Major Economic Indicators
- Qatar’s real GDP growth expanded by 4% year-on-year (YOY) in Q4 2015 on the strength of its non-oil sector. The country is projected to expand by 3.4% in 2016 due to massive infrastructure investment and further economic diversification.
- In preparation for the 2022 FIFA World Cup, along with the Qatari bid to host the 2024 Olympics, 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 in recent years, leaping from US$77 million in 2011 to US$354 million in 2014.
- Qatar is a member of the GCC and GAFTA. It has also entered into DTA 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 dropped by 17.8% YOY to US$30 million in the first three months of 2016, while imports from Qatar went down by 36.5% YOY to US$25 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 90% of export earnings. With a negligible agriculture sector, industry represents about 59% of the Qatari GDP, with the rest attributable mostly to services.
Qatar’s real GDP expanded by 4% YOY in Q4 2015 on the strength of its non-oil sector, which expanded by 7.4% in the same period. Robust growth was seen in the construction, trading and finance sectors on the heels of a 10% increase in Qatari population in 2014. The share of non-oil sector in the country’s nominal GDP increased from 53.1% in Q4 2014 to 67.5% in Q4 2015, with the construction sector rising 20.2% YOY as infrastructure building accelerated.
The Qatari authorities are optimistic over the expanding contribution of the non-oil sector, also expecting the start-up of the Barzan gas project to boost the economy. The IMF expects the Qatari economy to expand by 3.4% in 2016, supported by massive public investment for the 2022 FIFA World Cup and further economic diversification.
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 (2015) following Russia and Iran. 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 US$76,576 ranked as the world’s third highest in 2015, only after Luxembourg and Norway. 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. Despite the erosion of exports and fiscal revenues due to lower oil and gas prices, Qatar recorded a budget surplus of 10.3% in 2015. According to the IMF, however, the country is expected to post a deficit of 2.7% in 2016, the first time in 15 years. Following a 30% hike in gas prices by the state fuel company in January 2016, the Qatari authorities announced that fuel subsidies will be removed from May 2016 as part of its subsidy reforms.
Qatar uses its trade surplus accumulated from oil and gas wealth to establish the Qatar Investment Authority (QIA). In 2014, QIA indicated that QIA had about US$110 billion in assets under management. 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, plus the Qatari bid for hosting the 2024 Olympics, the government plans to spend up to US$205 billion over 2013-2018 on infrastructure projects. Massive infrastructure projects are underway including the construction of stadiums, rail connection and highways.
To strengthen its tourism capacity, Qatar plans to increase the number of hotel rooms from the current 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 2015-2016 published by the World Economic Forum, Qatar ranked 14th out of 140 economies, and was the most competitive economy in the Middle East leading the UAE (17th). Qatar’s competitiveness is underpinned by its macroeconomic stability and high efficiency in the goods market, which rank globally 2nd and 5th 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 MEC 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 limit 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 2014, cumulative FDI in Qatar reached US$31 billion, up 3.5% 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 2011 to US$354 million in 2014.
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 members 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 5.4% for agricultural goods and 4.6% for non-agricultural goods in 2013.
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 until 2012. The Qatar Distribution Company (QDC), a subsidiary of the national air carrier Qatar Airways, has been granted the sole authority to import pork and 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 Group of Mercosur (Brazil, Argentina, Uruguay, Paraguay and Venezuela) are also on-going.
Qatar has entered into double tax agreement (DTA) with over 40 countries including the Chinese mainland and concluded a Comprehensive Double Taxation Agreement with Hong Kong in 2013.
Hong Kong's Trade with Qatar^
Hong Kong's total exports to Qatar dropped by 17.8% to US$30 million in the first three months of 2016, after increasing by 10.3% in the whole year of 2015. Major export items included telecom equipment and parts (US$10 million, 32.8% of total), jewellery (US$6 million, 20.9% of total) and travel goods & handbags (US$3 million, 9.9% of total).
Owing to the sharp decline in international oil prices, which depress prices of petroleum products, Hong Kong's imports from Qatar went down by 36.5% to US$25 million in the period of January-March 2016, after dropping 44.7% in 2015. Of the major imports, petroleum oils (other than crude) topped the list (US$19 million, 74.3% of total), followed by polymers of ethylene in primary forms (US$2 million, 7% 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.