Qatar should develop a comprehensive strategy to attract foreign investment and pay attention to developing domestic technological capacity. Foreign partners can play a key role in supporting entry into new sectors.
IMF said in its latest Qatar report on Qatar that countries like Qatar those are looking to adopt technological and methodological advances in sectors new to them have a significant advantage. Working with foreign partners, by inviting foreign direct investment (FDI) and entering into joint ventures with foreign leaders, can be crucial for entering new sectors and improving domestic technological capacity.
When large investments are required, the public sector can enter joint ventures. Qatar has some experience with learning through joint ventures in the gas sector. The Fund recalled that over time Qatar Petroleum has increased its own technological and investment capacity.
The IMF said Qatar’s should develop a comprehensive strategy to attract foreign investment and pay attention to developing domestic technological capacity. Qatar has multiple portals that aim to attract foreign investment, including invest.gov.qa and Manateq.
While invest.gov.qa clarifies that, per Qatari Investment Law No. 1 of 2019, foreigners can now invest in any sector excluding banks, insurance, and commercial agencies, even outside SEZs, a comprehensive communications campaign is needed to ensure that all potential investors are aware of this change.
Similarly, plans to facilitate access to finance in priority sectors should be explicitly communicated. Once foreign investment is attracted, it is important to integrate the resulting enterprises into the Qatari economy to facilitate improvements in technological capacity throughout the economy.
Deliberate investments in human capital, targeted at priority sectors, are essential for developing expertise. Development of human capital is an essential component of building valuable know-how in advanced sectors.
Indeed, productivity has been declining in Qatar, and improving productivity through improved educational outcomes is important. To succeed, plans to prioritize specific sectors must be accompanied by targeted investments in human capital linked to the same sectors. While general improvements to the education system are also needed, Qatar should ensure that the specific skills needed for priority sectors are available in the labor market. Technical training can be more valuable in some cases than other types of higher education.
The report noted further diversification is important to help Qatar manage temporary shocks and prepare for far-reaching shifts to the economic context. Hydrocarbon prices are highly volatile with an uncertain long-term outlook. Qatar’s significant financial assets are a source of strength.
QIA’s asset allocation strategy should not ignore Qatar’s already significant dependence on hydrocarbon revenues. The government should continue to carry out rigorous evaluation of public capital spending.
Qatar has a strong infrastructure base, and its economy is generally competitive. However, some areas do deserve attention, including contract enforcement, processes for dealing with insolvency and disputes, and the quality of education.
