Small but Mighty

Qatar may claim a tiny population and land mass the size of Connecticut, but that’s not stopped the emirate becoming an investment force to be reckoned with

The $2.25 billion deal struck between Qatar Holding and Mohammed Al Fayed to buy Harrods adds a feather to the cap of Qatar Holding’s already impressive investment portfolio.

A government-controlled investment vehicle of the Qatar government, recent transactions by Qatar Holding reveal the oil-rich emirate’s penchant for investing in high profile brands. These include a substantial stake in Porsche as well as interests in Barclays, supermarket chain J Sainsbury and the London Stock Exchange.

The Emir Sheikh Hamad bin Khalifa Al Thani, who ultimately decides on these investments, clearly has a thing for London’s recording-breaking real estate, and his luxury portfolio includes the Shard skyscraper project, which at 1000ft will be the tallest in Europe, the US Embassy, and 100% ownership of Europe’s most expensive housing development in Chelsea, with estimated costs of $4.5 billion. All of this makes Harrods a perfect fit; an international landmark and respected brand with a solid business model behind it.

Although Qatar was already wealthy on the back of its oil reserves, new technologies enabled it to become the world’s largest exporter of liquefied natural gas in the late 1990s. But despite being touted as the next Dubai, the Emir is conscious that his country should take a different direction to avoid its neighbouring emirate’s high profile credit problems.

Experts say that Qatar has learnt lessons from Dubai’s speculative building model. Qatar’s strategy seems to be to keep on spending to maintain growth momentum at home while it continues to invest in trophy assets overseas. Ultimately, Qatar is keen to diversify its economy beyond the extraction of resources. Plans for Harrods are unknown, but expansion is probable and an outpost in Shanghai is just one of opportunities reportedly being discussed.

Meanwhile, Dubai World is standing by its own department store investment, Barneys New York, whilst feverishly restructuring its $26 billion distressed debt as speculation continues to mount as to how long it can hold on. The Emir of Qatar is no doubt taking note.

Sources
BBC – 8 May 10
The Independent – 11 May 10
WWD – 2 Feb 10