Qatar Country Report 2015 - Multiples...

QatarCountry Report 2015

1. Historical Background

2. Country Overview

2.1. Location and Features

2.2. Population

3. Economic Indicators

4. Main Economic sectors

4.1. Real Estate Sector

4.2. Oil and Gas Sector

4.3. Banking Sector


4.5. Retail Sector

4.6. Services Sector

5. Policies and Regulations

6. Future Outlook

Table ofContents

The state of Qatar has not taken the form of an independent modern state until 1971. Speaking of major events in the history of modern Qatar, the drilling of the first oil well began at Jebel Dukhan in 1938 and, over a year later, the well struck oil in the Upper Jurassic limestone. Oil production, however, did not start until 1942 due to the disruption caused by World War II, whereas oil exports and payments for offshore rights began in 1949 and marked a turning point for the Qa-tari economy. Competition between Britain and the United States over strong bilateral relationships with Qatar then became fiercer. It is quite obvious though that efforts done by the US were widely successful; US and Qatar nowadays coordinate closely on diplo-matic initiatives in the Middle East, maintain intense mutual economic interests as well as military ones illustrated by the fact that Qa-tar hosts one of the largest American military facilities.

Throughout its modern history, Qatar expe-rienced no wars and few external conflicts. The most worth-noting of these conflicts are those with Bahrain over the ownership of some important territories such as Hawar Is-lands and the Zubarah region. In 2001, the International Court of Justice gave Bahrain sovereignty over Hawar Islands while giving Qatar sovereignty over smaller disputed is-lands and the Zubarah region on mainland Qatar.

Historical Background

1.

Qatar Country Report 2015

Composition of Qatari Population

40%

14%

10%

18%

18%

ArabIndianPakistan

OthersIranian

QatarisExpats

Composition of Qatari Population

86%

14%

2.2. Population:

There are 2,123,160 people living in Qatar, according to the latest statistics. Al-though the Qatari population represents a small percentage in comparison to the Arab world, this number is expected to increase rapidly as annual popula-tion growth rate recorded 3.6% in 2014 which is the fifth highest rate across the world. Statistics show that only 14% of the population are Qatari while the rest are expatriates. In addition, as illustrated, only 40% of the population are Arabs (including Qataris) whereas 60% of total population are, in fact, non-Arabs.

As for the age structure, Qatar is relatively in a good position since the median age of its population is 32.6 years with more than 70% of its population lie in the working age group. It is worth noting, though, that males are more than females among the expats at a ratio of 3.3 males for every female as of 2014 statistics.

Qatari population by gender and age group

00-9 10-19 20-29 30-39 40-49 50-59 60-69 70+

100

200

300

400

500

600

Male Population

(In thounsands)

Female Population

(In thounsands)

2.1. Location and Features:

Qatar is located in the peninsula bordering the Persian Gulf and Saudi Arabia which is the only country that shares borders with Qatar now. This location is cen-tral as it is near major petroleum deposits. Qatar is one of the smallest countries in the region with 11,586 Kilo SQM as its land area and no water area. The per-centage of arable land to total land area is very small (1.2%) and Qatar also has a serious problem of fresh-water deficiency, which explains the countrys weak agricultural potential; yet, it is very rich in petroleum, natural gas and fishing.

Country Overview

2.


Qatars high GDP (the highest per Capita GDP in the world) means the country is a lucrative place for investment due to the high purchasing power.

The growth rate of the GDP of Qatar is im-pressive too since it has been significantly high throughout the last years. However, the less positive indication is the decrease in the growth rate of the GDP across the past 3 years; it was 13% in 2011, 8.1% in 2012 and 5.5% in 2013.

This can be explained by the instability of the price of oil since oil and gas still ac-count for more than 50% of GDP, roughly 85% of export earnings, and 50% of gov-ernment revenues.

In case Qatar lost the right to host the 2022 football World Cup, which is estimated to attract around 400,000 visitors to the Gulf state during the four-week event, growth in 2014-2015 would be likely to slow, as large spending on World Cup-related projects may be scrapped.

GDP

Services

Private consumption

Gross fixed investment

Exports of goods & services

Domestic demand

Industry

Imports of goods & services

Agriculture

Government consumption

6.5%

2013 2014E 2015E

7.6%

5.8%

9.6%

3.0%

4.1%

8.3%

6.9%

3.3%

12.3%

6.4%

7.3%

5.8%

9.0%

3.5%

4.4%

7.9%

4.2%

4.4%

12.7%

6.7%

7.2%

6.0%

10.0%

3.2%

4.7%

8.5%

4.5%

4.9%

12.6%

3.Economic Indicators:


To avoid economic vulnerability and Dutch disease symptoms, policy mak-ers in the country are trying to diversi-fy the countrys economic activities by directing resources to investment out-side the energy sector in general and the oil and gas industry in particular.

Qatar has a very high rate of national savings that puts it at the third place across the world which is a very strong drive for investment.

Exchange rate of the Qatari ryial per US dollar has been constant since 2008 at 3.64 and inflation rate has been relatively low even though it de-creased from 5.6% in 2012 to 3.17% in 2013, based on the official figures, yet with concerns about expected future spikes in inflation and cost of living.

Qatar depends on trade the most, with lots of import and export partners. As expected, it mainly exports oil and oil derivatives while depends primarily on importing food, chemicals and heavy machinery.

GDP

Capita GDP

Budget Surplus

Poverty rate

Exchange rate of Qatari Ryial per US dollar

Unemployment

Inflation rate

GDP growth rate

213.1 BN USD

102,100 USD

5.5%

9% of GDP

0%

0.3%

3.64

3.1%

213.1 BN USD102,100 USD5.5%9% of GDP0%0.3%3.643.1%



The Qatari real estate sector is one of the key pillars that support Qa-tar Investment Authority (QIA) plan for diversifying the Qatari econo-my. Infrastructure projects (con-struction and transport) currently account for the biggest share of project spending. Construction and transport projects make up 81.7% of projects currently under-way. The bulk of project budgets in construction are for mixed-use real estate developments.

The government is the biggest in-vestor in the real estate sector in Qatar through a number of state-owned companies like Qatari Diar (which already owns the London Shard, Chelsea Barracks and the Athletes Village at Londons Olym-pic Park). However, there is an increase in private real estate in-vestments especially in retail and offices. Nearly 91% of businesse offices are owned by private enti-ties; whereas government estab-lishments have a share of 7.5% according to Gulf Times.

Colliers International estimates that total office demand in Doha will reach 2.2 million m by the end of 2014. Given projected growth in

white collar employment, this fig-ure is expected to reach 3.4 million m by 2018. Demand is also on the increase when it comes to residen-tial and commercial units mainly.

According to the Qatar Real Estate Overview 2014, despite the 22,000 units expected to be released over the next five years, Dohas residen-tial market will remain significant-ly under supplied. It is estimated that number of demanded units is 177,000 whereas number of sup-plied units is 129,000 which means that there is a supply shortage of 37%.

For offices, despite being an over-supplied sector, there is an increas-ing demand for Grade A (in terms of location) office space. There is also a limited supply of smaller of-fices ranging from 200 to 500 m as the floor plates in a number of available buildings are targeted at larger occupiers.

Retail sector is currently not really under supplied. On the contrary, there is supply excess estimat-ed at 8%. However, as explained earlier, the forecasted demand for commercial assets like hotels and malls is growing.

Main Economic Sectors:

4.

Residential Supply K units

(F)20182013 2014 2015

(F) (F) (F)2016 2017

100

120

140

160

Existing Supply

Additinal Supply


4.2. Oil and Gas sector

Oil and Gas sector constitutes the backbone of the economy. As the Graph below shows in years 2010, 2011 and 2012 the Oil and Gas sector constituted more than 50% of Qatars GDP.

The state-owned Qatar Petroleum (QP) con-trols all aspects of Qatars upstream and downstream oil and natural gas sectors, in-cluding exploration, production, transport, storage, marketing, and sale of crude oil, natural gas, natural gas liquids, liquefied nat-ural gas, gas-to-liquids (GTL), refined prod-ucts, petrochemicals and fertilizers. Howev-er, given the countrys focus on integrated large-scale projects, it requires investments from international companies as Exxonmobil, shell and total.

The two LNG companies handle all upstream to downstream natural gas transportation themselves, while the Qatar Gas Transport Company (known as Nakilat) is responsible for shipping.

Oil and Gas sector (% of Nominaml GDP)

Oil and Gas Sector (% of Nominal GDP)

2010 2011 2012

48%

50%

52&

54%

56%

58%

60%


Qatar relies on three fields for its oil production as these three fields ac-count for more than 85% of Qatars crude oil production. The three fields are Al Shaheen, Dukhan, and Idd Al-Shargi. Qatar has a 6.6 BN USD petroleum development plan, which should make crude oil production lev-els reach 800,000 barrels (bbl)/d by 2017, as it currently produces 732.5 K barrels per day. Oil reserves in 2014 reached 25,240 million barrels.

Qatars refining and oil capacity ex-ceeds domestic demand for petroleum products, thus enabling the country to export most of its refinery and oil out-put. Petroleum consumption in Qatar rose by more than 70% from 72,000 bbl/d in 2003 to 189,700 bbl/d in 2012.

0

2003 20082004 20092005 20102006 20112007 2012

2000

500

1000

1500

Qatar total supply and total petroleum con-sumption, 2003-2012

Total Oil Supply

Consumption


The Brent crude oil has significantly dropped in June 2014 by 9% compared to the pre-vious year as shown in the chart below. A more significant drop is expected to occur within 2015 whereas the price would reach 44 USD/barrel. Such a drop in oil prices should affect the countrys economy in terms of budget and exports; however, the country did not suffer much from the last drop as it was backed up by the following factors:

Average Prices for OPEC Crude Oil USD per Barrel

0%2010 2011 2012 2013 2014 2015E

10

40

70

100

20

50

80

110

30

60

90

120

77

107 109106

96

44

Qatar has alternative resources to fi-nance World Cup 2022 with planned spending of 200 BN USD.

The country is still maintaining a high ex-port level that would generate revenue to finance infrastructure development. According the OPEC, Qatar export level across different products as follows: 599 K b/d of crude oil, 511 K b/d of petro-leum products, and 122,874 MM cubic meters of natural gas.

The natural gas remained intact after the drop in oil prices, which backed up the collective impact on the budget. The countrys budget is estimated to break even next year as the country has huge fiscal reserves to cover any deficits.

Overall, the economic outlook will re-main positive amid a continued drive to diversify the economy and thus reduce reliance on the oil and gas sector.


4.3. Banking Sector

The contribution of the banking sector to the economy continues to expand, with the ratio of total banking assets to GDP increasing from 97% in 2008 to 127% in June 2013.

Qatars Banking sector is the fastest growing in the GCC, the banking sector grew by 18.4 % year on year (until June 2013). This Growth was mainly driven by credit facilities and investment.

There are 18 licensed banks in Qatar. The sector consists of six commercial, four Islam-ic and seven foreign banks, plus the govern-ment-owned Qatar Development Bank (QDB). The banking sector is highly concentrated with the top five banks accounting for 77.8% of total assets.

GCC Banking Sector Asset Growth (June 2013)

0%Qatar Saudi Oman UAE Kuwait Bahrain

5%

10%

15%

20% 18.40%

11.60% 11.30%8.40% 6.20%

4.80%

QNBCommercial BankQIB

Doha BankForeign Banks

Qatar Development Bank

Masrf Al Rayan

GCC Banking Sector Asset Growth (June 2013)

45.2%

10.2%

8.2%

7.4%

6.8%

5%

0.5%


The overall domestic credit expanded at an annual rate of 13.1 % at the end of 2013. This is due to the high pop-ulation growth that boosted lending to sectors such as consumption and service. On the other hand, the rate of lending growth to the public sector slowed to 9.7% in 2013 from 46.5% in 2012, this is mainly because the gov-ernment is reducing its reliance on banks to implement its capital projects and started to depend on its own re-sources.

As shown in the following graph, credit growth was the fastest in the services sector in 2013, followed by contractors and foreign credit.

The Islamic banking sector is booming in Qatar whereas the country has 3% of the global Islamic banking assets and ranked the 5th after KSA, Malay-sia, UAE and Kuwait; having 24% of the global market share.

Others1.4%

18%

9.7%

12.7%

12.9%

18.1%

2%

4.5%

46.5%

41%

45.2%20.3%

32.6%

33.3%

Public Sector

Industry

Consumption

Foreign Credit

Contractors

Services

Bank Credit % Annual Growth

20122013


4.4. Retail Sector

Despite having the largest proportion of expatriate population in the world, Qatar has the least developed retail markets in the region, though the market is emerging as the second fastest growing market in the region with significant expansions in hyper and super markets in 2013.

Qatar is also a growing market for fashion and luxury retailers driven by one of the largest per capita disposable incomes in the world and is likely to witness the largest share of project completions in the retail segment in 2014 among the GCC countries.

The massive infrastructure investments and the sharp increase in the countrys population were the reasons behind the high anticipation that the non-oil sector will register over 10% growth by the end of 2014 and size of Qatars retail market has touched 32 BN QR (8.9 BN USD) mark.

As a result of growing demand and higher purchasing power of people, the sector is expected to grow by more than 7% annually during 2014 and 2017.

Unlike the commercial office sector, the overall occupancy level is genuinely high in retail segments. Most of the shops by the streets and in random alleys are occupied. Approximately, 25%-30% of tenants are restaurants and food related businesses.

In 2014, the un-organized retail sector secures 70% of total retail spaces. Upon the completion of all on-going downtown enhancement projects and the 14 malls under construction, the mall percentage share will change to 65% from the current 18%. This means that by the end of 2018, the major retail activities would be managed from the malls.

New malls surge organized retail spaces while at the same time, mall development supports neighborhood developments. As an example, Doha Mall in Abu Hamour would attract households to get their housings into neighboring areas such as Ain Khaled, Barwa City and so forth.

At present, the organized retail space within Qatar offers nearly 285 SQM for every 1,000 people which upon completion of all under construction malls would reach 900 SQM.

The highest monthly rental rates are 300 QAR per SQM and can be seen in Al Sadd. However, the average monthly rental rates within Doha and neighboring areas are in the range of 150 to 250 QAR per SQM.

60%

Available Retail Constructed Space

Mall/Retail Building Distribution

70%

18%

7%5%

Un-organized Retails

Doha

Hyper Markets

Al Rayyan

Souqs

Al Wakrah

Malls

Umm SlalAl KhorAl ShamalAl Daayen

28%

4%3%

3%

1%1%



Qatar GDP by Sector

72.2%

27.7%

0.1%

IndustryServicesAgriculture

4.5. Service Sector

Services sector is the second biggest sector in the economy which accounts for 27.7% of total GDP. The first sec-tor is Industrial sector, which is mainly concentrated in oil and gas produc-tion.

This sector is considered as one of the fastest growing economic sectors in Qatar mainly because of Qatars grow-ing population. Within services, the most important segments are: finan-cial services, infrastructure, tourism, restaurants and hotels, government services and trade.

Government Services expanded ro-bustly on higher demand from the growing population and investment projects, contributing 3.0% to non-hy-drocarbon growth in 2013.

Recent economic growths have helped trigger a huge expansion of public ser-vices in Qatar. Those include telecom-munications, Education and Research, utilities and media.

Policies and Regulations:

5.

Qatari regulations have been put to create an investment environ-ment that attracts capital and achieves integration with adjacent Arab countries and eventually provides the bases for protecting the national economy against any adverse effects.

According to Qatars Investment Law No. (13) of 2000, foreign in-vestors can invest in all national economy sectors provided that they have a Qatari partner having no less than 51% of the capital. Howev-er, foreign investors are not allowed to exceed their 49% contribution to be 100% of capital in the fields of agriculture, industry, health, ed-ucation and tourism, in order to develop and utilize natural resources or energy and mining on condition that it is in line with the develop-ment plan of the state.

Foreign investors capital is exempted from income tax for no more than 10 years since the day the investment project operates. It also has allowed customs exemption on the imports of the projects equip-ment necessary for operation. Foreign investors in the field of indus-try is exempted from customs fees on imports of raw materials or half manufactured goods necessary for production and not available in the local market.

In 2012, the minimum capital requirements was set by the Qatar Fi-nancial Centre Regulation Authority for fund managers to range from 250,000 USD (for operating a collective investment fund if restricted to providing fund administration) to 2 million USD for dealing in in-vestments as principal.

For real property, foreign individuals not from the GCC: permitted, according to Law No. (17) of 2004 Regulating Ownership and Usu-fruct of Real Estate and Residential Units by Non-Qataris (Foreign Ownership of Real Estate Law), to invest and own real estate in three designated areas: The Pearl-Qatar, West Bay Lagoon and the Al Khor Resort Project.

A new regulation prohibiting the operation of Islamic windows (de-partments of conventional banks offering Islamic finance in Qatar) came into force on 1 February 2013.


Winning the bid for the world Cup of 2022 has accelerated a wide wave of investment in different sectors especially in infrastruc-ture. This can be another huge boost for the Qatari economy. However, there has been circu-lating news that FIFA might with-draw the cup from Qatar due to possibility of bribery and corrup-tion in the 2010 vote.

Such news could cause a large drop in the Qatari economy and it is indeed causing the Qatari stock market to incur losses in contrast to the normal situation. This is be-cause most of the funds and the infrastructure investments that are being injected in the country depend on convening the cup and most of them would definitely withdraw otherwise.

The Oil and Gas sector is expect-ed to continue growing. Qatars proven reserves of natural gas exceed 25 trillion cubic meters, about 13% of the world total and third largest in the world. Proven oil reserves in excess of 25 billion barrels should enable continued output at current levels for about 57 years.

However, economic policy will fo-cus on diversification away from hydrocarbons, and on turning Qatar into a regional financial and business hub. Nevertheless, the economic growth will remain de-pendent on oil and gas revenue.

6.Future Outlook:


Oil prices have significantly declined in 2014 but expected to recover grad-ually over 2015. Yet the increased ac-tivity in the non-hydrocarbons sector will keep annual real GDP growth at an average of 6.1% in 2014-18.

The current account surplus is expect-ed to be around 14.4% of GDP in 2014-2015. Rising imports, non-merchan-dise outflows and weaker oil prices are expected to shrink the surplus to an average of 6% of GDP in 2016-2018.

On the other hand, there is a growing political tension between Qatar and a number of countries in the region es-pecially Saudi Arabia. Bahrain, UAE and Saudi Arabia have recalled their ambassadors from Qatar in the latest dispute. This, of course might have a negative economic impact. Yet, Qatar and Iran also share the worlds largest gas field which gives the two coun-tries strategic economic reasons to strengthen relations.


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