New investment law to give foreign investors more access to local market

In mid-2015, Qatar Financial Center (QFC) appointed its new CEO, Yousuf Al-Jaida, who, after having joined the QFC Authority in 2010, had also served as its Deputy CEO and Chief Strategic and Business Development Officer.  Speaking of Mr. Al-Jaida at the moment of his appointment, the Minister of Finance and Chairman of the QFC Authority, Ali Shareef Al-Emadi, declared that the new chief executive was a driving force of QFC’s strategy and would “ensure the QFC continues to contribute to Qatar’s economic diversification” – a role that Mr. Al-Jaida has taken on in earnest.

His recent appointment comes at an exciting time for QFC, as it continues to grow in the local market as well as in its offerings to international firms looking to expand their operations in Qatar. Mr. Al-Jaida is to be instrumental in the implementation of a new law which will improve and ease access for foreign businesses looking to operate in Qatar.

Since its establishment in 2005, the QFC, located in Qatar’s financial center, Doha, has been a gateway to onshore business and has facilitated foreign investment through its unique business and financial platform. QFC has its own legal, regulatory, tax and business infrastructure and environment.  It allows for 100% foreign ownership and unlimited repatriation of profits, along with a corporate tax of 10% on locally sourced profits. Unsurprisingly, the QFC has been in steady growth since its inception.

With currently more than 300 companies registered, members represent a spectrum of sectors and are a combination of domestic and foreign firms. It is clear that the QFC has been diversifying its registry, enveloping various sectors, both local and international – in fact, there has been a 25% year-to-date increase in the number of non-financial sector firms licensed, and 30% of firms are now Qatari entities. Some international firms include Bennett Jones LLP (legal services), Accenture (consulting), insurance companies such as AXA, and banking giants like Deutsche Bank, Citibank and UBS. In this way, QFC has been contributing to Qatar’s growing regulated and non-regulated sectors for over a decade.
In a recent press conference, QFC’s Chief Commercial Officer, Raed Al Emadi, projected an approximate growth of 10% in the number of registered companies in 2016 compared to 2015 – a promising figure given the global economic environment and the steady decline of oil prices.

GCC Financial Center of the Year
The QFC’s impact is expanding beyond Qatar’s borders, as it positions itself at the forefront of the development of financial markets throughout the Middle East, continuing to gain in the region, and becoming increasingly competitive, comparative to the Dubai International Financial Center (DIFC).

In 2015 the QFC was awarded as the GCC Financial Center of the Year in recognition of its achievements in 2014, including its 20% growth and the expansion of its unique platform.  

Sadiq Hamour, Director of Business Development at the QFC, accepted the award, stating “At the QFC, we remain committed to facilitating our firms’ success by both enabling local firms to expand regionally and attracting international firms to Qatar to benefit from the growing business opportunities here, thereby allowing us to continue contributing to the diversification of both Qatar’s and the region’s economies.”

Indeed, Qatar’s economy is moving away from one founded solely on the exploitation of its petroleum and natural gas resources, and towards one that is supporting the nation’s development as well as the region, particularly their markets, expanding the private sector, and fostering and strengthening ties between its energy-based economy and global financial markets.

Diversifying the economy in this manner is not the only way Qatar is fueling its growth. It is also moving toward transforming itself into a knowledge-based society. At a QFC-organized event in June, attended by some 450 guests, Mr. Al-Jaida spoke of Qatar’s potential: “Qatar has the necessary means, resources and talent, and today more than ever, the opportunity to lead by example. And this is exactly what the QFC is doing. We are attracting international expertise, promoting knowledge-sharing, enabling local firms to expand regionally, contributing to our nation’s economy, and investing in our youth.”

New investment law
Earlier this year, the QFC announced that a new law is to be passed by the end of 2016 that will ease the way for all types of foreign investment. Its main purpose is to simplify procedures for foreign investors, and to streamline disparate aspects of existing regulation with an aim to increase foreign direct investment (FDI) and to aid the nation’s efforts in its economic diversification.

According to Mr. Al-Jaida, the new law will expedite access to the onshore business environment, giving foreign investors more access to the local market and listing on the stock exchange.

“The new set of laws, which will be more aligned with the rules of Qatar Central Bank (QCB) and other regulatory bodies, will provide the QFC-registered companies more access to the local market, including listing on the Qatari [stock exchange] and also help launch Exchange Traded Funds (ETFs),” he says.  

Coincidentally, the first private company to list on the stock exchange in six years is one that is licensed by the QFC – the Qatar First Bank (QFB).

Founded in 2008, the QFB announced that it would list all its shares on the QSE in April, making it the first listing of a Qatari entity licensed by the QFC. Many hope that this will increase activity in the Qatari stock market, and, in particular, boost the participation of the banking and financial services sector.

In addition, the new law will also introduce regulatory reforms that are specifically aimed at asset management, banking and insurance.

“We are looking into developing the regulatory framework with the government before we proceed with a full force in attracting regulated companies,” Mr. Al-Jaida explains. “There are a lot of efforts on the ground with the QFC, QCB, and QFMA (Qatar Financial Market Authority) to enable a ‘best-in-class’ regulatory framework in Qatar to attract companies in those areas”     

Asset management is certainly a sector that the QFC sees as on the rise. “Asset management is something that we see growth coming from in the future,” says Kamal Nagi, QFC’s Chief Strategic and Business Development Officer.  
In talks with the press, Mr. Al-Jaida emphasized the plan for a combined regulatory framework between the QFC, QFMA and QCB to regulate asset management.

“For asset managers, it is important to be able to set up products quickly, to be able to have access to the stock exchange in terms of listing new products and to be able to raise capital either from the local market or from abroad,” says Mr. Al-Jaida.

Without a proper market set up, he notes, there is not much to attract international asset managers.

“The QFC law allows more room for onshore access,” he continues. “There are certain efforts that cannot be done unless these laws are revised. For the next expansion phase, these issues have to be addressed in order to attract more companies. If you want a better market and better stability within the market, FDIs would have to be comfortable in a friendly business environment.”