In 2017, a split hit the Gulf Cooperative Council (GCC), with Qatar isolated by the group’s other members. While some argue the economic blockade imposed by the likes of Saudi Arabia, the United Arab Emirates, Bahrain and Egypt has strengthened Qatar’s economy, it undoubtedly had a negative impact on its levels of foreign direct investment (FDI).
Qatar’s FDI inflows were pummelled by the economic blockage, falling from $986m in 2017 to -$2.8bn in 2019, according to the UN Conference on Trade and Development.
In January 2021, the GCC countries signed the Al Ula Declaration, lifting the economic blockades and resuming diplomatic relations between the countries.
How the blockade forced Qatar to up its FDI game
The blockade forced Qatar to increase its efforts to attract FDI, according to the CEO of the Investment Promotion Agency of Qatar, Sheikh Ali Alwaleed Al Thani. “The three years preceding this reconciliation signing represented a catalyst for the country to accelerate its economic development and diversification strategy while tapping new markets and reinforcing the strength and resilience of the economy,” he says.
Qatar’s capital city, Doha, will be central to these plans. The country has a population of just 2.9 million, and most people and economic activity exist in and around the capital.
Doha was named the capital when Qatar declared independence in 1971, and has since grown to become a teeming metropolis of skyscrapers, thanks principally to Qatar’s immense gas wealth.
Qatar hopes that its hosting of the FIFA World Cup football tournament in 2022 and eased relations with its neighbours will help raise Doha’s international profile and precipitate a strong rebound in FDI.
Measures to attract greater FDI in Doha
Like other countries in the GCC, Qatar has eased restrictions on foreign investment in recent years as the need to attract private capital to diversify their oil- and gas-dependent economies becomes more pressing.
Qatar is the world’s second-largest exporter of liquefied natural gas, and its gas wealth and small population have led the country to have one of the highest per capita incomes in the world.
Russia and Qatar enjoy remarkable multidimensional and rapidly growing ties. Sheikh Ali Alwaleed Al Thani, Investment Promotion Agency of Qatar
While gas until recently was seen as a bridging fuel for the world’s transition away from hydrocarbons, organisations such as the International Energy Agency are increasingly calling for an immediate phasing-out of global gas use, making the need for Qatar to build up other sources of economic activity more urgent.
In 2019, the country introduced a foreign investment law that allowed 100% foreign ownership in certain sectors and for foreign investors to hold at least 49% of the stock of a listed company (more if authorised by the government).
Then, in 2020, Qatar introduced a public-private partnership (PPP) law that Al-Thani says “reinforces investors as genuine, long-term partners in our economic diversification strategy”. PPP contracts provide investors with co-ownership of infrastructure assets they have developed under long-term concessions.
Al-Thani predicts these liberalisation efforts could result in more than $1.5bn in additional FDI inflows. He lists the country's major investment targets being in fintech, advanced manufacturing, healthcare, smart cities, logistics and supply chains, education (supported by 10% of the 2020 state budget, or $6.1bn), artificial intelligence (AI) and information and communications technology (ICT).
Attracting financial services firms to Doha
Doha has ambitions to emulate the FDI flows from financial services firms seen in neighbouring cities such as Dubai.
QFC and the Qatar Free Zones Authority now allow 100% foreign ownership and a range of tax incentives to attract companies.
Investment Bank EFG-Hermes has estimated that the introduction of 100% foreign ownership could create inflows of $1.5bn into listed companies in Qatar.
Qatar also has one of the lowest corporate tax rates in the world at just 10%. Qatar Chamber, a representative group for the country’s companies, estimated in August 2020 that FDI inflows totalled $4.5bn over the previous five years.
Al-Thani says “investment security” and an increased focus on sustainable investment are major selling points to potential investors, highlighting the AA ratings from international ratings agencies which remained stable during the Covid-19 pandemic.
The simmering tensions between Qatar and its neighbours, particularly the UAE and Saudi Arabia, had threatened to damage this reputation for stability, which is why the end of the blockade was so crucial for the country.
Qatar looks to strengthen links with Russia
While the prospect of regional cross-border investment has been enhanced by the lifting of the economic embargo, Qatar is also building relationships further afield.
In early June 2021, Qatar signed three memoranda of understanding at the St. Petersburg International Economic Forum to support Russian investment into the country. One is with Russian cybersecurity company BI.Zone, another is for the provision of transport, accommodation and consulting services for sporting events by Accord Pitch Doha, and the third is supporting investment in greenhouses in Qatar.
“Russia and Qatar enjoy remarkable multidimensional and rapidly growing ties as both states continue to bring progress to their shared goals of increased economic performance, quality of life, human capital development and further diversification of industries,” says Al-Thani.
He adds that there are 82 Russian companies operating in Qatar, and he sees opportunities for further Russian investment in fintech, advanced manufacturing, healthcare, logistics, education, ICT and AI.
Qatar's goals for the 2022 World Cup
Qatar’s spending on the 2022 World Cup has been enormous, with Invest Qatar announcing in May 2021 that the country had committed $200bn in investments in supporting infrastructure for the event.
Qatar is a centre for Islamic and Arabic heritage, as well as a modern-day leader in sports and media. Sheikh Ali Alwaleed Al Thani
All the stadia being used are being built from scratch specifically for the event, including the 80,000-capacity Lusail Stadium, designed by Foster + Partners and located in a new development on the northern outskirts of Doha, which will host the final.
Construction of stadia has attracted international criticism due to the conditions for migrant workers involved in the projects, with claims that more than 1,000 workers have died. Qatar's Supreme Committee for Delivery & Legacy has defended the working conditions of labourers used for the stadia however and says that all workers have been protected by its Workers' Welfare Standards.
FIFA was criticised for awarding the World Cup to Qatar given the lack of existing infrastructure and also for the need to move the tournament to winter months due to summer temperatures in the country of more than 40 degrees Celsius.
Despite the challenges created by the Covid-19 pandemic, event organiser FIFA said in November 2020 that three of the stadia had been completed, and the remaining five are on schedule to be finished “well in advance of the tournament”.
All but one of the eight stadia for the event are in or on the outskirts of Doha and are intended to leave a legacy centred around leisure, sports and entertainment activity after the World Cup. Invest Qatar is aiming for 5.6 million tourist arrivals in 2023.
The government says it has committed $200bn to infrastructure investment to boost tourism, with projects to improve the capital city such as the Doha Metro, the National Museum of Qatar and the Msheireb Downtown Doha development.
Al-Thani says: “Qatar is a centre for Islamic and Arabic heritage, as well as a modern-day leader in sports and media. The country is building a cultural hub that is equally attractive to investors, expats and visitors. Qatar is also the first Gulf nation to offer permanent residency for expats.”
Despite the controversy and criticism surrounding the event, Qatar’s government is hoping the World Cup promotes Doha as a tourism and investment destination. Given the damage caused by the recent economic blockade, keeping tensions low with its neighbours will also be crucial to the city’s FDI prospects.
This article is part of Investment Monitor’s Future of Middle Eastern Cities series. Other articles in the series are: