Date: Wednesday, 17 October 2018
Last month, Qatari Airways reported a $68 million dollar revenue loss as a consequence of the June 2017 blockade imposed by Saudi Arabia, the UAE, Bahrain, and Egypt. The dramatic severance was the culmination of years of brewing tensions, and intended to pressure Qatar into capitulation on several diplomatic and policy fronts, including severing ties with Iran, Hamas, and the Muslim Brotherhood. Despite the initial economic impact of the blockade, Qatar has been widely recognized as weathering the storm, and effectively coming out on top. Beyond its swift financial recovery, Doha has made a series of strategic policy moves that signals a new era of global engagement and positions the small but wealthy Gulf nation to emerge from the ordeal stronger than ever.
Qatar’s economic stability is in large part attributable to concerted governmental efforts to maintain and increase foreign investment. Despite the blockade, Qatar was able to attract $986 million inward FDI in 2017– a 27% increase from the $774 million received in 2016. Qatari banking flows have recovered, and non-resident capital flows are projected to reach $128 billion in 2018. A further testament to global bullishness on Qatar is Fitch’s rating upgrade of Doha Bank from ‘Negative’ to ‘Stable’, and affirmation of the long-term Issuer Default Ratings at ‘A’. In the wake of the embargo, the government stepped in to increase liquidity for the banking sector, and the cabinet approved a draft law that allows non-Qatari investors to invest 100% capital in all sectors. In addition, Qatar Stock Exchange-listed companies have increased their foreign ownership limit to 49%. These moves were not only economically sound, but also reflect a willingness to open up to international investors, and increase accessibility to global capital markets.
The changing tide in Qatar goes deeper than its short-term financial rebound. In an aim to further the Qatar National Vision 2030 (QNV 2030), the oil-rich nation has made strides in reforming and diversifying its economy. The contribution of non-oil sectors to the country’s economy has grown by 23 percent from 2013-2017. There has also been a concerted investment in the tourism industry, as well as a ramping up of infrastructure projects in preparation for the FIFA World Cup in 2022. However, these high profile initiatives come with intensified scrutiny of the systematic human rights abuse and exploitation of migrant workers. Amnesty International observed that the failure to improve labor conditions in the country would “call into question whether the Qatari authorities are serious about reform.” Though experts remain skeptical, the Qatari government has promised to take steps to improve the employment situation and appease the international community.
In addition to these reforms (–both real and symbolic), Qatar has made strides to diminish risks for foreign investors by diversifying its portfolio of geopolitical partners. Qatar has invested a significant amount of resources in maintaining its relationship with the US, despite the latter’s initial support of the blockade. The US has since changed its tune, suggesting that the blockade should be resolved, as it ultimately hindered regional counterterrorism cooperation. Though there is diplomatic and economic necessity to maintain positive relations with the United States, Qatar is trying to balance out this reliance by cultivating ties with various countries.
As the Syrian Civil War and migrant crisis continue to shake up alliances and bring unlikely parties together, Qatar has demonstrated willingness to engage with a range of stakeholders in the region. Doha has come to terms with the post-blockade reality in which its continued support for Sunni rebel groups is no longer viable, and has consequently strengthened ties with Iran and Russia. In addition, Qatar’s substantial investment in the German energy sector, generous offer to support Turkey, and investment in China’s Lufax by way of the Qatar Investment Authority, further reflect this repositioning.
It is likely that issues with the Arab quartet will soon be resolved. But even if they don’t, the embargo has propelled Qatar to make new friends – and Qatar is picking winners. Its strategic posturing has diminished economic and security risks associated with the region and is laying valuable groundwork for increased international engagement. Looking forward, Qatar may very well emerge in the coming years as a global economic hub, and a critical player in the post-Syrian War geopolitical order.