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Qatar and Privatisation:
Fuel for Economic Development?

by Sophie Smith

On 24 June 2021, Qatar Petroleum announced that it received commercial offers, covering double the offered equity stake, to participate in the North Field East project, the world’s largest liquified natural gas (LNG) development with unique advanced environmental features(1). Although the state-owned company has spearheaded the project alone, it is welcoming partnerships with major oil companies to distribute the financial risks involved in its development and assist in the sale of additional volumes of LNG that will be produced. Such cooperation between the public and private sectors speak to larger goals of privatisation in Qatar, which is seeking to expand the role of the private sector in realising goals of economic growth and prosperity in line with its economic development plans, National Vision 2030.

 

Privatisation Efforts in Qatar

 

Qatar’s privatisation efforts date back to the late 1990s and early 2000s when the government transferred control over electricity and water production and supply to the Qatar Electricity and Water Company (QEWC), a publicly listed company engaged in power generation and water desalination, and later the Qatar General Electricity and Water Corporation (Kahramaa), a government corporation managing the country’s water and power supply(2). In 1998, Qatar sold 45% of its stakes in the Qatar Telecommunications Corporation to private entities, acquiring around 2.7 billion QR (624.8 million EUR)(3). And, three years later in 2001, the country’s port services were privatised to improve the sector’s efficiency(4). That same year, the Ras Laffan Power Company Limited, a joint venture between the US AES Corporation, QEWC, Qatar Petroleum and the Gulf Investment Corporation, became the first independent power and water plant in Qatar(5). Similar initiatives in the wastewater sector have followed; for instance, in 2002, the government awarded the Gulf Waste Management Company a contract to perform municipal cleaning services in a bid to save its budget circa 500 million QR (112 million EUR) per annum(6). 

 

Against this backdrop, the Technical Committee to Motivate and Engage the Private Sector in Economic Development Projects was established under the Ministry of Economy and Trade to stimulate public-private partnerships (PPP) and support the private sector in economic development projects as it oversees the Ministerial Group for the Encouragement and Participation of the Private Sector in the Economic Development Projects, formed by the Council of Ministers, Qatar’s main executive body, in 2016 (7). Building on this, Qatar recognised the need to update and strengthen the legislative framework to regulate and increase the participation of private investors in public development projects. Recent examples include the Qatar Law No. 1 of 2019, in conjunction with the executive regulations issued by the Minister of Commerce and Industry under Resolution No. 44 of 2020, which regulates foreign investments (8). It stipulates foreign ownership of up to 100% in numerous economic sectors, among other regulations to boost foreign direct investment (FDI) in the country(9). Finally, Qatar adopted the important PPP Law No. 12 of 2020 that provides a legislative framework for regulating the private sector and its involvement in development projects to streamline and accelerate PPP initiatives (10).

 

These initiatives further support privatisation projects that have mushroomed in the past few years. For example, the sewage treatment plants in Al Wakra and Al Wukair that are being developed under a PPP agreement will be managed by a private entity for 25 years before being transferred to Qatar’s Public Works Authority (11). Likewise, in the power sector, similar initiatives have followed over the years, with one of the most recent being the Al Kharsaah solar power project, Qatar’s first large-scale solar plant, which was awarded to France’s Total and Japan’s Marubeni in January 2020 (12). Beyond water and power-related projects, privatisation initiatives of late have pierced into other spheres. For instance, in the education sector, the Qatar Schools PPP Development Programme, scheduled for completion between 2021 and 2023, intends to build and maintain 45 public schools for about 4 billion QR (900 million EUR) (13). In the healthcare sector, primary healthcare centres are set to be developed under a PPP as part of the Qatar Healthcare PPP Programme, announced in September 2020  amid the pandemic (14). This comes as Qatar looks to expand the private sector’s share in the healthcare market to 25% by 2022 to improve the quality of healthcare (15). Additionally, the country is looking to expand private investors’ involvement in real estate (16). And, in June 2021, Qatar signed three Memoranda of Understanding with Russian businesses to encourage their investment in agriculture-technology, hospitality and cybersecurity, among other sectors (17).

 

Why is Qatar privatising?

 

Qatar’s recent privatisation impetus comes as part of its Second National Development Strategy 2018-2022, which falls in line with its overarching economic development plan, National Vision 2030. Indeed, private sector development, with a particular emphasis on maximising PPPs, is seen as key to achieving sustainable economic growth (18). In this regard, the private sector would help reduce Qatar’s reliance on hydrocarbons revenues by contributing to economic diversification in priority sectors, notably manufacturing, financial services, professional and scientific activities, tourism, logistics, information and communication technology (19). Moreover, privatisation may help increase productivity levels in the aforementioned key sectors as the private sector is regarded as a driver of innovation and entrepreneurship while strengthening the labour market. As a result, such initiatives may equally help Qatar realise its goals of becoming a regional hub as its priority sectors become more competitive. And privatisation should lead to greater efficiency in government spending as it reduces its involvement in priority sectors. Within this context, the living standards of Qatar’s citizens are set to improve with new employment opportunities and increased quality of provided services. 

 

Such initiatives have become ever more pertinent amidst the COVID-19 pandemic, which has seen Qatar’s economic growth drop by more than triple to -2.6% as its budget balance shrunk to 1.32% of GDP in 2020 (20). Throughout this, unemployment equally took a turn for the worse, with previously relatively stable levels circulating just above 0.1%, skyrocketing to 3.45% in 2020 (21). Despite the increased urgency, however, Qatar still has a way to go in reaching the full potential of privatisation. According to the National Development Strategy, existing policies present several flaws, including oligopolistic practices, ineffective litigation systems and cumbersome regulatory processes, that make it more challenging for the private sector to flourish (22). Equally, market failures inhibit the private sector’s expansion into new areas, as there is a lack of incentives — in terms of an effective market size and activity — for private companies to do so (23). This comes as the private sector often faces difficulty entering the market due to factors such as a lack of financial resources or basic utility services (24). As a result, the ease of doing business in the country continues to be one of the least favourable in the Gulf region, ranking second to last in the Gulf Cooperation Council (GCC) (and 77th globally) in the World Bank’s index (25). Foreign direct investment inflows substantiate this, with figures dropping to the negatives from 2018 (-1.19% of GDP) onwards (26). Thus, while recent initiatives in privatisation are setting Qatar on the right path in realising its goals, there remain issues that require addressing for the private sector to fully flourish in line with Vision 2030. 

References

[1] Qatar Petroleum, ‘Qatar Petroleum has received offers for double the equity available in the North Field East project (NFE),’ Qatar Petroleum, June 24, 2021. https://qp.com.qa/en/MediaCentre/Pages/ViewNews.aspx?NType=News.
[2] Qatar Electricity and Water Company, ‘About,’ Qatar Electricity and Water Company, n.d. https://www.qewc.com/qewc/en/about/; Kahramaa, ‘Welcome to Kahramaa,’ Kahramaa, n.d. https://www.km.qa/Pages/default.aspx.
[3] Jasim H. Ali, ‘GCC Insights: Qatar: Privatisation drive moving gradually,’ Gulf News, September 13, 2002. https://gulfnews.com/uae/gcc-insights-qatar-privatisation-drive-moving-gradually-1.398431.
[4] Ibid.
[5] Ras Laffan Power Company, ‘About Us,’ Ras Laffan Power Company, n.d. https://www.rlpc.net/en/about-us/.
[6] Ali, ‘GCC Insights: Qatar: Privatisation drive moving gradually.’
[7] Ministry of Development Planning and Statistics, Qatar Second National Development Strategy 2018-2022 (Doha: Ministry of Development Planning and Statistic, 2018). https://www.psa.gov.qa/en/knowledge/Documents/NDS2Final.pdf - search=private sector.
[8] Law no. (1) of 2019 On Regulating Non-Qatari Capital Investment in the Economic Activity (2019) (Doha: Government of Qatar, 2019). https://docplayer.net/185899673-Law-no-1-of-2019-on-regulating-non-qatari-capital-investment-in-the-economic-activity-2019.html.
[9] Ibid.
[10] The Ministry of Commerce and Industry, ‘The Ministry of Commerce and Industry highlights Law No. (12) of 2020 regulating partnership between the public and private sectors,’ The Ministry of Commerce and Industry, June 1, 2020. https://www.moci.gov.qa/mec_news/وزارة-التجارة-والصناعة-تسلط-الضوء-على-4/.
[11] Ashghal, ‘Ashghal’s Roadshow for Al-Wakra & Al-Wukair Sewage Treatment Plant via PPP,’ Ashghal, March 26, 2019. https://www.ashghal.gov.qa/en/MediaHub/News/Pages/Ashghal-Roadshow-for-Al-Wakra-and-Al-Wukair-Sewage-Treatment-Plant-via-PPP.aspx.
[12] Total Energies, ‘Total to develop Qatar’s First Large-Scale (800 MWp) Solar Plant,’ Total Energies, January 20, 2020. https://www.totalenergies.com/media/news/press-releases/total-develop-qatars-first-large-scale-800-mwp-solar-plant.
[13] Oxford Business Group, ‘Public-private partnership builds in Qatar attract foreign direct investment,’ Oxford Business Group, n.d. https://oxfordbusinessgroup.com/analysis/new-approach-public-private-partnerships-take-greater-role-government-projects-and-help-attract.
[14] Ashghal, ‘Announcing a request for expressions of interest to develop primary health care centers on the basis of a public-private partnership,’ Ashghal, September 10, 2020. https://www.ashghal.gov.qa/ar/Tenders/Pages/PrequalificationDetailsPage.aspx?PrequalifID=65
[15] Ministry of Development Planning and Statistics, Qatar’s Second National Development Strategy 2018-2022.
[16] Investment Promotion Agency, ‘IPA Qatar shares positive outlook on real estate opportunities for international investors,’ Investment Promotion Agency, February 24, 2021. https://4d378f7f-dcba-447d-a9b2-64b17fa64ba9.filesusr.com/ugd/15d8da_d57226f2146044f0ab025f2512add5d1.pdf.
[17] Investment Promotion Agency, ‘IPA Qatar signs investment agreements in fields of cyber security, agriculture, and hospitality at SPIEF 2021,’ Investment Promotion Agency, June 8, 2021. https://4d378f7f-dcba-447d-a9b2-64b17fa64ba9.filesusr.com/ugd/15d8da_6a78b5a816074117b8fc3eab58dd6192.pdf.
[18] Ministry of Development Planning and Statistics, Qatar’s Second National Development Strategy 2018-2022.
[19] Ibid.
[20] IMF, ‘Real GDP Growth,’ IMF, n.d. https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD; IMF, ‘Net lending/borrowing (also referred as overall balance),’ IMF, n.d. https://www.imf.org/external/datamapper/GGXCNL_G01_GDP_PT@FM/ADVEC.
[21] The World Bank, ‘Unemployment, total (% of total labor force) (modeled ILO estimate) – Qatar,’ The World Bank, 2021. https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?locations=QA.
[22] Ministry of Development Planning and Statistics, Qatar’s Second National Development Strategy 2018-2022.
[23] Ibid.
[24] Ibid.
[25] The World Bank, ‘Ease of Doing Business rankings,’ The World Bank, n.d. https://www.doingbusiness.org/en/rankings?region=middle-east-and-north-africa.
[26] The World Bank, ‘Foreign direct investment, net inflows (% of GDP) – Qatar,’ The World Bank, n.d. https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?locations=QA.