An IMF report of 2003 announced that Qatar has the highest growth rate in the world and the budget surplus for 2004 is expected to exceed $1 billion. Ironically, because the economy is functioning so well at the moment, and with energy prices high, the privatization process is being held up. Qatar promised privatizations in petroleum, iron and fertilizers. Qatar still lacks diversification and Qatar Petroleum owns approximately 85% of the economy.
The frantic economic activity has generated a construction boom.
The creation of the Dubai International Financial Centre and Dubai Metals and Commodities Centre will dramatically shift the focus on to the services centre in 2004.
Principal Growth Sectors
Over the past few years, the relative importance of the non-oil sector in the country's GDP ranged from 63 to 69 percent. A review of the performance of the non-oil sector and sub-sectors indicate that agriculture and fishing, electricity and water, building and construction, and communications have all increased their share of GDP while manufacturing industries and services have decreased their share.
Foreign business involvement in the Qatari market since the early 1960s consisted principally of providing a wide range of products, including automotive and spare parts, as well as oil field supplies. In recent years, however, American technology, products and services were imported by various sectors of the Qatari market, including those which were previously dominated by European suppliers. Such sectors are electricity and water, oil and natural gas development and enhancement of recovery of these resources.
The Government of Qatar encourages foreign investment, particularly in joint ventures with Qatari partners. Wholly foreign-owned firms are permitted to operate in Qatar, provided they have a local agent or a sponsor. Foreign-owned firms and the foreign-owned portions of joint ventures are subject to corporate income tax, ranging from 5 percent to 35 percent of net profits. Qatari and GCC nationals and business concerns are exempted from the income tax provisions.
Foreign investors are not allowed to expand their investment beyond limits set forth in the law. An Emiri decree, however, can allow the expansion of a foreign investment in Qatar. Transfer of technology, management and marketing, as was the case in establishing steel, fertilizers and petrochemical industries in the 1970s, were taken as part of the foreign equity (20 or 25 percent).
Qatar, along with the other countries of the Gulf Cooperation Council has adopted a privatization policy, however, full realization of these policies will require additional revisions to the laws relating to foreign investment in business associations in Qatar. The establishment of the stock exchange is expected to facilitate privatization.
The financial sector in Qatar is dominated by the Qatar National Bank. The bank has extremely close ties with the bank, who is also the principal shareholder. Its capital to assets ratio, standing at 34%, tops the world league.
The Qatar Central Bank was established in 1973 as the Qatar Monetary Agency. In addition to supervising, coordinating and controlling the banking sector, the QCB also regulates insurance and controls the circulation of currency. The QCB sets interest rates for deposits and credit facilities maintained in QR.
There are more than a dozen commercial banks operating in Qatar. A banking license may be issued to a banking entity whose paid-up capital is at least QR 5 million. If the banking entity is a foreign subsidiary, it must maintain that amount of retained or operational capital in Qatar. Banking entities are required to retain a reserve of 100 percent of their paid-up or operational capital in Qatar. Deposits and credit facilities in foreign currency are subject to variable interest rates determined by the banks in accordance with prevailing market terms.
The Qatari Riyal is freely convertible on world financial markets. Currency exchange is regulated by Law No. 4/1982 which controls and sets licensing.
Restrictions exist on activities dealing with currency exchange, traveler's checks, valuable metals and personal transfers.
Law No. 4/1995 established the Doha Stock Exchange (DSE), and governs transactions in securities, including bonds and shares of Qatari shareholding companies, government or quasi-government, including government companies, bonds and negotiable instruments and other securities which are authorized for trading. The QCB and all licensed commercial banks in Qatar are members of the Doha Stock Exchange. Several trading activities are limited to brokers, and there are licensing rules applicable to brokers.
The formal stock exchange began operations in the first quarter of 1997. An international consultant was appointed in November 1996 to assist in drawing up its regulatory framework. The firm will also make recommendations to the DSM steering committee on whether the exchange should use electronic or floor-based trading. Initially, trading will be confined to Qatari nationals, although GCC nationals and foreigners may be allowed to participate at a later date. The DSE will be autonomous but indirectly overseen by the Finance, Economy and Trade Ministry.
Islam is Qatar's official religion, and Islamic jurisprudence, the Shar'ia, is recognized as the basis of the country's legal system. Civil legislation is based upon codification. As stated in the provisional Constitution, Qatar is a monarchy with full powers vested in the Emir as the Head of State.
The Common Court System
Justice is administrated by several courts: the Higher Criminal Court, the Lower Criminal Court, the Commercial and Civil Court, the Labor Court and the Court of Appeal. In addition, the Shar'ia Courts determine matters regarding the personal status of Muslims and civil cases where the parties submit themselves to the jurisdiction of the Shar'ia Courts. The jurisdiction of the Civil Court covers all civil and commercial disputes. There are no monetary limitations regarding the referral of disputes to the Civil Court to be heard by a single justice. Judicial independence is guaranteed by the Provisional Constitution.
The Labor Law No. 3 of 1962 (as amended) governs industrial relations in Qatar. Under the Labor Law, priority in employment is given to Qataris, then to nationals of Arab countries and, lastly, to other non-Qataris. Non-Qataris can be employed only if they obtain a work-permit from the Department of Labor in the Ministry of Labor and Social Affairs. The applicant must have a valid passport and a resident permit and must be of good conduct and reputation. Generally, permits are valid for two years.
There are no fixed minimum wages in Qatar. There are no pension schemes for non-Qataris. There are no labor unions in Qatar, and strikes, lockouts and slowdowns are prohibited. Workers are entitled to one day off per week and to other benefits such as holiday on the occasion of Ramadan, annual paid leave of fourteen days, illness pay and severance pay. Industrial disputes are resolved by the Department of Labor in the Ministry of Labor and Social Affairs. The matter may then be referred to the Labor Court for a final decision.
Qatar is a signatory to a number of international environmental conventions, including: The Convention of the Prohibition of the Development, Production and Stockpiling of Bacteriological (Biological) and Toxin Weapons, and their Destruction; International Convention for the Prevention of Pollution of the Sea by Oil, 1954 Concerning the Protection of the Great Barrier Reef of Australia (and amendments thereto); Agreement for the Establishment of a Commission for Controlling the Desert Locust in the Near East; Kuwait Regional Convention for Co-Operation on the Protection of the Marine Environment from Pollution; and the Treaty on the Prohibition of the Emplacement of Nuclear Weapons and other Weapons of Mass Destruction on the Sea Bed and the Ocean Floor and in the Subsoil Thereof.