IMF says availability and cost of hiring new workers in the future could be affected after working conditions of some construction workers and domestic help made global headlines.
Qatar faces Fifa World Cup 2022 cost and labour risks, IMF says
The IMF has warned about risks stemming from Qatar’s preparations to host the Fifa World Cup in 2022.
The country has already faced delays and cost overruns related to projects linked to the tournament, said the IMF.
“Qatar will continue facing the risk of cost escalation given its commitment to a compressed timetable ahead of the 2022 Fifa championship,” wrote the IMF after a mission to the country last month.
“An integrated approach to public investment management, including procedures for selection and management of all projects, and a comprehensive and transparent treatment of public programmes in the budget would be highly desirable, requiring substantial capacity building.”
Qatar is estimated to be planning to spend US$200 billion over the next decade ahead of the World Cup, with the largest chunk of the amount earmarked for a new airport, roads and a metro system. Delays have hit the opening of the Hamad International Airport, while tenders for the metro system were also pushed back.
Such investment spending was essential to help propel non-oil growth and diversify the economy, the IMF said.
But it added: “The programme entails the possibility of overheating in the near term, and low return and overcapacity in the medium term. In particular, the extent to which public investment will durably boost private sector productivity remains uncertain.”
Qatar has taken steps to better coordinate some of its big-ticket projects, including the creation of a central planning office to oversee infrastructure investments. But the IMF said there was scope for improving the investment oversight process further.
Warnings have already been issued about the potential ballooning cost of Qatar’s sporting plans. The construction consultancy EC Harris said last year that unless action was taken, construction inflation could reach 18 per cent per year over the next decade.
In a report released last week, the Egyptian bank EFG-Hermes said it expected inflation to accelerate to 4.1 per cent this year, “largely on the back of rental inflation strengthening with an expected rise in population growth as the investment programme picks up”.
The IMF said inflationary pressures appeared “contained at the moment, but policymakers needed to remain vigilant”.
It also flagged risks related to the labour market required to build projects linked to the World Cup.
“Working conditions of some construction workers and domestic help have made global headlines and could affect the availability and cost of hiring new workers in the future,” the IMF wrote. “This would hinder growth, since the success of Qatar’s current development model depends importantly on the ability to rapidly hire expatriate workers.”
Qatar has come under criticism from human rights groups for the working and living conditions of labourers, as well as its kafala system, which ties a foreign worker’s residency permit to his or her job.
In response, the government vowed to better enforce existing labour laws and issued a welfare charter aimed at safeguarding the rights of all workers involved in Fifa-related projects.
Qatar’s economy has remained resilient in the face of recent wobbles in other emerging markets. Supply disruptions among other oil producers in the region and restrictions in the liquid natural gas market have helped to keep oil prices at elevated high levels.
But growth has increasingly been driven by the non-hydrocarbon sectors of construction, communications, transport and finance. Overall growth reached about 6 per cent last year, according to the IMF.
Follow us on Twitter @Ind_Insights