Qatar looks to investment to strengthen transport infrastructure

Guided by plans laid out in Qatar National Vision 2030 (QNV 2030), Qatar is on track to take significant steps to upgrade and connect its land, air and sea networks in 2019. The first trains will run on the new Doha Metro network, while dozens of expressway bridges, underpasses and intersections will be completed. In the short term, organisation efforts for the 2022 FIFA World Cup have added urgency to the drive to improve transport connections.

At the same time, passenger and freight numbers are expected to grow at the country’s new international air and seaports. The increased traffic through these facilities is spurring the development of free zones and logistics centres, which are expected to create opportunities for home-grown entrepreneurs and foreign investors alike.

Structure & Oversight

The Ministry of Transport and Communications (MoTC) oversees the transport sector and is charged with meeting objectives for the sector outlined in QNV 2030. The MoTC collaborates with partners in both the public and private sectors to meet its project goals. Fuelled in part by preparations for the 2022 FIFA World Cup, the transport and storage sector’s contribution to GDP at current prices grew by almost 75% between 2013 and 2017, from QR14.82bn ($4.1bn) to QR25.78bn ($7.1bn), according to the Planning and Statistics Authority (PSA).

A number of state-owned enterprises (SOEs) and agencies are key stakeholders in the transport sector. In the aviation segment, the Qatar Civil Aviation Authority was established in 2001, at the same time providing a number of employment opportunities within the subsector. “High demand for pilots, air traffic controllers and other staff in the region’s civil aviation industry has raised interest in the sector as a potential career path, particularly for Qatari nationals,” Sheikh Jabor bin Hamad Al Thani, director-general of Qatar Aeronautical College, told OBG.

Still, many air industry functions are conducted by the national flag carrier Qatar Airways Group (QAG) and its subsidiaries. These include Qatar Airways, Qatar Aircraft Catering Company, Qatar Cargo, and Qatar Aviation Services. Hamad International Airport, which commenced commercial operations in April 2014, was established as a separate entity under the QAG umbrella in 2017.

Since the blockade imposed on Qatar in 2017 by four countries, including its neighbours in Saudi Arabia, the UAE and Bahrain, the country’s reliance on air and sea freight terminals has increased significantly since that time. Qatar Ports Management Company (Mwani Qatar) is responsible for the new Hamad Port at Umm Al Houl, south of Doha; the old commercial Doha Port, which is increasingly used by cruise liners; and Al Ruwais Port in northern Qatar. Hamad Port is operated by QT erminals, which was established in 2016 as a joint operation between Mwani Qatar and the private Qatari shipping conglomerate Milaha (Qatar Navigation).

Qatar Rail was established by Amiri decree in 2011. It is responsible for delivering the Doha Metro and the Lusail Tram (LT) that will start operation in 2019. Mowasalat is the SOE responsible for public road transport, and plans to have a fleet of 300 buses and 7000 taxis by 2019.

Infrastructure & Development

The 2019 budget granted a total of QR49.4bn ($13.6bn) to the infrastructure and transportation and communications sectors, equal to 23.9% of the total budget. These investments in transport infrastructure are taking place against the backdrop of significant recent and ongoing infrastructure spending.

Hamad International Airport was designed with a capacity of 30m passengers a year and built at a cost of $17bn, but passenger numbers quickly exceeded those figures. In 2016 it welcomed 37.3m people. Although there was significant disruption caused by the blockade in 2017, total passenger numbers remained above capacity at 34.2m that year. The Hamad International Airport Passenger Terminal expansion, budgeted at QR1bn ($274.6m) for 2019, will see capacity increase to 65m per annum.

New Investments

The transformation of Qatar’s maritime infrastructure is expected to cost QR27bn ($7.4bn). Its centrepiece, Hamad Port will have a capacity of 6m twenty-foot equivalent units (TEUs) of containers when it is fully operational by 2020, and will be served by three container terminals. Port operations were ramped up significantly when the blockade started in June 2017, and it played a key role in handling essential imports.

Ashghal, Qatar’s national public works authority, was founded in 2004 and is responsible for road construction projects, as well as sewers and other civil works. Its Expressway Programme includes a QR3.26bn ($895.3m) Orbital Highway and Truck Route, which is designed as a Doha ring road with a separate lane for lorries. Ashghal is also building the highway linking Doha with the new city of Lusail and an East-West corridor road.

Ashghal is also responsible for the construction of roads to serve new commercial, educational, residential and leisure developments including the stadia being constructed for the 2022 FIFA World Cup. In 2019 the first passengers will be able to ride on sections of the Doha Metro, with the first section connecting 13 stations on the network. The Metrolink service of 35 dedicated bus routes will serve the first 13 stations.

The Doha Metro is expected to be fully operational by April 2020, and will feature 75 automated trains carrying passengers to anywhere on the network with competitive fares. Qatar is also planning a soft opening for the LT service for 2019.

Transport Strategies

Although the 2022 FIFA World Cup may be used as a yardstick to judge demand and capacity for the country’s airport, cruise terminal, buses, taxis and metro trains, the transport strategy of the nation is being driven by aims that go beyond the tournament.

An additional component regarding the influx of tourists and businessmen and women involves a niche market in Qatar that continues to thrive despite the advent of ride-sharing apps. “In a world that is becoming more interconnected, the car rental market is increasingly more competitive. These companies are the first to greet visitors and the last to wish them a safe trip,” Sanaa Ouahmane, general manager of Hertz Qatar, told OBG.

To develop a country with thriving modern cities by 2030, the transport infrastructure has to be able to cater for the anticipated growth in population and to ensure those people are able to move efficiently around the country. “We are seeing a shift in culture in Qatar,” Khalid Nasser Al Hail, managing director of Mowasalat, told OBG. “By intensifying the use of public transport we can ease the traffic on the streets and protect the environment. We are focused on changing the minds of locals and expats to use public transport whenever possible.”

According to data published by the PSA in October 2018, the population had grown by 3.2% yearon-year, to 2.7m people, while the number of new vehicle registrations had surged by 19.6%. Transport planners know that the Doha Metro and LT have the potential to alleviate increasing traffic levels, but the planners also realise that people will want to see competitive door-to-door journey times if they are to make the conscious decision to switch from personal vehicles to public transport.

This change requires a holistic approach in improving pedestrian and bike access in the cities, integrating bus and metro networks, and constructing park and ride facilities at outlying stations on the network. The metro will also offer an onward travel option for up to 65m people arriving annually at Hamad International Airport.

According to regional business intelligence firm MEED, Qatar is expected to spend $100bn on infrastructure linked to the 2022 FIFA World Cup. In February 2017 finance minister Ali Shareef Al Emadi said Qatar was investing $500m weekly on infrastructure, and was expected to continue this level of spending until 2021.

Key transport projects linked to the four-week tournament include the Airport Passenger Terminal expansion programme and the Doha Metro. Five of the eight stadia being constructed for 2022 will be served by metro stations, with the remaining three connected to the metro network by shuttle buses.

Foreign Direct Investment

In 2019 there will be a raft of new opportunities for foreign investors in Qatar. The country is spending $3bn on developing two new free zones, both adjacent to its key air and sea transport hubs. Umm Al Houl Free Zone is due to open near Hamad Port in the first quarter of 2019, while Ras Bufontas Free Zone will open later that year near Hamad International Airport. The two free zones are designed to cater for companies that require air or sea freight import and export facilities.

In March 2018 the Qatar government also announced a new draft law, which would allow up to 100% foreign ownership in unlisted companies and up to 49% foreign ownership of companies listed on the Qatar Stock Exchange, with the latter terms being subject to government approval. The official law, Law No. 1 of 2019, was issued in January 2019.

Import & Export

Qatar is the world’s biggest exporter of liquefied natural gas (LNG). Even amidst the blockade that was suddenly imposed in June 2017, the country has continued exporting LNG, mainly to customers in East Asia.

In January 2019 Qatar’s total exports were valued at QR24.7bn ($6.8bn), according to PSA, a decrease of 2.6% from January 2018. Exports to Japan were worth QR4.24bn ($1.16bn) that month, making up 17.2% of the total. Additionally, exports to China also made up approximately 17.2%, amounting to QR4.23bn ($1.16bn), while exports to South Korea came to QR3.8bn ($1bn). Meanwhile, exports to India totalled QR3.1bn ($851.4m) and exports to Singapore came to QR2.1bn ($576.7m).

Qatar Petroleum (QP) exports both crude oil and LNG. Halul Island, 96 km north-east of Doha, serves as the main Qatar marine crude oil export terminal. Its facilities include two single mooring buoys that can load two tankers simultaneously. It has a loading capacity of 100,000 barrels per hour, or 2.3m barrels per day (bpd). According to QP, the Halul Island terminal exported 181,649 bpd on average in 2016. QP’s Ras Laffan port is the world’s largest single LNG export facility.

Embargo

However, the blockade had a profound impact on imports of essential goods. The newly commissioned Hamad Port, along with an airlift by Qatar Airways, helped to prevent a lasting impact on Qatar’s citizens. Qatar Airways found its cargo planes barred from 18 airports in Saudi Arabia, the UAE, Bahrain and Egypt, while the import of goods across the peninsula’s only land border was closed.

As with many countries in the region, Qatar had been heavily reliant on imports from Dubai’s Jebel Ali Port. Typically, larger ocean-going vessels offloaded in Jebel Ali, before transferring Qatar-bound cargoes to smaller feeder ships. With that route closed, Qatar used its deepwater facility at Hamad Port to receive cargo directly from Turkey, Iran, India and Pakistan, and via Oman and Kuwait.

Food

In October 2018 local media in Qatar reported imports of food from Pakistan had grown by 70% since the blockade. In the immediate aftermath of the blockade, Qatar Airways Cargo ensured food, medical supplies and other goods reached the country. The airlift lasted for several weeks using Qatar Airways cargo planes and leased aircraft.

Qatar Airways operates a freighter fleet of 23 aircraft. In 2017 more than 2m tonnes of cargo were handled by Hamad International Airport, a 14.42% increase on the previous year. In October 2018 Qatar Airways launched a new cargo route from Doha to Macau, its fourth cargo destination in China, with Boeing 777s with a 100-tonne capacity operating on the route. The blockade also had an immediate impact on non-oil exports, according to Qatar Chamber of Commerce and Industry analysis.

In May 2017, the month before the embargo was imposed, Saudi Arabia and the UAE collectively received 44% of Qatar’s non-oil exports, with Oman importing 11.36% of Qatar’s non-oil goods. By July 2017 the export of non-oil and gas goods to Saudi Arabia and the UAE, had ceased, and Oman was receiving 31% of Qatar’s non-oil exports – the most of any country. In September 2018 the total value of non-oil exports was QR1.64bn ($450.4m) with Oman’s ports remaining the most popular destination, receiving QR689m ($189.2m), 42.1% of the total value of Qatar’s non-oil exports.

Air

The realignment of commercial trade was also reflected in the routes offered by Qatar Airways. Although 18 gateway destinations were closed as soon as the blockade started in June 2017, the national flag carrier responded by introducing new destinations. In August 2017 a new route was opened to Sohar in Oman, home of the deepwater port that had become a key nexus in Qatari trade. The route began with three flights a week, increasing to daily service in October 2017 and bringing the total number of Qatar Airways flights to Oman to 60 per week. Between April 2017 and December 2018, Qatar Airways had added 23 new destinations.

Increased flight connections have also helped Qatar deepen its ties with other countries, including Turkey. “There is an increasing number of flights between Doha and Istanbul, both in terms of frequency and capacity, as Istanbul remains an important destination for Qatari visitors,” Mehmed Zingal, general manager for Qatar at Turkish Airlines, told OBG. “Similarly, Turkey is also an important transit hub for international business travellers. The opportunity now lies in boosting Turkish arrivals to Qatar in light of the 2022 FIFA World Cup.”

Plans for Expansion

QAG and its associated companies continue to play a significant role in the international passenger and commercial aviation sectors of the country. At the end of March 2018 the operator had a fleet of 213 aircraft, 20 of which had been delivered during FY 2017/18. It also had a pipeline of more than 300 aircraft – an order book it valued at approximately $90bn. However, the company’s annual report makes it clear that the blockade, and the response the company made in order to accommodate passengers and freight customers, took its toll on the group’s financial performance.

Although revenue and operating income increased from QR39.4bn ($10.8bn) in FY 2016/17 to QR42.2bn ($11.6bn) in 2017/18, the profit attributable to shareholders of QR2.8bn ($769m) in FY 2016/17 became a loss of QR252m ($69.2m) in the following financial year. Over the same period, the number of overall passengers fell from 32m to 29.2m. However, the total freight tonnage carried increased from 1.1m tonnes to 1.4m over the same period.

Hamad International Airport served 34.5m passengers in 2018, including 8.1m in the fourth quarter – a 5.6% increase over the fourth quarter of 2017. The airport also handled 2.2m tonnes of cargo in 2018, an increase of 8.4% over the previous year. The terminal was ranked the world’s fifth-best airport by Skytrax in its 2018 annual awards.

Sea & Ports

The first phase of Qatar’s new Hamad Port had been completed a few months before the blockade, and its role in replacing land imports as well as boosting maritime trade was crucial to the smooth running of the country. By October 2018 the new Hamad Port was celebrating milestones, having handled more than 1.5m TEUs of containers, 100m tonnes of liquid cargo and 1m head of livestock. The new port also handled mainline calls, with 23 direct lines and 75 international destinations replacing the feeder ships, many of which came from Dubai’s Jebel Ali prior to the blockade.

As the port’s expansion continues to 2020, Qatar is seeking to establish a stronger foothold on threeway trade between the Indian subcontinent, East Africa and the Gulf (see analysis). It also sees its new port as well positioned to serve Iraq as that country’s economy is rebuilt.

Cargo traffic has been transferred from Doha Port to Hamad Port; however, Doha Port continues to serve as a destination for cruise liners. It expects to host 42 ships during the 2018/19 winter season from October to May. There are also plans for the port to host cruise liners acting as floating hotels during the 2022 FIFA World Cup.

Rail

By 2022 Doha Metro and the tram serving the new community of Lusail will both be fully operational. Qatar Rail believes the metro service will be crucial for the smooth running of the World Cup, but its overarching challenge is to persuade Qatar’s citizens and residents to leave their cars at home and use the metro on a daily basis.

The metro’s driverless trains will have separate carriages for passengers travelling on gold, family or standard tickets. One aim is to reduce the number of cars and buses carrying children to school and to speed up journey times on the school run.

“You hear stories of children taking up to 90 minutes to reach school by car, and school traffic also contributes to congestion, so we want to offer a safe, clean and faster alternative,” Raimund Hanauer, Qatar Rail’s transport planning director, told OBG. The metro and tram services will also be integrated with Google Maps, enabling travellers to better plan their journeys. Additionally, dedicated feeder buses will increase the reach of the metro and reduce travellers’ walking distances.

Outlook

Qatar has made significant investments in transport infrastructure in recent years, and plans to continue spending well beyond the 2022 FIFA World Cup that takes place in the fourth quarter of that year. The multiple investments in airport and maritime infrastructure paid dividends when the country was faced with an economic blockade, and additional expansions will cater to more ships and aircraft, cargo and passengers.

At the same time, upgrades to the country’s road networks should ease the flow of the growing number of cars and lorries travelling across the country. Additionally, in 2019 Qatar will reap the rewards of its investment in public transportation when the first trains begin to run passenger services on the Doha Metro. Meanwhile, businesses and residents moving to the new community of Lusail will be able to take full advantage of the new tram services.