Economy of Qatar
Encyclopedia
Petroleum
is the cornerstone of Qatar
's economy
and accounts for more than 70% of total government revenue, more than 60% of gross domestic product
, and roughly 85% of export
earnings. Proved oil reserves
of 15 billion barrels (588,000,000 m³) should ensure continued output at current levels for 23 years. Oil has given Qatar a per capita GDP that ranks among the highest in the world. Qatar's proved reserves of natural gas
exceed 7000 km³, more than 5% of the world total, third largest in the world. Production and export of natural gas are becoming increasingly important. Long-term goals feature the development of off-shore petroleum and the diversification of the economy.
. Current GDP per capita registered a world record-breaking peak growth of 1,156% in the Seventies. This became quickly unsustainable and Qatar's current GDP per capita contracted 53% in the Eighties. But rising global oil demand helped current GDP per capita to expand 94% in the Nineties. Diversification is still a long-term issue for this over-exposed economy.
This is a chart of trend of gross domestic product of Qatar at market prices estimated by the International Monetary Fund with figures in millions of Qatari Rials.
For purchasing power parity comparisons, the US Dollar is exchanged at 5.82 Qatari Rials only. Mean wages were $59.99 per manhour in 2009.
Qatar's economy was in a downturn from 1982 to 1989. OPEC (Organization of Petroleum Exporting Countries) quotas on crude oil production, the lower price for oil
, and the generally unpromising outlook on international markets reduced oil earnings. In turn, the Qatari government's spending plans had to be cut to match lower income. The resulting recessionary local business climate caused many firms to lay off expatriate staff. With the economy recovering in the 1990s, expatriate populations, particularly from Egypt
and South Asia
, have grown again.
Oil production will not long remain at peak levels of 500,000 barrels (80,000 m³) per day, as oil fields are projected to be mostly depleted by 2023. Nevertheless, large natural gas
reserves have been located off Qatar's northeast coast. Qatar's proved reserves of gas are the third-largest in the world, exceeding 250 trillion cubic feet (7000 km³). The economy was boosted in 1991 by completion of the $1.5-billion Phase I of North Field gas development. In 1996, the Qatargas project began exporting liquefied natural gas
(LNG) to Japan
. Further phases of North Field gas development costing billions of dollars are in various stages of planning and development.
Qatar's heavy industrial projects, all based in Umm Said, include a refinery with a 50,000 barrels (8,000 m³) per day capacity, a fertilizer plant for urea and ammonia, a steel plant, and a petrochemical plant. All these industries use gas for fuel. Most are joint ventures between European and Japanese firms and the state-owned Qatar General Petroleum Corporation
(QGPC). The U.S. is the major equipment supplier for Qatar's oil and gas industry, and U.S. companies are playing a major role in North Field gas development.
Qatar pursues a vigorous program of "Qatarization
", under which all joint venture industries and government departments strive to move Qatari nationals into positions of greater authority. Growing numbers of foreign-educated Qataris, including many educated in the U.S., are returning home to assume key positions formerly occupied by expatriates. In order to control the influx of expatriate workers, Qatar has tightened the administration of its foreign manpower programs over the past several years. Security is the principal basis for Qatar's strict entry and immigration rules and regulations.
. http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20394793~menuPK:1192714~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html. As 2008 drew to a close no capital markets around the globe, including Qatar’s, were immune to the effects of the sub-prime fallout. That said, there is considerable optimism that Qatar’s bourse, the Doha Securities Market (DSM), will remain relatively resilient to the ongoing international turbulence. It has followed the same peak-trough trajectory as many others around the globe, hitting record highs in mid-2008, before diving in late 2008 and early 2009. Between December 2006 and July 2008 the DSM Index rose about 117% before the global financial crisis wiped out most of these gains. In the first few months of 2009, the DSM lost about 40% of its value. In an effort to stave off further losses, the government announced in February 2009 that it would step in to buy up shares of troubled banks amounting to about 10% of the market’s capitalisation. The move dramatically improved investor optimism and is hoped to prevent the market from falling further. The proposal to create a single unified regulator as early as 2010 to oversee all banking and financial services is viewed as another promising development that will dramatically transform the financial sector for the better. Underlining these developments is strong optimism that the solid base of Qatar’s economy, which has maintained a favourable outlook, will be enough to buoy capital markets and lure shaken-up investors back to the trading floor.
As driving is the primary mode of transport in Qatar, the road network is a major focus of the plan. Project highlights in this segment include the multibillion-dollar Doha Expressway and the Qatar Bahrain Causeway, which will connect Qatar to Bahrain and Saudi Arabia and is considered a milestone in regional interconnectivity. Mass-transit options, such as a Doha metro, light-rail system and more extensive bus networks, are also under development to ease road congestion. In addition, the railway system is being significantly expanded and could eventually form an integral part of a GCC-wide network linking all the Gulf states. The airport, too, is expanding capacity to keep up with rising visitor numbers. The New Doha International Airport
is one of the largest projects in Qatar today and will boast a capacity of 50m passengers upon completion in 2015. Finally, port infrastructure is seen as an integral part of Qatar’s economic development as it focuses on LNG and industrial exports. The port at Mesaieed is undergoing expansion and will be able to handle around 1m twenty-foot-equivalent units by 2020. While the financial crisis may present challenges to infrastructure development later in 2009, once all projects are up and running Qatar will have one of the most advanced and modern transport infrastructures in the region.
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
is the cornerstone of Qatar
Qatar
Qatar , also known as the State of Qatar or locally Dawlat Qaṭar, is a sovereign Arab state, located in the Middle East, occupying the small Qatar Peninsula on the northeasterly coast of the much larger Arabian Peninsula. Its sole land border is with Saudi Arabia to the south, with the rest of its...
's economy
Economic system
An economic system is the combination of the various agencies, entities that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed...
and accounts for more than 70% of total government revenue, more than 60% of gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
, and roughly 85% of export
Export
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"...
earnings. Proved oil reserves
Oil reserves
The total estimated amount of oil in an oil reservoir, including both producible and non-producible oil, is called oil in place. However, because of reservoir characteristics and limitations in petroleum extraction technologies, only a fraction of this oil can be brought to the surface, and it is...
of 15 billion barrels (588,000,000 m³) should ensure continued output at current levels for 23 years. Oil has given Qatar a per capita GDP that ranks among the highest in the world. Qatar's proved reserves of natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
exceed 7000 km³, more than 5% of the world total, third largest in the world. Production and export of natural gas are becoming increasingly important. Long-term goals feature the development of off-shore petroleum and the diversification of the economy.
Macro-economic trend
Qatar is now the richest country in the Muslim worldMuslim world
The term Muslim world has several meanings. In a religious sense, it refers to those who adhere to the teachings of Islam, referred to as Muslims. In a cultural sense, it refers to Islamic civilization, inclusive of non-Muslims living in that civilization...
. Current GDP per capita registered a world record-breaking peak growth of 1,156% in the Seventies. This became quickly unsustainable and Qatar's current GDP per capita contracted 53% in the Eighties. But rising global oil demand helped current GDP per capita to expand 94% in the Nineties. Diversification is still a long-term issue for this over-exposed economy.
This is a chart of trend of gross domestic product of Qatar at market prices estimated by the International Monetary Fund with figures in millions of Qatari Rials.
| Year | Gross Domestic Product | US Dollar Exchange | Inflation Index (2000=100) |
Per Capita Income (as % of USA) |
|---|---|---|---|---|
| 1980 | 28,631 | 3.65 Qatari Rials | 53 | 266.18 |
| 1985 | 22,829 | 3.63 Qatari Rials | 64 | 104.82 |
| 1990 | 26,792 | 3.64 Qatari Rials | 77 | 67.85 |
| 1995 | 29,622 | 3.63 Qatari Rials | 85 | 55.75 |
| 2000 | 64,646 | 3.63 Qatari Rials | 100 | 86.03 |
| 2005 | 137,783 | 3.64 Qatari Rials | 115 | 127.05 |
For purchasing power parity comparisons, the US Dollar is exchanged at 5.82 Qatari Rials only. Mean wages were $59.99 per manhour in 2009.
Energy sector
In 1973, oil production and revenues increased dramatically, moving Qatar out of the ranks of the world's poorest countries and providing it with one of the highest per capita incomes in the world.Qatar's economy was in a downturn from 1982 to 1989. OPEC (Organization of Petroleum Exporting Countries) quotas on crude oil production, the lower price for oil
1980s oil glut
The 1980s oil glut was a serious surplus of crude oil caused by falling demand following the 1970s Energy Crisis. The world price of oil, which had peaked in 1980 at over US$35 per barrel , fell in 1986 from $27 to below $10...
, and the generally unpromising outlook on international markets reduced oil earnings. In turn, the Qatari government's spending plans had to be cut to match lower income. The resulting recessionary local business climate caused many firms to lay off expatriate staff. With the economy recovering in the 1990s, expatriate populations, particularly from Egypt
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...
and South Asia
Asia
Asia is the world's largest and most populous continent, located primarily in the eastern and northern hemispheres. It covers 8.7% of the Earth's total surface area and with approximately 3.879 billion people, it hosts 60% of the world's current human population...
, have grown again.
Oil production will not long remain at peak levels of 500,000 barrels (80,000 m³) per day, as oil fields are projected to be mostly depleted by 2023. Nevertheless, large natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
reserves have been located off Qatar's northeast coast. Qatar's proved reserves of gas are the third-largest in the world, exceeding 250 trillion cubic feet (7000 km³). The economy was boosted in 1991 by completion of the $1.5-billion Phase I of North Field gas development. In 1996, the Qatargas project began exporting liquefied natural gas
Liquefied natural gas
Liquefied natural gas or LNG is natural gas that has been converted temporarily to liquid form for ease of storage or transport....
(LNG) to Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
. Further phases of North Field gas development costing billions of dollars are in various stages of planning and development.
Qatar's heavy industrial projects, all based in Umm Said, include a refinery with a 50,000 barrels (8,000 m³) per day capacity, a fertilizer plant for urea and ammonia, a steel plant, and a petrochemical plant. All these industries use gas for fuel. Most are joint ventures between European and Japanese firms and the state-owned Qatar General Petroleum Corporation
Qatar Petroleum
Qatar Petroleum is a state owned petroleum company in Qatar. The company operates all oil and gas activities in Qatar, including exploration, production, refining, transport, and storage. QP's Chairman Abdullah Bin Hamad Al-Attiyah, is also the head of the Ministry of Energy and Industry and, as...
(QGPC). The U.S. is the major equipment supplier for Qatar's oil and gas industry, and U.S. companies are playing a major role in North Field gas development.
Qatar pursues a vigorous program of "Qatarization
Qatarization
Qatarization is a program designed to increase the number of Qatari nationals in all joint venture industries and government departments. The target is 50% of the workforce in the Industry and Energy sector. Growing numbers of foreign-educated Qataris, including many educated in the United States,...
", under which all joint venture industries and government departments strive to move Qatari nationals into positions of greater authority. Growing numbers of foreign-educated Qataris, including many educated in the U.S., are returning home to assume key positions formerly occupied by expatriates. In order to control the influx of expatriate workers, Qatar has tightened the administration of its foreign manpower programs over the past several years. Security is the principal basis for Qatar's strict entry and immigration rules and regulations.
Industry
The government considers industry to be an integral part of its plan to diversify the economy and maximise its huge natural gas reserves, which serve as the primary feedstock for the sector. Accordingly, careful planning has gone into industrial development. With an eye towards exports, development has been clustered around the ports of Ras Laffan and Mesaieed, which are also key centres of energy. The result has seen considerable growth over the years. Industries Qatar (IQ), a producer of petrochemicals, fertilisers and steel, is a regional powerhouse, surpassed only in size by Saudi Basic Industries Corporation (SABIC), the Middle East’s largest chemical producer. In 2007 the manufacturing sector made the third-largest contribution to GDP among non-oil and gas sectors, equivalent to about 7.5% of GDP. Petrochemicals and fertilisers supply make up a large portion of the industrial base, along with steel and other construction materials, through Qatar Steel and Qatar Primary Material Company (QPMC). Indeed over the past few years, demand for construction materials experienced a major surge as the development boom swept the Gulf. But the global financial crisis has put a significant dent in demand in the region, as project credit lines dry up and investor sentiment remains cautious. The crisis has in fact impacted the whole of the industrial sector – IQ saw its net profit drop in the fourth quarter of 2008 more than 90% over the same period the previous year. But in relative terms, the sector has fared better than most and IQ still managed to post an annual profit of $2bn. Large profit chunks from years past have been channelled into capital investments, which should help the sector ride out the storm. IQ, for example, is pushing several major expansion projects, worth almost $6bn, ahead. Qatar is expected to be one of the fastest growing economies in 2009 – the hope is it will be enough to keep the industrial sector on an upward trajectory.Financial sector
The Qatari banking sector managed to escape the direct impact of the global subprime fallout, but was not altogether unscathed by its aftershocks. Overall, it was the best performing of the Gulf Cooperation Council markets in the last quarter of 2008 and most banks posted substantial profits for 2008. But the sector is also facing issues of liquidity, declining customer confidence and a forced reluctance to lend. In a bid to strengthen the banks’ positions, the Qatar Investment Authority (QIA) announced in early 2009 that it was willing to take a 10-20% stake in any interested local listed banks by way of a capital injection, although this was later reduced to 5% stakes and an additional 5% at the end of 2009. The Qatari government also announced in March 2009 that it was planning to buy the investment portfolio of the banks in the hope this would encourage them to continue lending. Cautious sector sentiment has also been compounded by the Qatar Central Bank’s (QCB’s) lending restrictions, which demand a loan-to-deposit ratio of 90%. Given the high level of integration between Qatar’s economy and the Gulf region, as well as the wider world, a slowdown in business and banking activity seemed inevitable. Nevertheless, Qatar’s banking sector has been faring relatively well, considering the strife experienced in other countries, and insiders are confident that activity will return to its previous brisk pace in the second half of 2009 as confidence slowly rebuilds around the globe.Islamic finance
The Islamic finance sector enjoyed increased activity in 2008 and is expected to continue to grow into 2009 as more sophisticated financial instruments spark the interest of investors. In addition to Islamic banks, such as Qatar Islamic Bank (QIB), Qatar International Islamic Bank (QIIB) and newcomer Al Masraf Al Rayyan, conventional banks have also been entering the sharia-compliant sector and are coming to view an Islamic subsidiary as a virtual necessity in order to maintain market standing. Islamic banks currently take the lion’s share of sharia-compliant business, though the conventional banks are working hard to take a greater share of market activity. Both Islamic banks and Islamic subsidiaries did remarkably well in the first three quarters of 2008, during which overall financing activity increased by 70.6% compared to the same period in the previous year. The global financial crisis has certainly thrown a dampener on this growth, though. Poor market conditions have contributed to a marked slowdown of Islamic bond, or sukuk, activity in 2008 throughout the Gulf. But other segments, such as Islamic insurance, or takaful, have not seen a similar downturn. In fact, takaful still shows significant room for expansion as it currently makes up less than 20% of the total insurance market. Overall, challenges to further growth remain, including a lack of qualified staff to meet the growing demand for sharia-compliant banking services. In order to compete with the conventional banking sector and expand its customer base, Islamic banks need to invest in suitable human resources.Capital market
The stock market capitalisation of listed companies in Qatar was valued at $95,487 million in 2007 by the World BankWorld Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
. http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20394793~menuPK:1192714~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html. As 2008 drew to a close no capital markets around the globe, including Qatar’s, were immune to the effects of the sub-prime fallout. That said, there is considerable optimism that Qatar’s bourse, the Doha Securities Market (DSM), will remain relatively resilient to the ongoing international turbulence. It has followed the same peak-trough trajectory as many others around the globe, hitting record highs in mid-2008, before diving in late 2008 and early 2009. Between December 2006 and July 2008 the DSM Index rose about 117% before the global financial crisis wiped out most of these gains. In the first few months of 2009, the DSM lost about 40% of its value. In an effort to stave off further losses, the government announced in February 2009 that it would step in to buy up shares of troubled banks amounting to about 10% of the market’s capitalisation. The move dramatically improved investor optimism and is hoped to prevent the market from falling further. The proposal to create a single unified regulator as early as 2010 to oversee all banking and financial services is viewed as another promising development that will dramatically transform the financial sector for the better. Underlining these developments is strong optimism that the solid base of Qatar’s economy, which has maintained a favourable outlook, will be enough to buoy capital markets and lure shaken-up investors back to the trading floor.
Tourism
Qatar is focusing on niche tourism, especially the business segment, as a means of growth for the sector. Under the ambitious five-year development plan of the Qatar Tourism and Exhibitions Authority (QTEA), the government aims to boost the number of visitors from 964,000 as of 2007 to 1.5m by 2010. The funding needed to meet this goal is certainly there – in 2008 the state allocated some $17bn for tourism development through 2014, most of which is going towards hotels, exhibition space and infrastructure. In order to keep up with a rising number of visitors, the government hopes to increase hotel capacity by 400% by 2012. In addition to financial support, the government has also worked to ease business regulations in a bid to increase private sector activity. A major aspect of expansion plans is the New Doha International Airport (NDIA), which will have the capacity to handle up to 24m passengers upon the completion of the first phase in 2012. Considering the vast majority of these visitors are members of the business community, the government has naturally targeted the meetings, incentives, conferences and exhibitions segment as a viable source of development, with two new convention centres slated to open in 2011. Other niche tourism segments receiving special focus include cultural tourism on the back of the recent headline-grabbing opening of Doha’s Museum of Islamic Art, and sports tourism, initially spurred by the Asian Games, to which Qatar played host in 2006. The government appears to be committed to long-term expansion plans, but challenges nevertheless remain, including effective marketing to the international community as well as the effect of the financial crisis on global tourism appetite.Transport
With a fast-expanding population and substantial economic growth over the past decade, a reliable and extensive transportation network is becoming increasingly necessary within Qatar. So far the government, the primary transport developer, has done well in terms of keeping up with demand for new transportation options. In 2008 the Public Works Authority (Ashghal), one of the bodies that oversees infrastructure development, underwent a major reorganisation in order to streamline and modernise the authority in preparation for major project expansions across all segments in the near future. Ashghal works in tandem with the Urban Planning and Development Authority (UPDA), the body that designed the transportation master plan, instituted in March 2006 and running to 2025.As driving is the primary mode of transport in Qatar, the road network is a major focus of the plan. Project highlights in this segment include the multibillion-dollar Doha Expressway and the Qatar Bahrain Causeway, which will connect Qatar to Bahrain and Saudi Arabia and is considered a milestone in regional interconnectivity. Mass-transit options, such as a Doha metro, light-rail system and more extensive bus networks, are also under development to ease road congestion. In addition, the railway system is being significantly expanded and could eventually form an integral part of a GCC-wide network linking all the Gulf states. The airport, too, is expanding capacity to keep up with rising visitor numbers. The New Doha International Airport
New Doha International Airport
New Doha International Airport is an international airport currently under construction in Doha, capital of Qatar. NDIA was slated to replace the old Doha International Airport as Qatar's only international airport in 2009. Current estimates have a completion date of 2011/2012...
is one of the largest projects in Qatar today and will boast a capacity of 50m passengers upon completion in 2015. Finally, port infrastructure is seen as an integral part of Qatar’s economic development as it focuses on LNG and industrial exports. The port at Mesaieed is undergoing expansion and will be able to handle around 1m twenty-foot-equivalent units by 2020. While the financial crisis may present challenges to infrastructure development later in 2009, once all projects are up and running Qatar will have one of the most advanced and modern transport infrastructures in the region.