Hosting the 2022 FIFA World Cup is not enough for Qatar. Its ambitions are out of this world – literally. For even as the country was rejoicing at the great honour of hosting the world’s most prestigious football tournament, a Qatar-led team was discovering a planet 500 hundred light years from Earth and 20 per cent larger than Jupiter, fittingly naming it Qatar-1b.
“The discovery of Qatar-1b is a great achievement – one that further demonstrates Qatar’s commitment to becoming a leader in innovative science and research,” says Dr Khalid Al Subai, leader of the Qatar Exoplanet Survey and research director at the Qatar Foundation.
The inter-planetary discovery late last year offers a great insight into the tiny state’s larger-than-life ambitions and how it sees itself among the league of nations: a leader.
Back here on Earth, the Qatari economy also appears to be in a parallel universe, posting 16 per cent growth in each of the past four years, and it is set to grow at an astonishing 21 per cent this year, even as Wall Street analysts warn about an impending global economic depression.
Qatar appears to benefit from a unique set of circumstances that has made it immune to many of the trials and tribulations of the global economy.
Sitting on the third largest gas reserves in the world, with a local population of a mere 238,000, Qatar’s investments in its natural gas fields in the 1990s are paying tremendous dividends. Its gas production has risen 21 per cent on average for the past four years at a time when Asian oil consuming countries are looking for alternatives from expensive oil shipments. The country’s natural gas production has risen from around 19 million tonnes per year in 2000 to 119 million tonnes by 2010. Not surprisingly, oil and gas revenues have doubled over the past four years alone, from $32.3 billion in 2006 to $65.9 billion by 2010.
According to the Qatar National Bank (QNB), these figures are expected to further double to nearly $115 billion by 2012 especially as new gas consuming clients come on board.
In June, Qatar shipped its first gasoil cargo from the $18 billion joint venture gas-to-liquids (GTL) plant in Ras Laffan. The facility is scheduled to be fully operational by mid-2012 and it will be the largest GTL plant in the world converting 1.6 billion cubic feet of gas into 120,000 barrels of condensate, ethane and liquefied petroleum gas (LPG) and 140,000 barrels per day of gas-to-liquids products.
“Qatar’s liquidified natural gas (LNG) export prospects have improved as the Japan earthquake has boosted demand for the country’s gas. Earlier this year, Qatar said it would supply an extra 60 cargoes of LNG to Japan,” notes Standard Chartered Bank.
Japan has also been buying more LPG (used for heating and vehicles) and naphtha (a feedstock for petrochemicals) from Qatar, and demand for LNG and LPG is expected to continue to grow as Japanese demand resumes.
Given that 90 per cent of the country’s oil products go to Asia, Standard Chartered believes prospects for Qatar’s gas sector remain very favourable.
Meanwhile, the current account surplus is expected to expand to 29 per cent of GDP in 2011-12, thanks to rising export revenues. Years of surpluses have built up Qatar’s foreign exchange reserves and holdings of foreign assets – which could well explain its adventures in outer space.
While Qatar’s energy riches are filling the state coffers, the country is looking to make rapid progress elsewhere too. In an international recognition of the country’s rising stature, it was granted the rights to host the prestigious FIFA World Cup in 2022, albeit in controversial circumstances.
“Qatar is planning $225 billion of investment in 2011-16,” notes the QNB in a report. “This is in the run up to its hosting of the 2022 FIFA World Cup, and rooted in the model of sustainable development envisaged in the Qatar National Vision for 2030.” Given Qatar’s small size (the UAE is seven times bigger in total area), the $225 billion is an astonishing figure and enough to keep the economy growing for an extended period of time, although there are dangers of overheating and high inflation if the development is not managed properly.
But the 2022 World Cup is but a milestone in the country’s grander 2030 Qatar National Vision, which sets out the country’s long-term ambitions.
It is also a document that highlights the country’s vulnerabilities to depending heavily upon its energy resources.
“The trajectory of Qatar’s economy is tightly linked to developments in the hydrocarbon sector. Hydrocarbons still dominate the economic landscape, but Qatar is branching out into new areas,” the report notes and it highlights the four pillars of growth which focus on human, social, economic and environmental development.
“Qatar’s economic prospects in the medium term remain favourable, though uncertainties loom…. beyond 2011 real GDP growth is likely to shift down as the current programme of investment in hydrocarbons reaches completion, and output plateaus,” the document states.
“Although the slowing of aggregate growth is sharp, this is not a reversal of fortunes, as income levels will remain high. Healthy growth of the non-hydrocarbon sector is also expected and will help keep overall GDP growth buoyant. Growth of non-hydrocarbon output is expected to average 9.1 per cent during 2011-2016,” notes the report.
But while Qatar’s non-oil plans are aggressive, for now the private sector has been lagging behind the energy sector. Many of the projects, especially for the 2022 World Cup, will take a while to get off the ground and most analysts don’t expect its impact to be felt by the private sector for at least another few years. “We believe Qatar will need to step up spending on smaller projects to prevent the private sector from being overwhelmed by hydrocarbons in the coming years,” notes Standard Chartered.
Citibank, however, feels the impact of the FIFA World Cup on the local economy is exaggerated. “This is because:
i) The actual spend on World Cup-specific infrastructure is going to be far less than the reported $50 billion plus.
ii) The actual spend on World Cup-specific infrastructure is a drop in the ocean compared with currently ongoing projects.
iii) The productivity of the World Cup-specific infrastructure developments is very low.
iv) The beneficiaries of increased expenditure on the World Cup will largely be foreigners, with little value-added remaining in Qatar,” the bank said in a recent report.
Apart from flexing its financial muscle, Qatar has also distinguished itself with its maverick foreign policy, which is often bolder than that of its Gulf counterparts. Brokering deals in Lebanon and supporting Libyan rebels militarily and politically, Qatar has punched above its political weight to emerge as an active player in regional diplomatic circles. It has also used its feisty news channel Al Jazeera to extend its influence and rise above the dull political inaction prevalent among most Arab states.
“As Qatar’s elite see it, being at the forefront of popular Arab opinion and defending fellow Arabs against an onslaught from a widely hated dictator is a priceless commodity, both at home and abroad,” wrote David Roberts in an article in Foreign Affairs.
Unlike Saudi Arabia, which is hesitant to wholeheartedly support popular causes in the region – lest the 15-17 million Saudis also demand it – Qatar has no such worries. Of the 1.7 million people living in the country, only 238,000 are Qataris, who enjoy free health care and government benefits and find no reason to complain about the rule of the Al Thanis – nor are they acutely interested in political reform, given they have few complaints against their rulers. That’s an enviable position to be in, and one that allows Qatar to pursue other interests, including aggressive and ambitious investments abroad to further its influence in global financial circles.
Qatar’s stakes in Volkswagen, the London Stock
Exchange, Barclays Bank, Credit Suisse, Porsche and Harrods, among others, has turned the country, and the Qatar Investment Authority, into a compulsory port of call for many countries and international companies looking to raise capital.
The country also invested $1 billion in European Greenfield, which has major operations in Greece, and, apart from investments in two recession-hit Greek banks, is gaining tremendous influence among EU states.
Clearly, the world has started to take notice. In a recent Y/Zen report, Doha upstaged Dubai for the first time as the region’s most prominent financial centre. Of course, it is just one survey, and Dubai remains the unequivocal regional hub, but Doha appears to be closing the gap.
Qatar has also regularly eclipsed its regional counterparts in other surveys as well. The country emerged as the most peaceful in the region in the Institute for Economics and Peace’s Global Peace Index; the Fraser Institute’s Global Petroleum Survey ranked Qatar as the best regional jurisdiction for energy development, while the influential World Economic Forum’s annual survey ranked Qatar as the most competitive economy in the region – and the 14th most competitive in the world.
While the planets appear aligned for Qatar, critics argue that political reforms have lagged behind. While Qatar holds municipal elections, where both men and women can participate, the process remains toothless and has no meaningful contribution to policymaking.
Some analysts have also noted that Qatar is stretching itself with trophy international assets especially in a global economic downturn. Also, some of these investments are driven more for political reasons, which are always fraught with risks.
In addition, Qatar’s active foreign policy could also make it a target for contempt and retaliation. Its Al Jazeera network often finds itself at odds with many of the countries it reports on (including Egypt, Iraq, Yemen and Syria) and that adds a layer of political risk to the country.
But it is tough to argue with the sheer volume of gas riches funnelling into the country. Not surprisingly, Qatar is the richest economy in the world in terms of GDP per capita, and with a healthy pipeline of projects under way, there is every reason to think that the country could serve as an oasis of calm in a region full of flashpoints and trouble spots.