We have developed a detailed economic model for Qatar and also for the whole of the GCC that can answer questions such as the impact of different policies, higher foreign investment, soaring energy prices or rising global interest rates As Qatar opens up its economy to foreign investors in an effort to diversify, the critical question is: what will be the impact of higher foreign investment on the non-hydrocarbon sector of the economy? We find that recent efforts to encourage FDI are a step in the right direction but further improvements to the business environment, particularly efforts to reduce the cost of labour, are needed to generate a transformation of the economy Using our model, we have simulated a one-time permanent 100% increase in the level of net direct investment To arrive at this scale of increase in FDI we have looked at Dubai’s experience in 2002-12 when it opened up its economy and we, therefore, view it as a reasonable expectation should Qatar enact a number of proposed measures to promote investment Under this scenario, we find that the non-hydrocarbon sector of the economy would be 1.0% larger in 3 years as a result of the increase in direct investment Our model suggests that the growth would be achieved as the increased foreign investment leads to stronger: Domestic investment Employment and wages, which would boost domestic demand Productivity Non-hydrocarbon exports and improved self-sustainability Portfolio inflows Credit impulse as portfolio inflows improve liquidity Read on for more details below… PDF……...
