Qatar’s Economy: Moving Downhill or Uphill
The economic and diplomatic war that has broken out between Qatar and three Gulf Cooperation Council members: Saudi Arabia, the UAE and Bahrain has begun to reveal its consequences.
Land, sea and air links:
UAE decision to stop any ship going to or from Qatar from refueling at Fujairah port – a facility on the edge of the Gulf used by the majority of tankers. The three Gulf countries imposing the blockade have all called a halt to their airlines’ flights to and from Qatar, including Saudia, Emirates, Etihad, FlyDubai, Air Arabia, and Gulf Air; Qatar Airways has, in turn, stopped flying to destinations in those countries. Now that the planes have been barred from flying over Bahrain, Saudi Arabia, and the UAE, the fact that compliments the problem at hand, is that the only land border Qatar has, is with Saudi Arabia.
For starters, some Saudi and Emirati goods have disappeared from supermarket shelves to be replaced by brands from Turkey, Iran and elsewhere.
Infrastructure for FIFA
A lot of equipment and raw materials for Qatar’s ongoing construction boom also comes in via road from Saudi Arabia – this too will now have to be shipped in if the country is to avoid any significant delays to the schedule for building the stadiums and other infrastructure required for the 2022 football World Cup – the sport’s governing body FIFA is said to be in “regular contact” with the authorities in Doha to monitor the situation.
Qatar’s Forte; Natural Gas
Qatar is the world’s biggest exporter of liquefied natural gas. Those exports make the small country’s inhabitants have the biggest per capita incomes in the world. Its economy, fuelled by its natural gas exports, continues to hum along despite all the pressure on its stock market and currency. Its biggest crude and gas customers include Japan, South Korea, India, and Singapore. However, 90% of its inhabitants are not Qatari and the minority of people who are actual Qatari do not enjoy these economic comforts and many feel like their county’s under occupation with the blessing of their unelected government. And let’s not forget this:
Neither party appears to be backing down which makes this fiasco a global concern. Qatar hosts some 10,000 American troops at the al-Udeid air base. US secretary of state Rex Tillerson has been making failed efforts of mediation to ease tensions, while US President Trump’s comments on Qatar funding extremist groups back the Saudi-led countries’ position.
After Trump praised the emir Tues., he privately confronted him with evidence Qatar still engaged in terrorism-related activity, I'm told.
— Jennifer Jacobs (@JenniferJJacobs) September 20, 2017
All Qatar’s economy is going to face is downhill. In the short run, Qatar may survive the boycott since it has developed good relations with European and Asian states and exports large amounts of natural gas. The Stock Exchange has dropped sharply after the diplomatic crisis emerged. Qatar’s LNG shipments are likely to become more costly as its super-tankers need to find new ports outside the Gulf to refuel. If the ban continues, Qatar Air’s revenue could fall by 30 percent due to lost traffic and idled planes, the cost of diverting flights, a decline in premium bookings etc. If downside risks materialize, contractual obligations to deliver the 2022 World Cup will limit Qatar’s ability to rein in capital spending, making the country’s fiscal position more vulnerable. The economic growth of 3.3% has been seen in 2017 and it’s expected to rise to 3.6% in 2018.
This crisis has the potential to interrupt preparations for the 2022 football tournament because of the aviation restrictions and the blockade of the land border with Saudi Arabia.
But the Qatari committee in charge of handing the World Cup said in a statement that “construction is advancing rapidly across all of the stadiums and infrastructure sites for the tournament.”
— المصدر الأول (@Number1_Source) September 20, 2017
Emirati foreign minister Abdullah bin Zayed Al Nahyan kept up the pressure on Qatar in his own remarks to journalists. “To defeat terrorism, we must confront extremism, we must confront hate speech, we must confront the harboring and sheltering of extremists and terrorists, and funding them,” he said. “Unfortunately, we in this region see that our sister nation of Qatar has allowed and harbored and encouraged all of this.” And added remarks like “Enough is enough”. On which Sheikh Mohammed bin Abdulrahman Al Thani replied, “When measures are clothed in this context, it is because they think they will be met with international sympathy because they are ‘anti-terrorism’ measures.”
According to Qatar’s finance minister Ali Shareef Al Emadi, Qatar has the 18th most competitive economy in the world, and the second in microeconomic efficiency. Inflation could tick higher this year because of the disruption to trade, but the state could rely on its ample reserves and stable banking system, as follows:
“We have the assets and the security we need to ensure economic stability”
It was also said that trade with Saudi Arabia, the UAE and Bahrain accounts for less than 8% of total exports. While Less than 15% of imports are sent from these countries. While we have previously imported numerous food items, consumer and manufactured goods from the blockading countries, we maintain strong economic ties with other countries who are able to replenish these goods. Whereas the banks are still witnessing a normal level of activity with customers in different parts of the world.
But What’s next!
Qatar’s ranking in the ease of doing business index has worsened continually since 2011, and the country currently languishes in position 83, far behind the UAE, a fellow GCC member; creating a more hospitable business environment will be key in order to attract foreign investment. It’s high time the Qatar government takes subsequent steps to improve the business environment, increase human capital and improve the efficiency of public investment.
Meanwhile, in the words of Christopher Davidson “They are trying to literally score a point here,” said, who teaches Middle East politics at Durham University in northeast England. “It sounds like a lot of money but given the stakes are hundreds of billions of dollars because of the World Cup, Neymar will be seen as a sound investment by Qatar.
“It proves they have the funds available and they have some liquidity to still be taken seriously.”
As Qatar has long used sports as a way to elevate its stature. This probably is Qatar’s ways of waging an international public relations offensive to fend off accusations by Saudi Arabia, the United Arab Emirates, Egypt and Bahrain that it supports extremists.