Qatar has made lots of headlines recently. Charges of bribery and a major gas deal in exchange for a win in the vote to host the 2022 World Cup may end up instead costing the country the event, which is only part of Qatar’s diversification program intended to secure the country’s well-being once oil and gas reserves run out.
While the bribery controversy could be a danger to the country’s economy, another and perhaps broader danger looms. It’s made headlines too, and is tied in many ways to the World Cup hosting, but its fallout could be greater—and for investors who may have no direct exposure to Qatar. Here are those two dangers, and what they might mean for investors as they play out.
First, London bookmakers have stopped accepting bets on whether Qatar will lose the 2022 hosting, saying that fresh revelations have made it more likely. However, while this would be a blow to the country’s prestige, it will likely do little to slow construction in Qatar’s overall plan.
Qatar seeks a greater goal than a single sporting event, even though the World Cup has loomed large in its overall economic diversification plan, as well as in its goal to become known as a world-class sports hub.
But sports aren’t everything. In February Qatar announced a tourism initiative designed to almost double that segment of its GDP by 2030. To that end, while the country is spending $200 billion on infrastructure, stadiums, hotels and transport as a runup to the World Cup, its greater aim is to attract visitors from far beyond other Gulf nations and for far longer than 2022. The Qatar National Tourism Sector Strategy 2030 is focused on bringing 7 million visitors to the country by 2030 to generate $10.7 billion in spending. In fact, the country is building a whole new city—Lusail—anticipated to cost $45 billion.
Although Qatari stocks and bonds tumbled after bribery allegations hit the news, John Blank, chief equity strategist for Zacks, believes that the likelihood of Qatar losing the World Cup is low. It makes sense for the Middle East to have the World Cup, he said, particularly since the smaller countries in the Middle East seem to be making the most progress in modernization and hosting the World Cup would further drive such change.
“Rolled-up” countries like Iraq and Syria, said Blank, are made up of smaller groups that were not traditionally united into a single country, but became so relatively recently. And the friction among those artificially united groups is erupting—whereas the “little pieces left to the side are the ones moving forward.” While Syria and Iraq are in turmoil, Qatar and its neighbor Dubai have been chugging along in relative quietude.
A World Cup competition would be “very positive,” Blank said. With Syria, Iran and Iraq among the countries sending teams to the World Cup, the award would function “the same as the Olympics, with rivalries on the [sports] field, not on the battlefield.”
Blank also said it made little sense to “unwind investments and deals when the merits of the decisions [are] sound but the process is corrupt. [They should] reform the process, not the decisions.” And that’s what he believes will happen.
Even if it doesn’t, said Blank, “ is eight years away. I doubt they’re going to lose much.” If this were to happen only three to four years from the World Cup, the fallout from a change in venue might be greater, but this far in advance, effects would be felt more in “plans, architectural designs—things like that.” A growing Qatar economy has already spurred considerable development that would not stop if the World Cup goes elsewhere.