Sunday, March 16, 2008

Structural inefficiencies hurting growth: Banker

DOHA • Even though Qatar is witnessing a reasoanably strong economic growth rate, there continues to be structural inefficiencies in the country's economy, a senior banker said yesterday.

Ray Maurer, Head of Corporate Advisory at Qatar National Bank said: "There is inadequate infrastructure, capacity constraints and steady devaluation of the currency. There is limited capacity at seaports and the airport and we are playing catch-up for last year's demand."

Maurer said capacity was one aspect which could "fix up" infrastructure. "However, there is a shortage of materials and labour meaning we cannot build enough to cope with the demands of the economy. There is also steady devaluation of the currency."

Mayer was speaking at the 'Second Banking and Islamic Finance Forum' held at the Four Season Hotel. The event was organised by Eversheds, an international law firm which has offices at the Qatar Financial Centre (QFC) here. It is expected to also open up shop in Abu Dhabi two months' time.

The banker said inflation is obviously hurting the economy. "There was strong GDP growth of 20 percent but after inflation, it lost six percent. The benefits of the money from oil and gas revenues have been destroyed by inflation. The windfall received out of oil is dissipated," said Maurer.

Looking at the US economy, which is pivotal to world business, Maurer said in January this year, American industrial production was at record levels. "To people in the know, it indicates a downturn in the US but not as severe as many people would suspect. There is no industrial slump because it could be the devaluation in the dollar which makes production cheaper and so the US produces more."

The banker felt the US could go into a mild recession but emerge much stronger in the end.

Sajid Khan from PriceWaterhouseCooper's spoke on Islamic finance and taxation. "In many countries there is no specific legislation. To comply with Shariah gives more complexities."

Khan said Islamic financing in the GCC is nestled in a comfort zone as there is little or no taxation. "But at any point, when we move away, we have a big problem," he said.

The final speaker was Abdulkader Thomas, CEO of Shape Financial and a leading expert in Islamic finance. "Some in banking are not always forthright with (Islamic scholars)," said Thomas. Speaking on the Accounting and Auditing Organisation for Islamic Banking Institutions (AAOIFI), Thomas said it may have its imperfections but it has the consensus of the largest group of scholars.

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