Friday, February 18, 2011

Qatar: past, present and future strategy

fig 1 : 2022 world cup logo (source: 2022qatarworldcup.info)                                        

In the midst of the global economic slowdown when most of the developing nations in the world recorded slow to substandard growth rate, there was one country that stood out from the rest  and this was Qatar , a tiny state in the Persian gulf. Blessed with huge amounts of oil and gas reserves , Qatar’s GDP is continuously growing with a double digit growth rate. With a GDP growth rate of 12% ,this 132 Billion US Dollar economy is the second fastest growing economy in the world after Ghana (Karvy private wealth, 2011). After analyzing the growth story of Dubai in the previous blog, the author will now attempt to analyze the same for this another success saga from the gulf.


The growth story so far


•  Petroleum and oil reserves:- So far the Qatar’s success story had been driven by its oil and natural gas reserves. Petroleum products contribute half of the Qatar’s GDP, 70% of its govt. revenue and 85% of its export (Jarred Cummans, 2010). According to Oil and Gas journal ,Qatar has a proven oil reserve of some 25.4 Billion barrels. It’s the sixteenth largest crude oil exporter in the world.,also an active member of international organizations like OPEC and GCC. It started exporting natural gas in 1997 only, natural gas today plays much more important role in Qatar’s economy than petroleum. Qatar is the third largest exporter of natural gas next to Russia and Iran. With an estimated reserve of 896 Trillion cubic feet it has 14% of the world’s natural gas reserves. A large chunk of oil export goes to Asian economies, Japan followed by South Korea are the largest importers. (eia.doe.gov, 2011) Most of the oil and natural gas reserves are operated by Qatar Petroleum, the national oil company of Qatar, established in 1974 controlling all the aspects of oil industry in the state. Some of the offshore fields are also operated by foreign countries under PSA (profit sharing screen). Oil was discovered for the first time in 1940, at that time the average production  was 5000 barrels a day (today it  is almost a Million barrel a day) . Qatar started exporting oil in 1952. After getting independence in 1971 the entire oil reserves came under the control of the local governing authorities and in the same year North fields, single largest field for non associated gas was discovered which marked a new beginning for oil and gas industry in Qatar. Subsequently factories were established to produce liquefied natural gas (LNG); Qatar Gas Company was established in 84 to export 6 million tons of LNG to Japan, followed by Ras Laffan with an annual capacity of 10 Million tons In 93. Pipelines were established to pump gas to Turkey, Pakistan etc. (Qatarembassy.net)



Al Jazeera:- Though petroleum had played a very important role in shaping up the success story of Qatar, there had been many other considerable achievements in the past few decades. One of them had been the establishment of “Al Jazeera” which was established in 1996 with the help of a financial aid of 137 Million US dollars from the Emir of Qatar, Sheikh Hamad Bin Khalifa Al Thani. The media agency owned by Qatar Media Corporation, had been started as an Arabic news channel for the Middle East region but later on  expanded into various, regions and languages. The news channel had been lauded for its media activism, high degree of transparency and independence. The news channel had played a very important role in promoting and reflecting the Arab viewpoints on major international issues, and influencing other media channels in the region for adopting transparency and freedom.



Marketing itself as a brand-  it is another area where Qatar had got some considerable success. Like Dubai, Doha had been marketed as a great place to do business. Doha had hosted some major sports events like Asian games 2006 and every year since 1993 is hosting Qatar Open/ Qatar ExxonMobil Open which had been attended by top notch players like Rafael Nadal, Roger Fedrer, Andy Murray and Boris Becker etc. Doha had unsuccessfully bid for Summer Olympics 2016 and had won the bid for conducting football world cup 2022. In November 2001 it hosted the ministerial level meeting between WTO members regarding trade negotiations. The meeting is famously known as Doha Development round. Other important events that showcase the passion and zest of residents of Doha along with its splendour  are Qatar Masters golf, Doha cultural festival and Qatar masters golf etc.



Social and political Reform


The govt. apparatus at Qatar is comparatively liberal and forward looking. The current ruler Sheikh Hamad had taken some steps for political reform after coming to power in 1995. These reform majors can be considered as a step forward for a region where the institutions of democracy and civil liberty are still in its inception phase. Other social reforms include granting permission to religious minorities such as Christians, Buddhists and Hindus for public worship. Similarly some concrete reforms have been made in the economic sphere as well. One of such reform is opening up the mobile telecommunication market. In March 2009 Vodafone was allowed entering the lucrative market which had so far been the monopoly of the state run QTel. Though 100% ownership is not allowed for foreign investors but sectors like education, tourism and agriculture had been exempted from the clause. (Bertelsmann Stiftung, 2009)



The way ahead


Qatar seems to have a very strong way ahead. Abundant gas reserves, efficient and visionary government and a strong social infrastructure will design the further growth trajectory for Qatar.


Social infrastructure: - thanks to the efficient usage of the oil revenue for various welfare and development schemes, Qatar had got a very strong social infrastructure that will provide supporting pillars to the country’s future ambitions. It has a, literacy rate of 89% which is one of the highest in the region, high life expectancy of 76 and ranks 33 out of 182 nations in the Human Development Index. The govt. wants to transform Qatar from a petroleum based economy to a knowledge based economy. It had formed the education city outside Doha which is home to six leading US universities. Another remarkable fact is that 70% of the students in these universities are female. (Bertelsmann Stiftung, 2009)


• Qatar has huge gas reserves which will ensure uninterrupted supply of capital for various developmental activities in the coming years.


• Tourism industry in Qatar is growing at an annual rate of 6%. A large part of the tourism revenue comes from the business tourism segment. In 2010 some 180 MICE (meetings, incentive travel, conferences and exhibitions) events were scheduled in Doha. (Technicalreviewmiddleeast.com, 2010) New 4 star and 5-star hotels are expanding their operations in Doha. Qatar has presently 66 hotels where as by 2011, 45 new hotels and hotel apartments are expected to be built. (DininginDoha.com, 2011) Other than business tourism Doha also has some great avenues for sports, leisure and lifestyle tourism. Opening up of the Doha international airport, completion of metro lines in the next five years and inauguration of Doha international convention bureau in 2012 will give further boost to the tourism industry in Qatar.


• Qatar is emerging as a new destination for intercontinental travel, thanks to the geographical location which is strategically placed between East and the West and North and the South, coupled with a very efficient state run airline, Qatar airways.


• Qatar has won the bid for conducting 2022 Football World cup. As a part of its preparation it is investing hugely in infrastructure as well as other tourism facilities. It had accelerated its 100 Billion US dollar infrastructure expansion plan. It is going to construct 12 new state of the art football stadiums, along with 80,000 new hotel rooms. It is also going to invest 20 billion US Dollars in road improvement program where as 25 Billion US Dollars in a railway project. Organizing the most famous sporting event will not only boost “Brand Qatar” / “Brand Doha” but will also be beneficial for the real estate and tourism sector of the whole Middle East region. Before Qatar winning the bid, it was predicted that by 2020 the total number of tourist visiting Middle East will increase to 67 Million from 36 Million at present. But after Qatar winning the bid this number will surely rise up further. (worldfootballinsider.com, 2011)



Qatar which has the second highest per capita income and is one of the fastest growing economies in the world seems to have a bright future ahead. Huge amount of petroleum and natural gas reserves along with the diversification of the economy into various sectors such as education, tourism and real estate will give a huge boost to the overall economy. But there are still few areas of concern that might be  detrimental to an emerging Middle Eastern economy like Qatar in achieving its full potential.


Qatar has following areas of concern that has to be contained. These are:-



• Qatar is still very slow in implementing economic reforms. It needs to speed up the process its process of economic liberalization.


• Qatar is still far away from the modern principals of democracy and social activism. Thanks to its high per capita income, today there hardly seems any concern for such things among the Qatari population. But in the light of the latest uprisings in neighboring countries like Tunisia, Egypt and Bahrain such state of political turmoil cannot be discounted.


• Gender inequality is still very high in Qatar. Out of 130 countries it holds 119th rank in terms of gender equality. (Bertelsmann Stiftung, 2009)


• Like Dubai, Doha also markets itself as a great place to do business. Though at paper it appears to be as exciting as Dubai, it surely lacks the cultural platform which Dubai has. Dubai is the most cosmopolitan and liberal place in the Middle East where business men, professionals and tourists from all around the world  visit , mingle and grow. This kind of charm is missing in Doha which is at many times, deterrent for many young talents. “Brand Doha” still needs a long way to go in order to catch up with “Brand Dubai”.


• Due to ongoing infrastructure projects and economic expansion plans Qatar is witnessing constant inflow of expatriates. This is increasing the cost of living at Qatar. Today Doha, 49th costliest city in the world according to one report, can be considered as the second most costly city in Middle East after Abu Dhabi. (Xpatulater.com, 2011)


• Even though the governing authorities at Qatar are trying to showcase political acumen and challenging the traditional thinking by, building ties with various nations such as Israel and USA etc, showing some degree of secular credentials and bringing some degree of liberty such as allowing liquor in some of the selected restaurants, nonetheless there are religious cum cultural circles which are not open to such changes and are opposing it.


• Besides one car bomb attack in 2005 there had hardly been any case of terrorist attack on the western populace leaving in Doha, nonetheless Qatar is rated high on the transnational terrorism ( on a scale ranging from low to critical ) due to general nature of the region. (Consider Qatar)



Reference-


1> Karvy private wealth, 2011, the world’s fastest growing economies, available at < http://karvywealth.blogspot.com/2011/01/worlds-fastest-growing-economies.html 

2> Jarred C, 2010, ETFs to Invest in the World’s Fastest Growing Economy, Qatar, available at < http://seekingalpha.com/article/216178-etfs-to-invest-in-the-worlds-fastest-growing-economy-qatar >

3> Eia.doe.gov, 2011, country analysis briefs: Qatar, available at <  ttp://www.eia.doe.gov/cabs/Qatar/pdf.  >

4> Qatarembassy.net, History of oil discovery, available at < http://www.qatarembassy.net/oil_history.asp >

5> Bertelsmann S., 2009, BTI 2010- Qatar country report, p-2 to 4, available at < http://www.bertelsmann-transformation-index.de/fileadmin/pdf/Gutachten_BTI2010/MENA/Qatar.pdf >

6> Bertelsmann S., 2009, BTI 2010- Qatar country report, p-2 to 4, available at < http://www.bertelsmann-transformation-index.de/fileadmin/pdf/Gutachten_BTI2010/MENA/Qatar.pdf >

7> Technicalreviewmiddleeast.com, 2010, Qatar’s tourism sector set for main revenue growth, available at < http://www.technicalreviewmiddleeast.com/news-a-development/business-a-management/160-qatars-tourism-sector-set-for-main-revenue-growth.html >

8> DininginDoha.com, 2011, investment pouring in Qatar’s hotel industry: QTA chief, available at < http://www.diningindoha.com/news-view.php?id=73 >

9> Worldfootballinsider.com, 2011, Qatar 2022 world cup to boost tourism sector, available at < http://www.worldfootballinsider.com/Story.aspx?id=34141 >

10> Bertelsmann S., 2009, BTI 2010- Qatar country report, p-14, available at < http://www.bertelsmann-transformation-index.de/fileadmin/pdf/Gutachten_BTI2010/MENA/Qatar.pdf >

11 > Xpatulater.com ,2011, International cost of living ranking, available at < http://www.xpatulator.com/outside.cfm?aid=240 >

12 > Consider Qatar, Business conditions in Qatar, p-3, available at < http://www.export.gov/middleeast/country_information/qatar/ConsiderQatarGuide.pdf >



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