I. COMMERCIAL OVERVIEW: After five years of strong economic growth, the Qatari economy is cooling down. While the private sector is still doing quite well, the oil and Government sectors are lagging behind, due mainly to a considerable drop in oil revenue and production levels. The likelihood that oil prices will remain low throughout the year 1994 and the substantial cut in government expenditures suggest a decrease in total Gross Domestic Product (GDP). The Government of Qatar (GOQ) is by far the largest, if not the only, end-user of a wide range of products and services in the Qatari market. Qatar's economic and commercial activity is, therefore, very sensitive to GOQ spending on new projects as well as health care, education, transportation and other development services. For the last four and a half decades, Qatar's economy has been fueled by revenues from crude oil exports to Far Eastern and European countries. In recent years, however, the focus of GOQ activity has shifted to the development of what is possibly the largest non-associated natural gas fields in the world, located off the North coast of the Qatari peninsula. To cope with the major costs of developing its immense natural gas reserves in the North Gas Field, the State-owned Qatar General Petroleum Corporation (QGPC) had to resort to foreign loans and enter into foreign equity participation agreements with leading oil companies in the United States, Europe and Japan. Phase I development of the North Gas Field was inaugurated on September 3, 1991, which marked the country's 20th anniversary of independence from Britain. Phase I was designed to produce 800 million cubic feet of gas per day for domestic consumption. Phase II, the development of Liquefied Natural Gas (LNG) exports, as so far seen the establishment of three separate equity-sharing consortiums. Qatar Gas Company (up to 6 million metric tons per year) and Ras Laffan LNG Company (up to 10 million metric tons annually) were formed to market to Far East customers. Eurogas, the third consortium, did not prove economically feasible and is defunct. Various policies are being pursued more forcefully in an attempt to reduce the impact of fluctuations in world oil prices on the domestic economy and to address the issue of international indebtedness. The most important of these policies is the re-orientation of the economy from a growth based on public sector initiatives to one where the private sector takes the lead. Due to constant budget deficit ranging from US$ 1.0 to 1.5 billion every year throughout the past several years, vigorous attempts to cut down on public spending are under way. The LNG industry excluded, no new projects have been introduced and the emphasis is on existing ones. The project finance approach followed by State-owned industries implementing expansion plans will utilize resources available from banks operating in and outside Qatar. Such finance will selectively go to those industries that are commercially viable, e.g., chemical fertilizers and petrochemicals. According to the 1992 Foreign Trade Statistics, issued recently by the Central Statistical Organization (CSO), Qatar's total imports in 1992 (latest available) reached Qatari Riyals (QR) 7.4 billion (US$ 2.024 million), an increase of 17 percent above the 1991 level of US$ 1.720 million. (One Qatari Riyal equals US$ 3.65, as set by GOQ in 1980 and unchanged since then). CSO computations also showed the country's 1992 exports at QR 13.6 billion (US$ 3,736 million), an increase of 23 percent above the 1991 level of US$ 3,047 million. The 1992 re-export trade from Qatar was computed by CSO at US$ 104.5 million, as in 1991. CSO computations have indicated that Japan continues to occupy the position of supplier number one to the Qatari market. Traditionally, the U.K. has been the second supplier and the United States the third. However, 1992 seems to have brought some disappointment to the British suppliers, because for the first time in Qatar's 22 years history of independence, the United States occupied second position, placing the U.K. in the third position among all suppliers to this market. Other trade partners with Qatar are: Germany, fourth position; Italy, fifth position; France, sixth position; U.A.E., seventh position; Saudi Arabia, eighth position. U.S. exports to Qatar in 1992 reached the highest level ever in the country's history. Services excluded, the United States exported goods worth QR 838.6 million, or US$ 230.4 million, an increase of 15 percent above 1991 and 400 percent above the 1975 level of US$ 45 million. Throughout the recession of the mid-1980s, our share of the market ranged from 9 to 10 percent. In the early 1990s, our share started to grow and reached a peak level of 11.5 percent in 1992. Major business opportunities for the United States in Qatar stand out in the liquefaction of natural gas (LNG). This industry looms over all other projects. Other sectors of special interest to the United States include: oil/gas exploration, power generation, water desalination, construction, medical care, communications and transportation. The Qataris and expatriate communities have great respect for American technology. In fact, American products and services are often given preference which other competitors from Europe and Japan do not usually receive. However, Qatar is now a price-conscious market. U.S. firms willing to enter the Qatari market or expand their presence here need to be aggressive and competitive.