QATAR STEPS UP TRANS­PORT SPEND­ING

Mo­men­tum is build­ing across Qatar's rail, avi­a­tion and port projects, on the back of ris­ing in­vest­ment, paving the way for a broad­en­ing of the state's eco­nomic base.

Qatar Today - - BUSINESS > VIEWPOINT - BY OLIVER CORNOCK The au­thor is the Re­gional Ed­i­tor of Ox­ford Business Group.

Higher in­vest­ment in Qatar's trans­port net­work will support ef­forts to di­ver­sify the econ­omy, ac­cord­ing to a re­port pro­duced by the Cen­tre for Eco­nomics and Business Re­search (CEBR) on be­half of the In­sti­tute of Char­tered Ac­coun­tants in Eng­land and Wales (ICAEW). The re­port, pub­lished in mid- Septem­ber and en­ti­tled “Eco­nomic In­sight: Mid­dle East Q3 2014”, noted that stronger trans­port in­fra­struc­ture would also re­in­force GCC in­te­gra­tion.

Re­gional po­ten­tial

In its find­ings, the CEBR said in­vest­ment in Qatar's rail and avi­a­tion in­fra­struc­ture would be­gin to have a marked im­pact over the next few years, with the lo­gis­tics sec­tor's con­tri­bu­tion to GDP ex­pected to reach 8.4% in 2018, up from 6.5% in 2013, ac­cord­ing to the Min­istry of De­vel­op­ment, Plan­ning and Statis­tics.

An im­proved per­for­mance on this scale would make Qatar bet­ter placed to step up trade re­gion­ally and beyond in the years to come, said ICAEW's re­gional di­rec­tor for the Mid­dle East, Africa and South Asia, Michael Arm­strong.

“While Qatar cur­rently has the low­est level of in­tra-re­gional trade of all the GCC na­tions, ex­port­ing only 1% of to­tal goods

to the Mid­dle East in 2013, this sit­u­a­tion is ex­pected to change sig­nif­i­cantly when the coun­try's rail and air­port projects come on-line. This di­ver­si­fi­ca­tion will help foster in­ter­nal com­merce and in­vest­ments nec­es­sary for sus­tain­able long-term growth,” he said.

The re­port noted that high lev­els of in­vest­ment in key sec­tors of the econ­omy, in­clud­ing trans­port, should put Qatar's econ­omy on course to post growth of 6.3% in 2014, edg­ing to­wards 7% in the fol­low­ing two years, well above the pre­dicted re­gional av­er­age.

QNB Group was even more bullish in its eco­nomic up­date, re­leased at end- Septem­ber. The bank said it ex­pected GDP to ex­pand at be­tween 6.8% and 7.8% up to 2016. Much of the growth, the group said, would be fu­elled by in­vest­ment in the trans­port, con­struc­tion and ser­vices sec­tors.

Key part for port

Qatar's New Port Project (NPP), which is un­der con­struc­tion to the south of the cap­i­tal, Doha, will be a cor­ner­stone of the in­fra­struc­ture de­vel­op­ment. The first phase of the $7.4 bil­lion (QR27 bil­lion) fa­cil­ity is sched­uled to be­gin op­er­a­tions in 2016, with ini­tial ca­pac­ity to han­dle 2 mil­lion con­tain­ers and 2 mil­lion tonnes of gen­eral cargo an­nu­ally. Once fully com­pleted, the port will be able to han­dle 6 mil­lion con­tain­ers and man­age 2.7 mil­lion tonnes of gen­eral and grain cargo com­bined each year.

“The port is quite pos­si­bly the most crit­i­cal project for the coun­try,” Nabeel Mo­hammed Al Bue­nain, NPP's ex­ec­u­tive-di­rec­tor, told OBG. “The amount of ma­te­rial needed for the coun­try can­not come in via road and air. The coun­try has to have the new port op­er­a­tional on time to bring in the ma­te­ri­als re­quired for the in­fra­struc­ture boom that is un­der way.”

Con­struc­tion work on the NPP's fa­cil­i­ties will also in­clude a naval base for the Qatar Emiri Naval forces and an ac­cess chan­nel for Qatar Eco­nomic Zone 3 (QEZ3), one of three in­dus­trial zones. The project's plan­ners hope QEZ3 can at­tract ad­di­tional in­dus­trial de­vel­op­ment in the area by pro­vid­ing busi­nesses with sim­pler reg­u­la­tions and in­fra­struc­ture con­nec­tions. The area is set to fo­cus on build­ing up value-added in­dus­tries like down­stream met­als, petro­chem­i­cals and mar­itime in­dus­tries.

Port in­vest­ments are sig­nif­i­cant, but progress could be in­stru­men­tal to fu­ture eco­nomic plans. Ex­port-ori­ented ports de­liv­er­ing LNG and other hy­dro­car­bons around the world have been the dy­namo driv­ing the Qatari econ­omy for­ward. Con­tin­u­ing to mod­ernise port in­fra­struc­ture could support those rev­enue streams and keep trad­ing costs low for vir­tu­ally ev­ery sec­tor of the econ­omy.

Tap­ping into in­vestors

A gov­ern­ment stip­u­la­tion that at least 50% of the work car­ried out on the port project must be awarded to do­mes­tic con­trac­tors will en­sure that much of the in­vest­ment re­mains within the lo­cal econ­omy. How­ever, Qatar has also be­gun high­light­ing the op­por­tu­ni­ties emerg­ing in its trans­port projects to over­seas firms.

In Septem­ber, Qatar's Min­is­ter of Trans­port, Jas­sim Saif Ahmed Al Su­laiti, told par­tic­i­pants at an in­ter­na­tional in­fra­struc­ture con­fer­ence in South Korea that the coun­try would be set­ting aside $140 bil­lion for trans­port and other in­fra­struc­ture de­vel­op­ment projects over the com­ing five years. List­ing sev­eral of the projects, in­clud­ing the NPP, the metro and rail net­work and the planned ex­pan­sion of Ha­mad In­ter­na­tional Air­port, the min­is­ter said Qatar had plenty to of­fer over­seas in­vestors seek­ing op­por­tu­ni­ties in the re­gion.

Sheikh Ali bin Jas­sim bin Mo­hammed Al Thani, the Chair­man and Man­ag­ing Di­rec­tor of trans­port company Mi­laha, be­lieves the sec­tor will see in­creased ac­tiv­ity over the course of the year as im­ports rise, re­sult­ing, in part, from new in­fra­struc­ture de­vel­op­ments.

“We saw rel­a­tively strong growth of 10% plus in im­port vol­umes in the sec­ond quar­ter of 2014 and we are op­ti­mistic that this growth tra­jec­tory can be main­tained the rest of the year,” he told OBG. “We ex­pect vol­umes to con­tinue to grow in the sec­ond half of 2014, as the pipe­line of projects is start­ing to move into ex­e­cu­tion stage.”

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