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Qatar’s economic diversification: A strategic move to grow its influence in the region

As the literature on the dire effects of the “resource curse” grows, the world has witnessed an ever-changing reaction from the GCC (Gulf Cooperation Council) as renewed policies are being recommended to steer away from oil dependence. While the results being scrutinized are asymmetric and uneven across various state stakeholders within the region, a general trend within the region is directed towards public-private partnership (PPP) as a means to guarantee higher economic productivity in a variety of sectors, particularly energy.

This blogpost attempts to locate developments and differentiation within Qatar, whose construction market recorded an outstanding compound annual growth rate of 9.6 percent between 2019 and 2024. The tiny oil-wealthy country is generally known for its extensively-developed and interventionist public sector. However, the state’s introduction of Public-Private Partnership policies and measures is a first step towards embarking on attractive private sector investments within an ambitious infrastructural framework constituting long-term and lucrative projects.

While some of these projects are mainly concerned with utilizing PPP to promote sustainable housing, a more exciting engagement is Qatar’s state of the art Al Kharsa Solar project. The investment revolves around using photovoltaic technology to produce electricity, as part of the country’s wider program to deviate away from extensive oil-use.

The Al-Kharsa Solar Project

Rendered one of Qatar’s most interesting and technologically-amplified projects, the Al-Kharsa Solar Project has received attention from numerous international developers pitching in with five bids. These contracts are signed between private developers and the Qatari public sector under a program in favor of PPP-pursued sustainability.

In fact, Kahramaa, Qatar’s state-owned electricity enterprise, will be reviewing all incoming company offers to participate in the making of this photovoltaic technology. Covering an area of 10 km sq, the overall capacity/magnitude of the project is approximately a minimum of 700 MW, with 350 MW linked to the grid in early 2021. Kharamaa suggested that rough commercial operation may as well begin in the first part of the year 2022. These developments further illustrate the fast-paced nature of Qatar’s operational strategy, characteristic of the country’s eagerness to overcome rentier development, and diversify its energy production at any cost.

The prime goals set for this project include but are not restricted to protecting Qatar’s environmental atmosphere in the midst of rising carbon emissions worldwide, primarily due to engaging human activity. The project may also further competitive prices within power generation to generate enough revenue for a plethora of long-term investment in the interest of the country. Nevertheless, it’s important to take note of a slight limitation given these positive developments; in other words, acknowledging the limits of the consistent state-driven developmental investment may as well open the door for policy change which benefits the state’s revenue sustainability.

Qatar and the State

Since the late 1990s, the Qatari state has embarked on an adventurous pathway towards launching ambitious state-funded projects and extensively intervening in markets in the pursuit of diversifying the economy and amplifying Qatar’s regional influence. While the state has been enormously helpful in rebuilding the country’s infrastructure and sustainable energy sectors, experts worry that active state guarantees and intervention may as well dilute the motive for the private sector to perform on its own and expand (United Nations, 2019-2020).

Nevertheless, the empirical reality concerned with the latest developments may not merit such pessimism. This is particularly due to the fact that PPP projects, such as those revolving around the Al-Kharsa Solar Project, have proven useful with regards to expanding the private sector enormously. In fact, Qatar’s private sector increased by around 6% in 2018, proving resistant to oil volatility shocks. Nevertheless, there is a need for allowing the private sector to acquire the necessary autonomy to proceed without a consistent government patron, which may as well merit relooking into the conditions of a PPP contract. Regardless of these contested developments, Qatar’s economic progress is promising and worth looking into the long-term for any potential investor.

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