Question

What are the procedures and steps taken by Qatar to encourage foreign direct investment?

Answer 1

Foreign direct investment (FDI) in Qatar

FDI in Figures

Foreign direct investment flows into Qatar have generally followed an upward trend in the past several years, thanks to the country's political stability, stable currency pegged to the U.S. dollar, high quality infrastructure and one of the lowest corporate tax rates in the world (10%). However, following the diplomatic crisis with countries such as Saudi Arabia,the UAE and Kuwait, Qatari economy experienced a negative impact. According to UNCTAD 2020 World Investment Report, FDI flows totalled to negative USD - 2,8 billion, a decrease compared to 2018 (USD -2,2 billion). The total stock of FDI stood at USD 31 billion in 2019. However, the trust of global investors remained still on Qatar’s economy even after the diplomatic tension that has taken place with its neighbouring states. Furthermore, Qatar is also a key international investor, thanks to its large foreign exchange reserves. The largest contributors to FDI inflows are the United States, Japan, South Korea and Singapore, while the main sectors that attract foreign investments are oil and gas, construction, public works and financial services.

Qatar aims to become a leading country in terms of its business and foreign investment environment. In May 2018, the government approved a draft law that allows non-Qatari investors to own 100% capital in all sectors, while many Qatar Stock Exchange listed companies have increased their foreign ownership limit to 49%. The organisation of the 2022 World Cup in Qatar is expected to attract large amounts of foreign investors in the coming years. However, one element that limits the expansion of FDI flows into Qatar concerns its policies governing the private sector, especially due to the long amount of time it took to establish a privatisation programme. Other elements that hinder FDI are the country's relatively small domestic market, a lack of a skilled workforce and high cost of living, and the current diplomatic and commercial relations with other Arab countries. The public-private partnership programme launched recently is expected to improve the situation. Qatar ranked 77th out of 190 economies in the 2020 Doing Business report issued by the World Bank, up by six spots compared with a year earlier. The rise was mainly due to a significant improvement with regards to registering property.

Foreign Direct Investment	2017	2018	2019
FDI Inward Flow (million USD)	986	-2,186	-2,813
FDI Stock (million USD)	35,522	33,874	31,061
Number of Greenfield Investments***	34	42	28
Value of Greenfield Investments (million USD)	564	537	1,581

Source: UNCTAD, 2016

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

Country Comparison For the Protection of Investors	Qatar	Middle East & North Africa	United States	Germany
Index of Transaction Transparency*	2.0	6.0	7.4	5.0
Index of Manager’s Responsibility**	2.0	5.0	8.6	5.0
Index of Shareholders’ Power***	2.0	4.0	9.0	5.0

Source: Doing Business, 2016

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

steps taken by Qatar to encourage foreign direct investment .

Tourism remains a high-priority development sector. In November 2014, the Qatar Tourism Authority (QTA) and QDB identified six projects to be fast-tracked to bridge gaps in the market. The projects, including a luxury dhow dining cruise, coach company, 4x4 leasing company, business tourism management company, ticketing and mobile information centre, and SME cottage markets, will be fast-tracked through the approval process with QTA’s assistance. Within one month of the announcement, four of the six had received funding.

QDB is also targeting investment in the education sector, providing QR29m ($7.9m) in education loans in 2013. This is set to expand in 2015: in June 2014 QBD announced plans to offer a 15-year loan for private investors that are establishing institutions at the pre-primary, primary and secondary school level to expand offerings and meet a growing shortage of primary and secondary spaces. QDB partnered with the Supreme Education Council (SEC) to offer loans subsidised at around 3-4% per year, covering 70% of the project cost. The SEC will conduct feasibility studies for proposed projects, while QDB provides financing. These efforts are much needed, as no capital investment in the sector was recorded in 2012, according to a 2014 report published by Alpen Capital, in part due to the capital-intensive requirements to register a business.

PRIVATE SECTOR: Private firms in Qatar will benefit from ongoing state support, as indicated by recent statements from Sheikh Tamim bin Hamad Al Thani. In November 2014, the emir announced the government had taken steps to restrict public institutions from competing with private entities, in order to bolster private sector development. Addressing the Advisory Council, the emir said the government had issued a circular restricting state-funded institutions from setting up companies or engaging in economic activities in sectors where private players are active without prior permission from the Office of the Prime Minister. He added that 19 new projects had been initiated to improve private firms’ competitiveness. With development of the private sector high on the agenda, Qatar’s business climate is expected to become increasingly attractive to investors.