## 1. A Framework to Guide Structural Reforms

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---

### Introduction
- Qatar’s National Vision 2030 (adopted October 2008) sets the framework for a more diversified, knowledge-based, greener economy and supports private sector-led development.
- Paper objectives:
  - Identify key structural reforms to accelerate economic transformation.
  - Estimate the impact of proposed reforms.
  - Inform design, prioritization, and sequencing of a comprehensive reform agenda toward Vision 2030.
- Strategic context:
  - Guided by the first two National Development Strategies (2011-16 and 2018-22); Qatar is finalizing its Third National Development Strategy.
  - Challenges include an unfavorable global environment and the ongoing energy transition that will ultimately reduce demand for hydrocarbon.

### Significant Progress (Selected achievements under the Second National Development Strategy)
- Labor market and worker protection reforms:
  - Abolished the Kafala system; workers no longer need a No-Objection Certificate (NOC) to switch jobs.
  - Mandatory minimum wage and allowances: Law No. 17 of 2020 set the minimum wage at QAR 1,000 per month; QAR 500 per month allocated for accommodation; QAR 300 per month allocated for food unless already provided.
  - Probation period limited to a maximum of six months; workers allowed to leave Qatar without exit permits.
  - Created the Worker’s Support and Insurance Fund.
  - Residency program for real estate investment introduced; Qatar Visa Centers (QVCs) established globally.
  - Qatar’s female labor participation rate has risen 9 percentage points over the last decade.
- Education and health investments:
  - Total public expenditure on education per student in 2019 was US$13,783.
  - Education City hosts 13 schools and several universities; Qatar University enrolls over 23,000 students.
  - Major investments in state-of-the-art healthcare infrastructure, facilities, and technologies.
- Attracting foreign investment and protecting investor rights:
  - Reforms allow up to 100 percent foreign ownership of businesses in most sectors and real estate in newly designated areas.
  - 2020 legislation to regulate and promote public-private partnerships.
  - Strengthened protections: unrestricted transfer of funds and assurances against expropriation.
  - Easier commercial registration via Invest in Qatar portal; economic zones established (Qatar Financial Centre; Qatar Free Zones Authority; Qatar Science and Technology Park).
  - Laws published via legal portal (Al-Meezan) and the Official Gazette.
- Enhanced access to finance:
  - Qatar Credit Bureau (established 2010) provides centralized credit database.
  - Two bankruptcy regimes introduced (Commercial Law 27/2006; QFC Insolvency Regulations 2005).
  - Qatar Development Bank (QDB) provides credit guarantee (Al-Dhameen), SME equity (Istithmar), seed funding (Ithmar), green house financing, export finance, export insurance, direct lending, financial education, and a fintech incubation center.
  - National fintech strategy launched in early-2023.
- Green and digital initiatives:
  - National Environment and Climate Change Strategy (2021) aims to reduce GHG emissions by 25 percent relative to business-as-usual baseline by 2030; key pillars include carbon capture, rationalizing residential electricity/water consumption, adopting global sustainability assessment standards, Electric Vehicle Strategy, biodiversity enhancement, and climate finance framework.
  - Digitalization: National Broadband Network, National Payment Gateway, e-Government 2020 Strategy; Cyber Security Center (2020); National Cyber Security Agency (2021); Qatar Finance and Business Academy training; FinTech strategy and Investment Promotion Agency efforts.

### Indicators and Key Findings on Diversification and Performance
- Structural shifts:
  - The non-hydrocarbon sector has gained in economic importance and is the main contributor to recent growth, but the large hydrocarbon sector limits economic complexity and remains a significant contributor to government revenue.
- Productivity and complexity:
  - Total factor productivity (TFP) is on a declining trend since the early-2000s at a faster pace than in other GCC countries and contrary to the rising trajectory in OECD commodity producers.
  - Labor productivity remains relatively lower compared to OECD peers.
- Fiscal dependence:
  - Hydrocarbon activity accounts for a significant share of fiscal revenue (percent share of total fiscal revenue reported in figures).
- Structural performance (benchmarked to OECD extractive economies on a 0–1 scale):
  - Qatar scores relatively high on public sector performance and government effectiveness.
  - Scope for improvement: access to finance, enabling competition, education and skills, legal framework.

### Areas for Further Improvement (Key constraints and metrics)
- Education and skills:
  - Despite high public education spending, Qatar lags OECD median in average years of school attendance and standardized test performance (PISA), particularly in STEM.
  - TOEFL scores for Qatari students in 2020 lag OECD and some GCC peers.
  - Gaps in availability of skilled workers, skill mismatches, and labor force participation.
- Gender gaps:
  - In 2021, the female labor force participation rate for Qatari nationals was 25 percentage points below that of men.
  - 2020 Census: 64 percent of Qatari females have secondary and post-secondary qualifications versus 62 percent of Qatari men.
  - The 2023 World Bank Women, Business and the Law (WBL) report indicates legal barriers affecting women’s decisions to work.
- Public sector concentration and private sector employment:
  - More than 90 percent of Qatari nationals are employed in the public sector, creating a skills supply mismatch for the private sector and constraining SMEs’ access to talent.
- State footprint and competition:
  - State-owned enterprises (SOEs) still dominate sectors such as oil and gas and telecommunications; concentration of state ownership can limit private entry and competition.
- Foreign direct investment and trade barriers:
  - Restrictions remain on foreign investment in certain sectors (e.g., banking, insurance, commercial agencies) and in real estate outside designated zones.
  - Trade-weighted tariff rates for non-agricultural and non-fuel products remain well above the OECD level; a common external tariff (CET) among GCC members exists but internal border posts and separate customs administrations persist.
  - Compliance costs for imports and exports remain above OECD median.
- Access to finance for SMEs:
  - Weak credit information, creditor rights, and insufficient collateral infrastructure reduce banks’ willingness to lend to SMEs; large public sector financing needs may crowd out private credit.
- Legal and regulatory processes:
  - Global Indicators of Regulatory Governance suggest room to enhance public consultation and transparency.
  - Legal and regulatory framework for technology application and intellectual property lags some GCC peers.
  - Lags exist between issuance of Qatari laws in Arabic and translation to English.
- Climate vulnerability:
  - Hydrocarbon sector contributes to significant GHG emissions per capita in Qatar (highest globally, though declining).
  - Qatar is highly vulnerable to climate stressors; urgent need for adaptation, emission reduction, and transition toward renewable energies.

### Synthesis of Implications
- Labor market reforms (including raising the share of skilled foreign workers and measures to increase Qatari private-sector participation) could bring substantial benefits.
- Reforms to improve the business environment, particularly improving access to finance for SMEs, could have large growth impacts.
- A comprehensive, well-integrated, and properly sequenced reform package that exploits complementarities across reforms could significantly boost Qatar’s potential growth.

### Labor market reforms and recommendations
- Implement recent expatriate labor market reforms and remove remaining restrictions, including exit permit and NOC requirements for some worker categories.
- Modernize visa and work permit issuance processes for expatriate workers.
- Ease granting residency status for high-skilled workers and entrepreneurs with significant investments in Qatar.
- Retrain expatriates to upgrade skill levels.
- Strengthen the social safety net for expatriate workers.
- Improve educational attainment and skills by:
  - Aligning education quality and outcome to international standards, particularly in STEM subjects.
  - Linking teacher compensation to performance (education outcomes).
  - Supporting early childhood development and education.
  - Engaging the private sector in designing curricula for vocational and tertiary education.
- Incentivize private sector employment among Qatari nationals by:
  - Conducting a civil service review to rationalize public sector employment and allow natural attrition of nonessential positions.
  - Aligning promotions and pay with performance (NDS2 recommendation).
  - Creating options for public employees to undertake temporary employment in the private sector or transition to the private sector prior to retirement without loss in public pension.
  - Expanding the Social Insurance Law (2022) to include unemployment insurance, educational and medical benefits for Qatari nationals employed in the private sector.
- Increase Qatari female labor force participation by:
  - Prohibiting employment discrimination based on gender and enhancing workplace protection of women.
  - Reducing barriers for women to participate in the labor force.
  - Encouraging female-friendly workplace practices (e.g., shifts/teams with only female members, flexible work arrangements including remote work).
  - Expanding access to affordable and quality childcare facilities and early childhood education.
  - Leveraging technology platforms to strengthen job search programs for women, enable remote work, and support female entrepreneurs.
  - Strengthening and diversifying leadership roles to include more women.

### Business environment reforms and recommendations
- Further trade openness:
  - Reduce trade-weighted tariff rates on non-agriculture and non-fuel products.
  - Enhance services trade by lowering non-tariff barriers, streamlining customs clearance, simplifying documentation, and liberalizing trade in banking, insurance, and commercial agencies.
  - Promote free trade agreements.
  - Facilitate regional trade integration by aligning trade regulations and tax on goods and services within the GCC.
- Promote foreign and private investment by:
  - Opening up more sectors for foreign investment and allowing majority foreign ownership, especially outside economic zones.
  - Further expanding freehold ownership of real estate from the current designated zones.
  - Enhancing digital infrastructure (e.g., improving internet speed) to support a knowledge economy.
- Reduce the role of SOEs by increasing competition and enhancing procurement bidding processes; revisit preferential treatment for large enterprises (including SOEs) in government procurement.
- Ease SMEs’ access to finance by:
  - Enhancing the insolvency framework and the efficiency of the court system.
  - Increasing coverage of the credit bureau and credit registry.
  - Further protecting legal rights of borrowers and lenders by enhancing property rights.
  - Increasing the recovery rate by improving foreclosure/receivership proceedings and procedural efficiency to reduce cost.
  - Encouraging a robust fintech ecosystem and simplifying procedures for banks to obtain information needed to grant credit, while protecting personal data.
- Improve legislative and regulatory frameworks to reduce bureaucracy, streamline business regulations, enhance transparency and accountability, and strengthen intellectual property rights.
- Specific reforms assessed for the non-hydrocarbon sector over 5 years:
  - (i) Permanent reduction in regulatory impediments to doing business (productivity shock).
  - (ii) Lower barriers to entry for domestic and foreign firms in more sectors (productivity shock).
  - (iii) Enhanced access for banks to corporate credit risk information, represented by an illustrative 1 percentage point reduction in the corporate risk premium.

### Climate mitigation actions
- Gradual removal of energy subsidies to promote efficient energy use and shift demand toward renewable energy.
- Expand solar power building on the successful 800 MW tender in 2020; develop long-term strategy for solar competitive auctions and integrate into electricity market plans (including energy buy-back schemes from solar powered homes).
- Expand carbon capture and storage (CSS) by requiring carbon sequestration units in hard-to-abate sectors such as cement and deploy pilot projects at scale.
- Further develop blue hydrogen value chains (blue ammonia, methanol, cryogenic H2 using CSS technology).
- Develop green hydrogen pilot projects (e.g., at the 800 MW solar park in partnership with international companies).
- Decarbonize and diversify the transport sector through broader use of public transport and ride share, changes to parking costs, and congestion pricing.
- Promote climate finance by improving the investment environment and institutional capacity, deploying public resources, crowding in private climate finance, developing appropriate platforms, and promoting innovative structured finance such as green bonds.

### Quantifying the impact of structural reforms (modeling assumptions and results)
- Modeling framework: IMF model (MCDMOD from the IMF’s Flexible System of Global Models (FSGM)); shocks outlined in Annex IV.
- Assumptions:
  - Government announces full extent of reforms with full transparency.
  - Reforms enacted gradually over 5 years.
  - Households and firms deem reforms fully credible and begin adjusting behavior in the first year.
- Labor market reforms modeled over 5 years:
  - Increase the Qatari women labor force participation rate by 10 percentage points.
  - Promote well-targeted active labor market policies (ALMP) for Qatari nationals so their productivity increases by 10 percent (requiring increased fiscal spending).
  - Increase the share of higher skilled foreign workers by 10 percentage points through changes in employment requirements and hiring practices, at no fiscal cost.
- Key modeled impacts:
  - With a 10 percentage point increase in the proportion of skilled foreign workers:
    - Average annual non-hydrocarbon real GDP growth would be 1.5 percentage points higher per year than the baseline for the next five years.
    - Labor productivity level would be 7.5 percent above the baseline level by 2028.
  - If Qatari workers’ skill level is also increased through ALMP:
    - Average annual non-hydrocarbon real GDP growth increase becomes 1.8 percentage points.
    - Labor productivity level would be 9 percent above the baseline by 2028.
  - With all three labor market reforms combined:
    - Average annual non-hydrocarbon real GDP growth would be about 2 percentage points per year above the baseline.
- Doing business reforms impacts (next 5 years):
  - Easing access to credit (illustrative 1 percentage point reduction in corporate risk premium) yields:
    - Non-hydrocarbon real GDP growth increase of 0.6 percentage points per year on average relative to the baseline over the next 5 years.
  - All three doing business reforms combined:
    - Non-hydrocarbon real GDP growth would rise by 1 percentage point per year relative to the baseline.
    - Labor productivity level would be 5 percent above the baseline in 2028.

### Prioritization and sequencing guidance
- Prioritize reforms based on impact, complementarity, ease of implementation, and cost-benefit balance (larger gains at lower costs).
- Implement complementary reforms together to magnify total impacts (example: female participation policies and ALMP).
- Determine sequencing by considering:
  - Which reforms are necessary before subsequent reforms.
  - Capacity of the economy or government to implement reforms.
  - Political feasibility.
- Model results indicate:
  - Both labor market and doing business reforms generate significant growth gains, with labor market reforms producing greater effects.
  - Increasing the share of skilled foreign workers has the greatest growth impact among labor market reforms given that close to 90 percent of the workforce are foreigners.
  - Among doing business reforms, increasing access to finance (better credit information) could potentially have the greatest impact.

### Conclusion and reform priorities
- Qatar is formulating its Third National Development Strategy toward achieving National Vision 2030, aiming to shift toward a more dynamic, diversified, knowledge-based, sustainable, private sector-led growth model.
- Further reforms should focus on boosting productivity and inclusiveness; fostering a more conducive business environment; and leveraging climate actions for diversification and growth.
- Prioritization should be guided by impact and complementarities; a comprehensive, well-integrated, properly sequenced reform package exploiting complementarities across labor, business, and climate reforms would best boost Qatar’s potential growth.

### Annex highlights (selected completed reforms and possible reforms)
- Selected laws/regulations completed (2018–23) include:
  - Labor law (19/2020): Enables employees to switch employers without requiring the employer’s permission.
  - Labor law (13/2018): Allows workers to leave the country without requiring exit permits.
  - Established Qatar Visa Centers (QVCs): Simplify residency procedures for expatriate workers.
  - Minimum wage law (17/2020): Upward revision of the minimum wage.
  - Regulating the Investment of Non-Qatari Capital in Economic Activity Law (1/2019): Permits foreign investors majority ownership up to 100 percent.
  - Property rights Law (16/2018); Expropriation Law (8/2022); Private-public Partnerships Law (12/2020); Investment Promotion Agency (2019); Investment Commerce Court Law (21/2021); Mediation in the Settlement of Civil and Commercial Disputes Law (20/2021); Combating Money Laundering and Terrorism Financing Law (20/2019).
- Possible reforms listed include:
  - Enhance human capital development: Improve education quality (particularly STEM and English); reduce skills mismatch; attract more high-skilled foreign workers.
  - Strengthen labor market dynamics: Improve female labor force participation; incentivize Qataris to take private sector jobs.
  - Trade liberalization, promote competition, ease access to finance, and regulatory effectiveness and efficiency (detailed recommendations provided).

*Source: 1qatea2024002 - 1. A Framework to Guide Structural Reforms; Annex III. The Behavior and Calibration of MCDMOD.*

### 1. A Framework to Guide Structural Reforms _____________________________________________ 4

### 1. A Framework to Guide Structural Reforms

### Introduction
- Qatar’s National Vision 2030 (adopted October 2008) sets the framework for a more diversified, knowledge-based, greener economy and supports private sector-led development.
- The paper’s objectives:
  - Identify key structural reforms to accelerate economic transformation.
  - Estimate the impact of proposed reforms.
  - Inform design, prioritization, and sequencing of a comprehensive reform agenda toward Vision 2030.
- Strategic context:
  - Guided by the first two National Development Strategies (2011-16 and 2018-22).
  - Qatar is finalizing its Third National Development Strategy to make the final leap toward Vision 2030.
  - Challenges include an unfavorable global environment and the ongoing energy transition that will ultimately reduce demand for hydrocarbon.

### Significant Progress (Selected achievements under the Second National Development Strategy)
- Labor market and worker protection reforms:
  - Abolished the Kafala system; workers no longer need a No-Objection Certificate (NOC) to switch jobs.
  - Introduced mandatory minimum wage and allowances: Law No. 17 of 2020 set the minimum wage at QAR 1,000 per month; QAR 500 per month allocated for accommodation; QAR 300 per month allocated for food unless already provided.
  - Legislative changes: probation period limited to a maximum of six months; workers allowed to leave Qatar without exit permits.
  - Created the Worker’s Support and Insurance Fund.
  - Residency program for real estate investment introduced; Qatar Visa Centers (QVCs) established globally.
  - Qatar’s female labor participation rate has risen 9 percentage points over the last decade.
- Education and health investments:
  - Total public expenditure on education per student in 2019 was US$13,783.
  - Education City hosts 13 schools and several universities; Qatar University enrolls over 23,000 students.
  - Major investments in state-of-the-art healthcare infrastructure, facilities, and technologies.
- Attracting foreign investment and protecting investor rights:
  - Reforms allow up to 100 percent foreign ownership of businesses in most sectors and real estate in newly designated areas.
  - 2020 legislation to regulate and promote public-private partnerships.
  - Strengthened protections: unrestricted transfer of funds and assurances against expropriation.
  - Eased commercial registration via Invest in Qatar portal; economic zones established (Qatar Financial Centre; Qatar Free Zones Authority; Qatar Science and Technology Park).
  - Laws published via legal portal (Al-Meezan) and the Official Gazette.
- Enhanced access to finance:
  - Qatar Credit Bureau (established 2010) provides centralized credit database.
  - Two bankruptcy regimes introduced (Commercial Law 27/2006; QFC Insolvency Regulations 2005).
  - Qatar Development Bank (QDB) provides credit guarantee (Al-Dhameen), SME equity (Istithmar), seed funding (Ithmar), green house financing, export finance, export insurance, direct lending, financial education, and a fintech incubation center.
  - National fintech strategy launched in early-2023.
- Green and digital initiatives:
  - National Environment and Climate Change Strategy (2021) aims to reduce GHG emissions by 25 percent relative to business-as-usual baseline by 2030; key pillars include carbon capture, rationalizing residential electricity/water consumption, adopting global sustainability assessment standards, Electric Vehicle Strategy, biodiversity enhancement, and climate finance framework.
  - Digitalization: National Broadband Network, National Payment Gateway, e-Government 2020 Strategy; Cyber Security Center (2020); National Cyber Security Agency (2021); Qatar Finance and Business Academy training; FinTech strategy and Investment Promotion Agency efforts.

### Indicators and Key Findings on Diversification and Performance
- Structural shifts:
  - The non-hydrocarbon sector has gained in economic importance and is the main contributor to recent growth, but the large hydrocarbon sector limits economic complexity and remains a significant contributor to government revenue.
- Productivity and complexity:
  - Total factor productivity (TFP) is on a declining trend since the early-2000s at a faster pace than in other GCC countries and contrary to the rising trajectory in OECD commodity producers.
  - Labor productivity remains relatively lower compared to OECD peers.
- Fiscal dependence:
  - Hydrocarbon activity accounts for a significant share of fiscal revenue (percent share of total fiscal revenue reported in figures).
- Structural performance (benchmarked to OECD extractive economies on a 0–1 scale):
  - Qatar scores relatively high on public sector performance and government effectiveness.
  - Scope for improvement: access to finance, enabling competition, education and skills, legal framework.

### Areas for Further Improvement (Key constraints and metrics)
- Education and skills:
  - Despite high public education spending, Qatar lags OECD median in average years of school attendance and standardized test performance (PISA), particularly in STEM.
  - TOEFL scores for Qatari students in 2020 lag OECD and some GCC peers.
  - Gaps in availability of skilled workers, skill mismatches, and labor force participation.
- Gender gaps:
  - In 2021, the female labor force participation rate for Qatari nationals was 25 percentage points below that of men.
  - 2020 Census: 64 percent of Qatari females have secondary and post-secondary qualifications versus 62 percent of Qatari men.
  - The 2023 World Bank Women, Business and the Law (WBL) report indicates legal barriers affecting women’s decisions to work.
- Public sector concentration and private sector employment:
  - More than 90 percent of Qatari nationals are employed in the public sector, creating a skills supply mismatch for the private sector and constraining SMEs’ access to talent.
- State footprint and competition:
  - State-owned enterprises (SOEs) still dominate sectors such as oil and gas and telecommunications; concentration of state ownership can limit private entry and competition.
- Foreign direct investment and trade barriers:
  - Restrictions remain on foreign investment in certain sectors (e.g., banking, insurance, commercial agencies) and in real estate outside designated zones.
  - Trade-weighted tariff rates for non-agricultural and non-fuel products remain well above the OECD level; a common external tariff (CET) among GCC members exists but internal border posts and separate customs administrations persist.
  - Compliance costs for imports and exports remain above OECD median.
- Access to finance for SMEs:
  - Weak credit information, creditor rights, and insufficient collateral infrastructure reduce banks’ willingness to lend to SMEs; large public sector financing needs may crowd out private credit.
- Legal and regulatory processes:
  - Global Indicators of Regulatory Governance suggest room to enhance public consultation and transparency.
  - Legal and regulatory framework for technology application and intellectual property lags some GCC peers.
  - Lags exist between issuance of Qatari laws in Arabic and translation to English.
- Climate vulnerability:
  - Hydrocarbon sector contributes to significant GHG emissions per capita in Qatar (highest globally, though declining).
  - Qatar is highly vulnerable to climate stressors; urgent need for adaptation, emission reduction, and transition toward renewable energies.

### Synthesis of Implications
- Labor market reforms (including raising the share of skilled foreign workers and measures to increase Qatari private-sector participation) could bring substantial benefits.
- Reforms to improve the business environment, particularly improving access to finance for SMEs, could have large growth impacts.
- A comprehensive, well-integrated, and properly sequenced reform package that exploits complementarities across reforms could significantly boost Qatar’s potential growth.

*Source: 1qatea2024002 - 1. A Framework to Guide Structural Reforms*

### 6.      Enhance labor market dynamics and attract high-skilled expats by: (i) fully

### 1qatea2024002 - 6.      Enhance labor market dynamics and attract high-skilled expats by: (i) fully 

### Labor market reforms and recommendations
- Implement recent expatriate labor market reforms and remove remaining restrictions, including exit permit and NOC requirements for some worker categories.
- Modernize visa and work permit issuance processes for expatriate workers.
- Ease granting residency status for high-skilled workers and entrepreneurs with significant investments in Qatar.
- Retrain expatriates to upgrade skill levels.
- Strengthen the social safety net for expatriate workers.
- Improve educational attainment and skills by:
  - Aligning education quality and outcome to international standards, particularly in STEM subjects.
  - Linking teacher compensation to performance (education outcomes).
  - Supporting early childhood development and education.
  - Engaging the private sector in designing curricula for vocational and tertiary education.
- Incentivize private sector employment among Qatari nationals by:
  - Conducting a civil service review to rationalize public sector employment and allow natural attrition of nonessential positions.
  - Aligning promotions and pay with performance (NDS2 recommendation).
  - Creating options for public employees to undertake temporary employment in the private sector or transition to the private sector prior to retirement without loss in public pension.
  - Expanding the Social Insurance Law (2022) to include unemployment insurance, educational and medical benefits for Qatari nationals employed in the private sector.
- Increase Qatari female labor force participation by:
  - Prohibiting employment discrimination based on gender and enhancing workplace protection of women.
  - Reducing barriers for women to participate in the labor force.
  - Encouraging female-friendly workplace practices (e.g., shifts/teams with only female members, flexible work arrangements including remote work).
  - Expanding access to affordable and quality childcare facilities and early childhood education.
  - Leveraging technology platforms to strengthen job search programs for women, enable remote work, and support female entrepreneurs.
  - Strengthening and diversifying leadership roles to include more women.

### Business environment reforms and recommendations
- Further trade openness:
  - Reduce trade-weighted tariff rates on non-agriculture and non-fuel products.
  - Enhance services trade by lowering non-tariff barriers, streamlining customs clearance, simplifying documentation, and liberalizing trade in banking, insurance, and commercial agencies.
  - Promote free trade agreements.
  - Facilitate regional trade integration by aligning trade regulations and tax on goods and services within the GCC.
- Promote foreign and private investment by:
  - Opening up more sectors for foreign investment and allowing majority foreign ownership, especially outside economic zones.
  - Further expanding freehold ownership of real estate from the current designated zones.
  - Enhancing digital infrastructure (e.g., improving internet speed) to support a knowledge economy.
- Reduce the role of SOEs by increasing competition and enhancing procurement bidding processes; revisit preferential treatment for large enterprises (including SOEs) in government procurement.
- Ease SMEs’ access to finance by:
  - Enhancing the insolvency framework and the efficiency of the court system.
  - Increasing coverage of the credit bureau and credit registry.
  - Further protecting legal rights of borrowers and lenders by enhancing property rights.
  - Increasing the recovery rate by improving foreclosure/receivership proceedings and procedural efficiency to reduce cost.
  - Encouraging a robust fintech ecosystem and simplifying procedures for banks to obtain information needed to grant credit, while protecting personal data.
- Improve legislative and regulatory frameworks to reduce bureaucracy, streamline business regulations, enhance transparency and accountability, and strengthen intellectual property rights.
- Specific reforms assessed for the non-hydrocarbon sector over 5 years:
  - (i) Permanent reduction in regulatory impediments to doing business (productivity shock).
  - (ii) Lower barriers to entry for domestic and foreign firms in more sectors (productivity shock).
  - (iii) Enhanced access for banks to corporate credit risk information, represented by an illustrative 1 percentage point reduction in the corporate risk premium.

### Climate mitigation actions
- Gradual removal of energy subsidies to promote efficient energy use and shift demand toward renewable energy.
- Expand solar power building on the successful 800 MW tender in 2020; develop long-term strategy for solar competitive auctions and integrate into electricity market plans (including energy buy-back schemes from solar powered homes).
- Expand carbon capture and storage (CSS) by requiring carbon sequestration units in hard-to-abate sectors such as cement and deploy pilot projects at scale.
- Further develop blue hydrogen value chains (blue ammonia, methanol, cryogenic H2 using CSS technology).
- Develop green hydrogen pilot projects (e.g., at the 800 MW solar park in partnership with international companies).
- Decarbonize and diversify the transport sector through broader use of public transport and ride share, changes to parking costs, and congestion pricing.
- Promote climate finance by improving the investment environment and institutional capacity, deploying public resources, crowding in private climate finance, developing appropriate platforms, and promoting innovative structured finance such as green bonds.

### Quantifying the impact of structural reforms (modeling assumptions and results)
- Modeling framework: IMF model (MCDMOD from the IMF’s Flexible System of Global Models (FSGM)); shocks outlined in Annex IV.
- Assumptions:
  - Government announces full extent of reforms with full transparency.
  - Reforms enacted gradually over 5 years.
  - Households and firms deem reforms fully credible and begin adjusting behavior in the first year.
- Labor market reforms modeled over 5 years:
  - Increase the Qatari women labor force participation rate by 10 percentage points.
  - Promote well-targeted active labor market policies (ALMP) for Qatari nationals so their productivity increases by 10 percent (requiring increased fiscal spending).
  - Increase the share of higher skilled foreign workers by 10 percentage points through changes in employment requirements and hiring practices, at no fiscal cost.
- Key modeled impacts:
  - With a 10 percentage point increase in the proportion of skilled foreign workers:
    - Average annual non-hydrocarbon real GDP growth would be 1.5 percentage points higher per year than the baseline for the next five years.
    - Labor productivity level would be 7.5 percent above the baseline level by 2028.
  - If Qatari workers’ skill level is also increased through ALMP:
    - Average annual non-hydrocarbon real GDP growth increase becomes 1.8 percentage points.
    - Labor productivity level would be 9 percent above the baseline by 2028.
  - With all three labor market reforms combined:
    - Average annual non-hydrocarbon real GDP growth would be about 2 percentage points per year above the baseline.
- Doing business reforms impacts (next 5 years):
  - Easing access to credit (illustrative 1 percentage point reduction in corporate risk premium) yields:
    - Non-hydrocarbon real GDP growth increase of 0.6 percentage points per year on average relative to the baseline over the next 5 years.
  - All three doing business reforms combined:
    - Non-hydrocarbon real GDP growth would rise by 1 percentage point per year relative to the baseline.
    - Labor productivity level would be 5 percent above the baseline in 2028.

### Prioritization and sequencing guidance
- Prioritize reforms based on impact, complementarity, ease of implementation, and cost-benefit balance (larger gains at lower costs).
- Implement complementary reforms together to magnify total impacts (example: female participation policies and ALMP).
- Determine sequencing by considering:
  - Which reforms are necessary before subsequent reforms.
  - Capacity of the economy or government to implement reforms.
  - Political feasibility.
- Model results indicate:
  - Both labor market and doing business reforms generate significant growth gains, with labor market reforms producing greater effects.
  - Increasing the share of skilled foreign workers has the greatest growth impact among labor market reforms given that close to 90 percent of the workforce are foreigners.
  - Among doing business reforms, increasing access to finance (better credit information) could potentially have the greatest impact.

### Conclusion and reform priorities
- Qatar is formulating its Third National Development Strategy toward achieving National Vision 2030, aiming to shift toward a more dynamic, diversified, knowledge-based, sustainable, private sector-led growth model.
- Further reforms should focus on boosting productivity and inclusiveness; fostering a more conducive business environment; and leveraging climate actions for diversification and growth.
- Prioritization should be guided by impact and complementarities; a comprehensive, well-integrated, properly sequenced reform package exploiting complementarities across labor, business, and climate reforms would best boost Qatar’s potential growth.

### Annex highlights (selected completed reforms and possible reforms)
- Selected laws/regulations completed (2018–23) include:
  - Labor law (19/2020): Enables employees to switch employers without requiring the employer’s permission.
  - Labor law (13/2018): Allows workers to leave the country without requiring exit permits.
  - Established Qatar Visa Centers (QVCs): Simplify residency procedures for expatriate workers.
  - Minimum wage law (17/2020): Upward revision of the minimum wage.
  - Regulating the Investment of Non-Qatari Capital in Economic Activity Law (1/2019): Permits foreign investors majority ownership up to 100 percent.
  - Property rights Law (16/2018); Expropriation Law (8/2022); Private-public Partnerships Law (12/2020); Investment Promotion Agency (2019); Investment Commerce Court Law (21/2021); Mediation in the Settlement of Civil and Commercial Disputes Law (20/2021); Combating Money Laundering and Terrorism Financing Law (20/2019).
- Possible reforms listed include:
  - Enhance human capital development: Improve education quality (particularly STEM and English); reduce skills mismatch; attract more high-skilled foreign workers.
  - Strengthen labor market dynamics: Improve female labor force participation; incentivize Qataris to take private sector jobs.
  - Trade liberalization, promote competition, ease access to finance, and regulatory effectiveness and efficiency (detailed recommendations provided).

*Source: IMF staff chapter content (1qatea2024002).*

### Annex III. The Behavior and Calibration of MCDMOD

### Annex III. The Behavior and Calibration of MCDMOD

### Model overview
- MCDMOD is part of the IMF’s Flexible System of Global Models (FSGM) and is a semi-structural, general equilibrium model covering primarily countries in the Middle East and Central Asia, including Qatar.
- The model is maintained by the IMF’s Research Department.
- For further methodological detail beyond this annex, the source notes Andrle and others (2015) and Snudden (2017).

### Agents, sectors, and behavioral foundations
- Households
  - Two household types: non-Ricardian, forward-looking overlapping generations households (as in Blanchard (1985) and similar literature) and hand-to-mouth households that consume all income each period.
  - Foreign workers in select countries (such as Qatar) are treated as hand-to-mouth households for domestic spending; foreign labor is specified exogenously and assumed to have no unemployment.
- Investment
  - Investment dynamics follow the Bernanke, Gertler, and Gilchrist (1999) financial accelerator specification.
- Production and trade
  - Aggregate supply: Cobb-Douglas production function of capital and labor plus oil production.
  - Aggregate exports: function of relative prices and foreign demand.
  - Aggregate imports: function of relative prices and domestic demand.
- Labor market
  - Equilibrium labor supply is determined by the equilibrium rate of unemployment given the labor force.
  - Labor is supplied by domestic workers and, in select countries such as Qatar, by foreign workers who remit a large share of their income abroad.
- Prices and wages
  - Consumer price and wage inflation are modeled with forward-looking but sluggish Phillips’ curves.

### Fiscal and monetary policy representation
- Fiscal policy
  - Fiscal framework targets a debt-to-GDP ratio through multiple fiscal instruments:
    - Spending channels: government consumption, public investment, and lumpsum social spending and transfers.
    - Taxation channels: for Qatar, taxation is modeled to include tariffs, royalties and dividends from the hydrocarbon sector, lumpsum taxes (proxying excise taxes), and corporate income tax; consumption and labor income taxes are available in the model specification though their use for Qatar is limited in practice.
  - Qatar’s government subsidies to the domestic price of hydrocarbons are explicitly represented.
- Monetary policy and exchange rate regime
  - Qatar is modeled as pegging its currency to the US dollar.
  - Monetary policy is captured by an interest rate reaction function designed to defend the currency peg.

### Calibration and data sources for Qatar
- Calibration emphasis
  - The Qatar calibration focuses on a steady-state calibration heavily dependent on hydrocarbon production.
- Core data sources used in calibration
  - IMF’s World Economic Outlook database (main data source).
  - Fiscal detail: IMF’s Government Fiscal Statistics.
  - Additional macro databases: OECD economic database; IMF databases for government debt and net foreign asset holdings.
  - Labor market: Qatar Planning and Statistics Authority (PSA) data used with special attention to labor sector detail.
- Model scope note
  - Given the level of model detail, the calibration combines WEO macro aggregates with country-specific fiscal and labor data to pin down steady-state and behavioral parameters relevant for Qatar.

### Key modeling assumptions and structural points
- Microfoundations are applied where feasible (households, investment), while other relationships (trade, some supply components) use reduced-form specifications.
- Foreign workers:
  - Specified exogenously.
  - Assumed no unemployment among foreign workers.
  - Remittances: foreign workers remit a large share of their income abroad (treated in model income flows).
- Policy instruments available for Qatar in MCDMOD include government consumption, public investment, lumpsum social spending/transfers, tariffs, royalties, dividends from the hydrocarbon sector, lumpsum taxes, corporate income tax; consumption and labor income taxes exist in the model structure even if not central to Qatar’s calibration.

*Source: Annex III. The Behavior and Calibration of MCDMOD.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1qatea2024002.pdf_