Analysis

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)

 

 

Qatar Establishes General Tax Authority
Qatar Leads Gulf Region in Economic Reforms
Building A Shared Future – Qatar’s Investments In The United States
Qatar’s Changing Economy & National Vision 2030

Share on Facebook
Facebook
Tweet about this on Twitter
Twitter
Share on LinkedIn
Linkedin
Share on Tumblr
Tumblr
Print this page
Print
Email this to someone
email