FROM FRONTIER TO EMERGING MARKET: QATAR’S LONG-TERM GROWTH PLAN 38 COUNTRY REPORT With this in mind, it is no surprise that QNV2030 envisages a comprehensive reform programme that will sweep through all levels of Qatari economy and society. A significant rationalisation of the functions and roles of ministries and national agencies is underway which the government hopes will result in tighter national policies, improved service delivery, enhanced public sector accountability and longer run national development planning. Inevitably however, the trajectory of both the Qatari economy and its long term outlook remains tightly linked to developments in the hydrocarbon sector. Generally the country’s economic outlook remains broadly favourable, underpinned by strong oil prices and rebounding world trade. Actually the country’s hydrocarbon income (though secure for at least the next 150 years at current consumption rates) will begin to flatten somewhat in 2012-2013 as the country’s current investment programme in hydrocarbons comes to an end. A new investment round will not be instigated until at least 2015, when a moratorium on exploration of the country’s so-called North Field expires. Even so, the country’s income levels will remain high. <strong>The</strong> government hopes through the implementation of QN2030 that robust expansion of non-hydrocarbon sectors will keep aggregate GDP growth in 2012-2016 to average just over 5% (excluding hydrocarbon income). “Confidence is key,” thinks Andrew Stevens, group chief executive officer of Commercial Bank of Qatar. “<strong>The</strong> underlying driver is helping people manage surplus in a creative way that helps build a sustainable economy diversified from hydrocarbon dependence.” This is particularly important for the emirate as Qatar has traditionally relied heavily on loans to finance its economic development projects. However, these days it has exhibited a willingness to draw on its sovereign wealth fund, the Qatar Investment Authority (QIA), to ensure that key projects proceed as planned. Shashank Srivastava, chief executive officer and chief strategic development officer at the QFC “<strong>The</strong>re are very few overlaps on the regulatory front and certainly none in reinsurance, asset management and captive insurance. <strong>The</strong>re are natural synergies between us all,” he says. Photograph kindly supplied by QFC, April 2011. Going forward, Qatar’s investment pattern will reflect the decline in hydrocarbon capital spending. During 2011-2016, suggests QNV2030, total gross domestic investment might be around QAR820bn, of which half is expected to come from the non-hydrocarbon segment. Central government, or public, investment is estimated at QAR347bn and based on current estimates is expected to peak in 2012. It is vital to remember however that much of the government’s spending plans revolve around the assumption that oil prices average $86 per barrel. In November last year, when the price of Brent crude hovered just below $84 it was something of a concern; in late April hovering at levels near $113 it appears somewhat less stressing for the emirate. Even so, gas prices are the greater swing factor for the country. In spot markets, gas and oil prices have uncoupled and while Qatar is generally shielded from short term fluctuations in spot gas prices through its long term off-take agreements with buyers, any prolonged weakness could seriously undermine the government’s ability to fulfill its investment programme. Naturally, the current obsession in Doha is the 2022 World Cup though in the period of the current 2011-2016 five year plan, any contribution to that project will be perforce modest. However, notes Samer Eido, partner at international law firm Simmons & Simmons in Doha, the build up to a successful World Cup will in part depend upon the country opening up to foreign visitors and investors, with all the internal development that requires. “Qatar will have to build at the very least a further 15,000 to 20,000 hotel rooms to accommodate the influx of even modest levels of fans visiting the country during the games. I expect the government to invest massively in this area and it will have to set out strategies to accommodate the cultural changes this will invariably require,” Eido says. All in all, the government has taken on a gargantuan task. QNV2030 suggests that after 2012, when the current expansionary phase of hydrocarbon development ends, the structure of the Qatari economy will be such that five percentage points of additional public sector investment spending would be needed to generate a 0.5 percentage point temporary acceleration of growth in non-hydrocarbon output. That ultimately is the scale of the challenge for the country. Moreover, other countries in the GCC zone have embarked on rather similar projects; with Bahrain, Abu Dhabi and Saudi Arabia working hard to diversify their economies. Petrochemicals, air transport, logistics, real estate, finance, life sciences and telecommunications are common diversification themes across the region. <strong>The</strong>re is a chance that with so many countries funnelling investment into the same sectors, each country will fall short of achieving the most efficient level of production. Contributing to economic diversity A variety of institutions are contributing to Qatar’s diversification drive. <strong>The</strong>se include Enterprise Qatar, the Qatar M AY 2 0 1 1 • F T S E G L O B A L M A R K E T S
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