GCC Insight: Qatar takes road to ambitious growth

An ambitious spending programme is bound to transform the Qatari economy. The plan calls for investing some $30 billion in the next five to seven years.

The largest category is reserved for the energy sector. The state-owned Qatar Petroleum plans to invest $24 billion for developing oil, gas and petrochemical projects.

Qatar's sustainable output stands at 800,000 barrels per day (bpd). But output is poised to reach to 950,000 bpd by end of 2004 on the back of a series of production sharing agreements between Qatar Petroleum with American and European oil companies.

In the field of liquefied natural gas (LNG), Qatar Liquefied Gas Co (QatarGas) and Ras Laffan Qatar Liquefied Gas Co (RasGas) have signed a series of agreements for expanding output. If the pace of expansion continues, Qatar could overtake Indonesia as the largest supplier of LNG in the world as early as 2007.

The Ministry of Municipal Affairs and Agriculture plans to invest $3.5 billion primarily on expansion of roads, besides a series of cultural projects, hospital and schools and drainage network. Road projects include a $200 million Salwa highway contract plus $800 million covering numerous expressways.

As to cultural projects, designs are being drawn up for constructing a $150 million Museum of Islamic Arts and $125 million Qatar National Library. Also, construction of three hospitals are planned, the largest being a $400 million Hamad Medical City.

The government has also set aside some $1.8 billion for constructing more than 20 projects related to the opening of the 15th Asian Games scheduled for December, 2006.

Besides, plans are underway to invest $1 billion for setting up a new complex for Doha International Airport, capable of accommodating 12 million passengers annually.

Additionally, Qatar is witnessing construction of new five star hotels, being built in the West Bay area of Doha.

By mid-2004, Four Season Hotel will open its doors to the public, adding to the already opened Ritz Carlton and Inter-continental hotels.

In order to meet the growing demand of construction, Qatar National Cement Company has plans to add a new 1 million tonnes a year at the cost of $125 million to its existing 1.35 million tonnes. Also, Qatar Steel Company (Qasco) plans to invest some $300-400 million expansion.

The budget for fiscal year April 2003-04 confirms the expansionary tendencies of the Qatari economy. The budget, which was published in late March, envisages a 43.4 per cent growth in allocation for major capital projects to $1.7 billion.

In turn, this has helped raise total expenditure by 16.4 per cent to $6.4 billion. Of the major projects, $275 million is allocated for road development and $180 million for the sewerage system, as only two-thirds of the population is connected to the drainage network.

However, the spending has led to accumulation of debt. Qatar's debt stands at $16 billion, constituting 90 per cent of its GDP, but this is an improvement from 100 per cent of the GDP.

Rating agency Moody's Investor Service continues to consider Qatar's debt as being reasonable.
The government intends to enhance the role played by the private sector, as currently the state dominates the economy. For example, the oil and gas sector alone, which is controlled by the state, contributes about 50 per cent of the GDP and 90 per cent of export earning.

Yousef Hussain Kamel, Finance Minister, has revealed that the Qatari government will be hiring an international consultant to look for ways to enhance the private sector role in the economy.

To be sure, local firms are being encouraged to participate in areas once regarded off limits. Privately-owned United Development Company (UDC) will be allowed to take part in Qatar's economic development programme including oil, gas, petrochemicals and electricity.

UDC has plans to invest some $2.1 billion in developing a grass-root aluminium plant in the industrial town of Ras Laffan, the first such smelter in Qatar. Some 3,400 Qatari and other GCC investors have stakes in UDC, including Hamad bin Jassem bin Jabr Al Thani, the Qatari foreign minister.

Earlier, the government formed a council comprising leading businessmen to advise on policies needed to help boost the private sector's role in the economy. The selected members include representatives from the ruling Al Thani family and business families. The council is expected to become an influential body in the formation of local economic policies.

Qatar is likely to remain in the spotlight partly due to economic development together with other political matters such as serving as a hub for the U.S. Central Command and a base for Al Jazeera satellite channel.

The author is Assistan Professor, College of Business Administration, University of Bahrain.