GCC: Special report - Qatar grows up

Despite overflowing with natural resources, the home of Al-Jazeera has set itself a target of rapid diversification.

by Nick Loney, World Business
Last Updated: 23 Jul 2013

When the athletes step on to the track for the opening ceremony of the 15th Asian Games in Doha 1 December, it will be one of the most significant moments in Qatar's history. The small emirate upset the odds when it was awarded the competition in 2000, after seeing off rivals Hong Kong and Kuala Lumpar. Qatar will be the first Arab nation to hold the games - some achievement for a country with a population of less than a million and which became an independent state only in 1971.

Qatar's growing self-confidence has been driven by rapid economic growth. Massive investment in the country's North Field gas reserve, coupled with high energy prices, have transformed the fortunes of a country that was still an economic backwater in the mid-1990s.

In the past five years, real GDP has climbed by 42%, exports have risen in value by 135% and the balance of payments surplus is up by 80%. Government revenues have almost tripled and the budget surplus has risen seven-fold. The country now ranks as the 11th richest country in the world per capita.

Qatar is perhaps best known in the West as the base of TV station Al-Jazeera, the launch of which in 1997 raised the profile of Qatari television internationally. The station is outspoken on issues traditionally deemed as sensitive in the Arab world. However, it is careful not to criticise Qatar itself or some of its close Gulf allies, specifically Saudi Arabia.

Oil and gas remain the backbone of the economy. The country has oil reserves estimated at 15 billion barrels and by 2011 liquefied natural gas capacity will have tripled to 77 million tonnes a year through the completion of six mega trains, making Qatar the world's biggest LNG supplier.

But despite a super-abundance of natural resources, the country has set itself the target of rapid diversification through the creation of a 'knowledge economy'. In 2004, it established the Qatar Science and Technology Park to attract and serve technology-based companies and entrepreneurs. The science park is now a 'free zone', allowing foreign companies to set up a 100%-owned entity free from tax and duties.

The Qatar Financial Centre (QFC) was created last year with a long-term perspective of supporting the development of Qatar and the wider region, and strengthening the links between the energy-based economies and global financial markets.

Apart from Qatar itself, which needs to raise the capacity of its financial services to support more than $130 billion worth of projects by 2012, the QFC also provides a conduit for financial services providers to access nearly $1 trillion of investment across the GCC as a whole over the next decade. The QFC's regulatory framework has been set up along Western lines, and last year 19 licences were issued to foreign firms by the regulatory authority.

The petrochemical industry has attracted people from all around the world and expatriates form the majority of Qatar's residents, most coming from south Asia and surrounding non oil-rich nations. The proportion of natives to foreigners is expected to shrink further in the future.

Although Qatar remains a deeply conservative country, its main problem may not be liberalisation, but rather how to retain its traditional identity.

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