Trade Policy of Qatar - Essay Example

Trade Policy of Qatar Introduction In the last decade, Qatar has evinced an impressive economic growth, courtesy the government’s development strategy and the favorable crude prices in the international markets in the late 90s. Qatar registered an average growth rate of roughly 9 percent in the period 1996-2003, as per a report published by WTO Secretariat, pertaining to the trade policy of Qatar (M2 Presswire 2005: Online). However, the primary lacuna is that despite Qatar’s ambition to diversify its economy, the trade is still predominantly dominated by oil and gas (M2Presswire: Online). Over the years, Qatar has done much to better the business environment and trade prospective within the country to attract maximum foreign direct investment. However, the nation has to a great extent being avoiding the investment avenues for the foreign investors in certain key areas like insurance, banking and the services sector. Still, to a large extent, irrespective of the coming into force of the external tariff of the Gulf Cooperation Council (GCC), the markets in Qatar could be considered to be more or less open (M2 Presswire 2005: Online). The nation conclusively needs to update some of the aspects of its trade regime and of course will have to aspire for a greater conformity with the WTO provisions. These reforms are poised to allow for a greater allocation of resources and will make Qatar’s trade regime more open, transparent and predictable. Thus, a thrust on diversification of economy, combined with the much needed reforms is bound to facilitate the maintenance of an already impressive growth rate. Qatar’s Economy: An Overview Qatar’s economy has been growing in strength and resilience overtime and in fact it happens to be one of the fast growing and most dynamic economies of the world. The GDP of Qatar registered an impressive growth of 33.8 percent in the year 2005 (Qatar Economic Review 2006). The rapidly growing oil and gas sector is the cornerstone of Qatar’s economy and is contributing immensely to the target of reshaping the national economy through diversification. Though it is true to say that the overall economic strength of Qatar is primarily dependent on the oil revenues, the share and contribution of the LPG in the national growth has definitely increased in the past few years. In the year 2005, the total share of oil and natural gas in the domestic GDP was 60 percent (Qatar Economic Review 2006). In terms of GDP growth, Qatar had performed unbelievably positively, recording an average growth of 19.9 percent in the period 2001-2005 (Qatar Economic Review 2006). The fundamental reasons that lie behind the formidable economic growth of Qatar are an exceptional growth in the exports of LNG, crude and petrochemical related products. This factor has been further bolstered by the rise in the prices of crude in the international markets. In the year 2005, the oil and natural gas industry recorded an overall growth of 46.3 percent (Qatar Economic Review 2006). In contrast, the non-oil sector augmented by 18.8 percent (Qatar Economic Review 2006). In the year 1999, the GDP of Qatar was QR 45.1 billion (Qatar Economic Review 2006). Not to say, by the last quarter of 2005, the GDP of Qatar trebled to QR 154.6 billion (Qatar Economic Review 2006). The salient reasons behind this unbelievable performance of Qatari economy in the terms of GDP growth are: The LNG exports by Qatar, which stood at 18.4 million tons in the year 2004, dramatically increased to 22.9 million tons in 2005, thereby registering a growth of 24.4 percent (Qatar Economic Review 2006). In the year 2004, the price of Qatari crude oil was $ 35.2 per barrel (Qatar Economic Review 2006). In the year 2005, the price of Qatari crude oil increased by 46.9 percent to stand at $ 51.7 per barrel (Qatar Economic Review 2006). The production of crude oil in Qatar, which stood at 759, 000 bpd in 2004, increased to 779, 000 bpd in 2005 (Qatar Economic Review 2006). An increase in the prices of crude and LNG, matched by an enhanced production, resulted in an increased contribution of oil and gas sector to GDP by 46.3 percent, thereby registering a rise of QR 92.1 billion in 2005 from being QR 62.9 billon in 2004 (Qatar Economic Review 2006). In the same instance, the share of non-oil and gas sector in the national GDP rose by 18.8 percent, to being QR 62.5 billion in 2005 from being QR 52.6 billion in 2004 (Qatar Economic Review 2006). The Non-Oil and Gas Sector When it comes to the non-oil and gas sector, it was the manufacturing industry that made the biggest contribution to the national economy. The manufacturing sector in Qatar grew by 8.7 percent in 2005 (Qatar Economic Review 2006). This sector constituted almost 8.4 percent of the total GDP, amounting to QR 13, 042 million (Qatar Economic Review 2006). So far as the Qatari government’s objective of economic diversification is concerned, the manufacturing sector commands the most important position in the scheme of things. The important products manufactured in Qatar are petrochemicals, fertilizers, steel, textiles, cement, footwear, concrete, etc (Qatar Economic Review 2006). As regards the building and construction sector, the urban landscape around Doha is an apt example of an unprecedented growth. Thus, the construction and building sector also has an important stake in the national economy. In the year 2005, the building and construction sector contributed QR 8, 744 million to the GDP, totaling to a value of 36.1 percent of the overall GDP (Qatar Economic Review 2006). In this context, the banking sector and the financial institutions in Qatar have been forthcoming in financing the construction industry, extending a credit of QR 9, 541 million in 2005 (Saab 2007)). Going by the upcoming FIFA World Cup in Qatar and its ambition to bid for the Olympics, the construction sector is poised to assume an ever increasing scope in the Qatari economy. It will be really interesting to take a preview of the services sector in Qatar. The business services and the real estate sector made a contribution of QR 7,672 million to the GDP in 2005, constituting the fourth largest (Qatar Economic Review 2006). The business services and the real estate sector comprised 5 percent of Qatar’s GDP in 2005 and witnessed an amazing growth of 24.2 percent (Qatar Economic Review 2006). However, the sector that deserves all the commendation is the finance and insurance sector. Not only it registered an awesome growth of 89.8 percent in 2005, but also added QR 7, 113 million to the GDP (Qatar Economic Review 2006). To say it simply, the finance and insurance sector constituted a 4.6 percent of total GDP in 2005 (Qatar Economic Review 2006). The well developed and flourishing hospitality industry of Qatar with its restaurants and hotels, in 2005 grew up by 11.7 percent and added a QR 6,861 million to the GDP (Qatar Economic Review 2006). Considering the Qatar’s ambition to promote itself as a preferred tourism and sporting destination, the hospitality industry is all set to grow by leaps and bounds in the coming years (Smith 2009). The other important star of Qatari economy is the transport and communication sector. This sector noted a growth of 27.2 percent in the year 2005 (Qatar Economic Review 2006). Qatar Telecom or more famously known as Q-Tel is at present the sole and the largest wireless telecommunications service provider in the country with a whopping 93 percent penetration level (Qatar Economic Review 2006). Q-Tel is also poised to expand its services in the neighboring regions like Oman in the times to come. When it comes to the agriculture sector, only 0.7 percent of the land mass in Qatar is arable and this sector has traditionally played a negligible role in the Qatari economy. Thus, the fisheries and agriculture sector only showed a nominal growth of 2.9 percent in 2005 (Qatar Economic Review 2006). Trading Policy and Institutional Framework The trading policies of Qatar are envisaged, designed and managed by the Ministry of Economy and Commerce (MEC). Depending upon the situation and circumstances, the MEC takes into confidence varied related institutions, ministries and individuals from time to time to coordinate the basic framework and eventual implementation of its trading policies (Trade Policy Review 2005). The private sector in Qatar extends its inputs and feedback in the context of the national trading policies, primarily through the medium of the Qatar Chamber of Commerce and Industry. In addition, the issues related to the WTO are taken care of by the National Committee on WTO Affairs (Trade Policy Review 2005). To synchronize its trading policies with the provisions of WTO, in 2002, Qatar enacted varied laws pertaining to copyrights, patents, etc. However, the problem is that Qatar has no laws regarding anti-dumping and countervailing issues (WTO 2005). Qatar became a member of WTO in 1996. However, since the time it secured the membership of WTO, Qatar has been facing many difficulties regarding the fulfillment of some of its multilateral trade obligations (WTO 2005). In addition, Qatar is also required to do much to fulfill some notifications necessitated by WTO agreements (WTO 2005). Also, Qatar is not associated with any of the WTO’s pluri-lateral agreements (WTO 2005). So far Qatar is not directly or indirectly related to any trade disputes that come under the WTO Dispute Settlement Mechanism (WTO 2005). Qatar is a member of the Gulf Cooperation Council (GCC). Since 1 January 2003, Qatar has adopted the GCC Common External Tariff (CET). Having the honor of hosting the fourth Ministerial Conference that saw the launching of Doha Development Agenda (DDA), Qatar is principally speaking, all for a multilateral trade policy (WTO 2005). Qatar has taken several steps to liberalize much of its trade on an MFN basis and its markets are to a great extent open for all products. Still, Qatar is required to do much to bring its trading policies in tandem with the provisions of WTO. Reforms are certainly under way in the area of privatization, tariffs, improvement of multilateral commitments, so as to make the trade regime in Qatar more predictable and open (Trade Policy Review 2005). The focus of Qatar’s trade reforms hinges on a full economic integration under the GCC (WTO 2006). GCC membership had both a good and bad influence on the Qatari trade policy. On the one side it has revitalized and boosted the national economy by promoting competitiveness and growth oriented strategies, but on the other side it has made Qatar go lukewarm on multilateral efforts. Things could certainly get more complicated if Qatar and its trading partners do not take steps and initiate policies for a mutual opening up of the markets. A lot of hassles like administrative rigmaroles, quota provisions, licensing requirements, subsidies, discriminatory tariffs and the like are marring Qatar’s trade policy, which if not taken care of could have a debilitating impact on the economy of Qatar and its trading partners (WTO 2005). Inhibitive Trade Policies and Practices The GCC Common External Tariff applied by Qatar, being a member of the Gulf Cooperation Council (GCC) is found to be discriminatory and restrictive by many nations interested in pursuing trade with Qatar. The WTO Agreement on Customs Valuation is yet to be implemented by Qatar. Much of the documentation associated with imported goods is subject to exorbitant commissions and administrative authentication. Qatar is yet to fulfill its commitments to WTO by enacting laws on anti-dumping, countervailing measures and safeguards and subsidies (WTO 2005). The companies interested in doing trade with Qatar need to be registered with MEC and are required to pay a registration fee. Again these companies are subject to inspections by the Ministry of Municipal Affairs and Agriculture (MMAA), which is again accompanied by a hefty fee payable after every two years. Much of the imports to Qatar are regulated by licenses. Also, the commercial imports to Qatar simply cannot be undertaken without the involvement of clearing agents. Qatar also imposes prohibitions and restrictions on the imports of certain products that disturb its cultural, religious or commercial sensitivities. As Qatar has not implemented Article VII of the GATT 1994 relating to custom valuation, in case of the valuation disputes, the importers are not left with much option but to be subject to the decisions of Customs and Ports General Authority or the Valuation Committee. The trade policy of Qatar has also ample problems regarding the application of rules of origin of the imports. The varied other problems marring Qatar’s trade policy have to do with unreasonable and discriminatory tariffs, duties, taxes, licensing requirements, import prohibitions and restrictions, government procurement, state incentives, competition policy, price control policy, etc. There are many other factors that discourage the international companies and other nations from indulging in trade with Qatar in specific sectors. The agriculture sector though makes a negligible contribution to Qatar’s economy, enjoys an important status, considering Qatar’s objective to retain food security. Hence, the government of Qatar extends massive subsidies to the local farming in the form of cheap infrastructure, free inputs and price control (Zarocostas 2005). This makes some of the imported food products less competitive in the Qatari markets. The public sector company Qatar Petroleum commands a monopoly over all the policies, procedures and activities associated with the oil and natural gas sector (Cordesman 2004). The foreign companies are allowed to invest in the oil and natural gas sectors, albeit in the form of joint ventures (Cordesman 2004). In the manufacturing sector again, it is the state that commands a monopoly stake, be it the steel, cement or fertilizers (Siddiqi 2007). Besides the manufacturing sector in Qatar enjoys immense subsidies, import duty exemptions and tax holidays. These sops compromise the competitiveness and trade worthiness of the foreign manufacturers. Also, the services sector, be it the airlines or telecommunications is either monopolized by or is exclusively under the control of state enterprises. The foreign companies also face barriers to entry in the banking and insurance sector. Qatar also does not allow the foreign natural persons to enjoy a self-employer status in the country (WTO 2005). Much needs to be done to make the trade policy of Qatar non-discriminatory and conducive to the international trade. Conclusion Qatar should indeed be commended for its impressive economic growth in the last decade. These favorable economic developments could indeed be attributed to the macroeconomic reforms initiated by Qatar; the development policy unfolded and implemented right from the late 90s and the increase is revenues through enhanced oil and natural gas exports. However, to assure long term sustenance and an equitable distribution of national wealth, Qatar needs to diversify its economy, which could not be achieved without the help and cooperation of foreign nations and MNCs. The trading policy of Qatar is marred by many restrictive and discouraging obstructions in the form of tariffs, duties, taxes, licensing requirements and administrative hassles. Besides, some sectors in the Qatari economy like the oil and natural gas, air transportation, telecommunication, banking, insurance and commercial services also need to be made receptive of and open to the interested foreign investors. However, it goes without saying that Qatar is learning from its mistakes in its quest for economic growth and things are more or less moving in the right direction. Reference List Cordesman, Anthony 2004, Energy Developments in the Middle East, Praeger, Westport, CT. M2 Presswire 2005, Trade Policy Review: Qatar; Further reforms will help sustain already Impressive Growth Rate, M2 Presswire, M2 Communications Ltd, HighBeam Research, viewed 6 March 2011, . Qatar National Bank 2006, Qatar Economic Review, Qatar National Bank, Doha. Saab, Gretta 2007, ‘A Study of Financial Development, FDI and Growth in the GCC Area’, Competition Forum, Vol. 5, no. 1, pp. 53-57. Siddiqi, Moin 2007, ‘Wooing Foreign Investors: Challenges and Opportunities’, The Middle East, March, pp. 30. Smith, Pamela Ann 2009, ‘Real Estate, Hotels and Tourism: The Future of Middle East is Bright’, The Middle East, January, pp. 31. The Middle East 1999, ‘Qatar: Financial Report’, The Middle East, July-August, pp. 30. Trade Policy Review: Qatar 2005, Bernan Assoc, London. World Trade Organization (WTO) 2005, Further reforms would help sustain already impressive economic growth, WTO, viewed 9 March 2011, . Zarocostas, John 2005, ‘Agriculture Deal a Primary Element’, The Washington Post, 31 October, pp. A17. Read More