Qatar model holds potential and risks for small-state development

Qatar

Qatar is one of the world’s smallest states, but it also has one of the largest gas reserves. Small and wealthy, Qatar’s policies have echoed elsewhere. Is it a guide for other small states to follow?

Qatar has the third largest gas reserves in the world valued by BP at 33.6 trillion cubic meters. In a world dependant on energy, Qatar reached the highest GDP per capita in the world in 2012, estimated at USD 88,000 per person, as well as soaring revenues reaching $9.6 billion in April 2012 alone. But the country shares problems with other GCC countries including Bahrain, Kuwait and UAE, where the small local population is outnumbered by a massive migrant one. In 2012, expatriates accounted for 94% of Qatar’s total labour force of 1.3 million. Furthermore, the country heavily depends on the profit generated by exploiting its non-renewable natural resources. In 2012, the Qatar Statistics Authority declared that half of Qatar’s GDP was generated by the oil and gas sector.  Whether these statistics are positive or not, the country’s rulers have tried hard to distinguish their small emirate from the rest of the Gulf States. Foreign politics is an obvious example.

Activist foreign policy

On the one hand, adopting unconventional stances has characterized Qatari regional foreign politics. Qatar was one of the first Arab states to establish diplomatic ties with Israel, starting in 1991. It is also one of the very few who maintain a relationship with Israel despite not having peace treaties following previous wars (e.g. Egypt and Jordan) or having a Jewish population (e.g Morocco and Tunisia). In the Gulf, it has many stances different from those of its neighbors who share the same political regime of family led states. Monarch-led countries like Saudi Arabia, UAE, and Bahrain were obviously very hesitant to welcome the Arab Spring, yet Qatar was a strong supporter of almost every regime change in the Arab world. For instance, while the majority of Gulf States restricted their relationships with the former Morsi regime and strongly back the current Egyptian administration, Qatar has sided with the Muslim Brotherhood.

On the other hand, seeking regional leadership has also been one of Qatar’s main foreign policy traits. Several times it offered to act as a mediator in regional and even distant conflicts. It hosted several Darfur peace process rounds and donor conferences, and proposed several initiatives to resolve the Arab-Israeli conflict. Seeking leadership sometimes extended to challenging other Arab countries, including the influential ones. This consequently gained Qatar several foes. The pre-2011 Arab League annual summits witnessed ongoing tension between the Qatari Emir and several other Arab leaders, especially Gaddafi and Assad. Ironically, few years later, Qatar became actively engaged in financing the air strikes against the Gaddafi regime as well as supporting the rebels in Syria’s civil war. It was the first and only Arab state who presented one of its citizens to run for the position of Secretary General of the Arab League in 2011 – a position that have always been dominated by Egypt since the League’s foundation over 60 years ago.

A real democracy?

Seeking an international reputation is also reflected internally. Qatar’s ruling family works hard to appear as modernizing and pro-democracy as possible. In a untypical move in the Middle East, the former Emir of Qatar Hamad Bin Khalifa handed over the power to his younger son Prince Tamim, making him the new ruler of the country. As the new Prince sacked the once powerful PM Hamad Bin Jassem and replaced the guard by a new one, Tamim declared he would continue his father’s track. Domestically, the new Emir seems to face several challenges, starting with re-organizing his own household, up to fixing regional relationships by creating an effective government structure and tackling the country’s social issues. It is too early to judge if this power-shift is a reform step towards government accountability, transparency and maybe a bit of democracy like Kuwait, or if it nothing but a promotional façade to this small country seeking both power and attention. Political freedoms have not seemed to change substantially. A poet was sentenced to 15 years in prison for allegedly inciting the people and insulting the former Emir in a poem in 2010. The verdict was nothing but confirmed during an appeal that took place earlier this month.

Resources and mounting challenges

Business-wise, Qatar is more successful than it is in its internal politics. The Emir seems to have an integral plan to diversify the economy through different approaches, including developing the private sector to attracting financial services entities, promotion of tourism and of course encouraging its sovereign wealth fund, Qatar Investment Authority (“QIA”), to invest in a variety of sectors around the world. The QIA is considered one of the wealthiest in the world, with assets estimated between USD 100-200 billion, and a long list of shares and investments that include Porsche, Agricultural Bank of China, Santander Brasil, Spain’s Iberdrola, Hochtief Greek banks, Britain’s Harrods and France’s Printemps, Paris Saint Germain and other European football clubs, Airbus and others. However, as the world recovers from the crisis, the conditions that helped Qatar build up a monstrous portfolio are changing. Deal conclusions would need to improve and become more rational, transparent and institutionalized.

The country still has much to do regarding its business environment. It ranked the 40th on the World Bank Ease of doing Business Report, while Saudi Arabia ranked 22nd and UAE ranked 26th. Qatar seemed to have problems with personal credit facilitation (where it ranked 104 out of 189) as well as protecting investors (where it ranked 100). Not only does the emirate need to improve its business rules but also its local human resources. A study by the Qatari Labour Ministry found that young nationals are not qualified enough to enter the job market, which explains why 92% of the local work force work in the public sector. As providing public sector jobs is slowing, Qataris have to consider preparing themselves to enter the private sector with more qualifications and competitiveness.

Avoiding the resource curse takes more than establishing mega infrastructure projects or hosting future universal events such the World Cup. Increased foreign assets certainly mean more diversification, but also signify more dependency on a fluctuant global economy. Meanwhile, avoiding the Dutch disease requires Qatar’s rulers not to be disillusioned by its position as the biggest exporter of liquid gas in the world, its enormous gas reserve, or its new natural gas discoveries. It is a country that definitely draws the world’s attention, but that still needs to prove if it is really that different from its other small, energy-rich neighbors.

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Categories: Middle East/North Africa, Natural resources

Author:Ahmed Abou Taleb

Ahmed is a trilingual political analyst and security researcher with an experience in the news industry and a comprehension of media & PR dynamics. In his researches, he worked on conflict analysis, political violence as well as state and nation building. He also tackled the Sudan – South Sudan peace agreement and assessed its implication regarding security arrangements and public administration. He has published research on cyber security and the 21st century online “hackivist” groups. Currently, Ahmed is working on Security Sector Reform, Post Arab Spring transformations in the MENA region, Corruption & Risk Analysis in developing countries especially in the Middle East, Africa & South America. He is also very interested in Defense and the growing relation between security and development worldwide. Ahmed has received a graduate education in Business & International Commerce in Egypt and France. He then pursued political science post-graduate studies in France and graduated with a Master's of Comparative Politics from the Institute of Political Studies (Sciences Po Aix). He conducted field research in both Northern & Southern Sudan. He worked for Perception Communication, BBC Arabic and several Egyptian NGOs.

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  1. Qatar has highest density of millionaires, study | How to become Millionaire - December 13, 2013

    […] Is Qatar the small-state guide to politics and business? (globalriskinsights.com) […]

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