As Qatar begins to develop some $90bn of new infrastructure ahead of hosting the Fifa football World Cup in 2022, competition for skilled international expertise is increasing, driving up salaries.

Average pay in the country is now 7 per cent higher than in the UAE, according to US manpower specialist Robert Half. Despite efforts to boost the employment of locals, the small size of the indigenous population coupled with the sheer scale of the development planned and under way means that many of the workers have to be recruited from abroad, and lured with attractive remuneration packages.

Although this is true for most GCC countries, the phenomenon is particularly marked in Qatar: some 74.2 per cent of the population comprises migrants, the second-highest proportion in the region after Kuwait. The Washington-based IMF recently stated that in the past decade, the Qatari private sector has been “almost completely dominated” by foreign workers.

Capacity challenge

Capacity rather than affordability has become the greater challenge for Qatar’s economy and social infrastructure. The huge influx of skilled workers has in turn increased demand for housing and other key services, along with the personnel to provide them, thus creating further demand for expatriate labour.

“The oil and gas sector continues to lead the way in the Qatari hiring market, with increased production likely to fuel additional job creation,” says Gareth el-Mettouri, associate director at Robert Half Middle East. “The resulting hiring increase, of both domestic and international workers, will create additional infrastructure demands, which will in turn create more jobs.”

He says a widening skills shortage in professional-level talent will result in continued recruitment into the country in the coming years. “The non-oil and gas sector is buoyant,” says El-Mettouri. “The services, manufacturing and construction industries are growing, and the financial services sector will continue its rise as insurance and Islamic finance develop. Additional business generated from the construction industry is likely to benefit the financial services sector as well.”

Among other megaprojects, Doha is developing a 216-kilometre metro system that will require up to 70,000 people to build. Moreover, it has to compete against other GCC markets to attract staff, since these countries are also delivering immense infrastructure programmes. Saudi Arabia awarded its Riyadh Metro contracts at around the same time as Qatar.

As the UAE has expanded and modernised its infrastructure and entertainment facilities over the past decade, it is now seen by expatriates as an attractive place to live and so companies have to work less hard to find workers. Qatar is still at an earlier stage of development, so employers have to offer better packages to compete. “We’re still seeing stronger expatriate benefits in Qatar, as firms are trying to appeal to expatriates to choose Doha over Dubai or Abu Dhabi,” El-Mettouri tells MEED.

While living costs do influence the salaries set by Qatar-based employers, this is not the deciding factor. Rather, it is competition that is driving the market. “While the cost of living is an important factor, the real issue we’re seeing is demand outweighing supply,” says El-Mettouri. “Increased business activity across the region, and the desire for candidates with experience in mature markets, means that the region is [facing a challenge] in finding the requisite skills within the domestic workforce. Companies need to look to expatriate talent to fill skills gaps as well as bring additional experience and insights into the region.”

“Many of the talent shortages that exist in Qatar are equally in short supply around the world, as GCC states compete with other business centres for top talent. Expatriate talent from more mature markets are being sought by other emerging markets in Asia, South America and the Middle East, and as world economies are improving, there will be more opportunities in home countries as well. This is pushing up salaries for those with niche skill sets such as accountancy and human resources.”

Cost of living

Despite the high remuneration on offer, the impact of Qatar’s high cost of living is still significant. This can be seen in IMF data for average per capita economic output. At $104,756 in 2012, Qatar’s per capita gross domestic product (GDP) was more than double that of the next richest GCC country, Kuwait, at $48,761, and the UAE at $43,774. But the gap is far narrower when consumer purchasing power is taken into account. The IMF recently published figures for 2011 GDP per capita calculated on a purchasing power parity basis, which show the UAE’s GDP per capita as $47,893 and Kuwait’s at $54,283, whereas Qatar’s was only $88,314.

Even allowing for the difference in years, the data clearly shows the high cost of living in Qatar significantly affects the real per capita value of its national income. For those expatriates who must meet their own housing costs, accommodation is by far the largest item of expenditure, typically accounting for 30-40 per cent of salaries. Sales and rental prices are still below levels seen in 2008 before the global financial crash, but they have been rebounding, reflecting a shortage of housing and the pressure on real estate development land – prices for which rose by as much as 15 per cent last year.

One of the factors driving accommodation costs upwards is that employers often finance housing directly or indirectly. “Most skilled expatriates in Doha employed by international companies have housing benefit included in their packages, or their rent is met by the company,” says Paula Walshe, head of international corporate services at Cluttons Middle East. “This has kept villa rentals in particular high, in comparison to other cities in the region. Many companies bulk-lease apartment buildings or compounds for their staff and leverage discounted rates from landlords on this basis.”

Also underpinning the strength of the housing market is the continuing growth of the economy and the development of major projects, which generate a requirement for skilled expatriate manpower.

The real estate sector is structured differently from that of the UAE, both at the development stage and in the pattern of purchases, with foreign buyers playing a much smaller role.

“Residential development is small-scale in comparison with Dubai or Abu Dhabi, with no true masterplanned communities in evidence,” says Walshe. “Most developments and buildings are constructed by private Qatari companies or individuals, rather than the government, as is the case in the UAE. The exception to this is Lusail and The Pearl. Non-GCC nationals can only purchase in very limited areas including West Bay Lagoon and The Pearl. Most apartments are bought for investment and most expatriates rent.”

Some of the pressure on housing costs will ease in the medium term, with the delivery of new developments. “When [Lusail] comes on stream over the next five years, this could put downward pressure on rents in other areas of the city,” says Walshe.

Ancillary costs

But other costs are set to remain high and even jump significantly as demand rises, in particular for education. Annual nursery and kindergarten fees can amount to QR20,000 ($5,492) a child, while fees for secondary schools in Doha are typically about QR50,000. Moreover, there are long waiting lists for the well-reputed English and French-language schools.

The Development Planning & Statistics Ministry says the consumer price index rose by 2.7 per cent over the course of 2013. Energy costs and housing rents rose by 4.8 per cent, while the cost of entertainment, culture and recreation grew by 5.4 per cent. These factors were partially offset by a decline in the cost of some goods and services, but the cost of living is certainly on the rise in Qatar.