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Leading the Way
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ome things never change, but Qatar isn't one of them. In the country's short history – Qatar is a year shy of its 40th birthday – it has managed to transform a peninsula known mostly for pearl fishing into an economic powerhouse, largely thanks to a seemingly limitless supply of hydrocarbons. Lately, it seems like the already lightning-quick pace of change is doubling. A desire to diversify the economy away from its reliance on hydrocarbon revenue has spurred investment in industry, infrastructure, real estate, and cultural developments. High-profile investments like the recent purchase of Harrod's department store in London (for £1.5 billion, or $2.21 billion) and the construction of the I M Pei-designed Museum of Islamic Arts in Doha have made headlines across the world. Add to this ten solid years of budget surpluses, rising oil and gas prices, and the state's resilience through the economic downturn of 2008-2009, and it is easy to see why Qatar is in many ways the darling of the international investment community at the moment. Bond issues in both the private and public sectors in 2009 were oversubscribed by approximately six and a half times across the board – an amazing statistic any year, made even more so by the fact that growth did not return to many markets until the latter half of 2009. Credit ratings bureaus have given Qatar's sovereign debt a listing of Aa2 (Moody's) and AA – (Standard & Poor's), helping spur the record-breaking order book of
nearly $27 billion for the largest sovereign bond issue in the region - $7 billion – in November 2009. The major companies which issued bonds this year enjoyed similar votes of confidence from Standard and Poor's, Moody's, and Fitch – Qatar Telecom (Qtel) was assigned A-, A1, and A+, respectively; RasGas merited grades of A, Aa2, and A+. This adds up to a considerable amount of economic and diplomatic clout for a country of 1.6 million inhabitants. On the whole, people are acting like Qatar is a safe bet. The country's hydrocarbon wealth is the most often cited reason for confidence in the country: the North Field alone has enough gas to support planned production for the next 200 years, and rising demand from thriving eastern economies is forecast to make up for any lessening demand from Europe and the Americas. More importantly, however, Qatar has gained a reputation as the kind of place where things get done, not just talked about. Those who once criticised the country for its 'outsize ambitions' have had to reconsider their positions in the face of Qatar's sometimes astonishing success stories: creating a state-run airline, Qatar Airways, that can rival Emirate, luring I. M. Pei out of retirement to design what has become, it seems, the first of a series of architectural marvels in the region, and building a news network, Al Jazeera, that many rank alongside CNN and the BBC.
The crisis that changed everything
Yet November 2009 has irrevocably changed the level of investor confidence in
the Gulf Region. While the magnitude of Dubai's bubble burst has largely been spun to excess – by most indicators, Dubai is already recovering much of the value lost in the market downturn – the fact remains that some investors lost staggering sums of money. As a result, the Gulf is no longer seen as a place where sand turns into gold on a reliable basis. Investors are right to approach the region with more caution, and to demand more transparency and regulation in developing markets. In this respect, Qatar has the potential to be a pioneer, as it already has been in so many other areas. The government announced in 2007 that it would create a 'single unified financial regulatory platform' – a goal that, understandably, was put on the back burner throughout the financial instability of the last three years. Now, as investor interest and confidence picks up, might be a good time to look for movement on this goal once again. Outside the financial sphere, there have been calls for a cohesive real estate regulatory body which would facilitate the accurate valuation of property. Qatar took a step forward in that respect when, in 2008, it called for the registration of all property contracts. The next step might be to make that data available to independent ratings bureaus. The failings of other country's regulatory institutions throughout 2008 provide a potent lesson as Qatar moves forward. The country was probably right to halt the reforms that were underway in 2008-2009, lest the uncertainty in the market lead to regulatory overreaction. Now, however, is an ideal time to restart n
By Oliver Cornock The author is the Regional Editor of Oxford Business Group
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