On a recent visit to India, Mr R. Seetharaman, Group CEO, Doha Bank, shared his perspective on how the Gulf states, particularly Qatar, are a promising source of foreign capital for India. Doha Bank, the leading bank in the Gulf region, has thrown its hat into the ring for starting banking operations in India. It hopes to build its business around thriving bilateral trade between the two countries, cross-border investments and the Indian diaspora living in the Gulf.

What is your perspective on the Arab spring?

From a long-term perspective, what is happening is good. It started with Tunisia and Egypt. It moved on to Libya — a difficult transition. Now we have Syria. The road is bumpy, but this is required for social progression in the region. After all, within the Arab league, the six Gulf states are very prosperous. It is a trillion-dollar bloc with $1.6 trillion in GDP. They run huge fiscal and current account surpluses, about 20 per cent of GDP. Forty five per cent of world oil and 20-25 per cent of gas comes from this belt. In fact, the social progression which some of the states have accomplished is a telling story. For instance, Qatar has made tremendous progress in education and healthcare in the last two decades. In my opinion, the social reorganisation is required. But it is going to be a bumpy transition.

What will be the economic implications for the region?

Gulf states have huge resources on account of the higher oil prices in recent years. They are supporting the Arab cause. Even when there were minor disturbances in Oman and Bahrain, the Gulf states pumped $10 billion into Oman and Bahrain. Oman is stable and functional now. Now, Qatar has played a big role in stabilising other Arab states. From an economic perspective, the Gulf states are the prime engines to support healthy transformation.

It is in everyone's interest to bring stability to Libya and Egypt. The oil- and gas-producing countries may need to make inevitable investments in this region. They already have large sovereign funds that have diversification as a strategy.

They invest across the world in multiple markets and assets. Take, for instance, Qatar. Qatar has invested in United States, Europe, China and UK, it has investments in Barclays and London Stock Exchange, which are producing good returns. Should they bring it back? They need not unless it is a must. Today they produce enough current account surpluses to support their internal consumption as well as cross-border investments. In my opinion, since they are resource rich they should be in a position to stabilise the region.

Doha Bank is one of the later foreign banks to enter India. What is the niche that Doha Bank wishes to occupy? There is so much competition and there are restrictions on the number of branches a foreign bank may open, too.

We applied for a license in 2005 and resubmitted the application in 2009. RBI, rightly, had held back on the license on grounds of reciprocity. But with SBI setting up a branch in Qatar, RBI asked us to re-apply and we did. We are hoping for a license.

Our bank's business model will be built around bilateral trade, investment banking and finance. Banking is the central point for bridging the gap between two blocs. The Gulf states and India are a logical fit. As on date bilateral trade is $125 billion but the scope is for a trillion dollars. A bank like Doha Bank has a big role to play here. Currently Doha Bank's exposure to India is over $2 billion, in terms of credit lines extended to Indian institutions; this is even without a branch here. We have annual remittances of about Rs 10-12,000 crore coming into India through our system.

Plus, India is grossly under-banked and its banks are short of capital. India needs global financial institutions to come in to meet the capital shortfall. There is also a very strong opportunity for Indian companies to come in and partake in the economic momentum in the Gulf. Trillions of dollars in projects have been announced. Qatar itself has abut $130 billion of infrastructure projects over the next five years. That includes the FIFA. A handful of companies have come in — L&T, Shapoorji Pallonji, SPIC, etc.

When companies come in, there are opportunities in investment management, project and treasury funding. There is scope to raise bonds from the Gulf states for Indian infrastructure building too. Then there is energy security. The Gulf region and Qatar in particular is a leading exporter of fuel and gas to India. LNG exports are a big opportunity. It is an energy-efficient and environment-friendly option.

Doha Bank can be the commercial gateway to add value on all the bilateral trade between Qatar and India. India has invested human capital in the Gulf. Therefore, there is a huge opportunity in wealth management in the Gulf for the 5-6 million Indians working there.

What are the capital investments made by Gulf states into India?

The Gulf states have a large investment surplus. And they have many high net-worth individuals. They do invest overseas. But the investment has been flowing mainly into the developed markets.

Of late, there is a change. Qatar has invested in the Agricultural Bank of China. A lot of investments have taken place in real estate and construction in Singapore. Sovereign funds have been investing in multiple markets. The change is on in terms of market preference.

But unfortunately, investments from the Gulf into India are not significant. I feel India has a lot of opportunity but it has not been showcased to investors in the Gulf.

Is it because of a poor risk perception of India among international investors?

I think it has to do with high price-earnings multiples. For instance, the price-earnings multiples are more attractive in the Gulf states at 10-11 times with firms generating a return on equity of 15 per cent or so. In India, there is a hit-and-run attitude to investments in India. People look for short-term gains from swings in the market. This has to change. There also needs to be a clear exit strategy for investments.

I think India deserves a better credit rating, too. It is a function of poor marketing. We need to do more road shows, showcase India and package it as a good investment destination. I think the Gulf states with their proximity and bilateral trade are a great opportunity to tap for foreign direct investments.

comment COMMENT NOW