Foreign direct investment is preparing to exit Qatar

In search of a safe climate
Date of publication: Tuesday 22 August 2017
Hatem Farouk (Abu Dhabi)

The level of global and Gulf direct investments in Qatar has dropped significantly in the past month after Western governments decided to withdraw investments in Doha against the backdrop of the economic and political boycott of the Gulf states by Qatar and Qatar.

The political and economic stability is one of the most attractive factors for foreign direct investment, while the atmosphere of the Gulf province continues to put considerable pressure on various sectors of the Qatari economy, a clear threat to complete the infrastructure required to host Doha for the 2022 FIFA World Cup.

Experts expected the Gulf countries to withdraw their deposits in the Qatari banking sector, which currently amount to $ 35 billion, representing a share of between 20-27% of the liquid assets of the Qatar Investment Authority, stressing that about 90% of foreign direct investment to The interior is concentrated in the oil and gas sector and associated manufacturing industries, as well as the transport, marketing, industry, construction, service and construction activities.
Osama Al-Ashri, an analyst with the UK-based Association of Technical Analysts, said that the atmosphere of the Gulf boycott of Doha continues to put pressure on the Qatari economy in various sectors. He stressed that the withdrawal of foreign direct investments operating in Qatar will have serious repercussions on the macroeconomic after the investments recorded more than 144 Billion dollars at the end of last year, noting that political and economic stability is one of the main factors to attract foreign investment and money.

Low flows

Al-Ashri added that foreign investments flowing to Qatar increased between 2013 and 2014 by about 440 million dollars. In the same period, other investments such as loans increased from 4.8 billion dollars to 84 billion dollars. Foreign direct investment reached 39 billion dollars. When investments in securities portfolios amounted to about $ 22 billion.

“Although foreign direct investment flows to work within the Qatari economy in 2014 have declined by $ 3.1 billion, foreign investment increased by $ 9.7 billion to $ 84 billion during the same period,” he said.

He pointed out that foreign investments in Qatar are concentrated in the fields of natural gas, oil, industry, construction, service, construction and banking. He said that Saudi, UAE, US and UK investments account for 85% of total foreign investments in Qatar followed by Japan and Korea.
As a result of the boycott decision, Al-Ashari said that withdrawing the investments of Saudi Arabia and the UAE is a major blow to the Qatari economy at the present time. The most serious consequence of the withdrawal of foreign direct investment from Qatar is delaying the construction of stadiums for the 2022 World Cup. 200 thousand workers in Qatar working in projects with investments in the UAE and Saudi Arabia.

He pointed out that the Qatari banking sector is subject to the sudden withdrawal of funding from the GCC countries, where it is estimated that the withdrawal of $ 35 billion of capital flows to the banking sector, accounting for 20% of GDP within one year if the GCC decided to cut financial ties also .

Al-Ashri added that the foreign assets of the Qatar Investment Authority may enable it to withstand foreign inflows and defend the banking sector. The increase in external inflows in the long term threatens to erode the balance sheet. The GCC countries’ $ 35 billion, representing a large share of between 20-27% of Qatar’s foreign assets.

Negative effects

Wadhah Al-Taha, member of the Advisory Board of the British Securities and Investment Institute in the UAE, said that the Qatari economy has begun to interact strongly with the decision of the Gulf province, with the negative effects of the boycott decision, especially regarding the decline in global confidence in investment within the Qatari economy. Western governments and Gulf governments to withdraw their investments from Qatar.

Taha added that the withdrawal of Gulf direct investment from Qatar would be the start for other countries such as Britain, the United States and the rest of the countries to withdraw their investments from Qatar in light of the strong isolation imposed on them and expectations of sanctions from the Gulf Cooperation Council and the League of Arab States. With Qatar has had a direct impact on a number of economic axes Qatar, led by the Qatar Stock Exchange and the bleeding losses suffered by the index of the Doha market, the result of panic investors, institutions and financial and investment portfolios, and resort to random sale, Finance, as well as the focus of trade exchange, which will have very negative effects on the overall economy due to the adoption of the Qatari market mainly on imports from abroad.

He predicted that the repercussions of the Gulf boycott on Qatar will affect many economic sectors, mainly aviation, capital markets and banks, as a direct result of the rating agencies including Moody’s, Skepticism about the future growth of the Qatari economy.

Standard & Poor’s Ratings also downgraded Qatar’s debt with the Qatari riyal falling to an 11-year low as portfolio funds moved out of the crisis. Standard & Poor’s downgraded its long-term debt rating to AA from AA And put it on the credit watch list with negative repercussions, which means readiness to reduce the rating.

Withdrawal of deposits

For his part, Reda Mosallam, , general manager of Truth Economic Consultancy Company, expects many Western institutions and Gulf governments to withdraw deposits from the Qatari banking sector, noting that Qatar’s domestic banking system is heavily dependent on foreign exchange. Non-residents accounted for 24% of deposits in 18 lenders in April, compared with 1.2% in Saudi Arabia and 12% in the UAE, confirming that the withdrawal of foreign deposits that helped maintain Qatari institutions such as Qatar National Bank, For Energy and Commercial Bank, You institutions are at risk.

Moody’s Moody’s revised its outlook on the Qatari banking system from stable to negative, exacerbated by the poor operating conditions and continued funding pressures facing banks. This reflects the weak ability of the Qatari government to support banks over expectations of slowing growth in gross domestic product During the current year, high non-performing loans and low profitability of Qatari banks coincided with a decline in return on assets.

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