9 Sept 2015
Qatar: Market Profile
Major Economic Indicators
- Qatar’s real GDP growth slowed to 4.1% year-on-year (YoY) in Q1 of 2015, after expanding by 6.1% in 2014 on the strength of its non-oil sector. The country is projected to expand by 7.1% and 6.5% in 2015 and 2016 respectively due to massive infrastructure investment and further economic diversification.
- In preparation for the 2022 FIFA World Cup, along with the Qatari bid to host the 2024 Olympics, large-scale infrastructure projects are underway, including construction of stadiums, rails and highways. The government plans to spend up to US$ 205 billion on infrastructure over 2013-2018.
- Hong Kong's exports to Qatar grew by 15.5% to US$77 million in the first seven months of 2015, while imports from Qatar went down by 45.6% to US$67 million.
Current Economic Situation
Qatar’s real GDP slowed to to 4.1% year-on-year (YoY) in Q1 of 2015, after expanding by 6.1% in 2014 on the strength of its non-oil sector, which expanded respectively by 11.3% for that year, and 8.9% in the first three months of 2015. Double-digit growth was seen in the construction, finance, trading and hospitality sectors on the heels of a 10% increase in Qatari population in 2014. The share of non-oil sector in the country’s nominal GDP increased from 41.9% in 2011 to 48.9% in 2014, with the construction sector rising 17.7% as infrastructure building accelerated. The Qatari authorities are optimistic over the expanding contribution of the non-oil sector, also expecting the start-up of the Barzan gas project to boost the economy. The IMF expects the Qatari economy to expand by 7.1 % in 2015, supported by massive public investment for the 2022 FIFA World Cup and further economic diversification.
In the preparation of the 2022 FIFA World Cup, plus the Qatari bid for hosting the 2024 Olympics, the government plans to spend up to US$205 billion over 2013-2018 on infrastructure projects. Massive infrastructure projects are underway including the construction of stadiums, rail connection and highways. To strengthen its tourism capacity, Qatar plans to increase the number of hotel rooms from the current 15,000 to 95,000 in 2022. By 2018, 21 new hotels will be added in Doha, the capital of Qatar. Further, the Qatar Tourism Authority (QTA) plans to invest US$17 billion on tourism-related infrastructure projects over the next five years, projecting the GDP share of travel and tourism to rise from 0.7% in 2011 to 6.4% in 2021. In addition, QTA launched the ‘Qatar National Tourism Sector Strategy 2030’ in 2014, targeting to push the contribution of travel and tourism sector up to account for 8% of GDP by 2030.
Qatar has been the world’s largest liquefied natural gas (LNG) exporter since 2006, boasting the world’s third largest proven gas reserves (2013) following Iran and Russia. Qatar Petroleum (QP), the national oil and gas company, is responsible for developing the country’s LNG sector from upstream to downstream, including exploration, production, storage and marketing. QP is active in partnering with international oil companies, which purchase LNG from the projects which they invest in Qatar (e.g. ExxonMobil). Japan, the world’s top LNG buyer, has increased LNG imports from Qatar since the 2011 Fukushima nuclear disaster, with many multi-year supply contracts signed.
After completing the LNG investment programme in 2011, Qatar has started to focus on the downstream energy sectors. Qatar’s Ministry of Energy and Industry noted that US$25 billion will be spent to raise the current LNG output from 9.2 million tonnes per year (mty) to 23 mty by 2020, and the new long-term strategy will further diversify the economy.
Thanks to its huge natural gas reserves, Qatar’s per capita income of US$93,965 ranked as the world’s third highest in 2014, only after Luxembourg and Norway. The government aims at utilising the enormous oil wealth to develop a sustainable economy. In its National Vision 2030 development plan, the government is dedicated to building a services-oriented knowledge economy through investment in infrastructure, education and healthcare. Despite the erosion of exports and fiscal revenues due to lower oil and gas prices, Qatar is expected to post a small fiscal surplus in 2015, with fiscal outlooks in outer years also hinging on the prospects of investment incomes.
Qatar uses its trade surplus accumulated from oil and gas wealth to establish the Qatar Investment Authority (QIA). In 2014, QIA indicated that the fund had about US$110 billion in assets under management. QIA and its subsidiaries invest in leading companies in non-oil sectors, such as hotels, retail, real estate and manufacturing, in the hope that such experiences will help lift Qatari standards and diversify the economy.
Qatar’s media sector is in a leadership position in the Gulf. Al Jazeera, a news network based in Doha, is renowned for its broadcasting independence. Al Jazeera has broadcast centres in Doha, Kuala Lumpur, London and Washington DC, making it a Middle Eastern broadcaster with a global reach.
In the Global Competitiveness Report 2014-2015 published by the World Economic Forum, Qatar ranked 16th out of 144 economies, and was the second most competitive economy in the Middle East after the UAE. Qatar’s competitiveness is underpinned by its macroeconomic stability and high efficiency in the goods market, which rank globally 2nd and 4th respectively.
Qatar is a member of the World Trade Organisation (WTO), and maintains a liberal trade regime.
Non-Qataris are barred from engaging in distribution activities in Qatar. Importers, who must be Qatari nationals, have to register in the Importers Register and be approved by the Qatar Chamber of Commerce and Industry (QCCI).
Qatar maintains a strong tie with other fellow members of the GCC (which consists of Saudi Arabia, Kuwait, Oman, the UAE, Bahrain and Qatar). In 1999, the GCC agreed to form a customs union, which took effect from 2003 to zero-rate the goods traded within the GCC. To qualify for zero-tariff, such goods must be accompanied by a certificate of origin (CO) by the chambers of commerce in the GCC. Under the accord, goods imported into the GCC area can be freely transported subsequently throughout the region without paying additional tariffs.
The standard rate of external tariff is 5% (ad valorem) in accordance with the GCC customs union. As a result, Qatar’s customs duty is calculated on the CIF value at the rate of 5% for most Hong Kong products. It also provides a list of items that can be imported duty-free. According to the WTO, Qatar‘s simple average most favoured nation (MFN) applied tariff was set at 5.4% for agricultural goods and 4.6% for non-agricultural goods in 2013.
Certain local manufacturers are protected by a higher customs duty. For example, Qatar has a 15% tariff on records and musical instruments, 20% on steel and cement, 30% on urea and 100% on alcohol. Imports of pork and pork products had been prohibited until 2012. The Qatar Distribution Company (QDC), a subsidiary of the national air carrier Qatar Airways, has been granted the sole authority to import pork and alcohol products.
With the approval of the Director General of Customs, some categories of goods may be temporarily allowed to be imported without collection of customs duties. These include heavy machinery and equipment for project execution, semi-finished products, use in exhibitions and temporary events and machinery, and commercial samples. This approval is normally valid for a period of 6 months, but may be extended by another 6 months.
Two Free Zones, namely the Qatar Financial Centre (QFC) and the Qatar Science and Technology Park (QSTP), have been established, with tax & duty incentives provided. Currently, Qatar’s government is encouraging foreign investment by streamlining licensing and financial sector regulations, with the corporate tax rate set at 10%. More recently, Qatar has started work on the country’s new special economic zones, which will be divided into three projects, namely the Ras Bufontos, the Umm Al Houl and the Al Karaana, to focus on different sectors. These three zones are expected to be completed in phases between 2017 and 2022 and offer favorable tax & duty incentives.
Hong Kong's Trade with Qatar
Hong Kong's total exports to Qatar grew by 15.5% to US$77 million in the first seven months of 2015, after increasing by 14.6% in the whole year of 2014. Major export items included telecom equipment and parts (US$25 million, 33.3% of total), pearls, precious & semi-precious stones (US$7 million, 9.7% of total), and travel goods & handbags (US$7 million, 9.3% of total).
Owing to the sharp decline in international oil prices, which depress prices of petroleum products, Hong Kong's imports from Qatar went down by 45.6% to US$67 million in the period of January-July 2015, after dropping 17.2% in 2014. Of the major imports, petroleum oils (other than crude) topped the list (US$48 million, 72.2% of total), followed by polymers of ethylene in primary forms (US$8 million, 12.6% of total).