U.S. at the forefront of Qatar’s intensified investment strategy

Speaking from the U.S. Embassy office in Qatar in June 2016, U.S. Ambassador to Qatar Dana Shell Smith set the tone for the burgeoning financial relations between the two countries: “There are so many opportunities here for American businesses, and Qatar has discovered that there are a lot of investment opportunities for them in the United States.”

These comments come at a time when the Qatar Investment Authority (QIA) has pledged to invest $35 billion into the United States over the next five years, with $7 billion already spent in 2015.

The investment decision from the QIA is a colossal move for the emirate, and is a result of strengthening bilateral relations between the two nations. This stems from the U.S.-Qatari trade relationship that has grown exponentially in recent years after the signing of a bilateral Trade and Investment Framework Agreement (TIFA) in 2004.

Qatar is one of the United States’ most important trading partners in the region. In 2014, U.S. exports to Qatar reached $5.2 billion, while Qatari exports were valued at approximately $1.7 billion, according to the Office of the U.S. Trade Representative. The increased trade and investment opportunities have fostered business relationships for both countries and are creating jobs for Qataris and Americans alike.

“Our bilateral trade relationship is growing every day. Last fall we inaugurated an Economic and Investment Dialogue between the United States and Qatar to establish a platform for enhanced economic cooperation,” explains Ms. Smith. “Qatar is a growing export destination for U.S. products. From 2004-2014, U.S. exports to Qatar grew nearly tenfold, eclipsing for the first time $5 billion on an annual basis.”

U.S. involvement throughout Qatar’s private sector varies from large corporations to SMEs to employees in Qatari companies. There are currently six prestigious U.S. universities that have full campuses in Qatar, as well as American contracting giants AECOM, Bechtel, and CH2M Hill that were recently awarded major contracts for Qatari infrastructure projects, including a $16 billion airport that was commissioned in 2014.

Furthermore, there are several companies that not only provide a service or equipment, but also act as a support business to vital industries – like Boeing, which works with Qatar Airways and also supports the defence and security sector.

As a strong ally of the U.S., Qatar has played a key part in diplomacy on the issues of terrorism and resolving conflicts. Chairman of the American Chamber of Commerce (AmCham) in Qatar, Robert A. Hager, explains: “It is worth highlighting Qatar’s position in the region, not only as a strong ally of the U.S., but also as a country that is able to keep relations with countries with whom we need to have dialogue.” The ongoing move to solidify ties is not only commercial but political which acts in both parties’ interests.

Meanwhile, the shock on oil prices has applied serious pressure on Gulf States to diversify their economies, which are heavily dependent on oil and gas exports. This strain, has forced Qatar to look outwards for growth opportunities elsewhere.

Mr. Hager notes, “You cannot depend on a commodity-based economy long term; you need to be able to diversify. It is important for U.S. business to be a part of this, and to assist with this, because it also fits with the U.S. vision. We have grown from a manufacturing-based to a service-based economy – an economy more and more based on small knowledge-based units. We see that is very complementary with Qatar.”

Qatar doesn’t divulge the size of its assets, but according to the London-based Wealth Fund Institute, it estimates its holdings at $256 billion, ranking it ninth in the world. While the Gulf country’s strategic objective is to diversify its assets overseas, neighboring Saudi Arabia is liquidating its assets to strengthen its finances against declining crude oil prices. The oil-rich kingdom is speculated to have withdrawn $70 billion from global asset managers in an attempt to remedy its budget deficit, according to financial services market intelligence company Insight Discovery.

The Doha-based QIA has traditionally invested in the European market with a particular focus on London, devoting its wealth to assets ranging from Barclays Plc to Total SA and commodities trader Glencore Plc. Last year, the Authority spearheaded a group of investors to buy London’s Canary Wharf financial district in a deal that valued owner Songbird Estates Plc at about $3.94 billion.

However, the prevailing American economy has spurred the QIA to recently establish an office in New York, a move which Ambassador Smith calls “another milestone” in the trade and investment relations between the two nations.
In a statement made by Ali Shareef Al-Emadi, Qatar’s Minister of Finance, “Qatar is to invest in U.S. tech, health care, real estate and infrastructure.” While this commitment to source new deals locally is a statement, the group is no stranger to American investment, with the fund buying a stake in movie distributor Miramax and luxury jeweler Tiffany & Co.

With that said, the most recent flagship investment, has been Qatari Diar’s (the real estate arm of the QIA) co-investment in a $1.5 billion mixed-use development in downtown Washington D.C., completed in 2014. The CityCenterDC has been one of the largest downtown developments in the U.S. capital – a pedestrian-friendly, mixed-use development that spans over 147,000 square meters and is Qatari Diar’s first significant investment in the U.S. property market. It has already realized tremendous success, having leased 100% of its office space, and sold more than 85% of its condominium residences, as well as leased more than 85% of its apartments.

The Minister of Finance, who is also the Chairman of Qatari Diar, claimed that the CityCenterDC’s success allowed the company to commence a new project, a five-star hotel in the fall of 2015.

The sovereign wealth fund’s decision to target new and existing investment partners is a sign of the gas-rich county’s investment strategy in the long term.

“I think it is a reflection that our economy is still growing, and despite the difficult years that the whole global economy has had, QIA has recognized that our economy has the most potential for growth,” concludes Ms. Smith.