the mid-market segment,” says Keery.
With there hardly being a substantive dividing line between corporates and family groups in Qatar going by the nature of the economy, does it affect how the bank looks at the large corporates and family groups in isolation?
According to Keery, one can look at the segregation between large corporates and large family groups in different ways – across scale, or the length of the establishment, or the scope of activity. Keery adds, “There are plenty of businesses in the middle market that are very fast growing and certainly are pushing into that sort of international space as well, which is one of the things that we look at to differentiate the two,” clarifying how the bank views the two groups of players as being dominant in the Qatar market.
In addition to large corporates and family groups, Keery also looks after trade finance, payments and cash management. In Keery’s opinion, there is an increasing area of activity and interest among the banking community – “that’s in the area of manufacturing”.
Commenting on HSBC’s outlook on the manufacturing activities taking place in Qatar, given the fact that the country is still predominantly an energy-driven economy with deliberate government efforts to facilitate the transition into a knowledge-based model, Keery says, “We are all very familiar with the Qatar National Vision 2030 and particularly the focus on diversifying the economy. The benefits associated with a diversified economy have been proven historically compared to an economy that is focused on one or two key industries.”
Keery sees Qatar’s extensive infrastructure development as one of the mainstays of the economic activity outside the oil and gas sector, and pegs it in the context of the manufacturing sector saying, “It will be industries that are initially focused on supporting other infrastructure spending which is expected to reach USD30 billion (QAR109.2 billion) in 2015, in areas such as electricity generation.” He explains that obviously with infrastructure development comes the need for the expansion of the electricity grid and expansion of the network.
Keery mentions that this is a pattern seen across the Gulf Cooperation Council countries, a region that is witnessing new investments when there have been discussions of a common grid, linking up the rail network, “so it’s quite practical to lay electricity grid at the same time, and combine the freight lines as well”.
These regional developments tie in well with the Hamad Port and the mega infrastructure and big logistical developments, says Keery, adding, “So I think one of the immediate ones will be in that area of electricity production, so you are looking at cable manufacturing, the manufacturing or assembly plants, which make sense from an expediency perspective because with growing infrastructure, and developing the networks, there are definite economic advantages to having plants nearby that you can make use of and help develop.”
Keery mentions that he sees a great opportunity for the private sector in the area of electricity production. “There are a number of family groups and a number businesses here that are working with a number of global producers, so there is an opportunity for them perhaps to bring production on shore or bring assembly lines, which can then support their servicing and support of Kahramaa.”
Analysing the overall business spiral created by the infrastructure activity and the way the sector is catalysing prospects, Keery mentions, “Infrastructure spending is bringing more people, an expansion of communities, and these are increasing the use of vehicles, consumer goods and other facilities.”
Keery thinks that these can balloon as more infrastructure spending gets actualised and it requires greater ancillary support, adding, “I think that’s where I would see a greater scope for the manufacturing sector.”
Opportunities for the financial sector
The growth of the manufacturing industry, as a support to the infrastructure activities, presents a multi-layered opportunity for banks, financial institutions and funding mechanisms such as export credit agencies (ECAs), which are public entities that provide government-backed loans, guarantees and insurance to corporations from their home country that seek to do business overseas in developing countries and emerging markets.
Keery talks about the various opportunities for banks – either to work on a sole basis, or in consortiums – and he adds that the business opportunities for banks will not be limited to Qatari banks alone.
In Keery’s opinion, the banking industry is strong and time and time again banks have proven that they can work together to provide financial solutions. Keery points out that large projects can also attract ECAs.
But as a mechanism, are export credit agencies well developed in the region, in the context of cash rich nations?
Keery says, “Some are more active than others, but the ECAs are certainly well known and becoming more well known, particularly as we are seeing investment in rail for instance. There are opportunities to offer ECA investment in the electricity industry, which is again something that some of the European ECAs are very attracted to.”
As a funding mechanism, ECAs not only bring in international expertise and international stakeholders, but very often the governmental support behind these agencies, which, according to Keery, develops Qatar’s international connectivity. He clarifies that this connectivity is “something that we have seen a lot of focus on recently, Qatar reaching out and building relationships internationally”. He adds, “I think that’s an area that is quite exciting and one that can help develop manufacturing capability. So there is scope to make use of the local banks, their local networks, capitalise on the local balance sheet strength but also there is an opportunity to bring in some international financers.”
In Keery’s opinion, the scope of financial solutions big ticket financing will be as varied as the projects themselves, but there is an opportunity for banks to work together on a syndicated basis, bring in investors or elements of expertise that can range from funding ability, market intelligence or aiding in the structuring of a particular project. “In this area, I foresee export credit agencies contributing to solutions,” he says.
Keery further explains that every bank will bring something different into their offering in Qatar and adds, “HSBC brings the rich experience of 60 years’ presence in the country, a truly global network and the capacity to introduce foreign players into the market here. Recently, we have helped local businesses tie up with global players.”
Without talking about HSBC specifically, Keery comments that there is a significant spend in the construction sector in Qatar, which opens up an opportunity for the financial industry to work together and to provide solutions to the multitude of projects.
Commenting on the business prospects emanating from the construction sector, Keery draws attention to the macroeconomic story of Qatar with a gross domestic product growing by seven percent annually, an infrastructure spend of USD30 billion (QAR109.2 billion) though the outlook for the region is between USD200 billion and USD250 billion (between QAR728 billion and QAR910 billion). Keery adds, “There are few markets such as Qatar that I am aware of and which are growing at this rate.”
However, while business volumes will likely be guaranteed by the strong fundamentals of the Qatari economy, doubt arises on the fact that with so much having been done with the 2022 World Cup, is there guarantee that the construction and infrastructure will be needed post the event?
Keery is confident, saying, “That’s where we can really look at the Qatar National Vision 2030, which, for me, is the exciting time. There is a lot of preparation going up into the 2022 World Cup, and effectively the mega event almost looks like a launch event in many ways as we work towards 2030”.
In this context, Keery cites the recent speech given by the Prime Minister and Interior Minister HE Sheikh Abdullah bin Nasser bin Khalifa Al Thani while inaugurating the Annual Macroeconomic Forum 2015. HE the Prime Minister mentioned that the Qatari economy, in the face of international crises, calls for continued development of the Qatari private sector and diversification of the national economy to reach the goals of Qatar National Vision 2030.
Keery also mentions that one can expect greater public private partnerships with the aim of creating a suitable legacy beyond the 2022 World Cup and towards the Qatar National Vision 2030.
In Keery’s opinion, the advantage that the private sector can bring is innovative ideas and their capacity for fast turnaround. He says that with the guarantee and long-term financial weight that hydrocarbon wealth brings, Qatar also lacks in its intrinsic industrial capacity that is related to core manufacturing, beyond downstream oil and gas.
Explaining the role of the private sector in Qatar’s transition from a hydrocarbon economy, Keery says, “There are no legacy industries here, so it is not like other parts of the world where industrial development is around fixing problems of the past and trying to layer in new industries on top of that. Instead, Qatar’s chosen path, as detailed in the Qatar National Vision 2030, is about creating a knowledge-based economy, sustainable development, research and development, developing the sciences to actually bringing in new clean manufacturing, and, I would say, there is a huge opportunity to do that and this is where the scope lies for the private sector.”
Giving some recommendations, Keery says that while the government has laid the roadmap for economic zones, these could be supplemented by the opportunity to add free zones as well, and help private enterprises to be linked with not just Qatar’s market alone, but to the wider region. In this context Keery mentions mega initiatives such as the Hamad Port and the rail networks that could help in the transition of Qatar as a regional hub.