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Dwindling Qatar investment as oil slump continues

Investment House CEO says that drop in oil price is dragging investment down in Qatar, despite its vast fiscal reserves.

Dropping oil pices are slowing Qatar's economy.
Dropping oil pices are slowing Qatar's economy.

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Investment in Qatar is slowing generally because of weak oil prices, Investment House's chief executive said.

A proposal by Qatar's Investment House for a QAR750m ($206m) flotation of an agricultural firm has been shelved by regulators.

Investment House is a private Qatari investment bank that is 87% owned by Qatar Investment and Projects Development Holding Co (QIPCO), a local investment group.

The proposal was for a company that would produce chickens, which are mainly imported.

The QAR750m initial public offer (IPO) would have raised half the money needed for the scheme, while the other half had been obtained from other investors, Hashem Al-Aqeel said in an interview with Reuters.

"Qatar consumes about 89 million kilogrammes of chicken a year and only produces six million kilograms, the rest is imported, so having this kind of project here is a huge step towards food security," he said.

However, the government has put the IPO on hold, he said, but declined to comment on the basis of the decision. It is unknown whether the project might proceed.

Al-Aqeel observed that in general, many investment projects in Qatar have slowed since oil prices began to plunge last year, also dragging down gas and oil prices, despite Qatar being the world's top natural gas exporter.

"The lower oil price is affecting Qatar – we are seeing a slowdown in the rate of investment here in the construction, banking and energy sectors."

In January, before construction had even started, state-run Qatar Petroleum and Shell said they had decided not to proceed with their $6.4bn Al Karaana petrochemical project in Qatar.

He also said that most projects that were not related to Qatar's hosting of the 2022 World Cup soccer tournament were slowing, and that investors were generally playing the waiting game to see what happens to energy prices before they commit fresh money to projects, the news agency reported.

In December, the Ministry of Development Planning and Statistics forecast gross domestic product would grow 7.7% in 2015, and senior officials have said key economic projects will not be cut back. That was before news broke that the Sharq Crossing project had been shelved, firing speculation within the construction industry.

Even if its oil and gas revenues shrink, Qatar's vast fiscal reserves mean that the government can continue spending heavily on the economy for years to come.

However, Al-Aqeel pointed out that banking system liquidity in Qatar was beginning to suffer: "From initial indicators you can see that deposits are lower so far this year, which will result in banks having less liquidity to lend, and the loans will have a higher interest rate."

The latest central bank data shows total deposits at commercial banks in Qatar fell to QAR553bn at the end of December from QAR560.4bn in September, though they were up 7.4% from a year earlier.

Al-Aqeel added: "I expect this slowdown will last a couple of years, and when things are slow, good sectors in invest in are healthcare and education," he advised.
 

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