Remarks by: Benoit Daignault
Senior Vice-President, Business Development
Doha, Qatar - May 26, 2009  

As-salam Alaikum. Good day and Bonjour.

I would like to thank the Canadian Business Association of Qatar for this opportunity to speak to you about our vision at Export Development Canada for building Canada’s trade and investment with Qatar and other members of the Gulf Cooperation Council – or GCC.

In today’s recession, the economic growth in your region is predicted to outperform the world’s average.   This region is among the bright spots and the future of global trade.

That’s good news.  However, we all have to keep in mind that trade has to constantly be nurtured to grow.  We have to keep on building new business, new markets and new financial relations – especially in today’s volatile economic times. 

That’s why I am visiting your region – to help make these connections stronger.  Canada and Qatar are highly compatible in many business sectors, and we can still take much better advantage of the opportunities that confront us.

So, I would like to share with you today two key messages:

• How Canada is an excellent match for Qatar and the GCC in several key industrial sectors; and
• How EDC offers unique financing and risk management tools to help make that match happen.

But first, let’s look at some of the trade realities in this region during this credit turmoil.

Like other regions around the world, the outlook for export growth in the GCC is weaker, and domestic consumer and industrial activity is slowing this year. Many of your countries have taken a blow from sharply lower oil prices, production cutbacks and reduced capital availability.  This is also causing delays in private sector investment. 

On the plus side, your governments have been able to manage their recent oil-and-gas windfalls, control expenditures and make reforms to grow a strong private sector.  This has allowed many large projects to proceed even under today’s turbulent conditions.

All of our economies will likely have to look to mid-2010 for bigger improvements.  But they are not going to happen by themselves.  Now is the time to engage with new markets and form new trade links to make the recovery even more promising.

One thing that both our countries, Canada and Qatar, have in common is that we rely heavily on external sources for trade.  In Qatar, for example, the latest World Bank data shows that some 95 per cent of your total GDP stems from international trade – whether imports, exports or direct investment abroad.   In Canada that figure is also high – at about 70 per cent.

Depending on the specific country in the GCC, some of your biggest trading partners include China, Japan, Germany, Italy and the United States. About 30 per cent of GCC imports came from the European Union last year. 

Canada is still a relatively small player in this mix, but one that has been making important strides.

For Canada, this region is our third largest trading partner among emerging markets. Our country’s exports to the region have grown more than 140 per cent since 2001 to reach $2.76 billion in 2008. More than 1,500 Canadian companies are now doing business in the GCC. Qatar in particular is one of Canada’s largest trading partners in the Middle East, along with the UAE and Saudi Arabia.

Since 2003, exports to the GCC countries from Canada have almost tripled and imports from the region have more than doubled. 

We recognize that Canada can’t provide all things to all industries.  But we also know that this region’s development plans are in many sectors where Canadians have a well-earned international reputation. 

Oil & Gas 

In the oil and gas sector, we are already seeing much softer oil prices and production cutbacks related to OPEC quotas. This will hit export earnings, government revenues and foreign exchange accumulations in this region.

Worldwide, energy demand is down, drilling is down, credit is in short supply and capital expenditure plans have been slashed.  The price of crude oil is predicted to fall from an average US $100 a barrel in 2008, to US $47 a barrel in 2009.

Next year, our economists forecast a modest rebound in prices – but this is far from certain if there should be additional financial shocks.  The road to recovery is still a long one.

For natural gas, the average price is also forecast to drop this year. In North America, for example, the natural gas price [Henry Hub] averaged US $8.9 per millions of BTUs in 2008 and is expected to dip to about $5 this year.  It could then start moving up again to land around $6.25 in 2010.  The prices vary in different regions of the world, but the pattern is similar.

In this environment, Qatar offers a more optimistic story.  As the world’s biggest exporter of liquefied natural gas or LNG, Qatar is about to get much bigger.  This country expects to increase its LNG production capacity from 28 million tonnes in 2007 to 71 million tonnes by 2010 – a 250 per cent jump. 

The increased output and foreign sales will mean that Qatar could ride out the global economic storm more comfortably than some of its neighbouring countries.  It also means Qatar could be looking for top-notch suppliers and service partners so that it can maintain its schedule.
 
Canadian companies have vast expertise in both the upstream and downstream processes of the oil and gas industries.   Indeed, Canada is the world’s third largest producer of natural gas and among the world’s top 10 oil producers.

Most of you are probably familiar with Canada’s SNC-Lavalin, the engineering and construction giant that has been involved in your region’s extractive industries for more than 30 years.  Petro-Canada too is a big player in the GCC.

Other Canadian companies have participated in several major oil & gas and other energy developments, including Qatar Petroleum and Chevron Phillips’ Q-Chem I and II integrated petrochemical plant, Ras Laffan C independent power and water plant, and Qatargas 3 and 4 projects. 

EDC has facilitated all of these projects and we’re ready to help you do more in the oil and gas sector.  But this is just one area where the opportunities in this region are vast.

Infrastructure

To keep up with development in energy and other sectors, your governments have directed a great deal of funding to massive infrastructure and urban development projects, not only in Qatar but across the GCC. This includes work on transportation, power generation, environmental protection and urban planning.

In spite of today’s recession, your countries’ external indebtedness is low and large sovereign wealth funds provide a pool of resources to tap. 

Overall, the GCC has indicated it expects to spend US$1.5 trillion on infrastructure over the next decade.  Qatar alone has indicated that investments which are “underway or slated to begin within the next five years” should total US$180 billion. 

On the other hand, while some projects are moving ahead, collapsing equity markets and real estate prices are impacting private sector investment in this region too.  For example, some of the project delays and cancellations that are happening in Dubai could spread more widely across the GCC.

In Canada, construction is one of the key drivers of our economy – representing about 12 per cent of our GDP.  We export construction goods and services to some 125 international markets.  These range from engineering, architectural and project management services to control systems, building materials and construction equipment. 

We have earned an international reputation that is getting more and more recognition in this region too.

For example, Canada’s Canam Group is a large designer and manufacturer of steel products for the global construction industry.  Today it has a joint venture that operates two plants in the GCC and it traces its business relationship in this region back to the mid-1970s.

Several mid-sized or smaller Canadian companies are also making inroads into this market. HOK Canada, an architectural firm, designed the terminal at Qatar’s Doha International Airport in 2004 and five hotel towers in Doha City Centre mall last year.

Telecom 

I’d like to touch on just one more sector where we expect to see large expenditures in this region -- information and communications technology or ICT.

Here again Canada is leading the way in some key areas – notably wireless technology.  According to a recent study, Canadian wireless companies are at the forefront of next generation technologies.  We have many world-firsts under our belt.  These include the first WiMAX chip – for high-speed, multimedia access over a long distance – and leading advances in satellite technology. 

Of course, Canada is probably best known for the popular and addictive Blackberry created by Research in Motion or RIM. 

Other smaller Canadian firms have also been able to break into the ICT market.  One example is the Bristol Group, a marketing communications firm that chose Doha for its first affiliate office outside Canada.  It helps companies here promote their business around the world. 

Another case in point is Redline Communications -- working with Saudi Telecom to set up the latest wireless broadband infrastructure.

Clearly there is no lack of common interests, opportunities and expertise between our two countries.   The challenge, outside of our volatile global economy, is helping bring the right players together.  This is where EDC comes in.

EDC

As Canada’s export credit agency, EDC is an integral part of the Government of Canada’s strategy to grow trade, and increase the ability of Canadian companies to engage in trade – especially in compatible markets like yours.

EDC can help Canadian companies connect with business opportunities and key players in this region through our market intelligence, financing services, credit insurance and other risk management solutions. 

In 2008, we worked with over 8,300 Canadian companies in 184 markets worldwide. We helped facilitate $85.8 billion in business volume for those companies, a 23 per cent increase over 2007 – all this in a slowing economy.

Most of our overall business activity is in the key sectors of interest to your country – extractive, including mining and oil & gas; infrastructure and environment; resources; transportation and telecom.

Last year, we facilitated a growing number of investment or structured finance transactions – 16 per cent more than the previous year -- and we are already at nearly 70 per cent of our target so far this year!

In addition to our sector and financing expertise, we have been increasing our representations abroad each year, to get closer to Canada’s global trading and financial partners.  We now have 14 representations in the world’s key emerging markets – we launched our GCC representation last year, based in Abu Dhabi.

This representation helped expand the Canadian exports and investments we facilitated in the GCC and Yemen in 2008 – reaching $1.6 billion, and working with about 250 companies.   In Qatar alone, we supported almost $244 million in business volume. 

Under today’s constrained credit conditions, we are seeing more companies turn to EDC for financial services and risk management expertise.

To help Canadian businesses during the credit crunch, the Government of Canada has given EDC greater financial flexibility to broaden our role and scope of activity.  These changes will allow EDC to facilitate a wider range of transactions for many of the Canadian businesses here.

How do we help Canada’s partners here in the GCC?
When you work with us, you are gaining access not only to practical trade financing and risk management services, you are also benefiting from links to the rest of the Government of Canada’s departments and agencies.

You are reassured by our respect for Canada’s international agreements and our strong Corporate Social Responsibility practices.  We apply the top international standards to our business ethics, anti-corruption practices and environmental assessment and mitigation of environmental risks.

Another distinguishing feature about EDC is our risk capacity. It is deep, and it is sustained. Today especially, private financial institutions are constrained by the recessionary market conditions and lingering fall-out from the financial crisis in the U.S. 

Our public mandate, strong financial resources and prudent risk management practices have enabled us to remain in markets that others have retreated from. It has established EDC as a trusted partner for Canadian companies that are committed to building their business in markets like yours.

We also recognize that to succeed in this new era, a company must invest in supply chains or participate in those of others. EDC is experienced in helping Canadian and Gulf businesses interact in complex business structures, and we are flexible in our approach to financing.

This includes unique banking arrangements such as performance and bid bonds which are often sought in infrastructure and power projects across this region. EDC has also ventured into local currency financing and Islamic financing in the UAE.

I have only given you a few examples of how EDC facilitates trade and helps Canadian companies expand their business in this region. I have also outlined why we at EDC think the Gulf is important to Canadian business; that Canadian capabilities match Gulf requirements in key sectors such as oil and gas, infrastructure and telecom; and that EDC is a good fit for both Canadian and Gulf businesses to expand their contacts and work together.

Our Chief Representative in this region, Jean-Francois Croft, enhances EDC’s value to Canadian companies through his ability to share in-market intelligence and trade finance knowledge in a timely way. 

This includes providing information about entering the market and its challenges, and introducing local players including key buyers, governments and banks to Canadian companies that want to do business in this region.  Then of course he can bring in the financial pieces that can help a deal go from discussion to completion.

I have been extremely impressed by my visit here. The Gulf has the wealth and talent to complete an incredible economic transformation.  Canada offers the experience and skill to help that transformation.  And EDC has the experience, knowledge and flexibility to make doing that business easier. 

I look forward to your questions.
 
Thank you. Shukran (sho-kraan)