The tiny Arab Emirate is investing its large revenues from oil and gas in other economic sectors in order to expand its economic base and develop a strong private sector. Qatar has opened other sectors of the economy to foreign participation and has relaxed business regulations in recent years to attract foreign investment. According to Qatar Development Bank (QDB), Doha offers a wide range of incentives, including subsidized or nominal rates for gas and electricity, no import duty on machinery, equipment and spare parts for industrial projects, tax exemptions on corporate tax for pre-determined periods, and no export duty. Other benefits include tax-free salaries, and state of the art telecommunication facilities. Business Start Up Qatar (BSUQ.com) assists and facilitates foreign investors to successfully start their business in Doha by handling the various company formation procedures including required legal processes.
"The idea to start BSUQ.com began shortly after an unsuccessful attempt to establish my first venture in Qatar. I saw great opportunities in the market and became keen on launching a close protection and event management services company. I soon discovered that starting a business in Qatar entailed unclear, time-consuming, high costs and above all frustrating procedures. Along the way, it became apparent to me that the commercial registration (CR) process alone was deterring potential businesses, both local and foreign, from entering the market. In fact, 10 months into the process I had lost a substantial sum of my investment capital without successfully incorporating my business," recalls Stevie Mackie.
As a result, Mackie started BSUQ.com in 2009 as a guide for foreign investors interested in starting a new business or expanding to Qatar. "As more and more people approached us for help in setting up their business we decided to commercialize. We registered as a company formation specialist named Solutions Four after discovering that the regulations prohibited using the Qatar in a corporate name. Since then BSUQ.com, as part of Solutions Four, has grown to become a one-stop shop to help entrepreneurs, startups, and business-owners in all aspects of starting their venture in Qatar." Finding the right contacts for guidance through the formation process was a major challenge. "We didn't understand the local culture and customs at the time and became frustrated when we were given assurances without real results. The cost of registering our business was another key challenge. We were left waiting on the long incorporation and licensing process without any incoming revenue. Moreover, finding a local partner, a requirement for most businesses, can be challenging for any newcomer to Qatar," says Mackie.
He continues to explicate how it is important for individuals looking to set up their venture in Qatar to immediately focus on getting their business off the ground. In other words, without the experience, knowledge and resources of a company formation specialist, incorporating a business and obtaining the necessary licenses and approvals can take months. "Moreover, it is crucial for any new business to be able to adjust to the cultural sensitivities of Qatar, whether it is marketing, creative design or company formation, Solutions Four can help businesses navigate the critical startup phase in an efficient and effective manner." While the challenges of incorporating a business are only temporary, the delays, lack of transparency, and inefficient systems are definitely frustrating for anyone. "One common grievance is the time required to obtain business activity approvals from the concerned authority."
When starting a business in Qatar, Mackie adds how one might be required to obtain approvals for the activities the business proposes- to undertake from the relevant ministry or mandated regulatory entity. This approval is often a source of major delay in particular for businesses in industries like healthcare and education. "One of the more challenging matters is obtaining ministerial authorisation for 100% foreign ownership in any of the 12 exempt sectors outlined in the amendment to the Foreign Investment Law. According to the amendment, first introduced in 2010, these 12 sectors -which range from agriculture to entertainment services- are eligible for the exemption if they contribute to the development of Qatar," Mackie details. "However, establishing the fulfillment of this condition is difficult. The exemption also requires ministerial approval, which is completely at the discretion of the concerned minister. Moreover, there are no detailed guides of eligibility criteria for these exemptions."
Qatar welcomes foreign participation in all the various sectors of national economy with 51% Qatari participation. Conversely, in order to promote foreign investment the Qatari government has enacted a Foreign Investment Law, which permits 100% ownership of the share capital of companies developing projects in the fields of agriculture, health, education, tourism, information technology, and exploitation of natural resources and mining. The Ministry of Business and Trade meticulously reviews each case prior to approval, but the law does not allow a non-Qatari to participate in banking, insurance, commercial agency or real estate trading activities.
"Understandably, the ownership restrictions can seem off-putting for many investors who would like to retain control over their venture. However, there are many provisions we can implement to address an investor's concerns. Even profit distributions and liability can be adjusted to the investor's needs. What many investors do not realize early-on is that having a reputable local partner can actually benefit your business. Many businesses use silent partners, but at BSUQ we encourage our clients to work with an active local partner who will work towards the benefit of your business by finding investors, corresponding with government officials and promoting your product or service."
At present, the Qatar Science and Technology Park (QSTP) and the Qatar Financial Centre (QFC) are the only two active free zone entities. Both allow 100% foreign ownership, licensed onshore trading, as well as unrestricted repatriation of profits and capital. QSTP is open to businesses involved in technology development and related activities in four areas: Energy, Environment, Health Sciences, and ICT. Also, businesses incorporated within QSTP have access to support services in addition to world-class office, laboratory, and training facilities. Technically QFC is not a free zone, instead it licenses businesses operating in financial services and related consultancy to do business in Qatar and abroad. QFC entities follow an autonomous regulatory regime that follows English Common Law. "An additional benefit of operating under QFC is that the business is not restricted to the physical premises of the QFC and can set up a physical presence anywhere in Qatar.
A key distinction between the two is that QFC has a relatively low 10% corporate tax rate on locally-sourced profit while QSTP firms are fully exempt from taxes. That being said, while both entities are open to everyone they appear to be predominantly occupied by large international firms with few small businesses and even fewer entrepreneurs," explains Mackie. In addition, the Special Economic Zones Company (otherwise known as Manateq) will be the flagship free zone entity in Qatar when launched. "The initiative comprises of three specialized zones, Ras Bufontas, Al Karaana, and Um Alhoul, which each cater to target sectors ranging from healthcare to petrochemicals. The zones will provide in-house administrative, immigration, and financing services. Collectively, the three economic zones are envisioned to serve as a hub for local industry and manufacturing," adds Mackie.
Another noteworthy initiative is the Student and Alumni Free Zone; this proposal is led by Roger Griffiths, Director of Entrepreneurship of Qatar-based Virginia Commonwealth University, and aims to establish a free zone for students and alumni of Qatar Foundation universities, Qatar University and other higher education institutions within the nation. "The initiative entails a pre-incubation support program that would allow students and alumni to develop their business idea into a micro-business without going through commercial registration. Those enrolled in the program will have access to working space, seed grants up to QR50,000, mentoring and a range of business development services while being able to operate their business virtually."
In recent years, Qatar's infrastructure, hospitality and real estate developments prior to the World Cup 2020 and the country's National Vision 2030 has attracted a large number of foreign construction and sub-contracting firms. The country's thriving economy has drawn in an influx of foreign businesses from around the world. "We've also seen the construction boom spur marine-based developments given Doha's prime location on the Arabian Gulf. Likewise, the many conferences and expositions hosted here in Qatar have prompted event management firms to expand their operations to Qatar. Other notable sectors with strong foreign presence include IT, education, and healthcare services."
The country has also freshly witnessed a shift from foreign- established businesses to local innovative business startups. "A startup scene has begun to emerge in Qatar as the local entrepreneurial ecosystem develops, and more support agencies offer assistance to young and aspiring entrepreneurs. While the innovative startup scene is still in its infancy, we've seen a strong presence from the service sector particularly from the ICT industry," continues Mackie. "Most aspiring entrepreneurs do not have access to external financing and office space. As such the relatively low set-up and operating costs of a tech startup combined with the prospect of high-value added margins make the ICT industry an easier market to break into. There is also a cultural dimension, the great success and social impact of tech startups in Silicon Valley has influenced local entrepreneurs to follow suit."
Referring back to having a local partner owning 51% of the business by law, Mackie explains how not always the highest earning partner invests in the business. "While it varies from one venture to another, the investment capital is usually paid in full by the foreign investor. The common local practice is for the business to employ a silent partner who does not partake in the activities of the business and receives a fixed fee for their role as a sponsor and the majority shareholder." Mackie explains that some of these arrangements fall into a grey area of the law, and this remains to be the most prevalent mode of conducting business in Qatar. "This is not to say that there are not cases where an active local partner contributes his labour and commits his financial resources as well."
Conversely, West Bay, which acts as the business and finance district of the capital, stands as the most desired location for businesses. West Bay hosts numerous world-class facilities and enjoys the status of a prominent upscale district, which in turn attracts many leading international firms. Other popular locations are C Ring Road and the Old Airport area. BSUQ usually refers their clients to serviced office providers such as Servcorp and Regus, which have offices in these areas. "Renting a serviced office may seem like an expensive option, but it may offer good value if you take all the included support services into consideration. Using a serviced office will also save you the hassle of obtaining a civil defence approval for the property. Most serviced offices are pre-furnished, come with trained receptionist and administrative staff, and include access to offices in most major cities," adds Mackie.
In accordance to BSUQ database of clients, the United Kingdom, Latvia, India, Canada and the United States are the top recent countries interested to invest in Doha. "With the slow economic recovery following the global financial crisis the political stability and double-digit economic growth of Qatar gives confidence to investors and business-owners alike. While investing in Qatar does present some formidable challenges there are unparalleled opportunities here. In fact, Qatar has the potential to become a hub from which businesses can expand into the region and beyond."
The Qatari government is trying to facilitate ways to attract foreign investors and achieve their overall goal of being the business hub of the Gulf, but without a doubt, Dubai remains a top choice for investors with its reputation as the easiest place to do business in the region. Dubai also ranks 23rd globally according to the 2014 World Bank Doing Business report. However, investors will find it difficult to set up a profitable venture in Dubai given the level of competition in the Emirati market. In contrast, the Qatari market is in its earlier stages of development, much like Dubai a decade ago, meaning that that there are still opportunities for investors to set up their ventures and establish industry leadership of their segment.
Basically, the time is right to head to Qatar for 'treps looking to get a leg up in the region. Mackie highlights the benefits: "Qatar has experienced phenomenal economic growth, enjoys political stability, and was recently upgraded to emerging market status making it a rare opportunity for business-owners and entrepreneurs alike."