With global oil prices trending towards decline, Qatar, whose economy is slated to grow 6.3% this year, must step up efforts to strengthen its manufacturing base and sustained investment in infrastructure will support growth over the next few years, even as there is a need to enhance labour productivity, according to a report.
Commodities account for 93% of Qatar's total goods exports by value, while manufacturing activities account for less than 10% of goods export revenues, Centre for Economics and Business Research (Cebr), a partner of the global body of chartered accountants (ICAEW), said in a report.
"With global oil prices forecast to fall over the medium-term, the need to broaden the industrial base is becoming more pressing. While Qatar has the infrastructure and financial means to advance their manufacturing output and export potential, more attention needs to be paid to fostering innovation in order to compete more effectively in international markets," Vernon Soare, executive director, ICAEW, said.
Strong investment will continue to see growth in Qatar outpace the rest of the world, but the prospect of falling oil prices due to increasing global supply, will put pressure on the Gulf country to diversify and grow its high-tech manufacturing industries, he said.
On the oil price front, Cebr said over the medium term, increases in supply - particularly rising production in the US, a resurgence among producers recently disrupted by violence including Libya and Iraq, and an incremental expansion in exports from Iran - are likely to lead to a gradual reduction in average oil prices from $102 in 2014 to around $95 a barrel by 2020.
The medium-term outlook of falling prices poses a challenge to the Middle East's hydrocarbon exporters that have expanded production in response to raised prices in recent years and used the resulting revenues to boost public spending, it said.
Commodity exports also account for more than 90% of the total value of goods exported from Kuwait and Qatar - much more stable economies, it said, adding while these economies remain so dependent on commodities markets, they are vulnerable to variations in global prices.
"Expanding capacity and competitiveness across a broader range of export industries would provide some protection against these fluctuations, reducing exposure to any single market," the report said.
Currently Qatar ranks in the top half of the World Bank's Knowledge Index, a comparison of 145 countries and their ability to develop modern competitive industries, coming 61st on the list. However, with competition from other emerging markets intensifying, Qatar must now further improve education standards, increase labour productivity and attract more foreign direct investment (FDI) to progress its skill-and technology-intensive manufacturing sectors, the report said.
While standards of education in Qatar fare better according to World Bank measures, there remains a shortage of workers with suitable education in science, technology, engineering and mathematics. However, the increasing number of students studying overseas is helping to address this skills shortage by creating new pathways for knowledge and skills development.
Improving the pace of labour productivity, or output per worker, will help Qatar to prosper in the cut and thrust of international markets, it said, highlighting that promisingly, labour productivity increased an average of 1% per worker between 2008 and 2012.
"Qatar will remain a key destination for FDI flows over the coming years, providing a welcome boost to labour productivity by introducing domestic workforces to new technologies, production techniques and management procedures," Soare said.
© Gulf Times 2014
