Qatar - Overview

An Expert's View about Business Environment in Qatar

Posted on: 30 Jul 2012

Recent Developments
•After consecutive years of double-digit growth, Qatar is expected to see slower economic growth of 6.2% in 2012 and 4.5% in 2013, due to the European debt crisis and slower growth of its hydrocarbon sector.
•In the run-up to the 2022 FIFA World Cup, plus its bid for hosting the 2024 Olympics, massive infrastructure projects are underway, including the construction of stadiums, rail connection and highways.
•Concerns about growing government debts are rising in Qatar, as they surged from US$8 billion in FY2007/08 to US$57 billion in FY20011/1 to account for 33.1% of GDP.
•Hong Kong's exports to Qatar grew sharply by 83.3% year-on-year (YoY) to US$51 million in the first five months of 2012, while imports soared by 49.4% YoY to US$38 million.

Current Economic Situation

Qatar has been able to maintain fast economic growth over the past few years, thanks to high oil and gas prices, as well as rapid gas capacity expansion. However, in Q1 2012, real GDP grew by 6.9% YoY, down from 14.8% in Q4 2011. Qatar's General Secretariat for Development Planning (GSDP) expects economic growth to ease to 6.2% in 2012 and further down to 4.5% in 2013, due to the Eurozone problem and a slowdown in the hydrocarbon sector. The non-oil economy is seen as maintaining momentum through 2013, especially in sectors of transport, communications, government services and construction, which showed double-digit growth in Q1 2012.

In the run-up to the 2022 FIFA World Cup, plus the bid for hosting the 2024 Olympics, massive infrastructure projects are underway, including the construction of stadiums, rail connection and highways. The government will also have to meet its commitment to build 90,000 hotel rooms by 2022. The Qatar Tourism Authority (QTA) expects the share of travel and tourism in GDP will rise from 0.7% in 2011 to 6.4% in 2021.

Qatar was the world’s largest liquefied natural gas (LNG) exporter and ranked the third largest gas reserves behind Russia and Iran in 2011. Its LNG production has been surging since 2003, from about 13 million tonnes per year (mty) to 77 mty in 2011. With the global economic slowdown, the Qatar National Bank expects gas production growth to slow to 4.3% in 2013. Besides, emerging LNG exporters such as Australia and North America are ambitious to enter the Asian market. Therefore, the IMF forecasted the growth of average natural gas prices will slow down to 2.2% in 2012, far below 11.9% in 2011.

After completing the LNG investment programme in 2011, Qatar has started to concentrate on downstream energy sectors. According to the Energy Ministry, the government will spend US$25 billion to raise the current petrochemical output from 9.2 mty to 23 mty by 2020. This new long-term strategy aims to further diversify the economy and reduce gas dependency.

Nonetheless, there are rising concerns about the growing government debts in Qatar, surging from US$8 billion in FY2007/08 to US$57 billion in FY20011/12 to account for 33.1% of GDP. The debt build-up is mainly for financing infrastructure construction, increasing the liquidity among local banks and improving the depth of the capital markets. The risk of termination of infrastructure projects will grow if there is a substantial fall in gas prices.

Qatar uses its trade surplus accumulated from oil and gas wealth to establish the Qatar Investment Authority (QIA). In April 2012, the QIA indicated that the fund had far exceeded US$100 billion. The QIA and its subsidiaries invest in leading companies in many sectors, such as hotels, in the hope that their experience can help lift Qatari standards, and diversify the economy.

Qatar’s media sector is in a leadership position in the Gulf. Al Jazeera, a news network based in Doha, is renowned for its broadcasting independence. The broadcaster has centres in Doha, Kuala Lumpur, London and Washington DC, making it a Middle Eastern broadcaster with a global reach.

Trade Policy

Qatar is a member of the World Trade Organisation (WTO), and maintains a liberal trade regime.

Non-Qataris are barred from engaging in distribution activities in Qatar. Importers, who must be Qatari nationals, have to register in the Importers Register and be approved by the Qatar Chamber of Commerce and Industry (QCCI).

Qatar maintains a strong tie with other fellow members of the GCC (which consists of Saudi Arabia, Kuwait, Oman, the UAE, Bahrain and Qatar). In November 1999, the GCC agreed to form a customs union, which took effect from January 2003 to zero-rate the goods traded within the GCC. To qualify for zero-tariff, such goods must be accompanied by a certificate of origin (CO) by the chambers of commerce in the GCC. Under the accord, goods imported into the GCC area can be freely transported subsequently throughout the region without paying additional tariffs.

The standard rate of external tariff is 5% (ad valorem) in accordance with the GCC customs union. As a result, Qatar’s customs duty is calculated on the CIF value at the rate of 5% for most Hong Kong products. It also provides a list of items that can be imported duty-free. When only the FOB price is available, duty is based on the 15% on the FOB price. According to the WTO, Qatar‘s simple average applied tariff is 8.0% for agricultural goods and 4.6% for non-agricultural goods in 2009.
Certain local manufacturers are protected by a higher customs duty. For example, Qatar has a 15% tariff on records and musical instruments, 20% on steel and cement, 30% on urea and 100% on Tobacco products. Pork and pork products are illegal to import under Qatari law.

The GCC has approved exemptions for approximately 400 goods (including basic food products such as live animals, fresh fruit and vegetables, seafood, wheat, flour, rice, feed grains, spices, seeds for planting and powdered milk), diplomatic and consular imports, military and security products, civilian aviation, personal effects and used household items, passenger accompanied luggage and gifts, goods destined for charitable use, ships and other vessels for the transport of passengers and floating platforms, and products to be used for industrial projects.

With the approval of the Director General of Customs, some categories of goods may be temporarily allowed to be imported without collection of customs duties. These include heavy machinery and equipment for project execution, semi-finished products, use in exhibitions and temporary events and machinery, equipment imported for repair, containers and materials for refilling, animals for grazing, and commercial samples. This approval is normally valid for a period of 6 months, but may be extended by a further 6 months.

Two Free Zones, the Qatar Financial Centre (QFC) and the Qatar Science and Technology Park (QSTP) have been established, with tax & duties incentives provided. Qatar will also develop additional investment free zones to attract investment in the industrial, agricultural and tourism fields in the future.

Qatar’s currency, the Riyal, is pegged to the US dollars at 3.64. Qatar, Saudi Arabia, Bahrain and Kuwait have brought the Gulf Monetary Union into effect, a big step to create a single gulf currency. But the establishment of single currency is unlikely to happen soon due to the current Euro crisis.

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Posted: 30 July 2012

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