Qatar: The envy of the Middle East

30 May 2011

As other governments come under increasing pressure to reform, Doha is reaping the benefits of two decades-worth of investment in gas export infrastructure

In numbers

$65,495: Qatar’s per capita income, which is the highest in the world

$130bn: The size of Qatar’s gross domestic product for 2010

Source: MEED

At a time of unprecedented political turmoil in the Arab world, Qatar stands out as an oasis of stability. As military forces clash with demonstrators and governments rush through political and social reforms in a bid to ease discontent, Doha is enjoying the fastest economic growth in the world.

Qatar’s future will be driven by foreign investment … Qatar needs to attract this type of investment

Doha-based banker

“One of the main problems for Bahrain is that it is located next to Qatar. Bahrainis must look at what the Qataris get from their government and think – why not us?” This comment from a Bahraini national at an oil industry conference in Saudi Arabia in mid-May, gives an indication of how the country is perceived by its neighbours.

Qatar shares many traits with Bahrain; it is a small nation of less than 2 million, ruled by an absolute monarchy and is strategically placed at the heart of the Gulf.

Stable environment in Qatar

Where the countries differ is that most of Qatar’s population is Sunni Muslim and it has huge hydrocarbon reserves. Qatar has the world’s third-largest reserves of gas and 15 billion barrels of oil. Bahrain, by contrast, has a majority Shia population ruled by a Sunni elite. Its oil and gas production has already entered decline.

Bahrain was the scene of large-scale anti-government protests in February and March, which prompted a violent crackdown from the authorities and led to scores of deaths, mass arrests and the declaration of a state of emergency.

Qatar nominal gross domestic product
e=Estimate. Source: IMF

“Qatar does not have the same problems as Bahrain, because they simply do not exist here,” a Qatari executive from a leading state-owned company says. “The economy in Qatar has done well and if you add no unemployment and a good standard of living into the equation it contributes to a stable country.”

Official figures put unemployment at 1 per cent, while per capita income is the highest in the world at $65,495. Qatar’s gross domestic product in 2010 totalled $130bn. This was the same as Egypt’s, which has a population of more than 80 million.

The Al-Thani family has ruled Qatar since the 19th century and although it has absolute control over the country, a governmental structure is still in place. The emir and highest authority in the country is Sheikh Hamad bin Khalifa al-Thani. The prime minister, Hamad bin Jassim bin Jaber al-Thani, heads the Council of Ministers, which in turn manages the financial, administrative, legal and regulatory infrastructure. 

Qatar GDP breakdown by sector, 2010
Mining & quarrying*56
Other services11
Finance Insurance & real estate9
Trade, restaurants & hotels6
Transport & communications6
*=Including hydrocarbons; GDP=Gross domestic product. Source: QNB

Qatar also has a constitution that guarantees the rights to private property and economic freedom, as well as state ownership of the country’s hydrocarbon reserves.

This stability has allowed the country to focus on developing its economy over the past two decades and fast-track industrialisation plans that would have seemed unthinkable 30 years ago. 

Qatar’s guaranteed revenues

In partnership with international oil majors Qatar has built up the world’s largest liquefied natural gas (LNG) export operation. In 2010, capacity hit 77 million tonnes a year (t/y).

Doha has secured long-term supply deals with European and Asian countries, guaranteeing revenues for decades to come and has invested in a fleet of tankers to transport the gas. Qatar has also established a metals industry, with large steel and aluminium production plants.

“[Economic] growth of 20 per cent is exceptional by any standards and in Qatar this is no different,” a Doha-based banking source says. “The reason it is so high is because of the additional LNG that has come onstream.”

What also sets Qatar apart from its neighbours is its commitment to ploughing these revenues back into the country and to create jobs for its nationals by building a sustainable knowledge-based economy.

The General Secretariat for Development Planning was set up by the government in 2006 to develop a strategy for the country’s growth. The result was the Qatar National Vision 2030, a document that promises to transform Qatar into an advanced economy, capable of sustaining its own development and providing a high standard of living for all its citizens.

Focused investment in Qatar

The national vision cautions against using the financial returns from hydrocarbon resources to fund trophy projects. It says Doha must instead invest in world-class education and healthcare systems, with education tailored to current and future needs of the labour market.

The vision calls for the wise management of Qatar’s exhaustible reserves, leveraging wealth by investing in infrastructure and supporting the innovation through effective systems for funding research. It says economic progress must not be to the detriment of the environment and the private sector needs to be engaged to provide training and support for entrepreneurs.

“The leadership has a good vision for the country and this is slowly being realised,” the banking source says. “Now that most of the oil and gas targets have been met, it is time to move to the next phase.”

The next phase entails ensuring other sectors of the economy also flourish. To facilitate this, several years ago the government eased restrictions on foreign ownership in several non-hydrocarbon sectors.

“While obviously investments in oil and gas have been the major driver [of economic growth], Qatar’s future will be driven by foreign investment in the country,” the banking source says. “Qatar needs to attract this type of investment and offer companies the right kind of deal if it is to maintain its momentum.”

Today, 100 per cent foreign ownership is allowed in a growing list of sectors that include industry, agriculture, health, tourism, education, energy, mining and the service sector. 

Qatar has also established economic zones, the Qatar Financial Centre and the Qatar Science & Technology Park. Any tenants trading from these areas are also allowed 100 per cent foreign ownership.

Corporate tax in Qatar has been simplified and now companies are subject to a flat 10 per cent rate on all profits. Unlimited money transfer is also allowed with remittance of profits permitted for any foreign company. To encourage the start-up of small and medium-sized companies, Enterprise Qatar was formed in 2009. Doha is particularly keen to support female entrepreneurs.

To complement the long-term vision, earlier this year, the government published its mid-term plan for the country, the Qatar National Development Strategy. The 286-page document outlines Doha’s investment programme for 2011-16.

Having hit its targets for LNG production, infrastructure spending is set to dominate the agenda in Qatar over the next five years. About $65bn is planned to be spent on schemes including the $11bn New Doha International airport, the $6bn Doha port project, and a $25bn railway system that includes the Doha metro.

Non-hydrocarbons projects in Qatar have traditionally been slow to progress, but a new motivation to get things done was found in December 2010, when the country won the bid to host the 2022 Fifa World Cup football finals. Now Qatar has a definitive deadline to work towards.

Qatar on the world stage

While some may question the wisdom of staging a football competition in the desert and even as investigations continue into alleged impropriety in how the bid was won, the award of the event to Qatar marked its arrival on the international stage.

A decade ago, few outside the region would have known where to find Qatar on a map. Today, they know the tiny state probably provides a large percentage of their country’s gas supply and that it controversially landed the right to host the world’s highest-profile sporting event. They will have also seen coverage of the 2011 Arab uprisings filmed by reporters working for Al-Jazeera, the Doha-based, state-funded satellite channel.

It is for all these reasons that protesters have not taken to the streets in Doha. As much as Qataris are still denied suffrage, ordinary citizens enjoy a high standard of living and personal freedoms. The state is investing for the future and the people are not only proud of their country’s economic growth, but are also pleased with its steady transition into a modern Islamic state.

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