Qatar Launches West Bay Lagoon a Success

Qatar Launches

West Bay Lagoon

A Success Story

Privatization of the Business Concern

Demerits of Government-Owned Model

Introduction of Entrepreneurship & Innovation

Theoretical Perspective

Qatar has been a hub of investment in the Arab Countries, especially in the sector of real estate. With complete support of government, the country has managed to excel in the field of Oil and gas and was pursuing for beneficial interests in the field of real estate as well. However, due to laborious procedures, lack of supervision and planning, undefined goals and absence of a concrete business model, lucrative ventures such as West Bay Lagoon failed to meet their desired success.

However, it was in 2002, when the development of this region was privatized with the management and the engaged human resource of the concerned department remaining the same. As a result of this intervention, Qatar now, has an established residential and commercial region in its portfolio which has been attracting investors worldwide.

If the possible causes of this earlier disaster and later success, are evaluated, it will be witnessed that it was the introduction of entrepreneurship and innovation in the business model which allowed the personnel to become accountable yet acting independently and made them devise their own objective with a clear business plan to follow.

Introduction

Many theoretical models have supported a rationale that change in leadership and organizational culture can result in producing the desired results which are a pre-requisite for the success of the given business model. There are many examples present in the global history where government ventures failed to meet the performance standards set for them. However, after converting into a private organization, they reached their benchmark and converted into a success story. Similar success story is shared by the establishment of West Bay Lagoon which is the most lucrative investment real estate venture as of now but was once another mark of failure on the portfolio of Qatar government.

Qatar and other Arab countries have been major hubs of investment in past two decades. Due to their predictable market growth, controllable foreign exchange rates and abundance of raw material and labor, it has been able to interest investors to a greater deal. In order to exploit these strengths, Government of Qatar planned to start a new venture under the supervision of Qatar government headed by the Ministry of Municipal Affairs and Agriculture. In 1995, Government of Qatar decided to exploit its available property and convert them into major real estate ventures. Few of such examples are West Bay Lagoon, Al-Khor Resort and Pear Island.

Historical Background

In 1995 till 2006, there has been a major attention paid to developing real estate market in Qatar. Both residential and international cities were being developed under the similar authority. In 90s, Qatar, economy has shown a particular susceptibility to growth in real estate. As a result, special measures were taken by the Government of Qatar to utilize this opportunity. Due to the contribution made by Government, Qatar economy was showing Nominal GDP leaped by 33.3% in 2005, reaching QR153.3bn (U.S.$42.11bn), rising from QR115bn (U.S.$31.6bn) in 2004. Qatar is one of the richest countries in the world, with a per capita GDP of U.S.$52,884 in 2005. This boom which was continued since 1998 and was foreseen before that caused a major real state demand in domestic economy. Major population growth coupled with presence of expatriated with high remunerations and abundant resources required for the development of industrial and residential ventures caused a major boom in real estate (Global Investment House, 2006).

Where the government has been highly supportive of such ventures, the efficiency and effectiveness of these ventures was always questioned. Instead of just relying on local investment, Government decided to open its horizons for non-Qataris as well. Development of above mentioned islands was a part and parcel of attracting investment from expatriates and foreign investors as well. Various interventions and new policies were put in place in order to facilitate the whole procedure. These policies and other legislations supported the GCC nationals to have ownership of real estate in Lusail, Al Kharayej, and Jebel Thiyab. Whereas, the non-GCC residents were allows acquiring land son lease in 18 other zones. One of these zones was West Bay Lagoon.

Where out of these regions, Doha has been the dominating name in the industrial and commercial cities. It has almost occupied the major 87% share of residential and industrial units with extended facilities in Al-Rayyan. These facilities are further extended in three other municipalities. It is expected to capture further non-residential side with promising business ventures in place which attract more investment capital to Qatar in the name of real estate. Other areas are also expected to gain similar attention. Where Al-Rayyan and Al-Khor have becomes hubs for stable growth in real estate offering a relative mix for residential and industrial units with major sky scrapers, the main attention grabber areas have been Pearl Island, West Bay Lagoon and Al-Khor projects which later on turned into paradise of Qataris as well as foreigners.

Qatar which was earlier renowned for its exponential growth suffered greatly from the recent recessionary crunch. However, where world economy is showing development, Qatar is no different. It is still experiencing major investment ventures, heavy addition of expatriates, abundance of supply required for industrial and residential building and erection. Considering the portfolio of the country, Doha was the centre of lime light in late 90s and in early 2000s. Where Qatar government was making sincere efforts for developing real estate in the country and establishes major residential and commercial units, the outlook of these efforts was no different than any other Arab country.

Other than Doha, another success story of Qatar is West Bay Lagoon. It is also known as Al-Qutaifiya. Doha has been centre of investors' attention for considerably long time. It is currently located in the near vicinity of the main commercial estate. Reaching from Doha Corniche to west bay lagoon the area has a variety of accommodations and lifestyle options. The area is now, rather smartly designed and has a great portfolio of impressive villas in the residential unit and sky-scrappers with exceptional infrastructure on the other. Another smart attribute of these units is their segregation. The residential area is well-established and separated fro the commercial one. The towers in Al Dafna with its high concentration with high end international restaurants and bars are more suited to young professionals and singles. West Bay has been able to gain major investments from GCC and non-Qatari nationals.

Government ventures in Asian countries especially in Arab countries have been subjected to typical bureaucracy and the pitfalls that there lengthy procedures offer. Similar situation was met by West Bay Lagoon as well, which was one of the neglected areas of government projects. It was headed by Qatar government and was handed over to MMAA in late 90s.

In 1995, the state of Qatar launches the initiative to help the private sector and creating new opportunities. Resembling to any new development market, Qatar Government started by an investment program to accelerate the economic cycle, by investing on the development of the West Bay Lagoon area. The project outlook included development of impeccable infrastructure, developing residential and commercial units at the quality standards set by Doha and also facilitating the investors to perform investment with ease which included expedient and convenient procedure leading to land ownership and development.

For this purpose, MMAA has established a Project Management Unit to serve this initiative and ensure its successful and timely implementation. However, MMAA was handling many projects at the same time and including many other estate related and marine related ventures. Too much diversified attention caused the growth of real estate became slow as compared to what was expected earlier. Various measures were taken by the government to ensure that West Bay meets similar success as Doha but these interventions failed to produce the desired results.

Privatization of the Business Concern

At later stage, in 2002, following the market needs increases, and the development of new concepts generating more opportunities, MMAA has put into operations two new departments, Investment Authority and Technical Compliance. Unfortunately the result was disappointing, a failure for the Government, due to an approach based on operating without a clear business plan and the long then expected approval processes as consequence of the Bureaucracy. With relation to government-owned projects, considerable research has been enabled the analysts to identify the possible causes for failure. These causes may include poor planning, lack of leadership, inadequate knowledge, people problems, and lifecycle problems.

Since Doha was already an established city and was enjoying the success factor after years of planning and development, West Bay Lagoon faced the above mentioned problems which hampered its overall growth. It is evident that development projects headed by government departments face barriers due to unnecessary hierarchical structure, too many departmental approvals and absence of project layout. For an effective project management, it is important that the project has a defined objective and scope with a designated manager or leader provided with all the necessary resources including human resource as well.

West Bay Lagoon project was provided with major resources but faced many difficulties due to lack of planning in its preliminary stage. The entire vision behind the departments' establishment i.e. Investment Authority and Technical Compliance was to provide sovereignty to these departments for facilitating the investment. However, since the departments were not given defined guidelines, objectives and desired independence, therefore these departments failed to perform their assigned tasks. Another major cause of this failure was absence of concrete relations between the project and the designated department's key strategic priorities with defined levels of success. Furthermore, lack of sponsorship from senior management and ministerial ownership acted as the discouragement for development of the project.

Demerits of Government-Owned Model

Other than that, like many departmental drawbacks, lack of engagement to the project objective made it rather difficult for the department to deliver the desired level of performance. Where the project's intent was clear from the very inception, the identification of stakeholders, the necessary modes for attracting them, understanding the stakeholder's desires and their further views as the feedback, were highly neglected. It is also observed that unlike private organizations, the level of skill development in the human resources engaged and the leadership is a rather neglected area. Lack of skills and proven approach to project management and risk management acted as a substantial factor which made the department being unable to attract the investors. Another important area of effective project management was insufficient attention paid to segregating the development and implementation into manageable steps. Hence, the project lacked the basic layout which was required to be followed. Lack of effective project team integration between clients, the supplier team and the supply chain was also one of the major reasons for the failure of this venture by Qatar government.

As a result of these major loopholes, the designated departments were failed to generate enough investment from the new leads and recover the already reported installments from the older ones. Where Qatar government was rather active in developing the real estate in the form of new regions, the flawed strategy of project management made it face the failure. Where Ministry of Municipal Affairs and Agriculture failed to meet the performance benchmarks (which it was expected to develop through involving customers to buy developed land to build residential, offices, shopping mall, full mixed used). The main business model did met some success in the beginning however due to defined strategy and business plan, major financing was failed to be recovered. Absence of sufficient cash flows also endangered the going concern of the venture itself (Heinrich and Lynn, 2000).

Introduction of Entrepreneurship & Innovation

However, private sector's influence in the real state began to change the total outlook of this venture. The department was made a sovereign authority with complete autonomy and was suggested to make necessary changes in its business model. As a result, the department was privatized with the management and engaged personnel remaining the same. Private organizations are found to flourish more because of the accountability that they have for their own survival and then progress. Similar portfolio was given to these departments as well. Instead of going through the tedious government procedures, the decision making and planning solely rested the departments themselves. Hence, the people who were earlier working for the government were made to work for themselves.

In order to address the impacts of privatization on West Bay Lagoon, we need to understand the merits offered by privatization itself. Privatization has apparently been seen as a mechanism of introducing the structural reforms in the basic business model. Such reforms help in achieving higher microeconomic efficiency and foster economic growth, as well as reduce public sector borrowing requirements through the elimination of unnecessary subsidies. Considering the guidelines provided by microeconomics, the publically owned organizations face insufficiencies leading to incentives and contracting problems. The main reason of such behavior is the difference between the objectives of the managers employed by state-owned organizations and those engaged with private organizations. Furthermore, level of monitoring also varies greatly in the two organizational models (Bhattacharya, 1996).

Theoretical Perspective

It is a fact that public managers or office holders have no effect of bankruptcy but they find it helpful as government saves them by providing a bail out in terms of a renewed budget or a financial package. This is not so in private managers as they tend to see bankruptcy as total failure with goal and objectives not achieved. Hence it is evident and seen in so many cases that privatization results in more profitability and increased revenues in both sectors based on monopoly or fair competition in open or controlled markets. In Monopolistic sectors converting a partial privatized body in to a fully privatized one results in further increase in profits and productivity, it also increases the market power of these monopolistic businesses. Trends are also positive in macroeconomic standpoint but there is no drawn conclusive evidence.

Using the benefits presented by the privatized model, the departments of Municipal Ministry were privatized and were made to operate at their own. Considering the fact that the related managers and other human resource remained the same, the leadership models and entrepreneurship theories became applicable. It was observed that where managers were made accountable, they tend to own the business and present innovative strategies for business development and maintenance. Effective leadership requires the managers to provide independence, accountability, clear vision and enough resources. When the organization became privatized, the managers who were earlier reporting to a long chain of management were found to be working for themselves under the entrepreneurial model. Secondly, they had a defined objective with a clear vision.