Foreign direct investment in Qatar - FDI Report

Foreign direct investment flows into Qatar have generally followed an upward trend in the past several years, thanks to the country’s political stability, a stable currency pegged to the U.S. dollar, high quality infrastructure and one of the lowest corporate tax rates in the world (10%). However, following the diplomatic crisis with countries such as Saudi Arabia, the UAE, and Kuwait, Qatari economy experienced a negative impact. According to the UNCTAD 2020 World Investment Report, FDI flows totaled to negative USD – 2,8 billion, a decrease compared to 2018 (USD -2,2 billion). The total stock of FDI stood at USD 31 billion in 2019. However, the trust of global investors remained still on Qatar’s economy even after the diplomatic tension that has taken place with its neighboring states. Furthermore, Qatar is also a key international investor, thanks to its large foreign exchange reserves. The largest contributors to FDI inflows are the United States, Japan, South Korea, and Singapore, while the main sectors that attract foreign investments are oil and gas, construction, public works and financial services.

Qatar aims to become a leading country in terms of its business and foreign investment environment. In May 2018, the government approved a draft law that allows non-Qatari investors to own 100% capital in all sectors, while many Qatar Stock Exchange listed companies have increased their foreign ownership limit to 49%. The organization of the 2022 World Cup in Qatar is expected to attract large amounts of foreign investors in the coming years. However, one element that limits the expansion of FDI flows into Qatar concerns its policies governing the private sector, especially due to the long amount of time it took to establish a privatization programme. Other elements that hinder FDI are the country’s relatively small domestic market, a lack of a skilled workforce and high cost of living, and the current diplomatic and commercial relations with other Arab countries. The public-private partnership programme launched recently is expected to improve the situation. Qatar ranked 77th out of 190 economies in the 2020 Doing Business report issued by the World Bank, up by six spots compared with a year earlier. The rise was mainly due to a significant improvement with regards to registering property.

Foreign Direct Investment201720182019
FDI Inward Flow (million USD)986-2,186-2,813
FDI Stock (million USD)35,52233,87431,061
Number of Greenfield Investments***344228
Value of Greenfield Investments (million USD)5645371,581

Source: UNCTAD, 2016

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country’s Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

Country Comparison For the Protection of InvestorsQatarMiddle East & North AfricaUnited StatesGermany
Index of Transaction Transparency*2.06.07.45.0
Index of Manager’s Responsibility**2.05.08.65.0
Index of Shareholders’ Power***2.04.09.05.0

Source: Doing Business, 2016

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

What to consider if you invest in Qatar

Strong Points

Qatar is an attractive country for FDI, with significant opportunities for investment in infrastructure, healthcare, education, tourism, and financial services.
The reasons to invest in the country include the following:

  • Qatar is one of the fastest growing economies in the world
  • the country was ranked first globally by the World Bank’s 2018 Doing Business Report for its taxation regime (the corporate tax rate is 10% and there is no personal income tax)
  • low cost of energy
  • good infrastructures
  • inexpensive labour force provided by migrant workers
  • the FIFA World Cup 2022 represent an occasion for investments
  • the government provides various incentives to local and foreign investors
  • the country enjoys the highest per capita income in the world
  • political stability.

Weak Points

Qatar’s investing landscape weak points are:

  • the economy’s heavy dependence on hydrocarbons and on foreign workforce
  • tense diplomatic relations with the neighbouring countries (Saudi Arabia, UAE, Bahrain and Egypt) which could have a negative impact on the economy in the medium term
  • a requirement for 51-49% partnership split in favour of Qatari nationals
  • an expected budget deficit in 2018 (for the third time in fifteen years)
  • small domestic market
  • preferential treatment given to suppliers using local products in government procurement
  • import licenses issued only to individuals with Qatari nationality, or companies owned or controlled by Qataris
  • the country’s untransparent system of rulemaking.

Government Measures to Motivate or Restrict FDI

The government remains the dominant actor in Qatar’s economy, though it encourages private investment in many sectors and is willing to attract more foreign investment.
A new Public Finance Law (Law No. 2/2015) aims to optimize the use of the public funds and introduce international best practices and standards in Qatar’s financial framework.
The government is expected to soon reform the country’s foreign investment regulations in order to allow 100% foreign ownership of businesses in more economic sectors. The government is also implementing a regulatory regime to curb corruption and anti-competitive practices.

Bilateral investment conventions signed by Qatar

Qatar has signed over 49 bilateral international investment agreements.

Find out more about Investment Service Providers in Qatar on GlobalTrade.net, the Directory for International Trade Service Providers.

Leave a Reply

Your email address will not be published. Required fields are marked *