GCC business outlook: Qatar

In the state of Qatar, crisis seems to be an alien term.

According to the IMF, Qatar's real GDP will grow at a rate of 16.4% this year.

After achieving 18% straight in 2008, this will be the highest and only double-digit growth in the Middle East, and probably the world.

According to Bank of America Merrill Lynch research, Qatar and its 928,000 inhabitants will remain one of the fastest growing nations despite lower oil prices.

Although oil still accounts for 70% of the national budget, Qatar's huge gas reserves made it less vulnerable than other Opec member states, because Liquified Natural Gas (LNG) has long-term, fixed contracts.

In 2010, Doha will be capital of the world's number one gas exporting nation, replacing Russia and Iran.

Industry diversification

Despite its wealth, Qatar does not aim to build the world's highest towers in break neck speed, neither does it try to establish every kind of industry segment whether needed or not.

As the ruler of the third biggest gas exporting nation, His Highness Sheikh Hamad Bin Khalifa Al-Thani's main focus is to transform the former fishing and pearl diving nation into a diversified industrial state.

Sheikh Al-Thani is also eager to go into new directions which no Arab state has done so far, without compromising on the state's rather conservative climate. In December 2006, Doha hosted the 15th Asian Games as the first global sports event ever on Arab soil.

With the Qatar Energy City and the Qatar Science and Technology Park, the Gulf state has also tried to lay the foundation for world class research and development.

As with Dubai, Qatar's capital Doha partially looks like a gigantic construction site. With artificial island The Pearl Qatar, the country's real estate bellwether United Development Company created a tourism and lifestyle conglomerate in the mould of Dubai's Palm islands.

Global industry players are still pouring into the country. On May 26, Qatargas entered into a partnership with Exxon Mobil Corporation, Total, Royal Dutch Shell and ConcoPhillips to bring three new LNG units into operation.

Financial initiatives

And the Qatar Investment Authority (QIA), the country's $62bn sovereign wealth fund, is still seeking the highest return in investments. In the wake of the financial crisis, the QIA acquired an 8.9% stake in Credit Suisse, Switzerland's second biggest bank.

As part of its diversification strategy, Doha established the Qatar Financial Centre in order to attract foreign investments. 'Over 100 licenses have been issued to date, for example to banks like Barclays, ICBC, Credit Suisse and Morgan Stanley, as well as to insurers and brokers like AXA, Marsh and Zurich', says Stuart Pierce, CEO and Director General of the QFC Authority, and a former HSBC private banker.

Pierce adds, that despite the global economic slowdown, 'we have 50% more firms making enquiries now than we did a year ago'.

However, in contrast to Dubai's financial hub at DIFC, registered entities in the QFC do not need to be located in a dedicated place in Doha, nor do they have to run a dollars-only business, but they have the choice between the greenback and the local currency, the Qatari Riyal. A fifth of the licensed firms are Qatari-owned or have Qatari interests. While the DIFC is a 'state within a state', the QFC regulatory regime is integrated into the local legal environment and therefore not a free zone.

'In 2008, Qatar's banks had the lowest rate of non-performing loans within the GCC', says Ahmed Masood, the IMF director for the Middle East and Central Asia. In 2006, Qatar surpassed Switzerland in relation to GDP per capita. Today, the GDP per capita stands at $101,000.

Non-oil sector slow down

However, as Bank of America Merrill Lynch states, the non-oil sector will slow along with capital intensive growth. Doha Bank, for example, skipped its plans to expand into India. Inflation did not slow down as in the UAE and will remain at 10% according to the Bank of America Merrill Lynch statistics.

Entrepreneurs who want to set up in Doha must face rising rents and some form of hidden costs. And while the national carrier Qatar Airways is investing $1bn in infrastructure improvements at Doha International Airport, linking the Gulf state to 84 global destinations, the capital still lacks a well-organized public transportation system.

And Doha's claim that it will not follow the UAE and pull out of the planned GCC Monetary Union may also put some uncertainty into future business calculations.