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Towards a Macro-fiscal Framework for Qatar

Thilak RanaweeraTranaweera@worldbank.org

GSDP, Doha, Qatar 23 to 25 January 2011

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Day 2, Session 4 – MTMF for Qatar: Investmen & External Debt

Topics covered:

1. Major elements of the investment module

2. Key assumptions3. How estimates are generated4. Links to main model

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NDS and investment

NDS has sector report on economic infrastructure investment

Background: Investment data compiled for the NDS report

Based on surveys of investment plans of different agencies and MEED Project database

Captures situation as known around mid-2010

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NDS and investment

Framework emphasis: overall as well as time phasing of investments

Lacking from beginning: could not obtain corresponding and relevant information of the projects covered:– Import content of investments– Labor requirements

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NDS and investment

So, had to make our own assumptions in these

In most cases, financing was also not clear

Prevented a direct link to external debt, FDI etc

Fortunately, GSDP had worked out some labor force projections (several scenarios) which could be used

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Sectoral aspects

HC and non-HC separation was very important

Identify contributions to growth coming from these two key sectors

HC sector investments: mainly based on capital expenditure plans of QP

Some data available here in various forms

Key assumption: North Field embargo continues during NDS focal period 2011-2016

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Hydrocarbon sector investments

QP Business Plan: primary source

Available Plan in mid 2010: was somewhat outdated, but since then updated

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Hydrocarbons sector investments

mostly classified by products

Crude oil

North Field: existing (with embargo)

NGL & local gas

Refined products

Petrochemicals

Industrial cities

Other business units

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Hydrocarbons sector investments

Notice: QP treats capital expenditure by business units

Logical, but slightly inconvenient

So, left out things like “industrial cities” part

A minor conflict: refined products & petrochemicals in SNA are under “industry”

We also treat HC sector excluding refined products and petrochemicals (similar to IMF)

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Hydrocarbon sector investments

Funding in HC sector still remains somewhat unclear

Extracted whatever data available on:– QP equity– QP debt– Joint ventures

More information on capex and its funding may be desirable for the future

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Infrastructure investments

Assembled for the NDS report from project reports

Information on time phasing also provided

Gross investments (project costs)

Issues faced: still remain valid – Cost overruns– Under implementation

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Infrastructure investments: Projects

Metro/rail

Airport

Qatar-UAE causeway (known, but uncertain about timing etc)

Qatar-Bahrain causeway

Port

Power

Water

Wastewater

Roads

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Infrastructure investments

Known sources of information:

Qatari Diar (Metro/rail)

MEED report (airport)

Kahramaa budget (power, water)

Ashghal budget (waste water)

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Infrastructure investments

At a 2nd stage: added other selected agencies (excluding those reported by QP & subsidiaries)

Barwa

Qatar Diar (excluding metro/rail)

QNB

Qatalum

Under Qatar Foundation: Sidra & Education City

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Infrastructure investments

How does the picture look like?

HC investments

Non-HC investments

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Overall picture during 2009-2016 period

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Relative contributions to growth

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Infrastructure inv/non-HC ratio

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Growth impact of infra investment

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Emerging story

Towards the end of NDS: infrastructure investments are dwindling

Current expectations: based on current investment cycles

In fact, development strategy has to confront this growth challenge

Important implication: productivity change?

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Emerging story

Expectations about a substantial contribution of factor productivity growth towards 2014 – 2016

Realistic?

But, as has been pointed out, labor productivity is declining in recent years

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Emerging story

Some good news

Airport can generate more trade in goods and services

Aggressive financial, communications sectors similarly

However, traditional sectors may not move that fast

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Competitiveness

Petrochemicals: state of the art factories producing high quality products for foreign markets

Appears to have strong competition in the region: Saudi Arabia

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Emerging story

Another unclear aspect

Qatar World Cup commitments

Which projects were included in the World Cup bid?

Beyond 2016, up to 2022, Qatar will have major World Cup related projects

Stadium, other sports infrastructure

So, need to sort out any elements in the current investment package that may belong to the WC

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Emerging story

Undoubtedly, capital accumulation efforts would need to be sustained for future growth

Productivity gains are important: without that future welfare would be difficult to achieve

Complex policy issues here: exchange rate, incentives, employment/immigration, etc

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Additional notes

We experimented allowing for:

Under implementation of projects

Possible cost overruns

However, final results were given on gross basis

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Links to other parts of the model

Links to main model

Investment details feed into the expenditure side of the national accounts

Impacts also on BOP

Influence the fiscal accounts

Growth impacts can be determined (short- term impacts)