4 Sept 2017
Qatar: Market Profile
Major Economic Indicators
- Qatar’s real GDP growth expanded by 2.5% YOY in Q1 2017 on the strength of its non-oil sector. The country is projected to expand by 3.4% in 2017 due to massive infrastructure investment and further economic diversification.
- In preparation for the 2022 FIFA World Cup, large-scale infrastructure projects are underway, including construction of stadiums, rails and highways. The government plans to spend up to US$205 billion on infrastructure over 2013-2018.
- China’s FDI stock in the country has surged from US$77 million in 2010 to US$450 million in 2015.
- Qatar is a member of the GCC and GAFTA. It has also entered into DTAs with over 40 countries including the Chinese mainland and concluded a Comprehensive Double Taxation Agreement (CDTA) with Hong Kong in 2013.
- Hong Kong's exports to Qatar increased by 10.7% YOY to US$70 million in the first seven months of 2017, while imports from Qatar rose by 20.8% YOY to US$61 million.
Current Economic Situation
The oil and gas sector dominates Qatar’s economy, as it accounts for more than 50% of total government revenue and around 80% of export earnings. With a negligible agriculture sector, industry represents about 51% of the Qatari GDP, with the rest attributable mostly to services.
Qatar’s real GDP expanded by 2.5% year-on-year (YOY) in Q1 2017 on the strength of its non-oil sector, which expanded by 4.9% in the same period. The share of non-oil sector in the country’s nominal GDP increased from 47.5% in 2014 to 66.8% in Q1 2017, with the construction sector rising 15.7% YOY as infrastructure construction accelerated. Robust growth was also seen in the financial and insurance sector, which expanded by 10.1% YOY.
In 2016, erosion of exports and fiscal revenues arose from lower oil and gas prices, plunging the Qatari budget balance into deficits, the first time in 15 years. To restrain spending, Qatari authorities have implemented a series of energy pricing and labour reforms. Meanwhile, the country is optimistic over the expanding contribution of the non-oil sector, and expects the start-up of the Barzan gas project to boost the economy. The IMF expects the Qatari economy to expand by 3.4% in 2017, supported by massive public investment for the 2022 FIFA World Cup and further economic diversification.
In June 2017, the UAE, Bahrain, Egypt, Libya, Yemen, and the Maldives joined Saudi Arabia in ceasing economic and diplomatic relations with Qatar, accusing Doha of supporting and funding terrorism. Thus far, the impact has primarily been on regional travel and trade. Amid the Saudi-led boycott, Qatar has been trying to restore confidence in the economy, adopting plans including construction of food-processing facilities near a new port and immigration rules to provide permanent residency to investors and skilled workers.
While Qatar may be able to maintain macroeconomic stability despite the political crisis, a prolonged period of uncertainty has nevertheless created some downside pressure on economic growth. In July 2017, credit agency Moody’s downgraded Qatar’s rating outlook from stable to negative, citing a lack of quick diplomatic resolution to the Saudi-led boycott.
Liquefied Natural Gas Exports
Qatar has been the world’s largest liquefied natural gas (LNG) exporter since 2006, boasting the world’s third largest proven gas reserves (2016) following Iran and Russia. Qatar Petroleum (QP), the national oil and gas company, is responsible for developing the country’s LNG sector from upstream to downstream, including exploration, production, storage and marketing. QP is active in partnering with international oil companies, which purchase LNG from the projects which they invest in Qatar (e.g. ExxonMobil). Japan, the world’s top LNG buyer, has increased LNG imports from Qatar since the 2011 Fukushima nuclear disaster, with many multi-year supply contracts signed.
After completing the LNG investment programme in 2011, Qatar has started to focus on the downstream energy sectors. Qatar’s Ministry of Energy and Industry noted that US$25 billion will be spent to raise the current LNG output from 9.2 million tonnes per year (mty) to 23 mty by 2020, and the new long-term strategy will further diversify the economy.
Thanks to its huge natural gas reserves, Qatar’s per capita income of over US$60,000 ranked as the world’s fifth highest in 2016. The government aims to utilise its enormous oil wealth to develop a sustainable economy. Under its National Vision 2030 development plan, the government is dedicated to building a services-oriented knowledge economy through investment in infrastructure, education and healthcare.
Qatar uses its trade surplus accumulated from oil and gas wealth to establish the Qatar Investment Authority (QIA). QIA and its subsidiaries invest in leading companies in non-oil sectors, such as hotels, retail, real estate and manufacturing, in the hope that such experiences will help lift Qatari standards and diversify the economy. The establishment of sizeable financial endowments helps Qatar provide continuity and predictability of funding for essential services such as health and education despite the fluctuation of hydrocarbon receipts.
In the preparation of the 2022 FIFA World Cup, the government plans to spend up to US$205 billion over 2013-2018 on infrastructure projects. Massive infrastructure projects are underway including construction of stadiums, rail connections and highways. In an effort to increase transparency of available investment projects, the Qatari government in June 2016 launched a new online procurement portal to consolidate information on all government tenders.
To strengthen its tourism capacity, Qatar plans to increase the number of hotel rooms from about 15,000 to 95,000 in 2022. By 2018, 21 new hotels will be added in Doha, the capital of Qatar. Further, the Qatar Tourism Authority (QTA) plans to invest US$17 billion on tourism-related infrastructure projects over the next five years, projecting the GDP share of travel and tourism to rise from 0.7% in 2011 to 6.4% in 2021. In addition, QTA launched the Qatar National Tourism Sector Strategy 2030 in 2014, targeting to push the contribution of travel and tourism sector up to account for 8% of GDP by 2030.
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. Al Jazeera has broadcast centres in Doha, Kuala Lumpur, London and Washington DC, making it a Middle Eastern broadcaster with a global reach.
In the Global Competitiveness Report 2016-2017 published by the World Economic Forum, Qatar ranked 18th out of 140 economies, and was the second most competitive economy in the Middle East after the UAE (16th). Qatar’s competitiveness is underpinned by its macroeconomic stability and high efficiency in the goods market, which rank globally 2nd and 7th respectively.
Qatar offers various incentives in attracting FDI, including import duty exemption on machinery, equipment and spare parts for industrial projects, tax exemptions on corporate tax for pre-determined periods and export duty exemption. The Qatar Business Development and Investment Promotion Department under the Ministry of Economy and Commerce (MEC) is responsible for promoting business development and attracting FDI. Information related to Qatar’s investment climate and incentive schemes are provided on the MEC website.
In Qatar, FDI projects are generally limited to 49% of the investment capital. However, Qatari Foreign Investment Law allows, upon obtaining special government approval, up to 100% ownership by foreign investors in the following sectors: agriculture, industry, healthcare, education, tourism, development and exploitation of natural resources, energy and mining, consultancy services, technical work services, information technology, cultural services and sport services.
To remove obstacles that hinder new companies in starting their operations, a new Commercial Companies Law which permits limited liability companies (LLCs) to have one member (as opposed to two as previously required) took effect in August 2015. The prior requirement for LLCs to have a minimum paid-up share capital of QAR 200,000 was also removed.
In 2016, cumulative FDI in Qatar reached US$33.9 billion, up 2.3% from the year earlier. According to China’s Ministry of Commerce, Chinese FDI stock in Qatar has surged in recent years, leaping from US$77 million in 2010 to US$450 million in 2015.
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 is a member of the Gulf Cooperation Council (GCC), which consists of Saudi Arabia, Kuwait, Oman, the UAE, Bahrain and Qatar. In 1999, the GCC agreed to form a customs union, which took effect from 2003 to zero-rate 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. According to the WTO, Qatar‘s simple average most favoured nation (MFN) applied tariff was set at 5.7% for agricultural goods and 4.6% for non-agricultural goods in 2016.
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 alcohol. Imports of pork and pork products had been prohibited. The Qatar Distribution Company (QDC), a subsidiary of the national air carrier Qatar Airways, has been granted the sole authority to import alcohol products.
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, and commercial samples. This approval is normally valid for a period of 6 months, but may be extended by another 6 months.
Two Free Zones, namely the Qatar Financial Centre (QFC) and the Qatar Science and Technology Park (QSTP), have been established, with tax & duty incentives provided. Currently, Qatar’s government is encouraging foreign investment by streamlining licensing and financial sector regulations, with the corporate tax rate set at 10%. More recently, Qatar has started work on the country’s new special economic zones, which will be divided into three projects, namely the Ras Bufontos, the Umm Al Houl and the Al Karaana, to focus on different sectors. These three zones are expected to be completed in phases between 2017 and 2022 and offer favorable tax & duty incentives.
Free Trade Agreements
Qatar is a member of the Greater Arab Free Trade Area Agreement (GAFTA) that came into force in 1998. Under the GAFTA, Qatar enjoys free trade with Algeria, Bahrain, Egypt, Iraq, Kuwait, Lebanon, Libya, Morocco, Oman, Palestine, Saudi Arabia, Sudan, Syria, Tunisia, the UAE and Yemen.
As part of the GCC, Qatar also holds free trade agreements (FTAs) with Singapore, New Zealand and the European Free Trade Association (EFTA), the latter of which consists of Switzerland, Norway, Iceland, and the Principality of Liechtenstein. FTA negotiations with the EU, Japan, China, India, Pakistan, Turkey, Australia, Korea and the Mercosur (Brazil, Argentina, Uruguay, Paraguay and Venezuela) are also on-going.
Qatar has entered into double tax agreements (DTAs) with over 40 countries including the Chinese mainland and a Comprehensive Double Taxation Agreement with Hong Kong, which was concluded in 2013.
Hong Kong's Trade with Qatar
Hong Kong's total exports to Qatar increased by 10.7% to US$70 million in the first seven months of 2017, after dropping by 10.5% in the whole year of 2016. Major export items included telecom equipment and parts (US$24 million, 34.6% of total), jewellery (US$17 million, 24% of total) and travel goods & handbags (US$6 million, 8.1% of total).
In the same period, Hong Kong's imports from Qatar rose by 20.8% to US$61 million, after dropping 9.9% in 2016. Of the major imports, petroleum oils (other than crude) topped the list (US$23 million, 37.9% of total), followed by pearls, precious & semi-precious stones (US$18 million, 28.6% of total) and polymers of ethylene in primary forms (US$12 million, 19.5% of total).
More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.
 Since offshore trade has not been recorded by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.