OBG talks to Yousef Hussain Kamal, Minister of Economy and Finance

Interview: Yousef Hussain Kamal

How is fiscal policy being developed to attract investors within non-hydrocarbons sectors?

YOUSEF HUSSAIN KAMAL: The Ministry of Economy and Finance has undertaken numerous initiatives to improve Qatar’s fiscal policy. In 2009 Qatar issued a transparent and equitable income tax law that allows investors to make decisions based on economic, rather than fiscal, conditions. Improvements to taxpayer services, tax registration and filing procedures, and user charge and fee structures will decrease the cost of doing business in Qatar. Performance-based budgeting will allow targeted and transparent economic development initiatives with identifiable areas for foreign investment participation and reduce competition between the government and private sector for investment opportunities.

Apart from infrastructure, what areas of the economy will see enhanced government spending to further improve the socio-economic outlook?

KAMAL: In the 2011-12 budget, almost half of the planned capital expenditure was on projects other than basic infrastructure. Allocations for the construction of educational and health facilities amounted to almost $8bn. Although the 2012-13 budget process is ongoing, it is likely that there will be enhanced government spending on health care and education.

The government is focusing on investment in education and scientific research with the intention of boosting research and development spending to 2.8% of GDP. According to the Qatar Economic Outlook 2011-12, Qatar’s service sector is relatively small for a state with a high-income economy (31% of GDP in 2010). The government has planned a total of 197 projects in the national development strategy for 2011-16 that are expected to indirectly benefit service sectors.

How can overseas spending of surplus financial resources help develop domestic industry?

KAMAL: We should differentiate between overseas spending and overseas investment. Overseas spending on consumable goods and services does not contribute to the development of the domestic industry.

Overseas investment, however, is a part of an important government strategy.

Qatar has built a strong track record of diversified investments, with a long-term investment view, and with the vision to transcend economic and financial fluctuations. The main contribution of overseas investment to the domestic economy is to the sustained macroeconomic and financial stability in Qatar.

In addition, downstream investment and joint ventures overseas create synergies with core hydrocarbons business, supporting oil and liquid natural gas (LNG) exports. Examples of investments in this category include QPI’s interests in LNG re-gasification terminals in the UK, Italy and the US. There are also major petrochemicals projects such as a joint venture with Shell in Singapore. Further projects are under consideration in China and Vietnam.

How does Qatar plan to mitigate global risks such as the European debt crisis and the fall in oil prices?

KAMAL: One of Qatar’s primary concerns is macroeconomic and financial stability. Qatar relies on discretionary fiscal policy, particularly delaying the start of, or speeding up, major projects to maintain stability. In previous periods of lower petroleum prices and weak global growth, Qatar has fared better than other GCC countries because of this commitment.

Qatar is proactive in its handling of the economic risks resulting from a dependence on hydrocarbons. Diversification and investments in sectors such as petrochemicals, fertilisers and metals production are already mitigating the risk of a fall in oil prices.

Despite the European crisis, oil prices are widely expected to remain close to their current high levels.

That said, further recession in Europe could seriously undermine oil prices. However, oil prices would need to fall dramatically from their current value before having any noticeable effect on Qatar's fiscal position.