SOCIOECONOMIC PROFILE
Qatar is a hereditary emirate, ruled by the Al-Thani family since the nineteenth century. After a century of Ottoman occupation, in 1916, a treaty was ratified with Britain making Qatar a British protectorate. The full independence of Qatar was announced on September 3, 1971, after the British withdrew. On June 27, 1995, H.H. Shaikh Hamad Bin Khalifa Al-Thani acceded as head of state. On October 23, 1996, the position of prime minister was established, a post now held by H.H Shaikh Abdullah Bin Khalifa. H.H Shaikh Jassim Bin Hamad Bin Khalifa Al-Thani is the heir apparent.
The provisional constitution decrees that the emir is the head of state and holds executive and legislative authority. The emir issues legislation based on the advice of the Council of Ministers, which he heads, and in consultation with the Advisory Council. The Council of Ministers is responsible for proposing draft laws and decrees, for implementing these laws, and for supervising the financial and administrative affairs of government. The Advisory Council consists of 35 members chosen from all sectors of Qatari society. They review draft laws proposed by the Council of Ministers prior to their ratification by the emir.
In the five years since assuming power, H.H. Shaikh Hamad has introduced a degree of political liberalization unprecedented in the Gulf region. The enfranchisement of women is the most obvious example of this. Qatar will push ahead with the process of liberalization, of which many Qataris are very proud. The political reform program has taken a major step forward with the creation of the National Constitution Committee. This committee was set up by an emiri decree to draw up a permanent constitution, which is expected to allow for the establishment of an elected parliament.
Qatar’s first civil polls, the elections for a “Central Municipal Council (CMC),” were held in March 1999, an event which marked the country’s first step on the road to democracy. Two hundred forty-six candidates, including six women, registered for 29 seats.
In addition to being a member of the Gulf Cooperation Council (GCC), Qatar is a member of many international agencies and organizations including Organization of Petroleum Exporting Countries (OPEC), the International Monetary Fund (IMF) and the World Trade Organization (WTO). Qatar will host the WTO meeting in November 2001. Relations with regional states remain good, including with Bahrain, after resolution of dispute over some islands between the two states by the International Court of Justice in February 2001.
ECONOMIC DEVELOPMENT
The Qatari economy is in a transition period. While economic performance still substantially depends on oil revenues, the share of the non-oil sector reached 65 percent of GDP in 1998, but declined to 55 percent and 42 percent in 1999 and 2000 respectively. The economy’s vulnerability to oil-price fluctuation, as well as the finite nature of oil revenues, has led the government to exploit Qatar’s significant reserves of natural gas and to promote investment in the non-oil sector of the economy, particularly down-stream industries that utilize natural gas as a source of fuel or as feedstock. With the recent development of projects to produce and export liquefied natural gas (LNG) and investment in petro-chemical industries, Qatar is diversifying its economy to reduce its dependence on oil.
GROSS DOMESTIC PRODUCT (GDP)
Qatar’s GDP growth has been uneven over the last five years, with the price of oil serving as the principal determinant of the overall trend of GDP growth. In 1998, when oil prices declined sharply (below $10 per barrel), the economy contracted by 9.2 percent, compared to a growth of 24.7 percent in the previous year (see Table 1). The significant increase in oil prices in 2000 ($27.3 per barrel), and increased export volume of LNG and condensate have resulted in a high GDP growth rate of 34.9 percent in 2000 to reach $16.5 billion compared to $12.2 billion in 1999.
PUBLIC FINANCE
The state budget plays an important role in achieving economic development targets, as public expenditure accounts for a substantial share of the total demand. Fiscal policy in Qatar as well as other GCC states is viewed as the core of general economic policy, which aims to achieve full utilization of economic resources. The government has been running a budget deficit since the mid 1980s as a result of several factors, including the impact of oil-price fluctuations and the development of the country’s huge gas and petrochemical projects.
The figures released by the Ministry of Finance, Economy and Commerce indicate that the 2000-01 budget shows a surplus of $1.2 billion, with total revenues reaching $6.4 billion and total expenditures reaching $5.4 billion. The 2001-02 state budget, which was announced recently, provides ample evidence of the government’s aim to restructure the economy and improve the liquidity situation. This was the first surplus budget in over a decade with a $137 million surplus (see Table 2). Qatar is the only GCC state to announce a surplus in its budgetary estimates, with Saudi Arabia showing slight traces of similarity after announcing a balanced budget for 2001. This turnaround has been achieved after 15 years, mainly on the strength of better than average oil prices, increased oil and gas output and new regulations aimed at gradually diversifying the economy. The budget allocation for major public projects has increased by a substantial 56 percent over the last fiscal year to reach $868 million, out of which 72.5 percent is directed towards public services and infrastructure projects. This will help revive vital projects that were put on hold and create a renewed market confidence that will benefit business.
BALANCE OF PAYMENTS
Qatar is fully integrated into the world’s free trade economic system; in 1994, the country became the one hundred twenty-first member of the WTO. Foreign trade plays an important role in Qatar’s economy, with exports and imports of goods accounting for around 57 percent and 18 percent respectively of GDP in 2000. The main destinations for Qatar’s exports are Japan, South Korea, the UAE, Singapore and the United States, while the main sources of Qatar’s imports are the U.K., the United States, Japan, the UAE and Saudi Arabia. The main items of export are mineral fuels and related materials, while the main items of import are machinery and transport equipment.
Official estimates indicate that the total value of Qatar’s exports increased by 61 percent in 2000 (see Table 3). Combining revenues from LNG, condensate and petrochemicals, and a corresponding recovery in oil prices, exports grew in 2000 to reach QR 42.2 billion ($11.6 billion). This significant growth is related to the strong rally in energy prices and increased exports of LNG and related industries. Qatar’s principal exports are mineral fuels and related materials, which are estimated to have accounted for more than 90 percent of total exports in 2000. The majority of Qatar’s crude-oil exports go to Asia, principally Japan, Singapore and South Korea (see Table 4). Qatar’s current crude-oil production capacity stands at 757,000 barrels per day (bpd) and is projected to reach over 1 million bpd at a later stage.
Oil production has risen by around 65 percent since 1996, but what has made Qatar a force to be reckoned with in world markets is its LNG production, which from a standstill in 1996 produced over 10 million tons in 2000. Qatar’s North Field (the single largest non-associated gas field in the world) has proven reserves estimated by Qatar Petroleum at 500 trillion standard cubic feet (tscf) of gas (or approximately 82 billion barrels of oil equivalent). Qatar’s two export-oriented LNG projects, QatarGas and RasGas, exported around 10.5 million tons of LNG in 2000, with production capacity reaching over 14 million tons (see Fig. 1 and Fig. 2). Among the many major projects on the horizon in Qatar, the LNG projects are by far the most interesting ones, catching the eyes of financial institutions and possible participants alike. This is not surprising, since the demand for environmentally friendly natural gas is likely to grow twice as much as that for oil.
THE BANKING SECTOR
The Qatari Banking sector comprises six local commercial banks, two Islamic banks and branches of seven foreign banks. Qatar National Bank, with an equity base held equally by the government and the private sector, is the largest and most prominent bank in Qatar. (A listing of commercial banks operating in Qatar is shown in Table 5.) The activities of the banking sector are supervised by the Qatar Central Bank (QCB), which was incorporated in 1993, when it took over from the former Qatar Monetary Agency. QCB has introduced the major international standards applicable to banking supervision and regulations based on the Basle Accord. QCB has also implemented an automated link with local banks (QCB-Link) to enhance its ability to provide guidance and monitor banks in a timely and accurate manner.
THE DOHA SECURITIES MARKET
The Doha Securities Market was officially opened on May 26, 1997. Twenty-two companies are currently listed on the exchange, including stocks in the banking, insurance, services and industry sectors (see Table 6). In order to qualify for listing on the DSM, a company must have at least 100 shareholders and a minimum share capital of QR 10 million, at least 50 percent of which must be fully paid. Listed companies must publish audited financial reports annually, and report gains and losses twice yearly. Eight brokers, four of which are banks (including Qatar National Bank), have been licensed to trade on the market.
INVESTMENT CLIMATE
To complement the tremendous expansion of the oil and gas sector in recent years, which has led to high GDP growth rates, the government has embarked upon an economic reform process so as to ensure balanced and sustainable economic growth. The foundations necessary for such growth can be seen through the recently announced state budget for 2001-02, which reveals an additional QR 630 billion (2000-01 it was QR 424 billion) allocation for public services and the development of infrastructure.
Government initiatives to attract the influx of foreign investment can be attributed, among existing incentives, to the New Foreign Investment Law passed by an emiri decree in mid-October 2000. The New Foreign Investment Law allows for foreigners to own up to 100 percent in certain local projects, keeping in mind that these projects are consistent with the development plans of the state. A brief outline of the foreign investment law includes the following: up to 100-percent ownership of hotels, hospitals, power plants, schools and colleges, and the leasing of land for up to 50 years.
(BY DR. FAWZI AL-KHATIB)
Table 1: GDP at Current Prices by Economic Sectors (1996-2000)
in QR million unless otherwise indicated
|
1996 |
1997 |
1998 |
1998 |
2000* |
1. Oil Sector (Mining & Quarrying) |
12,773 |
17,386 |
13,005 |
19,950 |
34,950 |
2. Non-Oil Sector |
20,203 |
23,738 |
24,325 |
24,447 |
24,943 |
-Agriculture & Fishing |
290 |
290 |
256 |
260 |
265 |
-Manufacturing |
2,499 |
3,417 |
2,938 |
3,250 |
3,450 |
-Electricity & Water |
427 |
482 |
611 |
640 |
650 |
-Building & Construction |
2,268 |
2,873 |
2,723 |
2,180 |
2,020 |
-Trade, Restaurants & Hotels |
2,544 |
2,762 |
3,162 |
3,210 |
3,250 |
-Transport & Communications |
1,223 |
1,451 |
1,867 |
1,952 |
2,040 |
-Finance, Insurance & Real Estate |
3,423 |
3,969 |
4,505 |
4,619 |
4,768 |
-Other Services** |
7,529 |
8,494 |
8,263 |
8,336 |
8,500 |
Total GDP |
32,976 |
41,124 |
37,330 |
44,397 |
59,893 |
% Change |
11.3% |
24.7% |
(9.2% ) |
18.9% |
34.9% |
Total GDP in millions of $ |
9,059 |
11,298 |
10,255 |
12,197 |
16,454 |
GDP per capita (in $) |
17,659 |
21,609 |
18,990 |
22,587 |
28,369 |
Notes: QR/US$=3.64; *The Planning Council (preliminary estimates); **Includes social services, imputed bank service charges, government services, household services and import duties; Source: The Planning Council, unpublished data
Table 2: The State Budget
|
97/98 98/99 99/00 00/01* 01/02** |
||||
|
(in millions of US$, except %) |
||||
Revenues: |
|||||
Oil & Gas |
2,880 |
2,076 |
3,119 |
5,084 |
2,887 |
Other Revenues: |
|||||
Investment Income |
814 |
1,683 |
622 |
747 |
1,699 |
Other |
356 |
417 |
455 |
568 |
374 |
Total Other Revenues |
1,069 |
2,100 |
1,077 |
1,315 |
2,073 |
Total Revenues |
4,050 |
4,176 |
4,196 |
6,399 |
4,960 |
Current Expenditure: |
|||||
Government Wages & Salaries |
1,645 |
1,544 |
1,547 |
1,373 |
1,468 |
Other Current Expenditure |
2,117 |
2,206 |
2,379 |
2,981 |
2,165 |
Total Current Expenditure |
3,762 |
3,750 |
3,926 |
4,354 |
3,633 |
Total Capital Expenditures |
1,164 |
912 |
849 |
837 |
1,190 |
Total Expenditures |
4,926 |
4,662 |
4,775 |
5,191 |
4,823 |
Surplus / (Deficit) |
(876) |
(486) |
(579) |
1,208 |
137 |
Surplus / (Deficit) as % of GDP |
(7.7) |
(4.7) |
(4.7) |
7.3 |
0.8 |
*Preliminary; **Projected; Source: Ministry of Finance, Economy and Commerce
Table 3: Balance of Payments (in QR millions)
P a r t i c u l a r s |
1 9 9 6 |
1 9 9 7 |
1 9 9 8 |
1 9 9 9 |
2 0 0 0 * |
1 . T r a d e B a l a n c e |
4 , 5 4 6 |
3 , 1 4 3 |
7 , 1 3 4 |
1 8 , 0 6 2 |
3 1 , 5 3 8 |
E x p o r t s |
1 3 , 9 5 2 |
1 4 , 0 3 6 |
1 8 , 3 1 1 |
2 6 , 2 5 8 |
4 2 , 2 0 2 |
I mp o r t s |
( 9 , 4 0 6 ) |
( 1 0 , 8 9 3 ) |
( 1 1 , 1 7 7 ) |
( 8 , 1 6 9 ) |
( 1 0 , 6 6 4 ) |
2 . S e r v i c e a n d P r i v a t e T r a n s f e r s ( N e t ) |
( 9 , 0 8 3 ) |
( 9 , 2 5 4 ) |
( 8 , 7 9 2 ) |
( 1 0 , 1 5 9 ) |
( 1 1 , 8 1 8 ) |
3 . C u r r e n t A c c o u n t ( 1 + 2 ) |
( 4 , 5 3 7 ) |
( 6 , 1 1 1 ) |
( 1 , 6 5 8 ) |
7 , 9 0 3 |
1 9 , 7 2 0 |
4 . N e t C a p i t a l T r a n s f e r s ( p r i v a t e a n d o f f i c i a l ) |
2 , 6 2 9 |
4 , 3 3 6 |
1 , 4 8 3 |
1 , 0 4 3 |
( 6 , 8 6 8 ) |
5 . S u r p l u s / D e f i c i t i n B a l a n c e o f P a y m e n t s ( 3 + 4 ) |
( 1 , 9 0 8 ) |
( 1 , 7 7 5 ) |
( 1 7 5 ) |
8 , 9 4 6 |
1 2 , 8 5 2 |
6 . C h a n g e i n R e s e r v e s ( i n c r e a s e -) |
1 , 9 0 8 |
1 , 7 7 5 |
1 7 5 |
( 8 , 9 4 6 ) |
( 1 2 , 8 5 2 ) |
-
-
- The Planning Council estimates; Source: Qatar Central Bank
-
Table 4: Destination of Qatar’s Crude Oil Exports (1995-2000)
Country |
% Share |
Rank |
Japan |
67.0 |
1 |
Singapore |
12.4 |
2 |
South Korea |
9.4 |
3 |
Thailand |
4.7 |
4 |
Taiwan |
2.0 |
5 |
Others |
4.5 |
6 |
Total |
100% |
|
Source: QP and QNB calculations
Table 5: Commercial Banks Operating in Qatar as of January 2001
Banks |
Head Office, Branches and Foreign Exchange Offices |
Year of Establishment
|
Qatari Banks: |
||
Qatar National Bank SAQ |
30 |
1964 |
Doha Bank Ltd. |
14 |
1979 |
Commercial Bank of Qatar QSC |
12
|
1975 |
Qatar Islamic Bank SAQ |
11
|
1983 |
Al-Ahli Bank of Qatar QSC |
8 |
1984 |
Qatar International Islamic Bank |
5 |
1990 |
Grindlays Qatar Bank |
5 |
1990 |
Arab Banks: |
||
Arab Bank PLC |
3 |
1958 |
Mashreq Bank PSC |
1 |
1971 |
Foreign Banks: |
||
HSBC |
3 |
1954 |
Paribas |
1 |
1973 |
Standard Chartered Bank PLC |
1 |
1950 |
United Bank Limited |
1 |
1970 |
Bank Sederat Iran |
1 |
1970 |
Total |
92 |
|
Source: Qatar Central Bank
Table 6: Doha Securities Market
Market Sector Year Price at Year- Capitalisation Listed Companies Established End 2000 (QR) 31.12.2000 (QR million) |
|||
Banking Sector |
|||
Qatar National Bank |
1965 |
45.0 |
4,671.9 |
Commercial Bank of Qatar |
1975 |
44.0 |
870.1 |
Doha Bank |
1979 |
41.0 |
756.7 |
Qatar Islamic Bank |
1982 |
25.5 |
637.5 |
Al-Ahli Bank |
1983 |
25.0 |
457.0 |
Qatar International Islamic Bank |
1990 |
24.5 |
245.0 |
Total |
7,638.2 |
||
Insurance Sector |
|||
Qatar Insurance Co. |
1964 |
54.0 |
648.0 |
Qatar General Insurance & Reinsurance Co. |
1978 |
58.0 |
174.0 |
Al-Khaleej Insurance Co. |
1978 |
31.5 |
75.6 |
Qatar Islamic Insurance |
-- |
17.0 |
34.0 |
Total |
931.6 |
||
Service Sector* |
|||
Qatar National Navigation & Transportation Co. |
1957 |
55.5 |
1,110.0 |
Qatar Cinema & Film Distribution Co. |
1970 |
29.0 |
45.0 |
Qatar Leisure & Tourism Development Co. |
1990 |
4.0 |
12.0 |
Qatar Electricity and Water Co. |
1990 |
12.4 |
440.0 |
Qatar Shipping Co. |
1992 |
4.4 |
440.0 |
Qatar Real Estate Investment Co. |
1996 |
14.5 |
362.5 |
Al-Ahli Hospital |
1996 |
5.4 |
30.4 |
Q-TEL |
1987 |
60.0 |
60000. |
Al-Salam International Investment ($) |
2000 |
0.60 |
- |
Total |
9,239.9 |
||
Industry Sector |
|||
Qatar National Cement Co. |
1965 |
64.5 |
524.1 |
Qatar Flour Mills Co. |
1969 |
28.0 |
168.0 |
Qatar Industrial Manufacturing Co. |
1990 |
13.0 |
260.0 |
Total |
952.1 |
||
Total |
|
|
18,762 |
* Al-Salam International Investment was listed on June 14, 2000; Source: DSM Reports
THE LEGAL SYSTEM
Despite its brief history, Qatar enjoys a highly evolved legal system, based on Islamic (Hanbali) teachings, but including many principles of the French system. The British established colonial or civil courts, while the native courts continued to administer Sharia law. This dual system persists today. The first Official Gazette was issued in 1961. Subsequently, several set of laws covering administrative, economic and social activities have been promulgated.
The Provisional Constitution
Qatar enacted a provisional constitution in 1972, the “Amended Temporary Basic Ordinance.” It establishes the independence and sovereignty of the state and decrees that the emir is the head of state, holding both executive and legislative authority. The provisional constitution also provides the state’s administrative framework, the powers and functions of the Cabinet of Ministers, the Advisory Council and the judiciary. Among other things, the provisional constitution also provides citizenship rights, civil liberties and obligations, and the fundamental objectives and directive principles of state policies.
As regards commercial activities, the provisional constitution emphasizes respect for private ownership, capital and commerce; freedom for commercial activities; economic development through international cooperation; independence of the judiciary; the right of all natural and judicial persons to seek justice through litigation and other means; and respect and enforcement of judicial judgments.
Legislation
New laws and amendments are normally prepared by the concerned ministry or department of the executive branch and forwarded to the Cabinet of Ministers for endorsement. The Cabinet reviews and amends the laws and then refers them to the Advisory Council, which issues its views in the form of “recommendations.” The Cabinet is not obligated to take these into consideration when recommending new laws or amendments for ratification and issuance by the emir. Article 67 of the provisional constitution gives the emir an unrestricted right to change the provisional constitution by amending, deleting or adding to it, as he deems fit for the interest of the state.
Most Qatari laws are drafted by jurists from Egypt and Sudan and thus follow very closely Egyptian and Sudanese codes.
The Judicial System
The judiciary in Qatar is divided into two main parts, the Sharia courts and the civil system. The Sharia courts administer Islamic law. They are rapidly moving towards codification of the applicable rules of Sharia jurisprudence. Their role is generally limited to the adjudication of disputes relating to personal status (marriage, divorce, inheritance, child custody and support) and certain criminal cases. The Sharia courts comprise specialized departments to deal with each of these matters.
The civil system comprises both civil and criminal courts. The criminal courts try capital offences against state security, property, breach of trust, financial offences (forgery, fraud, counterfeiting, cheating) and offences against the person (kidnapping, murder).
In hearing criminal cases, both the Sharia and the criminal courts employ practices and procedures similar to those employed in common and civil-law courts. A public prosecutor presents the case on behalf of the state, the accused is allowed legal representation, the accused is presumed innocent until proven guilty, and, generally speaking, the trials are open to the public.
The civil courts have jurisdiction over all disputes not heard by the Sharia courts or the criminal courts, particularly commercial and labor cases. The courts use written pleadings and rebuttals but do not usually entertain oral arguments.
Proceedings in all courts are conducted in Arabic. The courts provide translators for non-Arabic-speaking litigants. Decisions by the lower courts can be appealed at the respective departments of appeals, which are managed by very senior judges. There is no supreme court. Decisions of the Qatari courts are not published, and there is no doctrine of binding precedent, albeit, in practice, lower courts usually follow decisions of the courts of appeal in which the same point of law was considered.
The State of Qatar is not a party to any treaty with respect to the enforcement of foreign judgments or awards. However, Qatari law provides that the Qatari courts will enforce a foreign judgment or arbitral award provided that the country in which it has been issued provides reciprocal enforcement.
The choice of a foreign law by contracting parties is usually recognized in the Qatari courts as valid in any action to enforce such a choice. Similarly, Qatari courts usually uphold the choice of local or international arbitration as a dispute-resolution mechanism. Arbitration is widely practiced in Qatar, and arbitration awards are recognized and enforced by the judicial system.
COMMERCE AND TRANSACTIONAL LAWS
Civil and Commercial Law
Qatari civil and commercial law regulates business activities and other contractual transactions. The law consists of four parts. The first deals with obligations in general. It provides guidelines for the establishment of contractual relations and how to deal with obligations arising from them. It provides that natural and judicial persons are free to agree on whatever they desire, providing that their agreement does not conflict with public order and rules of conduct. It also emphasizes the principle of respecting and honoring the individuals’ agreements, i.e., the contract is the law of the contracting parties (pacta sunt servanda). The first part also deals with the effect and interpretation of contracts, contractual responsibilities, liability for personal acts, responsibility for acts of third parties, ownership responsibilities and gains. It also discusses performance, compensation and compulsory execution. Finally, it discusses assignment of rights, novation, impossible performance and statutes of limitation.
The second part deals with commercial activities, business agencies, commercial concerns, trade names and unfair competition. The third part addresses sales contracts in general, the rights and obligations of the buyer and the seller, maritime sales, commercial agencies, commission agencies and brokerage. The fourth part deals with commercial paper including bills of exchange, promissory notes and checks.
The above-mentioned law was issued in 1971. Realizing that it needs to be updated, the legislative authorities have embarked on a massive exercise to redraft and separate the law into two different codes: the civil (law of obligations) and the commercial. The drafting of the latter is essentially complete and was referred by the Cabinet of Ministers to the Advisory Council for review. It contains more than 880 articles and covers all aspects of commercial transactions in Qatar. The new draft addresses many issues that the current law does not: bankruptcy provisions and the registration of company charges.
Corporate Law
The commercial-companies law governs regulations relating to the structure and governance of companies. An investor may register a private limited-liability company with two to 30 shareholders with a minimum authorized share capital of 200,000 Qatari rials (QR). The whole amount must be paid in full prior to incorporation of the company. The liability of a shareholder for the debts of the company is limited to his or her share capital. A limited-liability company may not engage in insurance, banking or investment brokerage.
Public shareholding companies must have a minimum of five shareholders and a capital of no less than QR 500,000. Public shareholding companies can only be incorporated by a decree issued by the emir. Ordinarily, only Qatari citizens may subscribe to a public shareholding company, but it is possible to allow non-Qatari citizens to subscribe by an emiri decree. The shares of public companies are traded on the stock exchange in Doha. However, the law recognizes special public shareholding companies, such as those in which the government owns an interest (to which the commercial companies law does not apply except to the extent that the company articles of association permit) and closed public shareholding companies. The shares of a closed public shareholding company are not traded on the stock market.
Other forms of partnership companies can be incorporated under the commercial-companies law. The main trait of such companies is that the partners are jointly and severally liable for the partnership’s debts.
Foreign Investments
During October 2000, Qatar enacted a new law regulating the participation of foreign capital in the economic activities in Qatar (law No. 13 of 2000). The new law confers upon foreign investors privileges, benefits and protections not previously available to them. Before addressing the specifics of the new law, it might be beneficial to take a quick look at the evolution of Qatari laws in dealing with foreign investments.
The first law dealing with investments by foreign entities or individuals was law No. 3 of 1961 regulating public-share companies. Article 4 of this law stipulated that all shareholders must be Qataris. However, the same article stated that, as an exception, non-Qatari shareholders might acquire shares in a public-share company if “there is a need for investment of foreign capital or foreign expertise, provided that Qatari shareholding capital shall not be less than 51 percent of the company capital and provided that a license is obtained therefore from the Minister of Finance.”
In 1963, law No. 20 concerning the regulation of foreign participation in commercial activities was issued. It banned, in no uncertain terms, foreigners from carrying out business in Qatar in commercial or industrial fields except in participation with a Qatari partner holding a minimum of 51 percent. Simple crafts (barbering, sewing, etc.) were exempt from this ban, provided that the foreigner carrying out such handicrafts was sponsored by a Qatari national. It seems that the legislator felt the ban was not sufficient and therefore issued a year later law No. 9 of 1964 (modifying law No. 20), which banned non-Qataris (natural or judicial persons) from carrying out commercial or industrial activities even with Qatari partners. Several other laws followed suit, including law No. 18 of 1970, which compelled foreign contracting companies to appoint Qatari service agents.
Law No. 3 of 1985, concerning the participation of non-Qatari capital in economic activity, replaced a number of laws including No. 20 of 1963 and No. 18 of 1970. It too prohibited foreigners from carrying out business in the fields of commerce, importation, commercial agencies, contracting, all other commercial activities, industrial, agricultural or small or medium-sized projects. It also stipulated that all foreigners then conducting business not in compliance with the law must liquidate their participation within four years. The law excepted simple handicrafts. Article 6 of the law also made an exception for foreign participation in major industrial and agricultural projects, provided that Qatari participation is at least 51 percent of the share capital of the project. The main exception introduced by law No. 3 was Article 9, which stipulated that, pursuant to an emiri decree, non-Qatari natural or judicial persons may invest for economic development purposes or to facilitate the performance of a public service or to realize a public utility, whether relating to industry, agriculture, minerals, motive power, tourism or contracting works. Nonetheless, such a non-Qatari investor would have to appoint a Qatari service agent in order to procure the said decree.
Law No. 3 was repealed by law No. 25 of 1990, which carried a rather more friendly tone towards foreign investors. Rather than banning non-Qatari capital from participation in economic activities except where stated, the new law took the position of allowing non-Qatari participation in all economic activities except two: commercial agencies and importation. Apart from that, many of the 1985 stipulations were carried forward into the 1990 law.
Turning now to law No. 13 of 2000, it is noteworthy that it allows foreigners to invest in “all national economy sectors” except banking, insurance, commercial agencies and trading in real estate. The general rule is that 51 percent of the capital of the project should be owned by Qatari partners. However, pursuant to a decision by the minister of finance, economy and commerce, foreign investors may increase their interest from 49 percent to 100 percent of the capital in the fields of agriculture, industry, health, education, tourism and development, and exploitation of natural resources, energy and mining, provided such projects are compatible with the development plans of the State of Qatar.
In addition to expanding the zone within which foreign investors can participate in the national economy and avail themselves of 100-percent ownership in certain fields, the new law confers upon foreign investors privileges not available to them under the repealed laws. These include the right to lease land for the project for up to 10 years; the right to import the machinery, equipment and some of the primary materials required for the project; the exemption of the capital to be invested in the project from income tax for a period not exceeding 10 years; exemption from import customs duties on the equipment and machinery to be imported for the project; exemption from import customs duties on the primary raw materials and half the manufactured materials not available in Qatar; protection from confiscation by the state other than for the public welfare, without discrimination and subject to fair and adequate compensation; the freedom to repatriate the profits of the project and its capital on liquidation; and the freedom to transfer the ownership of the project.
Tax Law
Tax is levied on the net income of a taxpayer from activities in Qatar including from projects or contracts executed in Qatar: sale of company assets; commercial agency commissions; service fees; property rents; proceeds from the sale, assignment or rent of a concession and the use of intellectual property rights; and profits from liquidation. Non-taxable income includes personal income (salaries, wages, allowances and related items).
Tax is in the form of categories and progressive tax rates, the highest rate being 35 percent. No taxes are levied on companies wholly owned by Qatari nationals or citizens of member countries of the Gulf Cooperation Council (GCC). In addition, there are no payroll, property, municipal, sales, withholding or value-added taxes.
It is possible to grant tax exemptions and tax holidays for certain businesses upon application to a committee established under the tax law. The exemptions are for periods of either 5 or 10 years. Contractors executing projects for companies can avail themselves of such exemptions.
Customs Law
In general, any individual or company wishing to import goods into Qatar for sale must be listed in the importers registry. Individual importers must be Qatari nationals. Companies that are not wholly owned by Qatari nationals require special permission to import goods. The standard rate of customs duty is 4-percent value added. Importation of goods similar to those manufactured in Qatar requires higher duty rates ranging from 15 to 70 percent. No duty is paid on goods manufactured in GCC countries.
It is customary to grant duty exemptions to major national projects. Contractors working on such projects can also benefit from such exemptions. Subject to receiving prior approval, goods imported for temporary use and then re-exported are exempt from custom duties. There is no duty on personal effects. The import and sale of pornographic material, alcohol and pork products are prohibited. There are no export taxes in Qatar.
Agency Law
A foreign company may do business in Qatar through a commercial agent. A commercial agent can be a natural or a judicial person and should have the sole right to sell directly or distribute commodities and products or carry out certain services on behalf of the principal for a commission or a profit.
The law requires that agency contracts be in writing. It stipulates that such contracts must include certain elements such as names of the parties; the commodities, products and services included in the agency; rights and obligations of the parties; the commission or profit the agent is entitled to; the territory, the terms of the agency, etc. A principal may not employ more than one commercial agent in any one territory. The law stipulates that an agent is entitled to a commission even on transactions concluded by the principal directly. The law prohibits the termination of an indefinite agency contract without cause. It provides that either party may seek damages from the other for wrongful termination of the agency agreement.
Labor Law
The relationship between employer (other than the government and its corporations) and employee (skilled and unskilled) is regulated by the labor law. An employment contract must be drawn up in the Arabic language. Another language may be used in addition, but the Arabic text will always prevail. Normal working weeks consist of eight hours per day, six days per week, except during Ramadan (the Muslim fasting month) where the working hours per day are reduced to 6. Overtime is paid for additional hours worked. Employees are entitled to a minimum of two weeks of leave per year. In the case of expatriate employees, the employer is responsible for providing air fares upon final departure. Labor unions are not allowed in Qatar.
Intellectual Property
Trademarks can be registered at the Trademarks Office for a period of 10 years, renewable for further 10-year periods by paying a fee and without any new examination. The registration gives the owner the exclusive right to use the trademark on goods for which the trademark is registered. The protection commences from the date of the filing of the application for registration.
Patents are also protected by a system of registration for an initial period of 10 years, renewable for five years only.
The law of intellectual compilations and copyrights confers protection upon all original literary and artistic works, including computer software and audio and videotapes. The protection stipulated in the law applies to compilations by foreign individuals to the extent that their countries extend a similar treatment to compilations by Qatari individuals. The relevant laws impose penalties on infringing parties that may include fines and/or imprisonment. In May 2001, the Cabinet of Ministers passed a more comprehensive set of laws for review by the Advisory Council. It is expected that the new laws will be issued before the end of the year.
Environmental Legislation
Qatar established an environmental protection committee in 1986. A special law requires that all governmental and nongovernmental plans and projects be submitted to the committee for review, appraisal and approval and to ensure that environmental issues have been taken into consideration. According to this law, the issuance of various permits was contingent upon the committee’s approval of the project or plan.
During the year 2000, the committee was replaced by a newly established Supreme Council for the Environment and Natural Resources, headed by the heir apparent. A draft environmental law comprising some 100 articles was circulated for review by the industrial sector. Among other things, it establishes a fund to combat environmental disasters, remove pollution and support and finance environmental research. It contains specific instructions for dealing with hazardous materials and waste and pollution from oil and from harmful substances, as well as for the protection of ground and surface water. Finally, the draft law contains elaborate punishment provisions. Until such time the law is promulgated, the Supreme Council is using ad hoc environmental protection standards to review plans for new projects.
It should be noted that Qatar is a signatory to a number of environmental protocols, including the Kuwait and Brussels conventions of 1969 and 1971.
The Legal Profession
There is no independent bar in Qatar. A committee headed by the minister of justice regulates admission to the legal profession. Qatari nationals with law degrees from recognized universities and at least two years of working experience are enrolled into a list of practitioners. Those with less than two years of experience are enrolled in a list of trainees. Some non-Qatari individuals continue to practice law in Qatar by a special exemption. Typical Qatari law firms are quite small, consisting of one or two attorneys supported by experienced consultants from various backgrounds.
(BY SULTAN M. AL-ABDULLA)
Middle East Policy is fully accessible through the Wiley Online Library
Click below to subscribe to the online or print edition of Middle East Policy and gain access to all journal content.