A steady hand: Political stability is ushering in a promising era of economic and human development

With one of the world’s most commanding positions in the global energy industry and a growing role in regional diplomacy, Qatar has seen massive returns on the political and economic investments it has made in the past two decades, and the country has come to the fore as a respected voice in international forums.

Qatar has existed as an independent, sovereign state for just over 40 years. Unlike other Gulf neighbours, the country has no significant inland oases – virtually every permanent settlement was coastal and relied on fishing, pearling and trade for its livelihood. During some periods, as much as half of the peninsula’s population was engaged in the pearling industry, a ratio far higher than those of other Gulf states.

In the early 20th century, when methods of creating cultured pearls were discovered in Japan, pearl prices declined, ushering in a transformation of Qatar’s economy, hastened by the complete collapse of prices in 1929 with the start of the Great Depression. The British Anglo-Persian Oil Company (APOC) had had exclusive claims to oil rights in Qatar since 1916, but the oil concession with APOC was not finalised until 1935, and the discovery of commercial quantities of oil did not occur until 1939. Further delays due to the Second World War meant petroleum development only came into full swing in 1949, with revenues growing more rapidly by the 1950s. In January 1961 Qatar joined the Organisation of the Petroleum Exporting Countries (OPEC) and by 1971 became a fully independent state, maintaining close relations with neighbours and distant foreign powers alike.

The growth of the energy sector gained momentum in the late 1990s and early 2000s, after the 1995 accession of Emir Hamad bin Khalifa Al Thani. Throughout the reign of the Emir the state’s political course has consistently focused on maintaining stability, promoting human and economic development, and taking on a greater role in the international arena.

KEY STABILISERS: The leadership’s mission to maintain stability is aided by several factors. Economically, the state enjoys significant revenues from its hydrocarbons resources. By 2010, thanks to long-term investments and partnerships with major industry players, the state reached the liquefied natural gas (LNG) export capacity benchmark of 77m tonnes, making Qatar the largest exporter in the world. Due to these investments, hydrocarbons revenues have helped to maintain impressive growth rates. Between 2005 and 2009, GDP grew by 17.4% per year on average, according to the World Bank. The combination of hydrocarbons wealth and shrewd financial planning has allowed Qatar to enjoy relatively uninterrupted prosperity. Even in recent years, despite the effects of the global financial crisis in other countries, Qatar has maintained consistent growth. GDP in constant 2004 prices rose 47.7% from QR217.5bn ($59.72bn) to QR321.1bn ($88.17bn) between 2008 and 2011, according data from the Qatar Statistics Authority. In 2012 numbers have also been positive. The first and second quarters saw year-on-year GDP growth of 7.87% and 4.98%, respectively.

IMPROVING CITIZEN PARTICIPATION: In the context of unprecedented economic prosperity, the state’s leadership has worked to introduce gradual political reforms in the country and cultivate representative processes in domestic political institutions. Some bodies, like the Municipal Council, have existed since before independence. The body was first directly elected in 1998. Its members monitor and advise on municipal affairs, including government service provision and oversight of the budget. The most recent elections for the council took place in May 2011. In total, 101 candidates, four of them women, vied for 29 seats corresponding to 29 electoral constituencies.

Plans are also in motion to introduce more modes of representative governance at the national level. In a 2003 referendum 97% of participating voters approved a constitution calling for the creation of an elected Majlis Al Shura (Advisory Council). However, because of subsequent election delays, appointees currently occupy the seats of the council. The leadership has signalled, however, that elections are not far off. In his address to inaugurate the 40th session of the Advisory Council in November 2011, the Emir announced a plan to hold elections in 2013 for 30 of the council’s 45 members. “We know that all these steps are necessary to build the modern state of Qatar and the Qatari citizen who is capable of dealing with the challenges of the time and building the country,” the Emir said.

In terms of international politics, the state maintains cordial relations with many players. In addition to its close relationships with GCC member states Bahrain, Kuwait, Oman, Saudi Arabia and the UAE, Qatar also counts among its allies the UK, US and other countries involved in North Atlantic security institutions. At the same time, however, the state maintains friendly economic and diplomatic connections with important regional stakeholders, including Iran and India.

HUMAN DEVELOPMENT: Paramount to the state’s central goal of stability is human development. This fits well with the state’s economic diversification plans. In Qatar National Vision 2030, a document outlining these goals, greater human development and an increase in knowledge-based industries are listed as top priorities.

A series of semi-private institutions are currently operating to deliver on the leadership’s vision. Qatar Foundation (QF) is among the largest of these institutions. Founded in 1995 by the Emir and chaired by Sheikha Moza bint Nasser, QF operates under the mantra “Unlocking human potential”. It works to support education, research and community development. In pursuit of its goals, QF has created institutions like the Qatar Science and Technology Park, a technology free zone, and Education City, a complex of global universities, schools and research centres. The idea is to encourage science and research and provide opportunities for students to gain both an education and practical experience in the workplace.

As for community development, QF supports a broad array of activities. To build a more progressive society in Qatar, QF, in collaboration with the BBC, established the Doha Debates in 2004. This series of Oxford Union-style debates airs globally on BBC World News. QF also supports a series of museums, local debates and other institutions to preserve the state’s heritage and foster a greater sense of community.

The Doha-based Al Jazeera news network has also contributed to human development by furthering the goal of creating a well-educated, well-informed populace. Launched in 1996, Al Jazeera bills itself as the voice of the “global South”, aiming to cover regions and topics that receive less coverage from other international news sources. In over 15 years of operation, the network has grown to include two 24-hour news channels (in English and Arabic), a documentary channel, two children’s channels and eight sports channels.

ECONOMIC DEVELOPMENT: Economic development is a central priority for the state’s leadership. To that end, the government has been reinvesting revenues back into the economy, undertaking a series of infrastructure projects. Roughly 40% of the budget until 2016 has been allocated for major upgrades to ports, roads and a new railroad system.

As projects continue to progress, growing numbers of workers are arriving on the state’s shores from all corners of the world (see analysis). This trend is reflected in the state’s population growth. From 1998-2010, the population nearly tripled from 561,000 to 1.71m, according to data from the 2010 census. Growth rates hit their zenith in 2008, with the population expanding by 18.9%. By 2010 the rate had relaxed to 4.7%.

As the overall population has grown at a rapid pace, the government has worked to ensure that locals continue to participate in the labour market. The total number of Qatari employees grew by just over two-thirds, from about 45,000 to more than 71,000 between 2001 and 2009, according to the Qatar National Development Strategy 2011-16 (NDS). Census data in 2010 put the exact number of Qataris employed in the country at 71,076. However, the total portion of Qataris in the workforce slipped from 14% to 6% during the same period, as workers from abroad continued to flock to the country. Of the proportion of workers who are Qatari, the vast majority worked in the public sector (83%) or mixed sector (5%) in 2011, according to a Brookings Doha Centre analysis paper on the state’s workforce. The study also found that only 8% of Qatari workers held jobs in the private sector.

In order to boost the number of Qataris working in the private sector, various programmes have been developed among Qatari firms to recruit and train nationals to fulfil the private sector’s needs. Qatar Petroleum, for example, has started recruiting students out of secondary school and sponsoring their participation in vocational education programmes; it then gives them company training in order to fill various roles in the energy industry, from operations and engineering to finance and administration. Private sector training programmes, combined with educational opportunities at Qatar University and Education City, could go far in preparing young Qataris who plan to seek employment in the private sector.

Current salary structures, however, mean that Qataris have a greater incentive to find work within the public sector. In late summer 2011 the government announced salary raises of up to 60% for public sector workers and up to 120% for military personnel. Although some private companies could afford to raise wages in response, others could not. The higher salaries for public sector jobs, combined with other benefits like pensions and job security, are major reasons why many choose to work for the government.

The government is aware of these challenges and is studying the effects of wage gaps between the private and public sectors. Indeed, leaders plan to explore the extent to which the public-private wage gap would need to shrink in order to encourage more interest in the private sector. In the scope of this process, immigration and sponsorship procedures, as well as public sector wages and social allowances are set to come under review, according to the NDS.

DOING BUSINESS: Attracting a broad range of private firms is also an important element of economic development. Indeed, the government acknowledges that for economic gains to be sustainable in the long term, Qatar’s private sector will likely need to take on a larger role in the economy. To that end, the government has been working to make Qatar’s business legislation and tax code as business friendly as possible. Like other countries in the region, foreign firms wishing to establish operations in the state must work with a local partner who maintains a majority share in the enterprise. These measures are meant to ensure that local know-how can benefit from foreign expertise. There are, however, a number of exceptions to the 49% limit. Enterprises that work in agriculture, industry, health, education, tourism, consulting, IT, distribution and a host of other areas are permitted to operate under 100% foreign ownership, according to the Ministry of Business and Trade. Meanwhile, clusters like Education City and the Qatar Science and Technology Park offer a list of incentives to companies investing in areas that the state considers high priority.

Doing Business (DB), an organisation that is part of the World Bank, ranked Qatar 36 out of 182 in 2012 for the ease of doing business there, according to the DB annual report. The publication highlighted a number of positive legislative changes in Qatar, including the simplification of various business registration processes and changes to the credit information system that eliminate certain restrictions on borrowing.

HIGH PROFILE: As Qatar has worked to enhance stability, human development and economic prosperity, it has also been taking steps to improve its international profile and promote a vision of development throughout the region. Key to the state’s rising international standing is its expanding role in international trade, as economic ties often underpin the state’s diplomatic partnerships. To that end, the US and Europe remain important economic partners. Qatar’s exports to the EU have been on the rise in recent years, growing from €3.2bn to €13.3bn between 2009 and 2011, according to the European Commission’s Directorate General for Trade. Trade with the US has also been on the rise. Imports from the US increased from $335.8m to $2.79bn between 2001 and 2010, according to statistics released by the US Census Bureau. Qatari exports to the US have grown as well, seeing a boost from $501.9m to $1.23bn during the same period.

Business with countries in East Asia has also improved. Indeed, Asia’s share of total GCC trade increased from 10% to 36% between 1980 and 2009, according to the Economist Intelligence Unit’s report, “GCC Trade and Investment Flows.” Qatar has been at the forefront of this trade growth. In 2011 the state supplied the Republic of Korea with 8m tonnes of LNG, about a quarter of its annual needs, Qatar’s minister of energy and industry, Mohamed Saleh Al Sada, announced in March 2012. LNG exports to Japan are also up. Since the fuel has been fetching a higher price in Japan than in European markets, some Qatari ships are actually shifting their orientation and starting to shuttle fuel to and from the Pacific, rather than the Atlantic. Qatar has also been finding ways to export its energy expertise in the form of refinery and petrochemicals projects. Its partners in developing these facilities include companies in Vietnam, Indonesia and China.

India, meanwhile, remains one of Qatar’s largest trade and investment partners. Bilateral trade between India and Qatar grew nearly fourfold between 2005 and 2010, from $1.2bn to $4.6bn, according to India’s Ministry of External Affairs (MEA). After Japan, Korea and Singapore, India is the state’s largest export market. A broad range of Indian firms also do business in Qatar, and there is an Indian community of roughly 500,000 residents, according to estimates from India’s MEA.

As it continues to cultivate economic relationships around the world, the government of Qatar also maintains a diplomatically active posture. The state holds memberships in a broad range of international organisations, including the UN, WTO, IMF, Arab League, OPEC and the Gas Exporting Countries Forum. Through its participation in these and other organisations, the state has been able to work toward the goals laid out by its Ministry of Foreign Affairs, including stability and peaceful conflict resolution. Under the steady hand of Prime Minister Hamad bin Jassim bin Jaber bin Muhammad Al Thani, the ministry has worked to mediate disputes across the Middle East and Africa.

ARAB SPRING: In early 2011 turmoil in many areas of the Middle East and North Africa region presented opportunities for the state to put its foreign policy into practice. Enjoying a peaceful political landscape at home, Qatar began to take on more responsibility in shaping the outcomes of conflicts elsewhere. The state became the first country to recognise the National Transitional Council in Libya and participated in the UN-mandated NATO operation “Unified Protector”. In Egypt, Syria and elsewhere, the state has worked with international organisations to make its voice heard in international arenas. The Emir emphasised his vision for long-term regional stability in his address to the 40th Advisory Council in November 2011, saying, “[W]e emphasise that the only guarantee for the stability of Arab states, in the short and long terms, lies in the adoption of continuous reforms to meet the aspirations of their peoples, for reality affirms that no country can isolate itself from the current political movement.”

Although the tumult of the Arab Spring has brought its fair share of challenges in some areas, it has also created opportunities for progress in others. “This opens the door quite well for Qatar to take this leadership role and to play a role in the Arab renaissance in the 21st century,” Ibrahim Sharqieh, the deputy director of the Brookings Doha Centre, told the BBC in September 2011. Indeed, under the stewardship of the Emir, the state has been able to maintain domestic stability while working with international organisations to promote its goals of conflict resolution and development elsewhere in the region.

Following political unrest in other countries in the region, the state’s leadership has used its financial power to help support governments through transitional periods. In April 2012 Qatari authorities announced a $1bn loan for Tunisia, whose political revolution was the epicentre of the Arab Spring. Although many welcomed the change in the North African country’s leadership, its economy was hard hit by the ensuing upheaval. Instability contributed to reduced tourism revenues. In 2011 Tunisia’s economy shrank by 1.8%, according to official statistics. The loan from Qatar is set to provide some breathing space to economic planners, with half of the loan slated to support the central bank, according to a statement from the Tunisian central bank.

The state has also offered financial assistance to Egypt to help support its economy during its political transition. In August 2012, Sheikh Hamad visited Egypt for the first time since the election of the country’s current president, Mohamed Morsy. During the visit, the Emir pledged to deposit $2bn into Egypt’s central bank. The move is set to ease pressures on the North African country’s economy, which has faced challenges since the start of protests against former President Hosni Mubarak in February 2011. Saudi Arabia made a similar pledge to deposit $1bn into the Egyptian central bank in May 2012. Offering support to newly formed governments in the region could be mutually beneficial. Egypt, Tunisia and other areas can use these funds to support their economies through tougher economic circumstances. Qatar, meanwhile, gains the opportunity to support its neighbours through periods of transition and further its goals of stability and economic development in the region.

INTERNATIONAL CENTRE: Economic ties and diplomatic action have done much to raise the state’s international profile, but just as Qatar works to maintain cordial relations abroad, so too is it working to bring international events to local venues. In 2001 the state began hosting the Doha Round, the latest negotiations being conducted by members of the WTO. In December 2010, meanwhile, Qatar won the right to host the 2022 FIFA World Cup, one of the world’s most widely viewed sporting events.

Hosting high-profile international events has obvious material benefits. Attracting flocks of visitors could offer a boost to tourism and in turn retail, transport and other related sectors. But more important than possible material gains are the intangible benefits that come with hosting major international events. One such benefit is the reputation as a stable, progressive and global destination – a reputation that fits well with the leadership’s vision for the country.

OUTLOOK: Through its domestic policies, development initiatives and diplomatic activities, the government is pressing forward with its goal to shape a more knowledgeable and prosperous Qatar. However, there are still a number of challenges that could arise, and striking a balance between encouraging foreign investment and safeguarding national interests is crucial. To that end, the government is reviewing a number of reforms aimed at nurturing private enterprise. Leaders also recognise the challenge of boosting private sector employment among nationals, and are taking steps to provide incentives for workers to pursue these jobs.