We Got a Deal

Qatar’s economic freedom score came in at 71.2 in the Heritage Foundation’s 2014 Index, making its the 30th freest in the world. As Morgan Stanley Capital International (MSCI) announced the upgrading of Qatar’s status from frontier to emerging market in May 2013, FDI inflows to the country hit $86.8 million by the end of the year. The government is now continuing to put in place initiatives to provide investors with appropriate business structures, including fixing a low corporate income tax of 10% and applying no tax on the income of expatriates, thus creating a highly liberalized environment to lure foreign investors.

The real story is Qatar’s outward FDI, however, which showed a stronger performance in 2013 after a decrease of 29% between 2011 and 2012. The World Investment Report 2013, presented by the UN Conference on Trade and Development (UNCTAD), states that FDI flows from Qatar to other countries declined to $1.8bn in 2012. However, in the first half of 2013 alone, the market tracked 30 FDI projects from Qatar.

Diversification of the internal market similarly mirrors Qatar’s investment abroad. Shifting from traditionally high expenditures in the real estate and energy sectors, the communication and healthcare sectors account for 57% of projects tracked during 2013.

In 2013, The Financial Times called Qatar the world’s “most aggressive deal hunter” as Qataris leveraged wealth from the country’s natural gas reserves—the third largest in the world—to drive forward a hefty investment scheme. Some of the world’s biggest deals of recent years were generated by Qataris, including the multi-billion Barclays deal in 2008, and Washington, DC.’s biggest construction project in two decades, City Center, a $1billion project into which the Gulf country pumped hundreds of millions of dollars.

The Qatar Investment Authority (QIA) was founded by the State of Qatar and specializes in domestic and foreign investment. Its growing portfolio of long-term strategic investments helps complement the state’s huge wealth in natural resources. A direct investment arm of QIA, Qatar Holding also estimates that its assets have reached $100 billion since its inception in 2005.

Qatar has noticed a shift in the destination of outward FDI during 2013, with focus moving somewhat away from the GCC region, from highs of 50% to around 23% currently. During the first six months of 2013, the US has been the most popular destination for Qatari investment, accounting for 30% of total projects, an increase of 350% since 2011. Besides the City Center project, Qatar’s Al Faisal Group invested in Chicago, buying the Radisson Blu Aqua Hotel. The group announced it would also seek other US properties. In 2013, Doha-based broadcaster Al Jazeera launched its US branch Al Jazeera America, transforming Current TV, earlier bought for $500 million. US involvement complements a Qatar Airways plan to expand its US service in 2014, by adding Philadelphia, Dallas, and Miami to its destinations portfolio, while already serving to Houston, Washington, DC, New York, and Chicago. A total of $19 billion has also been earmarked for the purchase of 50 Boeing 777 aircraft as the US, Qatar, and the UAE solidify aviation ties. Qatar’s investments in Europe, particularly in the UK, France, and Germany amounted to $65 billion over the previous year. Earlier, in 2011 and 2012, Qatar was equally successful, coming in as the top buyer of European property, snapping up $4.2 billion worth of real estate. One of the most favorite destinations is the UK, where Qataris recently ensured theirs visibility on the market with over $10 billion invested in infrastructure projects. In the past six years, the country has invested almost $40 billion in the UK, including in Western Europe’s tallest building, The Shard. Elsewhere, Italian fashion brand Valentino is in Qatar hands, along with French department store Printemps, and a stake in Siemens.

Qatar Sports Investments also bought out French football team Paris Saint-Germain in 2012 for $130 million, and is Barcelona FC’s largest global sponsor. At the moment, Qatar has 49 bilateral international investment agreements, including economic giants such as China and Russian. However, 2013 was also a significant year for Qatari outward FDI to smaller and developing markets. Qatar Holding announced a$5 billion investment into Malaysian petrochemical projects. In India, the QIA is planning to invest $200 million in residential property.