Mobile Edition
Print
Get the Mag
Weekly UpdatesThe country's gas-fuelled economy is one of the few in the world forecast to grow, between 7-9% in 2009, while that of most of the other GCC states is projected to contract amid a slump in crude oil prices from a peak of $147.27/b for paper WTI on July 11, 2008. Economic growth has been in double figures in Qatar for the past five years, in 2008 peaking at 44%.
It is Qatar's position as the world's largest LNG exporter which is fuelling this strong growth and under-pinning the country's long-term economic prospects. By end-2010, LNG exports will have reached 77m t/y, meaning gas revenues will continue to fund the country's multi-billion-dollar infrastructure projects currently planned or under-way. For fiscal 2009/10 announced in April, $10.4bn of the $25.97bn budget has been allocated for spending on non-oil and gas projects.
As long as Qatar's infrastructure needs improvement, there will be room to spend gas revenues domestically, although much will also be invested abroad. With a vision for its economic development laid out by the government until 2030, it will be a long time before Qatar's ambitions are exhausted.
Qatar's GDP in 2008 reached $102.4bn. In 2008, Qatar's gas sector overtook oil as the largest contributor to GDP for the first time in the country's history. Gas constituted 32% of the state's income in 2008 compared with 27% for the oil sector. The majority of the new gas production has been designated for export.
A litmus test of the general health of Qatar's economy is it banking sector. Doha has undertaken a multi-pronged strategy to boost liquidity since ratings agency Moody's Investors Service changed its credit outlook for Qatar's banking sector from stable to negative in February 2009. Qatar's nine local banks registered an average increase in profit and assets of 10% and 19% respectively for the first quarter of 2009, compared with the same period in 2008. The value of Qatari projects, either planned or under way, stands at $200bn.
Finance & Economy Minister Yousef Kamal has predicted that 2009/10 revenue will fall 14% to $24.4bn, meaning it will have to draw on its reserves to cover the shortfall. Even though Qatar is expected to post a budget deficit of $1.6bn this year, its first since 2004/05, this will have a negligible impact - equating to 2% of GDP, which can easily be financed from available resources. And with the budget based on an crude oil price of $40/b, it looks likely that the deficit will be eliminated given the current price of paper WTI is more than $60/b.
In October 2008, the government launched the Qatar National Vision 2030 to serve as a blueprint for the social and economic future of the country. In stressing the need for reduced dependence on the petroleum sector, the plan calls for an expanded role for other industries and services within the economy.
GDP is expected to jump to $139.4bn in 2010, and it is not yet clear where the government will invest this money - and what proportion of it will be invested domestically versus overseas. The $65-75bn sovereign wealth fund (SWF), the Qatar Investment Authority (QIA), will be behind any overseas investments. Set up in 2005 with an agenda to invest Qatar's export income in non-oil and gas related assets, the QIA has risen to world prominence through its high-profile investments in, among other things, the London Stock Exchange.
The IMF has forecast that Qatar will be the only GCC state to escape the global crisis largely unscathed. Qatar's macro-economic fundamentals remain sound. Moody's sovereign rating of Qatar at Aa2 is a testament to its economic strength. Qatar National Bank has forecast GDP growth of 23.5% for 2010.
The 12-year-old Doha Securities Market ended on June 21, 2009, as Doha launched Qatar Exchange in partnership with the New York Stock Exchange's (NYSE's) Euronext, an operator of international exchanges. Qatar Exchange (QE) is offering derivatives and commodities beyond the DSM's existing cash equities business and is in talks with regional partners to launch overseas. QE adopted NYSE's Euronext technology. The QE, in which the trans-Atlantic operator has taken 20% for $200m, ratchets up the race for dominance as the region's leading trading hub and primary financial centre. Doha is thus to position itself as an alternative to Dubai, the region's established financial and trading hub.
The deal differs in size, but not in scale, from the 2008 announcement that NYSE Euronext was intending to take 25% for $250m. The more modest US investment was requested by the QIA which wants to launch an IPO. The QIA, which owns 80% of QE, is taking on an increasing domestic role in Qatar. It has bought up local banks' exposure to declining stock and real estate portfolios, as well as leading this revamping of the local stock market. For NYSE Euronext, the deal allows it to expand its presence in a region which has for years been hoping to develop deeper capital markets to complement economic reforms and favourable macro-economic fundamentals.
The Qatar-NYSE Euronext deal mirrors a similar arrangement between Nasdaq and the Dubai government, which in 2008 gave birth to NasdaqDubai. That deal emerged from the battle for control of OMX, a Scandinavian operator of exchanges. Nasdaq and Dubai eventually joined forces to assume control of OMX in a complex deal which gave Nasdaq a stake in Dubai International Financial Centre's bourse, now renamed NasdaqDubai. NasdaqDubai aims to extend its derivatives coverage, both in individual companies and indexes of those stocks, to regional markets including Kuwait and even Qatar. In November 2008 it launched 20 futures contracts on stocks listed in the UAE and has promised more. QIA's CEO Hussein al-Abdullah on June 23 said QE planned to become the "natural trading hub" in the GCC region but it aimed to work alongside, rather than against, its GCC peers.
The Urban Planning & Development Authority (UPDA) is drawing up a masterplan for Qatar to ensure planned infrastructure projects are able to move ahead on time. With a booming economy and a population forecast to more than double from 400,000 to about 1m within two decades, Doha is in momentous growth. This in turn is radically transforming the capital, with new housing and roads being built. To ensure public infrastructure can cope with the rapid pace of change in Qatar, the UPDA was set up in 2005 to guide development and major projects in the state over the next 20 years. The UPDA has the task of compiling a vision for future development in all fields.
The report will combine the plans for projects such as Education City and the Pearl and Lusail real estate developments into one integrated plan to ensure their compatibility and facilitate the timing of infrastructure work. However, the UPDA has not been given responsibility for the settlements and communities grown up around QP-controlled areas, such as the onshore Dukhan oilfield, Messai'eed port and Ras Laffan industrial city. The masterplanning for these is done by independent authorities, such as the Messai'eed Industrial City Authority.
Qatar's previous masterplan was completed in 1997 but became outdated as population growth averaged 5.8% a year between then and 2004. The UPDA masterplan will support Qatar's National Vision 2030, which was approved in June 2008. Under the guidance of the General Secretariat for Planning Development, the plan aims to transform Qatar into one of the world's most advanced countries in terms of economic, educational and environmental standards through sustainable social and economic development.
Development of a knowledge-based economy focused on innovation and research is seen as the best way to move away from Qatar's current reliance on petroleum. In February, the Qatar Science & Technology Park opened at Education City, a 14-sq-km, multi-billion-dollar complex being developed by the Qatar Foundation for Education, Science & Community Development, a state-funded organisation. Education City on the western outskirts of Doha is part of the Qatar Foundation's plan to build a research hub in the state. More than $800m has been invested in Qatar Science & Technology Park by Qatar Foundation and its partner organisations. International companies such as Exxon-Mobil, Shell, Total, Rolls-Royce and Microsoft have opened offices in the park. About 2,500 students are already studying at Education City. The site houses six US university campuses including the Weill Cornell Medical College, Pittsburgh-based Carnegie Mellon University and Georgetown University's Edmund A Walsh School of Foreign Service. A 412-bed teaching hospital is under construction at Education City. The Sidra Medical & Research Centre is being set up with a $7.9bn endowment from the Qatar Foundation.
While the Education City project lies at the heart of Qatar's quest to build a knowledge-based economy, it is the other major projects in the masterplan whihc are reshaping the capital, such as the relocation of the port and airport, which comes under UPDA's remit, and the Pearl and Lusail real estate developments. With the current Doha port becoming congested, the government is to move it 35km along the coast to a site between Messai'eed and al-Wakrah. The new, deep-water port will be built over three phases at QR14-16bn ($3.8-4.3bn). The airport is also being relocated away from the city centre.
The height of buildings in the city is restricted to 470 metres to allow clearance for the flight path, but this will be lifted when the $11bn Doha International airport opens. About 50m passengers are expected to travel through the new airport each year, compared with the 13m passengers passing through the current terminal.
The main projects in Doha are the Pearl and Lusail developments. Pearl is an artificial island to add 32km of coastline to Qatar, and is the first to allow freehold property ownership by foreigners. Lusail is a $5.5bn waterfront city being built near Pearl by developer Qatari Diar, which is owned by the QIA. The built-up area spans 35 sq km and is to house 200,000 residents. It includes Energy City Qatar, a business centre for the petroleum industry. With so much project activity taking place at the same time, UPDA's masterplan is to take an overview of all construction to ensure infrastructure and road capacity meets the demand from new developments. In this way, agencies such as the Public Works Authority and Kahramaa can plan their work schedules in an integrated manner. Thus Qatar will avoid the problems of drainage and soaring power and water demand seen in other GCC states, where growth has been allowed to accelerate in an uncontrolled way.
FEED