Mar 29 2011
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As a roadmap for its social and economic aspirations, you can't really fault Qatar's National Development Strategy 2011-2016 report. It is inspirational, comprehensive and packed with good intentions, as all such reports should.
For an economy that is growing at a rate that would put China to shame, it's national development strategy (NDS) is also lacking in a fair bit of pride and glory - if anything, there are parts of the report that are a bit hesitant and self-doubting. The missing vainglory is a contrast from some of the other national development strategies that one has seen over the years - and that is not a bad thing. It's almost endearing.
But before we jump into the risks highlighted in the report, it is important to look at the country's phenomenal growth.
The report looks at four pillars of Qatar's National Vision 2030, focused on human, social, economic and environmental development.
But for all its various focuses, Qatar's economy is a one-tricky pony. "The trajectory of Qatar's economy is tightly linked to developments in the hydrocarbon sector. Hydrocarbons still dominate the economic landscape, but Qatar is branching out into new areas," the report admits.
The Qatari economy has grown at an annual average of 13.1% from 2000 to 2009, and around 17.4% between 17.1% during 2004 to 2005.
According to Citibank, the country's GDP has tripled from $31.7 billion in 2004 to $110.7 billion forecast for 2010.
Here are some of the key points from the report:
* During 2005-2009, average spending on infrastructure for a sample of 69 countries was approximately 4.2% of GDP; it was 10% for Qatar. In U.S. dollar terms, infrastructure spending in Qatar increased 57.8% a year. Qatar's spending on infrastructure in recent years has also outpaced that of other countries (such as China and India) experiencing accelerated growth.
* Total real gross domestic investment might reach almost QR820 billion ($225-billion), with perhaps half that coming from the non-hydrocarbon sector. Central government investment is estimated at QR347 billion ($95 billion).
* The exceptionally high saving rate -- total national saving averaged approximately 60% of GDP during 2002-2009 -- has underwritten investments in physical and financial assets. Investments in domestic capital projects have been significant, with gross investment consistently running just over 30% of GDP.
* Private credit expanded from about 20% of GDP in 2000 to approximately 50% in 2008, but growth slowed sharply in 2009.
* Reserve money -- the liabilities of Qatar Central Bank -- has soared from just over QR3 billion in 2000 to QR50 billion in March 2010. During the same period broad
2011-2016 OUTLOOK & ENERGY PRICES
Qatar's authorities expect its blistering economy to cool down over the next five years.
While the government anticipates that the domestic economy will be driven by the momentum of its own spending plan, during this five-year period global economic certainties could weigh down the Qatari economy.
"Qatar's economic prospects in the medium term remain favourable, though uncertainties loom.... beyond 2011 real GDP growth is likely to shift down as the current programme of investment in hydrocarbons reaches completion, and output plateaus," NDS states.
"Although the slowing of aggregate growth is sharp, this is not a reversal of fortunes, as income levels will remain high. Healthy growth of the non-hydrocarbon sector is also expected and will help keep overall GDP growth buoyant. Growth of non-hydrocarbon output is expected to average 9.1% during 2011-2016," notes the report.
Not surprisingly, the authorities' key concern remains energy prices, both oil and gas.
Qatar is budgeting oil prices at $74 a barrel, which dampens its cheery outlook. Indeed, the country is not ruling out an oil price crash.
"More pessimistic assumptions about the future of oil prices--but certainly not outside the bounds of recent experience, when prices dipped to $34 in the summer of 2009--could move the overall fiscal balance into deficit, holding spending trajectories constant," the NDS report states.
Even more worryingly gas prices, which often fluctuates in tandem with crude prices, could also decline as much as 30% during the next five years.
"Negative income and fiscal impacts follow," notes the NDS gloomily. "Because the share of liquefied natural gas in total output will rise over the period, the impact of falling prices on income is large."
The assumed 30% fall in the price of Qatar's liquefied natural gas basket reduces nominal GDP in each year. Cumulative income losses over the period are QR 357 billion, a 9% reduction from the baseline level of cumulative GDP.
While Qatar benefits from long-term contracts with its Asian gas buyers, a spot market collapse in the price of gas could derail much of Qatar's progress.
These are clear and real dangers for the Qatari economy and even though the country is looking to diversify its revenues, which admits in the report is not an easy process and could take decades to achieve.
Qatar's Economic Sectors CHART
Qatar also has a challenge with its workforce. An overwhelming majority of the national workforce is heavily reliant on jobs in the public sector, and there is a mismatch between available jobs and skills. Underemployment and falling labour productivity are also blemishes on the Qatari economy.
With Qatar estimated to need 1.6 million workers by 2016, authorities have hinted in the report that they may look to alter the labour law, especially as the expatriate sponsorship, which "constrains the mobility of expatriates and thus their ability to respond to labour market signals.
While Qatar is keen to create innovative educational programmes that will allow Qatari citizens to get 'senior level' high paying jobs, other Gulf states have seen that such policies lead to inefficiencies, falling productivity and demotivation, even among the native workforce - exactly the issues Qatar is looking to avoid.
WORLD CUP GOALS
Earning the right to host the FIFA World Cup in 2022 is the coming of age of Qatar as a nation. Long seen as a Gulf backwater, Qatar has punched above its weight in the past decade and forged its own economic identity over the past decade.
The 2022 World Cup allows Qatar to move out of Dubai's shadows and create its own destiny. An acknowledgement from the governing body of the world's most watched tournament confirms that Qatar has finally arrived in the league of nations.
However, the full economic impact of hosting the World Cup will not be felt over the next five years.
Citibank also does not factor in Qatar's growth in the immediate future:
"The 2022 World Cup football have any significant economic impact on the country.
This is because: i) We believe the actual spend on World Cup-specific infrastructure is going to be far less than the reported US$50bn+, ii) The actual spend on World Cup specific infrastructure is a drop in the ocean compared with currently ongoing projects, iii) The productivity of the World Cup-specific infrastructure developments is very low, and iv) The beneficiaries of increased expenditure on the World Cup will largely be foreigners in our view, with little value-added remaining in Qatar."
Over the early part of 2011-2016 the economic impacts of the World Cup are likely to be modest, but Qatar must prepare for the sizeable investments in infrastructure that will follow, notes QNS, arguing that a sizeable pipeline of investments is already in place.
"Institutional arrangements for overseeing and managing World Cup-related activities will be established, and the pipeline of investments to deliver needed infrastructure services will be prepared."
So what's missing in the 270-page report? A political roadmap. There is very little emphasis on municipal elections, or any kind of inclusion of the national population in the country's political matters. While there are copious chapters on human development and social welfare, the report remains oddly silent on political liberties being granted by the ruling establishment.
While Qatar has remained immune from the political crisis that has engulfed the rest of the Middle East neighbourhood, perhaps this is the time for Qatar to lead the way in political liberties. That would make the tiny state a giant among the Middle East states.
© Copyright Zawya. All Rights Reserved.
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