Five years ago, half a dozen cars at a traffic light in Qatar's capital Doha would lead to mutterings about how crowded the city was becoming. Now bumper-to-bumper traffic often clogs a seafront dominated by gleaming skyscrapers. At night, tastefully lit buildings exude opulence, and wooden dhows plying the water are the only obvious sign of the past.
But this change is nothing compared with the transformation that the country's rulers plan over the next decade. Throw in its aspirations to be a regional peacebroker, and it's no exaggeration to call Qatar the world's most ambitious country.
The gas-rich Gulf state has a population of just 1.7 million people, of which only about 250,000 are Qatari citizens; most of the rest are foreign workers. So as it spends $150 billion on a metro, airport, seaport, roads and an urban makeover in preparation to host the 2022 soccer World Cup, the inevitable question is being asked: has a country a quarter the size of Switzerland bitten off more than it can chew?
The betting is still that cash -- plenty of it -- will help Qatar buy its way to success, but there are risks in the longer term. One is the lack of depth in the energy-dependent economy.
"We're relatively comfortable with Qatar currently. The top risk is a collapse in energy prices -- given the size of the tickets they're writing for themselves, things could get bad pretty quickly if they don't generate enough revenue," said Abdulkadir Hussain, chief executive at Mashreq Capital in Dubai.
"The economy is not diversified, and the diversification process is being funded by energy prices, so there would be a derailment if prices came off."
Hussain doesn't expect natural gas prices to collapse, at least in the next three years, but any slowdown among key emerging market consumers could hurt. Prices have fallen in the last few years because of new gas sources and a slowing global economy, and they recovered only slightly after last year's earthquake in Japan boosted demand.
Qatar bulls point to estimates of as much as $17 trillion in monetizable natural gas riches still in the ground. Exports of this bounty have lifted Qatar citizens to a per capita income of well over $90,000, the world's second-highest.
The country's desire to think big and impress is evident. An $11 billion new airport will eventually be able to handle 50 million passengers annually. It will start operations later this year, boasting onyx countertops, sunken gardens, a mosque complex, squash courts and a swimming pool.
Qatar Airways' rapid expansion -- and the desire to make Doha a transport hub -- mirror plans by Gulf rivals Dubai and Abu Dhabi and their airlines.
The country's sovereign wealth fund is the most aggressive in the region, having spent north of $20 billion on buying into companies ranging from iconic German carmakers Porsche and Volkswagen to luxury British department store Harrods and two football clubs.
But the scale of the task in hand and the reliance on nature's gifts may conflict with the relatively small number of talented managers to see development plans through.
"They have probably the best leadership in the Arab world. The prime minister is the hardest working in the region. Their biggest problem is finding people to manage their vision," said a Doha-based senior banker, who declined to be named because of the sensitive nature of the discussion.
The workaholic prime minister Sheikh Hamad bin Jassim bin Jaber Al Thani, a member of the country's ruling family who was instrumental in helping its emir take power in 1995, doubles up as foreign minister and also pulls the trigger on big purchases by the sovereign fund. The banker cited Sheikh Hamad's busy schedule as a reason the fund didn't do still more deals.
Not surprisingly, the perception in financial circles is that the government takes on responsibility for too much, stunting the private sector's development.
Much is made of the role that small and medium-sized Qatari companies will play as contractors and subcontractors in preparing for the World Cup, but such firms are thin on the ground.
Qatari bankers are concerned about which projects to fund, and the relatively small size of the banking system means contractors may have to look to Saudi banks for financing.
Some in the industry say the risks of delay in executing Qatar's World Cup development plans are substantial, mirroring slow changes in economic and financial regulation.
"They move very slowly here. Ten years may appear a long time, but I wouldn't be surprised if they require every bit of it," said a construction industry source.
Four years after Qatar announced a plan for a market watchdog combining the powers of the financial centre regulator, the stock market regulator and the central bank, there has been little progress.
The stock exchange has just introduced Treasury bill trading and talks of introducing market makers, traders who would spur activity by quoting both buy and sell prices. But there has been little progress in getting companies to raise limits on foreign ownership of their shares, causing equities index compiler MSCI to delay a decision to lift Qatar to emerging market status.
However, international belief in Qatar's prospects -- at least relative to a worsening global economic climate -- still appears strong, as evidenced by the success of its $5 billion sovereign bond issue late last year.
Qatar's leaders haven't shied away from taking controversial positions on world affairs, and their ability to engage almost everyone from the United States to Hezbollah has helped the country position itself as a diplomatic power centre.
It was a major supporter of Libya's rebels last year, providing arms and troops and ensuring the lasting gratitude of Libyans. The United States and Afghanistan are holding talks for Taliban insurgents to open a political office in Qatar.
But the lack of democracy at home may present a key challenge over the longer term.
The difficulty in getting individuals on the ground to speak on the record about the risks in Qatar's ambitions reflects the sensitivities of doing business in a small, authoritarian state, whose natural riches helped it avoid the political unrest seen elsewhere in the region during last year's Arab Spring.
"Despite the large number of buffers that protects Qatar from contagion, the lack of political freedom combined with the country's young population presents a potential challenge for stability in the long term," said Anthony Skinner, director at Maplecroft, a British-based risk advisory firm.
Though led by a modernizing ruling family, most Qataris are conservative Muslims who practice Wahhabism, an austere form of Islam. Social change that accompanies breakneck expansion is unlikely to sit well with all.
"Qatar is led by a relatively progressive elite that nonetheless has to be mindful of religious or culturally conservative forces within the country. It's a question of two steps forward, one step back," said a Doha-based consultant who declined to be named.
"It's not easy to be an absolute monarch in this part of the world. Taking everyone with you is going to be hard."
Some signs of this internal conflict are visible. Qatar recently suspended sales of alcohol at The Pearl-Qatar, an artificial island that hosts international restaurants popular with expatriates.
"Alcohol was allowed on The Pearl, and now it's not, with no explanation given. That leads to confusion, speculation and gossip," the consultant said.
"But the country's leadership has a marked ambition to lead, and changes within Qatar will occur because of that. Its ability to digest what it's doing -- that's the challenge."
TOO MUCH OF A GOOD THING?
Qatar has a long way to go to create a financial centre rivaling even Dubai, an hour's flight away and still the preferred destination for Western bankers in the region despite its debt crisis two years ago. Dubai, and not Qatar, was the major recipient of capital flight out of Bahrain during that country's popular revolt last year.
And so, much as the government talks of diversifying the economy away from the energy sector, it's clear that it's going to have to be gas that does most of the heavy lifting.
In the mid-1990s, with the country in dire straits financially, the government borrowed to invest in technology needed to develop its natural gas reserves. The gamble has paid off; in just over 15 years, Qatar has become the world's top liquefied natural gas exporter.
The fact that Qatar owns the entire LNG value chain works in its favor, analysts say. Qatar owns not only extraction facilities but also ships which transport the gas and once it gets to markets, regassification plants as well.
"There is a big difference between Qatar and other countries in the region -- Qatar's economy is built on real assets, not on real estate or other ephemera," Shashank Srivastava, acting head of Qatar's Financial Centre Authority, told a recent conference.
If Qatar pulls off its massive expansion, attention will turn to whether it can build on that success, using infrastructure and facilities created for the World Cup to sustain continued growth.
"For me, the question is not so much the process, that gets funded by natural gas. It's what happens after the event -- other places where such events have been held have grown into the capacity being built," said Mashreq Capital's Hussain.
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