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Qatar: Not Yet an Investor’s Dream

Still, this Gulf state should remain on your 'watch' list

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QatarQatar is mostly surrounded by the Persian Gulf and has only one land border — Saudi Arabia. The country is an absolute monarchy, ruled by the Al Thani family since the mid-19th century. In geographic size, Qatar may be small — 166th in the world — but its vast energy reserves pack a huge wallop economically.

As I mentioned in last week’s article about Paraguay, according to the CIA World Factbook, the state of Qatar’s growth in Gross Domestic Product led the world in 2010. And its GDP per capital — at $179,000 — also ranks No. 1.

Expanding by 16.3%, Qatar’s economy is “fueled” by oil and gas, amounting to 50% of GDP, approximately 85% of the country’s export income and about 70% of government revenues. Qatar has proven oil reserves of 25 billion barrels, which are expected to last at current output levels for more than half a century. And its natural gas reserves make up 14% of the globe’s reserves — the third-largest in the world, after Russia and Iran. Qatar continues to invest heavily in energy, with estimates for the next decade ranging around $120 billion.

Although Qatar has only 300,000 citizens, its population has doubled since 2004, as expatriates from all over the world have flocked to its borders to take advantage of the country’s growing prosperity and importance in the world, as well as its reputation for adhering to international and corporate governance standards. More than 45% of its work force comes from the Indian subcontinent, 20% from other Arab countries, and 10% from Southeast Asia. The unemployment rate is just 0.5%, an enviable position for any country!

Following the United Arab Emirates, Israel, Saudi Arabia and Egypt, Qatar is the United States’ fifth-largest export market in the Middle East. Its energy reserves are very compelling for foreign countries, and Qatar has seen some $100 billion in investment monies coming to its shores in recent years, including $60 billion to $70 billion from the U.S. energy sector.

Currently, Qatar allows only 25% foreign ownership in local companies, but experts expect that to change — although not right away.

And that hesitation to increase foreign investment is the roadblock that is holding back the further development of Qatar’s stock market — the Qatar Exchange, or DMS, which is fairly young, founded in just 1997.

Right now, only 44 companies are publicly traded in Qatar, and they are valued at about $88 billion. But the country is on the list of possible upgrades to emerging market status this week (along with the United Arab Emirates) from index compiler MSCI Inc. However, most experts believe Qatar hasn’t moved fast enough to encourage foreign investment and don’t really expect MSCI to upgrade the country this time around, whereas the UAE’s much more generous 49% cap on foreign investment is more compelling.

Article printed from InvestorPlace Media,

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