OBG talks to Sheikh Ahmed bin Jassim bin Mohamed Al Thani, Minister of Economy and Commerce

Interview: Sheikh Ahmed bin Jassim bin Mohamed Al Thani

How are investments in the domestic market being supplemented to fuel economic growth?

SHEIKH AHMED BIN JASSIM BIN MOHAMED AL THANI: The Ministry of Economy and Commerce (MEC) is primarily focused on regulation, the creation of a competitive economy and the promotion of economic diversification policies. The economy is still growing and planned expenditures on infrastructure will provide ample opportunity for expansion in the foreseeable future.

The government recognises that administrative and procedural processes should not thwart investment, whether it is foreign or domestic. In recent years we have been working to ease restrictions on foreign ownership and direct investment. The government intends to continue this progressive liberalisation, as well as add to the list of sectors where foreign equity participation is not restricted.

To further encourage economic diversification that will, in turn, fuel wider growth, the MEC is now studying the value chain of various activities for the purpose of clearing bottlenecks. We will then work on streamlining our legal framework to encourage direct foreign investment by providing clarity and transparency for non-Qatari investors.

One of the targets of the MEC for 2014 is to consolidate business regulations and achieve a significant improvement on the World Bank “Doing Business” scorecard. We are also looking into establishing an Economic Studies Directorate to collect, analyse and recommend policy direction, as well as disseminate information about the Qatari economy for both local and international parties.

In what way will the ministry’s planned policies assist the development of the private sector?

SHEIKH AHMED: Investment decisions by the private sector are significantly influenced by the availability and quality of infrastructure services, which influence costs, productivity and asset returns. Qatar is in the process of a huge infrastructural transformation, which offers tremendous opportunities for the private sector. Further, the country is currently ranked 38th worldwide by the World Economic Forum in the quality of its roads. There is little doubt that we will improve on this ranking in the years ahead, with $200bn due to be invested over the next decade, more than half of which is allocated for infrastructure. This should help enhance the attractiveness of Qatar for private sector investment.

Anti-monopolistic legislation that passed into law in 2006 was designed to encourage competition and reduce barriers to entry into the Qatari market for both local and foreign entrepreneurs. I think there is a recognition that more needs to be done to promote competitiveness and encourage the growth of a non-monopolistic market. With this in mind, we are aiming to create a robust implementation programme for the existing competition law, supported by the necessary legal framework.

We are also looking to prepare a strategy to reduce overregulation that is harmful to the business environment, especially during peak load of construction for the 2022 FIFA World Cup.

How can measures be put in place to ensure greater participation by local contractors?

SHEIKH AHMED: The National Development Strategy anticipates a larger role for the private sector and public-private partnerships (PPPs) in Qatar’s infrastructure agenda, and the MEC has studied the best ways to advance this ambition.

While Qatar is not looking to use PPPs in order to reduce fiscal constraints on the budget by using private finance initiatives, the country is nonetheless looking to benefit from PPPs in other ways, including using increased efficiency in the delivery of public goods and services and further stimulation of the local private sector.

Proper procurement procedures have to be followed to ensure the best quality and price, and that the market mechanism creates opportunities for local businesses that are competitive. Initiatives by some developers are in place to ensure the participation of local contractors. For example, the Qatar Public Works Authority, Ashghal, has three tiers of project cost. Furthermore, around 30% of any contract with an international company has to be subcontracted locally, including supply and works. Ashghal is transferring to a new procurement strategy that selects a list of qualified contractors for the infrastructure programme and selected contractors will sign a five-year agreement with Ashghal. The framework contract is for joint-venture contractors – split between 51% local and 49% foreign.

What is being done to mitigate risks associated with supply shortages and market volatility?

SHEIKH AHMED: The MEC has been tasked with monitoring the supply and prices of primary materials, and we are working on ensuring the availability of supplies of primary materials to prevent excessive price volatility. The primary materials committee, in collaboration with the Ministry of Development Planning and Statistics, has established a biannual survey of demand for primary materials. This survey includes input from 12 major government developers, a database of over 500 projects and all relevant variables related to primary materials demand. The supply side is also modelled and tracked through a monthly survey of prices for locally produced materials. The supply of imported materials supply is informed by an understanding of the limitations of both Qatari ports and ports of origin. Diversifying sources of primary materials to reduce risk of value chain disruption is a key strategy to ensuring sufficient supply. Many of the primary building materials produced in Qatar, such as sand and steel, already have fixed prices. The focus is now on imported materials, and PPPs are the main mechanism through which sufficient supply is provided.

Enhanced collaboration with the private sector requires the opening up of channels of communication to reassure stakeholders that projects will be executed, and signal to the market the magnitude of the materials required to prevent shortages. Once the supply and demand estimates are sharpened, clear recommendations based on policy analysis will be used to import required quantities.

The issues related to the internal logistics of movement and delivery of materials from the various points of entry will be the shared responsibility of all stakeholders. Proper planning must take into account the complexity of organising and carrying out more than 500 projects that may be interrelated in terms of scheduling.

One possible initiative being investigated is planning an optimal network for the delivery and storage of primary materials to ensure the best form of delivery to projects. This will assist with reducing traffic, lowering cost and optimising vehicle routing.

In what ways is the government policy assisting small and medium-sized enterprises (SMEs)?

SHEIKH AHMED: Entrepreneurship is not yet solidly established in Qatar, and SMEs constitute an underdeveloped part of the economy. Despite the notable success of a number of companies, there is still considerable room for development and fewer than 40% of existing manufacturing SMEs were established after 2000. The sustained growth of SMEs is one of the MEC’s priorities, and we aim to ensure special considerations for their needs and capabilities when formulating policy. To this end, we were instrumental in the establishment of Enterprise Qatar, a QR2bn ($547.8m) initiative to provide non-financial support to SMEs, as well as complimenting the key efforts of the Qatar Development Bank, which has a specific remit to help grow this important sector.