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Doha poised for pre-eminence
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An ever-changing skyline -
Doha as seen recently from the Gulf waters. Soon it may all look
different.
| Qatar is investing billions into building up its
infrastructure for an economic and social take-off on a grand scale and, while
doing so, it does not wish to be seen as a runner up to Dubai. Arab
Banker visits the frenetic scene. |
A definitive future guide
to etiquette in Qatar should include: do not mention Dubai and, if you must,
remember to check out Doha first. It’s not that Qataris feel slighted by
comparisons with the glittering city state a mere 236 miles away. It is more to
do with their awareness that what they are doing now is different from what
Dubai has done over the years to reach where it is now, and so the end result
will be different too and transform Doha and the state of Qatar into a place
quite unlike Dubai.
In May Qatar unveiled plans to spend US$15 billion,
its own as well cash from foreign investors, on projects designed to place the
state on the Gulf map as a quality destination for cultural tourism, beach
resorts, shopping, lifestyle, business and sports events.
The so-called
tourism master plan was unveiled by Qatar Tourism Authority Chairman and Qatar
Airways’ Chief Executive Officer, Akbar Al Baker, in the presence of World
Travel and Tourism Council (WTTC) Chairman Vincent Wolfington and WTTC
President Jean-Claude Baumgarten.
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High-end tourism
“Qatar,” said Al
Baker, “will offer the high end of the tourist market with a fantastic
travel experience of beach resorts, sun, expansive desert landscapes, a rich
Arabic cultural heritage, prestigious hotels and extensive conference
facilities, and major international sporting events — all in a very safe
environment.”
And he explained why. Tourism growth in Qatar is
expected to more than double in the next six years, from about 400,000 to more
than a million by 2010. Although revenue projections are speculative at best,
it is clear that Qatar sees tourism as one of the many ways in which it plans
to wean its economy away from dependence on oil and gas revenues.
This
is beginning to make more sense than Doha, or even Dubai, would have envisaged
before they got so deeply involved with tourism as a potential bread-earner.
The dynamics of the regional political and economic situation are driving a lot
of business towards the southern Gulf, and the relative safety of the working
environment, and its lucrative rewards, suddenly appears to be an asset that
almost got overlooked until recently. The troubles in Saudi Arabia have
contributed to this reassessment by both corporates and individuals.
Qatar has gone a few steps further than Dubai and promised what it
hopes will offer something of value for everyone — a rack of museums for
the culturally inclined, sport fixtures to suit different communities and
tastes and apparently limitless conferencing opportunities.
The urgency
with which Qatar is pursuing its tourism master plan raises the spectre of a
country about to lose all its oil and gas. The truth is remarkably different as
the drive towards diversifying sources of revenue comes amidst a healthy
performance of the economy as a whole.
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Growth highs
As the Governor of the Central Bank
of Qatar has outlined (see article below), Qatar’s GDP growth rate
over the period 1999-2003 averaged around 15% a year, while growth in
non–oil GDP during the same period averaged around eight % a year. Put
together Qatar’s growth in the oil and non-oil sectors was the highest in
the entire region.
And, while Qatar’s external balance has been in
surplus for the past four years, the country has been involved in a vigorous
international campaign to attract foreign investment. As one Doha-based analyst
told Arab Banker, “One view is that with quality investment will
come quality expertise and human resources, of which Qatar can use huge
quantities right now.”
Sure enough, most growth-orientated
businesses in Qatar, and particularly banks and other financial institutions,
have gone on a talent-spotting spree, their target at first being banks in
other Arab countries that cannot match the pay packages on offer in Qatar. The
head hunters from Qatari institutions have also been following with interest
the careers of experts in the West and in many cases have offered attractive
packages to entice them to the Gulf state. A 200-page tome funded by the
government entitled Emerging Qatar 2004, planned to be an annual, is designed
to promote Qatar as a destination for investment.
A Qatar Finance and
Investment Conference in London heard senior government aides and analysts push
for significant inward investment of cash and expertise. According to Mohammad
Bin Khalid Al-Mana, Chairman of the Qatar Chamber of Commerce and Industry, who
spoke at the conference, the opportunities offered by Qatar are unmatched. As a
liberal economy with diversification and greater FDI flows as some of its chief
aims, Al Manai believes that Qatar stands a good chance of outstripping other
economies in the region.
International
standards
He said the country is already well on its way to
embracing international standards in management and business operations,
ranging from computerisation to transparency in financial reporting.
Oil and gas remains the largest sector, contributing 58% of the total
GDP. But generous government funding has gone into establishing petrochemical
industries, steel production and manufacturing. Incentives abound and are aimed
at encouraging the Qatari private sector to establish medium- and small-sized
industries, and helping foreign companies to enter into joint ventures or
simply start up with 100% ownership in such sectors as agriculture, industry,
health, education and the development and exploitation of natural resources or
energy or mining.
A large-scale programme aimed at further developing
the country’s oil and gas resources is focused on encouraging more
downstream projects.
Entrepreneurs can benefit from pre-investment
benefits, including cheap land and utilities, fully serviced industrial areas
and exemptions from export tax and profits for the first five years that can be
extended up to 10 years.
Added
to these, says Al Manai, are the incentives offered by Qatar’s
“distinct location” in the Gulf, its social and political stability
and its extremely favourable tax regime. Qatar is almost a free economic zone
with only a 4% general tax tariff, and places no restrictions on capital and
profit transfers and as yet has no income tax on wages and salaries of
expatriates.
All this will be music to the ears of potential investors,
especially as the government ponders more privatisations of state-owned
companies, and nudges entities towards mergers and acquisitions.
“Qatar promises to be one of the most important countries for
attracting investments in general, and foreign investors in particular,”
says Al Manai. “This is due to the state’s adoption of ambitious
plans to invest billions of dollars in infrastructure, oil and gas sectors and
the downstream projects.” The view from Doha is that as the infrastructure
shows visible signs of improvement and modernisation, it will set in motion a
chain of events, started with a more proactive role being played by foreign
investors. Comparisons with Doha’s neighbours may then become irrelevant.
| Qatar indicators |
1999 |
2000 |
2001 |
2002 |
| GDP (QR million) |
45,111 |
65,646 |
62,341 |
63,578 |
| GDP (US$ million) |
12,393 |
17,760 |
17,127 |
17,466 |
| GDP growth rate |
20.8% |
43.3% |
(3.6%) |
2.0% |
| GDP per capita (US$) |
22,130 |
30,620 |
28,545 |
28,125 |
Source:
QNB/CBQ
Governor Abdullah Khalid Al Attiya |
Aiming
for full convertibility
Qatar’s
Central Bank has combined a strategy for steady growth with the aim of a full
convertible riyal and wide ranging efficiencies in the banking sector, says
Governor Abdullah Khalid Al Attiya. |
While
examining the economy of Qatar and its banking sector, it is important at the
outset to remember that economic efficiency and enforcement of an effective
macro-economic policy remain the strategic objectives of our leadership and
public policy formulators. A positive outlook for Qatar’s economy is
enhancing our capital formation, which has led to real economic growth and a
desirable level of financial stability.
Given the vulnerability of our
economy to external shocks and fluctuating oil prices in the short to medium
run, we have embarked on a development strategy based on income
diversification, economic restructuring and human capital development.
Fiscal consolidation is geared towards maintaining a discretionary
expenditure to finance infrastructure and capital investment, while increasing
non-oil revenues at an acceptable pace.
These decisions were reflected
in the high GDP growth rate over the period 1999-2003, which averaged around
15% a year. In the meantime, growth in non–oil GDP during the same period
was high as well, averaging around 8% a year; putting growth rates in both GDP
sectors (oil and non-oil) as the highest in the entire region.
Moreover, the external balance has been in surplus for the past four
years. Given the prosperous state of the economy, Qatar Central Bank has played
an active role in the pursuit of price and exchange rate stability, along with
its broad objective of promoting higher economic growth.
Maintenance of
the peg with the US dollar remains a prime objective of exchange rate policy
and works as an intermediate monetary target.
This nominal peg has
served the economy well in providing an anchor for macroeconomic policy and as
a reference for stability and confidence– particularly in keeping
inflation low at an average of 1.7% over the past five years despite strong
economic activity.
Qatar and its GCC partners are committed to
realising a single Gulf currency by 2010. As a first step to fulfilling this
objective all GCC member states have adopted a common peg against the US dollar
as of 2002. This will further promote financial stability and reinforces
monetary credibility, while expanding the benefits of economic integration
within the member states.
In the context of a fixed exchange rate and
an open capital account, monetary policy has been relatively neutral. QCB
strives to enhance its interest rate management through indirect instruments.
In 2001 it introduced the Qatar Monetary Market Rate or the QMR, which allows
banks to (electronically) borrow and deposit overnight funds with QCB on a
daily basis. The path of the interest rates over the course of the day is
determined by domestic liquidity market conditions.
Financial stability
also is promoted through QCB’s off-site Central Reporting System, which
enables inspectors to supervise banking risks, guard against money laundering
and various functions of the banking system. The system provides continuously
updated information and alerts the banks and inspectors against any violation
or discrepancies. QCB is also studying the possibility of establishing a single
regulatory system for both banking and financial sectors.
An efficient
payment mechanism contributes to enhanced GDP growth, and QCB’s cheque
clearing operation allows a cheque to be cleared within 24 hours. No doubt a
fast-growing economy requires discretionary macro-economic management. However,
QCB has set its sights on a free convertibility of the Qatari riyal,
maintenance of price and financial stability and promotion of efficiencies in
the banking system.
This
article is based on a speech that Governor Abdullah K Al Attiya
delivered at
a London conference in March 2004. |
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