The brief lull witnessed by Qatar in attracting foreign direct investment (FDI) seems to be over, with Morgan Stanley Capital International (MSCI) announcing the upgrading of Qatar’s status from frontier to emerging market in May 2013.
Along with the world’s highest GDP per capita, largest surpluses and fastest-growing non-oil sector, this change in status will draw the attention of foreign institutional investors to local businesses, including the equity markets. The Qatar Exchange has already urged the government to increase the cap on foreign ownership limits, which are at or near 25% of market capitalisation at present. It is estimated that FDI inflows will range between QR1.275 billion ($350 million) and QR3.64 billion ($1 billion) once the MSCI announcement comes into effect from May 2014.
The incentives working in favour of creating a conducive atmosphere for FDIs include the government’s liberal policies to lure foreign investors, providing them with appropriate business structures, fixing a low corporate income tax of 10%, no tax on the income of expatriates, facilities like well-structured schools and universities for their children, and air connectivity to major countries by its national carrier, Qatar Airways.
A survey by Dun & Bradstreet has revealed that business optimism in Qatar soared in Q4 of 2013 to its highest level in nearly three years. Confidence has particularly peaked in financial, real estate and business services to its highest level in three years, indicating the strong growth and resilience of the country’s economy.
While the outflows of FDI from Qatar declined by 8.5% to QR6.552 billion ($1.8 billion) last year, the inward fund flow saw a marginal increase of 0.6% to QR1.19 billion ($327 million), according to the United Nations Conference on Trade and Development (UNCTAD)’s “World Investment Report 2013”.
“Foreign investors have injected significant cash into Qatar in 2013. Year to date, net buying of Qatar-listed equities by foreign investors exceeds QR2 billion ($550 million).”