Category: Economy & Energy

Qatar’s Trade Surplus Hit $52 Billion Last Year

On March 10, 2019, Qatar’s Minister of Commerce and Industry publicly stated that the country’s trade surplus reached $52 billion in 2018.

This is a noteworthy economic achievement despite the economic and diplomatic blockade enacted by Qatar’s neighbors. This will bolster Qatar’s international standing and economic appeal as a safe and lucrative destination for investors. In essence, Qatar is telling the world that business is carrying on as usual.

When economic and diplomatic ties were severed between Qatar and the coalition of countries that implemented the blockade measures, which cut the country’s access to an estimated of 60% of imported goods, Qatar expanded its trade relations with existing partners. A concrete example would be with Pakistan. Speaking at a forum on Qatar-Pakistan trade, Minister Ali Al Kuwari declared that trade between the two countries grew over 230% in 2019 to $2.6 billion. Trade with Iran and Turkey has also increased; furthermore, Doha is also seeking partnerships with Western countries, including an open-skies agreement with the EU.

Additionally, Qatar’s Financial Center Authority CEO, Mohamed Al Jaida also spoke at the forum citing Qatar’s efforts to diversify the economy and to heavily invest in the New Emerging Belt Initiative (NEBI) targeting investments in countries like Oman, India, Turkey, and Pakistan. He went to state that Pakistan was the 13th largest trading partner to Qatar and that a $16 billion trade deal was signed to deliver LNG to Pakistan until 2030.

Most notably, the IMF noted on May 18, 2018, that Qatar’s growth performance has remained resilient to the external shocks caused by blockade. However, Qatar’s energy sector, specifically, its LNG exports, have helped the country in alleviating the economic pressures stemming from the blockade. In fact, IMF confidently estimated a 3.1% growth in 2019 for Qatar.

 

 

 

 

Moody’s Issues Government of Qatar Credit Opinion
Facilitating Foreign Investors’ Access to the Qatari market
2018 Doha Forum Brings World Community Together
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Moody’s Issues Government of Qatar Credit Opinion

Introduction: Moody’s is one of three major international credit rating agencies (CRAs) – the other two being S&P and Fitch – that evaluate the Sate of Qatar’s (SoQ) sovereign creditworthiness. These ratings are important for any government’s debt management exercises as they affect the country’s ability to access financing – for fiscal deficits and other external funding needs – through debt capital markets (DCM).

Government-related entities (GREs), such as Ooredoo (telecommunications) and Qatar National Bank (QNB), also benefit from the strength of the SoQ’s credit rating as private creditors use the sovereign’s borrowing spreads as a pricing benchmark for GREs looking to sell bonds.

In other words, rating upgrades or downgrades can lead to materially higher or lower costs of funding. On large multi-billion-dollar transactions – such as the jumbo bond issued by the SoQ in April 2018 – even marginally higher spreads can translate into accrued interest payments in the millions of dollars.

Moody’s uses the following criteria to assess any sovereign issuer’s ability to service its debt:

 

– Economic Strength – Wealth, size, diversification, and long-term potential;
– Institutional Strength – Governance, quality of institutions, and policy predictability;
– Fiscal Strength – Ability to deploy resources to face current and expected liabilities;
– Susceptibility to Event Risk – Risk of sudden risk migration

 

 

 

On 13 July 2018, Moody’s changed the outlook on Qatar’s sovereign issuer rating to stable from negative, citing that “Qatar can withstand the economic, financial and diplomatic boycott by the three neighboring Gulf Cooperation Council (GCC) countries and Egypt in its current form for an extended period of time without a material deterioration in its credit profile.”[1]

 

 

Key Highlights of Credit Opinion:

 

– Current SoQ rating: Aa3 (outlook: stable)

 

– Continued strength of fundamental credit metrics, underpinned by:

 

– Vast hydrocarbon reserves, fueling high export capacity and a dominant global LNG market share (28%);

 

– Exceptionally high per-capita incomes – with a nominal GDP per capita of $69,933 in 2018 (forecast) – allowing for significant shock-absorption capacity and reform flexibility for the government.[2]

 

– Continued progress in the government’s debt reduction (de-leveraging) program is credit-positive. Government debt to GDP (debt/GDP%) has declined from 49% in 2017 to 42% in 2018 and is expected to fall further to 36% in 2019.[3]

 

– The stable outlook is consistent with Moody’s expectation of a declining government debt burden under Moody’s baseline oil price assumption of $75/barrel in 2019 and $65/barrel in 2020.

 

– What could lead to a rating upgrade? Coupled with the government’s de-leveraging strategy, a sustained re-building of foreign exchange (FX) reserves – which were negatively impacted by the blockade – would prompt Moody’s to consider upgrading the rating. According to Qatar Central Bank (QCB) data, FX reserves have increased from $14.8 bn in December 2017 to $29.4 billion in November 2018, an increase of 99%.[4]

 

– During the course of 2019, it will be worth monitoring how Moody’s rating sensitivity will correlate with Qatari policymakers’ steps to build up QCB reserves, strengthen its external position and continue to successfully manage the status quo of the blockade.

 

– Institutional Strength: The Credit Opinion states that “The government’s responses to the GCC boycott imposed in June 2017 demonstrate policy effectiveness and coordination between public sector entities, as well as a strong institutional capacity to manage crises.”[5]

 

– Budget 2019 Highlights: The government is targeting a small budget surplus of QAR4.3 billion (0.6% of projected 2019 GDP), compared to a budgeted deficit of QAR28.1 billion (4% of estimated GDP) for 2018. This will be the first fiscal surplus in 3 years, reflecting higher oil prices. (Brent crude average in 2018 was $72/barrel, compared with $54/barrel in 2017).

 

– Major capital projects – public investments in infrastructure for the World Cup and the economy at large – will continue to account for the lion’s share (43%) of government expenditure.[6] This flows both from the need to complete requirements for hosting the 2022 FIFA World Cup, and from the Qatar National Vision 2030, which prioritizes investments in the building blocks of a modern competitive economy.

 

Qatar’s OPEC Exit: Moody’s does not expect Qatar’s decision “to have any credit implications for the sovereign. Qatar’s reliance on LNG means that OPEC’s decisions on oil supply and their implications for oil prices will continue to have an indirect impact on Qatar’s government and export revenue. For Qatar to no longer be part of these decisions will not change the sensitivity of its credit metrics to oil price fluctuations and will not have material impact on the country’s hydrocarbon production and growth dynamics.”[7]

 

 

 

__________________________________________________________________

[1] Moody’s, “Moody’s changes Qatar’s rating outlook to stable, affirms Aa3 rating,” 13 July, 2018

[2] Moody’s, Government of Qatar: Financials

[3] Moody’s Credit Opinion, “Regular Update: Government of Qatar”, pp.2

[4] QCB Monthly Monetary Bulletin – November 2018 – Table 11, “Total Official Reserves”

[5] Ibid., pp. 3

[6] Ministry of Finance – Qatar

[7] Moody’s Credit Opinion, “Regular Update: Government of Qatar”, pp.6

 

 

 

 

 

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Facilitating Foreign Investors’ Access to the Qatari market

 

Legislation to Ease Non-Qatari Capital Access

On 8 January 2018, Qatar issued a new law to facilitate foreign investors’ access to the Qatari market. Known as Law Number 1 of 2019, the new measure is the government’s latest step to open up the economy to foreign capital flows and promote private sector-led growth. The law aims to lower or remove barriers to entry that have previously hindered access to the Qatari market. Using the blockade as an impetus for greater self-reliance, the law expands the investment incentives rolled out by the government to advance a national agenda focused on localizing supply chains in-country.

 

Boosting Industrial Activity

Under the new law, non-Qatari investors can receive government assistance in securing land for setting up their investment and are exempted from customs duties on imports of machinery and equipment necessary for the operation of their companies. Imports of raw materials and semi manufactured goods that are required for production are also exempted from custom duties. Given that industrial machinery, vehicles and electrical machinery collectively accounted for 49% of total imports in 2017, this provision represents a high potential for cost savings.[1] As preparations for the World Cup enter peak construction phase, the law provides a timely incentive for international investors to set up their operations in Qatar and seize on regionally unrivalled opportunities to implement infrastructure projects.

 

Reform Drive and Free Zones

The law builds on existing plans – yet to be legislated – to allow 100% foreign ownership in all sectors of the economy. Currently, full foreign ownership is limited to designated zones. Last year, the government also established the Qatar Free Zones Authority (QFZA) to set the strategic direction and policy of the free zones, as well as securing anchor investments. The free zones will be self-sustaining clusters of enterprise that seek to attract local and international investors through incentives and a “business ecosystem based on transparency and the rule of law.”[2] Two of the zones, Umm Al Houl and Ras Bu Fontas, will be open in the first quarter of 2019 and are strategically located near Hamad Port and Hamad International Airport, respectively. Given the proximity of the zones to a deep-water port and a major airport, spurring a domestic logistics industry is a clear objective of the QFZA. Future zones will also target chemicals, aviation, plastics and artificial intelligence, among other industries.

 

The QFZA will also offer its tenants “doing business” solutions to encourage them to anchor their investments in Qatar, including one-stop shop facilitation for investors, introduction and business network connections, and assistance with work permits and residency permits for their workforce.

 

In-Country Value

Emerging as a post-blockade priority, creating In-Country Value (ICV) is intended to reduce reliance on imported goods and services, build the capabilities of the local population, and attract investment to Qatar to achieve a competitive and resilient economy. Qatar Petroleum’s recently announced ‘Localization Program for Services and Industries in the Energy Sector,’ known as the Tawteen initiative, is a prime example of promoting ICV.[3]

Tawteen is designed to reward suppliers and contractors who execute their contracts and agreements by maximizing local content. The program aims to create around 100 new investment opportunities within the energy sector in order to retain economic value within Qatar, which in turn is expected to add QR 8bn of import substitutes annually and is also expected to create more than 5,000 new white-collar jobs.

Commenting on the program, Qatar’s Minister of State for Energy Affairs, stated that it “aims primarily at helping develop the private sector, particularly small and medium-sized enterprises, which plays an important role in Qatar’s economic development in terms of production, employment generation, and contribution to manufacturing, exports, and GDP.”[4]

 

Self-Reliance Agenda

Although ICV has only recently been discussed as an explicit policy goal in Qatar, efforts to localize supply chains and promote homegrown industries have in fact pre-dated the blockade. Supply chains for the tourism, food security and defense industries, to name a few, have been both diversified and anchored domestically through greater public-private partnership. For instance, Barzan Holdings, an investment management company specialized in the defense niche was incorporated last year with seed funding from the Ministry of Defense. Barzan’s mandate is to provide the financing and business ecosystem for private sector-led innovation in defense and security technologies that will help “empower the military capabilities of the Qatari Armed Forces.”[5] Barzan will essentially serve as an incubator and venture capitalist for cutting-edge defense capabilities to emerge from Qatar and the international market.

Qatar’s new law governing non-Qatari capital is intended to enable the creation of new industrial niches that can both contribute to Qatar’s non-oil GDP and facilitate knowledge transfer to the country.

 

___________________________________________

 

[1] Qatar Ministry of Development Planning and Statistics

[2] Linkedin – “Qatar Free Zones Authority”

[3] Gulf Times – January 8, “QP to Enhance Localization of Energy Sector’s Supply Chain”

[4] Ibid.

[5] https://barzanholdings.com/en/

 

 

 

(Image Source: Providence Mag)

 

 

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Second U.S.-Qatar Strategic Dialogue Reaffirms Alliance, Strengthens Ties

On January 13th, 2019 the United States and Qatar held the Second U.S.-Qatar Strategic Dialogue in Doha under the theme “Forward Together.” Chaired by U.S. Secretary of State Mike Pompeo and Qatari Deputy Prime Minister and Foreign Minister Mohammed bin Abdulrahman Al Thani, the dialogue focused on: regional security and defense cooperation, education and culture, law enforcement and counterterrorism partnerships, commercial and energy cooperation, and labor issues.

This year’s Strategic Dialogue builds on the historic achievements of the First U.S.-Qatar Strategic Dialogue, in Washington, D.C., in which Qatar and the U.S. agreed to landmark cooperation in several areas.

A Joint Statement produced by the U.S. and Qatar details the outcome of the dialogue, progress made in key policy areas, and the signing of three Memoranda of Understanding (MOUs) and Statements of Intent (SOIs) to advance mutual cooperation.

Full Remarks with Secretary of State Mike Pompeo and Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani at a Press Availability (01/13/2019)

Full Remarks at the Opening Ceremony of the U.S.-Qatar Strategic Dialogue from Secretary of State Mike Pompeo and Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani (01/13/2019)

Below is a summary of key developments from the Joint Statement produced at this year’s U.S.-Qatar Strategic Dialogue:

 

Officials reaffirmed their commitment to ongoing senior-level engagement:

Qatar and the United States expressed strong support for the expansion of bilateral relations evinced by high-level meetings in 2018 between: U.S. President Donald J. Trump and HH the Amir Sheikh Tamim bin Hamad Al Thani; U.S. Secretary of State Michael Pompeo and Qatari Deputy Prime Minister and Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani; U.S. Secretary of Defense James N. Mattis and Qatari Deputy Prime Minister and Minister of State for Defense Affairs Khalid al-Attiyah; and an exchange of other minister-level visits to Washington and Doha. These high-level diplomatic engagements highlight the two nations’ shared commitment to advance cooperation and promote global peace and prosperity.

 

The U.S. recognized Qatar’s role as a leader in global humanitarian assistance and development:

The United States acknowledged Qatar’s generous humanitarian role bilaterally and multilaterally through the work of various UN agencies, in the form of a $500 million multi-year assistance pledge, including $8 million annually between 2019 and 2023 to support forcibly displaced populations, and assist refugees including millions of vulnerable young children and women.

 

Both countries reiterated the essential role the U.S.-Qatar defense partnership serves in international security:

Qatar and the United States emphasized the vital contribution their defense partnership provides for the security and stability of the region. This strong and lasting partnership is key to successfully combating terrorism, countering violent extremism, and deterring external aggression. U.S. officials lauded Qatar’s contributions in supporting the strategic U.S. military presence in Qatar under the U.S. Central Command.

 

Three key developments in defense were announced:

  • The two governments reaffirmed their commitment to the Joint Declaration on Security Cooperation to promote peace and stability and counter the scourge of terrorism.
  • The United States welcomed Qatar’s generous offer to expand critical facilities at bases used by U.S. forces in the country and to align operating procedures at these bases with NATO standards, thereby increasing the operational capability of U.S. and coalition forces based in Qatar.
  • The U.S. and Qatar signed an MOU enabling deeper coordination on potential expansion at Al Udeid Air Base. Qatar’s offers to fund capital expenditures and sustainment affords the possibility of a more enduring U.S. presence.

 

The U.S. recognized Qatar’s commitments to defeat radical extremism, prevent terrorism finance, and to support U.S. anti-terrorism efforts:

The United States thanked Qatar for its continued efforts to counter terrorism, counter the financing of terrorism, and prevent violent extremism in all forms. Both sides intend to strengthen their security and counterterrorism (CT) partnership to eradicate terrorism and violent extremism. The United States welcomed Qatar’s commitment to provide $75 million over five years to the work of the UN Office of Counter-Terrorism, including its efforts to help Member States develop and implement advance passenger information and passenger name record systems in accordance with UN Security Council Resolution 2396.

 

The forward progress made on several counterterrorism agreements, including the July 11, 2017 MOU on Counterterrorism, was reviewed:

They reviewed the positive progress made under the terms of the MOU on Counterterrorism signed on July 11, 2017, and the second bilateral CT Dialogue convened in Doha September 5, 2018, including the 2018 Joint Action Plan to implement provisions on border security, information sharing, countering the financing of terrorism, anti-money laundering, aviation security, cybersecurity, and judicial capacity building.

 

A Memorandum of Understanding in education was signed by Secretary Pompeo and Foreign Minister bin Abdulrahman Al Thani:

The U.S. Secretary of State Michael Pompeo and Qatari Deputy Prime Minister and Foreign Minister Mohammed bin Abdulrahman Al Thani signed the MOU in the field of education to continue building and sustaining key partnerships in the fields of: primary, secondary, and higher education; English and Arabic language instruction; student advising; promoting academic exchange; and facilitating a wide range of study abroad options that enable students to achieve their personal and professional goals.

 

Qatar and the United States welcomed the role of U.S. companies in Qatar’s development and of Qatari investment in U.S. firms and jobs:

The Qatari delegation outlined successful implementation of reforms designed to attract foreign investment in Qatar, including free trade zones and expanding business ownership for non-citizens. Both countries also underscored their commitment to boosting trade and investment and noted the growing strength of bilateral trade relations.

Qatar confirmed that the United States is its top import partner, representing 18% of all imports to Qatar in 2018.

The two governments recognized Qatar Investment Authority’s (QIA) previous commitment to invest $45 billion in American firms, real estate, and jobs. QIA Chief Executive Mr. Mansour al-Mahmoud described plans to increase Qatari investments in American infrastructure.

 

Closing statement:

The United States and Qatar emphasize the importance of their continued partnership which benefits the interests of both countries, as well as the security and prosperity of the Gulf region.

This Strategic Dialogue process underlines the commitment of Qatar and the United States to increase cooperation in fields that provide the greatest mutual and practical benefit. Such cooperation includes the issues discussed today but also incorporates important work in the fields of health, food safety, intellectual property rights, nuclear safeguards and more. Qatar and the United States remain committed to dialogue and long-term cooperation on political issues, consolidating state-of-the-art defense facilities, combating terrorism and violent extremism in all its forms, countering the financing of terrorism, expanding their trade and investment partnerships, and enhancing educational and cultural cooperation.

To expand partnerships and advance mutual policy goals in those areas, the two sides agreed to hold the first working group in April of 2019. Qatar and the United States look forward to reviewing progress in these areas at the next Strategic Dialogue in Washington in 2020.

 

(Image Source: Middle East Monitor)

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First U.S.-Qatar Strategic Dialogue
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2018 Doha Forum Brings World Community Together

The 2018 Doha Forum was held in its namesake city this year from December 15-16, 2018 and brought together key leaders from the international community under the Forum’s theme “Shaping Policy in an Interconnected World.”

The 2018 Doha Forum was launched with an opening address by His Highness Sheikh Tamim bin Hamad Al Thani, Amir of Qatar. His Highness stressed the need for free speech and dialogue between the Gulf countries.

The Financial Times reported on the mission of this year’s Doha Forum:

“The 2018 Doha Forum brought together political figures, thought leaders, governmental agencies, and civic society organizations with the aim of facilitating dialogue about how conscious policymaking can guide us to our global tomorrow. The forum addressed today’s urgent issues and ways the international community can come together to solve them. The forum also highlighted the modern success models and discusses how we can expand on them and replicate them. Through active and responsible global leadership, our possibilities are limitless.”

 

Below are some highlights of key 2018 Doha Forum developments, events, speeches, and speakers:

 

  • Qatar Announces USD Half Billion in Aide to UN Agencies

Qatar’s Ministry of Foreign Affairs and the Qatar Fund for Development today signed agreements with multiple United Nations agencies to support humanitarian, counter-terrorism and relief programs around the world on the sidelines of Doha Forum. The multi-year assistance to ten UN agencies amounts to USD 500 million, including 28 million to the UN Development Program (UNDP), 8 million annually between 2019 and 2023 to the United Nations High Commissioner for Refugees (UNHCR), 4 million annually to UNICEF and 15 million annually to the Security Council’s Counter Terrorism Committee (CTC).

 

  • Announcement of the Doha Forum Award

The first Doha Forum Award will be given in 2019 to recognize outstanding achievements in diversity, dialogue and diplomacy, and will be worth half a million US Dollars.

 

Opening address by HH Sheikh Tamim bin Hamad Al Thani, Amir of Qatar:

 

Keynote address by HE  António Guterres, Secretary-General of the United Nations:

 

Key Speakers:

  1. H.E. Sheikh Mohammed bin Abdulrahman Al-Thani, Deputy Prime Minister and Minister of Foreign Affairs, Qatar
  2. H.E. María Fernanda Espinosa Garcés, President of the United Nations General Assembly
  3. H.E. Hassan Ali Khaire, Prime Minister, Somalia
  4. H.E. Teodor-Viorel Meleşcanu,Foreign Minister, Romania
  5. Wolfgang Ischinger (moderator), Chairman, Munich Security Conference
  6. Brett McGurk, U.S. Special Presidential Envoy for the Global Coalition to Defeat ISIS
  7. Vladamir Voronkov, U.N. Undersecretary General for Counter Terrorism
  8. Peter Bergen (moderator), Vice President for Global Studies & Fellows, New America Foundation
  9. H.E. Ali Shareef Al-Emadi, Minister of Finance, Qatar
  10. H.E. Berat Albayrak, Minister of Treasury and Finance, Turkey
  11. Christian Sewing, CEO, Deutsche Bank
  12. Chris Giles (moderator),  FT Economics Editor
  13. Rt Hon Alistair Burt MP, Minister of State for the Middle East at the Foreign and Commonwealth Office & Minister of State at the Department for International Development
  14. H.E. Sigmar Gabriel, Member of the Bundestag (Parliament), Former Vice Chancellor and Minister of Foreign Affairs
  15. H.E Dr. Mutlaq Al-Qahtani, Special Envoy of the Foreign Minister of the State of Qatar for Counterterrorism and Mediation of Conflict Resolution
  16. Ibrahim Kalin, Special adviser to President Erdogan and the Presidential Spokesperson
  17. Julien Barnes-Dacey (moderator), Director, Middle East and North Africa Programme,  European Council on Foreign Relations
  18. Michael Rich, President, RAND
  19. Alain Gresh, Editor, OrientXXI
  20. Ahmed Elmagarmid, Executive director, QCRI
  21. Nicholas Enfield, Director, Sydney Social Sciences and Humanities Advanced Research Institute, University of Sydney
  22. Steve Clemons (moderator), Editor-at-Large, The Atlantic
  23. H.E. Moussa Mara, Former Prime Minister of Mali
  24. Yéro Boly, Former Defense Minister, Burkina Faso
  25. Hannah Armstrong, Senior Sahel Consultant, International Crisis Group
  26. Phillip Carter III, Consultant, The Mead Hill Group, Former US Ambassador to Ivory Coast
  27. Rinaldo Depagne (moderator), West Africa Project Director,  International Crisis Group

 

About the Doha Forum 2018

Full list of Speakers – 2018 Doha Forum

Full list of Sessions – 2018 Doha Forum

Full Schedule – 2018 Doha Forum 

 

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Qatar Establishes General Tax Authority

On 6 January 2019, Qatar launched the General Tax Authority (GTA) as a separate legal entity under the supervision of the Ministry of Finance (MoF). The GTA supersedes the Tax Department of the Ministry of Finance as the central tax collection and compliance function of the government. Remaining under the MoF’s umbrella, the GTA will retain the institutional memory of its parent entity, but will expand and streamline many of the tax activities of the state.

The law establishing the GTA mandates the authority to implement all tax laws and setup all related bylaws, procedures and instructions, and be responsible for their implementation. In addition, the GTA will review and assess tax return forms and collect taxes from subject entities.

 

Economic Diversification

In line with the Qatar National Vision 2030, which sets the target of a “diversified economy that gradually reduces its dependence on hydrocarbon industries,” establishment of the GTA is intended to broaden the state’s revenue base and increase the efficiency of tax collection processes.[1] Qatar has invested heavily in diversifying its economy over the past decade, with the non-oil and gas sector contributing 64% to total nominal GDP in 2017, from 42% of total nominal GDP in 2012.[2]

 

Unlike in the U.S., where personal income tax is a sizable component of tax receipts at the local and federal levels of government, Qatari law (Income Tax Law number 24 of 2018) stipulates that the salaries and wages of citizens and residents shall not be subject to any tax. This provision is a mainstay of Qatar’s economic competitiveness as it serves to attract talented foreign workers seeking a tax-free environment.

 

Eschewing personal income tax, the lion’s share (80%) of the Qatari state’s tax revenue is accounted for by royalties and taxes on oil and gas activity. These receipts are a fundamental source of funding for the government, representing 58% of total budget revenues.[3] Consistent with the government’s priority to strengthen fiscal buffers, the GTA will provide the financial instruments to diversify tax revenue.

 

Excise Tax Law

 Among the first measures the GTA will implement towards raising greater non-hydrocarbon taxes is the recently introduced Excise Tax law (number 25 of 2018). Also known as a “sin tax,” it came into force on January 1 this year and imposes a tax on a range of “health-damaging” goods. It includes a list of the “targeted goods”, with a 100% tax on tobacco products, alcohol and energy drinks; 50% tax on carbonated drinks; and 100% tax on special purpose goods.[4]

 

According to preliminary projections, the sin tax will increase non-oil and gas tax revenue to the state by 6%.[5] While this increase seems modest, the desired impact of curtailing consumption of these goods will achieve savings in healthcare costs that will amplify the 6% figure. Qatar’s health authorities are already grappling with some of the world’s highest rates of obesity and type 2 diabetes, prompting some to call it an “epidemic”.[6] From a fiscal standpoint, the prevalence of diabetes drives soaring health costs. According to researchers at Weill Cornell Medicine in Qatar, “while diabetes is already consuming about 20 percent of Qatar’s national health expenditure, it will consume nearly one-third of the national health expenditure by 2050.”[7]

 

Against the backdrop of these concerning health trends, the GTA’s enforcement of the sin tax – working closely with retailers to improve voluntary tax compliance – will have both direct and indirect economic benefits in the long run. The sin tax also syncs with Qatar’s objectives to build a healthier society through investments in world-class sports facilities and promoting sport as a bedrock of human capital development. The GTA will therefore also perform an important social good.

 

Tax Incentives

Supporting the government’s push to promote homegrown industries, the GTA will continue to implement an accommodating tax framework for participants in priority sectors.  Food security projects have consistently benefited from government support but have gained renewed focus in light of the blockade. Under Income Tax law (number 24 of 2018), the agriculture sector and fisheries are granted clear exemptions from tax. In addition to custom duty waivers, tax and other incentives in this sector represent new opportunities for American companies specialized in agribusiness and other sectors that the government is prioritizing post-blockade.

 

International Dimension

The GTA has been mandated to represent the State of Qatar in relevant international and regional organizations. It has also been authorized to sign tax agreements, including Avoidance of Double Taxation Agreements (DTA), with foreign partners to encourage economic cooperation and joint investments. As a large sovereign investor in a range of U.S. asset classes, with ever-increasing funds committed to the U.S. market, Qatar has long sought to enter into a DTA with the U.S. Going forward, the GTA will be responsible for negotiating such agreements and treaties with its international counterparts.

 

_________________________________________

[1] Qatar National Vision, pp.30

[2] IMF 2018 Article IV Consultation Staff Report, “Qatar: Selected Macroeconomic Indicators, 2013–23”, pp. 25

[3] Prospectus: State of Qatar Sovereign Bond Issuance: April 2018 “Public Finance,” pp. 8

[4] Gulf Times – January 2, 2019, “Cigarettes and Sugary Drinks become Dearer”

[5] Prospectus: State of Qatar Sovereign Bond Issuance: April 2018 “Public Finance: Custom Duties and,” pp.8. This projection uses 2018 budget figures for Custom Duties + Business/Corporate Income Tax as a reference.

[6] The Peninsula – April 3, 2019, “One in four adult Qataris will have diabetes by 2050: WCM-Q study”

[7] Ibid

 

 

 

 

(Image Source: Ministry of Finance – Qatar)

 

 

 

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Qatari Deputy PM: “There’s No Progress Yet… with the Blockading States”

 

Qatari Foreign Minister and Deputy Prime Minister HE Sheikh Mohammed bin Abdulrahman Al Thani gave an interview to Chris Giles of the Financial Times covering a variety of political issues related to Qatar during the 18th Doha Forum.

 

The latest development in the illegal blockade occurred when the Emir of Kuwait, HH Sabah Al Sabah, raised the issue during the December GCC summit. The matter was acknowledged by participants, but there was no “breakthrough,” according to the Deputy PM. Despite this, however, Qatar remains open to negotiations with the blockade nations.

“We are willing to come to the table to sit and to discuss what are the real problems, how we can resolve these problems, and the only thing you need to understand before you come to the table [is] that our sovereignty is [a] subject for negotiation.” -HE Sheikh Mohammed bin Abdulrahman Al Thani

 

The Deputy PM also addressed Qatar’s recent decision to leave the Organization of Petroleum Exporting Countries, or OPEC, in January 2019. He reiterated that, although the decision undeniably took place within a highly politicized context, Qatar left for purely business-related reasons: OPEC members primarily export oil, whereas Qatar primarily exports natural gas. Qatar’s departure simply acknowledges that Qatar is a very minor player in the global oil marketplace, and will allow the country to focus its efforts on its largest export.

 

 

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Kristian Ulrichsen: Leaving OPEC Reinforces Qatar’s Autonomy

 

Kristian Ulrichsen, a Baker Institute fellow and author of “The Gulf States in International Political Economy,” published an op-ed in The New York Times this week on the logic behind Qatar’s decision to leave the Organization of Petroleum Exporting Countries, commonly known as OPEC.

According to Ulrichsen, OPEC has become mired in geopolitical disputes like the Saudi-Iranian rivalry, to the detriment of its member states and its central mission to stabilize international petrochemical markets.

Qatar has persisted in its mission to serve as a secure natural gas exporter. Qatar provides more than half of India’s natural gas imports, as well as 14-15% of China’s, Japan’s, and the UK’s, according to the MIT Observatory of Economic Complexity. Following the illegal blockade, Qatar signed long-term natural gas agreements with China, Japan, and the UK. Qatar even still provides natural gas to the United Arab Emirates through the Dolphin Pipeline, despite the blockade.

Qatar remains committed to the central mission of mission of OPEC – maintaining a stable international market for petrochemical products. Its decision to increase natural gas exports was in response to a projected increase in international demand, according to then-CEO of Qatar Petroleum, Saad Sherida Al Kaabi. Qatar Petroleum is investing $20 billion in U.S. oil and gas fields, most notably the Golden Pass LNG terminal in Texas, even though the U.S.’s LNG exports will inevitably compete against Qatar’s primary source of revenue in the global market.

Qatar’s departure from OPEC is a business decision, allowing Qatar the autonomy to develop its natural gas resources – its foremost economic strength – independent of other members’ geopolitcal agendas.

 

 

(Image Source: Darren Hillman)

 

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Palestinian Neurosurgeon Wins the 10th Season of Stars of Science

 

A 35-year-old Palestinian neurosurgeon named Walid Albanna won Stars of Science‘s tenth season competition. Albanna won 32.5% of the online vote for his “Neurovascular Retina Analyzer,” a wearable retina camera that improves care treatment for patients who have suffered a stroke. His first place victory won him $300,000 in investment. Runner ups included Nour Majbour‘s “Parkinson’s Early Detection Kit,” Sylia Khecheni‘s “Home Privacy Drone Blocker,” and Salim Al Kaabi‘s “Safe Frankincense Varnish for Artists.”

Stars of Science is a Qatar Foundation “edutainment” reality show, where innovators from across the Arab World compete in Qatar Science and Technology Park for funding for their inventions. The show has been profiled and praised by outlets like the Harvard Business Review for offering smarter content than most of the reality TV genre and for showcasing and supporting the under-recognized ingenuity of the Arab World.

 

 

(Image Source: @StarsOfScience )

 

 

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SpaceX launches Qatar’s Es’hail-2 Communication Satellite

SpaceX launched Qatar’s Es’hail-2 spacecraft using the reusable Falcon 9 rocket. The launch took place at Florida’s Kennedy Space Center. The launch is the first mission for Qatar that SpaceX has undertaken. The Es’hail-2 satellite, built by Japan’s Mitsubishi Electric, will be operated by the state-owned Es’hailSat.

Es’hail-2 will be the first satellite dedicated solely to Qatar. Qatar’s previous satellite, Es’hail-1, was jointly owned by French telecommunications company Eutelsat. Qatar recently bought the rights from Eutelsat earlier this year.

 

The satellite is intended to be used for both broadcasting and transferring secure communication to devices within Northern Africa and the Middle East. This function will primarily be utilized by the Qatari armed forces that currently rely on external contractors to ensure safe and secure communication. Additionally, Es’hail-2 will also be the first satellite that will carry amateur radio relay capabilities opening up access to satellite and radio enthusiasts within the region.

 

The launch was attended by several high-profile Qatari officials, including the Qatari Ambassador to the United States, H.E. Sheikh Meshal Bin Hamad Al-Thani, as well as Qatar’s Defense Minister Khalid Mohammad Al-Attiyah, among others.

 

Launch Broadcast

 

 

 

Launch Images

 

(Image Source: NASA)

 

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