Despite state-backed efforts, there is little evidence that knowledge-based industries have taken hold in Qatar amid a surging construction sector, according to a newly released government report.
Knowledge-based businesses are generally those in the high-tech, creative and other sectors that are dependent on intellectual capital and require well-educated and highly motivated people.
It’s a sought-after sector by governments around the world because it employs highly-paid professionals and generates wealth through exports.
Qatar’s economy is largely dependent on oil and gas – non-renewable resources that will eventually run out.
Government officials are attempting to diversify into several areas by funding entrepreneurship programs, creating space for high-tech firms in the Qatar Science & Technology Park and churning out graduates from universities within Qatar Foundation’s Education City.
However, the proportion of highly skilled workers within the country’s population actually declined between 2008 and 2012, according to the Ministry of Development Planning and Statistics (MDPS).
While the breakdown and growth of each sector is not known, young entrepreneurs have previously complained that onerous regulations make starting a business in Qatar difficult.
Meanwhile, the International Monetary Fund (IMF) has previously warned that the negative media attention surrounding the country’s human rights record may be making it more difficult for local employers to attract expats.
Unskilled and semi-skilled workers now account for 70 percent of the employed workforce as mega-projects such as the Doha Metro, Lusail and Msheireb Downtown Doha development pick up pace.
Economic outlook
Construction, real estate and financial services are expected to drive Qatar’s economic growth this year as oil production declines and natural gas extraction levels remain unchanged.
The country’s economy is expected to expand 6.3 percent in 2014, down from 6.5 percent last year, according to the ministry. Despite the small decrease, that pace of growth is still more than three times what the IMF forecasts for the US and nearly two percentage points higher than the fund’s outlook for the UAE.
Next year, Qatar’s economic expansion is expected to accelerate again with the opening of the new Barzan gas plant, which is expected to help push gross domestic product (GDP) up 7.8 percent next year.
Inflation, meanwhile, is expected to remain modest with consumer prices increasing 3 percent in 2014, down from an increase of 3.1 percent last year, driven by higher housing, entertainment and recreation costs.
The government’s figures are slightly rosier than the consensus estimates of private-sector economists, who predict marginally lower economic growth (5.9 percent) and moderately higher inflation (3.7 percent).
Spending drops
Amid a pledge from Qatar’s new Emir to reduce inefficiencies, government expenditures declined 1 percent last year. It’s the first time in at least five years that spending has declined and follows a 15.1 percent rise in expenditures in 2012-13.
Last year’s decrease came despite an increase in capital spending and a 14.6 percent increase in government wages and salaries.
The report attributed the savings to a restructuring of several government ministries as well as lower interest payments on government debt. Nevertheless, government expenditures in 2013-14 were 11 percent higher than budgeted, largely due to unplanned foreign grants to governments and other organizations.
While the report does not provide any specifics, Qatar frequently uses its wealth to bolster the finances of its regional neighbors, such as a $150 million grant given to the Palestinian Authority in late 2013.
The ministry’s report does not explicitly state the size of the government’s fiscal surplus, it pegs it at 12.6 percent of nominal GDP, which works out to US$25.52 billion.
This is in part because the government assumes oil will sell for $65 a barrel in its budget, even though the actual price hovers around $100. Furthermore, this year’s books were boosted by an accounting change that now combines Qatar Petroleum’s surplus with the government’s general finances.
Thoughts?
“One cannot expect to reap Oranges when one plants Apple Seeds.”
In its quest to have the World Cup 2022 in Qatar, most of the things that we plant are those related only to its success. Infrastructure, Real Estate and Hospitality are three growing sectors, that will surely benefit from the World Cup.
In order to really foster a knowledge based industry, one must sufficiently invest on it. Further focus on S.T.E.M, based education, giving higher number of grants for technology research and development and having immigration policy that will attract people with talents and high potential in science and technology will surely sow the seeds of a knowledge based industry in the future.
This article is worth noting, there is a serious brain drain of skilled professionals. People are just not willing to come to Qatar due to their Out of Reality labor laws, laborers treated as not human, lack of infrastructure, schools, hospitals, leisure spaces, inefficient bureaucracy and shocking levels of red tape ….
Add to this the significant number of highly educated young Qataris who either do not return from their studies abroad or leave not long after studying in Education City. The actual number isn’t huge, but it is often the best and brightest of a very small population.
Elkhorn, the investment in science, technology, medicine, ICT etc. is to be applauded but it won’t connect with local business for decades for the single reason that Qatar is constraining commerce through its protectionist policies. You could add to this management that is lacking in depth and experience, the dreaded Kafala (and related issues surrounding talent acquisition), lack of confidence, reliance on western franchises instead of home-grown businesses, bureaucracy, more tempting business centres with free zones and non-protectionist markets elsewhere in the region, the list goes on…
The article is basically saying the GDP growth is entirely a result of O&G. There’s more dynamism in a soviet state.
The problem is simple there is not enough private investment and entreprise.
And a lot of this should come from expatriates as well as Qataris, starting businesses ranging from sandwich shops to high-tech initiatives.
The lack of free zones, lack of reasonably equal treatment of expats vs. locals, and the complexity for all (expats and locals) to start businesses all make it increadibly difficult.
The upshot is that to sustain a knowledge economy, we’ll need roads and bridges and housing and schools etc. And that’s exactly what the government is building.
As always in Qatar, some + but with plenty of space to improve.
I would say to anyone considering setting up a business in Qatar to be very wary. There are few safeguards and you have little control if you ‘partner’ decides to keep the company. The delays are incredible, frustrating and expensive. As for Intellectual property- forget it, particularly in any creative industry, it just isn’t valued, in fact is expected to be a freebie. Just my own humble experience.
Last year’s increase came despite an increase in capital spending…proof read please
on the same note – “Neverless”, spelcheck pls…
Thanks for catching these, guys. Just fixed them!
Don’t worry Shabina, the BBC makes these mistakes as well yet they have massive resources. I am a great fan of your work.
I thought it was a good article and I appreciate you covering interesting subjects like this.
You are welcome.
I don’t think Qatar is developed enough as a country to have Knowledge-based economy yet. A simple look at the largely failed attempt to modernize the public school system just shows that. They’re were many Qatari educators who spoke against the “Independent Schools’, but the powers that be just ignored them. And now that that experiment has proven to be mostly a failure, will those responsible be held accountable? Not likely. In such an environment, the seeds of a knowledge based economy will not grow!
As long as it is a huge legal, administrative and financial challenge for both locals and expats to set up a business, the knowledge economy concept will remain on papers. It is both sad and confusing that the government is spending a lot of money to bring talented people and prestigious institutions to the country, while at the same time putting all sorts of archaic restrictions on their work.
Liked the article and the commenting from the DN community…after a long time seeing some constructive criticism instead of simply “bashing” irrelevantly.
Also cannot agree more with what has been commented here. If at all someone really having the power to take decisions and make a difference is reading these comments, the voice is loud and clear about the barriers that must be removed for the economy and the country to reach the next level of the growth.
Simply put, ample amount of surplus (which is all based on unrealistic budgeting assumptions and practices) cannot translate into quality (although it may procure quantity in the short term) and nothing can drive quality better than open market. Hence remove the protectionist regime and then see how the place gets transformed into one of the best. I believe it is the shackles of business groups lobbying that is preventing lots of policy decisions. The regime needs to put the country above vested interests. No economy has sustained the times better than open markets in attracting talent, growth and quality.
I have always felt that the Qatari leadership sincerely wants to do good for their country. But, unfortunately, the desirable results are not showing. Mainly, because of the ‘status quo’ and local people’s support of it. Just look at the changes Dubai has made to their laws and regulations especially the free zones, and witness the results. If you need to progress effectively, then you have to take some serious measures and drastic changes have to occur, otherwise, the real fruits of development and Knowledge- based economy cannot be reaped.