A number of significant developments related to foreign direct investment (FDI) set to be implemented by the end of 2019 will further strengthen Qatar’s appeal as a destination for international investors. Expected developments include the opening of two special economic zones (SEZs), changes to foreign investment legislation and the launch of a substantial incentive programme by the Qatar Financial Centre (QFC).
The announcements reflect the country’s push to increase its levels of FDI amid the ongoing political and economic blockade of Qatar by Saudi Arabia, Egypt, the UAE, Bahrain and others that began in June 2017. Despite the conflict, statistics have shown that foreign investors retain trust in Qatar’s prospects as an economy. In 2017 FDI in Qatar rose by 27.4% to $986m, according to the “World Investment Report 2018” by the UN Conference on Trade and Development. In the third quarter of 2018 the total stock of inward FDI in Qatar stood at QR123.4bn ($33.9bn), per the “Qatar Foreign Investment Survey Q3 2018” released in December 2018 by the Planning and Statistics Authority, although this was down by 5.7% year-on-year.
In May 2018 the Ministry of Commerce and Industry (MoCI) announced that it had drafted a law that would permit foreigners to own 100% of businesses across all economic sectors, and this was issued in January 2019 as Law No. 1 of 2019. The law allows up to 100% ownership of companies by foreign parties, regardless of what sector those companies operate in, upon approval from the relevant government department. The purpose of the change is to stimulate economic diversification, in line with Qatar National Vision 2030, to boost foreign direct investment, and to accelerate development across all sectors, particularly in non-hydrocarbons activities.
One of the country’s most proactive institutions in terms of seeking out FDI since the blockade has been the QFC. In February 2019 the centre announced its strategic vision for 2022, outlining its focus of attracting FDI in four target sectors: digital, media, sports and financial services. The financial services and insurance sector is one of the most popular destinations for FDI, accounting for 36% of the total in 2016, followed by transportation, storage, information and communication (31%), and mining and quarrying (27%). In a statement describing the new strategy, it was noted that the number of firms registered with the QFC had increased by 31% in 2018 to reach 600. As a result, the centre is on track to reach its target of registering 1000 companies by 2022.
The vision also prioritises partnerships with countries included in the New Emerging Belt Initiative, including Kuwait, Oman, Turkey, Pakistan and India. According to the QFC, these countries have a combined GDP of $2.1trn and global FDI worth more than $150bn. The New Emerging Belt Initiative was first launched in November 2017 in response to the land and sea blockade on Qatar declared in mid-2017.
To encourage investment from these countries, the QFC is offering a five-year incentive programme that includes free office rent as well as subsidies and tax breaks. The value of the financial incentives offered under the programme are expected to be worth up to $2bn.
When the plan was unveiled in October 2018 Yousuf Al Jaida, CEO of the QFC, said that the fund for incentives was already established and would be allocated after the government finalised governance and administration structures. He added that he expected every company under the scheme to have full access to government tenders and unlimited access to local corporate and retail markets. The funds are intended for multinational companies able to give a commitment to run a business in Qatar for up to 10 years.
Such incentives are provided for by Qatari investment law, which makes provisions for allowances such as the exemption from income tax for a period of up to 10 years and the exemption from Customs duties on the imports of necessary machinery, raw materials or partially manufactured goods.
As an onshore jurisdiction, the QFC allows registered companies to enjoy other competitive benefits including working within a legal environment based on English common law, the right to trade in any currency, up to 100% foreign ownership, 100% repatriation of profits, 10% corporate tax on locally sourced profits and an extensive double taxation avoidance agreement network with more than 70 countries.
Providing comparable opportunities for foreign multinationals and investors, albeit in specific sectors, are Qatar’s first two SEZs at Um Alhoul and Ras Bufontas. Um Alhoul is located adjacent to Hamad Port and will be open to local and foreign investors in the first half of 2019, while Ras Bufontas is also expected to open during the year, although an exact date had not been announced as of February 2019.
Located on 4 sq km of land adjacent to Hamad International Airport, Ras Bufontas is intended to attract companies in the logistics and advanced technology sectors. Situated 20 km south of Ras Bufontas at Al Wakrah, Um Alhoul will span 34 sq km and be dedicated to businesses operating in the petrochemicals, building materials, maritime, metals, logistics and food processing industries. Um Alhoul is intended to become a key landing point for imports and exports, as the site combines a greenfield maritime cluster with an industrial canal allowing efficient access to the waterfront. A third SEZ, Al Karaana, is at an earlier stage of development. Located between Doha and Abu Samra, the site will cover 44 sq km and suit businesses involved in metals, building materials, plastics and chemicals.
Responsibility for regulation and oversight of Qatar’s SEZs falls to Manateq, established by the MoCI in 2011. To be able to operate in the zone and qualify for the benefits offered by Manateq, companies must be operating in one of the appropriate sectors designated for that zone, must be a manufacturing or services company, must be a viable and sustainable business, and must generate incremental value to benefit Qatar. Companies that qualify to operate in any of the zones benefit from 100% foreign ownership, an operations support system, a client service centre, and sustainably designed offices, factories and warehouses.
As part of efforts to make the process of establishing operations as efficient as possible, Manateq allows companies to submit applications via an online investor portal. Once investors have completed their application, the form is assessed by Manateq’s Investment Committee and companies are notified within seven working days. Furthermore, building permits for commercial warehouses are issued within three working days following the selection of approved designs.
Ahmad Al Sayed, the minister of state and chairman of Manateq, described the imminent openings of Um Alhoul and Ras Bufontas as a “starting point for communication between Qatar and the global market”.
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