The Doha Securities Market is moving forward with plans aimed at creating a single regulatory body called the Qatar Financial Market Authority. The government announced that the new organisation, which was established in early 2007, is intended to be an impartial body that will contribute to the development of a unified market and sound financial system to improve Qatar's attractiveness to investors.
On the economic front, inflation rose by 12.8% year-on-year for the second quarter of 2007 and surged to 13.7% by the end of September. The real estate sector is cited as the main cause for much of the inflationary pressure, with the government working to ease housing shortage stemming from high demand from a growing population and an increasing number of expatriate workers. In turn, rising housing costs had a "trickle down" effect on food, beverages and tobacco prices.
Inflation led to a call for action from many in the business community, coupled with the desire of some members of the Organisation of Petroleum Exporting Countries (OPEC) that oil should be priced in other currencies. As a result, there was mounting pressure on the Qatar Central Bank (QCB) to reconsider its long-standing peg to the dollar. The issue of de-pegging has been temporarily put to rest as leaders from Qatar and the region stated in December, at the Gulf Cooperation Council (GCC) Leaders' Summit in Doha, that there is no outstanding change and that if there was, it would be taken collectively. Still, speculation hovers as many continue to feel the impact of rising living expenses.
An eventful year in the telecoms sector was concluded by Vodafone's successful bid for Qatar's second mobile phone licence, with service expected to launch in 2008. Vodafone and its local partner, the Qatar Foundation Consortium, beat off competition including the United Arab Emirates-based Etisalat, Kuwait's MTC, AT&T and Verizon Communications. Vodafone's confidence in the Qatari market remains high despite the current 120% mobile penetration rate held by Qatar Telecom (Qtel)'s former monopoly. The successful bidding process paves the way for the award of a licence for a second fixed-line operator, a process due to begin as early as April 2008, though there will be no auctioning activities. Five organisations have already announced they will be bidding, including Verizon of the US, Bahrain's Batelco, the UAE's Etisalat and Italy's Eutalia. Companies have until February 7 to register potential bids. The winning licensee will have access to developments in Qatar such as the Pearl and Losail as well as to existing residential and business areas.
In terms of foreign investment, Qatar ranked highly in 2007, as the country sought to diversify from dollar assets. A consortium of GCC companies led by Qatar announced plans to invest MYR5bn ($1.4bn) in the oil and gas, Islamic banking and property sectors in Malaysia. Meanwhile, the country's sovereign fund, Delta Two, which handles most of the country's investment activity, remained in negotiations with its Dubai rival at the close of the year for a controlling stake in the London Stock Exchange (LSE) group. Currently, Borse Dubai owns 20% of the LSE, while the Qatar Investment Authority owns 15%, making them the number one and two shareholders in the London-based index. Dubai has agreed to trade about 5% of its stake in exchange of Qatar's 9.98% stake in OMX, the Nordic exchange group Dubai is looking to take over. If they come to a final agreement, they will swap positions, leaving the QIA with 20% and Dubai with 15%.
Meanwhile, Qatar's energy sector experienced tremendous growth in 2007 despite the 2005 moratorium on new gas projects. The moratorium was put in place to ensure optimal reservoir management and, as a result, the productive life of its North Field gas reservoir. Doha seems reluctant to add to the 25bn cf/d it is already committed to producing, at least until 2012. The biggest achievement in 2007 came with Qatar becoming the world's leading supplier of Liquefied Natural Gas (LNG). The world's former number one supplier, Indonesia, fell behind in production after the successful completion of RasGas train 5 in March 2007, ahead of schedule. RasGas train 5, one of the largest LNG plants in the world, is designed to produce 4.7m tonnes of LNG per year and will supply gas into the northern European market. In addition, RasGas, a joint venture between Qatar Petroleum and Exxon Mobil Ras Gas,is constructing the world's two largest trains ever built, with volumes of 7.8m tonnes per year, expected to be operational in 2008 and 2009.
On the infrastructure front, 2007 saw the signing of a Memorandum of Understanding (MoU) for a 40km-long causeway linking Qatar and Bahrain, a $2bn project expected to take approximately 48 months to complete. It is estimated that the causeway will be open to traffic in 2011 and will provide a much-needed alternative trade route between the two countries by road and rail.
Qatar's air and seaport infrastructure underwent further development with the ongoing construction of the New Doha International Airport and upgrades and expansion at Ras Laffan industrial city. Capacity expansions were also announced for Mesaieed Industrial City's port, which is home to Qatar's main oil export terminal, with the construction of a QR22bn world-class deep-water port that will have a capacity of 6m TEUs upon completion by 2030. This expansion will allow for further growth in light industrial manufacturing.
Qatar's economic growth should continue well into 2008 with oil production set to continue its upward trend following OPEC's decision to loosen restrictions put in place during 2007, and the launch of the Dolphin pipeline to the United Arab Emirates. Besides energy, government spending in health, education and transport should foster economic growth, with real GDP expected to rise by more than 9% in 2008.