Against all Odds

Doing Business

Qatar's diplomatic outlook seems unlikely to rebound soon, but the ostracized peninsula is moving forward to best maintain confidence in its economy.

Regional disfavor targeted at Qatar was meant to derail the country’s political influence and economic standing, but Qatar took measures to mitigate the negative economic effects and preserve its reputation as the ideal location for business in the region. Though the IMF projected non-hydrocarbon growth over 5% prior to being cut off from its neighbors, the revised expectation still settled at a decent 4.6%. Standard and Poor’s downgraded Qatar’s rating one notch, but simultaneously noted Qatari banks’ resiliency because of the central bank’s efforts to preserve liquidity in the face of the pulling of Gulf-based deposits. Through rerouting, Qatar remains the world’s largest exporter of natural gas.

VAT Continues as Planned

Before recent strain, member states planned to implement a GCC-wide VAT to increase and diversify revenue during the slow recovery of oil prices. The tax’s implementation will likely influence Qatar’s current position as number-one place for business with regard to paying taxes, according to The World Bank’s Ease of Doing Business 2017 rankings. Despite the GCC’s label as a tax haven, in particular Qatar, the bloc is moving ahead with VAT implementation. And Qatar, though currently under a Saudi-led embargo, has given no indication of stopping VAT implementation. The UAE and Saudi Arabia announced plans to officially roll out VAT on January 1, 2018 with the expectation that Qatar, Bahrain, Kuwait, and Oman follow by the start of 2019. The 5% tax rate on most goods and services will be consistent GCC-wide; however many specifics, such as zero-rated and exempt supplies, taxation of financial services, and implementation in free trade and special economic zones, will vary by country.

Attracting Business

In line with Qatar National Vision 2030 to increase domestic and foreign investment, Qatar is focusing on developing special economic zones (SEZs) with a focus on technology, communications, and industry. SEZs allow Qatar to incubate its knowledge-based economy and attract foreign businesses through attractive tax frameworks and various incentives. Qatar even developed an economic zones company, Manateq, to cultivate industry and logistics hubs.

Manateq specializes in economic zones, industrial parks, and warehouse complexes throughout Qatar and works to promote SMEs as well as to attract multinational companies. The company is expecting to complete two new economic zones by 2Q2018: Ras Bufontas, neighboring Hamad International Airport for international connectivity, and Um Alhoul, next to Hamad Port and focusing on petrochemicals, construction materials, metals, and auto machinery. Between Doha and Abu Samra, Manateq is developing a third SEZ, Al Karaana. Al Karaana’s first phase of construction is scheduled for completion in the fourth quarter of 2019. All three SEZs will help Qatar develop diversified industry, including different sectors and different scale businesses, further stabilizing the economy and business confidence during turbulent political periods like this one.

New FDI Law

Manateq’s work also facilitates inflows of FDI. In October 2016, Qatar approved draft legislation to replace Law No. 13 from 2000 (“the Foreign Investment Law”). Under the new law, foreigners are now allowed to invest up to 100% of project capital in all economic sectors so long as they have a Qatari services agent. Like Law No. 13 from 2000, the new law will also apply to cash transferred to the state through banks and licensed financial institutions; imported material assets to be invested; profits, revenues, and reserves resulting from the investment; and rights such as licenses, patents, and trademarks registered in Qatar. The country is showing its commitment to simplifying business on the peninsula with this more attractive FDI scheme. In a similar vein, the government is showing its support for the private sector as another draft law—this one focused on PPPs—is in the pipeline.

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