What Qatar’s leadership change will mean for the economy
Qatar’s leadership changes and the country’s cabinet shuffles as political stability and economic growth are expected to continue.
In late June, Qatar experienced a momentous change as His Highness the Father Emir Sheikh Hamad bin Khalifa Al Thani handed power to his 33-year-old son and Heir Apparent, His Highness the Emir Sheikh Tamim bin Hamad Al Thani, in a smooth succession. In a region often troubled by turbulence and instability following changes of leadership, this problem-free transition (which included a wide-ranging cabinet reshuffle), certainly is a welcome development and with months if not years of preparation time, has been handled successfully - although of course certain economic and political challenges remain for Qatar’s new leadership, writes Michael Stephens.
The new Emir’s opening speech was also certainly impressive, exuding assurance and providing a tolerant all-inclusive message, which seems to have calmed nerves and hinted to a number of refreshed engagements with regional nations.
A number of appointments have followed the succession, with a new Prime Minister HE Sheikh Abdullah bin Nasser Al Thani, a new Foreign Minister HE Dr. Khalid bin Mohammed Al Attiyah and a new Minister of Finance HE Ali Sherif Al Emadi appointed.
In addition, the Emir has created five new ministries, most notably the creation of a new transport ministry, which will oversee the rapid expansion of Qatar’s road network and the beginning of a rail system to service the needs of the world’s fastest growing country.
Although Qatar has seen a change, the cabinet reshuffle should ostensibly not indicate a huge change in policy direction. Many junior ministers remain, and the prime minister, foreign minister and finance minister carry established reputations and have worked closely in the main apparatuses of state for many years. They are very much part of the framework that has allowed Qatar to rise to political, sporting and cultural prominence in the region and world, and for its economy to grow at unprecedented rates.
From an economic point of view, interest focused on the appointment of Al Emadi to take over the Ministry of Finance. Yet, despite his appointment Al Emadi may yet remain as chief executive officer (CEO) of Qatar National Bank (QNB), whose assets have grown to more than USD100 billion (QAR364 billion) under his tenure (at the time of writing, there was no clear indication as to whether he would step down from this position or not). Regardless of the future for QNB’s CEO, Al Emadi’s guidance on the nation’s finances will ensure that Qatar’s stellar performing bank will remain close as ever to the apparatuses of state, and it should not be expected that QNB will be supplanted as the nation’s foremost financial house.
The markets appeared to be largely unaffected by recent changes, although an initial four-point jump in the Doha bourse Qatar Exchange followed the news of the succession, indicating that the way the process was handled had a calming effect on investor confidence. Nevertheless the recent market uptick also owed much to the recent MSCI upgrade of Qatar to Emerging Market status.
It should be noted that the current tracks for investment in the stock market remain based not so much on politics as they are on expectations for increasing the share allowed for foreign investors in Qatari companies, with the much vaunted 25-percent threshold barrier a widely debated topic. In addition, a number of large initial public offerings (IPOs) are expected in coming months. The long-awaited IPO for Doha Global Investment, as well as four IPOs for subsidiaries of Qatar Petroleum (QP), worth an estimated USD50 billion (QAR182 billion), remain some of the largest opportunities for market investment and injection of additional liquidity into the Qatari market (box out).
No conversation about the economy in Qatar would be complete without mention of the former Prime Minister and Foreign Minister HE Sheikh Hamad bin Jassim bin Jabr Al Thani, for many a towering figure in Qatar’s political and economic scene since 1992. Despite much initial speculation, he may step down from his government posts though the leadership transition, it was assumed by many commentators that he would probably remain as chairman of Qatar Investment Authority (QIA), the direct investment arm of the State of Qatar’s sovereign wealth fund, Qatar Holding, where Al Thani had overseen and negotiated many high-profile international investments and purchases in recent years.
The cabinet reshuffle should not indicate a change in policy direction. Many junior ministers remain, and some newly elected ministers carry established reputations.
However, on July 2 it was reported that Qatar Holding CEO Ahmad Mohammed Al Sayed would be awarded to the position of CEO of the QIA, effectively removing Sheikh Hamad bin Jassim bin Jabr Al Thani from any overly influential official positions in Qatar’s political and economic hierarchies. It remains to be seen what impact Al Thani’s removal will have on Qatar’s domestic scene in the long term.
As the chairman of Qatar’s national development strategy, HH the Father Emir Sheikh Hamad bin Khalifa Al Thani has overseen the vision of moving the country towards 2030 and its concomitant requirement to diversify the nation’s economy. Through bodies such as the QIA, and Qatari Diar, as well as QNB and Ooredoo’s drive to seek foreign markets to name but a few, the country has begun to move along this track toward a more diversified future, in line with its National Vision 2030.
However, according to a Doha-based finance analyst, this transition is likely to take more than a decade and that for the foreseeable future the hydrocarbon industry will continue to bolster the Qatari economy.
Clearly the new Emir faces a challenge here, in that incentives to drive the economy to a new future and attract investment are arguably hampered by motivational factors as much if not more than they are by economic or regulatory conditions. Indeed, this all takes place at a time when growth is slowing and healthy budget surpluses are diminishing. For example, Citigroup expects that Qatar’s budget will run at a deficit by 2015, while Qatar is at the same time investing up to USD200 billion (QAR728 billion) in projects as it seeks to complete its preparations for the World Cup in 2022.
It may well be necessary for some of Qatar’s foreign mega-purchases to be sold to stave off the problem of private sector growth not matching Qatar’s insatiable development needs. Managing the finances of Qatar will thus of course be a crucial task for the new Emir and finance minister to tackle in the coming years.
Politically stable internally, Qatar has been insulated from the regional troubles that swept across the Arab world since 2011, allowing it to build a safe hub for growth and investment. However, its foreign policy has occasionally raised concerns, including its intervention in Libya, a financial commitment to Egypt and, perhaps most significantly, a commitment to Syrians fighting to remove President Bashar Al Assad, which have drawn Qatar into some of the region’s major conflicts.
How Qatar manages these relationships in the near future will ostensibly be part of the key to its success at home. With new Foreign Minister HE Dr. Khalid bin Mohammed Al Attiyah, Qatar possesses an experienced man, well versed in foreign affairs, responsible for executing much of these policies. But even with his experience, most analysts expect Qatar to retreat from its previous frontline role to a more quiet domestic focus.
Indeed there is much for the Emir and his new team to ponder at home, no doubt the age of plenty in Doha will continue, but careful management is needed to navigate the future to make sure that prosperity lasts.
Qatar’s stellar rise in recent decades was always going to be hard to sustain, and there are challenges ahead. The new government team, which began work on June 29, must now set about finding ways to face those challenges. Certainly, the new team is highly capable, and instills confidence that competent ministers have been appointed to senior posts, and they enjoy the support of the entire country.