GCC Insights: Qatar: Enhancing private sector's role in economy

In 1997, the IMF advised Qatar to step up structural reforms in order to facilitate economic diversification. Amongst others, the IMF called for privatisation, deregulation and financial sector reforms. The authorities heeded the call and made concerted efforts to involve private sector firms in the economy.

In 2002 alone, a series of new laws were passed in order to improve the investment climate, including copyright, protection of trademarks and fighting money laundering.

Starting from June 2002, individuals have become free to import branded goods for personal use without having to either seek permission from local agents or to pay any commissions to the agents.

The new law replaces the 1986 rule that granted commercial agencies the sole selling rights for branded consumer goods.

Recently, 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 large business families. The council is expected to become an influential body in the formation of local economic policies. The council is separate from the Qatar Chamber of Commerce and Industry, which provides advice to the minister of economy and trade.

The Qatari economy is reaping the benefits of opening the energy sector to foreign investments. In a span of a few years, Qatar has managed to more than double its installed oil production capacity to 850,000 barrels per day, largely due to the efforts of American and European oil companies.

Likewise, Qatar is an acknowledged global player in the export of liquefied natural gas (LNG) thanks to the efforts of international oil companies.

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's shareholders include Hamad bin Jassem bin Jabr Al-Thani, the Qatari foreign minister, and other GCC nationals.

The private sector role is becoming particularly significant in the utilities sector. The majority privately owned Qatar Electricity and Water Company (QEWC) is increasingly playing a strategic role in the utilities sector. To help carry out its activities, the company was set up with a strong capital base amounting to QR1bn ($274M), owned 43 per cent by the government and the remaining 57 per cent by Qatari investors.

In 1999, QEWC took over the Ras Abu Fontas B station, power and water desalination complex, a key power plant.

In 2001, QEWC launched a $214 million expansion of the plant to raise capacity to 990 MW through three new generating units. The operation of two units with 251 MW alleviated the power situation during the year's long summer months.

In 2000, Qatar General Electricity & Water Corporation (Kahrama) was set up to replace the ministry of electricity and water.

In 2001, QEWC was handed the responsibility for the operation and maintenance of all Kahrama power stations.

QEWC holds a 25 per cent stake in Qatar's first independent water and power project (IWPP), which is under construction.

AES Energy Corp. of the U.S., holds the majority 55 per cent share in the project, while Qatar Petroleum and Kuwait-based Gulf Investment Corp-oration hold 10 per cent each. Once completed in 2003, the IWPP will add 750 MW of electricity and 750 million gallons/day of water.

During the 1980s, Qatar was not particularly receptive to foreign investments except in isolated cases.

Since taking power in 1995, His Highness Sheikh Hamad bin Khalifa Al Thani, the Emir urged the authorities to open up the energy and manufacturing sectors.

The rest is now history.