AsianInvestor Qatar report: society

Asian Investor Qatar report, July 2013

Qatari society is amid an evolution, and a very rapid one. Independent only since 1971, and with an economy based on fishing and pearling until the discovery of hydrocarbons in the 1940s, today it has the world’s highest per capita GDP, according to the IMF’s ranking for 2012.

The IMF puts the figure at $102,211 per person – more than $20,000 higher per capita than second-ranked Luxembourg, and the only nation in the world where six-figure individual wealth is the norm, not the exception.

This wealth stems, of course, from the extraordinary bounty of oil and natural gas – a small island nation that happens to sit on top of the third-highest proven natural gas reserves in the world. And, while that hydrocarbon trove has transformed the national society once, from near-subsistence to great personal wealth, it is now transforming it again as the Emir and government seek to diversify their economy and to build a model that will be sustainable when the oil and gas has run out.

A useful starting point for understanding the shifts in Qatar’s economy and society is the Qatar National Vision 2030 document, prefaced by Tamim bin Hamad Al-Thani and outlining the way the country wishes to develop in the years ahead. It acknowledges the “period of unparalleled prosperity” Qatar enjoys, with its advances in economic, human and social progress – such as the ratification of a permanent constitution in 2004. And it also point to the value of heritage, saying: “Despite rapid economic and social gains, as well as political change, Qatar has maintained its cultural and traditional values as an Arab and Islamic nation that considers the family to be the main pillar of society.”

“Qatar is at a crossroads,” the document says. “The country’s abundant wealth creates previously undreamt of opportunities and formidable challenges.” In essence, the National Vision aims to transform Qatar into an advanced economy by 2030, capable of sustaining its own development, and to do so by managing five challenges: modernization versus the preservation of tradition; needs of this generation and future generations; the balance between managed growth and uncontrolled expansion; the size and quality of the expatriate labour force; and economic growth with social development and environmental management.

One sees this in practice in a number of ways. For example, it is illuminating to look at the Qatar Foundation for Education, Science and Community Development. This institution, devised by the Emir and his wife in 1995, states its mandate as nurturing the future leaders of Qatar, and since 2010 has been accompanied by a dedicated endowment fund, one which captured international attention this year when it bought a US$1.26 billion, 5% stake in India’s Bharti Airtel. Investments like this, through the foundation, are designed to provide a sustainable income stream to fund the foundation in perpetuity. The level of effort made in both the foundation itself and its funding apparatus demonstrates how important Qatar considers a knowledge-based economy, and an educated local workforce, to be.

The 2030 Vision explicitly states that Qatar wants to build a world-class educational system comparable to that offered anywhere in the world, and that it particularly aims to be an active centre in scientific research and intellectual activity. Related to this, it wants (and probably already has) a world-class healthcare system.

Making this happen has already involved several shifts in the nature of Qatar society, in particular around immigration and the role of women. According to the World Report 2012, Qatar has the highest ratio of migrants to citizens in the world, with only 225,000 citizens in a day-to-day population of 1.7 million; it says there are more than 1.2 million migrant workers, mostly from India, Pakistan, Sri Lanka, the Philippines, Nepal and Bangladesh – and that construction alone employs 506,000 migrants (all these numbers are from the World Report 2012, referring to the situation at the start of that year). The contribution of this labour force is vital to Qatar’s development, particularly around infrastructure, and it is likely to continue to grow.

The role and rights of women are more liberal in Qatar than in many other Middle Eastern states, and the 2030 vision enshrines this as a stated ambition. “Women will assume a significant role in all spheres of life, especially through participating in economic and political decision-making,” it says. Women vote in municipal elections, and Qatar appointed its first female judge in 2010.

In this respect it is useful to understand the role of the Emir’s wife, Her Highness Sheikha Moza bint Nasser, who among other things is chairperson of the Qatar Foundation and very much its public face. “You see ladies getting involved in public life,” says Fadi Salibi, head of the Middle East for Axa. “They are encouraged very much by the wife of the ruler; she has taken a lot of initiatives on her own and has put in a big effort in promoting women in the workforce.” This, too, is likely to be a continuing trend in Qatar society.

Attempts to diversify wealth have brought Qatar very much into international consciousness, by two means in particular: investments of sovereign wealth in international businesses, mainly through the Qatar Investment Authority but also by several other sovereign vehicles; and the successful bid for the 2022 football World Cup.

The first of these is most evident when the QIA, usually through its Qatar Holding investment arm, buys in to big international businesses: Barclays, Credit Suisse, Volkswagen, Porsche, Hochtief, Harrods, and high-end property, particularly in London. Other vehicles have had a similar impact in sport, with Qatar Foundation appearing on the shirts of Barcelona football club, and with another institution, Qatar Sports Investment, having bought the French football team Paris St Germain. When this happens, it not only promotes Qatar to the world but exposes its own citizens to a more international mindset.

“Brand Qatar has grown,” says Akber Khan, director, asset management at Al Rayan investment. “And it has grown more from business transactions rather than advertisements in a newspaper or on TV. There have been high profile transactions across different sectors from real estate to mining to leisure and entertainment; regardless of your interests, it is hard not to have heard Qatar’s name in the last four years.”

Then there’s the World Cup bid, discussed in more detail in a separate article. If there was anyone who had not heard of Qatar before the successful bid, they certainly know it now. The choice of Qatar was not without controversy – chiefly around the prospect of playing football in an Arabian summer – but it gives the state a huge opportunity to showcase itself, and its ability to build world-class infrastructure.

Clearly another transformational effect of the World Cup will be the amount of infrastructure development needed to fulfill it, and this sits alongside a huge broader need for infrastructure development in Qatar, from housing to hotels, highways to railways. Shashank Srivastava, chief executive officer of the Qatar Financial Center, tells Asian Investor: “An estimated $140 billion is expected to be committed to infrastructure over the next five years. Adding in the investment necessary to host the 2022 FIFA World Cup, project spending over the next decade may exceed US$200 billion.” This, too, is discussed in more detail in a separate chapter, but for Doha residents the skyline – and the ground – is already in a state of transformation.

As Qatar becomes more international in its investments, so too the mindset of ordinary working Qataris evolves. “I started visiting Qatar in the late 90s, and there has been a big degree of change,” says Salibi. “You see more Qataris involved in their day to day life in private sector work. Before, they were mainly confined to government enterprise.” He notes the QFC is putting considerable effort into training young Qataris, “letting them take on jobs where they do the same work their expatriate colleagues are doing, with the same responsibilities,” including a large number of regulatory roles within the QFCA.  “And they travel more than before,” he adds. “Life is changing at a very fast pace.”

The Arab Spring had an interesting knock-on effect on Qatar, despite the fact – or, to put it another way, because of the fact – that no unrest came to the country. There is little appetite for change when one lives in the world’s richest country, and faith in the absolute monarchy of the Al Thani family appears to be very strong. But this was in marked contrast to many other places, and in particular neighbouring Bahrain, which until recently had built its economy on being a safe, stable, business-friendly hub through which foreigners could serve Saudi Arabia and to a lesser extent Kuwait.

One can argue how much difference this made to the relative economic fortunes of the two states – some conferences were swiftly moved from Manama to Doha, for example, but most financial services professionals who fled Bahrain probably went to the UAE – but it clearly does no harm that Qatar is a peaceful haven in a sometimes uncertain part of the world. Indeed, reflecting its increasingly international stance, Qatar offered itself as something of a broker when conflict arose elsewhere in the region like Egypt and Libya, and has been quick to provide funding to new regimes trying to find their feet in the region.

Qatar’s geopolitical stance is made particularly interesting by the presence of the Al Jazeera TV broadcaster, which until 2011 was owned by the government of Qatar but is now legally privately owned (although chaired by Hamad bin Thamer Al Thani, cousin of the Emir). Al Jazeera has swiftly become popular, and not just in the Arab world: increasingly westerners look to it for an alternate view, particularly to American stations. As the only channel to cover the outbreak of war in Afghanistan live from its own offices there, it has also been instrumental in shaping world understanding of conflicts in Iraq and Egypt, among other places. And it is an increasingly global enterprise: in January 2013 it bought Current TV in the US, in order to allow it to launch an American news channel.

“Al Jazeera gave Qatar a voice,” says Salibi. “Being forceful in its opinions and the way it puts them forward has really struck a chord with people who listened to them in the west. Rarely will you go into any circle in the west and people will not know who you’re talking about when you mention Al Jazeera.”

“I think the Al Jazeera development has been fascinating,” says Rod Ringrow at State Street. “It’s driven by Qatar’s desire to play a greater role on the geopolitical front. It has punched way above its weight on regional issues and is not afraid to get stuck in and have a go.”

It does raise some interesting questions for the future, though. “I do wonder whether that will cause some backlash against them down the road. It has caused issues with some of Qatar’s neighbours: that’s quite publicly known.”

So can Qatar modernize and keep its traditions? Locals say they see the effort being made: the expansion of Doha’s local souk, for example, is being done in a traditional manner, building in a similar style to the one the original souk was built in. A large part of the Qatar Foundation’s work is perceived to be about the preservation of heritage.

But grow Qatar most certainly will, and its society will continue to evolve as it does so.