Qatar bid to compete in financial centre stakes
Qatar also to provide world-class regulatory framework to attract big international financial players.
Qatar has announced plans to jump onto the financial hub bandwagon by outlining legislation aimed at creating a major financial centre in the Gulf state's capital, Doha.
Mohammed Althani, Qatar's minister of Economy & Commerce today outlined plans for the new centre which is designed to attract international financial institutions and multi-national corporates to set up in what will become the Qatar Financial Centre (QFC).
Speaking at a conference in Doha, the minister stated that the Qatar government was committed to forging closer partnerships with international business to enable them to share in the country's vibrant economy.
Crucially, the QFC will include a new regulatory environment similar to that already in place within the Dubai International Financial Centre (DIFC), in the United Arab Emirates (UAE). Sources close to the QFC said the regulatory system was created after hefty consultation with the international banking community including London, New York, more locally, Dubai, and that all Qatari civil and commercial law will be disapplied within the centre, as it is in Dubai's DIFC.
International law firm, Simmons & Simmons, advised the Qatari government on setting up the QFC's legal system. Stuart Evans, head of corporate finance, at the firm, told ITP that the laws have already been drafted and were ready to be enacted: "The laws have been approved and are now with the advisory council waiting to be formally passed."
A world class regulatory and legal financial system has proved critical to the DIFC attracting international players as it affords them the confidence and re-assurance that any disputes and legal cases that arise within the DIFC will be heard within a familiar regulatory and legal framework, unlike many other centres in the region where such cases are played out under Islamic shariah law, within the Arab legal system, often in Arabic.
However, rather than seeing this as a snub to Dubai, world class financial institutions may interpret the move as a positive sign that more countries across the region are keen to strengthen their regulatory and legal environments to attract heavyweight internationals. Moreover, this is likely to raise the bar for regional banks and finance houses that are not used to operating at such transparent levels.
Evans added that the Qatari government viewed competition as a good thing and that they saw it as a benefit to the region: "They believe that there is room for Bahrain, Dubai and Qatar to all benefit from developing financial centres. With the huge investment in infrastructure and development of the region ahead, to have available a context for international business to participate makes emminent sense," he said.
The minister said that the model would be slightly different to others across the region. For example, he said businesses would be able to set up in Doha with minimal cost, minimal risk and minimal bureaucracy. Firms will also enjoy a three year tax holiday after which a relatively low tax rate applies on profits.
Unlike neighbouring Dubai's DIFC financial hub, Qatar says it will not offer an offshore centre because it believes in a taxed environment. The minister said this will bolster high quality accounting and reporting, which is viewed favourably by international organisations, such as the OECD
However, in what could be seen as a snub to Dubai's massive commercial building boom, the minister said that Qatar's financial centre will not be a property play: "Qatar recognises that international firms will require state-of-the-art offices and is leasing a purpose built tower in Doha to provide such facilities at relatively low cost. However, Qatar is motivated in building successful partnerships with profitable companies, rather than big real estate projects."
According to a statement from the minister, Qatar has "the fastest growing economy in the world and by 2012 it will be the largest LNG (liquified natural gas) supplier in the world. Furthermore, Qatar is committed to spending $108 billion on infrastructure and hydrocarbon projects over the next five years."
These projects, combined with the rapid growth of the economy, present significant opportunities in project finance, bond issuance, insurance, reinsurance, asset management, private banking and general business support services. The minister believes that, for those international firms based in the QFC, there will be clear advantages."
He explained that the commercial and regulatory laws are already in place for the financial centre. The centre will include the Qatar Financial Centre Authority which will run the centre and drive the commercial strategy, reporting to the Council of Ministers.
Secondly, a fully independent Qatar Financial Centre Regulatory Authority will oversee business conduct, and grant licences to operate in the centre. Importantly, the Regulatory Authority will also report to the Council of Ministers.
Thirdly, an arbitration body will adjudicate on appeals. All three bodies have been established to meet international best practice, based on consultation with the international financial community. The legislation also allows full repatriation of profits and 100 per cent foreign ownership.
An international recruitment firm is currently vetting candidates for the roles of ceo of the Qatar Financial Centre Authority and the chairman and ceo of the Qatar Financial Centre Regulatory Authority, respectively.
"Qatar is developing its financial centre from a position of strength. We are one of the few countries to enjoy a fiscal surplus, an A+ stable sovereign risk rating and extremely high GDP growth," the statement read.
"By aligning our goals with the international firms we seek to attract, we aim to create progressive partnerships whereby we enable firms to operate profitably in Qatar – this, in turn, benefits the country. I am confident that the new financial centre marks another significant step in the transformation of our economy."