Qatar – new investment law, new opportunities for investors

published on February 1, 2019, reading time approx. 4min

 

​Discussion were on since May 2018 and, as promised, in the first days of 2019, the new Qatar Foreign Investment law has been officially announced by the Government. The new law n. 1 of 2019 is the first official legislation issued in 2019 by the Emir of Qatar Tamim bin Hamad Al Thani, an act of considerable practical and symbolic importance.

 


 
Qatar Law n. 1 of 2019 opens to foreign companies and individuals the possibility to directly invest in almost all the economic sectors in Qatar. In other words, the obligation to have a local partner holding at least 51% of the shares in any limited liability company or acting as sponsor, as established by the Qatar Foreign Investment Law n. 13 of 2000, has been abolished.
   
Until today, foreign companies or individuals wishing to invest in Qatar, were obliged to have a local partner or sponsor and operate in joint venture with him. The sole exception was established for the international governmental tenders (mainly issued for construction and infrastructure projects), where the foreign company, in case of positive award of the project, was allowed to establish a branch in Qatar with a license limited to the activities related to the awarded projects. Such branches were not allowed to freely compete in the market against the local companies.
 
The new Law has changed the entire regulation framework of foreign investments. The definitive draft of Law n. 1 of 2019 is not yet available in the Official Gazette of Qatar and the executive regulations are also missing. Nevertheless the official press announcement, directly issued by the Emiri Diwan, is extremely clear and leaves no room to interpretation. The Qatari economy will open to foreign investments in almost all sector and at a level still unknown to the other states of the Gulf. The sectors excluded by this new legislation are the following: bank, insurance, commercial agency activities, security and defense and other possible sectors indicated by the Ministry of Economy.
 
This announcement has arrived in a very particular moment for the history and geopolitical situation of Qatar. Just eighteen months have passed from the start of the country blockade, unilaterally operated by Bahrain, Kingdom of Saudi Arabia and the United Arab Emirates among others, which still persists. This unilateral blockade (not recognized in any legislation of any of the countries operating it and not even implemented by any international organization, such as the GCC or the UN) consists in the air, naval and road blockade of Qatar, aimed to remove and change the government of the country. The negative effects of the blockade have progressively diminished and Qatar managed, in an extremely effective way, to find new and reliable supply sources due to a very able and effective logistic reorganization, mainly operated by Qatar Airways, the national airline company. The logistic support together with a wise diplomatic campaign and the huge amount of financial reserves of the country, took Qatar outside the danger situation and now all the economic indicators witness that the huge losses suffered by the stock exchange have been fully recovered and the economic outlook is positive. It is not a coincidence that all the international financial rating companies have changed their prospective outlook from negative to stable in the last six months. S&P rating for Qatar is “AA-”, back to stable from 7th December 2018, Moody’s rating is “Aa3” back to stable from 13th July 2018 and Fitch outlook is “AA-” back to stable from 5th June 2018.    
      
The FIFA World Cup 2022, one of the world top sport events, is also approaching. The expectations for the first Arabic World Cup are huge, also thanks to the progresses made in the management of the projects aimed to guarantee a successful event, in particular the stadiums and the new metro network. All the stadiums are close to completion (the Khalifa stadium has been already inaugurated), while the metro network (the first precedent of an entire network of metro lines built in parallel) will be fully operational in 2020, well in time for the Confederation Cup of 2021 and the Word Cup of 2022. After an initial doubtful approach to the effective capabilities of Qatar to organize such a huge event, now even FIFA appears fully confident of the Qatar capacity to deliver. It is not a coincidence that FIFA is pushing to increase the number of the participating teams from 32 to 48 when such increase was originally scheduled for the 2026 World Cup (USA, Canada and Mexico edition).
 
Qatar is now ready to make the necessary steps to transform its economy from being fully dependent on energy commodities to a hub for foreign investments, not only in Qatar but also in other regions. To do so a free and diversified economy is required and this legal intervention is just the first step.
 
It is premature to anticipate the precise contents of the legislation. The declaration of the Government is extremely clear in indicating that almost all of the sectors of the economy will be open to foreign investments. There are some other anticipations that refer of economic incentives open also to foreign companies and the possibility for foreign companies to directly lease or even purchase plots of land. The fact that similar expectations have not been achieved by the legislation of the United Arab Emirates is not a reason to be doubtful. Qatar is different and often much more innovative compared to the other Gulf countries. At the moment we can confirm the existence of the law and its main contents, officially announced by the Government press release. We will maintain a close attention on the developments and we will communicate any official update on this new legislation that appears to be revolutionary. Once the legal framework will be completely clarified, we will communicate the outcome and organize ad hoc events for our actual and potential clients both in Europe and Qatar.

 

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Eugenio Bettella

Partner

+39 049 8046 911

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Guido Maria Solari

Associate Partner

+97 433 841 267

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