Qatar Country Report

Infortal Worldwide Geopolitical Risk Summary

Qatar’s placement in regional geopolitics renders and reliance on commodity prices in the oil and gas sectors render it volatile due to security tensions in the Gulf. Qatar’s close ties with Iran render Western companies doing business there at risk of violating sanctions in the US and Europe. Qatar’s monarchy is stable yet prone to personalistic power struggles within royal politics. This combination of factors heightens the geopolitical risk of companies engaging in financial transactions and investment in the jurisdiction.

Political Update

Qatar is governed by an absolute monarchy, with the presiding Emir holding virtually unrestricted power. Daily government functions are carried out by the prime minister appointed by the Emir and an advisory council of 15 emir-appointed members and 30 elected by popular vote. Though the prime minister and advisory council are responsible for much of the day-to-day governance of the country, the Emir has ultimate staying power and the final say over what legislation is to become law.

Local governance is divided into eight separate municipalities and overseen by municipal councils, but the ultimate power lies with the central ministries and the Emir. Democratic elections and locally elected officials are closely monitored and have limited authority in lawmaking and legislative processes.

Economic Update

Qatar has one of the world's highest GDP per capita incomes, driven primarily by oil and natural gas exports. With long-term forecasts for the demand for oil products on the decline and frequent market fluctuations, many oil-export-dependent economies, including Qatar, have sought economic diversification. In the face of recent volatility in oil exports, increased demand for Qatar’s liquified natural gas products to Europe and Asia due to sanctions against Russian natural gas bolstered modest growth in 2022.

Despite Qatar’s plans for diversification, diversification away from its dependence on the hydrocarbon industry remains low. This is partly due to relatively low foreign direct investment (FDI) and relative difficulty for international firms wanting to conduct business in the state. FDI and ease of doing business remain low for the following reasons:

• Sponsorship laws require foreign companies to have local sponsors with majority ownership of their operations in their territory. This can serve to restrict the autonomy of business operations in the country. It can also be difficult to find local sponsors compatible with the needs and vision of the interested party.
• Navigating Qatari bureaucracy and red tape can be cumbersome to efficient business practices. Securing business licenses and navigating new and existing regulations can be difficult and time-consuming.
• Lack of transparency and inconsistent application of the law and regulatory enforcement leaves businesses and individuals exposed to the whims of political leaders and state enforcement agencies. Lack of transparency with government officials also leads to the risk of complying with corruption and other unprofessional practices.
  
• Favoritism towards Qatari interests and companies puts international firms at a disadvantage, especially considering the often-uneven application of the law.

Key Investment Sectors

The Qatar National Vision 2030 plan states the continued importance of hydrocarbon and supporting industries. It highlights the importance of focusing on the industry's technological advancement to enhance exploration, refining, environmental sustainability, and the long-term maintenance of strategic reserves.

Efforts towards diversification have also highlighted the following industries to target for growth:

• Transportation and logistics. Qatar has directed billions of dollars towards developing its transportation and logistics industry, including upgrades to Port Hamad and Hamad International Airport, which has propelled the country to the second-best logistics hub in the region. Qatar’s position on the Gulf Coast places it at the center of much trade between the Asian, African, and European continents.
• Financial Services. Like logistics and transportation, the Gulf States, including Qatar, have put significant effort towards developing financial services. The Qatar Financial Centre is the hub of financial services in the country. It is a designated special economic zone offering tax incentives and other privileges promoting the development of this industry.
• Technology. Qatar has invested heavily in tech services and digital infrastructure across multiple sectors, including the hydrocarbon industry, fintech, and healthcare. Qatar has also seen the fastest growth in cybersecurity spending of any country in the Middle East in 2023.
• Renewable Energy. Qatar’s reliance on the export of hydrocarbon products leaves it vulnerable to external shocks and demand shifts. The global push towards renewable energy sources has not been overlooked by Qatar, which has an interest in maintaining its role as an exporter of energy products. They also have been investing in diversifying their energy portfolio through the creation of solar farms and improvements in green technologies and decarbonization.

U.S. State Department Travel Advisory

Level 1-Exercise normal precautions in Qatar

Recommendations for Companies and Investors

Companies operating in Qatar should enlist stringent due diligence processes when entering the Qatar. This includes screening partners, investors, suppliers, and customers as needed. Certain foreign companies operating in Qatar may also require a local sponsor to operate in the country, which requires an enhanced level of due diligence to ensure you know who you are doing business with.

It is also essential to understand Qatar's cultural norms and bureaucratic processes to avoid violating local norms and navigate the often complex and rigorous red tape associated with doing business there. Understanding cultural and business norms will help firms establish positive relationships with local partners

and customers and adequately train employees. In addition to incorporating an understanding of local cultural norms and practices into your strategy, firms and investors must also account for frequent policy changes, lack of transparency from government officials, and regional favoritism. This can be accomplished by conducting the correct level of geopolitical risk analysis.

Firms and investors should develop contingency strategies for risk scenarios associated with the complex geopolitical climate in the surrounding region. Understanding how regional conflicts may affect supply chains, sanctions, and the safety of assets and personnel is paramount to mitigating risk.

Enlisting due diligence processes can help to hedge against the threat of terrorist financing. Qatar has been criticized by the international community for inadequate anti-money laundering and terrorist financing controls, further necessitating the need for stringent due diligence.

Firms should also invest in cybersecurity protections to protect intellectual property and sensitive data.

Want To Know More?

For a deeper review of political, economic, due diligence and security risks for Qatar, please contact us.