Commentary | Sultan Al-Abdulla & Partners

As part of its effort to diversify its economy away from a reliance on petroleum, the State of Qatar has initiated numerous market liberalisation programmes to make foreign investment into the country more attractive. While these programmes were at various stages of implementation, the imposition of the blockade by some neighbouring countries has ultimately driven home the importance of creating more opportunities for foreign investment and put these programmes on the fast track. Additionally, with construction on the infrastructure for the FIFA World Cup 2022 continuing apace, most of the roads, metro and stadia infrastructure is nearing completion. As a result, Qatar’s economy has largely recovered from the blockade’s effects thanks to a number of recent developments.

The cornerstone of Qatar’s foreign investment legislation is Law No. 1 of 2019 (‘Foreign Investment Law’). Previously, the amount of permissible foreign shareholding was 49% of the shares in a limited liability company (unless permission for a higher shareholding has been granted by the Ministry of Commerce and Industry). The Foreign Investment Law no longer limits such higher share ownership to companies operating in a limited number of sectors. A foreign shareholder may now own more than 49% in a commercial company operating in any sector (with the exception that an LLC may not engage in banking or insurance business, and foreigners are prohibited from acting as commercial agents). However, we expect that obtaining special dispensation for a higher shareholding by foreigners will be easier under the new law. Further, participating in real estate trading is no longer prohibited to foreigners.

Another significant recent development has been the almost total abolishment of the ‘kafala’ or sponsorship system in Qatar. Prior to this development, expatriate employees were not permitted to leave the country without the permission of their employer. As of 28 October 2018, expatriate employees may travel freely in and out of the country (unless they are one of the 5% of employees designated by the employer that still require an exit permit).

In addition, as part of its drive to make Qatar a more attractive investment location, the Qatar Free Zones Authority was established to supervise several new free zones the first of which, Ras Bufontas, is expected to come online in September 2019. The free zones offer significant investment incentives, including bespoke legislation that permits 100% foreign ownership, tax-free operations for a period of 20 years, and a first-class infrastructure.

For those investors seeking a longer-term investment, Qatar has recently promulgated Law No. 13 of 2018, enabling foreign investors to obtain permanent residency status. The following types of current residents are eligible for the permanent residency permit: (i) residents who have a normal residency permit, have resided for 10 continuous years in the country, and were born in Qatar, and (ii) residents who have a normal residency permit, have resided for 20 continuous years in the country, and were born abroad (i.e. outside of Qatar). New applications for permanent residency permits will be reviewed by the Ministry of Interior, with a limit of 100 such permits being issued per year. All applicants must be fluent in Arabic.

Qatar has also enacted Law No. 3 of 2019, amending the Civil and Commercial Procedural Law (‘Amending Law’). Under the Amending Law, several amendments were introduced to speed up court rulings and other procedures related to experts. The enforcement of judgments will be conducted through a new department named the Enforcement Management Department, with enhanced procedures to ensure efficient handling of enforcement. The Amending Law also provides that the parties to a dispute will not be allowed to adjourn the proceedings for the same reason more than twice and such an extension, if granted, will not exceed two weeks, potentially decreasing the duration in reaching finality for cases.

Qatar’s construction sector has seen tremendous activity in anticipation of the FIFA World Cup in 2022. Although the World Cup construction continues unabated, the number of construction disputes before local courts and arbitral tribunals has increased exponentially, leading to increased case work for local firms.

While Qatar has been working to diversify and liberalise its economy, it has not neglected its energy sector. As the leading exporter of natural gas, Qatar’s energy sector has seen several significant developments. Late last year, Qatar announced that it was leaving the Organization of the Petroleum Exporting Countries (OPEC). Additionally, the lifting of the moratorium on development of the North Field, the world’s largest non-associated gas reservoir, and the implementation of the North Field Expansion Project by Qatar Petroleum, should boost Qatar’s liquefied natural gas output from 77 million tonnes to 110 million tonnes. The front-end engineering design contract for the project has already been awarded and Qatar Petroleum expects to issue onshore engineering, procurement and construction contracts by year end.

According to the International Monetary Fund executive board, Qatar has successfully adjusted to the economic impact of the blockade. As Qatar’s economy continues to grow, more foreign investment opportunities will become available, increasing its appeal. By continuing to pursue further market liberalisation and introduce additional incentives for foreign investors, Qatar is on track to continue its rise as a leading destination for doing business both regionally and globally.