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Scope for improvement on Qatari development

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Scope for improvement on Qatari development

The IMF has published a report on economic development in Qatar, with a focus on labour market, education and business reforms. The big picture is encouraging, but there is scope for improvement in the details

Signs of progress by Qatar towards strengthening and diversifying economic development have been recorded by the International Monetary Fund (IMF) in a major report, “From HydroCarbon to Hightech: Mapping the Economic Transformation of Qatar.” In particular, it notes improvements to labour rights and mobility with the abolition of the Kafala system; significant investments in education and health, and the enhancement of investor rights. The report also cites enhanced access to finance, digitalization and environmental responsibility. Progress towards the goals of the National Strategy 2030 is tangible.

Where the IMF sees need for improvement is in much of the detail of implementation and more progress is needed within some of the priority areas, with monitoring of outcomes. One example is education: levels of investment have increased, but the improvement in educational outcomes is not yet commensurate. Qatar spends nearly $14,000 per pupil, higher than the OECD average and significantly higher than the UAE or Saudi Arabia, but the scores on the PISA (Programme for International Students Assessment) measure are lower than the OECD and broadly similar to other Gulf states.

One caveat, however, is that the data for the report is five years old, so attainments may have improved since. A helpful reform would be for the Qatari government to introduce annual tests to monitor progress, similar to the long-established SAT tests used in the USA for college admissions, which assess linguistic ability, reasoning and mathematical ability. There should be strong support for the STEM subjects (science, technology, engineering and mathematics).

Some 90% of Qatari citizens work in the public sector, and private sector employment, including in start-up businesses, is dominated by expatriate workers. A better balance on these employment patterns would be healthy. The report found that Qatar had a medium ranking on availability of skilled professionals, below the UAE and the OECD median, though above Saudi Arabia.

Enhancement of skills suited for the private sector on the part of Qatari citizens would help strengthen the economy and prevent skills shortages. This does not only apply to hi-tech knowledge and other university-level qualifications, but also vocational training in specialisms such as auto repairs – a sector where most provision is by expat individuals. Reform of work visa arrangements could help encourage more high-skilled expatriate professionals to work and stay in Qatar. Not all expatriate workers in the Gulf are short-term – some families are established, with a third generation now growing up in the country, and so are likely to invest locally and not be remitting money back to the country of origin.

Labour market participation by women is 25 percentage points below that of men, and lags that of other states. Improvements should not be difficult, given that Qatari women are highly educated, with 64% possessing a post-secondary school qualification, slightly higher than the rate for men, which is 62%. Employment policies such as promotion of women-only teams, provision of childcare and flexible hours would help.

The report also encourages investment and entrepreneurialism. There is enhancement of investor rights, and development of a digital infrastructure, but more needs to be done to reduce bureaucracy, the IMF recommended.

There are still restrictions on foreign investment in certain sectors including banking and insurance; and foreign ownership and leasing rights of real estate, although broadened, are still limited to designated zones.

On trade-related taxes and regulations, some further progress would help, the IMF concludes. Qatar has introduced a single window electronic customs clearance system, known as Al-Nadeeb. There is a common external tariff among members of the Gulf Cooperation Council, although each member has individual customs administration. But compliance costs for imports and exports are above the OECD median, and trade-weighted tariff rates for non-agricultural and non-fuel products are well above OECD level.

The IMF also recommends better credit information, creditor rights and collateral infrastructure to encourage bank lending to smaller enterprises. Most funding for start-ups is from private savings.

Translation of laws into English could be quicker, and this would aid foreign direct investment. Strengthening intellectual property laws is also recommended, to boost development in the knowledge sector and direct investment more generally.

The document presents the results of modelling that indicates likely increases to growth as a result of implementing the policies. Labour market reforms are most likely to provide a stimulus, especially the attraction of high-skilled expats. Those reforms with the most benefit at the lowest cost should be prioritized, and reforms that naturally complement and assist each other should be introduced together.

The author is a Qatari banker, with many years of experience in the banking sector in senior positions.


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