Qatar’s diplomatic problems with its Gulf neighbours could not have come at a worse time for Canadian companies looking to diversify into new emerging markets.
Last Thursday, Qatar refused to comply with a list of demands imposed by Saudi Arabia, the United Arab Emirates, Egypt and Bahrain.
Qatar’s future in the Gulf Co-operation Council (GCC) and regional economic unity hangs in the balance. With tough economic, political and legal sanctions on the horizon, Qatar will find itself ostracized by its closest Arab neighbours, making the tiny, energy-rich country very vulnerable to a trade-route shutdown. This situation may also have negative blowback on Qatari allies such as Turkey and Iran.
This could prove challenging for Canada and G7 members such as the United States, France and Britain, which rely on many of these countries, including Qatar, as strategic trading partners and allies in the fight against global terrorism.
For decades, the GCC was regarded as a shining example of regional strength, economic prosperity and unity in the Arabian Gulf and beyond. Qatar has emerged as a hot spot for major infrastructure projects after winning the bid to host soccer’s World Cup in 2022. Saudi Arabia has also made major progress with its Vision 2030 plan to transform its economy, and the UAE remains a hub for companies operating in the region.
Return on investment and financial impacts are primary concerns for companies that are involved in global business. For those who are exposed to Qatar’s economy and GCC countries through exports, global operations or financial markets, the implications may be far reaching:
n Qatar is the Canada’s third-largest export market in the GCC, and about 9,000 Canadian expats work in the country. Any blockades would knock the wind out of Canadian exporter and investor confidence.
n Many Canadian businesses operate in Qatar. EllisDon’s $200-million contract in Lusail City overseeing a $3-billion real estate development project represents a major win for Canada and strengthens Canada’s brand in the region. Other Canadian organizations with operations in Qatar include Bombardier, SNC Lavalin, Stantec, the College of North Atlantic, University of Calgary and Tim Hortons.
n Qatar has invested more than $500-million in Canada and the country’s leading private commercial bank, Doha Bank, opened an office in Toronto.
n The Qatari government owns 40 per cent of Western Canadian natural-gas assets purchased from Suncor Energy in a Canadian $1-billion deal.
n In March, 2017, International Trade Minister François-Philippe Champagne went to Qatar on his first overseas trip, and in April, 2017, Prime Minister Justin Trudeau met with top leaders of the Qatar Investment Authority to attract more investment into Canada.
Qatar’s economy is highly exposed, and so are its neighbours and trading partners, in addition to its suppliers. Canadian companies that do business in Qatar and GCC markets are likely to experience a slowdown and potential financial effects – but the full nature and extent of the broader effects is still unknown. Your Canadian-based company is more likely to have exposure if it has sensitivity to the health of the Qatari economy; free movement of people between Qatar and the GCC; how goods and services move between Canada and Qatar, and the GCC; the business, legal and regulatory environment in Qatar.
No one is sure what Canada’s relationship with Qatar or the GCC will look like after the crisis is over. But Saudi Arabia is the region’s X-factor: The more distance Canada puts between itself and Saudi Arabia – the leader of the four countries opposing Qatar and the key economic driver in the region – the more challenging it will be for Canadian businesses to diversify exports, and for Canada to attract foreign investment. With Canada and its closest allies facing challenges throughout the region, including threats posed by the Islamic State, the importance of the Canada-Saudi Arabia relationship should not be understated.
As Ottawa works hard to deliver on its foreign policy and trade agenda, refreshing ties with Riyadh should be a No. 1 priority in the GCC to ensure security and economic co-operation in a region of strategic importance to Canada. This will be of paramount importance to supporting Canadian business interests and creating an international order based on rules in a world riddled with uncertainty and opportunity.
