The Report: Qatar 2016

With the fall in oil prices underlining the dangers of an over reliance on hydrocarbons revenues, Qatar has continued to forge ahead with its economic diversification drive in 2016. Non-hydrocarbons growth now outstrips hydrocarbons growth, with several big-ticket construction projects, an increasingly dynamic financial services sector and a growing reputation as a tourist destination all fuelling non-oil expansion.

Country Profile

Since gaining independence in 1971, Qatar has quickly risen to prominence both regionally and internationally to become an economic, political and cultural powerhouse in the Middle East. With a relatively small local population and substantial revenues generated from natural gas, Qatar has the world’s highest GDP per capita, averaging approximately $100,000. Prior to 2010, the country was mostly known internationally as the home of the media network Al Jazeera, yet this changed when Qatar won the contest to host the 2022 FIFA World Cup in December 2010. As the first and only Arab nation ever to host the event, Qatar has witnessed considerable press coverage since. Whether focusing on its extensive international investments, ample spending at home on substantial infrastructure projects, labour migration issues or the state’s involvement in foreign and regional affairs, Qatar has made a name for itself in the international arena.

This chapter contains a viewpoint from Sheikh Tamim bin Hamad Al Thani, Emir of Qatar; and interviews with Sheikh Abdullah bin Nasser bin Khalifa Al Thani, Prime Minister and Minister of Interior; Sheikha Hind bint Hamad Al Thani, Vice-Chairperson and CEO, Qatar Foundation; and Sheikh Joaan bin Hamad Al Thani, President, Qatar Olympic Committee.

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Over the past half-decade Qatar has posted robust economic growth on the back of strong hydrocarbons revenues, state-led infrastructure development and a rapidly maturing financial sector. According to Standard & Poor’s, from 2010 to 2015 it was one of the fastest-growing economies in the world, posting average annual GDP growth of 8.6%. Qatar is the world’s top exporter of liquefied natural gas and has the third-largest proven natural gas reserves. Consequently, Qatar’s indigenous population is among the wealthiest in the world, with the country reporting a per capita GDP in excess of $100,000. While gas and oil exports account for a majority of GDP, a handful of non-hydrocarbons sectors have expanded rapidly in recent years. Non-hydrocarbons growth was 7.7% in 2015, while hydrocarbons growth contracted by 0.1%. 

This chapter contains interviews with Sheikh Ahmed bin Jassim bin Mohamed Al Thani, Minister of Economy and Commerce; and Vice-Chairperson, Qatar Investment Authority; Saleh bin Mohamed Al Nabit, Minister of Development Planning and Statistics; Yousuf Mohamed Al Jaida, CEO and Board Member, Qatar Financial Centre Authority; Abdulaziz bin Nasser Al Khalifa, CEO, Qatar Development Bank; and Fahad Rashid Al Kaabi, CEO, Manateq.

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Trade & Investment

Although Qatar continues to enjoy a healthy trade surplus, benefitting from its position as a critical energy supplier to a number of countries worldwide, export revenues in 2015 were dramatically affected by falling oil and gas prices, while the state’s import bill continues to rise as a result of major infrastructure construction and rapid population growth. Declining export revenues have also seen foreign direct investment (FDI) outflows drop as two major state-owned corporations underwent significant restructuring in 2015. These challenges have been a boon to non-oil growth and economic diversification. Domestically, FDI showed a sharp turnaround in 2014 as ongoing liberalization, including the establishment of new special economic zones and improved access to financing, further bolstered non-oil growth, particularly within the small and medium-sized enterprise segment. The Qatar Stock Exchange has also benefitted from several emerging market upgrades on major global indices, which should help offset losses recorded in 2015 and keep domestic markets on a growth path in 2016.

This chapter contains a viewpoint from David Cameron, Former UK Prime Minister; and interviews with Chrystia Freeland, Canadian Minister of International Trade; and Shahin Mustafayev, Azerbaijani Minister of Economy and Industry.

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After half a decade of strong growth, Qatar’s banking sector is well positioned to weather regional economic volatility in 2016. As of the end of the first half of 2015 the country was home to the third-largest banking industry in the GCC, boasting total assets of $293bn. The sector consists of 18 institutions, including six domestic conventional lenders; Qatar Development Bank, which provides services for small and medium-sized enterprises; four domestic sharia-compliant banks and seven foreign institutions. Banking assets are highly concentrated in the domestic market, with the top five local institutions accounting for more than three-quarters of total sector assets, according to data from Qatar National Bank, the largest bank in the country by a significant percentage, and one of the largest financial institutions in the Middle East.

This chapter contains interviews with Sheikh Abdulla bin Saoud Al Thani, Governor, Qatar Central Bank; Raghavan Seetharaman, Group CEO, Doha Bank; and Fahad Al Khalifa, Group CEO, Al Khaliji.

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Capital Markets

After a banner year in 2014, Qatar’s capital markets endured a period of volatility in 2015. The Qatar Stock Exchange (QSE) ended 2015 down around 15% on the previous year, according to data from the exchange. Market participants and observers alike attributed the drop to fluctuating investor sentiment linked to the continued decline of energy prices, contracting government spending and tightening banking sector liquidity across the GCC region and further afield. Despite these and other challenges, in 2015 and 2016 thus far Qatar’s capital market has developed rapidly, with the QSE rolling out new products, upgrading trading tools and laying the groundwork for future growth across a range of market segments.

This chapter contains an interview with Abdulla bin Fahad bin Ghorab Al Marri, Chairman, Qatar First Bank.

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Islamic Financial Services

In recent years Qatar’s Islamic financial services (IFS) sector has expanded rapidly, on the back of government support and growing interest among domestic corporations and individuals alike. While tightening liquidity has the potential to result in slightly curtailed growth across the banking sector as a whole in 2016-17, sharia-compliant lenders are widely considered to be in a better position than their conventional counterparts to continue to grow during this slower period. Recent figures reinforce this perception, with Qatar’s four national Islamic banks posting overall asset growth of 17.5% between January 2015 and January 2016, compared with 14.4% growth in the conventional banking segment during the same period, according to the most recent data from the Qatar Central Bank (QCB).

This chapter contains interviews with Khalid Yousef Al Subeai, Acting Group CEO, Barwa Bank; Abdulbasit Ahmed Al Shaibei, CEO, Qatar International Islamic Bank; and Bassel Gamal, Group CEO, Qatar Islamic Bank.

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In recent years Qatar’s insurance sector has expanded swiftly on the back of government spending, economic development and a steadily increasing awareness of the benefits of coverage. Between 2005 and the end of 2015 the industry posted a compound annual growth rate (CAGR) of 21%, according to data from Moody’s. By the end of 2014 Qatar was the third-largest insurance market in the region, accounting for around 10% of premiums written in the GCC. Given that insurance growth tends to track overall economic growth and that Qatar’s economy is largely driven by the state, the recent jump in insurance activity will likely continue at least until 2022, when Qatar is scheduled to host the FIFA World Cup. Indeed, according to forecasts by Alpen Capital, the market is expected to increase at a CAGR of 17.8% from 2014 to 2020, which would make it the fastest-growing insurance sector in the GCC by current estimates.

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The year 2015 was a challenging one for Qatar’s oil and gas industry. The state saw its hydrocarbons revenues, which account for a significant portion of its income, significantly impacted as an ongoing global oil price plummet accelerated, with crude oil losing over two-thirds of its value between June 2014 and January 2016. The price slump extended into 2016, driven by soaring global reserves and rising output from the US and Iran. Despite these challenges, Qatar is better positioned than many. The world’s fourth-largest producer of dry natural gas and largest producer of liquefied natural gas (LNG), it has benefitted from over a decade of targeted investments that have allowed expansion into value-added gas-to-liquids (GTL) and condensate production, with a planned new helium production project indicating long-term confidence in GTLs. Although state-owned Qatar Petroleum underwent major restructuring during the first half of 2015, it is slated for medium-term growth after launching a new strategy targeting investment in foreign production projects.

This chapter contains interviews with Mohammed bin Saleh Al Sada, Minister of Energy and Industry; Sheikh Khalid bin Khalifa Al Thani, CEO, Qatargas; and Hamad Mubarak Al Muhannadi, CEO, RasGas.

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As Qatar’s population and economy have expanded in recent years, demand for utilities has also been increasing rapidly. Power and water consumption have recorded average growth rates of 10.4% and 7.7% a year, respectively, over the last half-decade, according to the country’s main utilities authority, the Qatar General Electricity and Water Corporation (Kahramaa). Such growth has prompted the government to pursue a range of expansion projects to raise capacity, many of them with foreign and private sector help, from pilot solar power projects to a large new power and water plant under way at Umm Al Houl. The drop in oil prices, meanwhile, is unlikely to severely hamper development of the sector, which has strong state backing and is supported by commitments in Qatar National Vision 2030 to provide first-rate public services – something it is doing increasingly via public-private partnerships.

This chapter contains an interview with Khalid Mohammed Jolo, CEO, Nebras Power.

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Though chiefly known for its success in the oil and gas sector, Qatar is also home to a number of non-hydrocarbons industries that are playing an increasingly important role in the economy, particularly in light of the government’s broader plans for greater diversification. According to the Ministry of Development Planning and Statistics (MDPS), the non-hydrocarbon sector accounted for all GDP growth in 2015, and was led by the services and construction sectors. Most of Qatar’s industry is relatively new, having been built up in the last few decades, largely as downstream components of the oil and gas sector. Qatar’s downstream petrochemicals sector forms a key pillar of its industrial base – and has maintained robust output despite depressed global oil prices. Qatar is also the largest producer of urea fertilizer in the GCC, accounting for 37% of the 15.2m tonnes produced in the region in 2014, up from 28% a decade earlier.

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The large-scale investments of the past half-decade look set to continue driving Qatar’s health sector in 2016. With a rapidly rising population and household incomes well above the developed-world average, public and private sector outlays are on track to keep rising alongside a state-led push to raise quality and expand services. As the public sector enters a new cost-optimisation phase in the wake of the oil price drop, the government is increasingly looking to the private sector to fill areas of need, particularly those stemming from the rise of lifestyle-related diseases, such as diabetes and cancer.

This chapter contains an interview with Hanan Mohamed Al Kuwari, Minister of Public Health.

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Transport upgrades are leading construction industry growth in Qatar, following rapid expansion and billions of dollars worth of new contracts awarded in recent years. The 2022 FIFA World Cup has created an impetus to finish a number of critical transport projects on time, including thousands of kilometers of road and expressway upgrades and construction, the new Hamad Port and a major three-part rail programme. Expansion of the recently opened Hamad International Airport (HIA) also advanced in 2015 when authorities released detailed designs for the next phase of construction, which will nearly double existing capacity – a welcome upgrade, given that the airport is already operating above capacity. Under the broader Qatar National Vision 2030 (QNV 2030) development plan, these projects will pave the way for future growth across all sectors of the economy, reducing bottlenecks and traffic congestion, improving trade and investment opportunities, and supporting ongoing efforts to diversify the economy.

This chapter contains interviews with Jassim bin Saif Ahmed Al Sulaiti, Minister of Transport and Communications; and Abdulla bin Abdulaziz bin Turki Al Subaie, Managing Director and Chairman of the Executive Committee, Qatar Rail.

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Although growth has slowed following a banner year in 2014, Qatar’s construction industry remains one of the most vibrant and fast expanding in the Middle East, and a key driver of non-oil growth. Major infrastructure projects including the Doha Metro, Long Distance Rail, Hamad Port, the next phase of expansion at Hamad International Airport (HIA), and a network of new roads and drainage systems are expected to keep the industry on track in 2016, while new builds in the health, education, real estate and hospitality segments will further augment growth. Many of these projects benefit from enhanced government spending aimed at delivering critical projects in time for the 2022 FIFA World Cup, which should help offset some of the challenges contractors are facing as a result of project delays, high build costs, delayed payments and lack of available labour.

This chapter contains an interview with Nasser bin Ali Al Mawlawi, President, Public Works Authority (Ashghal).

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Real Estate

Still an important and robust driver of non-hydrocarbons growth, Qatar’s real estate sector is nonetheless beginning to feel the impact of falling oil and gas prices, which have negatively affected the office and residential markets. There are also rising concerns about an oversupply of high-end residential and commercial space, with dozens of new projects still in the pipeline expected to come on-line in the medium term. Oversupply will be a major long-term concern for nearly all segments of the market, with the stock of retail, hotel and office space surging as developers rush to capitalise on population growth and rising tourist arrivals. Despite these challenges, smaller transactions have kept the market steady in early 2016, and although land prices and rental rates remain high, muted economic growth should help reduce inflationary pressures that have priced many middle- and lower-income families out of the market.

This chapter contains an interview with Abdulla Hassan Al Mehshadi, CEO, Msheireb Properties; and Ibrahim Jassim Al Othman, President and CEO, United Development Company.

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Twenty years ago, Qatar’s leadership set out to liberalize the country’s telecoms sector, transforming its state-run monopoly operator into a market-driven firm. This was part of an effort to transition the Qatari economy away from its traditional mainstays, oil and gas. To that end, the ICT sector has been instrumental to a broader process that continues today. As state and private players team up to roll out advanced infrastructure and increase ICT device penetration, they are driving growth in one of the country’s most dynamic non-energy sectors, improving communications, and building up infrastructure and expertise vital for the development of a knowledge economy.

This chapter contains interviews with Mohammed Ali Al Mannai, President, Communications Regulatory Authority; and Ian Gray, CEO, Vodafone Qatar.

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Tourism & Culture

Backed by a coordinated government strategy and strong investments in key economic enablers such as infrastructure, Qatar’s tourism industry continues to grow at a steady clip. Since 2010 Qatar has seen arrival numbers rise more than 72% to reach 2.93m in 2015. The sector’s economic contribution hit QR39.5bn ($10.8bn) in 2014, and mid-2015 estimates projected 2015 growth at 6.6%, according to the World Travel & Tourism Council. Foreign arrivals rose an average of 11.5% a year in 2010-15 and were up 3.7% year-on year in 2015, falling just shy of 3m visitors, according to Qatar Tourism Authority.

This chapter contains interviews with Hassan Abdulrahman Al Ibrahim, Chief Tourism Development Officer, Qatar Tourism Authority; and Khalid bin Ibrahim Al Sulaiti, General Manager, The Cultural Village Foundation-Katara.

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Education & Research

Human development is one of the four pillars of the country’s economic blueprint, Qatar National Vision 2030, with the 2011-16 National Development Strategy highlighting the importance of education in driving the state’s push toward a knowledge-based economy. Efforts to raise the standards of education in Qatar have been gathering pace and over the past decade the country has introduced a decentralised public school system, supported the development of a vibrant private school segment and invested significantly in tertiary education initiatives. Moving forward, a combination of government commitment, key partnerships with non-state stakeholders and increasing demand for education are set to maintain the sector’s pace of development.

This chapter contains an interview with Ahmad Hasnah, President, Hamad bin Khalifa University.

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In the past decade or more, Qatar has started to assert itself in the world of global sports. It has achieved this mainly through its athletics federation and Olympic committee with the country’s winning bid to host the 2022 FIFA World Cup evidence of the increasingly prominent role that sport is taking in Qatar. The government has also made efforts to expand the role of sports and related industries, such as sports medicine, logistics and security, to create more opportunities for high-value, skilled labour in the country. It is hoped that the increasing popularity of sports in Qatar will encourage its citizens to pursue more active and healthy lifestyles. If this is the case, the sector has a lot of potential, not only to bolster overall economic growth, but also to improve the well being of residents.

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Qatar has cultivated significant soft power over the last decade by hosting international events, stepping up to play a role in diplomatic mediation and developing itself into a regional and global media hub. In the mid-1990s the authorities took ambitious steps in establishing the news network Al Jazeera, which has gone on to become a highly regarded cornerstone of international broadcasting. Building on this success, the media sector has developed into a vibrant industry, evolving along with the global media landscape. Indeed, the push in recent years for the production of local, original, multi-platform content, including films, commercials, TV programmes and videos for the web, has fed into the state’s wider economic diversification goals of building up the knowledge-based sectors considered crucial to future sustainable growth.

This chapter contains an interview with Fatma Al Remaihi, CEO, Doha Film Institute.

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The combination of high disposable income, a growing population and rising tourist arrivals makes Qatar an attractive market for retailers of all segments. On the back of real GDP growth of 3.7% in 2015, private consumption was expected to have expanded by 9.5% in 2015, according to BMI Research. This surge is projected to continue, with household spending forecast to increase by an average of 15.8% per year through to 2020. Such momentum largely depends on broader growth in retail trade, hotels and restaurants, for which combined sales rose by 10.47% to reach $15.82bn in 2015, or 9.2% of GDP, according to figures from the Ministry of Development Planning and Statistics and the Qatar Central Bank.

This chapter contains an interview with Abdul Aziz Mohammed Al Rabban, Chairman, Business Trading Company; and Partner, Place Vendôme, Qatar.

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Accountancy & Tax

This chapter contains an overview of the tax framework in which local and foreign investors operate in Qatar, including a rundown of the tax rules that apply to businesses and how moves to widen the tax base are likely to affect future policy.

This chapter contains a viewpoint from Wadih AbouNasr, Country Senior Partner, PwC Qatar.

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Legal Framework

This chapter contains an outline of the legal framework in which local and foreign investors operate in Qatar, including the rules and regulations for foreign investors, the guidelines for incorporating a new company, a rundown of the foreign property ownership laws and regulations, and a review of the new changes to the Labour Law.

This chapter contains a viewpoint from James Elwen, Partner and Head of Qatar Office, Pinsent Masons.

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The Guide

The Guide contains listings of some of the leading hotels and resorts in Qatar and contacts for important government offices and services. It also contains useful tips and information for business and leisure visitors alike.

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