Research and analysis

UK/Qatar prosperity relationship: opportunities, challenges, next steps: April 2014

Published 6 May 2014

0.1 Summary

Qatar’s economy is booming but faces significant challenges. There is a strong and growing bilateral prosperity relationship, with opportunities for the UK to support Qatari delivery of its economic agenda and to realise significant prosperity benefits.

0.2 Detail

Qatar’s economy is booming. It was the world’s fastest growing economy over 2008-2012, with a real GDP growth rate of 12%, compared to China (second fastest) at 9%. In 2013, GDP grew by 6.5% and is forecast to grow by 6.8% in 2014. In contrast, the IMF is forecasting world growth for 2014 at 3.6%. Qatar has the third largest economy in the GCC, after Saudi Arabia and the UAE; and the IMF forecasts that Qatar will have the highest real growth in the region over the next five years. Some experts suggest Qatar is on track to become the region’s second biggest economy. At the end of March, Qatar agreed its largest ever budget, with $60bn of planned expenditure for 2014/2015, focusing on infrastructure, education, and health. Qatar has been the world’s largest Liquefied Natural Gas (LNG) exporter since 2006. It has up to $220bn of investments planned to deliver the 2022 World Cup and its 2030 National Vision, including $182bn of projects to be implemented in the next five years (excluding oil and gas and private sector projects). This is one of the most ambitious investment programmes in the world, and all the more impressive for a country with only 250,000 nationals - about 10% of the total population.

0.3 Bilateral prosperity relationship

Qatar is an important and growing export and investment market for the UK. Exports of goods to Qatar were up 12% in 2013 to £1.46bn; and in 2012 exports of services totalled over £500m. We have three High Value Opportunities (HVOs) in Qatar, focused on the 2022 World Cup, rail, and food security, with a potential fourth - education. Education and health are of increasing importance, reflected in their substantial budget rises for this year. Shell’s US$21bn Gas to Liquids (Pearl GTL) facility at Ras Laffan is the largest foreign investment in Qatar and also Shell’s largest overseas. Qatar is also a significant investor in the UK. The Qatar Investment Authority (QIA) has a number of significant investments in the UK including stakes in BAA, Sainsbury’s, Barclays, the London Stock Exchange, Canary Wharf Group, the Shard, the Olympic Park Village, the Shell site at Waterloo, Chelsea Barracks, and Harrods.

0.4 Challenges

Despite Qatar’s impressive economic performance and ambitious plans, there are aspects of Qatar’s approach to achieving long-term sustainable growth which require strengthening. The country’s leaders have recognised that Qatar needs to increase productivity and efficiency, ensure value for money, promote economic diversification, encourage the private sector and entrepreneurship, reduce barriers to competition, tackle inflation, and focus on research and development, education, and health. The Government has appointed a new economic leadership team and at both ministerial and senior official level we are seeing the gradual emergence of a new younger generation of Qatari leaders. However, institutional capacity is still small and underdeveloped. This means that Qatar will continue to rely on foreign talent, including from the UK, to realise its plans. The UK remains a trade and investment priority for Qatar and they are keen to explore further new trade and investment opportunities: they want “more UK in Qatar and more Qatar in the UK.” But the UK faces serious international competition, some of which is more competitive on price but not quality and expertise. For Qatari investment, emerging markets sometimes offer higher returns than the UK and other developed economies.

0.5 Taking forward the UK/Qatar prosperity relationship

Actions that would help benefit further from these significant prosperity opportunities include:

• Supporting the Qatari Finance ministry with their budgeting and public finance management. They are interested the UK public sector investment programme and keen to understand procurement models that provide value for money.
• Identifying and focusing on areas where we have competitive advantage to fully realise the significant export opportunities. This will help prioritise resources and our engagement, securing most value for the UK, now and in the long-term.
• Championing UK business in Qatar, and promoting Qatar to UK businesses. This year there have been a number of successful trade missions in both directions, across a range of sectors. This includes the Qatar 2022 World Cup Supreme Committee to the UK in February and Lord Livingston’s first visit to Qatar in March as the new trade minister.

0.6 Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.