Despite instability in the Middle East and the sharp drop in oil and gas prices, Qatar’s economy has maintained a solid growth rate through 2014, as the growth rate of GDP at constant prices reached about 6.1%. This is a favourable rate. Its importance is noticeable when compared with the growth rates in oil-exporting countries in the MENA region, where the rate was 2.4%, and with an average growth rate standing at 3.6% of GDP in the GCC. What attracts attention is that at the time the contribution of the oil and gas sector, which is the main component of GDP, dropped by 1.5%, and the non-oil sector contribution has increased by about 11%.
This growth has been accompanied by the continuation of a high level of confidence in Qatar’s economy by global rating agencies. Qatar has achieved advanced positions in global competitiveness indices. Also, global credit rating institutions have upgraded the Qatar Stock Exchange to emerging market status from frontier market status.
Such a large and continuous decline in energy prices requires alertness. I stress that it requires caution but not fear. Differentiation here is important: caution is realistic and useful in public policies, but fear is not realistic and is harmful, and does not help in drawing up the proper policies, as it spreads the sort of sentiment that negatively impacts the economy and investment, and hence becomes like an incorrect yet self-fulfilling prophecy. Caution must prompt us to be frank with each other, to band together in the face of challenges, and to be vigilant in rejecting two extreme trends: unjustified panic on the one hand, and the self-delusion that is reflected in embellishing reality for self-satisfaction on the other. Qatar has passed through more difficult stages than this one when its economy was not at this level of configuration, and the energy industry in the country was not yet at such a level of development. The key to passing through this stage safely is that each of us should realise that as we have benefitted during the stages of rapid growth and high oil prices, we should also bear the tasks, responsibilities and burdens that we find at this stage.
Since 2008 we have taken precautions against this in the Qatar National Vision 2030, and in the National Development Strategy (NDS) 2011-16. I stress that despite the decline of prices in the energy market, we will continue to implement infrastructure development and human development projects. The Qatar National Vision 2030 aims at transforming Qatar into an advanced country, capable of achieving sustainable development and ensuring the continuation of a decent living standard for its people for generations to come by seeking to develop a diversified economy, with diminishing dependence on hydrocarbons, where investment is directed towards a knowledge-based economy and the private sector grows in importance. NDS 2011-16 crystallised the development priorities during this period, which include sustaining economic prosperity, upgrading infrastructure, raising the efficiency of natural resource management, diversifying the national economy, activating the private sector and promoting human development, especially in the areas of education, health and environmental protection.
Preparatory work has already begun to draw up the NDS 2017-22. We need to plug the gaps in the planning framework, improve coordination across the sector and among different sectors, and focus on producing outputs and outcomes.
The actual concrete outcomes are the criteria for the strategy’s success. Regarding the efficiency and feasibility of government spending, the general budget for the fiscal year 2016 is being prepared to begin on January 1, 2016. It will take the fall in oil prices into consideration, to avoid a large budget deficit that might cause harm that surpasses the balance of payments to the overall economy.
High oil prices have brought immense benefits to this country and its people, but no one denies the accompanying negative phenomena, namely, the tendency towards wasteful spending, some over-staffing in institutions and a lack of accountability for mistakes in many cases, because available funds could be used to cover up failure in some institutions. It may also lead to dependency on the state to provide for everything, which reduces the motivation of individuals to take initiative and be progressive. We must transform mandatory spending control at this stage into an opportunity to face those drawbacks, and we should not miss the opportunity. This budget will focus on efficiency in government spending. It will also promote growth and expansion in non-oil sectors to further diversify the economy.
The inflation rate for the current year is expected to be in the range of 2%, and despite the fact that this rate is low, the government should not hesitate to encourage competition and at the same time control prices to achieve financial and economic stability.
In the area of strengthening the private sector and economic diversification, as well as limiting the state’s competition with the private sector, a comprehensive review of all state-owned companies has been carried out. After submitting this review to the Supreme Council for Economic Affairs and Investment, I have directed subsidies for a number of these companies to be ceased, some to be privatised and management of some to be transferred to the private sector. Moreover, government corporations and companies should not compete with the private sector, and opportunities for this sector to implement government projects will be enforced. The private sector must assume its responsibilities and take the initiative, and not wait for the state to be a patron state. The welfare state caters to the needs of incapable citizens, children and the elderly. Qatar has been ranked first in the world in spending to subsidise consumer products. But when it comes to business, it must not be a patron state of business. That is an area of private initiative. The state must strengthen the business sectors by arranging investment conditions, eliminating bureaucratic bottlenecks and preparing an incubating infrastructure for projects. But the rest depends upon the business sector itself. This sector is supposed to be more than just an intermediary between the state and foreign companies. Surely, foreign companies are indispensable, but we want to see the contribution from domestic capital, its initiatives and willingness to take risks in developing the national economy in order to make a profit.
The state is undertaking vigorous efforts in developing economic zones, logistics and storage facilities. Two industrial zones have been launched during 2014 and 2015. The government continues to put forward projects for tender to increase storage capacity and reduce operational costs for investors. This does not solve the whole problem, as we must also address the unjustified rise in real estate prices. High operational costs in all areas will eventually reach the state and inflate its budget. This is no longer possible.
It is necessary to remove bureaucratic obstacles countering investment, especially some procedures that have turned into stumbling blocks hindering work. This also applies to some duplication at the ministries, and frequent changes in the procedures, transactions, requested forms and licenses, which tend to confuse citizens, as well as local and foreign investors. Many would not venture to invest, if the investor is requested every day to fill out a new form, a new license, or if conditions change many times during the submission of the application. It is necessary to standardise as much as possible the procedures at the ministries by means of the one-stop shop concept, for the citizen and the investor.
The above is sourced from the opening speech of the Advisory Council’s 44th session on Nov. 3, 2015.
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