Taking The Long View

Not content to rest solely upon wealth accrued from natural resources, Qatar has an active investment strategy to help secure the future prosperity of their country. The total value of Qatari deals and investment abroad passed $10 billion in 2014, with 11 countries covered. Qatar Investment Authority (QIA) guides national investment overseas.

QIA was established in 2005 and has been successful in safeguarding Qatar’s credit rating through their investment strategy, which can be seen by its Aa2 rating from Moody’s. This reflects the business world’s perception that Qatar has a risk profile equivalent to some of the world’s largest and most advanced countries. QIA guides investment in asset classes such as equities, direct investment, fixed income and private equity.

The growth in GDP and subsequently funds available for investment abroad rests on energy prices and high exports of liquefied natural gas (LNG), of which as much as one-third of the world’s known total gas reserves is known to lie within Qatar’s territory. Much of the sovereign wealth has funded state projects including infrastructure, education and health facilities, as well as modern hydrocarbon operations. But Qatar is eager to diversify away from dependence on natural resources, and stability along with the foresightedness of the Qatar rulers has given ample opportunity for the national investment strategy to succeed.

The foreign assets held by Qatar’s sovereign wealth fund are valued at $115 billion, 80% of which is allocated to European countries. France and the UK represent a significant portion of these investments, and it is notable that Qatar Holding (a subsidiary of the Qatar Investment Authority) purchased Harrods, London’s iconic department store, in 2010. In 2013, London’s mayor Boris Johnson estimated that Qatar’s total investments in the UK stood at $30.6 billion, mostly around London, with a further $15 billion committed to road projects, railways, power plants, and the Thames Tunnel project. Precise details of Qatar’s investments abroad are not always possible, due to the discretion with which Qatar approaches foreign investment, and since clauses of confidentiality often cover deals, but estimates follow.

The former French president, Nicolas Sarkozy, offered Qatar “preferential investor treatment” and exempted Qatar’s investment holdings from paying capital gains taxes on property in France. The French Foreign Ministry recorded that over $15 billion was invested over the past six years. Qatar’s investments in Paris include some famous sites along the picturesque Champs-Elysées, notably the Elysées 26 Mall, the Aviation Club, the Citroí«n showroom, and the Lido cabaret.

Germany has received $18 billion in Qatari investment, with the lion’s share of that going to bolstering the capital position of Deutsche Bank. This investment was welcomed, as toughened regulatory demands imposed on European banks meant they needed to bolster their financial backing and support continued growth.

Greece and Italy, which have suffered from weak economies in recent years and were badly hit by the global financial crisis, have also benefited from Qatari investment. A joint venture between Italy’s strategic investment fund and Qatar Holding has made investments in sectors including food, furniture and design, tourism, fashion, and luxury goods. Greece has encouraged Qatar’s investment in banking, mining, power, and real estate.

Further afield, countries which have received significant investment from Qatar’s state funds include Brazil, where Qatar Petroleum International bought a 23% stake in Parques das Conchas from Shell for around $1 billion; the US, where American Express created a joint venture with QIA for $900 million; Switzerland, where Katara hospitality invested $546 million in luxury hotels; and Canada, where Qatar Petroleum International bought 40% of Centrica’s natural gas projects; Morocco, where $566 million was invested in the Moroccan state-backed venture Wessal Capital. This venture will develop hotels and development projects which include training in hospitality for Moroccan citizens interested in tourism.

These projects together describe Qatar’s foreign investment strategy as one that takes the long view, is optimistic about the future and is characterized by the desire to diversify the pillars of Qatar’s prosperity, and offer the world not just hydrocarbons and heating, but also tourism and reasons to visit the peninsula of Qatar.