An economic blockade on Qatar that’s being upheld by its Middle Eastern neighbors has forced the country to step up reforms and its quest for foreign inflows, an investment head told CNBC on Thursday.
“We are seeing a shift in Qatar economics and the entire region. As you know, Qatar is currently going through a blockade from neighboring countries but that hasn’t been all that bad,” Yousuf Al-Jaida, chief executive of the Qatar Financial Centre, a key agent for attracting foreign direct investment (FDI) to the state, told CNBC’s Nancy Hungerford.
“It’s been a catalyst for change for the entire nation,” Al-Jaida added.
Qatar is still experiencing a Saudi Arabian-led blockade of the country after a high-profile diplomatic rift with its influential and powerful neighbors.
The Saudi Kingdom, along with Bahrain, the United Arab Emirates and Egypt imposed an economic blockade on (and severed diplomatic ties with) the small Arab state in June 2017, accusing it of supporting terrorism. Qatar vehemently denies the accusations.
The blockade has impacted air travel, shipping and trade routes and media, among other sectors. However, the economic impact of the blockade has been seen as short-lived, the International Monetary Fund said in May.
“Growth performance remains resilient. The direct economic and financial impact of the diplomatic rift between Qatar and some countries in the region has been manageable,” the IMF said in its recent report published earlier this week on the country in May, predicting respectable gross domestic product (GDP) growth of 2.6 percent in 2018.
‘Doing things differently’
Al-Jaida said that as a result of the blockade, Qatar’s government was working to attract more foreign direct investment. The Qatar Financial Centre (QFC)’s website states that businesses setting up operations in Qatar can “enjoy competitive benefits” in the country, including a legal environment based on English common law, the right to trade in any currency, 100 percent foreign ownership, 100 percent repatriation of profits and a 10 percent corporate tax on locally sourced profits.
“We’ve allowed 100 percent foreign ownership across all sectors, we’ve allowed visas from 80 different nations and (allowed citizens) to get visas on arrival, which hasn’t happened in the past ever before, and we’re at looking at also doing things differently,” Al-Jaida said.
As trade routes and relations had been interrupted in the region, the government was focusing on developing its ties with ‘friendly nations.”
“It’s difficult to travel to Qatar from neighboring blockade countries so we’re taking advantage of this and we’re creating our own ‘hub’ model for friendly nations, if you will, between Qatar and Turkey, Oman, Kuwait and South-East Asia, and we’re allocating funds to that to enable multinationals to take Qatar as a hub for their expansion in the greater Middle East and South East Asia.”
Al-Jaida said FDI was the most prioritized item on the Qatari government’s agenda. FDI to Qatar increased 4 percent in 2017, he said, and the Qatar Financial Centre saw a sharp uptick in new firms being licensed to operate in Qatar, up 66 percent from the previous year.
The total number of firms on the QFC platform has reached 461 (as at 31 December 2017), compared to 348 firms at the end of December 2016, a 32.5 percent increase year on year.
There’s an explanation for that growth in business interest, Al-Jaida said.
“Companies that used to service Qatar from outside the country can no longer do that so they’ve been relocating to Qatar to service their clients, which means more FDI, more companies on the ground and more jobs being created because of the blockade. So it’s a very interesting dynamic that’s happening during the blockade and we expect this to continue all the way to 2022,” he said.
Qatar hosts the soccer World Cup in 2022 and hopes the tournament will provide an extra economic boost.