Investment


Openness to Foreign Investment
Qatar has one of the fastest growing economies in the world, with nominal gross domestic product (GDP) growth averaging 24 percent annually over the past four years. Its estimated 2008 gross domestic product (GDP) was USD 86.1 billion. Inflation remained high at about 14 percent through 2008, mostly due to high demand in the housing sector and for imported products.

The government is heavily involved in Qatar’s economy, although it strongly encourages international investment in certain sectors such as energy. Qatar’s investment liberalization policies proceed on a gradual basis, based on a desire to protect local companies from rapid competition.

The main economic stimuli in Qatar are oil, gas, and related industries, in particular the development of the North Field, the largest non-associated natural gas field in the world. Qatar’s liquefied natural gas (LNG) industry has attracted tens of billions of dollars in foreign investment. The energy industry will continue to be the most attractive sector for foreign investors, though significant opportunities exist for foreign investment in infrastructure development, medical, safety and security, education, and franchising.

The Organization of Foreign Capital Investment Law (Law No. 13/2000) is the primary legislation governing foreign investment. Foreign investment is generally limited to 49 percent of the capital for most business activities, with a Qatari partner(s) holding at least 51 percent. However, the law allows, upon special government approval, up to 100 percent ownership by foreign investors in certain sectors, including: agriculture, industry, health, education, tourism, development and exploitation of natural resources, energy, or mining.

When approving majority foreign ownership in a project, Law No. 13/2000 states that the project should fit into the country’s development plans. It adds that preference should be given to projects that use raw materials available in the local market, manufacture products for export, produce a new product or use advanced technology, facilitate the transfer of technology and know-how in Qatar, and promote the development of national human resources.

International firms must apply for local registration through the Ministry of Business and Trade.

Law No. 31/2004 further liberalized the investment regime and allows foreign investment in the banking and insurance sectors upon approval of the Cabinet of Ministers. It also allows foreigners to own residential property in a limited number of select projects. Law No. 23/2006 allows international law firms to operate in Qatar.

Foreign firms are required to use a local agent for matters related to sponsorship and residence of employees.

Although there is no income tax on salaries in Qatar, foreign investors are subject to taxation on their investment income. Qataris are not subject to any kind of corporate tax. Import licenses are issued only to individuals with Qatari nationality, or companies owned or controlled by Qataris. In practice, exceptions are sometimes made for foreign companies, such as those with government contracts.

Judicial decisions in commercial disputes are primarily based on contractual agreements, provided these agreements are not in conflict with applicable Qatari laws.

Foreigners are allowed to own up to 25 percent of the capital of companies listed on the Doha Securities Market. Foreign investors are not allowed to participate in any initial public offering (IPO) -- only Qatari and sometimes Gulf Cooperation Council citizens have that privilege.

Qatari regulations for local and foreign banks are the same, with new licenses available through application to the Qatar Central Bank. There are 18 licensed banks, including three Islamic banks and a specialized bank, the Qatar Industrial Development Bank. Qatar has 20 exchange houses, three investment companies and two commercial finance companies.

There is a separate Qatar Financial Center (QFC) that allows major international financial institutions and corporations to set up offices with 100 percent foreign ownership. There are currently 96 firms authorized to operate in the QFC, representing a spectrum of banks, investment companies, insurance houses, and related professional services. QFC firms are limited to providing services to wholesale clients, except for insurance companies, which can provide services to both wholesale and retail clients.

Certain sectors are not open for domestic or foreign competition, including public transportation, steel, cement, and fuel distribution. In these sectors, a single semi-public company has complete or predominant control.

Qatar has begun to liberalize its telecommunications sector to permit outside private investment, starting with the issuance in December 2007 of a second mobile license to a consortium including Vodafone and the Qatar Foundation. The same consortium was awarded the country’s second fixed-line license in September 2008.

Conversion and Transfer Policies
The government has pegged the riyal to the U.S. currency. The official peg is QR 1.00 per USD 0.27 or USD 1.00 per QR 3.64, as set by the government in June 1980 and reaffirmed by an Emiri decree issued July 9, 2001. Officially, the GCC states are harmonizing their monetary policies and intend to implement a common currency in 2010. Despite a number of recent private sector analyses suggesting Qatar may reassess its dollar peg policy, the government has maintained the exchange rate and apparently plans to do so for the foreseeable future. Any future revaluation or monetary policy change would likely occur in concert with the other GCC states.

Qatar neither delays remittance of foreign investment returns nor restricts transfer of funds associated with an investment, such as return on dividends, return of capital, interest and principal payments on private foreign debt, lease payments, royalties and management fees. Similarly, there are no limitations on the inflow or outflow of funds for remittances of profits, debt services, capital, capital gains or other returns, and foreign exchange is readily available through banks and branches of exchange companies.

Article 9 of Law 13/2000 allows foreign investors the right to deposit revenues from their investments into Qatari banks. Law 13/2000 also allows foreign investors to transfer investment revenues, amounts generated from sale or liquidation, amounts garnered from settlements and disputes, and compensation from expropriation to financial institutions outside Qatar without undue delay.

Performance Requirements and Incentives
Qatar levies corporate income taxes on foreign firms at rates between five to 35 percent of net profits exceeding 100,000 Qatari riyals (USD 27,473). All Qatari owned firms are exempt from corporate income taxes. Under Law No. 13 of 2002, the Ministry of Economy and Finance may grant a tax holiday of up to 10 years for new foreign investments in key sectors. Companies established in the QFC have enjoyed a tax exemption since the start of operations in 2005, though up to a 10 per cent rate may be imposed in the future.

The government offers a variety of incentives to foreign investors which may include tax exemptions, property grants, energy subsidies, and low-cost financing. The following is a list of incentives sometimes offered to foreign investors:

-- Natural gas priced at 60-75 U.S. cents per MBTU (Million British Thermal Units);
-- Electricity offered at less than two U.S. cents per KWH (Kilowatt Hour);
-- Industrial land offered at 27 U.S. cents per square meter per year for a period of 50 years, including options for renewing the lease;
-- Exemption from customs duties on imports of machinery, equipment and spare parts;
-- Exemption on export duties;
-- Exemption from corporate taxes for up to ten years;
-- Exemption from income taxes;
-- Absence of quotas on imports;
-- Low cost financing through Qatar Industrial Development Bank;
-- Flexible immigration and employment rules to enable the import of foreign labor.

The same incentives are offered to Qatari investors. Qataris are exempt from payment of corporate income tax.

Qatar does not maintain measures inconsistent with the Agreement on Trade-Related Investment Measures (TRIMs).

The Ministry of Energy and Industry determines the amount of foreign equity and the extent of incentives for industrial projects. Industrial projects can be established only in designated industrial zones. Necessary investment approvals may be required from the Ministry of Health, Qatar Tourism Authority, Ministry of Municipal Affairs & Agriculture, Ministry of Business and Trade, Supreme Education Council, and Ministry of Environment.

The Qatar Science and Technology Park (QSTP) located in Doha’s Education City complex, offers foreign investors an opportunity to start up a research and development facility that could also engage in commercial activity. Participating companies are allowed 100 percent foreign ownership, and a 20-year exemption from payment of income tax.

Right to Private Ownership and Establishment
The Commercial Companies Law, Law No. 5/2002, controls the establishment of all private business concerns in Qatar. The law provides for corporate mergers, corporate bonds, and the conversion of corporate partnerships into joint stock companies.

Joint ventures involving foreign partners usually take the form of limited liability partnerships. Law No. 15/1990 does not allow foreign investors to enter into a joint stock company with Qatari partners. Foreign investors may own up to 49 percent, and the Qatari partners no less than 51 percent, of a limited liability partnership. Foreign partners in ventures organized as limited liability partnerships must pay the full amount of their contribution to capital in cash, or in kind, prior to the start of operations. Usually, such firms are required to set aside 10 percent of profits each year in a statutory reserve until it equals 50 percent of the venture's authorized capital. This requirement represents the only legal restriction to a foreign company desiring to remit all of its annual profit.

Foreigners are generally not allowed to own property. However, a law enacted in 2004 allows foreigners to own residential property in select projects including the Pearl (currently the largest real estate development project in Qatar), the West Bay Lagoon, and the Al-Khor resort project. Non-Qataris may also have the right of usufruct over real estate for a term of 99 years in Cabinet-designated “investment areas.” Non-Qataris can be issued residency permits without a local sponsor if they own residential or business property in the designated districts.

Several state-owned companies in Qatar, such as Qatar Postal Corporation and Qatar Airways, dominate services activities and still operate under monopoly, or hold exclusive rights in some economic sectors.

Protection of Property Rights
Within Qatar, owners of trademarks, copyrights and patents depend on Qatari laws and regulations for protection. Intellectual property rights in Qatar are protected by Law No. 7/2002 (Copyright and Neighboring Rights Law), Law No. 9/2002 (Trademarks and Geographical Indicators Law), Law No.5/2005 (Protection of Trade Secrets), and Law No. 6/2005 (Protection of Layout Design of Integrated Circuits). Qatar has adopted the GCC Patent Law and has offices for patents, industrial property rights, and copyrights within the Ministry of Business and Trade. The Ministry of Health requires registration of all pharmaceutical products imported into the country and will not register unauthorized copies of products patented in other countries.

Patents may be registered for an initial period of 10 years, with one 5-year renewal possible. A trademark may be registered for 10 years and renewed indefinitely for further 10-year periods.

The Copyright Office works with law enforcement authorities to prosecute resellers of unlicensed video and software. The Ministry works with Public Prosecution and the Ministry of Interior to investigate and prosecute copyright infringement and forwarded 31 cases to the prosecutor’s office for further action.

Qatar uses the GCC patent law with derogations as needed to comply with its obligations under the TRIPS Agreement. It also established a joint committee between the Ministry of Business and Trade and Ministry of Health to coordinate their efforts and ensure that only patented products or authorized copies of pharmaceutical products are registered for sale. In 2006, an Emiri Decree on patents was issued requiring that: (1) only inventions of industrial use can be registered as a patent; (2) an industrial product or means or process of production must have something innovative about it to merit patent registration; (3) inventions in health, agriculture, plants and software development are not eligible for patent; (4) only Qatari citizens or foreigners of WTO signatory countries will be allowed to register a patent; (5) the Ministry of Business and Trade will frame and implement executive regulations to help enforce the law; and (6) the Ministry of Business and Trade will set up a patent registration office. This office has not yet been established.

As part of the GCC Customs Union, the six Member States are working toward unifying their intellectual property regimes. In this respect, the GCC has recently approved a common trademark law. All six Member States are expected to adopt this law as national legislation in order to implement it.

Qatar is a member of the World Trade Organization (WTO) and the World Intellectual Property Organization (WIPO), and is a signatory to the following WIPO Treaties:

-- WIPO Convention, since September 1976;
-- Paris Convention (Industrial Property), since July 2000;
-- Berne Convention (Literary and Artistic Works), since July 2000;
-- Nairobi Treaty (Olympic Symbol), since July 1983;
-- WCT (WIPO Copyright Treaty), since October 2005;
-- WPPT (WIPO Performances and Phonograms Treaty), since October 2005.
-- Qatar has also been a member and signatory to the TRIPS Agreement since January 1996.

Transparency of Regulatory System
There are four regulatory bodies in Qatar, though plans are underway to create a unified regulatory authority for the country. It remains unclear when the necessary legislation and oversight board will be in place. Current regulatory entities include:

1) The Qatar Financial Market Authority regulates the Doha Securities Market.
2) The Central Bank regulates locally registered banks.
3) The Qatar Financial Center (QFC) Regulatory Authority has a separate, independent regulatory authority for QFC-registered firms.
4) The Ministry of Business and Trade regulates the local insurance sector.

In Qatar, the government is the major buyer and end-user of a wide range of products and services. Government procurement regulations provide a ten-percent preference for Qatari bidders and five-percent for GCC bidders.

The Central Tenders Committee (CTC) of the Ministry of Economy & Finance is responsible for processing the majority of public sector tenders. The CTC applies standard tendering procedures and adheres to established performance norms. It also sets the standards for rules and regulations for bidding procedures.

Information on CTC tenders may be obtained from the CTC office in Doha or on the Internet at http://www.ctc.gov.qa. In tenders valued in excess of QR 100 million (USD 27 million), the CTC may invite and pre-qualify international firms to bid for a specific product or service. Technical bids submitted to the CTC are referred to the appropriate government end-user for short-listing. The CTC then opens the commercial bids and recommends the lowest priced, technically qualified bidder to the entity concerned, which will make the final award decision. Inquiries about specific award decisions should be directed to the CTC.

Some governmental entities have established internal tender committees. The Ministry of Energy and Industry, Qatar Petroleum, Urban Planning and Development Authority, and Public Works Authority process all tenders independently. Qatar Armed Forces and the Ministry of Interior are responsible for issuing tenders for classified materials and services.

Foreign firms wishing to participate in government procurement programs may be required to have a local agent and provide bid and performance bonds. International bidders should contact end-users directly for information on local agent requirements. Other regulatory policies do not significantly affect foreign investment decisions.

Efficient Capital Markets and Portfolio Investment
In Qatar, there are no restrictions on the free flow of capital. The Qatar Central Bank (QCB) adheres to conservative policies aimed at maintaining steady economic growth and a stable banking sector.

Loans are allocated on market terms, and foreign companies are essentially treated the same as local companies.

Qatar’s banking sector assets were estimated at USD 79.86 billion at the end of 2007, up 56 percent from the previous year. 91 percent of these assets were held by Qatari banks. Qatar National Bank (QNB), 50 percent state-owned, is the largest bank in the country, with total assets equal to 39 percent of the total assets of all Qatari commercial banks. Foreign banks hold around nine percent of all assets, or USD 7.2 billion.

Almost all import transactions are controlled by standard letters of credit processed by local banks and their correspondent banks in the exporting countries. Credit facilities are provided to local and foreign investors within the framework of standard international banking practices. Foreign investors are usually required to have a guarantee from their local sponsor/local equity partner. QCB prohibits banks from lending an amount greater than seven percent of a bank’s capital base to any single customer. In addition, the Qatar Central Bank does not allow cross-sharing and stable shareholder arrangements among banks and other business concerns that result in fewer shares of some corporations actually trading freely in the market.

Although most of the shares on the Qatar Exchange (formerly known as the Doha Securities Market) are owned by Qatari citizens, Qatar’s current regulations allow foreigners to invest in all Qatar Exchange listed companies. The total of foreign investments cannot exceed 25 percent of the capital of any listed company except Qatar Telecom and Salam International Investment, where foreign investment share may be higher. Foreign ownership of shares usually hovers around 8 percent, with most owned by other GCC citizens or local expatriates. The Mutual Fund Law (Law. No 25/2002) allows expatriates to invest indirectly in the stock market. No bonds have been traded on the Qatar Exchange.

Bilateral Investment Agreements
Over the past ten years, Qatar has signed bilateral investment protection agreements with numerous countries, including Belarus (2001), Bosnia and Herzegovina (1998), China (1999), Croatia (2001), Cuba (2001), Finland (2001), France (1996), Germany (1996), India (1999), Iran (1999), South Korea (1999), Morocco (1999), Pakistan (1999), Romania (1996), Senegal (1998), Sudan (1998), Switzerland (2001), and Turkey (2001).

On November 5, 2005, Qatar and Singapore signed a free trade agreement. Both countries continue to work to finalize the text of the agreement. Qatar has signed many agreements with other countries on the avoidance of double taxation.

Foreign-Trade Zones/Free Ports
Companies operating at the Qatar Science and Technology Park (QSTP) can import goods and services duty free. Foreign entities wishing to invest in the QSTP apply for a license with the Park’s managing board. No other licensing rules prevalent in the country will apply to the above businesses, although individuals will be subject to the criminal and civil laws of the state. Licensed foreign companies can enjoy 100 percent ownership and full capital and income repatriation benefits.

Businesses in the QSTP are exempt from all taxes, including income tax. The property of such a business is not to be seized under any circumstance, but capital and other cash can be seized on the orders of a local court. Equipment, machinery, or any other goods being imported for use by an entity doing business in QSTP are exempt from customs duty, and goods produced in the Park are not subject to export tax. Goods being sold within Qatar, but outside the QSTP, will be subject to the normal customs duty applicable to imported products. Flammable and radioactive materials, drugs, weapons, and explosives are banned from import by any of the licensed businesses.

Qatar has a 2005 law regulating the establishment of free trade zones. Qatar is planning to establish three free-trade zones, but no definite time frame has been announced for their establishment. One zone would be established near the New Doha International Airport (currently under construction with an estimated opening of mid-2011) and would house light industries, financial services, and legal, trade and engineering consultancies. A second zone for the industrial area of Doha would cater to manufacturing and transport companies. The third zone, near Mesaieed Industrial City, would house petrochemical and other downstream-related businesses in the energy sector.