In its quest to diversify Qatar's economy, the government continues to introduce international regulatory standards for its financial services sector in order to attract foreign investors and move away from its dependence on oil and gas revenues.
In the last week of May, it was announced that the local stock exchange, the central bank and the QFC would come under the authority of a single regulatory body, which the government hopes to have established by 2009, said Phillip Thorpe, chairman and CEO of the Qatar Financial Centre Regulatory Authority.
"Companies have a choice where they base their headquarters in the region," Thorpe told the press. Having a single regulator "simplifies things" and makes Qatar more attractive for foreign investment, he said. He also said that with international standards of regulation, it might be easier for domestic companies to be accepted abroad.
The new agency will introduce regulations for the insurance industry, private banking and asset management, which are limited now, according to Thorpe.
The as-yet-unnamed regulator is intended to improve the quality of company financial disclosures and accounting standards as well as tighten listing requirements, said Thorpe.
In addition to this, good corporate governance, accountability and transparency have been identified as important building blocks for the country's development.
Yousuf Kamal, the minister of finance, told OBG, "We need the highest practices and standards for doing business. We are upgrading our laws and systems for this purpose. The most important thing for us is transparency."
With this in mind, Qatar Central Bank has focused on structuring departments, separating management responsibilities and clarifying their duties and responsibilities to build a banking sector based on these principles.
The government is undertaking other reforms designed to develop both the financial sector and capital market such as the creation of the Qatar Financial Centre (QFC), which was established in Doha in May 2005. It was set up to provide a regulatory environment for international financial services companies, which operates according to international standards. Businesses participating in the centre are entitled to 100% ownership and full repatriation of profits. Foreign companies outside the QFC must have majority local partners. Companies in the QFC receive a three-year tax holiday, after which a corporate tax rate of 10% applies.
Further reforms in 2006 led to significant changes in the capital market, with the Doha Securities Market creating a regulatory agency called the Qatar Financial Market Authority. The government says the organisation is intended to be an impartial body that contributes to the development of a sound financial system that will contribute to Qatar's attractiveness for investors.
Qatar also recently announced it is looking to reduce its economic dependence on energy revenues to zero by 2020 as it moves to diversify its economy away from oil and gas production.
Kamal said that by 2015, the country would like to see its reliance on the energy sector to 25%. In 2006, hydrocarbons accounted for 62% of the country's GDP. He said this could be achieved through encouraging investments in other areas and building a knowledge-based economy. This is in line with the government's decision to earmark $130bn to develop infrastructure and other revenue-generating sectors of the economy.
In order for the country to realise its full potential, Kamal said Qatar must also reduce inflation and lower corporate taxes to improve the investment climate.
Qatar's overall inflation touched an all-time high of 11.83% in 2006, mostly as a result of skyrocketing rents and their effect on the prices of commodities and services.
The government has introduced legislation that will slash corporate taxes from the current 35% to 12%. The annual average growth rate for the country is set at 13% for the next six years and then it is expected to fall to 6%. The government hopes that in cutting corporate taxes, it can maintain a rate of 9%.