Economy

Since the mid-1800s, Qatar has grown from a poor British protectorate known for pearling into one of the world's most important oil and gas producing countries. While there is increasing investment in non-energy sectors, oil and gas still account for more than half of the Gross Domestic Product. Due to oil and gas, the country now has one of the highest incomes per capita in the world.

The Qatari Economy is based on the production and export of crude oil and other hydrocarbons such as liquefied natural gas (LNG), condensate, propane, butane and other natural gas.

The Qatari Economy’s vulnerability to oil price movements, as well as the finite nature of oil reserves have led the Government to exploit Qatar‘s significant reserves of natural gas and to promote investment in the non-oil sector of the economy, particularly downstream industries. With the recent development of projects to produce and export LNG and investments in petrochemical industries, Qatar is diversifying its economy to reduce its dependence on oil.

Oil formed the cornerstone of Qatar's economy well into the 1990s and still accounts for more than 70% of total government revenue. In 1973, oil production and revenues increased significantly, moving Qatar out of the ranks of the world's poorest countries and providing it with one of the highest per capita incomes. Despite a marked decline in levels of oil production and prices since 1990, Qatar remains a wealthy country.

Qatar's economy was in a downturn from in the mid-1990s. The 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 necessary local business climate caused many firms to lay off expatriate staff. With the economy recovering in the late 1990s, expatriate populations, particularly from Egypt and South Asia, have grown again.

Economic Development

Economic development in Qatar has gone through four clearly marked stages characterized as flows:

Stage 1 - relates to the period before the discovery of oil, during which the principal economic activities were pearl diving and fishing, with limited trading and farming.

Stage 2 - relates to the period from 1949 –1972. It commenced with the commercial exploitation of oil in 1949. This stage was characterized by the recovery and processing of oil and associated gas from onshore oil production and the gradual establishment of related secondary industries

Stage 3 - covers the years from 1973-1990. In this stage, the industrialization process accelerated. The State took full control of the oil sector in 1973 under the aegis of Qatar Petroleum (QP) formerly Qatar General Petroleum Corporation (QGPC). In this period, the State’s oil revenues rose rapidly as a result of the sharp increases in international oil prices.

In 1947, the first five-year industrial development plan was introduced and a number of   large industrial projects were established in the form of iron and steel production, petrochemicals and natural has liquids (NGL), as well as medium-scale industries and organic fertilizers. In the later years of this period the chemical, fertilizer, cement and oil refining industries were further expanded.

The private sector also moved into a variety of light industries such as paints, detergents, building materials, food and soft drinks primarily for import substitution in order to meet the increasingly sophisticated market needs of the rapidly expanding population.

Stage 4 - Stage 4 (1991 to date), represents the most dramatic period of change and diversification in the structure of the economy of Qatar directed for economic exploitation of the State’s huge reserves of non-associated natural gas while accelerating the pace of industrial expansion and diversification.

Trade and Commerce

Qatar indigenous population is only 3 hundred thousand. Despite being small, Qatar has provided a lucrative market for some of the world major trading countries. In 2012 Qatar’s total global export was $133 billion and the major export items are liquefied natural gas (LNG), petroleum products, fertilizers, steel etc. Japan (26.7%), South Korea (19%), India (12.1%), Singapore (5.7%), China (5.4%) are the major export destinations for Qatar. In 2012, Qatar’s total global import was $30.79 billion and the major import items are machinery and transport equipment, food, chemicals, etc. US (14.2%), UAE (11.4%), Saudi Arabia (8.6%), UK (6.4%), Japan (6%), China (4.8%), Germany (4.7%), Italy (4.4%), and France (4.4%) are the major import destinations for Qatar.

Some major multinational companies like Landmark, Marks and Spencer, Debenhams, Carrefour, food chains like McDonalds, Hardees, Burger King, KFC, Pizza Hut, and Buskin Robbins etc. have their branches in Qatar.

Real GDP

Qatar’s        real    GDP   grew   at       a        CAGR of       13%   between 2000 and  2011, which          was    maintained  during         the     global financial crisis. The percentage change in real GDP of Qatar is shown in the following figure. Such economic resilience was largely the result of prudent increases in government spending, investments in the oil and gas sector and net exports of hydrocarbons.

Inflation

Exponential economic growth coupled with a rise in income levels led to high levels of inflation between 2005 and 2008. As presented below, inflation peaked at over 15% in 2008 which was followed by a period of deflation during 2008 and 2010 mainly    due to declining real estate and oil prices respectively. Deflationary pressure     eased from 2010 onwards as a result of global economic improvement and an increase in international food prices and raw materials. Qatar’s inflation rate was recorded at 1.9% in 2011 and approximately 2% in 2012.

Monetary System in Qatar 

Prior to 1966, currencies in circulation in Qatar were those linked to the Pound Sterling, like the Indian Rupee and Gulf Rupee. When India devalued the Rupee (including the Gulf Rupee) by approximately 35%, Qatar and Dubai decided to replace the Gulf Rupee with the Saudi Riyal as an interim measure until the issuance of a new currency. On the 21st of March 1966, Qatar and Dubai signed a currency agreement to set up the Qatar-Dubai Currency Board. The new board issued the first national currency, known as the Qatar-Dubai Riyal (QDR) on September 18, 1966 at a gold par value of 0.186621 grams of pure gold—the same as the pre-devaluation rate of the Gulf Rupee. The Pound Sterling continued to provide cover for the new currency.

On December the 2nd 1971, Dubai became a part of the UAE. Therefore, it was decided to relinquish the Qatar Dubai Currency Board in accordance with Emiri Decree No. 6 of May 1973. On May 13th 1973, Law No. 7 of 1973 was issued, establishing the Qatar Monetary Agency (QMA) to assume the duties of a central bank. Further Emiri Decree—No. 24 of 1973—was issued authorizing the redemption of QDR and the issuance of a new currency known as the Qatari Riyal (QR), with the same par value against gold as the QDR.

QMA was responsible for maintaining the stability of the QR exchange rate against, and its free convertibility into, other currencies. In 1975, as per Decree No. 60 of 1975, the QR was pegged to the Special Drawing Rights (SDR) at a rate of 0.21 SDR per QR with a fluctuation margin of ± 2.25% (QR 4.7619 ± 0. 2.25% per an SDR unit). Over the period 1973-1993, QMA adopted the United States dollar (USD) as an intervention currency to fix the daily value of the QR. The QR exchange rate against the USD was to be determined on basis of the latter’s exchange rate against SDR as determined by the IMF. The QR exchange rate against other currencies was to be determined on basis of USD exchange rate against other currencies in the international financial markets. The tolerable flux margin of the QR against the SDR was increased to ± 7.25% in early 1976 due to appreciation of the USD against the SDR in late 1975. Hence, the QR exchange rate used to fluctuate against currencies other than the USD, in line with the fluctuations of the latter against those currencies.

During the second half of the seventies, QMA revalued the QR against the USD many times in order to stabilize its value against other major currencies of Qatar’s trading partners and to alleviate pressures of imported inflation. Over the period March 1976 to June 1980, the QR was revalued twelve times against the USD. On the whole, the QR was revalued against the USD by 8.5%, compensating for 13.4% depreciation in the value of the latter against the SDR. When the USD started its upward trend (in July 1980) vis-à-vis other major currencies, QMA had maintained a de facto exchange rate of QR 3.64 per a USD unaltered. The immediate impact of this link was the appreciation of the QR with the appreciation of the USD against major currencies of Qatar’s trading partners, particularly the European countries.

Established in August 1993, the Qatar Central Bank (QCB) has inherited the QMA monetary strategy of targeting the exchange rate. QCB kept adopting the policy of fixed exchange rate against the USD at the same rate of QR 3.64 per USD. In their December 2001 Summit, GCC leaders decided to adopt the USD as a common peg for the GCC national currencies as a step towards accomplishing the GCC monetary union with a united currency.

Banking

There are 18 authorised Banks (07 traditional National Banks, 07 traditional Foreign Banks & 04 Islamic National Banks) in Qatar and they provide good banking facilities (Source: Qatar Central Bank). Banks operate under an inter-bank agreement with the support of the Government and of the Central Bank. The Central Bank charged with the responsibility of ensuring a sound banking system, is empowered to prescribe reserve requirements and liquidity ratios, and to determine interest rates and other condition of bank credits to the private sector.

Doha Securities Market (DSM)

On 26th May 1997, Qatar became the fifth of the GCC country to open an official stock exchange. The launch of the Doha Security Market (DSM) forms part of Government’s strategy to increase the sale of the private sector and is linked to a longer plan to open up the economy to competition and more foreign involvement. Thirty companies are currently listed on exchange, which include stocks in the banking, insurance, services and industry sectors. In order to qualify for listing on the DSM, a company must have at least 100 share holders, and a minimum share capital of QR10mn, at least 50% of which must be fully paid. Recently the Government has issued a law opening up the market to the expatriates effective from January 2005 allowing holding up to 25% of Qatari shares in all firms listed on the DSM, with the exception of some banks and finance companies.

Qatar Chamber

Qatar Chamber was established in 1963 with the objective to support the burgeoning/trade business climate in the country at that time. In 1990, Qatar Chamber of Commerce and Industry was granted its own autonomy with the legal authority to represent all private sector activities in the State of Qatar. All members of the private sector must therefore be registered with Qatar Chamber in order to perform commercial and industrial activities in the country. This way Qatar Chamber can help member firms and companies to introduce their services and products to the local Qatari market, as well as ensure that the country’s business and market needs are met by these available companies.

Investment opportunities

The State of Qatar is striving hard to realize economic diversification. Although oil is the main contributor and component of the gross domestic product (GDP), Qatar encourages making use of investment opportunities in different sectors, such as petrochemical industries, financial, real estate and industrial sector. It has also adopted open market policy which for sure will help investor achieve better profits. Investors in Qatar enjoy many additional benefits, including freedom of unrestricted travel and movement of funds. 

In 2009, GDP has recorded QAR 458,525. During the same year, foreign investment flows reached USD 6700 million. Also in 2009, Qatar was globally ranked the 6tH.H.ighest country for income per capita and the 1st among GCC countries.

Qatar has a good number of investment friendly encouraging benefits that include:

Low electricity, water and Gas consumption charges;

Lands allocated for Industrial purposes that can be leased for nominal prices starting at one Qatari Riyal (QAR 1);

Zero taxes on importing heavy machines, equipments, spare parts and raw materials;

Zero taxes on exports;

Zero income taxes on individuals;

Zero quantitative quotas on imports;

No restrictions on foreign currency exchange and overseas profit transfer;

Flexible immigration and residence laws for highly skilled and unskilled workforce;

Easy access to global markets via air and marine cargo networks that connect Qatar to the rest of the world;

Easy access to residence permits for the investor and his family;

Up to 25% ownership of Qatari shareholding companies that are publicly listed in Qatar Exchange;

Properties and luxurious residential units can be owned at freehold projects such as the Pearl, West Bay Lake and Al Khor Resort; and

Plots of land can be allocated to establishing new projects for a renewable period not exceeding 50 years