What is being done to encourage the private sector to actively participate in meeting the goals and objectives outlined in the National Development Strategy (NDS) 2011-2016 and the National Vision 2030?
AL NABIT: There are actually many tools that have been used to encourage the private sector to actively participate in the Qatari economy and in the development of Qatar, both for large-scale and medium- and small-scale establishments. They are all being encouraged to fully participate and they have been given many benefits and advantages to actually participate in the economy in all sectors; namely the manufacturing sector, the service sector, large-scale and small-scale. There is increased attention being given to the knowledge-based activities and knowledge-based manufacturing and services are being encouraged to come to Qatar and to actively participate in Qatar’s development. The development of a vibrant private sector economy is an essential part of Qatar’s ambitions to diversify. The development of world class infrastructure, the streamlining of unnecessary and costly business regulations, improvements of trade and customs logistics, easier access to credit, expanded sources of equity funding, subsidized support to business services, and procurement reforms that given small businesses a helping hand are just some of the measures that are proposed in the Strategy to assist business, and most are now under way. Yes, it will take time for the private sector to establish strong roots and to play a fuller role in the development of the nation, but the process has certainly started.
How would you describe the level of public sector engagement to date?
AL NABIT: The public sector is the leader for the National Development Strategy and the Qatar National Vision. We know how big the public sector’s contribution to the Qatar economy is. That’s why a very important focus is being given on public sector participation and efficiency in order to achieve the goals and objectives of the National Development Strategy. The NDS, as you know, did not start from scratch. It built on what already existed and drew extensively on knowledge across the public sector. The result is that many Ministries and agencies genuinely own the agenda and projects. At this point, there have been numerous pre-implementation preparatory activities by Ministries and Agencies including establishing NDS Project Management Offices, fleshing out detailed in project implementation plans in accordance to project management principles and capacity building initiatives. Many Ministries and Agencies have prepared their own NDS aligned plans – though some have not yet done so. However, a lack of project management capacity and human resource constraints are delaying progress in some areas. We developed the National Development Strategy to translate the National Vision into programs and projects. These two documents were developed to be implemented. We are now implementing the National Development Strategy on the ground. There is very good progress so far. We are keen to continue this effort and to see a different face of Qatar in the future; a Qatar with a more dynamic economy and a more coherent society. We are very excited to look forward to the future Qatar.
The Qatar Economic Outlook 2011-2012 identified 4 key economic challenges: productivity and efficiency; private sector development; revenue diversification; and economic management and capital markets. How adequately is each of these challenges being addressed?
AL NABIT: All these challenges have been addressed so far and they have been addressed quite a long time ago. But they exist and they are continuous. This is the nature of a very fast growing country, to have these kinds of challenges. I think Qatar is dealing with the challenges in a good manner, in good faith, and with expertise. Qatar has proved to be efficient in facing many challenges and much turbulence in the global economy and also in regional circumstances. We think we will need to face these challenges in the future and we will have to live with them somehow. But I think we are facing these challenges and giving adequate attention to them. These are linked challenges. Progress on each will be needed to support the Qatar's goal of sustainability prosperity. In response to your earlier question, I provided examples of some of the initiatives that are or will be taken to support private sector development. I should add that these efforts involve many different actors, including: the Qatar Development Bank, Enterprise Qatar, and the Ministry of Business and Trade, Qatar Exchange, the Qatar Foundation, Qatar Science and Technology Park and by alliances within the business community itself.
In terms of revenue diversification, the Ministry of Economy and Finance has set a target that by 2020 all spending will be financed from non-hydrocarbons sources. While this is a challenge, significant progress has already been made in mobilizing tax revenues following the recent streamlining and simplification of the corporate tax system and the introduction of a flat rate of 10% on profits. The eventual introduction of a value-added tax, the expiry of tax breaks for investors in the oil and gas economy, and the implementation of withholding tax is expected to contribute to robust revenue growth in the future. Looking at economic management, the Ministry of Economy and Finance is taking steps to modernize fiscal financial management and has taken preliminary steps towards planning budgetary spending in a forward looking (3-years) framework. Building institutional and human capabilities within the Ministry to support these new directions is a priority.
Inefficiency and low levels of labor productivity call for a variety of responses. For example, technical measures can be taken to stem water leakages or improve the efficiency of energy use in buildings. However, policy and institutional changes will also be eventually required to modernize regulatory regimes and to realign incentives in ways that will promote positive changes in behavior. The challenge of raising labor productivity is multifaceted. At one level it requires ensuring a good match between the supply of skills coming out of Qatar's education system and needs in the labor market. There is work to be done here, but recent initiatives in vocational and technical training will help. However, the drive to lift productivity and sustain advances will ultimately require incentive structures that encourage investment in modern capital equipment and human capital. At this time, an abundant supply of largely uneducated and unskilled labor and low wages in the private sector are currently acting as a drag on capital formation and the wider adoption of productivity boosting technologies.
What policies and programs have been put in place to ensure that the benefits of economic growth extend to SMEs?
AL NABIT: The idea that growth should extend or trickle down to SMEs does not adequately convey the importance the Vision and Strategy place on SME development. Indeed, both anticipate that SMEs will eventually be in vanguard of private sector development and the diversification of Qatar’s economy. The emphasis in the Strategy, and in the work of important agencies like Enterprise Qatar and the Qatar Development Bank, is to build a business ecosystem in which SMEs can germinate, take strong root and then blossom. Of course, one way of doing this is to ensure that SMEs are able to more fully participate in the wider economy. Reforms of state procurement regulations, including those in the oil and gas sector, that present obstacles to SMEs competing for contracts on a level playing field with larger firms warrant serious consideration. I think one very relevant example is the establishment of the SME organization. It has been given a lot of support in order to help and assist small and medium enterprises to start, to be activated, and to participate. They are giving a lot of help to these firms, in terms of finance, administration, and export support. Qatar Development Bank is also playing a major role in helping these agencies. There are many regulations which are advantageous for small and medium enterprises.
Of course we realize that we are a small country in a turbulent region. We have almost a single source of income and activity, which is based on hydrocarbons. But we realize clearly that this has to change...There are many measures and policies that have been put in place to diversify the economy and diversify the sources of income. To give one example, we can look at the huge investment abroad to stabilize and diversify the income of Qatar.
How do the National Development Strategy 2011-2016 and the National Vision 2030, and the related policies and programs, take into account outside economic risks and their potential effects on Qatar?
AL NABIT: As a hydrocarbons economy, Qatar is prone to volatility emanating from fluctuating oil prices. The dollar peg and the country's high dependence on imports are other sources of potential volatility, and limit options for management of the domestic economy. To manage risks better and to promote stability, the Strategy underlines the need for the adoption of forward looking frameworks for fiscal, financial and liquidity management. It notes that improvements in the coverage and availability of data will be required to support these efforts. The Strategy also suggests other mechanisms to promote stability, including through the accumulation of funds that could cushion essential fiscal spending against shocks. Of course we realize that we are a small country in a turbulent region. We have almost a single source of income and activity, which is based on hydrocarbons. But we realize clearly that this has to change. We have to be ready for the case where there will be a more diversified economy that is more stable and takes into account the turbulence in the region and the world and the risk of having one source of income and even employment. There are many measures and policies that have been put in place to diversify the economy and diversify the sources of income. To give one example, we can look at the huge investment abroad to stabilize and diversify the income of Qatar.
One of the central elements of the Qatar National Vision 2030 is the development of a knowledge-based economy. How important is increasing the amount of research done in Qatar to meeting this goal?
AL NABIT: It is very important to increase the investment in research and development. I think Qatar has taken a very big step in terms of allocating enough funds for this sector because it is actually seen as the future of Qatar, where Qatar must become a knowledge-based economy to compensate for the small population and the scarcity of resources that we have. I think Qatar has taken very good steps, not only in terms of funding, but also in processing the research and funding activities. There are very good results so far. The journey to become a knowledge based economy is likely to take some time. Qatar is currently in a state of transition. It is moving from an economy in which growth is input, investment, and extraction driven to one in which economic advances will increasingly rely on leveraging efficiency improvements and catalyzing productivity growth. This next productivity driven phase of Qatar’s development will pave the way for an economy that is better able to use and exploit knowledge to its economic advantage. Only then will Qatar have a secure foundation for an economy which generates value through innovation and knowledge creation. Of course, these phases of economic development do not follow in strict linear order, and there are already "communities" in Qatar where intensive knowledge use, knowledge creation and innovation are present. Building research capabilities in universities and through supporting collaboration among government, the private sector and educational institutions will be essential to ensure that these knowledge communities expand, connect and become more deeply embedded in the economy and society. While the volume of research is important—as critical mass is required for a successful research community— it is important too that research has relevance and meets accepted standards in terms of rigor.
What areas or fields of research have the most potential in Qatar?
AL NABIT: I think there are many potential areas for research in Qatar. Some of them are now being addressed, namely computer science research and health related research. There is very good advancement in these two areas but I think there are more to come. I think we have a very clear picture of the importance of this sector. We have provided adequate funding and support to this sector. I’m very optimistic about the future of this sector as a whole. In the scientific and technological field there is a wide range of opportunities. The Qatar Foundation in particular has been active in supporting initiatives across a range of disciplines including: computing; stem cell science; smart materials such as polymers; geophysical sciences; renewable and clean energy; transportation; and water. In the policy field too, there is a need for high quality research that can inform policy and institutional design on issues linked to sustainable development. Cross-disciplinary perspectives and those that factor in important trends that will impact on Qatar in the future, such as global warming and rising sea levels, have particular relevance.