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Law amendments and new economic zones open door to greater foreign investment

Article - March 23, 2016

The recent decision to raise the foreign ownership limit for shares on the Qatar Stock Exchange, as well as the establishment of new economic zones, is indicative of the country’s determination to become a world class business destination


A  drive through Qatar’s booming capital city of Doha or a stroll through one of its glittering shopping malls reveals a plethora of store names and product brands from around the world familiar to any Westerner.

At the same time, foreign companies involved in less consumer-oriented goods and services sectors such as oil and gas, construction, consulting, health care and many others are also present in the emirate and for good reason.

Qatar boasts one of the world’s fastest-growing economies, a very investment-friendly government and billions of dollars in earnings from the petroleum sector, all helping to fuel the influx with experts agreeing that now is the time for foreign enterprises to set up shop in this stable, and rapidly modernising, nation.

Over the past decade, the Qatari authorities have made regular amendments to the country’s Investment Law with each further opening up investment opportunities for foreigners but at the same time protecting local companies and nurturing domestic industrialisation. 
Other pro-FDI (foreign direct investment) measures include full repatriation of profits, a flat 10 per cent corporate tax on locally-sourced profits, no income tax on expatriate salaries and an increase on the limit of foreign ownership of shares on the Qatar Stock Exchange to 49 per cent.

“Our leadership is making all efforts to make Qatar an attractive destination for local and regional businesses”, Prime Minister and Minister of Interior Sheikh Abdullah bin Nasser bin Khalifa al Thani told a recent conference, describing the emirate as “a magnet for investment which has taken a number of steps to facilitate doing business to ensure efficient performance and fair competition based on transparency.”

The Qatar Stock Exchange, which is currently home to 43 companies across a range of sectors including banking, industry, real estate and telecoms, plays a particularly big part in promoting the country as such, explains its CEO Rashid Almansoori.

“We provide information on our leading companies and give investors the opportunity to benefit from their continued growth,” he says. “We are in constant contact with privately held and family companies, as well as government-owned entities, advising them of the advantages of being listed on the exchange, and encouraging them to be part of our community. We are also very active in supporting investor relations initiatives and events, and spend considerable time and resources to provide education to the local investor community.”

Mr Almansoori adds that the recent upgrade of Qatar from “frontier” to “emerging market” by MSCI and Standard & Poor’s, as well as the government’s decision to lift foreign ownership restrictions for shares listed on the stock exchange has already had a positive effect on country’s business climate.

“The present Qatar Stock Exchange is part of a national vision aimed at establishing Qatar as a world-class, internationally recognised market,” he says. “The recent announcement by the government to allow for an increase in foreign ownership limits from 25 per cent to 49 per cent is a testament to that commitment. Qatar has also benefitted from the market upgrade, leading to an inflow of foreign capital, evidenced by a significant increase in trading volumes.”

Going forward, Mr Almansoori affirms that the exchange will carry out “ambitious and aggressive” plans to introduce new products and technologies to meet the growing demands of both the domestic and increasingly international investor community.

Equally as engaged in Qatar’s business investment and equally as optimistic is Quantum Global Solutions. Quantum is a consultancy active in contractual and commercial services, forensic planning, commercial claims, dispute resolution and others in a range of sectors covering the local economy.

“Opportunities are dynamic with the development of our laws. The most important thing I see unfolding at the moment is the law that allows international companies to have joint ventures and ownership of companies of up to 49%”

Issa Al Mannai, Chairman of Quantum Middle East

Issa Al Mannai, who sadly passed away in January 2016, was the local Gulf partner who established Quantum Global Solutions in 2007 and served as the Chairman overseeing the company’s growth. With an illustrious career spanning over 40 years, Issa held a variety of prestigious positions within both public and private sectors. His national pride twinned with his immense international understanding and experience gave him a unique perspective of Qatar’s position and future. His colleagues, friends and family continue to build on his legacy of Quantum Global Solutions, and the strong foundations which he leaves behind.

Speaking about the development of Qatari laws last year, the late Mr Al Mannai, mused: “The most important thing I see unfolding at the moment is the law that allows international companies to have joint ventures and ownership of companies of up to 49 per cent.”

Health care, he argued, is potentially very lucrative. “Recently the government implemented new health coverage policies which mean that any Qatari is insured by the government to be treated in any private clinic and the treatments include plastic surgery, dentistry and so forth. And with new hospitals going up, specialised technical construction companies are benefitting. Financial services are also attractive, as is the education sector.”  

The late chairman also stressed the importance that foreign investors, firms or individuals looking to break into the Qatari market should engage with a local partner in a joint venture with the right vision and that British involvement would be particularly welcome.

“Even though we have improved our legal system to allow international companies to operate in Qatar, nevertheless there could be further improvements and this is where we need British expertise,” he said. “The needs and demands of a growing economy like ours are constantly changing and we invite you to explore the new opportunities with us.”

Among those new opportunities are three new Special Economic Zones scheduled to open over the next several years and lure foreign investors, small and medium-sized enterprises (SMEs) and high-tech firms.

“We need to establish main anchors for the international companies that can add value to our market,” explains Fahad Rashid Al Kaabi, the CEO of Manateq, which was created by the government to develop and manage the zones.

First on the schedule is the Ras Bufontas Zone to be operated as a warehousing and logistics centre next to Hamad International Airport with an opening date of March 2017 and focusing on air freight technology.

The four-square-kilometre site is being built as a joint venture by Spain’s Sacyr construction company and the Qatar-based firm, UrbaCon Trading and Contracting.

Two larger Special Economic Zones, the 38-square-kilometre Al Karana near the country’s border with Saudi Arabia targeting machinery, building materials and manufacturing, and the 33-square-kilometre Um Alhoul site close to the port of Hamad with a focus on light manufacturing, are expected to open in 2018 and 2019.

“These economic zones are not meant to create job opportunities as that would require a further influx of foreign labour and they are not meant to compete with economic zones in other countries in the region,” the CEO says.

“Rather, their purpose is to establish clusters in high-technology industries using clean energy sources and sustainable business practices which will serve our investment plans and enable us to compete in the international market.”

Mr Al-Kaabi maintains that it is vital for Qatar to develop joint ventures with high-tech firms and that most of them be small or family-owned businesses.

“These outfits need to feel comfortable because they do not know enough about Qatar. But if we bring them here and give them the information they need, the know-how and the financing come together and it’s a win-win situation for everyone.”