QATAR’S BUSINESS CLIMATE AND NEW FDI LAW

Qatar 2019 | ECONOMY | ROUNDTABLE

Qatar's leading industrialists, bankers, and policy makers discuss the importance of diversification, the new FDI law, and other imperatives needed to spur long-term sustainable development.

Abdulbasit Talib Al-Ajji
ABDULBASIT TALIB AL-AJJI
Director of Business Development and Investment Promotion
Ministry of Commerce and Industry
Elias R. Chedid
ELIAS R. CHEDID
Chief Operating Officer & Deputy CEO
Seib Insurance
Ahmed Abu-Sharkh
AHMED ABU-SHARKH
Country Senior Partner in Qatar
KPMG
Dr. Hassan Mohammed Al Ansari
DR. HASSAN MOHAMMED AL ANSARI
Editor in Chief
Qatar Tribune
Emad Turkman
EMAD TURKMAN
Group CEO
Rumaillah Group & Chairman, Qatar British Business Forum (QBBF)
Kamal Naji
KAMAL NAJI
Chief Project Officer
Qatar Financial Center (QFC)

AYŞE VALENTIN (CEO, The Business Year) We are interested in exploring a number of subjects related to the investment environment in Qatar in the context of the blockade, the 2022 FIFA World Cup, and Vision 2030. It has been extraordinary to see Qataris turn the blockade into an opportunity. We are going to discuss how the new FDI law will affect FDI numbers and further develop the country. I am sure the government and business community will turn this into a sizeable expansion. Every government talks about how to attract FDI, and this is especially true in Qatar. We hope this roundtable will help TBY convey valuable insight about the business environment in Qatar to our readership of international investors.

ABDULBASIT TALIB AL-AJJI The new FDI law is meant to give investors the chance to know exactly what is needed to begin business in Qatar. The Qatar National Vision (QNV) is a list of general goals for the future of the state of Qatar that we are working hard to translate into real-life developments. We know that business people and investors will feel the changes in the upcoming years. Qatar is perched between the East and West, and our excellent geography gives investors an opportunity to expand their investment plans; Qatar's oil and gas resources, transportation infrastructure, and business environment allows us to be a truly dynamic regional and global player. Here are some brief economic statistics from 2017: GDP grew to USD166 billion, a nominal growth rate of 10% and a real one of 1.6%. What's more, we expect to see larger growth in 2018 and the first half of 2019. Additionally, the share of oil in the country's economy was reduced, another development we were striving for. Oil now represents around 48% of the economy, which is a good indication that the private sector and economy in general are strengthening. Inflation was stable in 2017 at around 0.5% despite prognostications it would increase further. Exports of goods reached USD67 billion and imports were USD30 billion, which gave us a surplus, while the government's support for the private sector was also strengthened. We provided enough support to create a strong and appropriate business and investment environment, which has been crucial during the last two years. Meanwhile, every government ministry worked together to support reaching the desired goals of QNV 2030. Even better, their technological competence was also improved, especially the government's e-services. Most ministries now have their own websites and e-government portals. Though an ongoing process, we have made great strides. Furthermore, all of the completed and ongoing infrastructure projects are in line with international standards. The state has set up large-scale projects to develop the infrastructure to serve the expected investment in the coming years. All of these projects will directly or indirectly support the expected growth in investment across sectors. The new law will open the way for 100% ownership in every sector with the following investment incentives: up to 10 years' income tax exemption for selected investment projects and other industrial areas; customs tax and fee exemptions for equipment and raw material imports; free repatriation of capital and profits; and free transfer of company ownership. This article means to support the manufacturing and logistics projects in the country. If someone wants to open a factory, the machinery they import will be exempted from any tax duty as well. The free repatriation of capital and profits is also a priority, giving investors the freedom to repatriate their profits into any currency at any time. There will be no limitations on this. The law also allows investors to transfer the ownership of their investment. The new investors who purchase these assets will have the same incentives as the previous investors. Non-Qatari investment applications and processes were also made much easier through the single-window and investment service center, which handles all types of applications and company registrations. The center will handle every stage, from the time the investor applies until the final approval. We have significantly reduced the procedures to streamline the number of steps required for applications. Investment Service Center staff then review and evaluate all applications to attract more investors. You need to develop the infrastructure, marketing, logistics, and local and international transportation. Hamad Airport, now one of the largest and best in the world, handles more than 30 million passengers each year, and the runways are 4.8km long, meaning that it can receive all types of aircraft. Last year, the airport was ranked fifth in the world. Hamad Port, for its part, is also an extraordinary piece of logistics infrastructure. It was opened in 2017 and can receive 7.5 million TEUs. A number of agreements have been signed with various countries to establish direct lines between Hamad and other international ports that will reduce the time and money required to ship goods. Qatar Airways is also expanding, and there are plans to add more passengers and cargo planes to its fleet.

HASSAN MOHAMMED AL ANSARI How will this new FDI law and its incentives affect business activity in line with the QNV 2030?

Elias R. Chedid I am glad to give you our perspective from an insurance company established in 2009 with local and foreign investment. Yet, before going into the importance of FDI in the insurance sector here, I would like to give you an umbrella view of the importance of this specific step. QNV 2030 is a realistic vision. Every investor needs a vision, and a strategy and means of executing their strategy. FDI increases the capacity of the local economy. It also provides diversification that the local economy needs. This diversification does not, however, come overnight. It will take years. Therefore, this vision will be particularly important for future generations of Qataris. In order to ensure the success of this vision, we need a strategy, which has requirements. An investor will need to look at the legal and regulatory requirements that exist in a particular market, country, or company. They will also need to look at the economic climate, political stability, the social support needed in relation to human capital, the cost of human capital, and the value that human capital can add. This has all been clarified and promoted in a logical and achievable level in Qatar. Additionally, you need to look at the competition. Being competitive requires careful monitoring from a policy perspective so that the proper regulatory structures can be put in place to incentivize investors to put money into areas where it is needed. Investing is not about making money and exiting. FDI requires a more long-term vision. All of these considerations exist in Qatar's current FDI law and will be further emphasized in the new one. Qatar is an attractive environment for foreign investment, and we have seen this in the many agreements foreign firms are making with Qatari firms. Of course, there are other attractive elements that have brought the international financial sector into Qatar. In 2009, Seib Insurance got licensed after a several-year process because it had to prove that it is a reliable investor with strong local Qatari partnership. At Seib, we view ourselves as a Qatari company, and the threshold of its foreign investors will likely continue to be the case based on the visible opportunities in the local economy. The new law and regulations put in place by the Ministry of Economy make Qatar even more attractive, and the opportunity is even bigger.

AHMED ABU-SHARKH It is important to have the right strategy connected to Vision 2030 to attract the right investors for the Qatari economy and regulation is a crucial component of that strategy. Applying regulation and facilitating dynamic regulations are even more important. Having a law is one thing but having the agency and authority behind that law is another. Regulation should effectively facilitate problem solving and help tackle industry challenges. Regulations, along with relevant promotions, which attract FDI, are important for Qatar. We need to focus on explaining to investors exactly why Qatar is the right choice for them. Additionally, it is important to have a forum for sharing feedback between foreign investors and the government. A foreign investor council might be valuable in this regard.

EMAD TURKMAN Investors look to make money, which is what business and investment are all about. However, most of them also have families and are interested in supporting a standard of life. They look at the country they are considering moving to, and they compare it with what exists in their home country. Health, education, visa restrictions, property ownership, retirement, and local infrastructure are important for business people thinking of coming to Qatar. I came here in 1995 at a time when the country was quite small. It has come a long way in the last 24 years. The government has wisely invested in the aforementioned sectors, and the quality of life is on par with most of the so-called Western countries. In terms of restrictions, the new developments are likely to improve the situation. There are crucial changes coming in these areas that promise to further improve the investment climate in Qatar.

KAMAL NAJI Qatar has been on a real journey over the last few years and has transformed itself. In terms of the business environment, it has been doing all kinds of things in order to be open for business and attract FDI. The statistics illustrate the success of this approach. We are the second-most competitive economy in the region. In terms of visa facilitation, we are the eighth-most open country in the world. Nationals from 88 different countries can get visas on arrival. The nation is truly opening up and becoming more competitive. We are also deepening our relationships with many countries around the region. At the Qatar Financial Center (QFC), we recently announced the New Economic Health Initiative strategy. This is one of our many projects. The goal of this strategy is to deepen economic and trade relationships with friendly neighboring countries, such as Turkey, Pakistan, Oman, and Kuwait. These neighboring countries have a combined GDP of over USD2 trillion and a market size of over 400 million people. We want to attract companies to come to Qatar to take advantage of the business opportunities, first here and then in neighboring countries. Even without the latter, the opportunities here are impressive. At QFC, we believe FDI is positive for the country, and have seen real results from this kind of investment. The fastest-growing year for the Qatar Financial Center was 2017, and we have over 120 companies set up in the QFC. In 2018, we saw rapid growth.

HASSAN MOHAMMED AL ANSARI What will define the business environment in the aftermath of the 2022 FIFA World Cup?

EMAD TURKMAN: Any contracting and trading company can take advantage of the huge number of contracts being awarded. Be it the railways, stadiums, or hotels, there are a great number of opportunities. As a trade and contracting company, we have benefited tremendously from the opportunities here and are pursuing more than 70 business opportunities related to the World Cup. What will happen after the World Cup is quite interesting; this is the million-dollar question. Facilities management, maintenance, and event management and organization will all be important because these new venues will need to be utilized. A lot of thinking and planning will need to take place so we can effectively utilize the huge number of venues we will have.

AHMED ABU-SHARKH Everyone knows the progress of ongoing construction projects has not been affected by the blockade. I know the government has plans for this to extend beyond 2022. First, tourism will play a vital role in the economy after the FIFA World Cup, which is why more communication on local tourism offers is so important. We must respect residents while ensuring visitors have a good experience. We need to test this before 2022, so we can be sure that it works for everyone and then iron out the bugs. The second thing has to do with increasing how retail spaces can continue to flourish and be supported after the World Cup is over.

KAMAL NAJI Everyone talks about FIFA, but Qatar hosts more than 30 sporting events a year from a wide variety of disciplines. The sports and events market here in Qatar is over USD20 billion.

How can SMEs benefit from the new regulatory incentives?

ABDULBASIT TALIB AL-AJJI There is no minimum for a project and no minimum capital for an investment. In the past, there was, but capital now depends on your business plan and project size. This allowance will take all SMEs into account.

KAMAL NAJI At the QFC, we have a large number of financial and insurance institutions, but we also have a large number of SMEs. There is no minimum working capital requirement, and we welcome SMEs to the QFC. The companies we have in the QFC are financial services firms. This typically means companies that sell time, but not physical products. Consultancies and professional services firms are invited, no matter their size, to set up in QFC.
What business opportunities are available in Qatar?

AHMED ABU-SHARKH Copper and metal production, pharmaceuticals, food security, light industry, and manufacturing all present great opportunities, even for SMEs. These are the sectors the country really needs right now and the ones that can really make a difference in the country moving forward. Tourism is another area with huge potential. In some countries, approximately 70% of revenues in the tourism sector are actually linked to tour operators and individuals that are involved before getting into the country. If we can manage this from end-to-end and Qatar can reduce leakage and get the most of the benefits, then we can see huge growth.

KAMAL NAJI I see another huge opportunity, though it is quite competitive, in digitalization. Digitalization is a common need across all segments, and our future will rely on it. Nor does it require massive capital to start. It needs creativity, innovation, and know-how. I would encourage investors and business people to come and put boots on the ground when they are determining the best areas to invest. Even companies with a small presence must make the connections, investigate, and meet people for themselves. They must explore the opportunities in person, which is how we advise all companies entering Qatar.

How do you control the quality of investors?

KAMAL NAJI As the economy becomes more competitive, there will be more entrants, which will lead to higher-quality companies rising to the top. Lower quality firms will disappear. We are already the second-most competitive market in the region, which will continually improve over time.

ELIAS R. CHADID In terms of quality companies rising to the top, we have, as a country, been through an important stress test. After the blockade, many companies were able to survive. As an insurance company, we immediately applied our business continuity plan in relation to navigating the blockade. Companies with plans in place will continue to survive. Many have risen to the test and proven themselves to their clients and to the market. Now, the market is on an upward trend, and many are starting to grow again. New companies are emerging and new opportunities are presenting themselves. We are well on our way to being able to present more success stories to investors interested in moving to Qatar.