What Types of Foreign Direct In-

vestment would Strategically Sup-

port Qatars Vision 2030?
Bachelor Thesis
Berlin School of Economics and Law & Anglia Ruskin University

In Fulfillment of the Requirements for the Degree:

Bachelor of Arts (Honors) in International Business
By Ahmad Miari

Subject: Strategic Management

Supervision: Prof. Dr. Breinlinger-O'Reilly & Prof. Dr. Spear

Matriculation Number: 329257 Date: 01/07/2015

Declaration

I hereby certify that this bachelor thesis is entirely the result of my own work and I
have faithfully and properly cited all sources used in the thesis.

Date Signature

1
Foreword and Acknowledgements

This thesis is written as completion to the Bachelor of Arts (Honors) in International Business
at the Berlin School of Economics and Law (BSEL) and Anglia Ruskin University (ARU). The
subject of this thesis deals with the appropriate types of Foreign Direct Investment (FDI) that
would strategically support Qatars Vision 2030. I have chosen to deepen my knowledge
base about FDI and Qatar because of my keen interest towards fast-changing as well as
growing countries like Qatar, FDI and the Middle East (especially the Gulf region). Moreover,
the research and elaboration of this thesis has supported my understanding of the various
conditions in Qatar that may influence FDI. Hence, in the long-term I am seeking to work as a
manager at a foreign firm in Qatar or even establish a German enterprise and do FDI into
Qatar. Accordingly, the elaboration of the main question of this thesis has helped me to
identify attractive types of FDI as well as take opportunities and threats into consideration.

Since April of this year I have been conducting research on the topic. I have experienced this
period as very interesting and instructive. The thesis is set-up as per the catchwords (Qatar,
Vision 2030 and Foreign Direct Investment) of the thesis question. No qualitative or quanti-
tative surveys were conducted, because there are already many critical secondary literatures
by institutions. Nevertheless, there is a gap in the literature concerning the edit of the thesis
question. Hence, there is a limited number of academic or scientific contribution to the
question of what types of FDI would strategically support Qatars Vision 2030. There will be
linkage statements to foreign direct investors (who themselves are working or planning to
work in Qatar) at the end of various sub chapters, so that the topic of FDI into Qatar will stay
relevant.

I would like to thank my supervisors Professor Dr. Jochen Breinlinger-O'Reilly and Professor
Dr. Bruce Spear for their valuable advice and support whenever needed.

Thereby I would like to close one chapter of my life and open up a next one, hopefully as
interesting and rewarding as the four years of studying at the BSEL and ARU.

2
Table of Contents

1. Introduction .............................................................................................................. 8

2. Overview of Conditions in Qatar ............................................................................. 12

2.1. Country .......................................................................................................... 12

2.2. Political ......................................................................................................... 13

2.3. Economic ...................................................................................................... 21

2.4. Social ............................................................................................................ 23

2.5. Investment .................................................................................................... 26

3. Qatar as a Company ............................................................................................. 31

3.1. Strategic Management in Entities ................................................................. 31

3.2. Introduction to Vision 2030 (Qatar) and Vision 2020 (EY) .............................. 33

3.3. Comparison between Vision 2030 and Vision 2020 ........................................ 41

3.4. Applicability of Strategic Management Tools to Qatar .................................. 42

3.5. SWOT-Analysis of Qatar ................................................................................ 44

4. Discussion................................................................................................................. 48

4.1. How attractive is Qatar for FDI? ..................................................................... 48

4.2. What types of FDI would strategically support Qatars Vision 2030? .............. 53

5. Conclusion ................................................................................................................ 59

6. References ............................................................................................................... 67

3
List of Abbreviations

BBC British Broadcasting Corporation

B.C.E Before the Christian Era

BCG Boston Consulting Group

BMW Bayerische Motoren Werke

BRICS Brazil, Russia, India, China, South Africa

BVC Bosch Vocational Training Center

CEO Chief Executive Officer

CIA Central Intelligence Agency

CO2 Carbon Dioxide

EY Ernst & Young Consulting Firm

FAZ Frankfurter Allgemeine Zeitung

FBI Federal Bureau of Investigation

FDI Foreign Direct Investment

FIFA Fdration Internationale de Football Association

FTA Free Trade Agreement

GCC Gulf Cooperation Council

GCI Global Competitiveness Index

GDP Gross Domestic Product

GSDP General Secretariat for Development Planning

HEC Paris cole des hautes tudes commerciales de Paris

4
HMC Hamad Medical Corporation

ICT Information, Communication, Technology

IFS International Financial Statistics

ILO International Labor Organization

IMF International Monetary Fund

IS Islamic State

IWS Institute for Workplace Studies

Km Kilometer

LNG Liquefied Natural Gas

LSE London School of Economics and Political Science

MENA Middle East & North Africa

Mio Million

MNE Multinational Enterprises

MSCI Morgan Stanley Capital International

NATO North Atlantic Treaty Organization

NDS National Development Strategy

OECD Organization for Economic Co-operation and De-

velopment

OPEC Organization of the Petroleum Exporting Countries

PEST Political, Economic, Social, Technology

PwC PricewaterhouseCoopers Consulting Firm

QNV 2030 Qatar National Vision 2030

QP Qatar Petroleum

5
QR Qatari Riyal

R&D Research & Development

Sq Square

SWOT Strengths, Weaknesses, Opportunities, Threats

UAE United Arab Emirates

UK United Kingdom

UN United Nations

UNCTAD United Nations Conference on Trade and Develop-

ment

UNESC United Nations Economic and Social Commission

US / USA United States of America

WEF World Economic Forum

WHO World Health Organization

WIR World Investment Report

WSJ Wall Street Journal

6
List of Figures

Cover Page/ Flag of Qatar: Flagpedia, 2015

Cover Page/BSEL Logo: HWR Berlin, 2015

Cover Page/ARU Logo: StudyLink, 2015

1.1 International Capital Flows: Protsenko, A., 2003

2.1 Map of Qatar: Kelly et al. 2015

2.2 Key Data of Qatar: Kelly et al. 2015

2.3 Key Data on Qatars Import and Export Commodities and Partners: Kelly et al. 2015

2.4 Foreign Investment Assessment in GCC countries: Kelly et al. 2015

2.5 Qatar Foreign Direct Investment from 1970 to 2013: The Global Economy, 2013

3.1 Qatars Vision 2030: Dr. Leete et al., 2014

3.2 Target sectors of the National Development Strategy 2011-2016: General Secretariat for
Development Planning, 2011

3.3 The National Development Strategy 2011-2016: Minister of Education and Higher Educa-
tion, 2011

3.4 EYs Vision 2020: EY USA, 2013

3.5 Qatars SWOT-Analysis: Deloitte, 2009

7
1. Introduction

Highlighting that FDI is increasingly becoming an important source of private external fi-
nance for developing countries, including in the Middle East Qatar Vision 2030 provides a
roadmap to developing a political and organizational climate that supports the foreign in-
vestment (Gulf-Times, 2015).

This thesis will discuss the crucial types of Foreign Direct Investment (FDI), which strategical-
ly support Qatars Vision 2030, thus the impact of FDI on Qatars Vision 2030 will be exam-
ined with the aid of a modified PEST analysis, discussion on Qatars strategic management
approach and attractiveness of FDI. The question of whether Qatar might remain attractive
as a strategic site in the Middle East for foreign firms will be discussed within the thesis.

Qatars National Vision 2030 provides a broad social blueprint that aims at preparing for a
knowledge-based economy. The aim is for sustainable growth that does not rely on oil or
liquefied natural gas (Government of Qatar, 2007). According to the Vision 2030, Qatar aims
to be an advanced society capable of sustaining its development and providing a high stand-
ard of living for its people. Qatars National Vision defines the long-term outcomes for the
country and provides a framework within which national strategies and implementation
plans that can be developed (Worldbank, 2008). The plan aims for suitable economic diver-
sification, by which is understood a diversified economy that gradually reduces its depend-
ence on hydrocarbon industries (Fasano, 2003), enhances the role of the private sector and
maintains its competitiveness (LSE, 2013).

In order to stay competitive, FDI helps developing countries such as the Gulf Co-operation
Council countries to boost their economies (Al-Khatib, 2003). The GCC is a political and eco-
nomic alliance established in 1981, and designed to foster relations between Qatar, Bahrain,
Kuwait Oman, Saudi Arabia and the United Arab Emirates (Kelly et al., 2015). All GCC states
together have a population of almost 47 million people. The GCC was established to effect
coordination, integration and inter-connection among the member states in all fields in or-
der to achieve unity (The Islamic Centre for Development of Trade, 2010).

In order to understand the topic of the thesis, it is necessary to define the term Foreign Di-
rect Investment (FDI). FDI is one of the three components of international capital flows (as

8
illustrated in Figure 1.1), besides the portfolio investment and other flows like bank loans
(Protsenko, A., 2003).

Figure 1.1

The following definition of FDI clarifies the difference to the other two forms of international
capital flows: Foreign Direct Investment reflects the objective of obtaining a lasting interest
by a resident entity in one economy (direct investor) in an entity resident in an economy
other than that of the investor (direct investment enterprise). The lasting interest implies
the existence of a long-term relationship between the direct investor and a significant de-
gree of influence on the management of the enterprise. Significant degree of influence and
long term relationship are the key terms to distinguish FDI from portfolio investments, which
are short term activities undertaken by institutional investors through the equity market. A
lasting interest in foreign entity emphasizes the difference to other forms of capital flows
and occurs in form of tacit knowledge (Protsenko, A., 2003).

According to the Financial Times Lexicon (2015), FDI occurs in two types:

The horizontal type refers to the foreign manufacturing of products and services roughly
similar to those the firm produces in its home market. This type of FDI is called horizontal
because of its multinational enterprise character, which duplicates the same activities in
different countries. Horizontal FDI arises because it is too costly to serve the foreign market
by exports due to transportation costs or trade barriers (Protsenko, A., 2003).

The vertical type refers to those multinationals that geo-graphically fragment a production
process. It is called vertical because the multinational enterprise (MNE) separates the pro-

9
duction chain vertically by outsourcing some production stages abroad. The basic idea be-
hind the analysis of this type of FDI is that a production process consists of multiple stages
with different input requirements. If an input price varies across countries, it becomes prof-
itable for the firm to split the production chain. Furthermore, as shown in Figure 1.1, vertical
FDI consists of two groups: backward and forward vertical FDI (Protsenko, A., 2003). Forward
vertical FDI it takes the firm nearer to the market (International Finance Corporation, 2015)
and backward vertical FDI is where international integration moves back towards raw mate-
rials (Financial Times Lexicon, 2015).

Moreover, FDI can take the form of a greenfield entry or takeover. The term Greenfield
entry implies assembling all elements from scratch (Financial Times Lexicon, 2015), whereas
foreign takeover (mergers and acquisitions) means the acquisition of an existing foreign
company. The World Bank Group (2015) and Protsenko (2003) classify FDI into four distinct
motivation types resource-seeking (FDI in natural resources such as raw materials or miner-
als), market-seeking (FDI that aims at adapting products to local tastes and needs, and to use
local resources), efficiency-seeking (rationalized or integrated operations whether regionally
or globally leading to cross-border product or process specialization), and strategic asset-
seeking (acquisitions and alliances to promote long-term corporate objectives).

After the brief introduction, the thesis will continue with a chapter which gives an overview
of conditions in Qatar. There will be a modified PEST-Analysis of Qatar, tackling political,
economic, social and investment issues as well as providing exclusive conclusions to foreign
direct investors.

After that, there will be a chapter to Qatar as a Company. This chapter helps to understand
the strategic activities of Qatar and their business-like orientation. Based on this infor-
mation, Chapter 3 will deal with strategic management similarities and differences of a state
like Qatar and a global company like Ernst & Young. Initially, the meaning and applicability of
strategic management to entities such as governmental or private will be discussed. Further,
Qatars Vision and then Ernst & Youngs (as well as National Strategy) will be introduced and
critically reviewed. Moreover, both visions will be shortly compared. After clarifying the ap-
plicability of strategic management to governmental entities, the applicability of strategic
management tools to Qatar will be discussed. Additionally, the strategic management tool
namely a SWOT analysis will be applied to Qatar.

10
The discussion in Chapter 4 is taking into accounts the outcomes of the previous chapters.
The first discussion will be about the attractiveness of Qatar for FDI, as a foreign direct inves-
tor must essentially know whether it is worth investing in Qatar, in order to do FDI benefiting
both the multinational and the Qatari economy (and QNV 2030). The objective of the first
discussion is to examine the deciding factors, especially the inflow of Foreign Direct Invest-
ment to Qatar and the attractiveness of the country for FDI (Manhal, 2005). After that, the
research question of the thesis question will be discussed by taking into account various per-
spectives such as distinct motivation, sector and region of the foreign direct investor.

The thesis will conclude with providing additional guidance chapter for the Qatari govern-
ment and potential foreign direct investors in order to give ideas for further improvement of
Qatars performance in various fields.

11
2. Overview of Conditions in Qatar

In the following, Qatar will be discussed from different perspectives. A general country over-
view will provide necessary key data about Qatar. Afterwards, this country will be analyzed
in the fields of politics, economics, society and investment.

2.1. Country

With a population of about 2.2 mio. people, Qatar is a small (see Figure 2.1 and Figure 2.2),
affluent country that is rapidly developing. On the back of its richness of oil and natural gas
reserves, Qatar has transformed from being one of the poorest countries in the Middle East,
to one of the richest in the region, with its per-capita income ranking among the highest in
the world (Kelly et al., 2015). The high GDP per capita (approximately 90.000, 00) is due to
the enormous endowment in hydrocarbons and the small size of the national population,
the smallest in all GCC countries (Global Finance, 2014). Exploiting the resources and chan-
neling them into ambitious development, policies required massive imports of foreign labor.
The countrys total population has multiplied by four since the mid-1980s; moreover, foreign
nationals made up an estimated 90 percent of all residents and up to 94.1 percent of all em-
ployed population in 2013. The awarding of the 2022 FIFA World Cup to Qatar in December
2010 turned the spotlight on the countrys dilemma with regard to employment regulations
(De Bel-Air, 2014).

The high GDP per capita and upcoming FIFA World Cup into Qatar seems promising to FDI.
Nevertheless, the high number of foreign nationals indicates that Qatar does not have
enough educated national workers. For foreign direct investors this would mean that they
have to deal with the nationals lack of education and cannot fully rely on Qatari expertise
(Kelly et al., 2015).

12
 2.2. Political

History

The livelihood of the early inhabitants of Qatar was almost totally dependent on seafaring
activities such as pearling, fishing and trading, while agriculture was limited to Bedouin ani-
mal husbandry and the cultivation of date palms. This way of life did not change significantly
until the discovery of oil in the 1930s.

Until the 3rd century the Persian Parthians fortified the Gulf coast and dominated the region,
followed by the Sassanians, another Persian dynasty, ruling the area until the advent of Islam
in the 7th century (BBC, 2015).

The people of the Gulf region were exposed to a variety of cultures and religions, and evi-
dence exists of early Christian and Jewish settlement in the area, along with Zoroastrians.
While these influences dissipated rapidly with the conversion of the Arabs to Islam, the co-

13
mingling of Arabic and Persian peoples continues to be an exception of the modern Gulf
States (Kelly et al., 2015).

In late 18th century, a new force within Islam rose to prominence on the Arabian Peninsula. It
is known as Wahhabism, after its founder Mohammed Ibn Abd al-Wahhab, and it sought to
return Islam to its purest and strictest form (BBC, 2015). The al-Wahhab forces were joined
by the leader of the Ibn Saud tribes from the Riyadh area. These tribes embarked upon an
aggressive mission of conquest on the eastern side of the Arabian Peninsula, inspired by
their desire to spread the true word of Islam. The tenets of Wahhabism proved to appeal
to various local tribes in the Qatar region, most notably the Al-Thani. The Al-Thani and their
followers fiercely adapted Wahhabism, and by the early 1890s, Qatar was established as an
isolated Wahhabi community on the gulfs east coast. This was highly significant for the sub-
sequent history of the country and established the Al-Thani as a dominant ruling entity in
the region.

Ottoman Turks occupied the region from 1872 until 1916 when Qatar became a British pro-
tectorate. Qatar became independent in 1971. A new constitution providing for democratic
reforms came into force in 2005 (Kelly et al., 2015). In 2013 the Emir of Qatar, Sheik Hamad
bin Khalifa al-Thani, announced to turn power to his son Tamim bin Hamad Al Thani. Sheik
Hamad said that after nearly to two decades of service as the Emir of Qatar, it was time for
the next generation to lead the country (The Moscow Times, 2005).

To foreign direct investors it is important to know the Qatari history, because it indicates
why the Qatari society is fundamentally Islamic with Al-Thani tribe being the ruling family in
Qatar. Moreover, it is crucial for foreign direct investors to understand that the independent
Qatar has a short history of only four decades. Therefore, the political environment of Qatar
as well as neighboring countries may change more rapidly compared to established western
developed country, by this uncertainty influencing the Qatari FDI policy.

Political Conditions

Qatar is evolving from a traditional society into a modern welfare state to Qatari nationals
and government departments have been established to meet the requirements of social and
economic progress. Qatar, as all the Gulf States, has an authoritarian governmental form
which limits basic freedoms of expression, assembly and association, and does not secure

14
individuals' rights due to process protections (Beydoun et al., 2012). Key political issues in
Qatar are currently focused on Middle East and Arab topics, and Qatar enjoys close relations
with most of the countries (Kelly et al., 2015).

The authors focus on the political conditions in Qatar relies on political risk, political sta-
bility, freedom rankings, human rights, government functions and foreign relations. With the
support of the index of CountryWatch, political risk, political stability and freedom rankings
in Qatar will be highlighted. The scores of political risk and political stability are assigned
from 0-10 using an established methodology by CountryWatch. A score of 0 marks the worst
level, while a score of 10 marks the best level in the respective area (Kelly et al., 2015).

The political risk in Qatar can be measured by the Political Risk Index, which measures the
level of risk posed to governments, corporations, and investors, based on several political
and economic factors. The Political Risk Index is based on varied criteria including the follow-
ing: political stability, political representation, democratic accountability, freedom of expres-
sion, security and crime, risk of conflict, human development, jurisprudence and regulatory
transparency, economic risk, foreign investment considerations, possibility of sovereign de-
fault, and corruption. Scores are assigned from 0-10 using the aforementioned criteria.

Several Arab countries, such as Egypt, Libya, Algeria, Syria, Bahrain and Yemen have been
downgraded due to political instability caused by the "season of unrest", which has been
affecting the region since 2011 (Kelly et al., 2015). While the most severe downgrades af-
fected Syria, with the civil war and the invasion of troops of the Islamic State being the
main factors. Qatar was upgraded (7 out of 10 index) due to its political stability and power
in the Middle East.

Foreign direct investors might consider Qatars political stability and power but also the con-
flict and human development in their internationalization strategy. Nevertheless, Qatar lacks
democratic accountability and freedom of expression, which may cause problems for west-
ern FDI into Qatar.

Political stability in Qatar is assessed through the Political Stability Index, which is a proprie-
tary index measuring a country's level of stability, standard of good governance, record of
constitutional order, respect for human rights, and overall strength of democracy.

15
This index is based on a given country's record of peaceful transitions of power, ability of a
government to stay in office and carry out its policies when confronted with credible risks of
government collapse. Possible threats include coups, domestic violence and instability and
terrorism. This index measures the dynamics between the quality of a country's government
and the threats that can compromise and undermine stability. Accordingly, Qatar is a politi-
cal stable country with a score of 7 out of 10. For comparison, Germany scored 8 out of 10
(Kelly et al., 2015). This is beneficiary for FDI into Qatar, as foreign investors can plan strate-
gically without having to fear a loss of investments due to coups or domestic violence.

Freedom Rankings

The ranking by Freedom House quantifies political freedom and civil liberties and generates
a single combined index for each country. The initials "PR" and "CL" stand for Political Rights
and Civil Liberties, respectively. 1 on the scale represents the freest countries and the
number 7 represents the least free. Several countries fall in the continuum in between.
The freedom ratings reflect an overall judgment based on survey results (Kelly et al., 2015).

This survey claims that Qatar is not free (PR=6; CL=5) and therefore has a lack of political
rights and freedom and civil liberties, because it is not allowed to stand against the Sheikh-
dom and its political agenda.

The low Freedom Ranking of Qatar is a serious issue for foreign direct investors, because the
majority of FDI comes from western countries who investors state that political rights and
freedom as well as civil liberties are essential to live under fair and comfortable conditions.
Accordingly, limited civil rights also influence the organizational structure of a multinational
firm in Qatar (World Bank Group, 2015).

Human Rights

Human Rights are further considered as vital by various foreign direct investors from all over
the world. The monarchical system with limitations in governmental transparency for in-
stance, limits to freedom of speech, press and associations for the residents of Qatar might
cause displeasure among foreign direct investors who may seek to live and work in Qatar in
the long-term.

16
The state of Qatar is a traditional monarchy where the Emir exercised full executive power,
but a new constitution came into effect in 2005, which included human rights provisions that
are yet to be implemented. The human rights situation did improve in recent years, some
other problems have remained while others have recently emerged. The government, which
lacks transparency, limits the freedoms of speech, press, religion, assembly and association.
It also has the ability to revoke citizenship and restrict worker rights (Kelly et al., 2015). In
Qatar citizens seem to be unable to change their government peacefully. There are re-
strictions on fundamental civil liberties, and the rights of noncitizen workers are often de-
nied. Human trafficking and legal discrimination against women are further concerns. Over-
all, Qatar has one of the better human rights records in the Middle East, but might still con-
sider improving the conditions (Freeman Center For Strategic Studies, 2014).

Government Functions

Qatar is a traditional monarchy; the Al-Thani family has formally ruled the country since the
19th century. Power is passed on along family lines by hereditary regulations, usually to a
son, though the primogeniture of the first born son is not always strictly respected.

The Emir is the head of state, and an absolute ruler. His role is influenced by traditions of
consultation, rule by consensus, and the citizen's right to appeal personally to the emir. The
Emir initially derives his formal power from the Basic Law of 1970, also known as the provi-
sional constitution. According to this law, the Emir is bound to rule in accordance with the
main principles of fairness, honesty, the Islamic religion, generosity, and mutual respect. The
Emir, while directly accountable to no one, cannot violate the Shari'a (Islamic law) and, in
practice, must consider the opinions of leading notables and the religious establishment
(Kelly et al., 2015).

The role of notables and the religious establishment, in this regard, was institutionalized in
the form of the unicameral Advisory Council or Majlis al-Shura, an appointed body that as-
sists the Emir in formulating policies. There are currently 35 members of the advisory coun-
cil, which, in effect, functions as the supreme legislative body. The Emir appoints its mem-
bers, and they advise on policy matters formulating the laws of the country (Kelly et al.,
2015).

17
The judicial system comes under the provenance of Emiri rule, although Islamic law largely
regulates individual matters. It is, mainly, a discretionary system of law controlled by the
Emir. Certain civil codes, however, are in the process of implementation. It is also notewor-
thy that under the judiciary law issued in 2003, the former two court systems, the civil and
Islamic law, were merged under a higher court (Court of Cassation), which was established
for appeals (Kelly et al., 2015).

On balance, the country is currently in the process of being transformed into a constitutional
monarchy. However, political parties are still not able to operate freely and there are no na-
tional elections. It is yet to temporize if the political unrest sweeping the Middle East since
2011, manifest by demonstrations and passionate demands for democratic reform, will have
a long-lasting effect on the Qatari political and social life (Bertelsmann Stiftung, 2014).

Against this background, foreign direct investors might take into account that they are in-
vesting in an absolute monarchy, which is governed by the Emir and its family. Moreover,
the role of the Majlis al-Shura as a legislative power giving religious advices under Islamic
law on the lawmaking process might harm Foreign Direct Investments due to the fundamen-
tal interpretation of Islam as well as potential penalization under the Sharia.

Foreign Relations

Qatar has strong foreign diplomatic relations to many countries in the world. Shortly after
the declaration of independence in 1971, the country joined the United Nations and several
of its specialized agencies, such as the Food and Agriculture Organization, the International
Labor Organization, the World Health Organization, and the United Nations Economic and
Social Commission. Qatar is neither a signatory to the United Nations Convention on Civil
and Political Rights nor to the Vienna Convention on Consular Relations. Diplomatic relations
have been established with a large number of countries around the world, and relations in-
crease annually, with the opening of more Embassies on both sides (World Bank Group,
2015).

For instance, in 1988 diplomatic relations were established with China and have since been
continuously developed (Kelly et al., 2015). Today, China is an important trade and invest-
ment partner of Qatar, which for example satisfies approximately 20 percent of Chinas LNG
needs (The Jamestown Foundation, 2012). The extent of Chinese-Qatari cooperation in the

18
energy sector extends beyond Chinese imports of Qatari LNG and joint development projects
in Qatar. In October 2011, the companies Qatar Petrol, Royal Dutch Shell and PetroChina
agreed to build a petrochemicals and refining complex in the Zhejiang province with an ini-
tial investment of $12.5 billion. Additionally, Qatar was an early member of OPEC (Kelly et
al., 2015). Qatar's geopolitical influence exceeds its size, a reality that results in tensions to
other Great Powers. Qatar's ascension to the world stage in recent years represents one of
the most important trends in Middle East affairs (Asia Times, 2012).

Similar to its GCC partners, Qatar plays a critical role in advancing US strategic military ob-
jectives in the Middle East. Qatar is host to the headquarters for US Central Command, in-
cluding key military installations such as Camp al-Sayliyah and the Al-Udeid Air Base
(Blanchard, 2014). Qatari soil serves as the largest prepositioning base for US forces outside
of United States. Accordingly, Qatars rise to international prominence occurred as a result
of its energy prowess and strategic alliance with for instance the US in the Middle East (Asia
Times, 2012).

Foreign direct investors might keep in mind that Qatar is a strong country in the Middle East
that has strong diplomatic relations. Foreign relations to institutions like the UN, ILO, WHO,
UNESC and OPEC and countries like the BRICS as well as western countries. These strong
worldwide diplomatic ties might provide foreign direct investors with further global oppor-
tunities and collaborations (Kelly et al., 2015).

Regional Relations

Despite the turbulence in the Persian Gulf, Qatar has managed to maintain equable with
even excellent relations with many of its neighbors and with other Middle Eastern countries.

Over the last years, the GCC countries have expanded their cooperation into the field of de-
fense. The alliance depends on western forces to protect the security of the oil-rich region,
but increasing regional cooperation might allow a reduction of the western military presence
in the region. In December 2000, a defense pact was signed that aimed at enlarging the ex-
isting joint defense force "Peninsula Shield" from 5,000 to 22,000 troops (Blanchard, 2014).

Qatari officials positioned themselves as mediators and interlocutors in a number of regional

conflicts in recent years. Qatars deployment of military aircraft to support NATO-led opera-
tions in Libya and US led operations against the Islamic State in Syria signaled a new asser-

19
tiveness, shown by Qatars support for armed groups of the Syrian opposition. Qatars will-
ingness to support Hamas, Muslim Brotherhood, and the Taliban as well as extremists in
Syria has caused problems with its Gulf neighbors and led to increasing tensions with other
Arab states on the Persian Gulf (IWS, 2015). In March 2014, various countries withdrew their
ambassadors from Qatar, in protest to a perceived non-compliance with a November 2013
agreement to not interfere in countries internal affairs (Blanchard, 2014).

Since spring 2015, a Saudi-led coalition has launched air strikes on Yemen in an effort to stop
the advance of the Huthis' which are Shia-Muslim. This movement is seen as a danger to the
Wahhabi Muslim oriented Saudi-Arabia, which has intensive political influence and power on
Yemen. Officially known as Ansar Allah (Partisans of God), the Huthi rebels began as a theo-
logical movement that preached tolerance and peace in the early 1990s, according to Ahmed
Addaghashi, a professor at Sanaa University (Aljazeera, 2015). According to Newsweek
(2015) the Huthis are fighting "for issues that Yemenis crave: government accountability, the
end to corruption, regular utilities, fair fuel prices, job opportunities for ordinary Yemenis
and the end of Western influence". There are concerns in the GCC states, that this might be
a maneuver to establish a Shia counterpart to the Islamic State, therefore Saudi-Arabia is
bombing the Huthi basis.

Regional relations are very important for foreign direct investors, because they need to
know whether long-term FDI is possible. Hence, Qatar maintains very close relations with
various Middle Eastern countries. The GCC and western military presence provide Qatar with
further stability and security in the region (Mina, 2007). Nevertheless, Qatar is pursuing a
dual strategy, because on the one hand, the country is investing in strong diplomatic ties to
other regional countries and on the other hand it supports extremist groups like the Hamas
or Taliban, which internally damage the respective countries (Blanchard, 2014). Such politi-
cal gamble by Qatar might cause military tensions that would have an impact on the volume
of FDI. Moreover, potential threats to Qatars political security are the various civil wars, IS
and the Shia-Sunni tensions in the regions like Bahrain, Kuwait, Yemen or Saudi-Arabia. A
potential Sunni-Shia confilict in Qatar may not be as distinct compared to Bahrain, because
the majority is Sunni and the Qatari government does not distinguish between both religious
groups as Bahrain did in history. In addition, in the long-term it is not clear how strong IS will
become and whether the GCC countries, especially Qatar will be their next target. According-

20
ly, civil wars or terrorist attacks might not only cause domestic damage but also the escape
of foreign direct investors from Qatar (Kelly et al., 2015).

2.3. Economic

It is noteworthy that Qatar developed since its independence to a very affluent country that
has transformed from being one of the poorest countries in the Middle East to one of the
richest in the region, with a per capita income among the highest in the world (Kelly et al.,
2015). According to the Worldbank Group (2015), Qatar is rated as the fastest growing coun-
try in the world (Cyclopedia, 2014). This is largely attributable to the country's rich oil fields
and natural gas reserves, with the hydrocarbon sector accounting for more than 50 percent
of the GDP. Sustained high global oil and gas prices in recent years have spurred Qatar's out-
put growth and generated substantial fiscal and current account surpluses. Despite the glob-
al economic crisis, Qatar's economy continued to perform well in 2009. The government's
supportive policies helped maintain investment, contributing to strong growth and sizable
fiscal and external surpluses (Kelly et al., 2015).

Moreover, the central bank's policies, like their timely and decisive intervention, helped
moderate the impact of the global crisis on the domestic banking system. Qatar had the
world's highest growth rate in 2010, largely due to the spike in oil prices. It also had the dis-
tinction, of being the world's second highest per-capita income country (behind Liechten-
stein) and the country with the second lowest unemployment rate which is 0.3 percent (IMF,
2015). Qatar has also benefited from a doubling in natural gas production, a timely interven-
tion in the banking system, and continuing large public investments into the infrastructure
(CIA, 2010).

In mid-2011 Qatar won the bid for the FIFA World cup 2022 through millions of dollars in
bribes. Qatari officials denied the accusations and as to date, the country was permitted to
host the games (The Guardian, 2013). However, evidence against Qatars World Cup bribe
might, according to a prominent FIFA whistleblower, cause its expel from the tournament in
context of a series of FIFA reforms. Speaking to The Independent, Almajid said that she wel-
comed the dramatic developments in the corruption scandal following the arrests in Switzer-
land on 27th of May, and predicted that FIFA would soon be left with no option but to find
another host for the 2022 World Cup (The Independent, 2015). The FIFA bid was expected to

21
accelerate large-scale infrastructure projects such as Qatar's metro system and the Qatar-
Bahrain causeway, where had been little progress (Albawaba, 2012).

Up to date, a strong GDP growth has continued, supported by Qatar's investment in expand-
ing its gas sector. In general, the country's non-hydrocarbon sector was estimated to have
grown by 9 percent, driven by manufacturing, financial services, trade and hotel business.
Looking ahead, the economic outlook appears favorable despite increased external risks. The
main downside risks are lower hydrocarbon prices and potential disruption in transportation
of LNG due to increased geopolitical tensions (Gulf Business, 2012). The real GDP growth
rate of 2012 was projected to be moderate but still outpace to other Gulf states. By July
2012, it was clear that concerns about the slow pace of Qatar's massive infrastructure build-
ing program negatively impacted the Doha stock market (Kilani, 2014). In July 2012, govern-
ment officials unveiled new financial reforms and relaxed trading rules that had the potential
to boost sentiment once they finally took effect. The reforms included extending the settle-
ment time for local investors' stock trades and expediting the creation of banks' brokerage
arms, according to the World Economic Forum (2013).

The Gross Domestic Product in Qatar expanded 1.50 percent in the fourth quarter of 2014
over the previous quarter. GDP Growth Rate in Qatar averaged 3.75 percent from 2004 until
2014, reaching an all-time high of 14.40 percent in the second quarter of 2008 (Trading Eco-
nomics, 2015). Gulf-Times (2015) reported that stable inflation rates and high current ac-
count surpluses are expected to further boost Qatar's economic momentum. For instance,
construction, transport and communication, financial, real estate, and business services are
all experiencing double-digit growth in Qatar (Kelly et al., 2015).

The economy was accelerating also on the basis of large infrastructure projects such as the
Doha Metro Rail. The increased demand for labor due to the infrastructure expenses was
leading to an even greater influx of people into the country. Indeed, Qatar's population re-
portedly tripled between 2001 and 2013 leading to significantly more vehicles on the road,
so that the CO2 emissions increased rapidly (Kelly et al., 2015).

Foreign direct investors have to consider economic conditions in Qatar to be relevant to

their strategy, because this information strongly influences further business efforts. None-
theless, they have to understand that the Qatari government is moving away from the de-
pendence on the hydrocarbon sector to a balanced economy which is not predominantly

22
dependent on oil and gas. Hence, investment opportunities for FDI may arise. Especially for-
eign direct investors who are already investing in the natural reserves in Qatar might rethink
their strategy in order to stay profitable in the long-run. Moreover, upcoming investors from
various sectors may seek also to invest in non-hydrocarbon sectors (Kelly et al., 2015).

In addition, the large-scale infrastructure projects such as Qatar's metro system and the Qa-
tar-Bahrain causeway which have to be ready for the World Cup in 2022 seem to be attrac-
tive for FDI into Qatar. As Qatar might lose its bid for the FIFA World Cup in 2022, foreign
direct investors might invest in sectors and projects that may stay attractive and profitable in
the long-run such as the construction, transport, communication, financial, real estate and
business services sector (Kelly et al., 2015).

2.4. Social

The countrys population has risen rapidly over the past decade, from less than 600.000 in
2000 to an estimated 2.2 million in 2014. However, these population figures include the ex-
orbitant numbers of foreign temporary workers; only the minority is holding Qatari citizen-
ship. In other words, only about one tenth of the people living in Qatar are actually Qatari
citizens. It is reported that foreign workers represent 94.2percent of the total economically
active population in Qatar. Roughly, 71 percent of all people in Qatar are male (Cyclopedia,
2014).

Immigrant Workers

In 2014, Qatar was ranked badly by Human Rights Watch (2015), related to the countrys
high prevalence of modern slavery in society (The Global Slavery Index, 2014). It is reported
that more than 90 percent of the Qatari population originates from foreign countries; many
of these are coming into the country for domestic help or as workers in the booming con-
struction industry (Human Rights Watch, 2014). Workers immigrate predominantly from
India, Sri Lanka, Nepal, Pakistan, Bangladesh and the Philippines. They report a number of
unjust practices like forced labor, including extortionate recruitment fees, illegal confiscation
of passports, withholding of salaries, excessive working hours, hazardous workplaces, unhy-
gienic living conditions, as well as physical, psychological and sexual abuse from employers in
Qatar (The Global Slavery Index, 2014). World media pressure on Qatar has due to the

23
planned hosting of the 2022 FIFA World Cup exposed that those unjust practices of Qatari
employers towards foreign workers are very common (Gardner et al., 2013).

For instance foreign direct investors in the construction field, who care about ethical issues,
might have major problems with the slave-like treatment of the foreign workers in Qatar.
Even though the Qatari government does not regard this treatment as illegal, in front of the
world media and stakeholders foreign firms that do not refuse the modern slavery in their
businesses in Qatar make themselves guilty for the inconvenient treatment of foreign work-
ers, which then negatively affects the companys image.
Indigenous Society

Qatari citizens can be divided into three groups: the Bedouin, Hadar and Abd. The Bedouin
descend from the nomads of the Arabian Peninsula, and the Hadar descend from settled
town dwellers. Originally, Hadar are descendants of Bedouin, mostly descending from mi-
grants from present-day Iran, Pakistan, and Afghanistan. The word Abd means slaves, and
accordingly, this faction consists of the descendants of slaves from east Africa. All three
groups identify themselves as Qatari and their right to citizenship is not challenged (Kelly et
al., 2015).

Islam is the official religion in Qatar, and Islamic jurisprudence is the official basis of Qatars
legal system, even though civil courts have jurisdiction over commercial law. Qatar is the
only country other than Saudi Arabia which is dominated by the conservative Wahhabi
branch of Sunni Islam, which includes the royal family of Qatar (The Encyclopedia of Earth,
2012). While the majority of Qatari citizens are Sunni, 20 percent of the population identify
themselves with the Shia community. This derives from the ancestral differences between
the Bedouin and the Hadar. Qataris with ancestral links to Arabia are likely to identify Bed-
ouin cultural values and be adherents of Sunni Islam, whereas Qataris with ancestral links to
regions along the northeastern side of the Gulf are likely to be adherents of Shia Islam.

After gaining independence from Great Britain in 1971, Qatar developed extensive social
welfare programs for its national citizens, including free health care, housing grants and sub-
sidized utilities. Education is compulsory from ages six to sixteen and free for all citizens
throughout college. Institutions have also been established to support low-income families
and disabled individuals by educational and job training programs (Kelly et al., 2015).

24
Foreign direct investors need basic knowledge about the indigenous society of Qatar, be-
cause it gives them the cultural sensitivity for effective business. Hence, foreign businesses
in Qatar might understand that Qataris are divided in three groups and are predominantly
Sunni Muslims. Each group has its own differing traditions and approaches doing business.
By this, potential conflicts between ethnicities and religions (tensions between Christians,
Sunni Muslim, Shia Muslim and Hindus) might arise in the establishments of FDI in Qatar.

Human Development Index (HDI)

The HDI was compiled by the United Nations Development Program in order to measure the
quality of life according to longevity, education, and economic standards of living in coun-
tries across the world. Countries evaluation can show one of the following levels of devel-
opment: very high human development, high human development, medium human devel-
opment and low human development. Qatar is ranked 38 out of 169 countries having a very
high human development and is on the same line with countries like Singapore, the United
Kingdom and Portugal (Kelly et al., 2015).

The high standard of living is attractive to foreign direct investors who expect a lifestyle simi-
lar to their home country, especially those of western countries who do not want to give up
human development privileges in Qatar.

Global Gender Gap Index

The Global Gender Gap Index by the World Economic Forum ranks most of the world's coun-
tries in terms of the division of resources and opportunities among males and females. In the
Arab world, Qatar after the United Arab Emirates, Kuwait, Tunisia, Bahrain and Lebanon,
holds the highest rank within that region of the world. However, its placement near the bot-
tom of the global list (Qatar ranked 117 out of 134 countries) highlights the fact that Arab
countries generally perform poorly in gender equality on a global scale (Kelly et al., 2015).

Thus, potential female foreign direct investors might take into consideration this inequality
while doing business and employing foreign female or national female employees in their
Qatari enterprise.

25
Culture and Arts

Qatari culture is predominantly Muslim, where self-presentation and behavior should be

appropriate to this more conservative environment. Thus, Islamic behaviors and practices
should be respected. One might be aware of how Islamic law, which is delineated in the
Shari'a, is used within the legal and juridical structure of Qatar. While in western countries
the violation of traditions may be seen as ignorance, in countries where the Islamic religion
directly impacts all aspects of society and culture it takes on far greater meaning. Qatari
Wahhabism, however, is less strict compared to Saudi Arabia (CIA, 2010). For example, alco-
hol, which is strictly prohibited in Saudi Arabia, is available in Qatar and there is also no pro-
hibition on women driving cars.

Qatar's official language is Arabic. Furthermore, English, Farsi and Urdu are widely spoken.
Arabic is closely associated with the Islamic faith, thus, its use reinforces the Islamic identity
of the nation and its citizens. The Qatari dialect of Arabic is similar to the version spoken in
the other Gulf States and is called Khaleeji Arabic. The adjective Khaleeji ("of the Gulf")
used to describe the local dialect, also distinguishes citizens of the six Gulf States from North
African and Levantine Arabs (Statistics-World, 2015).

Qatar is primarily a Bedouin culture, and the tribal ethos is still strong in modern society.
Bedouins (being nomads) is a culture traditionally based on poetry and song rather than
buildings or art. However, the art of weaving has produced some globally valuable Bedouin
artifacts, such as tents, rugs, cushions and saddlebags. Qatar has been widely known for its
weaving industry. The National Council for Culture, Arts and Heritage in Qatar is responsible
for preserving the cultural heritage of Qatar (Kelly et al., 2015).

Especially foreign direct investors related to the cultural and educational field are affected
by Qatars culture and arts, as the way foreigners present their home culture and arts are
asked to conform to Islamic standards. Due to the propensity to Wahhabi Islam, the culture
and arts projects of foreigners might not include exhibitions that might be perceived as sex-
ually and politically offence.

2.5. Investment

Neither the Bedouin culture, nor the weaving industry, have made Qatar the highest per-
capita income country, instead the natural resources oil and gas intensively, contributed to

26
Qatars wealth status. Proved oil reserves of 15 billion barrels will enable continued output
at current levels for 37 years. At the same time, Qatar's proven reserves of natural gas ex-
ceed 25 trillion cubic meters, about 14 percent of the world total and third largest in the
world (Kelly et al., 2015).

On the one hand the major export commodities of Qatar are petroleum products to coun-
tries like Japan and South Korea, on the other hand Qatar predominantly imports machinery
and transport equipment from the US, Japan and Germany (see Figure 2.3).

Figure 2.3

Considering the import commodities in Figure 2.3, foreign direct investors might find out
that it is a worth opportunity to produce machinery, transport equipment, food and chemi-
cals inside Qatar, because there is a high domestic need for these (Kelly et al., 2015).

Foreign Investment Assessment

In the last decade, Qatar has attracted significant foreign investment, which has spurred
economic growth. In order to facilitate continued growth, foreign investment is welcomed -
particularly when it seeks to develop its natural gas reserves in the offshore north gas field.
The energy sector, particularly the LNG industry, is the most attractive arena of interest to
foreign investors (Sud de France Dveloppement, 2015). Still, changes have to be made in
the field of law for the purpose of encouraging such investment. In particular, new codes will
have to be implemented in order to ease the requirement for a local agent/sponsor and al-
low 100 percent ownership of foreign investment in certain sectors of the economy. The
Emiri decrees have been issued to attract foreign investment in certain areas where existing
laws are problematic for outside investors. Anyway, according to Transparency International,
Qatar ranks as one of the world's less corrupt countries. Foreign direct investors can benefit
from the fact that Qatar belongs to one of the worlds less corrupt countries, because for-
eign firms do not have to submit bribe to the government (Kelly et al., 2015).

27
Foreign Investment Index

The Foreign Investment Index is a proprietary index that measures the attractiveness for
international investment flows. It is based on a given country's economic stability and thus
the sustained economic growth, monetary stability, current account deficits, budget surplus,
economic risk (risk of non-servicing of payments for goods or services), business and invest-
ment climate (property rights, labor force and laws, openness to foreign investment and
market conditions). The evaluation similar to the Political Risk and Political Stability Index
scores 0-10 using an established methodology by CountryWatch. A score of 0 marks the low-
est level of foreign investment viability, whereas a score of 10 marks the highest level (Kelly
et al., 2015).

Due to its upcoming 2022 FIFA World Cup and the related projects in various sectors (e.g. in
the field of infrastructure) Qatar holds a slightly higher ranking than the other GCC states
(see Figure 2.4). On a global scale, Qatar is performing very well, so that it is worth investing
due to Qatars economic stability, low economic risk and stimulant business and investment
climate (Kelly et al., 2015).

Competitiveness Ranking

The Global Competitiveness Report's competitiveness ranking is based on the Global Com-
petitiveness Index (GCI), which was developed for the World Economic Forum. The GCI is
based on a number of competitiveness considerations, and provides a comprehensive pic-
ture of the competitiveness landscape in countries around the world. The competitiveness
considerations are: institutions, infrastructure, macroeconomic environment, health and
primary education, higher education and training, goods market efficiency, labor market
efficiency, financial market development, technological readiness, market size, business so-

28
phistication, and innovation. Out of 139 participating countries, Qatar was ranked 16th in
2015 and moved up six positions compared to 2009 (Kelly et al., 2015). Qatar is leading the
Middle East in the competitiveness landscape (World Economic Forum, 2013). Thus, foreign
direct investors can benefit from Qatars competitive environment in the Middle East (Kha-
lifa, 2012).

Taxation

The corporate tax rate in Qatar is at 10 percent. The rates run from a zero percent taxation
on corporations earnings and increase to 10 percent for all income over 5 million QR. For-
eign owned firms and the foreign owned portions of joint ventures are subject to corporate
income tax, ranging from 5 percent to 10 percent of net profits. Qatari and GCC nationals
and business are exempted from the corporate tax. There are no withholding taxes in Qatar,
and the country has yet to establish a personal income tax system (KPMG, 2014).

Corporate tax exemptions are granted regardless of whether the corporation is Qatari or
foreign, but certain criteria are evaluated for consideration for tax exemption. These include
the following four key questions:

Does the project provide social or economic benefits to Qatar?

Does the project contribute to Qatar's national economy?
Does the project create employment for citizens?
Does the project use modern technology?

In some cases, fully-owned firms by foreign direct investors might be exempted from taxes,
if the Qatari government determines that a given project is alongside Qatars Vision 2030, as
outlined in the criteria above (Kelly et al., 2015).

Foreign Direct Investment

The Government of Qatar does not publish detailed statistics for FDI in Qatar, however ac-
cording to the World Bank Group (2015); FDI net inflows in Qatar are valued at USD 326,9
million.

Qatar's objective is to become a leading country in terms of business environment and for-
eign investment. These two factors have not stopped to increase in the past years due to the
environment of its political stability, the high quality of its infrastructures, one of the lowest

29
corporate tax rate in the world and a law on investment enacted in 2010, which allows for-
eigners to own the totality of a company in some sectors such as information technology,
counseling, culture, sports and distribution (Sud de France Dveloppement, 2015).

The main sectors that attract foreign investments are oil and gas, construction and the pub-
lic sector, as well as financial services. The main investing countries are the United States,
Japan, South Korea and Singapore (Kelly et al., 2015). The organization of the 2022 FIFA
World Cup will attract a large amount of FDI during the next years (Sud de France D-
veloppement, 2015).

However, one of the elements to limit the expansion of FDI flows in the private sector is the
long amount of time it takes to establish a privatization program. In addition, the small size
of Qatars domestic market, the lack of skilled workforce and the high cost of living are also
hindrances to FDI. Qatar lost three ranks in the classification Doing Business 2015 issued by
the World's Bank; it now ranks 48 out of 189 countries (Sud de France Dveloppement,
2015).

The World Bank (2015) provides further data for Qatar from 1970 to 2013 (see Figure 2.5).
The average value for Qatar during that period was 1.64 percent with a minimum of -0.42
percent in 2013 and a maximum of 8.31 percent in 2009. The following years have not been
characterized by an increase of FDI in Qatar, which might be due to a saturated market. Ac-
cordingly, foreign direct investors might think of investing in alternative and more promising
sectors (The Global Economy, 2013).

Figure 2.5
Note: Qatar Foreign Direct Investment, percent of GDP
30
3. Qatar as a Company

Qatar aims at being an advanced society capable of sustaining its development and provid-
ing a high standard of living for its people and becoming a leading country in terms of busi-
ness environment and foreign investment (Sud de France Dveloppement, 2015). Thus, in
2008 Qatar defined long-term outcomes for the country and provided a framework within
which national strategies and implementation plans can be developed (Dr. Leete et al. 2014).
It is also noteworthy that Qatars National Vision 2030 (QNV) reminds academics of a corpo-
rate business vision, because the path to achieve their vision by a step-by-step strategy that
would turn each goal in the QNV 2030 is similar to the strategic management approach of
companies such as EY (General Secretariat for Development Planning, 2011).

It might also be considered that Qatar and EY differ in terms of their political power, stake-
holder, responsibilities, personal and shareholder interests. Accordingly, EY is strongly influ-
enced by its shareholder, whereas a country like Qatar is more or less free from sharehold-
ers, but instead influenced by other powers such as Saudi-Arabia and the United States.

This chapter will deal with strategic management similarities and differences shown by a
state like Qatar and a global company like EY. Although such a comparison of a country and a
company is rather uncommon, it proves helpful for the argumentation of the present thesis.
In this context, it was important to choose a non-Qatari company out of the private sector
and from a developed country in order to allow for a relatively unbiased and objective com-
parison of the states and the corporate vision. Normally, foreign direct investors have to
merge with Qatars state owned firms, due to a state law which requires foreigners in many
sectors to have 51 percent Qatari partnerships in their businesses.

Furthermore, Qatars National Vision 2030 and EYs Vision 2020 will be compared in order to
examine if Qatar is really acting like a company and the national strategy of Qatar from 2011
to 2016 will be introduced. At the end of this chapter it will be discussed if strategic man-
agement can be applied to a state like Qatar and the strategic management tool, SWOT
analysis will be implemented to Qatar.

3.1. Strategic Management in Entities

Although the term strategic management is used a lot in the business world, it is not un-
derstood very well by most people (Hofstrand, 2007). Hence, people think strategic man-

31
agement is exclusively linked to long-term decisions, even though decisions for the short-
term might be also strategic (Girneata, A., 2011). According to Steinmann et al. (2013) stra-
tegic management is used in order to ensure the viability of an organization. In essence, stra-
tegic management answers the questions of where do you want your business to go
(goals), how is your business going to get there (strategy) and how will you know when
you get there (evaluation).

Don Hofstrand (2007) from Iowa State University characterizes strategic management as
follows:

Strategic management involves deciding what is important for the long-range success
(and viability) of the organization and focusing on it.
Strategic management involves planning, analyzing and implementing an organiza-
tion strategy.
Strategic management involves seeking and identifying opportunities and threats in
the market and industry and the outside world in general.
Strategic management involves assessing the strengths and weaknesses of the organ-
ization.
Strategic management is more of a state-of-mind than a rigid process.

Strategic management might be used in all organisations, whether private or governmental

(McBain et al., 2010). Examples of strategic management approaches of entities are the U.S.
Department of Homeland Security (2010) Strategic Plan, the Kuwait Vision 2035 or strategic
management as implemented in the state sectors of New Zealand. Accordingly, every entity
which strives for viability should know where it wants to go, how to get there (McKinsey,
2010) and how to monitor its strategy milestones. As already described by Hofstrand (2007),
strategic management is a mind-set which helps countries like Qatar or companies like EY to
work towards long-term viability, having in mind the bigger picture (e.g. stakeholders),
matching resources to market opportunities (e.g. Qatars profits through the natural re-
sources might partly be used to invest in the knowledge-based economy), involving oppor-
tunities and threats in their market strategy and formulating an effective strategy through
their identified strengths and weaknesses (Brinkerhoff, 1996).

32
 3.2. Introduction to Vision 2030 (Qatar) and Vision 2020 (EY)

Qatars Vision 2030

In July 2008, Qatar published the long-term plan called Qatar National Vision 2030, which
was followed by the publication of the Qatar National Development Strategy 20112016 in
March 2011 (Dr. Leete et al., 2014).

The National Vision 2030 addresses the following five major issues: modernization and
preservation of traditions; needs of this generation and the needs of future generations;
managed growth and uncontrolled expansion; size and the quality of the expatriate labor
force and the selected path of development; and economic growth, social development and
environmental management (VEGAMEDIA, 2011). Environmental management will probably
be the section that will specially be needed. Research related to the ratio of domestic, indus-
trial and agricultural water consumption indicates that out of 17 countries designated as
being extreme risk of experiencing an interruption to its water supply, Qatar is ranked sec-
ond, according to the British risk analysis firm Maplecroft. Yet, despite these conditions, the
per-capita households use of water in Qatar is one of the highest in the world (Worldbank,
2008).

The QNV 2030 foresees development according to four interconnected pillars (Figure 3.1).

Figure: 3.1

The QNV 2030 plans its first National Development Strategy 2011-2016, a strategy that aims
at paving the way for Qatars economic, social, cultural, and environmental development,

33
leading to a more prosperous Qatar and setting the pace for future national strategies to
come (General Secretariat for Development Planning, 2011).

The national plan focuses on the development for example of a comprehensive high-quality
health care system and a skilled local workforce to provide those health services. Qatar is
spending more per capita on health infrastructure than any other country in the Gulf region,
and the majority of health care is provided by the nonprofit Hamad Medical Corporation
(HMC), which offers free medical treatment to Qataris (General Secretariat for Development
Planning, 2009). HMC is working to ensure that Qatar has enough highly qualified medical
staff, including staff professionally trained in Qatar in order to meet the country's future
needs. HMC is working with foreign universities, including Canada's University of Calgary,
which has set up a campus in Qatar to provide degree courses in nursing (WSJ, 2011).

In a report on the Qatar National Vision 2030, Sheikha Mozah Bint Nasser al-Missned, the
wife of Sheikh Hamad, stressed the importance of education to be one of the key compo-
nents (Scharfenort, 2012) that enables Qatars people and institutions, including the Qatar
Foundation, to provide development (ECHARRIS, 2013).

QNV 2030 is very general and describes long-term development goals; while the National
Development Strategy is a report that encompasses not only detailed plans for specific pro-
jects and initiatives, but also economic and institutional changes to be undertaken during
the plan period. Parallel to these plans, the Urban Planning and Development Authority is
drawing up a national master plan to guide land use (Scharfenort, 2012), namely for infra-
structure, mega projects, housing and industrial activities (LSE, 2013).

QNV 2030 thus defines broad future trends and reflects the aspirations, objectives and cul-
ture of the Qatari people. Illuminating the choices available, it is meant to inspire Qataris to
develop a set of common goals related to their future; and it provides the framework for
Qatars National Development Strategy 20112016 (Worldbank, 2008). Qatars management
of its hydrocarbon resources will continue to secure improvements in standards of living, but
those improvements cannot be the only goal of society (WSJ, 2011).

The National Development Strategy 20112016, which is Qatars first, is the culmination of
extensive stakeholder consultations, dialogues and analyses. The positive and unprecedent-
ed engagement of multiple sectoral and intersectoral stakeholders reflects a genuine desire

34
for reform being in the interest of the country (Ministry of Development Planning and Statis-
tics, 2014). The consultation process began with ministers and key leaders from government,
private sector and civil society and then spread into society (The Peninsula, 2011). Reflecting
the broad reach of the strategy, crosssectoral task teams comprised representatives from
government ministries, agencies, private companies and civil society organizations. The ex-
tensive intersectoral consultations, including interviews, discussions, debates and research,
were important for building a strategy that enables strong and positive public ownership
(Worldbank, 2008).

The strategy builds on situational analyses, diagnostics, regional and international bench-
marking and detailed strategies for each of 14 sectors (see Figure 3.2). The situational anal-
yses identifies priority areas using benchmarking against best practices in other countries,
both in the region and around the world (General Secretariat for Development Planning,
2011).

Sector Agency

Ministry of Culture, Arts and Heritage and General

Culture Sector Strategy 20112016 Secretariat for Development Planning (GSDP)
Economic Diversification and Private Sector Development Ministry of Business and Trade and GSDP
Economic Infrastructure Ministry of Municipality and Urban Planning and GSDP
Economic Management Ministry of Economy and Finance and GSDP
Education and Training Sector Strategy 20112016 Supreme Education Council and GSDP
Environmental Sector Strategy 20112016 Ministry of Environment and GSDP
Family Cohesion and Women's Empowerment Sector
Strategy 20112016 Supreme Council for Family Affairs and GSDP
National Health Strategy 20112016 Supreme Council of Health and GSDP
Institutional Development and Modernisation Report General Secretariat for Council of Ministers and GSDP
Labour Market Sector Strategy 20112016 Ministry of Labour and GSDP
Natural Resource Management Qatar Petroleum and GSDP
Public Safety and Security Sector Strategy 20112016 Ministry of Interior and GSDP
Social Protection Sector Strategy 20112016 Ministry of Social Affairs and GSDP
Sports Sector Strategy 20112016 Qatar Olympic Committee and GSDP
Figure: 3.2
Note: Target sectors of the National Development Strategy 20112016

The sector strategies provide indicative resource requirements for each program and pro-
ject, identifying the key stakeholders in the projects and the risks and mitigation measures
for successful implementation. Especially important, each strategy contains a basic monitor-
ing and evaluation framework, supported by selected monitorable indicators, to enable ad-
justments during implementation (Worldbank, 2008).

35
Qatars National Development Strategy 20112016 translates QNV 2030 into specific actions
and targets that represent the first wave of changes to launch the next chapter of Qatars
transformation. Developed by a combination of top-down and bottom-up approaches (see
Figure 3.3), Qatars National Development Strategy 20112016 (General Secretariat for De-
velopment Planning, 2011) is said to identify critical development goals and challenges, out-
line strategic initiatives aligned to QNV 2030 goals, provide strategic coherence in terms of
moving from ad hoc development projects to forward-looking, outcome-based planning and
strengthening public sector institutions for carrying out planned reforms and programs.

Figure: 3.3
Note: The National Development Strategy 2011-2016 was developed
through a combination of top-down and bottom-up approaches

Critical Review: Qatar National Vision 2030

Jan Keulen, the director of the Doha Centre for Media Freedom, argues that Qatars Vision
2030 reflects the imaginative and farsighted character of Qatars political orientation and the
benchmark of the 2022 FIFA World Cup give perspective to an active business community
and citizens alike. Additionally, he points out that Qatar is turned towards the future without
forgetting where it is coming from: its deep roots, traditions and religion (Doha Centre for
Media Freedom, 2012).

Alternatively, since the QNV 2030 aimed at increasing the standard of living and improving
the well-being of all Qatari, the government decided to increase Qataris wages by 60 per-
cent. This increase created a gap between the experienced and qualified expatriates com-
pared to highly paid inexperienced locals. The Commercial Bank of Qatar for example, faced
a massive influx in overall payroll, which increased expenses. The bank treats this change as

36
inevitable cost, or even long-term investment for operating in Qatar (University of Roehamp-
ton, 2013).

Furthermore, the majority of Qatars population consists of wealthy families who are either
born rich or are often managers of successful businesses. The fact that many Qataris can
survive without the need of a job might hinder their eagerness to peruse higher education
and develop their skills. That is mainly due to the fact that salaries are high and businesses
are in high demand of employees. Work appears to be practiced only because it is socially
not accepted to be unemployed, and not because of its necessity (General Secretariat for
Development Planning, 2008). Basically, the government plan considers the state and not
the private sector as the main driver of the economy for decades to come. The private sector
is not yet ready to play a prominent role in the economy (Worldbank, 2008).

Accordingly, FDI decreased continuously since the implementation of the Vision 2030 in
2011. The stimulus for foreign companies to do greenfield investments as well as acquire or
merge with Qatari firms seems to deteriorate. Potential reasons for the declining interest of
further foreign direct investors to Qatar as seen in Figure 2.5 might be due to the saturation
of the market and the governmental lack of focus towards the private sector. In addition,
due to the difficulties in having 100 percent foreign private ownership in an upcoming busi-
ness and the political instability of the Middle East harm potential foreign direct investors.

Qatars National Vision 2030 wants to cast Qatar in a positive light, but the reality is contro-
versial. There are many threats, which Qatar will face in terms of realizing their Vision 2030
(World Economic Forum, 2013).

If Qatar is to develop a competitive diversified economy, it needs a setting where hydrocar-

bon resource depletion is no more the dominant source of income. Qatar will also need to
promote stability in an environment where hydrocarbon price volatility creates risk and pre-
sents challenges for calibration of economic policy (General Secretariat for Development
Planning, 2011). Lastly, Qatar will require a lack of bolstering enterprise creation as well as
private sector development (World Economic Forum, 2013).

Further, the state of Qatar has to take into account various challenges to enable its citizens
to sustain a prosperous society. For example, the imbalance in the healthcare system causes
major expenses due to the lack of a patient-focused, preventive and community-based mod-

37
el. Then, Qatar still does not meet the critical need for national Qatari high-quality workforce
as well as low-skilled workers across their health sector. Accordingly, low-skilled foreign
workers do the jobs in an unjust labor policy (sponsorship law), which seems to worsen Qa-
tars image (World Economic Forum, 2013).

The third column of the QNV addresses the social development, which intends to create a
just and caring society with high moral standards. Against the background of the treatment
of immigrants, the status quo of Qatar is still far away from that (TAZ, 2015). Even though
the country moves towards (technological) modernization, Qatars society might appear as
backward-thinking due to their different treatment of people on the basis of ethnicity. Qatar
makes huge harsh differentiation between nationals and foreigners. Even though, the major-
ity of the society is non-Qatari, the QNV solemnly focuses on Qatari citizens. There is no sin-
gle statement in the QNV that might encourage the local society to coexist harmonically with
foreign workers (especially the low-skilled) and it too does not introduce initiatives to inte-
grate the foreign workforce into the indigenous society. According to The Global Slavery In-
dex (2014), the QNV does not find ways to abolish the modern slavery treatment of the
foreign workers. Hence, there is a lack of social inclusion of the foreigners, who are the driv-
ing force of the country. This might lead to a missing identification with the country as well
as a decreasing foreign (high-skilled) workforce (World Economic Forum, 2013).

In addition, the QNV wants to ensure a correlation between economic growth and environ-
mental conditions, concerning the industry and production sector, these are generally con-
flicting goals. Accordingly, it will be a challenge for Qatar to on the one side strive for a di-
versified economy in times of globalization and on the other side be ecologically friendly.

Based on the QNV, Qatar is striving for a diversified economy, which means to develop a
sophisticated primary, secondary and tertiary sector. Consequently, due to the increasing
number of industries and means of transportation, there will be more CO2 emissions. The
immense consumption and extraction of water in Qatar compared with other countries is an
additional issue which will affect the ecosystem on the long-run. Especially, desalination
plants cause geographical occupation along coastal areas, noise pollution, greenhouse gas
emissions (Danoun, 2007) including carbon monoxide, thermal pollution and damage to the
marine population (World Economic Forum, 2013).

38
Further, the national strategy has to be considered. Within the World Competitiveness Re-
port 2011, published by the International Institute for Management Development, Qatar
rose from 15th to 8th position. Ibrahim, former secretary-general of the General Secretariat
for Development Planning, annotated the report as following "It confirms that we are mak-
ing good headway and will certainly help us to identify those areas where we need to consol-
idate gains and make further improvements (Scharfenort, 2012). The former secretary add-
ed that Qatar's National Development Strategy sets out clear targets in the areas of business
regulation, economic infrastructure, and private-sector development that will lead to future
advances. Qatar has no other option, but to diversify its economy and to achieve this, Qatar
has to continuously work on lifting efficiency and productivity to improve its international
competitiveness (WSJ, 2011).

Key amongst the future challenges will be the need to ensure that new investments are pro-
ductive and meet identified development needs and priorities, as well as to manage gov-
ernmental spending not to generate undue inflationary pressures (Samba, 2011).

The authorities are targeting education and training by providing an enabling business envi-
ronment in order to move towards a high wage private sector economy (Minister of Educa-
tion and Higher Education, 2011). Success will depend on individual Qataris responding to
the incentives provided to acquire new skills and establish new businesses, as well as on at-
tracting FDI inflows in an increasingly competitive regional environment (KPMG, 2014).

EYs Vision 2020

According to Mark A. Weinberger (Global Chairman and CEO of EY) the Vision 2020 (as
shown in Figure 3.4) sets out EYs purpose, ambition and strategy. EY writes that they real-
ized that their purpose should be clear building a better working world. EY wants to under-
stand their obligation to look beyond their self-interest and engage with their stakeholders
such as investors, clients, regulators and other governmental bodies, and non-profit organi-
zations to create positive change (EY, 2013).
Figure 3.4

39
EY states that they want to build a better working world by helping entrepreneurs, who ac-
cording to EY are the key to economic health, to bring their products and ideas to market
supported by Entrepreneur of the Year and a series of services. Moreover, EY indicates
that at EY they seek to develop leaders with successful careers and enable them to move on
to other roles in industry, government and academia (EY UK, 2015).

According to the EY philosophy, having purpose gives the company energy and being clear
about their ambition helps turn that energy into results. It is said that their purpose defines
why they exist as an organization, and their ambition sets out what they want to achieve.

By 2020 EY is seeking to grow to a $50 billion distinctive professional services organization.

Additionally they want to become the best brand (among the Big Four), be the most favored
employer (refers to the Universum Ideal Employer Survey) and have world-class talents, e.g.
through investing in new services and making smart acquisitions (EY, 2013).

EY states that their strategy is built on relentless focusing on winning the market, creating
the highest performing teams and strengthening the global footprint. EYs values are said to
be defined by people who demonstrate integrity, respect, teaming, energy, enthusiasm and
the courage to lead and build relationships based on doing the right thing (EY, 2013).

Critical Review of the Vision 2020

EY wants to present itself in a very positive light with their Vision 2020. Nevertheless, their
efforts towards their vision will be harmed by the continuous lawsuits and investigations
(e.g. accounting scandals Lehmann Brothers in 2010 or Olympus Corporation in 2011). Fre-
quent lawsuits and investigations might impact the companys brand image and might have
a negative impact on the margins and cash flow. Moreover, the weak economic recoveries in
their key European markets as well as regulatory pressures will affect EYs future endeavors.
Another threat to EYs Vision 2020 is the intense competition among consulting firms. One of
the strongest competitors is PwC, because they have nearly the same business-portfolio.
Additionally, PwC acquired the well-deemed consulting firm Booz & Company in April
2014. This acquisition is a further threat to EY, because PwCs large network can take over EY
existing and potential clients (FAZ, 2014).

All in all their very optimistic Vision 2020 does not differ from the vision of their competitors
or provides a pragmatic approach. Nowadays, nearly all successful consulting firms strive to

40
build a better working world, focusing on winning in markets, having highest performing
teams and having a diverse global footprint in order to serve global clients better. Against
the background of competition with PwC, it will be difficult to EY to fulfil its Vision 2020 and
become the best brand and the first in market share in their chosen services.

3.3. Comparison between Vision 2030 (Qatar) and Vision 2020 (EY)

Qatars government is very different from EY, as on the one hand the work of the govern-
ment has political legitimacy deriving from Islamic law and is implemented by force and in-
volves compromise and incremental decisions and, on the other hand, EY pursues the inter-
ests of their shareholders, designated private interest, focuses on service differentiation,
market positioning and greater flexibility to make unilateral strategic decisions.

At the same time, Qatars government and EY have very much in common. For example,
both have large bureaucracies, small leadership structures, top-down decision-making pro-
cedures, recruitment-challenges by getting high-potentials and future strategic directions
that are essential in realizing their vision. Even though both use a different vocabulary, it is
still possible to find similarities between Qatars and EYs vision. Both have set a vision,
which is still exceptional for states or companies as many underestimate the value of long-
term planning. Then, both focus on the positive development of their people. EY calls it
highest performing teams and Qatar calls it human development. Both want to be suc-
cessful in their respective markets: EY in the auditing and consulting market and Qatar in its
knowledge-based economy with an advanced society capable of sustaining its development
(EY, 2013).

Nonetheless, the major difference between the two visions is that Qatars vision focuses on
the micro-macro-economic field and EYs vision on their respective business-related issues.
Furthermore, EY as a British consulting firm wants to build a better working world and in-
cludes their stakeholders of different (e.g. ethnic) backgrounds. In contrast to this, Qatar and
its Vision 2030 exclude the approximate 90 percent of society, even though they are seen as
the driving force of the economy. In this foreword to Qatars Vision 2030, the Emir Tamim
bin Hamad Al-Thani does not mention the topic of expatriates. Instead, he states that:
strong Islamic and family values will provide our moral and ethical compass [] Qatars Na-
tional Vision belongs to the government [] to all Qatari citizens. This statement excludes
those who do not feel connected to strong Islamic and family values living another lifestyle

41
(Worldbank, 2008). Accordingly, the QNV 2030 might be seen as very national and narrow-
minded, calling for enforced political and Islamic conformity and disregards non-Qatari from
their agenda.

3.4. Applicability of Strategic Management Tools to Qatar

The impact of increasing competition is not only experienced by businesses but also by gov-
ernments such as Qatar. When companies like EY try to be the best among their rivals and
enlarge their costumer potentials, similarly, the Qatari government wants to improve itself
and compete with other governments in order to perform the best (for instance within the
GCC countries). Fast changing environmental conditions force businesses and governments
to change their classical way of thinking to sustain their business. Decision-makers have to
define strategic priorities in order to create some coherence in their strategic processes, but
at the same time they rely on individuals in the entity to provide ideas and opportunities for
future market development (Sentrk, 2012).

Following Don Hofstrands (2007) definition of strategic management, it is obvious that any
entity whether private or governmental might plan in a strategic management way. As dis-
cussed earlier, every successful entity which strives for viability should have a strategic aim
and a plan how to reach this aim. To have a vision, plan by taking into account the possibili-
ties and to have long-term projects are just a few needs which have to be fulfilled in a global-
ized economy (Sentrk, 2012). Accordingly, strategic management is a methodology which
helps countries like Qatar or companies like EY to move towards long-term success, having in
mind the bigger picture, matching resources to market opportunities, involving opportuni-
ties and threats in their market strategy and formulating an overall effective strategy with
the aid of their identified strengths and weaknesses.

The question arises whether strategic management as such is applicable to Qatar, or put
differently: can strategic management tools be applied to a Qatar? To understand the nature
of strategic management tools, it is first necessary to clarify the term strategic management
tools. Although academics and practitioners show increasing interest in strategic manage-
ment tools, there is no universally accepted definition of the concept (Afonina et al., 2012).
Knott (2006) and Gunn and Williams (2007) suggest the following two definitions:

42
Knott (2006): The term strategy tool is used to encompass the full range of concepts, ide-
as, techniques and approaches that structure or influence of the strategic thinking, strategic
decision-making and strategy implementation activity. [..] Strategy tools act as a guide to
thinking and a starting point for structuring strategic management activity.

Another definition is provided by Gunn and Williams (2007): Strategic tools [] used to de-
scribe methods of simplifying and representing a complex situation. The authors use the
term tool to encompass any systematic approach or technique that the strategist has em-
ployed to further inform their strategic decision-making.

What both definitions have in common are the following criteria for strategic management
tools: techniques and approaches that support strategic decision-making and simplify a
complex situation (Afonina et al., 2012).

Against this background, the initial question, whether strategic management tools can be
applied to Qatar, the answer must be given with a clear yes. If strategic management as
the basis of strategic management tools works out for governments, why should strategic
management tools not be applicable? Basically, strategic management tools are instruments
which support entities to align with the forces driving change in their environment, sustain
profitability and compete against rivals.

One of the most popular strategic management tools is the so-called SWOT analysis. The
SWOT analysis is considered as one of the most visible methods to assess internal and exter-
nal factors. In addition, SWOT analyses are mostly used as a strategic management tool, be-
cause it can be associated with simple utilization. Finally, the SWOT analysis is popular be-
cause decision-makers can derive from the SWOT diagram where to take action to defend
their weak areas and how to use their strengths and opportunities as advantage (Afonina et
al., 2012).

43
Besides the SWOT analysis, there are many other strategic management tools, which the
government can use to accomplish their vision. Rigby (2001) conducted a research named
Management Tools and Techniques. In the following, several strategic management tools
will be introduced and discussed in the context of Qatars strategic aims:

Vision Statements
As discussed in chapter 2.3, Qatars government has formulated the Vision 2030.
Strategic Planning
Qatars National Strategy 2011-2016 (see chapter 2.3) sets a precise plan for sectors
of what to accomplish by 2016.

Scenario Planning
Within Qatars Vision 2030, the pillars (see Figure 3.1) are meant to show the pos-
sible future environment in terms of human, economic, social and environmental af-
fairs.

Strategic Alliances
Qatar is part of different strategic alliances such as GCC, OPEC, UN and Arab League.

3.5. SWOT-Analysis of Qatar

As mentioned previously, strategic management is used by governments as an instrument to

support the state to align with the forces driving change in their environment, sustain viabil-
ity and compete against rivals. Qatar, for example, has used at least four different strategic
management tools within their strategic approach.

The current status-quo and future aims were not critically reflected within Qatars Vision
2030. When reading the National Vision 2030, it becomes apparent that Qatar aims at
achieving further progress especially in the economy.

In the following, a SWOT analysis will be done in order to figure out the strength, weakness-
es, possible opportunities and threats of Qatar (see Figure 3.5). Each component of the
SWOT was analyzed from a political, economic and business point of view. The outcomes of
the SWOT analysis are crucial for the discussions in Chapter 4.

44
Strengths

No doubt, Qatar has a lot of strengths (i.e. advantages), otherwise they would not be the
richest in the Gulf region with a per capita income among the highest in the world (Kelly et
al., 2015). From a political perspective, the government's popularity is backed by a high per-
capita GDP, combined with universal state benefits without any taxation. Since Emir Hamad
came to power, improvements in civil rights and a stricter control of corruption have boost-
ed the anti-corruption government movement. From an economic point of view, the abun-
dance in natural gas and large oil reserves has kept the GDP relatively high. Due to the small
population the per capita GDP is very high too. Additionally, good credit ratings have allowed
Qatar to internationally borrow money at low rates. From a business point of view, Qatar
enjoys a stable governmental fiscal policy and market-based monetary policy. Furthermore,
Qatar is ranked 17th in Transparency International's 2010 Corruption Perception Index, per-
forming very positively in comparison with other countries in the region. Aside from that,
the corporate tax rate was cut to a flat 10 percent in January 2010 (Kelly et al., 2015).

45
Weaknesses

With reference to chapters 1 and 2, Qatar has deficiencies in various fields. Politically
viewed, a close tie with the US is unpopular and might cause tension with other Arab lead-
ers. Also, the occasional frictions with Saudi Arabia harm Qatar, because they share a border
and the disadvantage of the geographical location of Qatar is that surface transport can only
be realized in agreement with Saudi Arabia. Even though Qatar is considered technologically
advanced, they still hinder themselves by restrictive labor regulations (e.g. the sponsorship
system), political differentiation between Qataris and non-Qataris, inadequate educated
workforce and poor public health system for expatriates. From an economic perspective,
Qatars dependence on oil and gas leaves its growth, exports and government revenue vul-
nerable, because of shifts in world prices. Additionally, Qatars high dependence on immi-
grant labor means an outflow of remittances, though the current account leaves a solid sur-
plus. According to a survey by Deloitte (2009), the most problematic factors for doing busi-
ness in Qatar are the domestic economies relying on a buoyant oil market to maintain
growth and the fact that in most sectors the foreign ownership is capped at 49 percent (Kelly
et al., 2015).

Opportunities

Qatars strengths and opportunities led to the countrys worldwide prosperous status. Politi-
cally, Qatar is currently becoming more attractive to foreigners due to its first constitution,
which might pave the way for parliamentary elections. Moreover, major investments in edu-
cation are in the long-run expected to reduce the lack of expertise and training and improve
the knowledge of the society. In an interview with BBC, Abdulla, a member of the ruling Al-
Thani family, explains Qatars strategic orientation: "Qatar is making a strategic decision to
spend oil income on education [] The blessing of the oil and gas won't last forever, so fo-
cusing on something sustainable is more important" (BBC, 2012).

Furthermore, the geographical location of Qatar is strategically important, as the country is

located among the GCC states, close to Iran and can reach the Indian Ocean or Arabian Sea
through the Persian Gulf. Additionally, Qatar is a member state of various strategic alliances,
among them GCC, OECD, Arab League or UN and thus has strong diplomatic and economic
ties with many countries. On top of this, Qatar is negotiating a Free Trade Agreement (FTA)
with the US and has many FTA with various countries like Singapore and Australia. Other

46
favorable economic opportunities are the development of natural gas reserves and distribu-
tion deals especially in the LNG industry and the development of the non-hydrocarbons sec-
tor, principally financial institutions. The successful bid for the 2022 World Cup might also
boost the country in fields such as tourism and foreign investment (Chris Wright Media,
2013). According to Business Monitor Internationals (2011) prediction, Qatars long-term
prospects for growth are very good. Meanwhile, a 100 percent foreign ownership is permit-
ted in agriculture, industry, tourism, health and education.

Threats

Currently, Qatar and other Middle Eastern countries are in risk due to the expansion of ter-
rorist groups like Islamic State or Huthi as well as regional civil wars like the Bahraini
uprising of 2011. The first recorded militant attack on civilians in Qatar occurred in March
2005. Against the background of the recent terrorist attack in Kuwait on June 26st 2015 by IS
(The New York Time, 2015), the security has been increased in Qatar. Accordingly, the risks
of terrorism or regional conflict cannot be discounted, although the Qatari monarchy ap-
pears to be stable. Moreover, hosting the US Air Force during the Iraq War caused conflicts
with Islamists in the region. In the unlikely event of a US-Iranian war, the base might be a
target for Iranian forces or militants (Aljazeera, 2015).

From an economic point of view, drops in global commodity prices may result in downside or
inflation risks to Qatar's budget revenues due to its strong dependence on hydrocarbons.
Additionally, tight credit markets might make the finance of large-scale projects hard to ob-
tain, or prohibitively expensive. The Qatari government risks running into a budget deficit in
2016 as low oil prices continue to pose a challenge to energy-dependent nations, the Inter-
national Monetary Fund recently stated (WSJ, 2015).

For businesses, possible threats especially to foreigners and entrepreneurs might be that
only Qataris are able to obtain import licenses and, as US observers frequently reported,
Qatar's copyright protections are inadequate (Kelly et al., 2015).

47
4. Discussion

The present thesis has used a deductive approach to analyze two issues: Qatars attractive-
ness to FDI and the central question What types of Foreign Direct Investment would strate-
gically support Qatars Vision 2030? Based on these findings, the following two topics will
now be discussed.

4.1. How attractive is Qatar for FDI?

Overseas expansion has been one of the major strategies for companies from both devel-
oped and developing countries (Khalifa, 2012). As FDI keeps increasing in quantity and diver-
sity, the question where and how to invest in Qatar is becoming increasingly important. In
2011, total FDI flow reached more than $1 billion, which represents about 10percent of total
fixed capital formation. Since 2012, FDI flows to Qatar have maintained a downward trend.
Flows have remained well below the levels reached some years before, even though the law
allowed non-Qatari capital to be completely sued in a wide range of economic activities that
were previously Qatari-exclusive. Nevertheless, the government of Qatar began its efforts to
amend its legislative and bureaucratic framework to ensure easy and adequate inflow of
foreign capital into the country, especially in support of QNV 2030 (Manhal, 2005).

The most notable governmental reforms in Qatar according to Manhal (2005) are:

1) Enabling foreign investors to exercise 100 percent ownership in any project with the ex-
ception of those in banking, insurance and trade where 51 percent Qatari partnership is still
required.

2) The introduction of intellectual property right laws.

3) Making corporate income tax more transparent.

4) Rationalizing import duty structure and reducing tariff rates on imports to comply with
World Trade Organization standards.

Additionally, Qatar has made some progress in developing its financial sector and capital
markets over the last few years. The country is well monetized, Qatars Central Bank abol-
ished interest rate ceilings on deposits, and interest rates are determined by market forces
and therefore are in line with those of international capital markets. However, related to the

48
limited share of the private sector in economic activities, most of the credit was given to the
government and public entities to finance public projects whereas loans to the private sector
are characterized as being of small and short-term scale (Manhal, 2005). According to Global
Finance (2014) Qatar shows no signs of slowing its internal and external investment. The IMF
predicts that Qatars real GDP growth will average six percent to seven percent in the medi-
um term, supported by public investments, and will likely remain the fastest-growing in the
region (WSJ, 2015).

Qatars FDI development represents an upwards trend over the last decades. FDI stocks as a
percentage of GDP are rising, and the fraction of FDIs of gross capital formation is pointing
upwards since the 1990, reaching a momentum of 20 percent in 2009. While other countries
in the region have experienced a severe drop in FDI as a consequence of the financial crisis,
Qatar continues to attract investment. In the past, a vast amount of investment was drawn
in by the gas industries, which made Qatar become the world largest liquefied natural gas
exporter (German Emirati Joint Council for Industry and Commerce, 2013).

In 2013 and 2014, Qatars Gross Domestic Product has been growing at very high rates of
almost 6.5 percent. In recent years, some developments have taken place leading to more
effective fiscal policy as well as the creation of the right business and economic environment
and enhancing the role of the private sector (Manhal, 2005). For years, Qatar benefited from
an oil price that hovered above $100 a barrel, but in the past six months that fell to about
$60. According to the IMF, more than 90 percent of Qatars budget revenues and exports
stem from activities tied to the energy sector (WSJ, 2015). The increased prices of oil have
helped to maintain economic growth and create a surplus in government budget.

Currently, the short-term growth outlook is positive, but lower oil prices will lead to a sub-
stantial deterioration of the fiscal and external balances, as the IMF states in its report. In
sharp contrast to previous years, the budget will be in deficit from 2016 onward and the cur-
rent account surplus will largely be eliminated. For Qatar to counter the low oil price impact,
the IMF renewed its calls for the country to diversify its economy according to their Vision
2030 and further improve their business climate. It also urged Qatar to keep attention on its
real-estate markets rapidly rising prices. However, Qatar has accumulated sufficient re-
serves in recent years to overcome these economic hardships and to continue spending,
analysts say (WSJ, 2015).

49
Moreover, the inflation rate is relatively low even when compared to the average rate of
inflation of the industrialized countries. It might be noted, that despite the increase in reve-
nue, the economic reforms have continued to be a top priority for the policy and decision-
makers. A major effort is directed to control public spending and diversify revenues, as well
as to continue the privatization process (Manhal, 2005).

Qatars government has targeted FDI as a crucial element of its long term strategy for eco-
nomic growth and development. Accordingly, an open FDI policy will replace foreign loans
and assistance. It will also enhance the rate of technology transfer. Furthermore, it will bet-
ter integrate Qatar into the world economy and provide access to global markets (Manhal,
2005). The flow of FDI to Qatar has relatively shifted from resource-seeking FDI to more effi-
ciency-seeking FDI. This shift is induced by highly global competition which drove prices,
forcing multinational corporations to relocate some of their investment to developing coun-
tries like Qatar.

However, the inflow of FDI to Qatar might be characterized as resource-seeking due to the
fact that the greatest share of FDI is concentrated in the internationally traded petroleum
and LNG products. Hence, the growth rate in exports of oil and liquid natural gas should be
positively correlated with FDI. Qatars reserves, tax concessions, openness on the flow of
FDI, countering of corruption as well as non-transparency, political stability in the Middle
Eastern region, government spending in education, infrastructure and economic develop-
ment are important factors that attract FDI and stimulate economic growth (Manhal, 2005).

Diversification and investment in several service sectors such as transportation, construction

and tourism, has helped boost the economy in recent years and is expected to continue in
the lead-up to the 2022 FIFA World Cup, as Qatar is expected to expand its hotel capacity,
develop a railway network and invest in large-scale construction infrastructure projects. In-
vestment in education and healthcare sectors, as part of the Qatar National Vision 2030, is
expected to further develop Qatars knowledge-based economy (WTO, 2014). For instance,
according to the OECD (2002), investment in education and other generic human capital is of
the utmost importance in creating an enabling environment for FDI. Achieving a certain min-
imum level of educational attainment is paramount to a countrys ability to both attract FDI
and maximize the human capital spillovers from foreign enterprise presence.

50
Following German Emirati Joint Council for Industry and Commerce (2013), Qatars economy
already performs very well in terms of competitiveness and freedom, illustrated by the 14th
place in the Global Competitiveness Index by the World Economic Forum. In the World
Banks Ease of Doing Business Ranking, Qatar currently ranks in the 36th place. Most im-
portantly, though aside from its current ranking, Qatar has shown a continuous improve-
ment in all rankings over the past few years.

Overall, Qatar scores well in the Ease of Doing Business Ranking for 2014, being in the 45th
place due to its positive credit accessibility (State of Qatar, 2014). Similar to other GCC coun-
tries, however, Qatar shows an enormous variation in the individual categories. The tax
structure is ranked to be in 1st place (out of 189 countries) with other beneficial categories
(places 23 to 61) such as getting electricity, registering property, dealing with construction
permits, trading across borders and resolving insolvency complementing it. These compara-
tive advantages are partly reduced by lower performances in enforcing contracts (104th),
protecting minority investors (122th), getting credit (131th) and starting a business (103th).
For example, the measured time to enforce contracts amounts to 570 days with 43 neces-
sary procedures to go through or very high capital costs to open up a business. Additional
drawbacks are the high reliance on natural resources and despite efforts to strengthen the
financial sector, its trustworthiness and confidence and the soundness of banks are assessed
as low by the business community (80th rank). Similarly, the legal rights of borrowers and
lenders are insufficiently protected (105th rank) (World Bank Group, 2015).

Even though Qatar is opening up gradually to global investors and attracting growing
amounts of FDI. The oil-rich country is still classified as a frontier market, and in the eyes of
many institutional investors, this makes Qatar more risky than emerging markets, despite
their high GDP per-capita ratios. If Qatar is to be upgraded to an emerging markets status by
the New Yorkbased company MSCI, they might attract significant new inflows from inves-
tors who benchmark the MSCI Global Emerging Markets Index. Qatar and the UAE were un-
der review this year for a potential reclassification to emerging markets. Following discus-
sions with the investment community, however, MSCI announced that these two countries
would have to wait for at least another year, along with South Korea and Taiwan (World
Bank Group, 2015). In Qatar, much like UAE, global investors need to create separate custo-
dy and trading accounts and shuttle assets between them because local brokers have unlim-

51
ited access to the trading accounts. This issue needs to be addressed to meet emerging mar-
kets standards, according to the MSCI (VEGAMEDIA, 2011).

The government is spearheading efforts to create more opportunities beyond the oil and
gas sector, states R. Seetharaman, CEO of Doha Bank. These include the Qatar Financial
Center, The Pearl, Education City and Sidra Medical and Research Center, as well as free-
trade areas, such as Qatar Science & Technology Park. Projects such as these can stimulate
demand in the office market, according to Seetharaman (VEGAMEDIA, 2011).

On balance, Qatars economy is performing well and Qatar might function as an Arab site to
foreign firms. As mentioned before, the Global Competitiveness Index ranks it as 16th, fol-
lowing a considerable improvement of the country over the last 5 years. A high-quality insti-
tutional framework (14th rank), a stable macroeconomic environment (5th rank), and an effi-
cient goods market (17th rank) paired with economic growth, QNV 2030 and further expan-
sion ambitions (e.g. the 2022 FIFA World Cup) are fueling the economy. The fiscal freedom
based on an excellent tax structure (10 percent corporate tax) is another attraction to Qatar
(World Bank Group, 2015). Moreover, the attractiveness of Qatar for FDI is relatively posi-
tive, due to its striving for economic, social, human and environmental development. Addi-
tionally, in Qatar FDI express a strong upward trend, unchallenged by the recent turmoil on
international financial markets. Strengths are Qatars tax policy, strong macroeconomic
background with growth and stability, strong diplomatic ties in the region, well-developed
institutions with low corruption levels as well as abundant labor (German Emirati Joint
Council for Industry and Commerce, 2013). The empirical results of Manhal (2005) show that
FDI on the short-run is mainly affected by GDP and government spending, which implies that
the Qatari government with its strong GDP should continue its efforts to create the econom-
ic environment by spending in various sectors which are attractive to FDI. However, FDI does
not solely depend on domestic determinants. There are several external factors influencing
FDI flows which are beyond the control of Qatar. Thus, policy-makers should not expect too
much from the measures designed to encourage FDI or from FDI itself. FDI can be seen as a
complement to domestic investment (Manhal, 2005).

52
 4.2. What types of FDI would strategically support Qatars Vision 2030?

The previous discussion concerning the attractiveness of Qatar for FDI served to answer the
underlying question whether it is worth investing in this country. Regarding Qatars attrac-
tiveness to FDI, it was expressed that this competitive country has a strong upward trend
and stable macroeconomic background with growth and stability (Saudi Gazette, 2014),
strong diplomatic ties in the region, well-developed institutions with low corruption levels as
well as abundant labor. Hence, on the assumption of Qatars general attractiveness to FDI, it
will now be discussed what types of FDI would strategically support QNV 2030 (Manhal,
2005).

In its QNV 2030, Qatar emphasizes an economic diversification. According to the Emir of Qa-
tar, economic diversification within the national strategy implies an open policy towards the
privatization of enterprises and FDI (Samba, 2011). Qatars open policy in international FDI is
responded by foreign direct investors showing an increasing interest in the country. Even
though, a Qatarization initiative is in place which aims at increasing the number of Qatari
nationals in the public and private sector workforce. The Labor Law introduces Qatarization
initiatives for certain private sector entities. The employment of Qatari nationals is one of
the criteria that are examined in the application process for tax exemptions (NewInQatar,
2011).

Currently, investors into Qatar are mainly interested in resources. Thus, many foreign firms
do FDI on a horizontal level, where the manufacturing of products and services is roughly
similar to those the firm produces in its home market. Another type of FDI, which would
strategically support Qatars Vision 2030, is a vertical FDI. Vertical FDI occurs when a multi-
national enterprise decides to acquire or build an operation that either fulfills the role of a
supplier (backward vertical FDI) or the role of a distributor (forward vertical FDI).

Some of the resource-seeking foreign firms in Qatar like Royal Dutch Shell typically engage in
vertical FDI as they seek to improve the cost and supply of raw materials (e.g. oil). The need
for a forward vertical FDI stems from the problem of finding distributors for a specific mar-
ket. Nevertheless, there are positive examples of foreign firms that have reliable distributors
in Qatar. For example, the German car manufacturer Daimler sells its cars in the Qatari car
market. Since many Qatari car dealers do not wish to carry foreign brand vehicles, the

53
German car manufacturer built its own distribution network in Qatar to fill this niche (Sim-
mons & Simmons, 2013).

In addition, most FDI in Qatar is resource-seeking, which is generally used to produce goods
for export. This type of investment aims at exploiting Qatars comparative advantage. For
instance, countries like Qatar that are rich in primary materials, such as oil or minerals, will
attract foreign companies seeking to develop these resources. Low-cost or specialized labors
(for instance the Indian-Pakistani workers) are two other factors that attract resource-
seeking FDI in Qatar. Hence, also market-seeking, efficiency-seeking and strategic asset-
seeking foreign firms are needed for backward as well as forward vertical FDI projects in or-
der to go hand in hand with Qatars Vision 2030 (Simmons & Simmons, 2013). Market-
seeking FDI would be that companies like Louis Vuitton follow their high purchasing power
customers in Qatar, so that they come closer to the Qatari market and address the local
needs, with products such as Louis Vuittons Abaya (Islamic robe).

Efficiency-seeking FDI would mean that companies such as Bosch rationalize or integrate
operations in Qatar leading to cross-border product or process specialization. For instance,
Bosch might serve the Qatari market and its client Daimler with its products while executing
greenfield investment in terms of opening a manufacturing in Dohas suburbs. Efficiency-
seeking as well as market-seeking FDI might imply strategic asset-seeking FDI, which means
the acquisition of alliances in Qatar (e.g. Bosch cooperates with Daimler or Louis Vuitton
cooperates with Qatari Islamic boutiques) to promote long-term corporate objectives.

Additionally, various future projects seem to be promising to foreign direct investors such as
The Pearl-Qatar, New Doha Port, FIFA World cup, Qatar Entertainment City, Qatar metro
system and the Qatar-Bahrain causeway, Qatar Railway System and Lusail City (urbanization
project). Thus, Qatar might function as an important Arab site for foreign firms, with rising
projects as well as a stable economy and political situation.

Generally, FDI which goes in line with Qatars diversification efforts and contains at least one
of the pillars of the QNV 2030 temple (see Figure 3.1), but also focuses target sectors of
the National Development Strategy (see Figures 3.2), strategically FDI supports Qatars Vi-
sion 2030 as well as Qatars National Strategy. In the following, types of FDI will be distin-
guished by sector and investors region.

54
Along with the QNV, non-oil-gas FDI strategically supports the diversification efforts of the
country and helps shift the economy from carbon-based to knowledge-based. Moreover,
there are various investment opportunities like upcoming international events which seem
to be especially promising to foreign direct investors and at the same time contribute to a
long-term developed and prosperous Qatar.

Firstly, the infrastructure, real estate, sports and culture sector in Qatar provides projects for
foreign firms in the field of real estate development, infrastructure projects, consultancy and
construction. These sectors still count as one of the most attractive to foreign investors, as
they have generated the highest number of jobs in Qatar. The potential for massive infra-
structure and construction buildup in Qatar is the wake of forthcoming international events,
such as the IHF Handball World Championships (in 2015), World Amateur Boxing Champion-
ships (in 2015), World Robot Olympiad (in 2015), UCI Road Cycling World Championships (in
2016), FIG Artistic World Gymnastics Championships (in 2018), FIFA Confederations Cup (in
2021) and FIFA World Cup in 2022. According to EYs megatrends report (2015), urbanization
will be the future. Hence, effective infrastructure investment and sound planning will make
future cities like Doha competitive and resilient.

Secondly, the tourism, retail and manufacturing industry sector is looking for developer and
travel authorities. In an effort to diversify its economy and become less dependent on oil,
the Qatari government has substantially increased its spending on the tourism sector over
the last years, due to a large number of upcoming national events. The trend towards orga-
nized retail is gaining momentum, and major retail players are already investing in new store
formats. The sector is capitalizing on the regions rich and expanding consumer base. In addi-
tion, due to Qatars large imports of machinery and transport equipment as well as food
from the US, Japan, Germany and the UK, respective greenfield investments in Qatar would
be needed in order to locally serve the Qatari market and save import costs. Foreign direct
investors would be nearer to their Arab customer needs and be able to create local research
and development (R&D) centers. As been said, greenfield investments, such as in machinery
production, would further diversify the Qatari economy and at the same time provide a
presence of foreign companies in Qatar (EY, 2015).

Thirdly, the business services finance and insurance sector is in need for investment institu-
tions, banks, and consulting, as well as leasing and insurance companies. The creation of

55
financial free trade zones in Qatar and growing public and private wealth have generated
significant foreign investments from asset managers, banks and other financial institutions
(EY, 2015). There is a separate and distinct form of government for establishing companies in
the Qatar Financial Center which allows 100 percent foreign ownership and has been put in
place to attract international financial services companies to come to Qatar (NewInQatar,
2011).

Fourthly, the healthcare, entrepreneurship, environment and education sector still requires
further hospitals, medical centers and research, start-up boot camps, business incubators,
renewable energy projects, (vocational) schools as well as universities. As many foreign uni-
versities like HEC Paris, Georgetown University and University College London already estab-
lished their presence in Qatar, the State of Qatar needs more of these satellite campuses in
their country. The knowledge economy is envisioned to bring more Qataris into skilled as-
signments and thus, on the long run, reduce the number of expatriates. Hence, direct in-
vestment into private or state-owned foreign universities is favored. Even Sheikha Mozah,
the wife of the Emir, stressed the importance of education as of one of the key components
that enables Qatars people and institutions to perform well (Al-Jabor et al., 2013). Also, in-
vestors are calling for steps towards a better educated and skilled labor force in Qatar (EY
Attractiveness Survey, 2012). Moreover, intellectual property protection gains particular
importance in Qatar, with the establishment of the Qatar Science and Technology Park
which aims at attracting: internationally renowned companies to set up research and devel-
opment centers and start-up companies. Although not strictly monitored or enforced, Qatar
has enacted several intellectual property laws in compliance with its World Trade Organisa-
tion obligations (NewInQatar, 2011). EYs megatrends report (2015) also emphasized on the
entrepreneurship rising all over the world and driving the need for more supportive ecosys-
tems.

Additionally, Qatar is spending more per capita on health infrastructure than any other
country in the Gulf region, and the majority of health care is provided by the non-profit
Hamad Medical Corporation, which offers free medical treatment to Qatari nationals. Future
medical projects, which intend to provide medical treatment to every citizen subsidized by
the Qatari government, are still in progress (WSJ, 2011).

56
Fifthly, the information, communication and technology sector is a further promising field
for foreign direct investors. According to EYs megatrends report (2015), the digital future
(for instance technology) is disrupting all areas of enterprise, resulting in many opportunities
and challenges. Hence, multi-billion dollar investments are made in mobile, fixed and inter-
net networks infrastructure as well as e-government initiatives that have been the key driv-
ers of the technology industry in Qatar (EYs megatrends report, 2015).

Furthermore, the metals and mining sector was ranked as one of the top six sectors in Qatar.
The increased infrastructure spending has been the key driver for growth of the metals and
mining sector in Qatar. The number of projects in the sector increased intensely and Qatar
continues to be one the favorite FDI destinations in the GCC (Simmons & Simmons, 2013).

Foreign investors may invest in all sectors of the national economy, assumed that they have
one or more Qatari partners whose share is not less than 51 percent of the capital. However,
in the health, education, tourism, consultancies, sport, culture and environmental services it
is permissible for foreign investors to exceed the percentage of participation up to 100 per-
cent of the project capital (Al-Khatib, 2003).

It is crucial to examine the firms or countries that are currently doing FDI into Qatar, because
the status quo of the regions that are doing FDI into Qatar will most likely be also the future
investors.

Western Europe has invested the highest number of projects in Qatar. The advantages of
proximity have led many Western European companies like EY, BMW and Siemens to estab-
lish their presence in the country. The United Kingdom, France and Germany are the largest
investors in Qatar.

North America, predominantly the USA, approximately invest one fifth of total FDI projects
in Qatar. Beyond the strong political and military ties to Qatar, the US interest has largely
been directed toward oil, gas, services activities including business services, financial ser-
vices, IT and technology (EY, 2015).

Asia-Pacific countries, especially India, Japan, China, South Korea and Australia, also ac-
counted approximately one fifth of the total FDI projects in Qatar. Increased use of export
credit agencies in bailing out suspended or canceled construction projects shows the strong
relationship between the two regions (EY, 2015).

57
Not only outside the GCC states have foreign countries done FDI into Qatar. FDI investment
within the GCC region has gained significant momentum. The GCC states, especially UAE,
Kuwait and Saudi Arabia, have become the largest investors in Qatar in terms of number of
projects, value and job creation. Gulf Cooperation Council nationals under certain circum-
stances are treated equal to Qatari nationals. The Ministry of Economy and Commerce has
put in place internal regulations which allows GCC nationals to completely own a Qatari
company, under certain exempted activities. In addition, there is growing optimism among
Middle Eastern companies in terms of using the potential of their own region. Thus, intra-
regional FDI projects doubled in 2012 in comparison to 2011, signifying that Middle Eastern
investors are more optimistic about their own region than their Western counterparts (EY,
2015).

58
5. Conclusion

In summary, the main aim of Qatars Vision 2030 is to achieve sustainable economic, social,
human and environmental development in partnership with the private sector aligned with
FDI and an attractive investment climate. Accordingly, Qatar wants to strengthen and
broaden their fast- growing economy and at the same time help secure the future prosperity
of its people by building a diversified asset base and economy.

Initially, at the beginning the topic of the thesis was introduced as well as the terms QNV,
GCC and FDI were defined.

Further, Qatars politics, economy, societal and investment conditions were discussed. The
reader was provided with key data, historical information, and political conditions in terms
of political risk, political stability as well as freedom rankings, human rights, government
functions, foreign relations and regional relations. Moreover the economic factors which led
the country be the fastest growing in the world and the issue of immigrant workers, indige-
nous society, Human Development Index, Global Gender Gap Index, culture and arts was
debated. Additionally, the Foreign Investment Assessment, Foreign Investment Index, Com-
petitiveness Ranking, taxation and Foreign Direct Investment of Qatar were discussed.

Moreover, the strategic orientation of the government of Qatar was analyzed. Thus, it was
dealt with the strategic management similarities and differences of the state of Qatar and
the global company Ernst & Young. In accordance, the meaning and applicability of strategic
management to entities such as governmental or private was discussed. Afterwards, Qatars
vision (as well as national strategy) and then Ernst & Youngs vision were introduced and
critically reviewed. Both visions were shortly compared. After clarifying the applicability of
strategic management to governmental entities as well as discussing both visions, the ap-
plicability of strategic management tools to Qatar was discussed. Afterwards, the strategic
management tool namely SWOT analysis was applied to Qatar.

Then, the following two major questions: How attractive is Qatar for FDI? and What types
of FDI would strategically support Qatars Vision 2030? were discussed. Based on various
scientific elaborations such as EYs attractiveness survey, the outcome of the first discussion
was that Qatars economy is performing well in terms of positively developed institutions,
stable macroeconomic environment, strong diplomatic ties in the region, excellent tax struc-

59
ture, efficient goods market, further expansion ambitions (e.g. Football World Championship
2022) and low corruption levels as well as abundant labor. Accordingly, it was declared that
the attractiveness of Qatar for FDI is positive, due to Qatars striving for economic, social,
human and environmental development. Additionally, in Qatar FDI express a strong upward
trend, unchallenged by the recent turmoil on international financial markets.

The result of the thesis question was that vertical FDI as well as market-seeking, efficiency-
seeking and strategic asset-seeking FDI might strategically support Qatars Vision 2030. In
addition, FDI which generally goes in line with Qatars diversification efforts and at the same
time approaches at least one pillar of the QNV 2030 temple is contributing to Qatars de-
velopment efforts. Particular types of FDI in relation to various sectors such as education,
healthcare and business services were found to be strategically advantageous for Qatar.

On balance, there are many ways to strategically contribute by FDI to Qatars Vision 2030.
Nevertheless, if Qatar intends to fulfil its Vision 2030 to become a developed country, they
have to pave way for a prosperous economy, society, politics, environment and investment.

Recommendations

Particular recommendations for governmental and firm action that create an attractive FDI
climate in Qatar have to go in line with the pillars of the QNV 2030. Hence, the possible rec-
ommendations are based on the human, social, economic and environmental development
in Qatar.

In order to further enable Qataris to sustain a prosperous society, on the one hand the gov-
ernment might promote vocational training institutions (whether a domestic or foreign firm)
for all Qataris (especially natives) in order to reach a diversified economy with a diversified
educated workforce. Foreign firms, on the other hand being already in Qatar or seeking to
enter the Qatari market might invest in vocational training in order to gradually eliminate
the lack of skilled Qatari workers. A possible inspiration for foreign companies might be the
Bosch Vocational Training Center Bangalore (BVC), which follows an approach inspired by
the German vocational training model. More than 20 percent of the curriculum consists of
theory, while 30 percent focuses on gaining practical skills and abilities. Apprentices spend
the remaining 50 percent of their time on the shop floor, where they put into practice what
they have learned. Instructors train them in various trades as electricians, mechatronic

60
engineers, toolmakers, or machine operators (Bosch-Media Service, 2014). Domestic as well
as foreign firms will in the long run be enriched by the resulting amount of highly skilled
workers in Qatar.

Thus, the General Secretariat for Development Planning (Worldbank, 2008), states from the
perspective of a Qatari that: The welfare of our children, and of our children yet to be born,
demands that we use our resource-wealth wisely. Qatar must continue to invest in its peo-
ple so that all can participate fully in economic, social and political life (Scharfenort, 2012).

A key part of the Qatar 2030 National Vision is to continue investing in education. Tertiary
initiatives will have to include expanding the Qatar Foundation Campus, increasing the num-
ber of foreign university campuses, creating new community colleges and raising the
achievement of Qatari students at all levels, especially in math, science and English. Qatars
education system, from the primary school to university level, needs to support and meet
the requirements of its economy to ensure immediate and long-term stability and growth. A
comprehensive reform program of how schools and universities in Qatar can meet the gov-
ernments objectives for a knowledge economy should be undertaken (Bunglawala, 2011) in
order to move away from the amount of less educated nationals. This is resulting in shortage
of nationals within the work force in Qatar particularly in the private sector. The number of
Qataris is small, which makes the search for qualified and experienced Qataris even more
pressing (Worldbank, 2008).

Hence, universities might provide institutional support to young people with viable business
ideas by supporting the initial start-ups and by providing the needed infrastructure. For this
support, the universities should establish a specialized entity to accompany students from
higher education into real business. This gives perspective for real projects to be designed
and implemented by students within universities in their early stages. This, in turn, will en-
courage more students to become involved in business and eventually contribute to the
transfer of knowledge. By adding such structure, a new generation of Qataris will be more
likely to venture into the private sector, thus contributing to the development of a
knowledge-based economy (Bunglawala, 2011).

61
In addition, from a human development perspective, more focus needs to be put on encour-
aging greater equity and access to employment opportunities, especially for women. Accord-
ingly, a key statement as advocated by the Qatari National Vision 2030, is that: The State of
Qatar aspires to advance and develop the social dimensions of its society by nurturing Qatari
citizens capable of dealing effectively and flexibly with the requirements of the age they live
in, and by preserving a strong and coherent family that enjoys support, care and social pro-
tection. Women will assume a significant role in all spheres of life, especially through partici-
pating in economic and political decision-making. (Worldbank, 2008).

As a result, a better diversified educated workforce and fair employment opportunities be-
yond gender and ethnic discrimination will most likely motivate more foreign direct inves-
tors to establish businesses and live in Qatar.

If Qatar wants to develop a just and caring society with high moral standards, the govern-
ment needs to improve conditions for its many migrant workers, according to the United
Nations' Special Rapporteur on the Human Rights of Migrants (Furcoi, 2013). The following
recommendations might be taken into account (Furcoi, 2013):

Effectively implement existing legislation, including by enforcing the prohibition

against the confiscation of passports, prosecute violations and impose meaningful
sanctions on companies and individuals who violate laws designed to protect mi-
grants' rights.

Adopt legislation on domestic workers that include meaningful labor rights' protec-
tion and effective compliance mechanisms.

Ensure that illegal recruitment fees are not charged, and that employment contracts
signed in the sending countries are fulfilled and not altered in Qatar without the
agreement of the migrant concerned. This might be achieved by adopting a uniform
model contract with terms and conditions clearly stated, for all workers, regardless of
their nationality, and ensuring they are properly informed on their rights in a lan-
guage they understand.

62
 Create a strong and effective labor inspection system, with more labor inspectors,
who might be well trained on human rights standards, and interpreters for the most
commonly used languages. Labor inspectors might monitor the enforcement of labor
laws, including by interviewing the migrant workers, reviewing their contracts and
making sure they are allowed to keep their passports, are issued IDs, and are paid on
time.

Ratify the International Covenant on Civil and Political Rights and the International
Covenant on Economic, Social and Cultural Rights.

Ratify the International Convention on the Protection of the Rights of All Migrant
Workers and Members of Their Families, which would provide the Qatari government
with a useful framework for managing migration while ensuring the full respect for
the human rights of migrants.

Consider seeking technical assistance from the Office of the United Nations High
Commissioner for Human Rights in order to make sure Qatari legislation and practice
is in line with these treaties.

Ratify ILO (International Labor Organisation) Conventions, including on migrant

workers, freedom of association, right to organize and collective bargaining, domestic
workers and private employment agencies, and consider seeking technical assistance
from the International Labor Organisation to ensure Qatari legislation and practice is
in line with these Conventions.

Apart from the improvement of the conditions of the foreign workers, Qatar becomes in-
creasingly involved in both regional and international affairs. Therefore the need for political
reform is becoming more and more essential. During the Arab Spring and its aftermath,
Qatar assumed a rather particular role in the region: an absolute monarchy that supports
revolutionary movements abroad, but experiences no civil unrest within its own borders.

The reforms enacted since 2011 were initiated to improve the international image of the
country, not only because of domestic pressure. A democratic transition is unlikely to hap-

63
pen without a well-organized domestic call for reform, which currently does not exist. While
supporting democracy and freedom of speech in other countries, Qatars record for support-
ing freedom of speech domestically is weaker (Bertelsmann Stiftung, 2014). Accordingly,
Qatar should promote democratic reforms and at the same time stop support extremist
groups outside the country in order to maintain a safe country with high moral standards.

Thus, enhancing the conditions of foreign workers and implementing a democratic system
might be appealing to foreign direct investors as it might lower moral reservations with re-
gard to conditions in Qatar.

Economically QNV 2030 makes clear provisions for a post-oil era: to create a knowledge-
based economy, to diversify the economy to non-oil sectors, and to become a leading host
nation in the world. It remains to be seen how much of this can be put into practice, because
industry experts have already warned of a lack of competition among young Qataris when it
comes to education, as highly paid government jobs are provided to them once they gradu-
ate. As long as the public sector continues to offer better paid jobs than the private sector,
this might seriously harm the creation of a knowledge-based economy (Bertelsmann
Stiftung, 2014). Therefore the government would have to change the salary differences in
order to boost its planned knowledge-based economy.

Nevertheless, the high reliance on the oil and gas sector, which still forms about 50 percent
of Qatars GDP (German Emirati Joint Council for Industry and Commerce, 2013), points out
the structural weakness of the economy. This observation is solidified in the assessment of
the World Economic Forum categorizing Qatar as an efficiency-driven economy, in opposite
to the innovation-driven, which is the neighboring country United Arab Emirates.

In order to change this, FDI can help to avoid a long and costly internal learning curve and
provide Qatar access to state-of-the-art industry in other sectors. However, in order to at-
tract more FDI to non-oil and gas sectors, Qatar will have to improve primarily the areas of
financial and business freedom, as well as investor protection. Additionally, Qatar will have
to consolidate the financial sector, build up trustworthiness in banks and ease access to capi-
tal (German Emirati Joint Council for Industry and Commerce, 2013) for private firms.

In order to ensure harmony between economic growth, social development and environ-
ment, the Qatari government might promote environment-friendly public transportation,

64
such as electronic public transportation, as well as invest in photovoltaic for governmental
institutions and create incentives scheme for enterprises which are ecological-friendly. Addi-
tionally, Qatar might cycle and reuse water instead of desalination in order to counter the
immense consumption and extraction of water. This should positively affect the ecosystem
in the long run (Danoun, 2007). In times of sustainability, Qatars potential shift to a more
environment-friendly country might bring FDI that establishes green technology sites in
Qatar.

The Qatari government has to continue investing in world class infrastructure to create a
dynamic and more diversified economy in which the private sector plays a prominent role.
This requires continuous improvements in the efficiency, transparency and accountability of
government agencies (Qatar Foundation, 2015). In accordance, the government has to un-
dertake the twin functions of spearheading development and assuring the growth of private
sector capabilities through financial support and other means (Worldbank, 2008).

In order to gain institutional development, the Qatari government might consider the follow-
ing ideas (Worldbank, 2008):

sustaining high rates of saving

making sound investments in human, capital and financial assets for the future
eliminating administrative wastes
simplifying the process of creating a start-up (especially for foreign direct investors)
implementing far-reaching privatization programs

Furthermore, taking the Small Business Innovation Research program in the United States as
a model, the Qatari government could help generate demand for research that is then trans-
formed into viable businesses through public procurement initiatives. The Small Business
Innovation Research program allocates 2.5 percent of the total research budgets of all fed-
eral agencies with budgets over $100 million to contracts or grants for small businesses. The
Qatari government might set a similar target of funds from research budgets to be allocated
to small businesses (Bunglawala, 2011).

Moreover, the Qatari government should better explain its policies and business opportuni-
ties to potential foreign direct investors; because the responses to EYs Attractiveness Survey
(2012) clearly show that there is a lack of regional awareness among investors who are not

65
doing business in the Middle East. Respondents who are already doing business in the region
are well-aware of the diversification drive, political environment and education and labor
challenges. These investors are more optimistic about the region than those who are not yet
present there. Therefore, there is an urgent need for the Qatari governments to improve
communication channels and effectively educate potential investors who have inaccurate
perceptions of the country (EY Attractiveness Survey, 2012).

66
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