SWEETENING THE DEAL

Qatar 2019 | ECONOMY | FOCUS: NEW FDI LAW

With Qatar rebranding itself as a high-tech economy of diversified commercial endeavors, the government is introducing legislation that should have the catalytic effect of making the state a more desirable FDI address.

Recent numbers show that FDI in Qatar dropped by QAR5.19 billion in 1Q2018. The figure had averaged at QAR401.88 million between 2011 and 2018. Qatar's Direct Investment Abroad expanded in March 2018. As a percentage of GDP, from 1970-2017 FDI averaged 1.6%, peaking at 8.3% in 2009. But now the government has worked to boost investor sentiment and attract firms of economic significance to set up long-term shop.

The new FDI law

The comprehensive law announced on May 27, 2018 by the Ministry of Economy and Commerce (MEC)—now Ministry of Commerce and Industry (MoCI)—was designed to reflect best international FDI practices. Put into force in 2019, it primarily seeks to establish Qatar's credentials as a commercial and re-export hub, working in tandem with economic zones already in place. The appeal, Doha argues, is foreign firms' ability to springboard from Qatar to the 400 million consumers in promising regional markets, which includes Iran, Iraq, Pakistan, and Turkey, among others. The latest legislation builds on Law No. 13 of 2000, a core component in meeting the targets of Qatar National Vision 2030. And reflecting the scope of the national vision, Qatar is encouraging FDI across 12 specific sectors to include manufacturing, agriculture, health, technology, education, distribution, energy, tourism, and mining. In short, the objective where firms are concerned is not to see quantity, but quality.

Sorting through the fine print

The bulk of economic sectors have been made available for 100% foreign ownership, with the exception of banking and insurance. Considered vital economic components, having a foreign presence here requires specific prime ministerial approval, according to MOCI. The current investment environment permits foreign investment in every sector of up to 49% of the equity of Qatari limited liability companies. Moreover, while 100% ownership is allowed under the new law, it is not a prerequisite to being recognized as a Qatari company, as JVs with a 20-30% local stake will be eligible for incoming incentives. Corporate income tax in Qatar is at a record low of 10%, having averaged 17.69% from 2006-2018 and peaking at 35% in 2007. With the new FDI law, foreign capital invested in select projects can look forward to a 10-year income tax holiday, while abolishing taxation and customs duties on imported equipment and raw materials. The bearers of FDI may also repatriate profits and transfer ownership. Regarding disputes, foreign firms will have recourse to both local and international courts, which will incentivize more JV activity.

Confidence is a capital idea

The law goes hand in glove with Qatar's work to maximize overall foreign investor confidence in the country. The local capital markets, for one, in the form of the Qatar Stock Exchange (QSE), launched their fourth annual Investor Relations (IR) excellence program, one that dates back to 2015. Its purpose, never more important than in prevailing times of global disquiet and flux, is to competitively guide Qatar's listed companies to maximize their investor relations' best practices. Accordingly, IR websites are ranked based upon public voting by retail and professional investors, with votes cast this year from mid-November to end-December 2018. Already a friendly investment proposition, the new FDI law should go some way to mitigating Qatar's current diplomatic travails and boost its long-term economic standing.