Bringing greater transparency should top agenda

The authorities in Qatar need to heed views and recommendations appearing in a recent report by the S&P concerning constraints in the local economy. The limitations were revealed in the context of a review of the Qatari economy for credit rating purposes.

Undoubtedly, the agency made the right decision by affirming ratings of AA for the long-term and A-1+ for short-term. This well-deserved rating is supported by a stable outlook.

To be sure, there are plenty of reasons for assigning this investment-friendly rating. Sources of strengths for Qatar entail plans for investing some $200 billion in a span of a decade on infrastructure, education, and health as well as sports-related projects.

Qatar is due to host World Cup 2022, requiring allocations of billions of dollars on matters such a metro system, upgrade of road network and sports complexes, with extraordinary positive spillover effects on business and the quality of life in the country.

Happily, only last week the Prime Minister and Foreign Minister of Qatar Hamad Bin Jasem Bin Jaber Al Thani reiterated his government’s intention of making large-scale spending. His comments were made to an event designed to encourage local firms to go public.

The move is vital considering, as the index of Qatar Exchange dropped by 5 per cent in 2012, the second worst performer after Bahrain within the GCC. Yet, the performance of Bahrain Stock Exchange is partly linked to on-going political crisis. Conversely, political unrest is something not heard off in Qatar, a country boasting per capita income of $100,000, the highest in the world.

Concerning the potential of the local bourse, the promised sale of shares in the $12 billion Doha Global Investment Co. is yet to happen. Qatar Holding, an investment arm of Qatar Investment Authority, has opted to set up the new firm partly to offset limited desire of Qataris for investing in the stock exchange.

The firm would be backed by the country’s sovereign wealth funds. Undoubtedly, Qatar enjoys a sizable asset exposure through the SWFs, some $115 billion by March, according to Sovereign Wealth Institute.

This places Qatar Investment Authority amongst the top dozen SWFs in the world.

What’s more, state-owned Qatar Petroleum intends to list four of its companies on the bourse, a move fitting the strategy of strengthening the case of sharing the country’s wealth with citizens and institutions.

Concerning the constraints, it is fair to assume that little if any progress could occur with regards to absence of flexibility of the monetary policy. Ostensibly, the authorities derive safety and comfort from linking the riyal to the dollar.

However, there is room for addressing another constraint, namely that of developing institutions for strengthening transparency. In fact, Qatari officials should be commended for setting up a transparency authority headed by Abdullah bin Hamad Al Attiyah, the person credited for playing a pivotal in developing the country’s energy sector.

Already, the alarm bells have been sounded with regards to transparency. Sadly, Qatar’s ranking in the 2012 Corruption Perceptions Index dropped by five notches to a global ranking of 27.

Conversely, the UAE, a fellow GCC member state, managed to advance by a single notch, thereby allowing it to share ranking with Qatar.

Notwithstanding the satisfactory investment ratings, Qatari officials need to overcome the institutional constraint of limited transparency and, hence, the oversight of governmental activities, notably international investments by its SWFs, such as acquisition of UK’s Harrods in 2010 for $2.2 billion.

The writer is a Member of Parliament in Bahrain.