Drivers of Economic Development in Qatar Paper Example

Acknowledgement and Declaration

This report is as a result of my own work and was taken in conformity with the world economic development code of Ethics and Conduct. I would like to thank individuals from Qatar population who allowed me to conduct the research. I hope this research will fulfill some of the challenges that are opposing the development of the economy of Qatar.

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Abstract

The economy of Qatar is one of the best world performing economies with a Gross Domestic Product of $124,930 in 2017. This was the highest in the world according to the annual IMF rankings of economies in terms of GDP. Oil and gas resources are the main driving forces of the economy. This sector accounts for 70% of all government revenues, 60% of GDP and comprises 85% of export revenues. The government has a very ambitious vision 2030 development program. The ambitious program seeks to transform the economy of Qatar. However, the path to vision 2030 has not been easy (Rogers, Simon, & Ami, 2011). As the challenges have come so has Qatar thrived. The Qatar economy is now a case study by many economists. This paper seeks to describe the theoretical framework of the determinants of economic growth in Qatar. This paper will discuss the main macroeconomic agents that have an increase in Qatar. The key drivers of growth are government expenditure, monetary policy, public and private administration, Foreign Direct Investments (FDI), technology, education standards, availability of human capital, international trade, and geographical location. This paper will discuss the factors that have driven economic growth and development in Qatar in the succeeding sections of the paper. Moreover, the critical examination of some of the challenges that hinder economic progress will also be mentioned.

Introduction

Qatar has one of the highest Gross Domestic Product in the world. According to the (The International Monetary Fund, (2018), Qatar has a nominal gross domestic product of $366.807 billion. To stimulate economic development and trade, GCC (Gulf Cooperation Council) commercial block was formed in 1981. The member countries consist of: Bahrain, Kuwait, Saudi Arabia, Qatar, and the United Arab Emirates, Qatar is one of the member countries has undergone structural transformations in its economic development since the inception of the economic block. The six GCC countries have approximately thirty-nine percent of the world's oil reserves. Qatar is endowed with the largest oil reserve in the region. Qatar, the United Arab Emirates, and Saudi Arabia jointly are endowed with approximately ninety percent of GCC countries natural reserve. (Abdalla et al. 2014). Qatar's endowment of natural resources is one of the contributing factors that have led to the recent economic growth that has occurred in the country. Increase in production of oil and gas has significantly contributed to the GDP of the respective countries in the trading block. However, there have been efforts to diversify the economy since the oil crisis phenomenon.

The issue on the determinants of economic growth has been one of the most heated debated by both classical and neoclassical economists. Classical economists like David Ricardo's theory of competitive advantage were later improved on by neoclassical economic growth theories like the Solow model that postulates the critical contribution of factors of production. The most recent argument on economic growth is the endogenous growth model by Barro (1991).The economy of Qatar is one of the best world performing economies with a Gross Domestic Product of $124,930 in 2017. This was the highest in the world according to the annual IMF rankings of economies in terms of GDP. Oil and gas resources are the main driving forces of the economy. This sector accounts for 70% of all government revenues, 60% of GDP and comprises 85% of export revenues. The government has a very ambitious vision 2030 development program. The ambitious program seeks to transform the economy of Qatar. However, the path to vision 2030 has not been easy (Rogers, Simon, & Ami, 2011). As the challenges have come so has Qatar thrived. The Qatar economy is now a case study by many economists. The population of Qatar is a mere 2.7 million citizens. However, this has not stopped the Qatari citizens of dreaming. The economy recently hit as a result of a tiff with its neighbors. However, it's the initiative that Qatar took to mitigate that will form the basis of many economic studies. This essay will examine the reasons behind Qatar's thriving economy in the midst of the turmoil in the Middle East and the acrimony with its neighbors.

According to heritage foundation a conservative think tank in the USA, the sanctions and embargo against Qatar is not working because the whole world isn't adhering to this sanctions. The restrictions strengthen the governments as opposed to weakening the economy; this is according to one MP from Italy. The government owns the majority of the infrastructure in the oil and gas industry. That means that over half of the revenues generated by this industry remain in government coffers giving the government huge muscle to exercise its influence in the market. The expenditure of the Qatar government contributes to 31% of GDP (Rogers, Simon, & Ami, 2011). In 2018 the government projected a budget deficit of$ 7.7 billion with the price of oil pegged $45. This was a very conservative figure would give the government a lot of room to wriggle.

Qatar is hosting the 2022 world cup in the colder month of December. In 2018 alone some $3 billion was allocated in the budget to set up infrastructure that goes with hosting a world cup. Some of these infrastructures are stadiums, transport, and hospitality infrastructure. It is estimated that Qatar will spend will have spent about 46% of GDP in financing a new railway, Doha metro system, water and sewerage facilities and refurbishment of existing facilities.

Majority of the government expenditure has been to stimulate growth in non-hydrocarbon sectors. This economic diversification is meant to rid of Qatar from its dependency on oil and gas revenues. Crude oil prices are relatively low today when compared with prices a decade ago. Looking into the future, it is estimated that demand for oil and gas will register flat growth has major world economies move from fossil fuels.

As observed above, the Qatar government intends to wean off the economy from its dependence on oil and gas revenues. This is not to mean that oil and gas deposits are dwindling. In a real sense, the current levels of production can be sustained for decades to come. The diversification by the government has seen tremendous growth in the financial sector as well as the hospitality sector. In the years between 2012 and 2016, the contribution of the construction sector to GDP nearly tripled, from 4.6% of GDP to 6.6 % of GDP (El Mallakh & Ragaei, 2015). Whereas one can attribute a huge chunk of the growth to the 2022 world cup, the growth has trickled down not only to the financial sector but also the services sector of the economy. As a result of diversification, the contributions of oil and gas activities are projected to contribute up to 30% of GDP.

The blockade by the Arab countries accelerated plans for the diversity of traditional markets too. Qatar sourced more than half of its textiles and food from its Arab neighbors. Also, most of these commodities were transported over Saudi Arabia and the United Arab Emirates. The blockade caused shockwaves to the Qatari economy, and the financial markets felt it too. The government of Qatar is now making massive investments in producing its food. Experts estimate that the Qatari economy has lost close to $38 billion as a result of the blockade. 95% of Qatar food is imported, and the government is investing in irrigations systems to produce more food and vegetables. Also, the government is investing in massive food storage facilities like silos in its major ports.Diversification are also being observed in the transport sector. The Hamad seaport has seen some $7.4 billion worth in investment pumped into it this will ensure that it can play host to some of the largest Panamax vessels. Moreover, Hamad now has new shipping routes namely India, and Pakistan as well as turkey. Hamad international airport has seen several faces of multibillion expansions which have made Doha a major transit route. This has had two immediate effects. A Qatar airline has increased its reach worldwide, and the Manateq free zone which is now operational have also received a massive boost. The growth of the airline, the port, and the free zone are in tandem with the Qatari government's intention of Doha being a center for industry logistics, international travel, and trade. DHL and the Red Cross already have massive cargo handling centers in Doha.

Aim

The aim of this research is to identify and describe the macroeconomic factors that have driven economic growth in Qatar. The research will also look into the implementation of different plans of the government of Qatar in efforts to achieving economic development.

Research objectives

Considering the good performance that Qatar has shown in its economical growth, the region has hence attracted most research on some of the drivers that will help Qatar achieve vision 2030.Therefore; this research intends to determine significant drivers of Qatar's economic development.

Objectives of the study:

1. To analyse Qatar's development based on development theories.

2. To evaluate relevant economical driver's based on the literature.

3. To analyse the contribution that Qatar's economical drivers has in relation to general development and vision 2030.

Research questions

1. What are the major economical development driver's theories that relate to general development of Qatar?

2. What are the relevant economical policies that would highly facilitate economical development in Qatar?

3. What is the correlation between the economical development elements with the one for Qatar?

Literature Review

The IMF predicts that...