The Impact of Exports and Foreign Direct Investments on the Gross Domestic Product in Qatar - Research Paper Example

The impact of exports and foreign direct investments on the gross domestic product in Qatar (1990 al affiliation) Exports and foreign direct investment plays a crucial role in the growth of the economy of Qatar. One of the export products is the liquefied natural gas. The economy of the country has continued to rise due to the increase in export of petroleum products including the liquefied natural gas. The exports provide revenue to the government and have a positive impact on the gross domestic products. Oil export has given raised the per capita gross domestic product placing it among the economic giants in the world. Qatar exports crude petroleum (39%), petroleum gas (47%), ethylene polymers (2.1 %), refined petroleum (7.1%) and nitrogenous fertilizer (1.3%). Most of the products are produced in the country and exported to countries such as South Korea, Japan, china, Singapore and India. The country in the end is able to acquire foreign exchange used for economic development. Oil and gas together with foreign investment are the vital components of Qatar’s trade (Al-Iriani, 2006). The country has also raised the production of liquefied natural gas. In the year 2010 the country’s export value was rated at 57.82 United States Dollars. Foreign direct investment is the sum of the country’s long term capital, short term capital, reinvestment of earnings and equity of capital as presented in the payment balance. Foreign direct investment contributes to the gross domestic product of the country. Nearly a quarter of the total population in the country is foreigners. Some multinational companies have also invested in the country increasing the Gross domestic product value of the country (Al-Iriani, 2006). . The table below indicates the exports, foreign direct investment and the gross domestic product of Qatar in billions of the United States dollars. 1990 1991 1992 1993 1994 1995 1996 1997 1998 Exports 2.1 2.5 2.9 3.0 3.31 3.61 3.96 5.45 5.24 FDI 0.18 0. 25 0.5 0.02 0.13 0.01 0.34 0.42 0.35 GDP 10.0 12.0 13.0 14.5 15.2 16.2 17.1 18.0 18.1 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 7.4 11.95 11.56 11.68 14.52 20.36 28.98 38.24 48.05 70.73 0.11 0.25 0.3 0.62 0.62 1.2 2.5 3.5 4.7 3.78 19.0 22.6 23.6 24. 5 26.7 29.4 31.75 44. 53 60.88 79.71 2009 2010 2011 2012 2013 50.31 75.04 121.69 143.64 155.21 8.12 4.67 -0.09 0.33 -0.84 115.27 97. 58 125.12 169.8 189.95 Descriptive Statistics             Export   FDI   GDP             Mean 15.55473684 Mean 1.041052632 Mean 26.14578947 Standard Error 4.26960729 Standard Error 0.33085296 Standard Error 4.093057902 Median 7.4 Median 0.35 Median 19 Mode #N/A Mode 0.25 Mode #N/A Standard Deviation 18.61078671 Standard Deviation 1.442154618 Standard Deviation 17.84122577 Sample Variance 346.3613819 Sample Variance 2.079809942 Sample Variance 318.3093368 Kurtosis 3.465958044 Kurtosis 1.498281715 Kurtosis 4.087697021 Skewness 1.925363029 Skewness 1.667050821 Skewness 2.040121887 Range 68.63 Range 4.69 Range 69.71 Minimum 2.1 Minimum 0.01 Minimum 10 Maximum 70.73 Maximum 4.7 Maximum 79.71 Sum 295.54 Sum 19.78 Sum 496.77 Count 19 Count 19 Count 19 Largest(1) 70.73 Largest(1) 4.7 Largest(1) 79.71 Smallest(1) 2.1 Smallest(1) 0.01 Smallest(1) 10 Graph Regression EXPORT Regression Statistics Multiple R 0.82557721 R Square 0.68157773 Adjusted R Square 0.662847008 Standard Error 10.80633038 Observations 19 ANOVA   df SS MS F Significance F Regression 1 4249.3 4249.3 36.38823 1.35E-05 Residual 17 1985.205 116.7768 Total 18 6234.505         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept -5442.451737 904.8055 -6.01505 1.39E-05 -7351.42 -3533.48 -7351.42 -3533.48 X Variable 1 2.730368421 0.452627 6.032265 1.35E-05 1.775408 3.685329 1.775408 3.685329 FDI Regression Statistics Multiple R 0.767876213 R Square 0.589633879 Adjusted R Square 0.565494695 Standard Error 0.950625295 Observations 19 ANOVA   df SS MS F Significance F Regression 1 22.07388 22.07388 24.42642 0.000124 Residual 17 15.3627 0.903688 Total 18 37.43658         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept -392.3411053 79.59511 -4.92921 0.000127 -560.272 -224.41 -560.272 -224.41 X Variable 1 0.196789474 0.039817 4.942309 0.000124 0.112782 0.280797 0.112782 0.280797 GDP Regression Statistics Multiple R 0.826453625 R Square 0.683025595 Adjusted R Square 0.664380042 Standard Error 10.33590666 Observations 19 ANOVA   df SS MS F Significance F Regression 1 3913.442 3913.442 36.63209 1.29E-05 Residual 17 1816.126 106.831 Total 18 5729.568         Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept -5211.725193 865.4173 -6.02221 1.37E-05 -7037.6 -3385.85 -7037.6 -3385.85 X Variable 1 2.620245614 0.432923 6.052445 1.29E-05 1.706857 3.533634 1.706857 3.533634 Graph showing the relationship between GDP and Exports Graph of GDP and FDI Impact of exports on the gross domestic product value of Qatar The GDP of the country was estimated at US $202.45 billions. The gross domestic product of the country has continued to rise year after year. Despite being the smallest country and with a slightly lower population value Qatar is among the economic giants in the world among the OPEC member states. Qatar produces and exports gas and oil. All this have majorly contributed toward the gross domestic product of the country. Oil and gas make up around fifty five percent of the total gross domestic product in the country. The export of the two products among others have seen the country’s economy rise among the in the recent past. The country moved from the category of the poor countries in the world to be among the Giants. The growth of the economy in a country is usually determined by the GDP of the country (Al-Iriani, 2006). . Gross domestic products are the market value of services and goods produced in the country. Gross domestic product is calculated by summing up all the country’s expenditure. The GDP of Qatar as a country is determined by summing up the value of investments, consumptions, net exports and government purchases. Exports and investments remain the largest contributors to the gross domestic product of the Qatar. The country has made an impact in the economic world in the last several years as a result of increasing exports which are mainly gas and oil. The increase in oil prices especially in the year 2010 resulted to dramatic rise in the overall gross domestic product of the country. The country continued to improve the gas sector which resulted to extended growth. Despite the move by the country to promote investment in non gas and non oil sectors, gas and oil export is still the main source of revenue for the country and the people of Qatar. Qatar is among countries in the world with the highest per capita income. Over fifty percent of the country’s gross domestic product is generated from the export of gas and oil. The excess oil reserves with natural gas reserves will spearhead the country’s economy even more in the coming years. The gross domestic product of the country rose to 185.3 billion of United States dollars. Oil and gas export has made the country to have the highest GDP in the world. It is placed thirteen in the world and the highest among the GCC regional states ( world bank, 2014). Apart from exports, the gross domestic product of the country has continued to increase as a result of external investors such as shell and pearl gas to liquid located at Ras Laffan. The government is utilizing the revenue accrued from the sale of gas and oil to help in economy diversification. The real gross domestic product of the country moved from 12.0% in the year 2009 to 5.6 % in the year 2013. The change in the GDP was due to fluctuations in the prices of oil in the world that impacted negatively on the oil producing countries. Qatar’s wealthy is generated through selling of liquefied natural gas obtained from the big gas fields in the world that it shares with Iran. Western nations especially the United Kingdom provided the country with a technology that converted gas into liquefied natural gas for export. According to Qatar’s statistics, gas and oil export generated over 50% of the total gross domestic products. The country is the major exporter of liquid natural gas in the world which makes up eighty percent of the country’s gas exports. The major gas to liquid gas converter plant was opened in the year 2014. The plant was developed due to a partnership between shells a foreign company and Qatar petroleum at a cost of around ninenteen billions US dollars. The county was ranked among the highest exporters of crude petroleum. Despite the government owning some of the oil fields in the country, some fields are controlled by companied that are foreign and under the sharing agreement (Kari & Saddam, 2012). Most of the crude oil for export comes from Al- shaheen and Dukhan fields. The foreign direct investments and the gross domestic products Foreign investors from around the world are allowed to invest in Qatar. The county in the process is able to acquire capital from the tax levied upon the investors. Foreign direct investment is the sum of reinvestment earning, equity capital, short term and long term capital as presented in payment balance. The average foreign direct investment for the country had a minimum of -0.42 with an average of 1.64 and a maximum of 8.31% in the year 2009. The foreign domestic investment in Qatar and other Middle East country with oil field usually reflect the ownership of the production facilities that are controlled by the foreigners. Many times foreign companies such as shell in Qatar have partnered with the Qatar petroleum and invested in the production sectors (Chan & Gemayel, 2004). The investment could be services, agriculture and manufacturing. Foreigners are also allowed to invest in other sectors of the economy such as tourism especially at this time when the country is willing to diversify and avoid over depending completely on oil. The investment may begin as partnership, buying of a company in existence and also purchase of something that is considered new. The country has continued to receive increased number of foreign investors hence impacting positively on the GDP of the country. The value of foreign direct investment keeps on fluctuating from time to time. More investment means more jobs to the people and more revenue to the government. Opportunity for investment in the country has made it easier for many foreign companies to thrive even though fluctuation in the prices of oil and gas in the world sometimes provides challenges to the markets. Foreign companies are able to invest oversees through merger or by acquiring shares. The foreign direct investment accepted threshold is usually estimated to be around ten percent. Most United Kingdom companies have invested in Qatar (Chan & Gemayel, 2004). The home country usually benefits during such investment because of the many advantages that are presented with it. The presence of foreign investors have boosted and increased the amount of export by the country as a result of increase in production. Western investors have ensured sophisticated technology is utilized in the conversion of gas to liquid hence increased the production of liquid natural gas that has been the main source of revenue for the country and the people concerned. Direct investment is usually long term and may include reinvestment of the accrued profit. Qatar has continued to witness an increase in the number of direct investors. The foreign direct investment was around 0.62 in the year 1991 and moved to 3.73 in 2011 (Shotar, 2005). Change in the prices of oil and gas to reduced investment. Although the number of foreign investors in the country has kept on increasing, the growth rate is still too low. The government has however in the recent past come up with effective means to ensure the investors are attracted. This involves creation of policies that will be conducive for the foreign investors. In the 1990s the government in power amended its bureaucratic and legislative framework to ensure adequate and easy inflow of the foreign capital. The amendment for the first time allowed foreign capital to be used in various economic activities that initially belong to the Qatari’s population. The policies that control the economic and legal environment of the foreign investment were amended in the year 2002. Some of the amendment that permits foreign investors involved; allowing full ownership of project by the foreign investors expects those in the insurance, banking, and general trading. In such sectors such as banking, fifty one percent of Qatari partnership still holds (Chan & Gemayel, 2004). The other factors that have attracted foreign investors entail the creation of laws that guides and govern the intellectual property. The income tax of corporate is more transparent with less corruption involved. The government has also reduced tax and rationalizing the structure of the import duty. The move has attracted more investors and in the process increases the gross domestic product of the country. The country’s gross domestic product has continued to rise as a result of increased production and foreign direct investment. More fiscal policies that are considered effective have been created and the economic and business environment has continued to be ideal. The role of the private investors in the country has been enhanced. Economic reforms have continued to be considered and changed in order to focus on creating better environment for the business to flourish (Bossdorf, 2012). Qatar has continued to pay much attention to the foreign investors with an intention of ensuring the country is able to achieve much in the end as a result of the gross domestic product. The presence of foreign investment in the country may be considered as resource- seeking due to most of the investors targeting the oil and liquid natural gas. Investment in the two fields has highly impacted on the economic growth of the country due to increase in production. The country should come up with appropriate measures including diversification of the various sectors of the economy with an intention of preventing overreliance on oil and gas as the only source of revenue. Foreign investors despite increasing the production in the oil and gas sector have also taken part in ensuring upgrading other sectors of the economy such as agriculture, infrastructure, health and tourism. Developing countries should consider utilizing the foreign direct investment for the purpose of economic development. Fiscal policies should not be so tight to scare away the people involved (Kari & Saddam, 2012). Conclusion Both the export and foreign direct investments plays a crucial role in the growth of the gross domestic product. However, Qatar’s exports mainly focuses on oil and gas. Oil and gas are produced in large amount though it is believed that their reserve may not last for a very long time (Bossdorf, 2012). The government and the sector concerned with the economy are currently focusing on economic diversification. The country can be able to focus on other forms of investment for example agricultural, health and education sectors. With the number of investors growing from the country is set to remain among the economic giants in the globe. Gross domestic product usually target the market value of the services and goods produced in a given period of time. With increased investors, more goods and services will be produced hence the gross domestic product rises. References Al-Iriani, M. A. (2006). Energy–GDP relationship revisited: an example from GCC countries using panel causality. Energy policy, 34(17), 3342-3350. Bossdorf, M. M. (2012). Investment Profile Qatar. Chan, K. K., & Gemayel, E. R. (2004). Risk instability and the pattern of foreign direct investment in the Middle East and North Africa region. International Monetary Fund. GDP (current US$). (2014, September 8). Retrieved December 22, 2014, from http://data.worldbank.org/indicator/NY.GDP.MKTP.CD Kari, F., & Saddam, A. (2012). Growth, FDI, Imports, and their Impact on Carbon Dioxide Emissions in GCC Countries: An Empirical Study. Mediterranean Journal of Social Sciences, 25. Shotar, M. M. (2005). The Attractiveness of Qatar to Foreign Direct Investment, 1980-2002. Applied Econometrics and International Development, 5(3). Read More