Why Qatar is the real jewel of the Gulf

Now the television commercial that boasts that 'Qatar is a place of unimaginable beauty' may be stretching the truth - the beaches are too polluted for bathing, for example, and the flat, desert landscape is an acquired taste. But in terms of GDP growth, Qatar is the undoubted regional champion, with a 20% increase slated for 2005.

'A place of almost unimaginable economic growth rates' also has a nice ring about it, though there is nothing very mysterious about the Qatari formula for economic success.

Since the present Emir took over in 1996 Qatar has become the foreign direct investment capital of the Middle East, welcoming inward investment by the US and European energy multinationals at a time when other countries could not quite bring themselves to accept the need for FDI.

The results are clear for all to see, and as Ronald Regan famously remarked on his re-election in 1984, 'You ain't seen nothing yet!' For Qatar's investment in LNG has only just begun to pick-up speed, or more correctly the FDI in the Qatari LNG sector has only really just begun to get going.

By 2012 this tiny Gulf state confidently expects to be the world's largest exporter of LNG, which is increasingly seen as the pollution-free, fuel of the future as oil reserves dwindle and the world turns to alternatives.

By next year the GDP per capita of Qatar is set to overtake that of Switzerland, making Qatari nationals easily the richest ethnic grouping on the planet. Clearly by 2012 the gap between the Qataris and the Swiss will be even bigger.

However, for foreign companies not in the oil and gas sector Qatar is more challenging. Yes, its retail, leisure and hospitality sector all need development, as does its real estate. But entrenched local interests dominate, and the oil and gas wealth gives the state in particular an enormous hold over the domestic economy.

Thus unless a foreign entrant can really add value to the local economy there is little point in setting up in Qatar. For the Qatari Government has access to a huge pool of capital and can outspend anyone. On the other hand, where the Government is promoting projects, such as in the sports' field, then foreign companies are as welcome as in the energy and gas sectors.

This is a bit of a paradox: openness to FDI has led to even more state control in Qatar than that seen in many of the more closed Gulf economies. Perhaps others might learn from that reality and worry less about FDI in the future, for this is what has made Qatar the jewel of the GCC economies.