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Qatar steps into the spotlight as potential financial centre
18 August 2011
With attributes from plentiful natural resources to booming foreign investment and political stability, Qatar is enjoying its time in the sun
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Qatar
Middle East
MSCI
The headline attractions of Qatar have been known for some years. According to the US Energy Information Administration, which tracks energy production and reserves worldwide, Qatar holds the world’s third largest natural gas reserves and is already the single largest supplier of liquefied natural gas, as well as being a significant net exporter of oil.
It’s quite a bounty for a country roughly the size of Connecticut, and has been the engine both of soaring individual wealth – the IMF says Qatar had the world’s highest per capita GDP in 2010 – and of national economic growth. Qatar’s GDP grew 16% in 2010 and the IMF expects it to hit 20% in 2011. Exports grew 53% annually compound between 2006 and 2009.
On top of that, there are the other headlines: the worldwide front-page landmarks. Chief among these is the successful bid to host the FIFA World Cup in 2022, but one could also consider some of the high profile investments of the Qatar Investment Authority and its Qatar Holdings subsidiary, whose stakes include the Harrods Group in London, Miramax Films, the London Stock Exchange and Volkswagen (rumours that it will also buy Manchester United have yet to come to anything).
And alongside the more famous acquisitions comes a long pipeline of steady infrastructure deals: Qatar’s policy of diversifying away from hydrocarbon exposure has caused it to announce $145bn of projects over the next seven years.
Analysts, even in competing jurisdictions, are convinced. This year Youssef Nizam, head of equity research at Audi Capital Saudi Arabia, made Qatar his key overweight in the region.
“The major reason is the GDP growth,” he says. “Qatar has made huge investments into the natural gas business and many investments are starting to materialise now and will be reflected in the economy. It is a country rich with resources but small enough to be able to deploy those resources within the country: a small prototype that is easily manageable compared to other countries in the region.”
It’s no surprise that bankers are optimistic in such an environment. “The outlook hasn’t changed for quite some time,” says Emad Mansour, CEO of Qatar First Investment Bank. “If you go back to 2007, the outlook has always been very positive: a strong economy, extremely sizeable natural resources, and it managed to weather the storm of the financial crisis.”
And what might look like trophy investments from overseas are very important. “The people in Qatar are very proud about the FIFA World Cup, but it also has the potential to free up a lot of infrastructure projects. It acts as a catalyst – and a catalyst with a timeline attached to it that is very clear to everyone.”
Foreign banks feel the same way. “Qatar is the fastest growing economy in the MENA region,” says Abdul Hakeem Mostafawi, CEO of HSBC in Qatar. “It has booming trade flows, an independent foreign policy and is promoting a peace-maker role, mediating regional political conflicts. The medium term outlook is bullish, providing immediate potential.”