Posted on September 12, 2011

Qatar is rich enough to maintain its domestic "social contracts" while having a strong view on building sports economy and acquiring huge stakes around the world.

Qatar can afford many more $8 billion handouts. Nationals employed in the public sector have been awarded pay raises of 50 to 120 percent. The risk of inflation is limited. And unlike many of its Middle-Eastern neighbours, Qatar is rich enough to maintain its so-called “social-contract”.

The emirate is under no pressure to spend its riyals. Qatar has been spared the unrest brought elsewhere by the Arab Spring and demands for political reform are timid. The closest Qatar has come to a protest movement in recent months has been a modest, one-hour boycott of Qatar Telecom organised on social-media website Twitter.

Qatar didn’t give an official reason for the decision to bump wages. It may be a reward for the role played by the military in operations in Libya, or simply as a way of cheering the population as it celebrates the Muslim holiday of Eid. It may even be just a show of bravado.



Whatever the reason, Qatar’s move isn’t raising the worries typically fuelled by such announcements. The benefits will be widely felt among Qataris — only 10 percent of whom work in the private sector. But Qataris account only for a fifth of the total population. So inflation, now a reasonable 1.8 percent, should remain subdued.

Handouts may theoretically undermine the development of the private sector. But any incentive Qatar develops stems from prestige rather than necessity. The emirate has the lowest rate of unemployment of the six-nation GCC– by some estimates it is as low as 0.5 percent. The country’s GDP per a capita for 2011 is forecast at $109,881 — around five times that of Saudi Arabia, according to the International Monetary Fund. And wealth is fairly evenly spread among the citizens.

Notwithstanding huge infrastructure projects in the pipeline, Qatar was expected to generate double-digit GDP growth and a budget surplus of 10.3 percent in 2011/12 before the additional spending measures were announced, according to HSBC. Export revenues from energy alone are expected to total $80 billion. No wonder the emirate can afford the occasional splurge.


Meanwhile, the country’s economic reach extends very well into the way it conducts global business affairs. It is currently playing a pivotal role in the Volkswagen-Porsche merger which seems to be a shrinking possibility with each day. Qatar also has huge stakes over in Greece, as it facilitates the creation of a joint venture between Greek’s two largest banks.

And then of course there’s Sports. With Qatar winning the World Cup 2022, the country is faced with the challenge of becoming a sports global hub. Besides the World Cup, Qatar has also launched a bid for the Paralympics while Qatar Airways sponsors a number of sports events and teams, including the Tour de France. A Qatari investment vehicle earlier this year bought a 70 percent stake in French soccer club Paris St Germain for an undisclosed amount.

Doha-based broadcaster Al Jazeera recently bought a share of the domestic TV rights of French league games from 2012 to 2016. The network paid 90 million euros ($129 million) a year for rights to broadcast two live games a week and for other associated rights over four seasons between 2012 and 2016.The timing couldn’t have been better.

“By giving Qataris — especially the youth — more access to sport and bringing the world’s best sporting stars to Qatar, Qatar’s elite are quite simply and understandably boosting their own popularity domestically,” said David Roberts, deputy director of the Royal United Services Institute based in Doha.

Unlike neighbouring Gulf countries, Qatar has been notably free of the unrest that has swept the region in recent months. As the country with the world’s highest per capita income, estimated at $90,149, it can afford to spend lavishly on bids for sporting events.

Qatar is likely to spend an estimated $100 billion to host the 2022 tournament. It spent $2.8 billion on the Asian Games, which it hosted in 2006.

By Una Galani and Regan Doherty of Kippreport