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Qatar sets sights on knowledge-based economy

Published: 05/03/2013 05:26:11 PM GMT
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The Ministry of Trade and Business yesterday launched for the first time a report that gave an overview of the evolution of Qatar's economy over t (more)

The Ministry of Trade and Business yesterday launched for the first time a report that gave an overview of the evolution of Qatar's economy over the last three decades until 2012.

The Qatar Business and Trade 2012 study has been prepared and presented under the patronage of HE Sheikh Jassim bin Abdulaziz al-Thani, the Minister of Business and Trade.

Mira al-Attiyah, assistant undersecretary for trade affairs, said the aim of the report was to provide context to economic stakeholders and decision-makers with information and data that would facilitate Qatar's way forward to growth and sustainable development.

"We hope to publish such reports on an annual basis from now on. Next year there will be another report that will compare the results from 2013 with the previous years."

She said Qatar had now embarked on plans to diversify its economy away from its heavy dependence on hydrocarbons to a knowledge-based economy.

Professor Nitham M Hindi , Dean, College of Business and Economics at Qatar University, said the biggest challenge for the state was to turn its oil-based economy into a knowledge-based one.

The professor, who spoke at a discussion panel, said the other most important challenge for Qatar's economy was the absence of small and medium enterprises. "World over, SMEs are the backbones of economies."

He called for more facilitation in loans and credit to companies in the industrial sector.

The report notes that Qatar relies heavily on its oil and gas export revenues while the bulk of consumables, raw materials and capital goods are imported. To diversify its economy, Qatar has taken steps such as investing in foreign assets; introducing regulations to stimulate economic growth; establishing free zones; encouraging a knowledge-based economy; and promoting itself as a tourist destination leading up to the 2022 FIFA World Cup.

Qatar's real GDP grew at a compounded annual growth rate of 13% between 2000 and 2011, which was maintained during the global financial crisis. "I expect Qatar to maintain its high growth the following years," the professor said. However, he warned that the government must keep its eye on inflation.

Inflation remained high between 2005 and 2008 and peaked at over 15% in 2008. This was followed by a deflationary period during 2008 and 2010, mainly due to declining real estate and oil prices. In 2011, inflation was recorded at 1.9%.

CEO of QNB Capital, Salman al-Muhannadi, said the only way to shift from a hydrocarbon-based economy to a knowledge-based one was through the creation of quality human resources.

"The state has built the infrastructure, now it's for the private sector to play a bigger role."

He called for mechanisms to inject fresh blood into the system. "You can't expect a 50-year-old who is all set in his business to take more risks."

The study highlights that the highest percentage ownership of the registered companies is being held by Qatari nationals (77%). There has been an increase in the number of Qatari and foreign shareholders after restrictions imposed on foreign investors were eased in 2000 .

Mira al-attiyah said: "Qatar is interested in foreign investment that adds value. For example, companies that transfer technology and train our human resources."

When asked whether Qatar needed to establish free economic zones, experts, including former minister Sheikh Hamad bin Faisal al-Thani, said they were needed in countries where there were many restrictions. In their opinion, Qatar was already providing a lot of freedom to foreign companies such as one of the lowest tax rates in the region.

The report notes that the foreign investment law amended in 2000 has made it easier for foreign investors to penetrate the Qatari market, allowing them to potentially own 100% of the company and offering incentives such as no income tax payable on salaries, permitted full repatriation of capital and profits overseas and corporate tax on foreign companies of only 10%.

The report also notes that establishments in Qatar grew at a stable rate since the 1980s; however towards the end of 2008 there was a sharp decline in the number of establishments, which can be attributed to the global economic crisis.

The distribution industry, which includes the wholesale and retail trade, has been the most dominant industry sector since 1980 and currently accounts for 59% of all companies incorporated in Qatar.

The second largest sector is the construction industry with 17%, followed by the consulting and technical services sector and the lifestyle services sector accounting for 9% and 8% of issued, respectively.

The education sector has experienced a 19% growth over the last 10 years while the healthcare sector in Qatar has witnessed a strong 15% growth in terms of the number of new entities registered. The positive growth trends in the education and healthcare sectors indicate that the Qatari market is moving in line with the 2030 National Vision.

© Gulf Times 2013

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