QATAR’S SOCIO-ECONOMIC RESURGENCE

SURESH KUMAR
14.06.2004

Arriving in Doha after a gap of a few years, does alert you, and with some alacrity, to the phenomenal progress made by this young country about to emerge as a vibrant socio-economic force in the GCC. It is hot on the heels of Dubai, and in a sense, attempts to replicate and implement the best ideas that have had successes in Dubai. The presence of the U.S. Central Military organizations in Qatar is arguably a stabilizing initiative that allows this emirate; sandwiched between some powerful neighbours, to focus on its economy without needing to be overly concerned about national security. With a resident population of less than a million, Qatar does not have daunting challenges that Saudi, for instance has, in terms of creating employment for its young domestic population, nor the travails that Oman, Bahrain and Yemen have, because of inadequate energy resources to fuel their economic growth.

Indeed, what the Qatari government and its Emir are fashioning for their future, is both bold and imaginative. They are under no pressure fiscally, to launch a number of such initiatives and yet, wisely, the society, given its conservative and traditional moorings, is investing massively in education. The tie-up with Cornall, in the realm of the medical studies and the envisaged educational city under the patronage of the Emir’s wife, are valuable contributors to developing skills and leadership.

Given its huge gas fields, upstream energy activities are being given the predominance that they deserve. Huge investments have gone into this, and all of this will serve well for the country’s prosperous posterity. It is a different matter that gas supply is also abundant in many parts of the world, and therefore, gas prices could be affected, if alternative suppliers pop up and create marginal price pressures. The economic giants in Asia i.e. India and China will require huge amounts of energy to grow and their lopsided economic growth thus far, will be remedied if they can be assured of a steady stream of energy flows; tied in long term.

Despite its small size, the Qatari government has taken some innovative steps to put Doha on the world centre-stage. The WTO event a few years back, was clearly the most dramatic and has therefore, put Doha into the lexicons of the world economic history. Similarly, the Asian Games planned for 2006 will be an opportunity to demonstrate its capabilities.

In geo-political terms, Qatar has weighed and played its options dexterously. With Iran as a large neighbour, the South Pars gas fields are a shared resource. Qatar is mindful of Iran’s concerns that by pumping out gas more rigorously, Qatar could suck in gas from the Iranian end!

With Saudi Arabia on the other hand, it has had an uneven relationship with their respective interests sometimes at loggerheads; exacerbated by Al Jazeera and the free media in Qatar that the Saudis and indeed now the Americans would rather see reined in. Similarly with Egypt and now with Russia, there have been incidents where Qatar has been firm and yet not clumsy. These are the travails of a small country that nevertheless, needs to be resolute and decisive, when certain matters threaten its stability. Ultimately, this is the geo-political risk that the overseas investors will monitor carefully.

Upon comparison to Doha, Dubai is less advantaged, as it does not have the huge energy resources that Qatar has, that can be encashed progressively, to fund the various industrial and commercial initiatives. But Doha would appear to defer to Dubai’s pre-eminent leadership role in GCC’s business and economic echelons. Qatar is also using its vast real estate as a means of propelling economic momentum e.g. by allowing ownership by foreigners of selected real estate zones and GCC nationals in designated areas. It has come up with a ‘Pearl of the Gulf’ concept and is also developing the West Bay and other areas with several towers and attracting new hotels to the country, including the Four Seasons to its fold. Given its small population, Qatar like the UAE, depends heavily on a large expatriate work force to operate its economic engine successfully. In that sense, the parallel with the UAE is somewhat striking. Qatar is embracing democracy in its own idiom by setting up an elected Shura.

It is heartening to note that Qatar is also mulling the establishment of its own investment authority on the lines of ADIA. This augurs well for the future, as ultimately, the huge surpluses that will be generated from gas exports, going forward, will need to be invested wisely and well to underpin the country’s economic resurgence. Besides, we will have times when the world energy markets may not provide the right pricing, because of global glut in energy supplies or indeed economic recession in the major economies of the world.

Islamic banks have created a much stronger niche for themselves in Qatar than in other parts of the Lower Gulf. Qatar’s banking system is dominated by the Qatar National Bank, followed by the Doha Bank and the Commercial Bank of Qatar, who are readying themselves for enhanced level of activities. The country’s capital markets are beginning to be put on a firmer footing. However, the earlier legislation and necessary processes are established, the better for the economy. It is a ‘high value’ market place, albeit with low volumes. The capital market experience needs to be honed through appropriate partnerships with regional institutions. In this context, the UAE and Qatar can work together, especially, given their proximity in physical, emotional and geo-political terms. Eventually, the leading regional financial institutions will have to forge special relationships.

In the ultimate analysis, Doha has already been recognized by the international financial world as the next major opportunity for project finance and wealth management. It will not be long before a number of banks and investment companies make a bee line for Qatar. However, a physical presence in any large scale may not be warranted; given its small coverage ambit. Those that are present in other parts of the GCC and possess strong credentials, will be welcomed anyway. Qatar’s small domestic economy cannot absorb more than what is currently being provided by global expertise. As it generates wealth and spawns new projects, these will require further support from and the involvement of strong global and regional financial institutions. It will be interesting to see as to who has the appetite and strategy to benefit most.

[The author is General Manager of Emirates Bank. However, the views expressed in this article are not necessarily shared by the Bank].

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