Pressure on Small Businesses

Qatar

Economic News

22 Jul 2010
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Trade volatility, caused by war in the region, has put pressure on Qatar's small independent businesses involved in the sale and importation of foodstuffs.



The continuing bombardment of Lebanon by Israel is making its effects felt throughout the region. In Qatar, where the country's ambassador to the UN denounced Israeli aggression, those effects have been felt by local retailers and marked by an increase in the price of fresh produce.



Less than 2% of the land in Qatar is used for agricultural purposes and agriculture and fishing makes up only a fraction (less than 1%) of the country's GDP. As a consequence, Qatar is heavily dependant on imports of food from abroad, including Lebanon.



In 2005, according to the Qatar Chamber of Commerce and Industry, total imports from Lebanon amounted to QR151m ($41.48m).



The current situation in Lebanon has meant a severe shortfall in the supply of foodstuffs coming from the country - a fall in exports that will not only be seen in the Lebanese economy, but has resulted in inflated prices for fresh produce in the Gulf markets due to restricted supply.



The price of fresh fruit and vegetables in Qatar has been estimated as rising between 20 and 100%, with one local paper recording a 10-fold increase in the price of "summer fruits". In many cases supplies have dried up and local suppliers are forced to look elsewhere - to Syria, Jordan or Saudi Arabia - for alternatives.



In terms of Qatar's retailers, those feeling the pinch the most are the small, local stores. Many are unable to subsidise the price increases to the same extent as the larger chains that can swallow some additional costs, at least in the short term.



Qatar's independent retailers and other small businesses have already been hard hit by other factors. Longstanding roadwork projects have adversely affected many local retailers and restaurants, with customers and clients preferring to go elsewhere than deal with the difficulties of traffic diversions and restricted parking. In some areas, such as the airport highway where road projects have continued for almost a full year, a small number of businesses have been forced to close.



Falling sales have been compounded by rising rents. In most cases, the premises are owned by Qatari nationals but managed and staffed by expatriate workers, with a varying proportion of the businesses profits taken by the owner. Traders, or "proxy owners", have complained that some store owners have insisted on raising rents despite falling sales and the difficulties they are experiencing in trading.



More generally, independent businesses in Qatar have begun to feel increasingly that they deserve more support and protection from the authorities. A recent outcry by local manufacturers saw companies complaining of a lack of government support for small- and medium-sized enterprises (SMEs) in the face of increasing competition from other states in the Gulf Cooperation Council (GCC) region.



Qatar is very aware of the importance of economic diversification away from the oil and gas sector. This diversification is dependant on SMEs, and government agencies are searching for ways to actively promote growth in this sector.



A small number of businesses have called for outright protectionism, and the local press has carried calls by a number of businesses for a clampdown on what they claim is the "dubious quality" of goods entering the market from elsewhere.



Although there are means to closely monitor the quality of goods, most critics would argue that competition is healthy and ultimately beneficial to all concerned. Perhaps the issue that needs to be more closely addressed is that Qatar's manufacturers are simply not competitive enough. Disruption to infrastructure, slow customs clearance procedures, inadequately serviced industrial plots, rising land prices and a lack of housing for workers are major problems for Qatar's SMEs and are factors that push up the price of Qatari goods.

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