Megaprojects push Qatar's population up

03 February 2010

Qatar’s mushrooming expatriate population is putting increasing pressure on the state’s infrastructure – but the influx of new workers is also proving a motor for diversification

In tandem with its economic boom, Qatar’s population has grown fast over the past five years. In October 2009, according to figures from the Qatar Statistics Authority (QSA), it had surpassed 1.6 million – a dramatic increase from 744,029 in 2004. Even with the global financial downturn, Qatar’s population has continued to grow. It stood at 1.5 million in January 2009 – and in November last year the population increased by 51,678.

Key facts

1.6m - Qatar’s population in October 2009, up from 744,000 in 2004

76:24 - Ratio of men to women resident in Qatar in 2009

Source: MEED

As of October 2009, there were 1,631,728 people, including Qataris and non-nationals, living in Qatar. Men made up about three quarters of the total population, a figure of 1,254,092, while women numbered 377,636. The high male statistic is due to the hundreds of thousands of foreign workers employed in the gas sector and the broader projects market.

Economic diversification

There are currently $229bn worth of projects planned or under way in Qatar, according to regional projects tracker MEED Projects. Doha’s drive for economic diversification and megaprojects such as the $7bn New Doha Port, the $5.5bn Lusail real estate development and the $8.25bn Education City, have resulted in an influx of expatriate workers, recruited to work on these projects.

“The most important recent factor behind the population bulge is the scale of economic diversification under way, which has led to an increasing demand for manpower,” says Samir Pradhan, senior researcher for the GCC economics and Gulf-Asia programme at the Gulf Research Centre. “And given the domestic as well regional skills deficit, both business and industry have to rely on a migrant workforce.” 

The most striking change has been in the proportion of manual labourers in Qatar. In 2004, they accounted for just 25 per cent of Qatar’s population of 744,029 population. But by 2008 this figure had soared to 57 per cent, according to the QSA.

Qatar’s systematic exploitation of its gas fields over the last few years has required a significant increase in manpower. Doha has been investing heavily in its gas sector, with liquefied natural gas (LNG) production forecast to rise from 43 million tonnes a year (t/y) in April 2009 to 77 million t/y by 2011. It is already the world’s largest exporter of LNG.

While Qatar’s investment in developing its industry will result in even higher state revenues – in the third quarter of 2009 Qatar’s gas sector contributed $4.5bn to gross domestic product (GDP) – the population increase has generated major planning challenges.

As the booming economy drew expatriate workers into Qatar, the country suffered an acute shortage of housing and office rental stock which triggered a spike in rents.

“In Qatar you’ll struggle to get your child into a school, hospitals are overcrowded, and there’s a long wait for a car”

Kapil Chadda, managing director, HSBC Middle East

Qatar’s Planning Council reported an average 154 per cent increase in residential rents in 2005-07, and a further 15-20 per cent rise in 2008. The accommodation shortage was made worse by the global financial crisis, which has prompted developers to reconsider their development plans for new housing.

“Clearly the main problem is housing,” says Kevin Carey, senior country economist for the GCC, Middle East and North Africa region at the World Bank. “This explains part of the surge of inflation in 2008 when Qatar faced the paradox of trying to expand housing supply to meet demand, but in so doing, it was adding to the demand by creating the need for more construction workers.”

These soaring rents contributed significantly to the high inflation rates in the country last year, which peaked at 15 per cent.

However, the supply-demand balance is now shifting. Data from the QSA released in December last year shows that rental prices decreased by an overall 2.8 per cent compared with October and are now 16.3 per cent lower than prices in January 2009. According to real estate consultant DTZ, average monthly rental rates for two-bed apartments in Doha’s diplomatic district peaked in the first half of 2008, at QR20,500 ($5,630), dropping to QR14,000 in October last year.

The swell in Qatar’s population has also put pressure on the health care system, which is almost entirely funded and operated by the government. State-owned provider Hamad Medical Corporation (HMC) currently handles about 98 per cent of in-patient care and 95 per cent of out-patient visits. HMC’s facilities are currently running at almost full capacity. 

Strained infrastructure

Qatar’s rise in population is also creating bottlenecks in other areas of the economy. “There are certainly pressures in terms of infrastructure,” says Kapil Chadda, managing director and head of global banking at HSBC Bank Middle East. “If you move to Qatar today, you’ll struggle to get your child into a school. The hospitals are significantly overcrowded and you still have to wait 3-5 months to get a car.”

In this sense, the prevailing financial crisis has been beneficial in prompting a slowdown in the economy which is helping to moderate population growth. Doha’s real GDP slowed to 11.5 per cent in 2009, compared with 16.4 per cent growth in 2008, according to the International Monetary Fund.

Although Qatar reported an all-time high population figure of more than 1.66 million in October 2009, the figure dipped to 1.63 million at the end of the year. “The pressure is certainly abating as the rate of population increase has slowed down,” says Chadda. “But there is still an under-capacity in service provision.”

However, the government is making concerted efforts to address this. For instance, the 2008-09 budget allocated $2.53bn in funds for social and health services, a marked increase from the $1.32bn for the previous fiscal year.

“A lot of the problems are being solved through the building of new infrastructure,” says Chadda. “The roads are being widened and there’s a new airport under construction, all of which will help, but there’s still a long way to go.”

With many of Qatar’s mega-projects coming to completion in the next couple of years, particularly in the gas sector, economists are confident that the population pressure will begin to ease in the near future. “The main driver of population in Qatar is the megaprojects,” says Marios Maratheftis, regional head of research at Standard Chartered Bank in Dubai. “There are a lot of new projects coming up which will ensure a continuing demand for labour, but I doubt they will be of the same magnitude as the ones that are soon to be completed. So the rapid pace at which the population has expanded should slow down.”

As a separate issue, economists increasingly point to the pitfalls of having a large proportion of the population comprising imported low-skilled or manual labour because of the detrimental impact this has on the labour market for the local population.

Firstly, the open market for expatriate labour has lowered the wages for many occupations far below what a Qatari national would be willing to accept. In addition, because most expatriates will only be in Qatar on a temporary basis, they have little or no incentive to acquire specific job skills as they are unlikely to be able to exploit them in the long-term.

The combined effect of this is to limit the country’s ability to build up quality human capital. For the most part, Qataris do not work in the private sector building up their experience, and the expatriates who are there do not view it as a long-term proposition.  

“This does suggest the need for integrated thinking about immigration, education, incentives, and on-the-job training with the objective of creating high productivity, non-hydrocarbon sector jobs for Qatari nationals,” says Carey.   

Sustainable growth

It has also been highlighted that since the majority of expatriates’ incomes are not spent in Qatar, but sent back to their home countries as remittances, labourers’ contribution to the economy is somewhat limited. Furthermore, because they tend to be employed on short-term projects, this demographic tends to be very transient in nature.

For population growth to be sustainable, there needs to be a larger influx of professionals moving into Qatar, not just blue-collar workers who simply leave the country when their infrastructure projects are completed.

In this sense, ongoing job creation in the country’s knowledge sector is imperative. Founded in 1995, the Qatar Foundation for Education, Science & Community Development is spearheading the country’s drive to become an advanced knowledge-based society.

It aims to develop human potential through a variety of projects. The most high-profile to date being Education City which is home to Qatar Science and Technology Park and the branch campuses of six world-renowned universities, including the US’s Carnegie Mellon University and Weill Cornell Medical College.  

“I think the future of Qatar is as a knowledge-based economy,” says Maratheftis. “You cannot ignore the huge gas wealth of the country, but the diversification of the economy has got to be prioritised, because that will generate jobs and sustain the population in the future.”

In the short term, it is clear that the rate of population growth will be influenced to a large extent by the size of Doha’s 2010-2011 budget, which will be announced in April, and the size of the future projects market.

However, economists agree that there will be a definite slowdown in population growth in the near future, with Maratheftis predicting that Qatar’s population growth will remain more or less flat in 2010, a trend that will continue into 2011 as most of the new LNG production units come online.

“I think we’ll see a modest growth in population this year, somewhere in the range of 3-5 per cent,” says Chadda. “It’s a little more difficult to predict for 2011. At worst, it’s the same rate, at best, it’s probably 1 to 2 per cent more than that, depending on what investment plans are announced this year.” In the longer term, the Gulf Research Centre is forecasting the emirate’s population to hit 1.9 million by 2015, while the QSA has projected it to be somewhere near 2.5 million by 2030.

However, a study published at the end of last year by the UAE’s Madar Research has raised concerns over the accuracy of population estimates in the GCC. Estimates produced by local, regional and international organisations, such as the UN and World Bank, have been found to differ by as much as 25 per cent.

Given the extremely high number of expatriate workers arriving and leaving the GCC, it is very hard to accurately calculate and forecast population figures. 

But, since Qatar uses the International Monetary Fund methodology for collating its economic statistics, the majority of economists are fairly confident about the accuracy of the population numbers that are generated by the QSA.

Given the country’s vast hydrocarbon resources and drive for economic diversification, as well as the small national population, there is no doubt that, going forward, Qatar’s growth model will continue to involve high levels of expatriate labour.

The population surge of recent years has clearly created unwelcome pressure points in the economy’s infrastructure. But Qatar is making a considerable effort to address them.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications