QATAR'S ECONOMY

PROF. DR. S. M. ALAM
(feedback@pgeconomist.com)
Mar 22 - 28, 2010

Agriculture used to be a major source of earning livelihood for many in today's oil rich Qatar's economy for centuries. Small-scale farming and fishing were the predominant means of subsistence in the region before the discovery of oil.

Although the relative importance of these activities has declined as a means of livelihood, the state encourages agriculture and fishing sectors to have a degree of self-sufficiency in food.

Qatar is one of the world's smallest countries with an area of 11,000 square kilometers. It is member of Organization of the Islamic Conference (OIC). Agricultural resources in the country are scarce as compared to other Muslim countries, because of the semi-desert and desert conditions. Areas in which crop production is practiced are usually low lands with alluvial soils and ground water resources. Rainfall arrange in about 100mm/year. Agricultural soils are sandy. Ground water resources are normally brackish. Only 3.4 thousand hectares are cropped each year. Some cereals are grown in the country.

Qatar is a net importer of all food and agricultural commodities. The country imports major quantities of rice, wheat, maize, sugar, pulses, and edible oils, red meat, milk, white meat, fruits and eggs. About 60% of vegetables and fish consumption are also imported. Water scarcity is an obstacle in agriculture and livestock production in the country.

Doha is the capital of Qatar. Agriculture sector grew in the country between 1960 and 1990. The number of farms, for example, increased fourfold to 411. Of land under cultivation in 1990, about 48% was used for vegetables (23,000 tons produced), 33% for fruit and date production (8,000 tons), 11% for fodder (70,000 tons), and 8% for grains (3,000 tons). In 1990, the country had approximately 128,000 head of sheep, 78,000 goats, 24,000 camels, 10,000 cattle, and 1,000 horses. There are also dairy farms and about 2,000 chickens for poultry. Twenty percent of local demand for eggs is met domestically. Despite the encouragement of agriculture and fishing, these two elements of the economy together produced only about 1% of the gross domestic product in 1989. Severe conditions, such as extremely high temperatures and lack of water and fertile soil, hinder rise in agricultural production.

Qataris who own agricultural land or properties generally hold government jobs and hire Iranians, Pakistanis, or non-Qatari Arabs to manage their farms. The government operates one experimental farm. The limited groundwater that permits agriculture in some areas is being depleted so rapidly that saltwater is encroaching and making the soil hospitable to only salt-resistant crops.

As a partial solution, the government plans to expand its program of using treated sewage effluent for agriculture. Parkland and public gardens in Doha are already watered in this way. The Qatar National Fishing Company was incorporated in 1966 to fish for shrimp in territorial waters and to process catches in a refrigerated factory. Japan is a large market for Doha's commercial fish. The total catch of fish and other aquatic animals for 1989 was 4,374 tons.

Qatar is now the richest country in the Muslim world. Qatar's GDP per capita contracted 53% in the eighties. But, rising global oil demand helped per capita to expand 94% in the nineties.

PETROLEUM

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. Proven oil reserves of 15 billion barrels 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 proven reserves of natural gas exceed 7000 km≥, more than 5% of the world total, third largest in the world. Production and export of natural gas are becoming increasingly important.

Diversification is an issue to be reckoned with for this single product economy. 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.

Oil production will no longer remain at peak levels of 500,000 barrels per day, as oil fields are projected to be mostly depleted by 2023. Fortunately, large natural gas reserves have been located off Qatar's northeast coast. Qatar's proven reserves of gas exceed 250 trillion cubic feet. In 1996, the Qatar began exporting liquefied natural gas (LNG) to Japan.

INDUSTRIES

Qatar's heavy industrial projects include a refinery with 50,000 barrels per day capacity, a fertilizer plant for urea and ammonia, a steel plant, and a petrochemical plant. All these industries use gas for fuel. The US is the major equipment supplier for Qatar's oil and gas industry, and US companies are playing a major role in north-field gas development.

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.

SERVICES

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 1.5 million by 2010. The funds needed to meet this goal is certainly there - in 2008 the state allocated some $17 billion 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, which will have the capacity to handle up to 24 million passengers upon 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.

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. In 2008, the Public Works Authority, one of the bodies that oversee infrastructure development, underwent a major reorganization in order to streamline and modernize the authority in preparation for major project expansions across all segments in the near future. As personal driving is the primary mode of transport in Qatar, the road network is a major focus of the plan. Projects in this segment include 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. Finally, port infrastructure is seen as an integral part of Qatar's economic development as it focuses on LNG and industrial exports.