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World Cup Will Boost Infrastructure Investment in Qatar

Qatar : 28 December 2010

After winning the bid for the 2022 FIFA World Cup, the need for Qatar to invest in infrastructure should result in GDP growth throughout the emirate.

The small country currently has the fastest growing GDP in the Gulf, mainly boosted by concentrated investment projects in the gas industry with the goal to raise production and boost export capacity of the valuable commodity.

Now that Qatar has reached the 77 million tonnes of LNG (liquefied natural gas) output target, a good portion of those investments will now be earmarked for the projects necessary to host the football tournament.

Senior economist for the Mena region at Standard Chartered Bank, Philippe Dauba-Pantanacce, stated to news media AFP that the GDP growth machines will alter.

In recent years the steady growth in Qatar’s GDP was driven by the output of LNG.  Now, with the approaching World Cup event and the various infrastructure projects scheduled for the lead up time, the accumulation of capital will help to finance the build up and drive GDP growth, according to Dauba-Pantanacce.

The GDP of Qatar is expected to grow 8 percent in 2010 and 5 percent next year, according to recent Standard Chartered reports.

Qatar is the smallest nation to host the international tournament and is creating the necessary infrastructure from the ground up.  Plans to open new roads and demolish whole neighbourhoods in capital city Doha are set to make way for modern projects.

In the pipeline currently, the nation is planning for a rail and metro network worth $25 billion (or 19.1 billion euro).  Some parts of this network will certainly be ready by the beginning of the World Cup, since public transportation in Qatar in nearly non-existent.

Doha is also the site of a $10 billion international airport, with the first phase scheduled to open by 2012.

Various other large projects are set to begin, such as a deep-water port worth $7 billion and a causeway from Bahrain to Qatar worth $4 billion.  Qatar also has plans to invest $20 billion building and expanding the roads.

Preparations for the World Cup will involve projects like the construction of nine new football stadiums and refurbishments worth $4 billion at three other stadiums.  Air conditioning systems will be powered by solar to create an oasis from the blazing heat of the desert.

There has been a commitment to add 90,000 hotel rooms to the nation by 2022.

There are tight deadlines involved with the hosting of this tournament, which will result in extra spending but also provide more motivation and incentive for completion.  The National Bank of Kuwait noted that these projects will also attract new expertise to the nation.

Dauba-Pantanacce noted that many of the projects are not scheduled to begin anytime soon due to the time left before the 2022 tournament.

Because the World Cup is still twelve years off most projects are simply on the schedule as opposed to underway.  Dauba-Pantanacce noted that the impact on real GDP may be delayed.

Since many of the larger infrastructure developments were in the plans before the World Cup award, the only thing that will change is the acceleration of these projects on the schedule.

The stock market in Doha had a rally after the capital city was named as a host, with construction and real estate companies driving the hike.  It was reported that the optimism in the markets was too much, too soon and stocks were soon retreating from their high point.

International credit rating firm Standard & Poor (S&P) stated that the World Cup date was too far off to be a factor in their ratings.

In a statement to local media Luc Marchand, credit analyst, stated that no changes to the rating are anticipated until the 2022 date becomes much closer creating a more stable outlook.

Marchand also stated that analysts expect the World Cup to have a major impact on economic growth in Qatar for the next couple of years as this already healthy nation gets ready to host the globally anticipated sporting tournament.

S&P expects the additional spending on infrastructure in Qatar due to the World Cup to reach $64 billion, roughly 47 percent of the GDP for 2010.

The state, rich in oil and gas, is not likely to struggle to meet the high costs of refurbishing the nation in anticipation of all those football fans flocking in.

Revenue from hydrocarbons will continue to be the major source of funds, according to Dauba-Pantanacce.  He pointed out that the country has already committed to avoiding added debt while financing the World Cup projects.

Prime Minister of Qatar Sheikh Hamad bin Jassim al-Thani noted that the nation will not need to issue bonds, stating that the development plans laid out before winning the football tournament bid include about 80 percent of the infrastructure necessary for the event.

S&P concurred with those remarks.

Marchand stated that S&P does not anticipate any increasing levels of sovereign debt in Qatar.

Standard Chartered anticipated that number to hit $103 billion by year end 2010.

In the mean time, an expected surge in the construction industry is set to draw a large number of contractors and labourers into Qatar, where the current population sits at 1.67 million.

Dauba-Pantanacce noted that immigration will likely strengthen and businesses in the region are currently getting into position for the boost.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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