Creating facts worthy of fiction

30 August 1996

The events could have come out of the pages of a political thriller. It's a tale of coup and counter coup, an assassination attempt on a government minister and the disappearance of $8,000 million of state funds.

Yet, none of it is fiction. It is all fact from the last 15 months in Qatar. Indeed, the small Gulf state has shed its reputation for political inertia with some style, witnessing some of the most turbulent moments in its 25-year history as an independent nation.

The catalogue of events suggests a climate of instability and uncertainty, but there is little expectation of any more major surprises. Today, the new regime of Emir Sheikh Hamad Bin Khalifa al-Thani appears to be in firm control, enjoying the support of most Qataris. It is recognised in the international community, and there is close military co-operation with the US. Doha also continues to attract significant international investment and funding for its projects.

Relations with the former emir Sheikh Khalifa Bin Hamad al-Thani remain a problem, however. Deposed by Sheikh Hamad on 27 June 1995, the 65-year old Sheikh Khalifa, who was abroad at the time, refused to ease himself into a comfortable retirement. When he emerged at the GCC summit in Muscat in December, it became clear that Sheikh Khalifa was more interested in reinstatement than reconciliation.

The Qatari delegation boycotted the final session of the summit and tension between the former leader in exile and his son at home has been high ever since. In late December, Sheikh Khalifa announced in Abu Dhabi that he remained Qatar's legitimate ruler and intended to return to Doha to take up his 'rightful position.' Rallying support around the region, he was received with all the pomp and circumstance befitting a visiting head of state.

The government in Doha hit back. In an interview with MEED on 17 January, Foreign Affairs Minister Sheikh Hamad Bin Jassem Bin Jabr al-Thani vowed that Sheikh Khalifa would never rule again and confirmed rumours that the former emir had control of a substantial portion of Qatar's state reserves. A month later, the feud took a turn for the worse, when the security forces foiled an anti-government plot, involving foreign forces and bodyguards loyal to Sheikh Khalifa.

On 24 May, Public Health Minister Ali Saeed al-Khayareen survived an assassination attempt at a petrol station in Al-Wajba. Initially, the attack was explained as a tribal matter and played down. Then, after three nationals involved in the incident had made confessions, the Interior Ministry accused Qatari nationals in Abu Dhabi of instigating the assault. In early August, another act of the drama opened in the London high court when the government launched proceedings against Sheikh Khalifa to recover the missing billions.

Father figure

Most Qataris would like to see the saga ending in a compromise that might even allow Sheikh Khalifa to return, not as ruler, but as a father figure for the nation. 'It is our view that he can come at any time as a father to all of us. The father of our emir is welcome,' Foreign Affairs Minister Sheikh Hamad said in the January interview, echoing the sentiments expressed by the new emir on the day he assumed power.

'People don't hate Sheikh Khalifa. He's considered as a father figure in Qatar and has a place here,' says one civil servant. 'But we don't want to revert back to the situation we had before. Time moves on and Sheikh Hamad's time has come.' Another view is offered by a local contractor: 'It is really a family affair. If the ruling family can sort something out, then we will support them.'

Diplomats monitoring developments in Doha expect events to move on. 'For much of the past 15 months, it has really been a question of the new emir getting to grips with the issues,' says one. 'I think we will witness some major developments over the next couple of years and see Sheikh Hamad living up to his reputation as a man of action. Many new ideas are being floated and are making their way through the consultation process.'

Sheikh Hamad has already shown an interest in broadening discussion. Among the announced changes are municipal elections which will be held for the first time in 1997. All nationals over the age of 18 would be eligible to vote. An emiri decree has also been issued for the first elections to the board of the Qatar Chamber of Commerce & Industry, which was previously appointed.

Censorship of the local media was officially abolished last December and there are plans to scrap the Information & Culture Ministry by the end of 1996. Articles that cause offence to neighbouring states can still land newspapers in trouble but robust attacks on domestic personalities have escaped censure. Two Arabic dailies have experienced temporary closures while a scathing attack on a minister brought no such retribution.

The attack on the minister might mean that a government shake-up is imminent, diplomats say. 'A cabinet reshuffle would be sensible,' says one. 'The regime is in a stable position, but there is also a feeling that new blood needs to be brought in.'

The government's top priority is to meet the rising economic expectations of the national population. This is a challenge in current circumstances: Qatar is asset rich, but cash poor at present. New gas revenues are about to begin flowing, but Doha is entering a four-year period that will test its financial discipline and management skills to the full. From now until 2000, the government will have to walk a fiscal tightrope, meeting rising debt service obligations before the earnings from of its investments in Qatargas and Rasgas start to make a major impact.

The government plan for the period ahead is to maximise revenues, minimise the growth in expenditure and encourage the private sector to play a greater role in the economy. A key policy strand is to rejuvenate the oil sector, which appeared to be in terminal decline until a change of policy brought in foreign companies, new technology and new investment. In the spring, oil production surged to a 10-year high of 470,000 barrels a day (b/d). Further output gains are on the way. 'Our aim is to have 700,000 b/d of capacity by the end of the decade, but we believe it may be more with the amount of exploration going on,' says Oil & Industry Minister Abdulla Bin Hamad al-Attiya.

The government is raising new revenues elsewhere. A departure tax is now payable at Doha international airport and draft legislation is being prepared for new health cards and fees. The IMF has reported that the government is considering raising utility charges by 17 per cent (see page 10).

Big borrowing

Higher oil output coupled with firmer prices this year is also helping to raise revenue. The budget for fiscal 1996/97, which was unveiled on 10 April, forecasts a 17 per cent increase in revenues to QR 10,800 million. Total expenditure, of which 82 per cent is allocated to current spending, is budgeted to increase by 8 per cent to QR 13,750 million, leaving a deficit of QR 2,950 million.

The actual deficit is likely to be substantially lower if past experience is any guide. The Ministry of Finance, Economy & Trade regularly underestimates revenues and overstates spending. In fiscal 1995/96, higher than expected income and lower than expected spending left a deficit of only QR 1,950 million, which was 40 per cent below expectations.

To promote its ambitious development plans Qatar taps the international money markets on a regular basis. Even though the national debt is equivalent to 77 per cent of gross domestic (GDP), international financiers are still lining up to lend substantial sums. General syndication closed recently on a $250 million sovereign loan for balance of payments support. In March, commitment letters were signed with a banking group headed by Industrial Bank of Japan to provide non-recourse financing for up to 75 per cent of the $1,000 million liquefaction plant contract for Rasgas.

Some bankers in Doha readily express surprise at the ease with which Qatar manages to borrow from abroad. 'When the figures and projects were first put out, I thought it was quite ridiculous what was being looked at,' says one banker. 'And while every year, I go around thinking that it can't last, it does.' Others are impressed by the affordable cost of borrowing: on the sovereign loan, banks queued up to participate even though it was competitively priced at just 0.5 per cent over the London interbank offered rate (Libor).

Qatar's enjoys such credibility in the international markets because it has painstakingly built up an impressive portfolio of project financing deals over the past three years. It also remains one of the wealthiest places in the world, a point borne out in a 1995 World Bank report that classified it as the richest country in the Gulf. Most important of all, its economic prospects over the medium-to-long term are bright, given the revenue forecasts for Qatargas and Rasgas.

The success of the gas schemes has been a useful counterweight to the political uncertainties of the past year. 'Everyone can now see the day when the first Qatargas shipment leaves Ras Laffan for Japan,' says a foreign banker based in Doha. 'Its departure will be enormously symbolic and will inevitably have a positive impact on confidence. It will clearly demonstrate that there is forward momentum.'

Local business people are happy to echo such sentiments. 'People used to worry about investing at home,' says one prominent local businessman. 'But now there is confidence in the future, as well as trust. People don't need economists to tell them to invest. The feeling comes naturally, when the conditions are right, and they are now.' Anecdotal evidence of this abounds in the housing, office and shopping developments around Doha and in the private investment in sectors such as healthcare that were previously the preserve of the state.

The positive mood in the business community suggests that the political diversions of the past year have generated more optimism than anxiety. 'I think it is because the excitement is all over,' says one long-term Doha resident. 'No one wants to go back. Everyone wants to go forward. And that means with Sheikh Hamad.' Unless there are more surprises in store, the Gulf's youngest ruler seems to have secured his position beyond further dispute.

Exchange rate: $1 = 3.64

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